Trending with global markets, Indian indices posted their biggest weekly gains in five months during the week ended. On the BSE, the Sensex gained 1,376 points to close at 16,371 and the Nifty on the NSE logged 368 points to end at 4,942.
Moving in tandem with frontline indices after a long time, both the CNX Midcap and the BSE Smallcap indices also gained eight per cent plus. Market breadth clearly reflects that worst may be over for present. Rise in commodity prices was seen impacting inflation numbers. While inflation and GDP are the most talked about numbers, market players feel fourth quarter results will determine near term direction of markets.
Though decoupling theory has been discarded, some savvy old timers believe that domestic consumption and investment story as far as real economy is concerned will emerge a winner in long term. Do not be too obsessed with global picture and focus on Q4 results and domestic events.
With the Left Parties showing red flags to IndoUS nuclear deal and inflation becoming primary concern markets are likely to remain range bound till macro economic picture improves and monsoon prediction is available. For the week ahead, chartists predict trading bands of 15,680 to 17,360 for the Sensex and 4,580 to 5,240 for the Nifty. Expect stiff resistance to the indices on upside at 16,800 and 17,200 and 5,100 and 5,250. On downside support is evident at 16,080 and 15,800 and 4,820 and 4,680.
Cut all short term longs if indices trade below 15,860 and 4,760 levels. Do not be too exuberant and adopt cautious approach as markets are not out of woods yet. With onset of results season, adopt stock specific approach for near term trading. Buy when stocks have few friends. Be patient. Don't be rattled by fluctuations. Rational and clear thinking are what's needed to succeed as an investor.
F&O segment D espite thevolumesended week being settlement week, trading continued to be moderate. Strong recovery in the markets was not reflected in volumes indicating that "confidence" level is still low. Punters were seen preferring to cover most of the shorts, and fresh build up in long positions resulted in Nifty futures trading at premium to spot. Key resistance level for Nifty traders is 5,100 points. One interesting observation is active trading in Nifty 5000 strike December call option and Nifty 4300 December put option. Barring couple of sectors nearly all the sectors witnessed good buying interest from lower levels.
Side counters like HDIL, Edelweiss, GBN and others scored impressive gains. Modest buying interest was seen in technology, metals, capital goods and power counters. Banking counters were seen facing resistance on every upmove. Reports of most banks likely to take a hit in their investment portfolio and slowdown in credit disbursal are clouding the picture.
Ahead of Q4 numbers, tech counters are witnessing good warehousing. Stay invested in Infosys, Wipro and Satyam for further gains. Media stocks are attracting renewed buying. Buy on declines Adlabs, GBN and Zee. Surprise move in WWIL not ruled out. Buy for target price of Rs 55. Cement counters are beginning to show comeback gains. Buy ACC, Ambuja Cements and Birla Corp. Among the side counters, looking good for gains are Idea Cellular, Redington, Praj Inds and Gitanjali. Issuance of petro bonds may give fillip to PSU oil refiners like IOC, BPCL and HPCL.
Network18 which has acquired Infomedia India is likely to rename the company as Infomedia18 and also leverage the substantial printing capacity of the company for launch of specialist magazines. Already a JV with Forbes Media has been to launch a fortnightly has been inked. Buy Infomedia for medium term target of Rs 350. ¦ Jain Irrigation Systems is planning to expand into food processing, piped gas and water management. A little known fact of the company is that it is the world's largest processor of mangoes and pomegranates. Buy on declines for steady gains in medium term. ¦ Edible oil player Sanwaria Agro Oils has reportedly undertaken wind power project to improve operating margins. The company also manufactures Lecithin, an emulsifier used in edible oil industry. With sales rising by an average of 101 per cent over past five quarters, PAT will improve the valuation. Buy at current levels for good long term gains. ¦ Select stocks like Prime Focus, Allied Digital, Subex, Gati, and Electrotherm have witnessed spurt in volumes. Prime Focus operates in niche segment of media sector concentrating on high class processing and digital arena. Post recent correction the stock looks good bet for short term price target of Rs 825. Subex is reportedly back on growth path and has restructured for better performance. The company is focusing on branding and improvement of margins. ¦ Electrotherm is reportedly expanding into related areas. The company is reportedly making QIP at attractive price. Good results and booming user industry make the stock good bet on every decline. ¦ Allied Digital has recently launched remote management services. Excellent results and reports of inorganic growth by acquisition route make the stock good buy on declines.
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Monday, March 31, 2008
Monday, March 24, 2008
TRADING PICKS FOR THIS WEEK 24.3.08
Mimicking the high volatility in global markets and caught in the bear grip, Indian markets witnessed another week of manic trading.
After recording the second biggest single day decline, the Sensex on BSE made a feeble recovery to close the week with 4.9 per cent loss at 14,995 and the Nifty on the NSE shed 3.6 per cent to end at 4574. The steep fall in the BSE Smallcap index by 11 per cent and the CNX Midcap by 8.5 per cent clearly reflect the panic and dilemma of retail investors.
Volumes continued to be dismal on low trading interest. Negative news flow like selling of Bear Stearns portfolio and impact of derivatives and FCCB exposure losses to some corporates turned markets jittery. Fears of more bad news from US and rise in inflation index kept the markets in nervous mode.
The US Federal Reserve's rate cut, falling commodity prices and good corporate advance tax numbers failed to enthuse traders. With strong inflation numbers dampening expectations of a rate cut by RBI in near term, only robust fourth quarter results may trigger stock-specific buying in coming days. Many stocks in B group are available at below five P/E levels at mouth watering valuations.
Start bottom fishing advice savvy market players. For the week ahead chartists predict a trading band in the range of 14,400 to 15,800 for the Sensex and for the Nifty a range of 4,200 to 4,960. Expect stiff resistance to the indices on upside at 15,400 and 4,750 levels. Support is evident at 14750 and 4450 levels for BSE and NSE respectively.
Initiate fresh positions if indices trade steadily with improvement in volumes above 15,400 and 4,800 levels. Aggressive short selling is not suggested at present levels.
Never assume a market fact based on what you read or what others say; verify everything yourself. Fundamentals are not bullish or bearish in a vacuum; they are bullish or bearish only relative to price.
F&O segment E xpectedly volumes continued to be on the lower side due to high volatility and uncertain environment. With overnight global trends determining market openings (either gap up or gap down), keeping an open position is like buying a single day lottery ticket. Rollover of shorts in index futures is evident from Nifty April futures trading at deep discount of 22 points to spot.
Volume selling below 4,490 may see Nifty futures slide to 4,350. Move above 4,850 may propel it to 5,100 level. Ahead of settlement week sentiment indicators like implied volatility, put/call ratio and open interest indicate another bout of volatility.
Moderate rollover of open interest positions was seen ahead of settlement week due to long weekend.
Volumes may show strong improvement in the coming week. Nearly all the sectors witnessed savage selling. Realty, banking, metals and power counters witnessed unwinding of positions. Nibbling was seen at some IT and auto counters on the last trading day. Further upside indicated in Tata Motors, Mahindra & Mahindra, Satyam Computers and Wipro. Banking stocks are at crucial support levels.
Modest bounce back from current levels is not ruled out. Buying suggested in small quantities in both PSU and private banks. Defensive buying was seen in select FMCG stocks.
Stay invested in Hind Unilever, Colgate and ITC. Beaten down by news flow Orchid, S Kumar, Purvankara, IFCI, Wockhardt and Idea Cellular look good short term bets at lower levels.
Among the side counters, Indian Hotels, Sesa Goa, IRB Infra, JP Hydro and Tulip IT look good for some gains from current levels. Never buy or sell merely on the basis of background statistics. Technical market considerations and psychology must also be taken into account.
The recent meltdown has relegated the stocks of once high-flying sectors to market's scrap yard. The time to make money in the stock market is not when everything looks gung-ho, but when things look as if they are going bust. Many midcap and smallcap companies have already lost fifty to over seventy five per cent of their value. While it is agreed that just because these stocks or sectors are down does not mean that they will not fall further, there are bargains which may turn out to be multibaggers. Sift through the salvage yard, separate the gems from the scrap yard. If you wait too long to buy, until every uncertainty is removed and every doubt is lifted at the bottom of a market cycle, you may keep on waiting and waiting. ¦ Maytas Infra, Solar Explosives, Bilcare, Spanco Tele and Sagar Cements are witnessing buying interest from savvy players. Belonging to the kin of Satyam's promoters Maytas Infra is aggressively moving in all segments of infrastructure like ports, airports, housing etc. Stay invested and accumulate on declines for good medium term returns. Solar Explosives is the second largest explosives and explosive initiating devices manufacturer. With the user industries mining and infrastructure undergoing tremendous expansion the company is poised to report excellent topline growth. Buy on declines. Many south-based cement companies are on the radar of foreign majors for tie ups or mergers. Unlisted My Home got good valuation for its cement division. Positive news is on cards in Sagar Cements. Stay invested for further gains. Pharma packaging major Bilcare and RADAG owned Spanco Tele are witnessing good buying at lower levels. Buy for medium term.
After recording the second biggest single day decline, the Sensex on BSE made a feeble recovery to close the week with 4.9 per cent loss at 14,995 and the Nifty on the NSE shed 3.6 per cent to end at 4574. The steep fall in the BSE Smallcap index by 11 per cent and the CNX Midcap by 8.5 per cent clearly reflect the panic and dilemma of retail investors.
Volumes continued to be dismal on low trading interest. Negative news flow like selling of Bear Stearns portfolio and impact of derivatives and FCCB exposure losses to some corporates turned markets jittery. Fears of more bad news from US and rise in inflation index kept the markets in nervous mode.
The US Federal Reserve's rate cut, falling commodity prices and good corporate advance tax numbers failed to enthuse traders. With strong inflation numbers dampening expectations of a rate cut by RBI in near term, only robust fourth quarter results may trigger stock-specific buying in coming days. Many stocks in B group are available at below five P/E levels at mouth watering valuations.
Start bottom fishing advice savvy market players. For the week ahead chartists predict a trading band in the range of 14,400 to 15,800 for the Sensex and for the Nifty a range of 4,200 to 4,960. Expect stiff resistance to the indices on upside at 15,400 and 4,750 levels. Support is evident at 14750 and 4450 levels for BSE and NSE respectively.
Initiate fresh positions if indices trade steadily with improvement in volumes above 15,400 and 4,800 levels. Aggressive short selling is not suggested at present levels.
Never assume a market fact based on what you read or what others say; verify everything yourself. Fundamentals are not bullish or bearish in a vacuum; they are bullish or bearish only relative to price.
F&O segment E xpectedly volumes continued to be on the lower side due to high volatility and uncertain environment. With overnight global trends determining market openings (either gap up or gap down), keeping an open position is like buying a single day lottery ticket. Rollover of shorts in index futures is evident from Nifty April futures trading at deep discount of 22 points to spot.
Volume selling below 4,490 may see Nifty futures slide to 4,350. Move above 4,850 may propel it to 5,100 level. Ahead of settlement week sentiment indicators like implied volatility, put/call ratio and open interest indicate another bout of volatility.
Moderate rollover of open interest positions was seen ahead of settlement week due to long weekend.
Volumes may show strong improvement in the coming week. Nearly all the sectors witnessed savage selling. Realty, banking, metals and power counters witnessed unwinding of positions. Nibbling was seen at some IT and auto counters on the last trading day. Further upside indicated in Tata Motors, Mahindra & Mahindra, Satyam Computers and Wipro. Banking stocks are at crucial support levels.
Modest bounce back from current levels is not ruled out. Buying suggested in small quantities in both PSU and private banks. Defensive buying was seen in select FMCG stocks.
Stay invested in Hind Unilever, Colgate and ITC. Beaten down by news flow Orchid, S Kumar, Purvankara, IFCI, Wockhardt and Idea Cellular look good short term bets at lower levels.
Among the side counters, Indian Hotels, Sesa Goa, IRB Infra, JP Hydro and Tulip IT look good for some gains from current levels. Never buy or sell merely on the basis of background statistics. Technical market considerations and psychology must also be taken into account.
The recent meltdown has relegated the stocks of once high-flying sectors to market's scrap yard. The time to make money in the stock market is not when everything looks gung-ho, but when things look as if they are going bust. Many midcap and smallcap companies have already lost fifty to over seventy five per cent of their value. While it is agreed that just because these stocks or sectors are down does not mean that they will not fall further, there are bargains which may turn out to be multibaggers. Sift through the salvage yard, separate the gems from the scrap yard. If you wait too long to buy, until every uncertainty is removed and every doubt is lifted at the bottom of a market cycle, you may keep on waiting and waiting. ¦ Maytas Infra, Solar Explosives, Bilcare, Spanco Tele and Sagar Cements are witnessing buying interest from savvy players. Belonging to the kin of Satyam's promoters Maytas Infra is aggressively moving in all segments of infrastructure like ports, airports, housing etc. Stay invested and accumulate on declines for good medium term returns. Solar Explosives is the second largest explosives and explosive initiating devices manufacturer. With the user industries mining and infrastructure undergoing tremendous expansion the company is poised to report excellent topline growth. Buy on declines. Many south-based cement companies are on the radar of foreign majors for tie ups or mergers. Unlisted My Home got good valuation for its cement division. Positive news is on cards in Sagar Cements. Stay invested for further gains. Pharma packaging major Bilcare and RADAG owned Spanco Tele are witnessing good buying at lower levels. Buy for medium term.
Monday, March 17, 2008
SENSEX,NIFTY TRADING LEVELS IN DETAIL DT:17.3.08
Dancing to the tunes of global markets and reacting to economic data in the form of weak IIP numbers, markets continued to be in a bearish phase. Encountering heavy selling on rallies the Sensex and the Nifty shed 215 points and 26 points to close at 15,761 and 4,746 during last week.
Expectedly market breadth continued to be very negative with many midcap and smallcap stocks hitting lower circuit filter regularly. It is pertinent to note that many B group stocks are already at 8,000 Sensex level and two year lows reflecting that markets are excessively oversold due to the negative sentiment.
Weak IIP numbers have raised doubts of India growth story coming to premature end and the possibil ity of an economic slowdown. Key event to watch in the week ahead will be US Fed meet and reaction of global markets to the outcome.
With two holidays in the coming week trading activity may be range bound with negative bias. Likely trading range for the Sensex is 15,300-16,600 and for the Nifty is 4,300-5,200. If it falls below last week's low of 15,230, the Sensex may slip to 14,600. Initiate trading longs if Sensex stabilises above 16,000 level.
F&O segment V olumes continuedintothe be on lower side derivatives segment. Low open interest at around Rs 65,000 crore reflects trader's aversion and disinterest for risk in highly volatile markets. Sentiment indicators like implied volatility, open interest and put/call ratio indicate further volatility with negative bias. Punters were seen avoiding stock futures and playing actively in index futures. Contrarians expect Nifty futures to touch at least 5,300 once before the end of current settlement.
Bulls hope US Federal Reserve governor Bernanke to come out with liberal cut and infusion of capital for relief rally. With markets in a strong intermediate downtrend, continuation of lower top-lower bottom trend is likely. Short sellers can use bulges to create fresh shorts. Avoid large positions till volatility subsides. Selling was seen across the boa-rd in nearly all the sectors.
Modest buying interest was seen in sugar counters at lower levels. Accumulate Shree Renuka, Balrampur Chini and Bajaj Hindustan at lower levels. Punters expect relief rally in PSU banks. BOI, BOB, Canara and PNB look good for comeback gains. With fertiliser prices at all time high. Accumulate Chambal, GNFC and GSFC.
Ahead of commissioning of the plant in October punters expect Reliance Petro to cross Rs 200 mark again.
Obsession over every bit of market news only raises the odds of overestimating risk. Punters are keenly awaiting advance tax numbers of major companies due on Monday to reassess whether weak IIP numbers are aberration compared to ground reality. Keep close watch on last quarter numbers to gauge whether Indian growth story is intact or the slow down is for real. Stock specific approach is the mantra for gains in these difficult times. ¦ Select stocks such as GSS America, English India Clay, Thomas Cook, PTL Enterprises and Balaji Tele are bucking the weak trend by clocking smart gains. Open offer from the parent company and possibility of higher revised offer triggered good buying in Thomas Cook. Book partial profits at current levels. PTL Enterprises, which was pre viously known as Premier Tyres, has reportedly finalised plans to unlock the value of its Kochi property. Use sharp declines to buy for price target of Rs 45.
Unlike other recently listed public issues GSS America has defied gravity to give smart returns. Reports suggest that limited subscription has led to cornering of stock. Orchestrated buying cannot be ruled out say observers. Positive news is on cards in Balaji Tele says company source.
Use the current decline in the recently listed V-Guard for buying. Good brand equity and results spell better price for counter when markets revive. Goof up in the relisting of English I Clay with a low base price of Rs 179 after the demerger of a division and subsequent remedial measure in fixing circuit filter at 20 per cent saw the scrip now tou-ch Rs 1,740 after being loc-ked at circuit filter for several days on the stock exch-anges. A similar goof up was seen in Gujarat Glass wherein the relisting was done at a higher base price saw the stock fall sharply after relisting. Whether the regulator will act is the million dollar question.
Expectedly market breadth continued to be very negative with many midcap and smallcap stocks hitting lower circuit filter regularly. It is pertinent to note that many B group stocks are already at 8,000 Sensex level and two year lows reflecting that markets are excessively oversold due to the negative sentiment.
Weak IIP numbers have raised doubts of India growth story coming to premature end and the possibil ity of an economic slowdown. Key event to watch in the week ahead will be US Fed meet and reaction of global markets to the outcome.
With two holidays in the coming week trading activity may be range bound with negative bias. Likely trading range for the Sensex is 15,300-16,600 and for the Nifty is 4,300-5,200. If it falls below last week's low of 15,230, the Sensex may slip to 14,600. Initiate trading longs if Sensex stabilises above 16,000 level.
F&O segment V olumes continuedintothe be on lower side derivatives segment. Low open interest at around Rs 65,000 crore reflects trader's aversion and disinterest for risk in highly volatile markets. Sentiment indicators like implied volatility, open interest and put/call ratio indicate further volatility with negative bias. Punters were seen avoiding stock futures and playing actively in index futures. Contrarians expect Nifty futures to touch at least 5,300 once before the end of current settlement.
Bulls hope US Federal Reserve governor Bernanke to come out with liberal cut and infusion of capital for relief rally. With markets in a strong intermediate downtrend, continuation of lower top-lower bottom trend is likely. Short sellers can use bulges to create fresh shorts. Avoid large positions till volatility subsides. Selling was seen across the boa-rd in nearly all the sectors.
Modest buying interest was seen in sugar counters at lower levels. Accumulate Shree Renuka, Balrampur Chini and Bajaj Hindustan at lower levels. Punters expect relief rally in PSU banks. BOI, BOB, Canara and PNB look good for comeback gains. With fertiliser prices at all time high. Accumulate Chambal, GNFC and GSFC.
Ahead of commissioning of the plant in October punters expect Reliance Petro to cross Rs 200 mark again.
Obsession over every bit of market news only raises the odds of overestimating risk. Punters are keenly awaiting advance tax numbers of major companies due on Monday to reassess whether weak IIP numbers are aberration compared to ground reality. Keep close watch on last quarter numbers to gauge whether Indian growth story is intact or the slow down is for real. Stock specific approach is the mantra for gains in these difficult times. ¦ Select stocks such as GSS America, English India Clay, Thomas Cook, PTL Enterprises and Balaji Tele are bucking the weak trend by clocking smart gains. Open offer from the parent company and possibility of higher revised offer triggered good buying in Thomas Cook. Book partial profits at current levels. PTL Enterprises, which was pre viously known as Premier Tyres, has reportedly finalised plans to unlock the value of its Kochi property. Use sharp declines to buy for price target of Rs 45.
Unlike other recently listed public issues GSS America has defied gravity to give smart returns. Reports suggest that limited subscription has led to cornering of stock. Orchestrated buying cannot be ruled out say observers. Positive news is on cards in Balaji Tele says company source.
Use the current decline in the recently listed V-Guard for buying. Good brand equity and results spell better price for counter when markets revive. Goof up in the relisting of English I Clay with a low base price of Rs 179 after the demerger of a division and subsequent remedial measure in fixing circuit filter at 20 per cent saw the scrip now tou-ch Rs 1,740 after being loc-ked at circuit filter for several days on the stock exch-anges. A similar goof up was seen in Gujarat Glass wherein the relisting was done at a higher base price saw the stock fall sharply after relisting. Whether the regulator will act is the million dollar question.
Monday, March 10, 2008
DETAILS OF THIS WEEK TRADING CALLS 10.3.08
Reflecting the continued recession in the United States, most of the global equity markets are weak and hitting multimonth lows. Recording the biggest weekly loss since May 2006, the Sensex last week tanked 9.1 per cent to close below-the-16,000level at 15,976 points and the Nifty slid by 8.7 per cent to end at 4,772 points.
Extremely negative market breadth shows that there is revulsion to risk and a lack of confidence in the market. Weak sentiment and lack of self-confidence among investors are causes for magnification of every small negative news.
Soaring crude oil prices, rising commodity and food prices across the globe and weak economic data from the US continued to be sentiment dampeners. Reports of renewed differences between the Left Front and the ruling coalition UPA on the progress of Indo-US nuclear deal compounded the bearish talk.
Rising inflation may not allow US Fed cut interest rates as liberally as expected but may continue to infuse liquidity in the system at regular intervals. On the home front also, fears of spiralling inflation may see RBI adopt neutral stance. Barring any major negative surprises in the Q4 earnings season, a good monsoon may see markets recover substantially in the second half of the year.
For the week ahead, chartists predict trading band of 15,400-16,600 for the Sensex and 4,444-5,100 for the Nifty. Expect resistance on upside at 16,300 and 4,940 on the indices.
Avoid aggressive shortselling from current levels. After a weak opening markets may recover in the later part of the week on institutional buying due to compelling valuations and short covering ahead of US Fed meet. Do not let emotion or prejudice warp your judgment. Base your trading operations on facts.
F&O Segment M irroring the overall market sentiment, trading volumes continued to be on lower side. Nifty futures were seen trading at deep discount of 45 points to spot indicating the "confidence" of bears and existence of shorts. Violation of 4,650 support level may see Nifty futures tumbling to 4,350. However, good volumes above 4,850 may trigger short covering and see the futures touch 5,300 in near term.
Sentiment indicators like implied volatility, open interest and put/call ratio indicate that hyper volatility will continue for some more time. Banking, realty and power stocks were the worst hit in the last week's mayhem.
From over ownership, observers say, the sectors are likely to be under owned ones very soon if the present wave of selling continues. Start nibbling at good public sector banks, low P/E realty and power counters for good medium term returns.
Pharma and FMCG counters look good defensive bets. Hike of its holding in Orchid by Life Insurance Corporation and steady buying in other pharma counters in the post-budget scenario augurs well for the sector. Stay invested and add on declines in pharma counters.
Despite volatility, metal stocks are witnessing steady buying. Stay invested in Tata Steel, JSW Steel, SAIL, Hindalco and Nat Aluminum. After the recent sharp fall, select infra stocks like HCC, IVRCL Infrastructure Ltd and Punj Lloyd are attracting good buying at lower levels. Further gains likely in near term. Among the beaten down counters, short covering gains are likely in Reliance Communication, Suzlon, Bharti and Reliance Energy Ltd, GE Shipping, United Spirits and Adlabs.
Avoid big positions and stick to stocks showing better relative strength. Do not try to outguess the market. Don't try to pick the top and the bottom of the market.
One sector that is attracting attention of savvy fund managers is steel sector. Analysts say that iron ore shortages and also coking coal shortage due to floods in Australia are leading to demand/supply mismatch and further hikes in global steel prices are not ruled out. However, only integrated steel players like Tata Steel are likely to benefit because they are insulated from raw material shortages. Scout for good value picks in the sector. ¦ One country's gain is other country's loss. Strong rally in international crude oil prices may generate forex reserves of over $2 trillion for the Opec nations. Analysts feel that most of these funds may come to global equity markets in next few months in some form or other. Recent buyout of some equity in Citigroup by a Gulf nation's investment arm is a pointer. Sovereign wealth funds are likely to play key role in the current global crisis. ¦ Select stocks showing good resilience in the current downturn are Sun Pharma and Asian Paints. Post-demerger of research division Sun Pharma has repositioned itself for major organic and inorganic growth. Positive news flow on cards say sources. Buy on declines for target price of Rs 1,600. Paints major Asian Paints is reaping benefits of boom in the infra, housing and auto sectors. A true Indian multinational Asian Paints has profitable overseas production operations. Despite rise in raw material prices the company has performed creditably in the last quarter. Bonus issue is on cards say sources. Buy for excellent medium term gains. ¦ It is interesting to note that more than 200 stocks which have touched lifetime highs in January are now trading at 1-2 year lows. How sharp the correction has been can be seen by this. Many stocks have been sliced of their ‘flab' and are now available at extremely reasonable valuations. Nobody can time the market and despite possibility of some more downside to markets, long-term investors are advised to start building good portfolio from current levels.
Extremely negative market breadth shows that there is revulsion to risk and a lack of confidence in the market. Weak sentiment and lack of self-confidence among investors are causes for magnification of every small negative news.
Soaring crude oil prices, rising commodity and food prices across the globe and weak economic data from the US continued to be sentiment dampeners. Reports of renewed differences between the Left Front and the ruling coalition UPA on the progress of Indo-US nuclear deal compounded the bearish talk.
Rising inflation may not allow US Fed cut interest rates as liberally as expected but may continue to infuse liquidity in the system at regular intervals. On the home front also, fears of spiralling inflation may see RBI adopt neutral stance. Barring any major negative surprises in the Q4 earnings season, a good monsoon may see markets recover substantially in the second half of the year.
For the week ahead, chartists predict trading band of 15,400-16,600 for the Sensex and 4,444-5,100 for the Nifty. Expect resistance on upside at 16,300 and 4,940 on the indices.
Avoid aggressive shortselling from current levels. After a weak opening markets may recover in the later part of the week on institutional buying due to compelling valuations and short covering ahead of US Fed meet. Do not let emotion or prejudice warp your judgment. Base your trading operations on facts.
F&O Segment M irroring the overall market sentiment, trading volumes continued to be on lower side. Nifty futures were seen trading at deep discount of 45 points to spot indicating the "confidence" of bears and existence of shorts. Violation of 4,650 support level may see Nifty futures tumbling to 4,350. However, good volumes above 4,850 may trigger short covering and see the futures touch 5,300 in near term.
Sentiment indicators like implied volatility, open interest and put/call ratio indicate that hyper volatility will continue for some more time. Banking, realty and power stocks were the worst hit in the last week's mayhem.
From over ownership, observers say, the sectors are likely to be under owned ones very soon if the present wave of selling continues. Start nibbling at good public sector banks, low P/E realty and power counters for good medium term returns.
Pharma and FMCG counters look good defensive bets. Hike of its holding in Orchid by Life Insurance Corporation and steady buying in other pharma counters in the post-budget scenario augurs well for the sector. Stay invested and add on declines in pharma counters.
Despite volatility, metal stocks are witnessing steady buying. Stay invested in Tata Steel, JSW Steel, SAIL, Hindalco and Nat Aluminum. After the recent sharp fall, select infra stocks like HCC, IVRCL Infrastructure Ltd and Punj Lloyd are attracting good buying at lower levels. Further gains likely in near term. Among the beaten down counters, short covering gains are likely in Reliance Communication, Suzlon, Bharti and Reliance Energy Ltd, GE Shipping, United Spirits and Adlabs.
Avoid big positions and stick to stocks showing better relative strength. Do not try to outguess the market. Don't try to pick the top and the bottom of the market.
One sector that is attracting attention of savvy fund managers is steel sector. Analysts say that iron ore shortages and also coking coal shortage due to floods in Australia are leading to demand/supply mismatch and further hikes in global steel prices are not ruled out. However, only integrated steel players like Tata Steel are likely to benefit because they are insulated from raw material shortages. Scout for good value picks in the sector. ¦ One country's gain is other country's loss. Strong rally in international crude oil prices may generate forex reserves of over $2 trillion for the Opec nations. Analysts feel that most of these funds may come to global equity markets in next few months in some form or other. Recent buyout of some equity in Citigroup by a Gulf nation's investment arm is a pointer. Sovereign wealth funds are likely to play key role in the current global crisis. ¦ Select stocks showing good resilience in the current downturn are Sun Pharma and Asian Paints. Post-demerger of research division Sun Pharma has repositioned itself for major organic and inorganic growth. Positive news flow on cards say sources. Buy on declines for target price of Rs 1,600. Paints major Asian Paints is reaping benefits of boom in the infra, housing and auto sectors. A true Indian multinational Asian Paints has profitable overseas production operations. Despite rise in raw material prices the company has performed creditably in the last quarter. Bonus issue is on cards say sources. Buy for excellent medium term gains. ¦ It is interesting to note that more than 200 stocks which have touched lifetime highs in January are now trading at 1-2 year lows. How sharp the correction has been can be seen by this. Many stocks have been sliced of their ‘flab' and are now available at extremely reasonable valuations. Nobody can time the market and despite possibility of some more downside to markets, long-term investors are advised to start building good portfolio from current levels.
Wednesday, March 5, 2008
Recommendation for March 15, 2008
Recommendation for March 15, 2008
Portfolio Choice
Large-Priced Scrip
Wockhardt
Healthy choice
Snapshot
BSE ticker code: 532300
NSE ticker code: WOCKPHARMA
Major activity: Pharmaceutical-India Bulk
Chairman Habil F Khorakiwala
Equity capital: Rs. 54.72 cr. (FV Rs.5)
52 week high/low: Rs. 450/295
CMP: Rs. 332
Market Capitalisation: Rs. 1817 cr.
Recommendation: Buy at declines
Wockhardt which is a global pharmaceutical and biotechnology company engaged in development and manufacture of formulations, biopharma ceuticals, nutrition products, vaccines and active pharmaceutical ingredients (APIs) has healthy prospects ahead. Just consider:
The company with an active multi-disciplinary R&D programme employing over 400 scientists has been a frontrunner in biotechnology research in the country. It has 15 manufacturing plants in India, UK, Ireland, France and US. These have the approval of major regulatory bodies, including US FDA and UK’s MHRA, with capabilities for both finished dosage formulations and APIs. Besides, it has subsidiaries in US, UK, Ireland and France and marketing offices in Africa, Russia, Central and South East Asia.
As per ORG-IMS, the domestic business of the company recorded an annual growth of 19% vis-Ã -vis 13% industry growth rate. Its business in UK, Ireland, Germany and France recorded double-digit growth, almost twice the industry growth in these markets. The European formulation business grew 97% FY 2007. In the UK, the company launched the NRT (Nicotine Replacement Therapy) in patches and lozenges forms for curbing smoker’s habit.
In October 2007, the company acquired Morton Grove Pharmaceuticals, the leading liquid generic and specialty dermatology company in US. With this acquisition, Wockhardt now have the right size of operations in US. It now has a complete range of dosage forms tablets, capsules, liquids and injectibles. Morton Grove has a portfolio of 31 products, 13 of which occupy the No.1 market position. All others are in the Top 3. The overall product range has now swelled to around 56 products for the US market, of which Wockhardt USA Inc is currently marketing 25 products. The US FDA also approved 13 ANDA’s, of which 11 products have already been launched.
Wockhardt has in principle decided to hive off its research & development business into a separate entity. The new company will house the new drug discovery programme and the innovative new technologies being developed by the R&D team.
Wockhardt has a strong track record in acquisition management, with five successful acquisitions in the European market. The European business now contributes about 55% of revenues. The company which is enjoying a leading position in Europe, is steadily growing its market presence in the US. The management is confident of achieving the corporate target of becoming a $1 billion company by 2009.
The company is doing quite well. For the FY ended December 2007, it registered a 53% rise in sales to Rs 2,653 crore. PAT went up by 60% to Rs 386 crore. OPM grew by 100 basis points to 24.1%. For 2008, we expect the company to register EPS of Rs 42.5. The share price trades at Rs 332 P/E works out to just 8.
Performance indicators (RS IN CRORE)
Year Net Op Net EPS Div BV RONW
sales profit profit (Rs.) (%) (Rs) (%)
2006 1731.48 400.27 301.62 27.6 100 87.4 29.3
2007 2653.20 639.10 382.50 35.1 225 111.5 29.7
2008 3250.00 780.00 465.00 42.5 275 141.3 30.0
Medium-Priced Scrip
Jagran Prakashan
Wake up to it
Snapshot
BSE ticker code: 532705
NSE ticker code: JAGRAN
Major activity: Entertainment-Electronic Media
Chairman Mahendra Mohan Gupta
Equity capital: Rs. 60.23 cr. (F V Rs. 2)
52 week high/low: Rs. 169/60
CMP: Rs. 110
Market Capitalisation: Rs. 3312.65 cr.
Recommendation: Buy
Jagran Prakashan is a leading media house, which publishes Dainik Jagran, India’s largest read daily with a total readership of 536 lakh (IRS 2007 R2). It was also voted the most credible and trusted newspaper in India, according to a survey by Globscan, prospects for the company are quite encouraging. Just consider:
Dainik Jagran is now published in 31 editions across 11 states from 29 different facilities. The company also publishes two youth-oriented newspaper brands viz. I-Next a daily bilingual compact and City Plus, an English infotainment weekly compact, besides Sakhi, a monthly magazine targeted at women. The group also publishes Jagran Varshiki, an annual general knowledge digest, and various national and state statistical compilations. All these publications are doing quite well.
JP has consolidated its presence in established markets and added 17 new editions in the last five years. It is also expanding its operations pan India in out-of-home and events management. It has been building on its strong regional franchise and is open to inorganic route to further boost presence and growth.
Jagran Engage provides specialized ‘Out of Home’ (OOH) advertising services with a pan India footprint. Jagran Solutions is its event management business. Since this business compliments the OOH business, the company shares most of its clients with Jagran Engage. The clients of Jagran Solutions include Microsoft, Hutch, Godrej, TVS, ICICI Prudential, Escorts, Standard Chartered Bank, M&M, Bajaj and HLL.
In FY06, JPL entered into a strategic partnership with Independent News and Media (INM), a reputed media house in Europe, publishing 175 titles of newspapers and magazines in nine countries across four continents. INM holds 20.8% stake in JPL and is eager to increase its stake though current FDI regulations do not permit it.
The Hindi language newspapers make 44.6% of the total newspaper industry in India. Thus JPL has the advantage of being the market leader in the largest media segment. The spread of literacy also augurs well for the future growth of the company. The literacy rate in Bihar (47.53%), Jharkhand (54.13%), Uttar Pradesh (57.36%), Jammu & Kashmir (54.46%) are all below the average literacy rate. As a result the growth potential is higher.
We expect the company to register EPS of Rs. 3.4 in FY 2008 and Rs. 4.2 in FY 2009. The share price trades at Rs. 116. While P/E on FY 2008 EPS works out to 34.1, it falls to 27.6 on FY 209 EPS. Due to its premier position in Hindi daily news media which it is capitalising on through ad rate hikes, increased colour advertising, new synergistic launches, outdoor advertising, event management, internet and business newspaper, the company will continue to command premium valuations.
Performance indicators (RS IN CRORE)
Year Net Op Net EPS Div BV RONW
sales profit profit (Rs) (%) (Rs) (%)
2005-06 480.53 70.16 31.70 1.1 50.00 97.0 11.41
2006-07 598.18 119.84 73.48 2.4 75.00 84.9 15.28
2007-08 (E) 770.00 170.00 101.00 3.4 90.00 86.5 15.42
2008-09 (E) 960.00 212.00 125.00 4.2 100.00 88.7 15.81
Small-Priced Scrip
Hydro S&S Industries
Reinforced growth potential
Snapshot
BSE ticker code: 524019
NSE ticker code: Not listed
Major activity: Plastics
Chairman V Srinivasan
Equity capital: Rs. 6.53 cr. (FV. Rs. 10)
52 week high/low: Rs. 82/30
CMP: Rs. 58
Market Capitalisation: Rs. 37.87 cr.
Recommendation: Buy
Headquartered in Chennai, Hydro S&S Industries (HSSIL) is a leading manufacturer and supplier of high quality re-inforced polypropylene compounds, thermoplastic elastomers, and fibre reinforced composites. Polypropylene modified by the addition of reinforcements such as talc, chalk, mica and glass fibre has enabled it to establish itself as a metal substitute in engineering applications. This is a safe investment bet. Just consider:
Established in 1987, in technical collaboration with the Performance Plastics Division of Norsk Hydro Polymers Limited, UK to manufacture polypropylene compounds, the company’s products find application in various industries like automotive, electrical, furniture and home appliances segments. Its clientele list includes Tata Motors, Maruti Udyog, Hyundai Motors, General Motors, Motherson Automotive Tech & Eng, Pricol, Fiat India, BPL, Tata Auto Plastics Systems, Tractor And Farm Equipments, Sundaram Auto Components, Nilkamal Plastics, Supreme Industries, Titan Plast, Indo Matsushita Appliances Co, Whirlpool of India, Amararaja Batteries, etc.
The company’s production facilities are located at Pudukkottai in Tamil Nadu and Pondicherry. It has the capacity to supply 18000 MTS of compounds per annum and has latest R&D and testing facilities, which include Instron UTM, Ceast Impact and HDT testers, ATLAS weatherometer, UL Chamber, computerised colour matching facilities etc. Both the plants are certified under TS16949 quality standards by Det Norske Veritas.
HSSIL is also evaluating plans to set up a new plant at Uttranchal in order to cater the north Indian market. Along with access to untapped market, the company will also get tax benefit.
The company is also the authorized distributor in India for a whole range of masterbatches, produced by Tosaf Compound Limited, Israel, a global leader in the field of performance masterbatches. Hydro S&S Industries is working in conjunction with Tosaf to service its clients needs of performance masterbatches.
The company has been appointed by ExxonMobil Petroleum & Chemical, BVBA as an authorised distributor in India for their ‘Santoprene’ range of Thermoplastic Elastomers. Field trials are underway to introduce various grades of these compounds into the market.
For the quarter ended December 2007, HSSIL registered sales growth of 25% to Rs. 30.01 crore. OPM improved by 680 basis points to 11.7%, which took OP up by 196% to Rs. 3.52 crore. PBT improved by 568% to Rs. 2.47 crore and PAT was up 645% to Rs. 1.66 crore. For the nine month ended December 2007, the company registered sales growth of 17% to Rs. 84.32 crore. PAT was up 149% to Rs. 4.49 crore.
For the fiscal 2008, we expect HSSIL to register EPS of Rs. 9.6. This is likely to rise to Rs. 12.4 in FY 2009. The share price trades at Rs. 58. While P/E on FY 208 EPS is just 6.1, if falls to 4.7 on FY 2009 EPS.
Performance indicators (RS IN CRORE)
Year Net Op Net EPS Div BV RONW
sales profit profit (Rs) (%) (Rs) (%)
2005-06 81.47 4.36 2.61 1.6 12.00 30.8 5.7
2006-07 100.69 6.99 2.94 4.5 12.00 33.9 12.0
2007-08 (E) 120.00 13.50 6.24 9.6 18.00 41.7 13.4
2008-09 (E) 144.00 17.20 8.09 12.4 20.00 52.0 13.6
Market Wind
Mahindra & Mahindra
(Ticker code 500520)
A fund manager with a leading mutual fund has turned distinctly bullish on Mahindra and Mahindra after the budget. According to him M & M is one of the top beneficiary companies on account of the budgetary provisions. While the debt waiver for farmers would give a boost to demand for tractors and utility vehicles in rural areas, the provision of deduction for dividend tax paid by its subsidiaries will push up the bottom line. “I will not be surprised if the M & M remains in demand even when the overall market is slack,” the fund manager avers and insists the share price is bound to move up.
(FV Rs. 10, H/L Rs. 872/543, CMP Rs.692.80)
Ashok Layland
(Ticker code 500477)
A Mumbai-based investment banker feels that Ashok Leyland will be a scrip to watch on the stock market in the current year. Of course, the company’s fundamentals are sound and its growth prospects are quite encouraging. Now the liberal duty concessions announced in the union budget will further improve its future financial performance. The reduction in the excise duty on buses and their chassis from 16 per cent to 12 per cent will go a long way in giving a boost to its bottom line besides pushing up demand for its buses. He expects the share price to move up to Rs. 50 in due course.
(FV. Rs. 1, 52, H/L Rs.58/26, CMP Rs. 37.45)
Sesa Goa
(Ticker code 500295)
An investment expert at a FII favours Sesa Goa, the iron one mining company located in Goa which now belongs to the Vedanta group. The company is also in the manufacture of pig iron and metallurgical coke, the market for which is growing. The widespread fears of a hike in export duty on iron ore have proved wrong as the Finance Minister Mr. Chidambaram has kept the export duty unchanged. During the third quarter of the current fiscal, the company’s net profit has shot up by 153 per cent to Rs. 493 crore and the FII investment expert expects a further improvement in the last quarter.
(FV. Rs.10, H/L Rs. 3969/1485, CMP Rs. 3464.20)
Infosys Technologies
(Ticker code 500209)
A knowledgeable market operator advises his friends and associates to keep away from IT stocks in general and Infosys Technologies in particular for the time being. The fiscal year 2008-09 is not a good year for Infosys, he maintains and adds “the finance minister has not taken the right step by not extending the STPI tax benefit beyond March 2009, and creating uncertainties. The operator fears the share price may go down to Rs. 1000-Rs. 1200 range
(FV Rs. 5, H /L Rs.2183/1212, CMP Rs. 1546.85)
State Bank of India
(Ticker code 500112)
An analyst of the banking sector working with a leading financial institution is very bullish on State Bank of India. According to him, the prospects for the banking company are highly encouraging and the union budget has brightened them all the more. The writing off of the farm loans will not only bring the funds which were unlikely to be received but will also clean its balance sheet. The relief provided in terms of the distribution of the dividend tax will further push up the bottom line as SBI has several subsidiaries.
(FV Rs. 10, H/L Rs. 2397/797 CMP Rs. 2109.70)
Hitachi Home & Life
(Ticker Code 523398)
A senior fund manager with a FII stronlgy recommends Hitachi Home and Life, the Indian outfit of the Japanese giant Hitachi for medium to long term investment. According to him, the company was on a strong wicket itself and the union budget has made it all the more attractive invesmnt bet. As the demand for refrigerators and air conditioners is likley to shoot up on account of liberal tax concession, so will the sales as well as the bottomline of Hitachi.
Again, the share is available rather cheap around Rs 130, indicating a price equity ratio of just 7. “One should not wonder if the share price doubles within the next 2 to 3 years”, the fund manager insists.
(FV Rs 10, H/L Rs. 180/64 , CMP Rs. 132.60)
Jain Irrigation
( Ticker Code 500219)
A high networth investor who is a buyer in Jain Irrigation strongly advocates the inclusion of this scrip in the portfolios of his friends. According to him, the union budget is extremely favourable to the company. Even before the budget the company has been doing very well with its net profit during the first three quarters amounting to Rs 103 crore as against the net of Rs. 98.80 crore earned in the entire previous year. According to him, the company’s reserves will shortly reach Rs. 100-crore mark against its paid up capital of Rs. 67 cropre and one can certainly expect a bonus issue within a couple of years or so.
( FV Rs. 10, H/L Rs. 766/399, CMP Rs. 716.85 )
Portfolio Choice
Large-Priced Scrip
Wockhardt
Healthy choice
Snapshot
BSE ticker code: 532300
NSE ticker code: WOCKPHARMA
Major activity: Pharmaceutical-India Bulk
Chairman Habil F Khorakiwala
Equity capital: Rs. 54.72 cr. (FV Rs.5)
52 week high/low: Rs. 450/295
CMP: Rs. 332
Market Capitalisation: Rs. 1817 cr.
Recommendation: Buy at declines
Wockhardt which is a global pharmaceutical and biotechnology company engaged in development and manufacture of formulations, biopharma ceuticals, nutrition products, vaccines and active pharmaceutical ingredients (APIs) has healthy prospects ahead. Just consider:
The company with an active multi-disciplinary R&D programme employing over 400 scientists has been a frontrunner in biotechnology research in the country. It has 15 manufacturing plants in India, UK, Ireland, France and US. These have the approval of major regulatory bodies, including US FDA and UK’s MHRA, with capabilities for both finished dosage formulations and APIs. Besides, it has subsidiaries in US, UK, Ireland and France and marketing offices in Africa, Russia, Central and South East Asia.
As per ORG-IMS, the domestic business of the company recorded an annual growth of 19% vis-Ã -vis 13% industry growth rate. Its business in UK, Ireland, Germany and France recorded double-digit growth, almost twice the industry growth in these markets. The European formulation business grew 97% FY 2007. In the UK, the company launched the NRT (Nicotine Replacement Therapy) in patches and lozenges forms for curbing smoker’s habit.
In October 2007, the company acquired Morton Grove Pharmaceuticals, the leading liquid generic and specialty dermatology company in US. With this acquisition, Wockhardt now have the right size of operations in US. It now has a complete range of dosage forms tablets, capsules, liquids and injectibles. Morton Grove has a portfolio of 31 products, 13 of which occupy the No.1 market position. All others are in the Top 3. The overall product range has now swelled to around 56 products for the US market, of which Wockhardt USA Inc is currently marketing 25 products. The US FDA also approved 13 ANDA’s, of which 11 products have already been launched.
Wockhardt has in principle decided to hive off its research & development business into a separate entity. The new company will house the new drug discovery programme and the innovative new technologies being developed by the R&D team.
Wockhardt has a strong track record in acquisition management, with five successful acquisitions in the European market. The European business now contributes about 55% of revenues. The company which is enjoying a leading position in Europe, is steadily growing its market presence in the US. The management is confident of achieving the corporate target of becoming a $1 billion company by 2009.
The company is doing quite well. For the FY ended December 2007, it registered a 53% rise in sales to Rs 2,653 crore. PAT went up by 60% to Rs 386 crore. OPM grew by 100 basis points to 24.1%. For 2008, we expect the company to register EPS of Rs 42.5. The share price trades at Rs 332 P/E works out to just 8.
Performance indicators (RS IN CRORE)
Year Net Op Net EPS Div BV RONW
sales profit profit (Rs.) (%) (Rs) (%)
2006 1731.48 400.27 301.62 27.6 100 87.4 29.3
2007 2653.20 639.10 382.50 35.1 225 111.5 29.7
2008 3250.00 780.00 465.00 42.5 275 141.3 30.0
Medium-Priced Scrip
Jagran Prakashan
Wake up to it
Snapshot
BSE ticker code: 532705
NSE ticker code: JAGRAN
Major activity: Entertainment-Electronic Media
Chairman Mahendra Mohan Gupta
Equity capital: Rs. 60.23 cr. (F V Rs. 2)
52 week high/low: Rs. 169/60
CMP: Rs. 110
Market Capitalisation: Rs. 3312.65 cr.
Recommendation: Buy
Jagran Prakashan is a leading media house, which publishes Dainik Jagran, India’s largest read daily with a total readership of 536 lakh (IRS 2007 R2). It was also voted the most credible and trusted newspaper in India, according to a survey by Globscan, prospects for the company are quite encouraging. Just consider:
Dainik Jagran is now published in 31 editions across 11 states from 29 different facilities. The company also publishes two youth-oriented newspaper brands viz. I-Next a daily bilingual compact and City Plus, an English infotainment weekly compact, besides Sakhi, a monthly magazine targeted at women. The group also publishes Jagran Varshiki, an annual general knowledge digest, and various national and state statistical compilations. All these publications are doing quite well.
JP has consolidated its presence in established markets and added 17 new editions in the last five years. It is also expanding its operations pan India in out-of-home and events management. It has been building on its strong regional franchise and is open to inorganic route to further boost presence and growth.
Jagran Engage provides specialized ‘Out of Home’ (OOH) advertising services with a pan India footprint. Jagran Solutions is its event management business. Since this business compliments the OOH business, the company shares most of its clients with Jagran Engage. The clients of Jagran Solutions include Microsoft, Hutch, Godrej, TVS, ICICI Prudential, Escorts, Standard Chartered Bank, M&M, Bajaj and HLL.
In FY06, JPL entered into a strategic partnership with Independent News and Media (INM), a reputed media house in Europe, publishing 175 titles of newspapers and magazines in nine countries across four continents. INM holds 20.8% stake in JPL and is eager to increase its stake though current FDI regulations do not permit it.
The Hindi language newspapers make 44.6% of the total newspaper industry in India. Thus JPL has the advantage of being the market leader in the largest media segment. The spread of literacy also augurs well for the future growth of the company. The literacy rate in Bihar (47.53%), Jharkhand (54.13%), Uttar Pradesh (57.36%), Jammu & Kashmir (54.46%) are all below the average literacy rate. As a result the growth potential is higher.
We expect the company to register EPS of Rs. 3.4 in FY 2008 and Rs. 4.2 in FY 2009. The share price trades at Rs. 116. While P/E on FY 2008 EPS works out to 34.1, it falls to 27.6 on FY 209 EPS. Due to its premier position in Hindi daily news media which it is capitalising on through ad rate hikes, increased colour advertising, new synergistic launches, outdoor advertising, event management, internet and business newspaper, the company will continue to command premium valuations.
Performance indicators (RS IN CRORE)
Year Net Op Net EPS Div BV RONW
sales profit profit (Rs) (%) (Rs) (%)
2005-06 480.53 70.16 31.70 1.1 50.00 97.0 11.41
2006-07 598.18 119.84 73.48 2.4 75.00 84.9 15.28
2007-08 (E) 770.00 170.00 101.00 3.4 90.00 86.5 15.42
2008-09 (E) 960.00 212.00 125.00 4.2 100.00 88.7 15.81
Small-Priced Scrip
Hydro S&S Industries
Reinforced growth potential
Snapshot
BSE ticker code: 524019
NSE ticker code: Not listed
Major activity: Plastics
Chairman V Srinivasan
Equity capital: Rs. 6.53 cr. (FV. Rs. 10)
52 week high/low: Rs. 82/30
CMP: Rs. 58
Market Capitalisation: Rs. 37.87 cr.
Recommendation: Buy
Headquartered in Chennai, Hydro S&S Industries (HSSIL) is a leading manufacturer and supplier of high quality re-inforced polypropylene compounds, thermoplastic elastomers, and fibre reinforced composites. Polypropylene modified by the addition of reinforcements such as talc, chalk, mica and glass fibre has enabled it to establish itself as a metal substitute in engineering applications. This is a safe investment bet. Just consider:
Established in 1987, in technical collaboration with the Performance Plastics Division of Norsk Hydro Polymers Limited, UK to manufacture polypropylene compounds, the company’s products find application in various industries like automotive, electrical, furniture and home appliances segments. Its clientele list includes Tata Motors, Maruti Udyog, Hyundai Motors, General Motors, Motherson Automotive Tech & Eng, Pricol, Fiat India, BPL, Tata Auto Plastics Systems, Tractor And Farm Equipments, Sundaram Auto Components, Nilkamal Plastics, Supreme Industries, Titan Plast, Indo Matsushita Appliances Co, Whirlpool of India, Amararaja Batteries, etc.
The company’s production facilities are located at Pudukkottai in Tamil Nadu and Pondicherry. It has the capacity to supply 18000 MTS of compounds per annum and has latest R&D and testing facilities, which include Instron UTM, Ceast Impact and HDT testers, ATLAS weatherometer, UL Chamber, computerised colour matching facilities etc. Both the plants are certified under TS16949 quality standards by Det Norske Veritas.
HSSIL is also evaluating plans to set up a new plant at Uttranchal in order to cater the north Indian market. Along with access to untapped market, the company will also get tax benefit.
The company is also the authorized distributor in India for a whole range of masterbatches, produced by Tosaf Compound Limited, Israel, a global leader in the field of performance masterbatches. Hydro S&S Industries is working in conjunction with Tosaf to service its clients needs of performance masterbatches.
The company has been appointed by ExxonMobil Petroleum & Chemical, BVBA as an authorised distributor in India for their ‘Santoprene’ range of Thermoplastic Elastomers. Field trials are underway to introduce various grades of these compounds into the market.
For the quarter ended December 2007, HSSIL registered sales growth of 25% to Rs. 30.01 crore. OPM improved by 680 basis points to 11.7%, which took OP up by 196% to Rs. 3.52 crore. PBT improved by 568% to Rs. 2.47 crore and PAT was up 645% to Rs. 1.66 crore. For the nine month ended December 2007, the company registered sales growth of 17% to Rs. 84.32 crore. PAT was up 149% to Rs. 4.49 crore.
For the fiscal 2008, we expect HSSIL to register EPS of Rs. 9.6. This is likely to rise to Rs. 12.4 in FY 2009. The share price trades at Rs. 58. While P/E on FY 208 EPS is just 6.1, if falls to 4.7 on FY 2009 EPS.
Performance indicators (RS IN CRORE)
Year Net Op Net EPS Div BV RONW
sales profit profit (Rs) (%) (Rs) (%)
2005-06 81.47 4.36 2.61 1.6 12.00 30.8 5.7
2006-07 100.69 6.99 2.94 4.5 12.00 33.9 12.0
2007-08 (E) 120.00 13.50 6.24 9.6 18.00 41.7 13.4
2008-09 (E) 144.00 17.20 8.09 12.4 20.00 52.0 13.6
Market Wind
Mahindra & Mahindra
(Ticker code 500520)
A fund manager with a leading mutual fund has turned distinctly bullish on Mahindra and Mahindra after the budget. According to him M & M is one of the top beneficiary companies on account of the budgetary provisions. While the debt waiver for farmers would give a boost to demand for tractors and utility vehicles in rural areas, the provision of deduction for dividend tax paid by its subsidiaries will push up the bottom line. “I will not be surprised if the M & M remains in demand even when the overall market is slack,” the fund manager avers and insists the share price is bound to move up.
(FV Rs. 10, H/L Rs. 872/543, CMP Rs.692.80)
Ashok Layland
(Ticker code 500477)
A Mumbai-based investment banker feels that Ashok Leyland will be a scrip to watch on the stock market in the current year. Of course, the company’s fundamentals are sound and its growth prospects are quite encouraging. Now the liberal duty concessions announced in the union budget will further improve its future financial performance. The reduction in the excise duty on buses and their chassis from 16 per cent to 12 per cent will go a long way in giving a boost to its bottom line besides pushing up demand for its buses. He expects the share price to move up to Rs. 50 in due course.
(FV. Rs. 1, 52, H/L Rs.58/26, CMP Rs. 37.45)
Sesa Goa
(Ticker code 500295)
An investment expert at a FII favours Sesa Goa, the iron one mining company located in Goa which now belongs to the Vedanta group. The company is also in the manufacture of pig iron and metallurgical coke, the market for which is growing. The widespread fears of a hike in export duty on iron ore have proved wrong as the Finance Minister Mr. Chidambaram has kept the export duty unchanged. During the third quarter of the current fiscal, the company’s net profit has shot up by 153 per cent to Rs. 493 crore and the FII investment expert expects a further improvement in the last quarter.
(FV. Rs.10, H/L Rs. 3969/1485, CMP Rs. 3464.20)
Infosys Technologies
(Ticker code 500209)
A knowledgeable market operator advises his friends and associates to keep away from IT stocks in general and Infosys Technologies in particular for the time being. The fiscal year 2008-09 is not a good year for Infosys, he maintains and adds “the finance minister has not taken the right step by not extending the STPI tax benefit beyond March 2009, and creating uncertainties. The operator fears the share price may go down to Rs. 1000-Rs. 1200 range
(FV Rs. 5, H /L Rs.2183/1212, CMP Rs. 1546.85)
State Bank of India
(Ticker code 500112)
An analyst of the banking sector working with a leading financial institution is very bullish on State Bank of India. According to him, the prospects for the banking company are highly encouraging and the union budget has brightened them all the more. The writing off of the farm loans will not only bring the funds which were unlikely to be received but will also clean its balance sheet. The relief provided in terms of the distribution of the dividend tax will further push up the bottom line as SBI has several subsidiaries.
(FV Rs. 10, H/L Rs. 2397/797 CMP Rs. 2109.70)
Hitachi Home & Life
(Ticker Code 523398)
A senior fund manager with a FII stronlgy recommends Hitachi Home and Life, the Indian outfit of the Japanese giant Hitachi for medium to long term investment. According to him, the company was on a strong wicket itself and the union budget has made it all the more attractive invesmnt bet. As the demand for refrigerators and air conditioners is likley to shoot up on account of liberal tax concession, so will the sales as well as the bottomline of Hitachi.
Again, the share is available rather cheap around Rs 130, indicating a price equity ratio of just 7. “One should not wonder if the share price doubles within the next 2 to 3 years”, the fund manager insists.
(FV Rs 10, H/L Rs. 180/64 , CMP Rs. 132.60)
Jain Irrigation
( Ticker Code 500219)
A high networth investor who is a buyer in Jain Irrigation strongly advocates the inclusion of this scrip in the portfolios of his friends. According to him, the union budget is extremely favourable to the company. Even before the budget the company has been doing very well with its net profit during the first three quarters amounting to Rs 103 crore as against the net of Rs. 98.80 crore earned in the entire previous year. According to him, the company’s reserves will shortly reach Rs. 100-crore mark against its paid up capital of Rs. 67 cropre and one can certainly expect a bonus issue within a couple of years or so.
( FV Rs. 10, H/L Rs. 766/399, CMP Rs. 716.85 )
Monday, March 3, 2008
DETAILS FOR THIS WEEK TREND & TRADING CALLS 3RD MARCH 2008
D espite few expectations from the Union Budget to dole out any mithai, sentiment on the bourses turned negative by the hike in the shortterm capital gains tax and changes in treatment of STT. For the week ended the Sensex closed at 17,579 with weekly gain of 229 points and the Nifty gained 113 points to end at 5,224. The intra week high and low for the Sensex were 18,137 and 17,137 and for the Nifty were 5,368 and 5,055.
FM's claims that the Budget will bring about inclusive growth and growth momentum in economy can be maintained may prove hollow if global inflationary trends continue. Galloping international commodity prices and weak trends in US markets continued to keep the broader sentiment negative. The Budget mithais like farm loan waiver scheme and others clearly indicate that elections are not very far away.
Weekend cues from the US clearly reflect that worst on sub prime and bond insurance is not yet over. Brace for a roller coaster ride with unexpected speed breakers in the markets in coming months. For the week ahead trading range suggested for the Nifty and the Sensex are 5,030 to 5,440 and 16,800 to 18,100.
Expect support on downside for the Nifty and the Sensex at 5,100 and 4,800 and 17,100 and 16,800. For intermediate uptrend key levels to cross are 18,160 and 5,380. Adopt sell on rally strategy for present. Hope for the best, but expect the worst. Being braced for disaster - by diversifying and by learning market history - can help keep you from panicking. Every good investment performs badly some of the time. Intelligent investors stick around until the bad turns back to good.
F&O segment V olumes week segment.
improved during the ended in the derivatives Despite clouds of uncertainty decent rollover of positions for the new settlement at over 75 per cent was seen. While R-pack witnessed muted rollover, metals, pharma and cement counters saw enthusiastic rollovers. Nifty put/call ratio at 1.5 clearly reflects build up of short positions. Other sentiment indicators like implied volatility, open interest and put/call ratios in stock futures indicate highly volatile sessions in near-term.
Despite rally in bank counters after clarification that farmer loan waiver amounts will be compensated by the government, near term outlook is turning hazy. Use sharp declines in PSU banks to accumulate for long term. Pharma and auto stocks witnessed good buying interest after the Budget sops.
Buy Ranbaxy, Aurobindo, Orchid, Hero Honda, Maruti, Tata Motors, M&M and TVS Motors on declines. Expect selling in technology and fertiliser counters on rallies. Oil and Gas stocks are attracting buying at lower levels from savvy market players.
Sources indicate that Budget changes are going to benefit standalone refiners. Stay invested for present. PFC, Cairn, HLL, Glaxo, Gitanjali Gems, Maha Seamless, Voltas and Aban Offshore look good for short-term.
With many holidays curtailing trading days in March settlement F&O players are advised to avoid large positions and quickly change sides in line with the trend. Investigate each stock thoroughly before you buy. It's not enough to do the homework; one has to do the right homework. Different kinds of trades and investments call for different kinds of homework.
There's nothing more dangerous than thinking you've done all the right homework only to find out later that you've been researching the wrong aspects of a company.
Thrust on infrastructure projects and focus on public private partnership projects are likely to benefit wide cross-section of players in the construction sector. BOT players and construction companies with infrastructure assets housed in SPVs are being favoured by savvy fund managers. Dark horse buys in the sector include Roman Tarmat, Madhucon, Pratibha and Shristi Infra. Q3 results of Roman Tarmat clearly reflect the growing profitability and good results in next few quarters. Thrust on road projects is paying off for the company. Buy for target price of Rs 175 in next few weeks. ¦ Increased power sector investment and focus on transmission and distribution segment may improve the prospects of suppliers like AIA Engg, Elecon, KEC Intl, Kalpataru and Crompton Greaves.
With the goveernment stressing focus on UMPPs and also continuation of 80 IA benefits for generation and T&D projects, power and power utilities companies will continue to attract buying at lower levels from long term investors. Use sharp declines to buy REL, Tata Power, CESC and NTPC. ¦ Dull sectors like tyre and paper are likely to be back in limelight on the recent duty cut benefits in Budget. Among the tyre counters buying is suggested in Apollo Tyres, JK Inds and MRF. From the paper sector favourites include TNPL, Sirpur Paper, Speciality Paper and Seshasayee Paper. ¦ Changes in treatment of Securities transaction tax, which is to be treated like any other deductible expenditure against business income (currently allowed as rebate against tax liability) may prove to be big deterrent for day traders and arbitrage players and could impact market liquidity. As STT earlier got a 100 per cent rebate against tax liability and would now attract only a 30 per cent deduction for the highest slab, the tax implications are very high and literally kill arbitrage business. Negative impact on markets is likely to be high.
FM's claims that the Budget will bring about inclusive growth and growth momentum in economy can be maintained may prove hollow if global inflationary trends continue. Galloping international commodity prices and weak trends in US markets continued to keep the broader sentiment negative. The Budget mithais like farm loan waiver scheme and others clearly indicate that elections are not very far away.
Weekend cues from the US clearly reflect that worst on sub prime and bond insurance is not yet over. Brace for a roller coaster ride with unexpected speed breakers in the markets in coming months. For the week ahead trading range suggested for the Nifty and the Sensex are 5,030 to 5,440 and 16,800 to 18,100.
Expect support on downside for the Nifty and the Sensex at 5,100 and 4,800 and 17,100 and 16,800. For intermediate uptrend key levels to cross are 18,160 and 5,380. Adopt sell on rally strategy for present. Hope for the best, but expect the worst. Being braced for disaster - by diversifying and by learning market history - can help keep you from panicking. Every good investment performs badly some of the time. Intelligent investors stick around until the bad turns back to good.
F&O segment V olumes week segment.
improved during the ended in the derivatives Despite clouds of uncertainty decent rollover of positions for the new settlement at over 75 per cent was seen. While R-pack witnessed muted rollover, metals, pharma and cement counters saw enthusiastic rollovers. Nifty put/call ratio at 1.5 clearly reflects build up of short positions. Other sentiment indicators like implied volatility, open interest and put/call ratios in stock futures indicate highly volatile sessions in near-term.
Despite rally in bank counters after clarification that farmer loan waiver amounts will be compensated by the government, near term outlook is turning hazy. Use sharp declines in PSU banks to accumulate for long term. Pharma and auto stocks witnessed good buying interest after the Budget sops.
Buy Ranbaxy, Aurobindo, Orchid, Hero Honda, Maruti, Tata Motors, M&M and TVS Motors on declines. Expect selling in technology and fertiliser counters on rallies. Oil and Gas stocks are attracting buying at lower levels from savvy market players.
Sources indicate that Budget changes are going to benefit standalone refiners. Stay invested for present. PFC, Cairn, HLL, Glaxo, Gitanjali Gems, Maha Seamless, Voltas and Aban Offshore look good for short-term.
With many holidays curtailing trading days in March settlement F&O players are advised to avoid large positions and quickly change sides in line with the trend. Investigate each stock thoroughly before you buy. It's not enough to do the homework; one has to do the right homework. Different kinds of trades and investments call for different kinds of homework.
There's nothing more dangerous than thinking you've done all the right homework only to find out later that you've been researching the wrong aspects of a company.
Thrust on infrastructure projects and focus on public private partnership projects are likely to benefit wide cross-section of players in the construction sector. BOT players and construction companies with infrastructure assets housed in SPVs are being favoured by savvy fund managers. Dark horse buys in the sector include Roman Tarmat, Madhucon, Pratibha and Shristi Infra. Q3 results of Roman Tarmat clearly reflect the growing profitability and good results in next few quarters. Thrust on road projects is paying off for the company. Buy for target price of Rs 175 in next few weeks. ¦ Increased power sector investment and focus on transmission and distribution segment may improve the prospects of suppliers like AIA Engg, Elecon, KEC Intl, Kalpataru and Crompton Greaves.
With the goveernment stressing focus on UMPPs and also continuation of 80 IA benefits for generation and T&D projects, power and power utilities companies will continue to attract buying at lower levels from long term investors. Use sharp declines to buy REL, Tata Power, CESC and NTPC. ¦ Dull sectors like tyre and paper are likely to be back in limelight on the recent duty cut benefits in Budget. Among the tyre counters buying is suggested in Apollo Tyres, JK Inds and MRF. From the paper sector favourites include TNPL, Sirpur Paper, Speciality Paper and Seshasayee Paper. ¦ Changes in treatment of Securities transaction tax, which is to be treated like any other deductible expenditure against business income (currently allowed as rebate against tax liability) may prove to be big deterrent for day traders and arbitrage players and could impact market liquidity. As STT earlier got a 100 per cent rebate against tax liability and would now attract only a 30 per cent deduction for the highest slab, the tax implications are very high and literally kill arbitrage business. Negative impact on markets is likely to be high.
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