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Posts
Monthly Newsletter in English
2 months ago
Friday, May 30, 2008
Stock market updates
Exchange rates table-30 may 2008
Exchange rates table
No. 105/A/NBP/2008 of 2008-05-30
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Thursday, May 29, 2008
Exchange rates table-28 may 2008
Exchange rates table
No. 103/A/NBP/2008 of 2008-05-28
| Currency | Symbol | Mid-rate |
|---|---|---|
| Australian Dollar | 1 AUD | 2,0724 |
| Brazilian Real | 1 BRL | 1,2968 |
| Bulgarian Lev | 1 BGN | 1,7370 |
| Canadian Dollar | 1 CAD | 2,1736 |
| Chinese Yuan Renminbi | 1 CNY | 0,3113 |
| Croatian kuna | 1 HRK | 0,4687 |
| Czech Koruna | 1 CZK | 0,1350 |
| Danish Krone | 1 DKK | 0,4554 |
| Estonian Kroon | 1 EEK | 0,2171 |
| Euro | 1 EUR | 3,3973 |
| Hong Kong Dollar | 1 HKD | 0,2770 |
| Hungarian Forint | 100 HUF | 1,3938 |
| Iceland Krona | 100 ISK | 2,9522 |
| Indonesian Rupiah | 10000 IDR | 2,3206 |
| Japanese Yen | 100 JPY | 2,0733 |
| Latvian Lats | 1 LVL | 4,8533 |
| Lithuanian Litas | 1 LTL | 0,9839 |
| Malaysian Ringgit | 1 MYR | 0,6696 |
| Mexican Peso | 1 MXN | 0,2082 |
| New Zealand Dollar | 1 NZD | 1,6982 |
| Norwegian Krone | 1 NOK | 0,4319 |
| Philippine Peso | 1 PHP | 0,0495 |
| Pound Sterling | 1 GBP | 4,2787 |
| Romanian Leu | 1 RON | 0,9253 |
| Russian Ruble | 1 RUB | 0,0916 |
| Singapore Dollar | 1 SGD | 1,5860 |
| Slovak Koruna | 1 SKK | 0,1103 |
| South African Rand | 1 ZAR | 0,2793 |
| South Korean Won | 100 KRW | 0,2089 |
| Swedish Krona | 1 SEK | 0,3638 |
| Swiss Franc | 1 CHF | 2,0952 |
| Thai Baht | 1 THB | 0,0669 |
| Turkish Lira | 1 TRY | 1,7417 |
| Ukrainian Hryvnia | 1 UAH | 0,4569 |
| US Dollar | 1 USD | 2,1610 |
| SDR (IMF) | 1 XDR | 3,5223 |
Price watch
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Stock market: Reliance Communications, Reliance Power
Equities are set to open lower on Monday in line with Asian peers as rising oil prices and its impact of inflation will continue to weigh on investor sentiment. Analysts anticipate further weakness this week.
“The current range for Nifty is 4850-5080. Breakout of the band on the lower side and violation of 4720 would increase the probability of markets testing January ‘08 and March ‘08 lows,” cautions Bharat Dalal, fund manager at Dawnay Day AV Financial Services.
South Africa’s MTN and Anil Ambani owned Reliance Communications may shortly announce that they are in exploratory talks for an alliance. According to banking sources, discussions between the two began last week. MTN has offered RCOM a structure similar to the one that Bharti turned down.
In another development, Reliance Communications is close to take over London based global virtual network operator VANCO. The bids for the buyout were made on Friday.
Petrol, a fuel used primarily by urban consumers could soon be selling at market prices. This would mean an increase of Rs 10-16 per litre at current prices. Officials told ET that a proposal to sell petrol at market prices, while keeping diesel, cooking gas and kerosene at subsidised rates was under consideration.
Mid-size technology services and IT engineering company firm Rolta is learnt to be close to acquiring a US based IT firm in the area of business intelligence. The firm has been searching for an asset that will add to its skills on the IT side and complement its core strengths in geographic information systems and engineering.
Reliance Power which was awarded the Sasan ultra mega power project has advanced the date of commissioning of the UMPP by three years while Tata Power has advances dates for commissioning of Mundra UMPP by 17 months. This has been done on insistence of Centre which is struggling to achieve the targeted capacity addition of 78,500 mega watt in the 11th plan.
Reliance Power is also planning to bid for PowerSeraya and Senoko Power, which account for more than 60 per cent of the power produced in Singapore. GMR Infrastructure is also in the fray, reports Business Standard.
Housing Development and Infrastructure is diversifying into the oil and gas sector. The company will bid for 10 of the 57 hydrocarbon blocks on offer in the seventh round of the New Exploration Licensing Policy, reports DNA Money.
Initial public offering of Niraj Cement Structurals will open for subscription Monday. The price band of the issue is fixed between Rs 175-190. Issue closes May 30.
Stocks to watch
Equities are seen higher on Tuesday tracking a rebound in Asian peers as bargain hunters scoured the market after five days of losses. However, rising inflation and high oil prices will keep investors uncertain about the outlook.
Shares of oil marketing companies could find comfort in the government’s dual strategy of fuel price hikes and duty cuts. So, even if the retail petrol and diesel prices are increased, a duty cut would make the net increase marginal. Petroleum Minister Murli Deora is schedule to meet Finance Minister P Chidambaram later today on this issue, having already deliberated on it with Prime Minister’s Economic Advisory Committee Chairman C Rangarajan, reports The Economic Times. Crude oil was up at $133/barrel following supply concerns.
The dollar continued to trade firm at 42.85 up 0.10 paise against the rupee on Tuesday. The rupee ended at 42.73/74 per dollar on Monday. This will help IT stocks to inch upwards.
Warburg Pincus-controlled WNS holdings is working on an out-right acquisition firm Firstsource Solutions, in which ICICI Bank holds 26.8 per cent stake. WNS is looking to buy out ICICI Bank’s stake and mop up shares held by some other private equity investors. The scrip ended or 2.75 lower at Rs 40.7 on the BSE.
The proposed deal between Reliance Communication and MTN may involve open offer by the South African telco to the shareholders of RCOM. The broad contours of the deal, on which both parties began exclusive talks on Monday, may result in a transfer of Anil-Ambani’s two-third equity stake in RCOM to MTN shareholders, against his acquisition of around one-third equity in the foreign company. Shares of Reliance Communications ended 5.08 per cent lower at Rs 543.20.
Tata Consultancy Services has won a $100 million five-year contract with NXP Semiconductors. The $6.3-billion Netherland-based company, founded by Philips, is among the top 10 semiconductor companies.
Kirloskar Electric has mounted a bid to acquire Germany’s Lloyd Dynamowerke based on an estimated enterprise valuation of around $100 million. The share ended 5.45 per cent lower at Rs 183.10.
Omaxe is entering into power generation by forming a joint venture with Isolux, a Spanish firm, reports DNA Money. The company plans to set up a 150 mw unit at Ennore near Chennai. The company is expected to hold 51 per cent stake in the joint venture, with Isolux holding the rest.
HTMT Global will be taking over a mortgage-specific company in the UK soon, reports DNA Money. The company is expected to invest over $150 million for this foray into Europe.
Results today: Bajaj Electricals, Deepak Nitrite, Emco, Jindal Steel & Power, Neyveli Lignite, Opto Circuits and Tata Coffee
Stocks to buy
Analyses of selected stocks by broking firms
AKRUTI CITY
Broking firm: Prabhudas Lilladher
Price at the time of recommendation: Rs 1,079
Target price: Rs 1,500
Rationale: Project execution is on track. Akruti City has a product portfolio of 39 projects and a development potential of 45.5 mn sq feet of which 20.46 mn sq feet is Akruti’s share of development. Apart from this the company is developing two Township projects and the Baroda Biotech park. Together the two township projects at Panvel and Uran should be able to generate a developable area of 116 mn sq feet and the Baroda Biotech Park should generate a developable area of 20.6 mn sq feet out of which Akruti’s share is 13.8 mn sq feet.
The management is confident of executing development of the 20.5 mn sq feet without much funding constraint. However, has indicated that they are looking at raising additional funds either at the entity level or at the SPV level to fund land acquisition of the two township projects. The management does not see much pressure on prices for projects that they plan to develop in the medium term since projects are in specific prime locations and are targeted at a focused market. Hence execution so far is on track. Based on expected development schedule for various projects being developed by the company we arrive at a NAV value Rs 100 bn which works out to a per share value of Rs 1500. We maintain Outperformer rating on the stock.
Closing price on Friday, May 23, 2008: Rs 999
BALAJI TELEFILMS
Broking firm: Angel
Price at the time of recommendation: Rs 181
Target price: Rs 275
Rationale: Balaji Telefilms started to witness better times from the December quarter (3QFY2008) with the commencement of three new programmes, two on the newly launched 9X channel and one on Sony, thus re-initiating its relationship with the latter. The company is also scheduled to launch the mythological, Mahabharatha, on 9X. Also in the pipeline are two Reality shows, one on 9X called Kaun Jeetega Bollywood Ka Ticket and the other one on Sony. Overall, with these programmes getting launched, the company would be diversifying its revenue stream to some extent and reduce its dependence on Star.
Also, a slew of general entertainment channels are expected to be launched soon, which would open up further opportunities for Balaji to provide prime time content. Further, the company’s joint venture with Star, though delayed, could spawn 3-4 channels over the next few quarters in South Indian languages, which would augur well for Balaji’s content supply business. However, we have not assumed any contribution from this JV in our projections. The company has also ventured into movie production, co-production and distribution to widen its revenue stream and reduce risks. Balaji Motion Pictures, a wholly-owned subsidiary , released three movies during the year, of which two (Shootout at Lokhandwala and Bhool Bhulaiya) had a decent run. For FY2009, the company has four new film projects in the offing including the much-awaited Sarkar Raj.
While this film will be distributed by Balaji Motion Pictures, the other films (EMI, CKkompany and Mission Istanbul) are being coproduced by it. For FY2008, the Motion Pictures Division reported a Topline of Rs36.5cr and Net Profit of Rs5.5cr. We have not factored in any profit/losses that may arise from this business segment.
On the realisations front, Balaji faced pressure on commissioned realizations during the quarter. But while we do not expect it to command premium realisations in the wake of stabilised TRPs of its programmes, we believe it would have a marginal upper hand when its contract with Star comes up for re-negotiation in June 2008. This is because Star Plus continues to derive a substantial chunk of its TRPs from Balaji serials. Also, with new GECs likely to get launched, Balaji Telefilms seems to be in a comfortable position.
At current levels of Rs181, the stock trades at 9.8x FY2010E EPS. Balaji continues to be amongst the most preferred content providers for a general entertainment channel. We remain confident of its growth prospects going forward. Nonetheless, the biggest risk to our assumptions is any of the company’s key programmes going off-air without an equally strong substitution. We maintain a Buy on the stock, with a marginally reduced Target Price of Rs275 (Rs285) factoring in a 3% reduction in our FY2010E EPS.
Closing price on Friday, May 23, 2008: Rs 181
Friday, May 23, 2008
Exchange rates table,23 may 2008
| Currency | Symbol | Mid-rate |
|---|---|---|
| Australian Dollar | 1 AUD | 2,0812 |
| Brazilian Real | 1 BRL | 1,3079 |
| Bulgarian Lev | 1 BGN | 1,7432 |
| Canadian Dollar | 1 CAD | 2,1952 |
| Chinese Yuan Renminbi | 1 CNY | 0,3122 |
| Croatian kuna | 1 HRK | 0,4703 |
| Czech Koruna | 1 CZK | 0,1359 |
| Danish Krone | 1 DKK | 0,4570 |
| Estonian Kroon | 1 EEK | 0,2179 |
| Euro | 1 EUR | 3,4095 |
| Hong Kong Dollar | 1 HKD | 0,2778 |
| Hungarian Forint | 100 HUF | 1,3899 |
| Iceland Krona | 100 ISK | 2,9937 |
| Indonesian Rupiah | 10000 IDR | 2,3256 |
| Japanese Yen | 100 JPY | 2,0879 |
| Latvian Lats | 1 LVL | 4,8791 |
| Lithuanian Litas | 1 LTL | 0,9874 |
| Malaysian Ringgit | 1 MYR | 0,6760 |
| Mexican Peso | 1 MXN | 0,2090 |
| New Zealand Dollar | 1 NZD | 1,6986 |
| Norwegian Krone | 1 NOK | 0,4308 |
| Philippine Peso | 1 PHP | 0,0498 |
| Pound Sterling | 1 GBP | 4,2852 |
| Romanian Leu | 1 RON | 0,9273 |
| Russian Ruble | 1 RUB | 0,0919 |
| Singapore Dollar | 1 SGD | 1,5947 |
| Slovak Koruna | 1 SKK | 0,1096 |
| South African Rand | 1 ZAR | 0,2828 |
| South Korean Won | 100 KRW | 0,2069 |
| Swedish Krona | 1 SEK | 0,3666 |
| Swiss Franc | 1 CHF | 2,1069 |
| Thai Baht | 1 THB | 0,0682 |
| Turkish Lira | 1 TRY | 1,7392 |
| Ukrainian Hryvnia | 1 UAH | 0,4568 |
| US Dollar | 1 USD | 2,1675 |
| SDR (IMF) | 1 XDR | 3,5372 |
Stocks to watch on Wednesday
Equities are likely to extend Tuesday’s losses tracking declines in overseas markets. Market sentiment turned jittery after crude prices hit yet another record high.
Oil hovered just above $129 on Wednesday, within striking distance of the previous session's record high as OPEC again said it would not raise supply while demand rages on and a weaker dollar supports funds buying.
There are concerns on inflation front also as RBI governor Yaga Venugopal Reddy on Tuesday said that inflation rate, which is at its highest in three-and-a-half years, is totally unacceptable and the official data underestimates the actual rate of inflation.
In a blow to Reliance Industries’ exploration story, the government has confiscated the company’s five blocks in the Kerala-Konkan basin after it failed to meet the minimum work programme. Of the five blocks, one lies in offshore shallow water and four in deepwater. RIL held seven blocks in the basin. The director general of hydrocarbons (DGH) has written to RIL that the blocks stand “relinquished” and it should immediately submit the data on them. Shares of Reliance Industries closed at Rs 2,602, down 1.26 per cent on the BSE.
In another development on SEZ front, Business Standard reported that 10,000-hectare Mumbai Special Economic Zone project, being set up by Reliance Industries Chairman Mukesh Ambani and his associate Anand Jain on the outskirts of Navi Mumbai, appears to take off with the Maharashtra government clearing the developer's rehabilitation and resettlement package.
Rising cost of raw materials had hit ACC in the fiscal’s first quarter, but the second quarter profitability for the company, could also see a fall, a senior company executive said on Tuesday. “It is quite clear that margins in Q2 (second quarter) will be under further pressure,” managing director Sumit Banerjee said at a conference. Shares of ACC closed 682.45, up 0.35 per cent on the BSE.
Aiming to grow its castings business, Mahindra &Mahindra is learnt to be close to buying out partner Hitachi Metals’ stake in Mahindra Hinoday, a manufacturer of components for automotive, electronics, telecom and other sectors. M&M holds 66 percent in the Pune-based joint venture while Hitachi Metals owns the remaining 34 per cent stake. M&M bought the stake in 2005 from DG Piramal, in what was then DGP Hinoday. Shares of Mahindra &Mahindra closed 1.44 per cent lower at Rs 652.65 on the BSE.
Orbit Corporation is close to acquiring Orkay Mills, located at Andheri-Kurla road near Saki Naka for over Rs 150 crore. Orkay Mills is a four lakh square feet property which Orbit plans to develop into a commercial complex. The stock gained 4.66 per cent to close at Rs 522.95 on the BSE.
Ranklin Solutions will acquire 51 per cent in BPO/ITES company Logic Bytes for a total consideration of Rs 91.80 lakh. Shares of Ranklin Solutions closed at Rs 149.40, up 9.81 per cent on the BSE.
Tata Tea is eyeing to acquire Turkish tea-maker Dogus Cay, reports DNA Money. The report quoted Dogus Cay chairman Suleyman Karakan saying that talks were on for a possible partnership with Tata Tea. The stock closed at Rs 922.15, down 2.64 per cent on the BSE.
Key Results Today: Alfa Transformers, Bajaj Auto Finance, Gabriel, Gammon Infra, HDIL and Thermax.
What are the stocks we can buy
MUMBAI: Prabhudas Lilladher has maintained ‘buy’ on Reliance Communications for a target price of Rs 706, an upside of 26.2 per cent from current level. RCom has guided for a potential market size of $ 275 billion for its global assets, which will be offering a diverse portfolio of global communication business services, including global voice, managed network, carrier ethernet and fibre capacity businesses. Total investments in Reliance Globalcom stands at $ 2.75 billion at the end of 2007-08.
Reliance Infratel aims to increase its tower portfolio to 70,000, thus enabling it to have 280,000 slots by 2009-10. The company has hinted at using around
110,000-120,000 slots for captive use. Further, the company is in active talks with two new entrants for pan-India tower portfolio.
Rcom has outlined to spread its GSM network to cover 90 per cent of the population by 2009. This will be the fastest rollout of GSM network in India. It has already signed conclusive arrangements of $ 1.3 billion for electronic equipment with vendors, including Huawei, ZTE and Alcatel Lucent. The company management has hinted at net additions to pick-up in subsequent months due to increase in its coverage of existing eight GSM circles.
With favourable regulatory developments in the last couple of quarters, Prabhudas believes Rcom is in a sweet spot. At the market price of Rs 559, the stock trades at a PER of 14.2x and at an EV/EBITDA of 9.8x FY10E earnings. Unlocking value in Reliance Globalcom and Reliance Infratel could be key catalysts in the next 6-12 months, says Prabhudas.
Sun TV
Prabhudas has maintained ‘market performer’ on the stock for a target price of Rs 367, an upside of 9 per cent from current level. Sun TV is expected to maintain 18 per cent CAGR in revenue over FY07-10E, which will be largely driven by annual advertisement rate hikes and increasing subscription revenue from addressable platforms such as DTH.
Operating margin is likely to expand by 300 basis points on the back of improving synergies post amalgamation and increase in DTH-related revenue. Earnings as a result, are likely to grow at 24 per cent CAGR FY07-10E.
Sun TV, along with its subsidiaries – Kal Radio and S FM, has been allotted licences for setting up 45 radio stations across India, for which it has paid licence fee of Rs 180 crore. During 2007-08, the company also acquired minority stake (48%) in Red FM, which operates three stations. With 37 operational stations at the end of FY08E, the company’s rollout plans are on track.
With competition heating up in the regional broadcasting space, Sun TV’s channels are expected to face the heat. However, the management seems confident, despite increasing competition, of sustaining their leadership position in all four states.
The stock is trading at 33.2x and 27.9x FY09E and FY10E respectively. Prabhudas has turned over their PER from FY09E to FY10E, at Rs 362 for its broadcasting operations and Rs 4.6 for its radio operations, valuing it at 1x investment value of Rs 180 crore.
Anant Raj Industries
Prabhudas has maintained ‘outperformer’ on the stock for a target price of Rs 282, an upside of 16.2 per cent from current level. Anant Raj is an NCR-based real estate company having a land bank of 982 acres, translating into approximately 70 million square feet of developable area.
The company believes in being location specific, however, it is diversified across varied commercial segments like IT, SEZ, hospitality and retail, as well as residential development.
The company has a strong pipeline of projects and is currently working on two retail projects, two hospitality projects and one IT Park. Besides, it is also working on an SEZ project, which is likely to be completed by December 2009. It is also likely to embark on two residential projects and a few hospitality projects.
The company has adopted the rental model, largely for its commercial projects, which comprises 75 per cent of its land bank. The other 25 per cent is residential projects, which are on an outright sale model.
Based on projects that are nearing completion, the company is likely to
earn a strong flow of rental income of Rs one crore per day starting August 2008, which it targets to increase to Rs two crore per day by 2008-09 and Rs four crore per day by 2009-10.
Prabhudas expects strong growth of 52.9 per cent and 111.5 per cent in the company’s revenue over 2008-09 and 2009-10. The corresponding growth in
profit after tax is likely to be 44.7 per cent and 95 per cent respectively. The brokerage working of the company’s NAV stands at Rs 332. The target price is based on a 15 per cent discount to NAV on account of the decline in peer group valuations.
Wipro
Prabhudas has maintained ‘marketperformer’ on the stock for a target price of Rs 512 (16x FY10E earnings). The management has maintained that it is not witnessing any pricing pressure yet, with new contracts commanding 3-5 per cent increase in billing rates. However, over the last few quarters, the increase in billing rates for Wipro has been one of the lowest as compared to its peers.
Wipro has indicated no loss of momentum in deal pipeline. While the past few months had witnessed decision paralysis with no decisions being taken by clients, the management indicates that the momentum appears to be building up.
BFSI contributes around 25 per cent to Wipro’s topline. The company believes that the segment will grow at the company average growth rate. The segment has grown at a CQGR of 10.1 per cent and 8.2 per cent over the last four and eight quarters respectively.
Consumer segment has grown at a CAGR of around 55 per cent over the last four years. The consumer division has done well clocking growth well above industry averages. Santoor brand has been recognised as India’s No. 3 toilet soap brand by value.
Prabhudas expects Wipro to report revenue of Rs 25,280 crore for 2008-09 and Rs 31,160 crore for 2009-10, implying a year on year growth of 28.1 per cent and 23.3 per cent respectively. Prabhudas expects its EBIT margin to be stable at 16.1 per cent and 16.2 per cent respectively over the same period. Earnings over the same period are expected to grow by 16.7 per cent and 24 per cent to Rs 25.8 and Rs 32.
At the market price of Rs 501, the stock trades at 19.4x FY09E and 15.6x FY10E earnings, respectively.
Sensex slides as fears of more RBI action rise
MUMBAI: Equity benchmarks fell 1.5% on Friday, as persistent inflationary pressures, coupled with rising oil prices, heightened fears of further monetary tightening by RBI. Analysts fear that further moves to absorb money supply from the banking system would delay reversal in the interest rate cycle and weigh down economic growth.
The BSE Sensex fell 257.47 points or 1.52% to close at 16,649.64. NSE Nifty fell 78.9 points or 1.57% to close at 4,946.55. Mid and small-cap shares, which have outperformed their frontline counterparts in recent sessions, also succumbed to the bear onslaught on Friday, with losers outnumbering gainers 1924:795 on the BSE. Optimists are concerned about Nifty breaching a key support level of 4,950 on Friday. Technical analysts feel that if the index closes below this level for a few more sessions, there could be further downside.
Weak European markets added to the discomfort of the bulls in India. Elsewhere in Asia, all markets, with exception to Japan, ended roughly 1% lower after a flat opening. US equity market futures too were trading lower few hours before the opening of the markets there.
Back home, sustained rise in crude prices is expected to force the government hike the administered auto fuel prices. Any such move is likely to drive inflation higher, with some analysts estimating double digit inflation over the next couple of months.
“In spite of weakening domestic macro fundamentals, inflation continues to rise, money supply growth remains above RBI’s target level and liquidity overhang shows no signs of abating. With CRR (cash reserve ratio or the amount banks need to keep with the RBI in cash) becoming the instrument of choice for RBI, further hikes in CRR cannot be ruled out in our view, though we expect no action on policy rates,” brokerage India Infoline in a recent client note.
Inflation data for the week ended May 10 stood in line with market expectation at 7.82% as compared to 7.83% for the week earlier.
But, optimists have not given up hope. “We don’t see significant downside to the markets from these levels. As our strategy, we have started deploying some cash in the markets. Going forward, investors will have lot of opportunities to invest as there is also a healthy pipeline of IPO,” says Kotak Securities senior VP and head-PMS Kunj Bansal.
As per the provisional data, foreign institutional investors (FIIs) have been net sellers of Rs 654 crore, even as domestic institutional investors (DIIs) absorbed the selling by buying into Rs 750 crore on Friday.
Combined turnover in the cash and derivatives segment on both the stock exchanges stood at approximately Rs 60,000 crore, lower than previous day’s about Rs 65,000 crore. The turnover was lower as investors stayed away from taking new positions due to last session of the week.
Fuel price hike a matter of time
NEW DELHI: Consumers need to brace themselves for a hike in petrol and diesel prices over the next few weeks. The government is exploring a combination of measures including duty rejig, higher subsidies and raising fuel prices.
“A price hike is inevitable,” petroleum secretary MS Srinivasan said without elaborating on products and quantum of the hike. The petroleum ministry also wants cut in customs duty on crude oil and products, besides reducing excise duty on petrol and diesel, a move that may not be easily acceptable to the finance ministry.
Oil company scrips reacted positively to the possibility of a price hike which would bring down their losses. Market leader IOC’s scrip rose 3.2% to Rs 420.05, HPCL advanced 3.5% to Rs 242.65, while BPCL gained 3.6% to Rs 359.20. Global crude prices softened and was ruling at $130 a barrel on Friday.
Hectic parleys were on till late Friday evening to work on a possible solution to the oil crisis. Prime Minister Manmohan Singh met petroleum minister Murli Deora on Friday morning to take stock of the situation. A high-level meeting led by PM’s principal secretary, TKA Nair, finance secretary D Subbarao, petroleum secretary and CEOs of the three oil PSUs, took place on Friday evening to deliberate on the possible options before the government.
According to government sources, the meeting failed to reach a consensus on either the price hike or duty rejig proposal. A hike of Rs 4 per litre in petrol and Rs 2 per litre in diesel is one of the proposals doing the rounds. However, ET could not get an official confirmation on this.
Government officials said that the decision on a price hike will have to be taken at the highest (Cabinet) political level and this may take a while. “This was only the first round of meeting. Oil companies are bleeding and the government will have to act fast,” he said.
Officials of oil companies said that the total oil subsidy bill has to be limited to Rs 70,000 crore at the maximum. Although, it’s a matter of time before the government bites the price-hike bullet, political realities like poll results of Karnataka and the continued rise in inflation rates would play a role in the timing of the decision.
It is estimated that under the prevailing situation under-recoveries of three PSUs may touch Rs 180,000 crore in 2008-09 compared with Rs 77,303 crore in 2007-08.
The government swung into action after oil marketing companies pressed the panic button. “A bailout package is a must in a couple of days. Two of the navratnas — BPCL and HPCL — have informed that they would turn red in the current fiscal if the prevailing condition continues,” an official in the petroleum ministry told ET.
Crude import bills of refining companies have skyrocketed, with Indian crude basket touching $130/barrel. The government is forcing them to suffer losses by holding the price line. It is learnt that companies are losing Rs 600 crore a day on fuel sales.
Oil companies, who are bearing the brunt, however, feel that retail prices should be released by a minimum of Rs 5 a litre to keep losses under check.
Thursday, May 22, 2008
stock market update
Across-the-board selling dragged the market by over 1.95% as indices followed the weak international markets and overlooked the strong quarterly numbers from heavyweights, Cummins, Bajaj Holding, Balaji Telefims and Moser Baer. The market never recovered after resuming 138 points lower at 17105 and the sentiment turned extremely bearish as the trading progressed. Followed by a sharp fall in heavyweights, correction in bank, realty, CG, power and auto stocks dragged the index below the 16900 mark in noon trades to touch the day's low of 16863, down 380 points from yesterday's close of 17243. Finally, the Sensex tumbled by 336 points at 16907 while the Nifty dropped 92 points to close at 5025.
All the sectoral indices took heavy hammering. The BSE Bankex led the slump and dropped 3.06% at 8,376 followed by the BSE Reality index (down 2.68% at 7,693), the BSE CG index (down 2.40% at 13,342), the BSE Power index (down 2.12% at 3,233) and the BSE Auto index (down 2.05% at 4,685).
The market breadth was extremely weak. Of the 2,791 stocks traded on the BSE 1,684 stocks declined, 1,040 stocks advanced and 67 stocks ended unchanged. While only one Sensex stock advanced, 29 declined today. Among the major losers, Tata Motors slumped 3.98% at Rs661.45, Reliance Infra shed 3.97% at Rs1,322.95, ICICI Bank declined 3.39% at Rs880.40, SBI lost 3.28% at Rs1,607, Reliance Communication shed 3.16% at Rs584.65, Jaiprakash Associates fell 2.65% at Rs246.10, Ambuja Cement slipped by 2.61% at Rs104.30, Larsen & Toubro plunged 2.57% at Rs2,916.80 and HDFC Bank tumbled 2.40% at Rs1,379.90. Other blue chips also fell around 1-2% each. Among the gainers only Hindalco Industries added 0.20% at Rs197.65.
Among the bank stocks, Indian Overseas tanked 4.82% at Rs138.25, Axis Bank slumped 4.73% at Rs828.40, Yes Bank dropped 4.52% at Rs161.45, PNB shed 3.70% at Rs537.60 and Kotak Bank was down 3.12% at Rs714.85.
Ispat Industries was the most actively traded counter with volumes of over 4.32 crore shares traded on the BSE followed by IFCI (3.13 crore shares), Nagarjuna Fertilizers (1.11 crore shares), RNRL (1.09 crore shares) and Cybermate (0.99 crore shares).
Value-wise Reliance Capital clocked a turnover of Rs225 crore followed by IFCI (Rs201 crore), Cairn India (Rs189 crore), R Power (Rs180 crore) and Reliance Industries (Rs176 crore).
Wednesday, May 21, 2008
Element of Risk
Ashok Kanetkar is a retired executive with senior-level experience at several companies, most recently Cummins India. Apart from his experience of the corporate sector as well as the engineering industry - he is an articulate and dedicated student of Graham, Buffet and other investment gurus.
Life is a series of events, some predictable, some unpredictable. Those that are unpredictable but turn out to the advantage of the individual are called 'pleasant surprises' while those, which turn out to be otherwise, is termed 'rude shocks'.
No one likes rude shocks and therefore there is a constant endeavor to shore up all defenses against them and this tendency gets accentuated as age advances. In matters related to investment this desire to seek protection against shocks is quite pronounced and investors spend considerable time and mental energy in analysing the risks involved in putting money in a particular area.
Further, in the field of investment, general perception is that investment in shares is riskier than investment in good fixed income bonds and deposits. Without going into comparison between the two it is necessary to take a look at the risks related to common stocks.
The first justifiable concern in relation to any investment is the security of the principal amount itself. The question, 'Is my money safe and will it be returned to me as per the promise given?' is uppermost in investor's mind.
The second concern is related to the return on investment. An investor needs an assurance that whatever is promised, will be delivered. In the case of shares the answer on both the counts is slightly complex. Correct evaluation of the risks involved in a particular share, therefore, becomes a little complicated exercise than what would be for a simple fixed deposit in a bank.
Let's look at the concern about the capital as perceived in relation to securities. Many people feel that decline in value is a major risk involved in this type of investment. Yet, since there is also a possibility that the value may increase we have to call investment in shares both safe as well as unsafe.
A lot depends on the initial evaluation of the company whose shares are purchased. If shares of good companies with standing in the market and those, which have survived for number of years, are purchased then generally there is no reason to worry about the capital. Yet many people buy shares without paying any attention to this aspect.
Investment is made more out of false grandiose promises on part of the management or on the recommendation of a broker or a friend without really taking a hard look at the company management, its financial resources and the product line. In such a case if the capital is lost it should really be attributed to foolishness on part of the investor and not to any undue risk.
Even with good purchases a decline can occur. If this decline is of temporary nature it need not worry the investor unless for some reason he is forced to sell his holding. So if we apply the concept of risk solely to the loss of value then we must agree that such a loss may occur through actual forced sale at a lower value, or caused by a significant deterioration in company's position or more frequently, as a result of paying more than the intrinsic value of the share.
Enough signs about deteriorating performance of the company are available to an alert investor so that he can cut his losses. If he fails to read them or if he miscalculates about the nature of decline then there is a possibility of a loss and to that extent we must agree that investment in securities is a risky affair.
A deposit in bank or bonds will have to be termed unsafe if the interest payment is withheld for some reason or principal amount is held back. Similarly a reduction or passing of a dividend in the case of a company share should also make that investment unsafe. For an intelligent investor signs of a poor performance are apparent if he is alert and watches the quarterly results. Thus if he senses that the dividend yield is likely to fall below his expectations he can exercise the exit route.
However if at that time if the market price is less than what he initially paid for the purchase then a loss will occur. If the investor reads the drop in dividend yield as a passing phase then he may continue to remain the owner of the securities. To arrive at a decision for sale an investor may look at average dividend yield over a number of years. Generally matters even out over a five-year period.
Frauds and scams, which have a habit of occurring from time to time, need not be considered specifically in relation to securities because they can occur in any area jeopardising the interests of the investor. Though share market scams get much greater publicity, a serious intelligent investor need not give too much importance to possible frauds because he is neither a speculator nor a short time investor.
Fluctuations in the market on account of scams are really not due to poor performance of the company and they mostly result in decline of value, which has been discussed earlier. A clever investor should really be taking advantage of them if he is confident about the performance of the company and if his reading of the economic conditions is sound. If the value of his holdings goes up beyond reasonable limits he should sell and book profits, and if it falls below he should buy some more of the goodies.
Benjamin Graham categorises investor into two types; a defensive investor and the aggressive investor. For the defensive investor he has made some valuable suggestions for purchasing of shares in his book 'The intelligent investor'. These take into account the elements of risk discussed above. These suggestions are:
(1) There should be adequate though not excessive diversification.
Do not concentrate your purchases in one or two industrial sectors. Economic cycles affect different industrial differently. Automobile industry may be facing a slump but housing loan industry may be enjoying a good progress. Diversity in holdings helps even out the matters.
(2) Each company selected should be large, prominent and conservatively
financed.
The statement contains adjectives and as Graham says "a criterion based on adjectives is always ambiguous." Yet, all these adjectives convey a notion. According to Graham an industrial company's finances are not conservative unless the common stock (share capital plus reserves) represents at least half of the total capitalisation. 'Large' and 'prominent' carry the notion of substantial size and a leading position in the industry.
(3) Each company should have a long record of continuous dividend payments.
In Indian context this would mean a continuous record of dividend payment of at least twenty years.
(4) An investor should impose some limit on the price he will pay for issues in
relation to its average earnings over say the past seven years.
This is related to the p/e ratio. Every investor has to form his own standards here. Within the standard an investor laying emphasis on dividend yield will strive for a lower p/e than one looking for value appreciation. Also for a defensive investor, the limit is bound to be low whereby many growth stocks may get eliminated, which generally trade at high multiples.
Growth stocks, though they are capable of giving spectacular profits to investors, are quite capable of causing a decline in value if too high a price is paid for the purchase. Defensive investors should be careful before venturing into these stocks with high P/E ratios. The doors are not closed to them but they should tread wearily.
Despite every thing, there is lot of excitement in investment in shares. Companies make profits, other investors notice what you noticed long ago and the share price goes up, or your company appears in newspapers and experts offer praises for the performance and you feel proud of yourself for having taken the decision to buy etc. etc.
The biggest thrill about shares is the possibility of a windfall, which no other investment can offer. Balzac, the French author, once said, " Behind very fortune there is a crime". An intelligent investor can overlook this statement because he can make a fortune in the share market and still remain completely above the law!
Learn Trading
Chapter 2: Stock Markets
Review of books that reveal the secrets of stock markets
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| Article 2: Where are the customers' yachts? | Aug 20 2001 Fred Schwed Jr's book with this zany title examines if the rules on Wall Street have really cha... |
Learn Trading
Chapter 1: Investing
Review of books that teach the fine art of investing
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| Article 2: Graham and value investing | Apr 26 2001 Janet Lowe's book makes a good attempt to encapsulate Ben Graham's investing philosophy. |
| Article 3: ignore | May 3 2001 Fred Schwed Jr's book with this zany title examines if the rules on Wall Street have really cha... |
| Article 4: An unreasonable man | Aug 7 2001 A look at Warren Buffet's investment philosophy based on 'The Warren Buffet Way' by Robert G Ha... |
| Article 5: Uncovering stock market profits | Jul 6 2001 Joel Greenblatt's best selling book "You can be a stock market genius" attempts to inspire us e... |
| Article 6: ignore | Jul 9 2001 In the minds of most investors short sellers are next only to Satan worshippers. Once you read ... |
| Article 7: Sold Short | Jul 9 2001 In the minds of most investors short sellers are next only to Satan worshippers. Once you read ... |
| Article 8: "A Random Walk..." | Jul 24 2001 Described as the “Dr Spock of investment”, this book is a guide for individual inve... |
Sensex drops 205 points
The market held firm above the 17,100 levels for almost entire session as positive US and strong Asian markets created a perfect platform for the bulls to pursue buying. The Sensex resumed 107 points higher at 17,085 and advanced further on substantial buying support. While the gains continued unabated, buying spree in heavyweights, capital goods, realty, oil & gas, banking and power stocks propelled the index to an intra-day high of 17,366 in noon trades. The Sensex finally wrapped up the session with gains of 375 points at 17,353, while the Nifty ended at 5,115, up 104 points.
The market breadth was positive, with gainers outpacing losers by 1.40:1. Of the 2,754 stocks traded on the BSE 1,771 stocks advanced, 909 stocks declined and 74 stocks ended unchanged. All the sectoral indices, barring BSE FMCG index, ended positive. BSE CG index was the major gainer and soared 3.46% followed by the BSE Realty index (up 3.41%), BSE oil & gas index (up 2.65%), BSE Bankex index (up 2.44%) and BSE Power index (up 2.12%).
Front-line stocks once again led the rally. Hindalco was the front-runner amongst the heavyweights and vaulted 6.11% at Rs204.05. Among other major gainers, Reliance Communications rose by 5.31% at Rs589, L&T surged 4.67% at Rs2,962, Reliance Industries advanced 3.66% at Rs2,622.65, ICICI Bank scaled up 3.62% at Rs928.70, Infosys flared up 3.56% at Rs1,891.30 and DLF jumped 3.36% at Rs643.85. Maruti, BHEL, Gujarat Ambuja Cements, HDFC and JP Associates gained over 2% each. Satyam Computer Services however lost ground and tumbled 3.43% at Rs483.90, while Hindustan Unilever lost 1.85% at Rs238.60.
Capital goods stocks witnessed strong buying support. Crompton Greaves rallied sharply by 8.13% at Rs245.30, Kalpataru Power Transmissions vaulted 5.04% at Rs1,034.10, Kirloskar Brothers surged 4.20% at Rs250.30 and Areva scaled up 3.65% at Rs1,605.55. Alstom Projects, Suzlon Energy, Havells India and Punj LLoyd added over 2-3% each. Among the gainers in realty stocks, Phoenix Mill, Omaxe, HDFC, Parsvnath Developers, Akruti City, Unitech, DLF and Indiabulls Real Estate flared up 2-5% each.
Over 7.04 crore Aishwarya Telecom shares changed hands on the BSE followed by IFCI (2.18 crore shares), Ispat Industries (1.08 crore shares), Cyber Mate (1.08 crore shares) and Reliance Natural Resources (1.02 crore shares).
Valuewise, Aishwarya Telecom registered a turnover of Rs866 crore followed by Reliance Communications (Rs258 crore), Reliance Industries (Rs179 crore), Reliance Petroleum (Rs163 crore) and Satyam Computer Services (Rs158 crore).
Volatile market ends buoyant
The market wiped out losses of over 150 points incurred in the first half, after a strong bout of buying in Tisco, Mahindra & Mahindra and Reliance Industries triggered wide-spread buying in the market. It was a highly volatile trading session, with the Sensex opening 164 points lower at 17066 following weakness in Asian indices and crashing to the day's low of 17042 on relentless selling. The market was on a recovery path thereafter--the Sensex witnessed a sharp turnaround in the afternoon as gains in heavyweights, oil & gas, metal and public sector stocks propelled the index to an intra-day high of 17293. After gyrating 250 points during intra-day trades, the Sensex closed up 13 points at 17243. The Nifty also ended 13 points higher at 5118.
The market breadth ended in positive. Of the 2,795 stocks traded on the BSE 1,710 stocks advanced, 1,009 stocks declined and 76 stocks ended unchanged. Among the sectoral indices, the BSE Oil & Gas index led the pack and gained 2.36% at 11,433 followed by the BSE Metal index (up 1.24% at 17,390) and the BSE PSU index (up 0.98% at 7,727). The CG index, auto index and realty index ended with steady gains. The rest of the sectoral indices ended in negative territory.
Tata Steel was the star performer amongst the heavyweights and the stock soared 3.09% at Rs922.25. Among the other major gainers, Mahindra & Mahindra advanced 2.66% at Rs670, Reliance Industries jumped 2.53% at Rs2,667.90, BHEL rose 2.03% at Rs1,771.70, Grasim moved up by 1.57% at Rs2,323.10, Tata Motors advanced 1.55% at Rs688.85 and TCS added 1.18% at Rs963.95. However, HDFC Bank, HDFC and HUL inched lower.
Oil stocks were in demand and scaled higher. RNRL soared 5.04% at Rs113.60, Aban Offshore flared up 4.95% at Rs4,050, Essar Oil added 4.75% at Rs261.20, RPL gained 3.99% at Rs192.90 and BPCL was up 1.99% at Rs356.05. In the metal pack, Gujarat NRE zoomed 6.28% at Rs159, NATCO shot up by 4.62% at Rs538, Hindustan Zinc rose 3.07% at Rs752 and Ispat gained 2.40% at Rs34.10.
Over 2.15 crore IFCI shares changed hands on the BSE followed by RNRL (1.49 crore shares), Ispat (1.40 crore shares), Aishwarya (1.39 crore shares), Chambal Fertilizers (1.24 crore shares) and RPL (1.04 crore shares)
Mastek eyes $20-30 mln acquisition in FY09 - CFO
Software services firm Mastek Ltd is looking at an overseas acquisition of around $20-30 million during the current financial year, a senior official said on Wednesday.
"We are mainly looking at the U.S. and the UK and it will be insurance or government vertical," Group CFO and Director (Finance), R.S. Desikan told reporters, referring to firms which have expertise in handling government jobs and insurance sector.
In March, the company paid $29 million to acquire U.S.-based STG International, which offers business software services to the property and casualty insurance companies in North America.
The insurance vertical currently contributes a quarter to the Mastek's total revenues and this share is expected to reach 40-45 percent in the next 2-3 years, he said.
Mastek shares ended 1.25 percent down at 392.60 rupees in the Mumbai market.
Global liquidity to dictate markets
We have seen a sustained one-way rise in our stock market after the Fed cut the key short-term rate on September 18, 2007. The other important central banks in Europe have also kept their policy rate steady, which goes to show that the central banks would rather overlook inflation concerns than jeopardise growth. Thus, an easing monetary policy in the developed markets is likely to free up a lot of liquidity, which would find its way into the emerging markets like India.
To know how to make the most of the resulting opportunity read our latest Market Outlook report, Global liquidity to dictate markets.
Market Outlook is a premium content available absolutely free of cost to only our trading customers. If you don’t have a trading account with us, open one right here right now.
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