Stock market updates- 15th july 2008

Infosys Has Give a bearish breakout by breaching the Lower Trendline and it is headed for 1350 So short with Stoploss of 1615 on closing basis.

Sensex today - 4 jul 2008

SENSEX	13454.00	359.89
NIFTY	4016.00	90.25
DJIA	11288.54	73.03
NASDAQ	2245.38	-6.08
RS/$	43.30	0.04

Market 4th july - Steel Authority Of India

Sail Has Given Bearish Breakout by Breaching lower Trendline and its headed for 115 and 102 hence short with stoploss of 134.

Its time for small retailers

The fledgling retail sector is set to witness a spate of sellouts amid falling valuations. Small grocery retail chains, typically with less than 100 stores, are sending feelers to bigger chains and potential new entrants for possible buyouts.

The lack of funds is casting a doubt on their sustenance and ability to scale up in the low-margin and dog-eat-dog world of retail business. What is making matters worse is that big retailers—the likely buyers—have already garnered some experience and achieved a sizeable presence and want to buy out smaller players only on their own terms.

Some months ago, a north Indian supermarket chain called off a prospective selloff deal with a business house because it wanted a much higher valuation. The chain is now back in the market scouting for a buyer, but this time the asking price is 30% less. Similarly, a south-based chain is sounding out prospective buyers for a complete sellout. Representatives of another small retail chain are approaching even real estate players with retail plans, sending out proposals under fictitious names so that its identity is not leaked in the market.

“We are not averse to selling out but only after we have set up 500 stores. If the promoters of Ranbaxy can sell out, why not us?” says a retailer, who owns 50-60 stores in NCR. He says he hasn’t been approached by any big Indian retailer for a possible buyout so far. According to Ernst & Young Partner (retail) Pinakiranjan Mishra, the bargaining power has shifted from small retailers to potential buyers in the past six months.

“It will still make sense for big Indian retailers to buy the smaller ones in markets where they are not present. Also, they will get a good deal today since small retailers are desperate for cash infusion. FDI restriction bars private equity as well as big foreign retailers from investing in Indian retailers,” says Mr Mishra.


Tables have clearly turned since the retail revolution began two years ago. When the big business houses entered the scene and started wooing regional business chains for buying them out to build immediate scale, the owners acted pricey. While some deals were sealed, majority of the negotiations didn’t consummate on account of high asking prices.

Since then, large conglomerates, whether it is Reliance Retail or Spencer’s, have moved on their own and built a fairly big retail presence across all formats. They have locked in real estate space and built management bandwidth. So, they see no value in regional players anymore, barring one or two. On the other hand, small players, some of whom had built their businesses only to sell at a targeted period, find themselves pushed to a corner.

They don’t have money to pump into the business on a sustained basis. More importantly, real estate prices have started correcting, so the edge of having signed real estate at a cheaper price much in advance is no longer there. “The rentals have corrected by as much as 15-20% since January this year,” says grocery chain LM@365 owner Prem Garg.

“I have signed locations for supermarkets that will be launched 6-8 months from now at prices that are 15-20% cheaper than what a retailer negotiated two years ago? So, where is the advantage?’’ asked a large retailer who has been approached by two small retailers for an alliance.

These small retailers have mainly been present in convenience store formats in residential areas. Significantly, since the Delhi government has put off its drive to shut commercial establishments in residential areas, there is an increased supply of space for convenience stores.

Also, regional players were under the impression that accumulating square feet area (number of stores) and creating a brand with some visibility were enough to claim a high valuation. What they didn’t anticipate is the real estate crash. “In this backdrop, valuations are bound to come down because they lack a clear business model, sustainable profits and robust supply chain,’’ said retail consultancy Technopak’s Arvind Singhal.

Tata steel - 19th june

Tatasteel Has give bearish breakout on lower trendline so it is headed towards 800 and 780. If there is any gap down dont go for shorting. Short stoploss 829 cmp 822.

Stocks rise, but traders cautious ahead of inflation

Stocks opened higher on Friday tracking advances in certain East Asian markets on account of a drop in crude oil. But dealers warned the rise may be short lived as the market awaits inflation data expected around noon.

At 10:05 am, the National Stock Exchange’s Nifty was up 12 points or 0.27 per cent at 4516.60.

The Bombay Stock Exchange’s Sensex was up 70 points or 0.46 per cent at 15,157.12.

Biggest Sensex gainers were ONGC (up 1.93%), BHEL (1.54%), DLF (1.15%), Grasim Industries (1.11%), NTPC (1.09%) and Infosys Technologies (1.07%).

Losers comprised Bharti Airtel (down 0.7%), Reliance Industries (0.29%), Reliance Communications (0.25%) and ITC (0.12%).

Market breadth on BSE showed 501 advances against 188 declines.

“The morning buoyancy will be on account of the $4.75 slide in crude, which in turn was reacting to the decision of China to increase the fuel prices by 17 per cent. The market hopes that the price hike will reduce consumption and may help in cooling crude prices,” said Anagram Stock Broking in a note to clients.

“We believe the move will not reduce consumption, though crude can temporarily face pressure. Secondly, this price hike will add to the inflation woes further and this higher inflation will be exported to other countries by China. The view remains to be on the sidelines and use any rise to lighten commitments,” the brokerage added.

Following China’s decision to hike oil prices in order to curb consumption, the CSI 300 Index shot up 4.86 per cent in China, the Hang Seng was up 1.71 per cent in Hong Kong and the Straits Times added 0.93 per cent in Singapore. The Nikkei 225, however, was down 0.95 per cent in Japan.

Oil slipped further on Friday, after a nearly $5 plunge a day ago, as China's move to raise fuel prices raised concerns that demand in the world's second-largest oil consumer will fall. US July crude, which expires later in the day, fell 66 cents to $131.27 a barrel.

The rupee was trading at 42.96/97 a dollar, from the previous close of 42.97/98.

Inflation data due around noon, is expected to have risen to a 13-year high of 9.82 per cent in the week to June 7, higher than the previous week's 8.75 per cent.

US stocks rose on Thursday as a drop in oil prices fueled investor optimism about consumer spending, driving shares of transportation and retailers sharply higher. The Dow Jones Industrial Average gained 0.28 per cent, the Standards & Poor’s 500 Index added 0.38 per cent and the Nasdaq Composite Index rose 1.33 per cent.

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

Article 1: Manias, Panics and Crashes | Jun 13 2001 A must read for everybody in the stock market. This Kindleberger's classic lays the boom bust c...

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

Article 1: The Art of Speculation | Aug 16 2001 A review of Philip Carret’s book that is a gospel for speculators and investors alike.

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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