Monday, December 28, 2009


Weekly Update 27 Dec, 2009 by Tanmay G Purohit
Nifty closed up by 190 points or 3.82% at 5178 recovering all of previous week's losses and in addition hitting new 2009-year high at 5198 on Friday. Though Nifty is into new yearly high territory, Sensex (17360) has failed to achieve this feat as its 52-week high at 17493 is still some way to go which may happen next week if rally sustains on higher volumes. The year is closing with strong gains as both Nifty and Sensex have risen more than 75% this year so far where AUTO, METAL, IT, HEALTHCARE stocks have given fantastic returns to investors while REALTY, CAP GOODS and FMCG have remained laggards. 
This week METAL stocks dominated the up trend SAIL +11%, HINDALCO +10% and TATA STEEL +9%. NTPC moved up 11% and the company has got "Maharatna Status" along with ONGC and SAIL from Indian government, the status would provide more autonomy to these public sector units. Losers were not special - CIPLA lost 3% this week.
Food inflation softened to 18.65% for the week ended December 12, though essential items like potato and pulses continued to remain expensive. The food inflation declined by 1.30 percentage points during the second week from 19.95% in the previous week. Core infrastructure industries grew by 5.3% in November against meagre 0.8% a year ago, in line with the recovery in industrial growth. Food Inflation, though easing a bit, is still a worrying indicator as it is in double-digits from quite some time and many expect RBI rate action through CRR or interest rate hike before RBI 3rd Quarter Review on 29 Jan. Nifty bounced back strongly from 4950-support this week after FM Pranab Mukherjee said the economy can grow 7.75% in current FY and the fiscal stimulus given to the industry will not be withdrawn before the budget. The number of telephone subscribers touched 543.20 million at the end of November; with this record addition, the overall tele-density has touched 46.32% and the telecom industry is becoming "matured" now as competition is becoming cut-throat, in such a situation stocks like TATACOMM would provide margin of safety and one can accumulate this stock in dips. 
Both Nifty and Sensex have closed at yearly highest levels and a sustained move past 5200 on Nifty may take it to 5350/5500 also but next move would be characterized by euphoric rally which would give fast returns but may not last for a long time. As a trader one would do well trailing positions as gains can be huge in short period of time but protecting downside would also be equally important. Investors would do well avoiding blind investing, always look for margin of safety before putting hard-earned money. Value-buys - JUBILANT, ABG SHIP, IDBI.

Supp 5105/5058/5000 Res 5205/5350/5418



Last Weekly Update:-
Nifty closed down 129 points or 2.53% Week-on-week and it has hit 14-day low at 4979 closing at day and weekly lowest level. HEALTHCARE stocks had big buying interest this week as BSE HC Index rose 3.76% this week and RANBAXY, CIPLA, SUN PHARMA were among top gainers in Nifty. TECH stocks remained resilient through the week on the back of gains in TCS, WIPRO, INFOSYS and HCL TECH. Major draggers for index have been BANKING and REALTY as both indices fell more than 5% this week. OIL and GAS index too retreated 4% after nearly 5.5% decline in RELIANCE INDUSTRIES.
Advance Tax numbers for Q3 were out and the all India direct tax collection, which includes corporate and personal taxes, increased 8.1% to Rs 2.27 lakh crore, according to figures that are currently with the income-tax (I-T) department. Corporate tax collection has gone up by 11.3% to 1.48 lakh crore.The tax collection from foreign banks operating in India has also come down significantly, affecting the rate of growth in tax collection. Large tax-payers such as SBI, RIL, HINDUNILVR, TATA STEEL have paid higher advance tax this quarter. Overall, companies in the auto industry and pharmaceuticals have paid higher advance tax. BANKING was a dampner as the Adv Tax payments were pretty flat while the stock performance has been amazing the last one year that is why the sector is witnessing large profit-taking after disappointment in Adv Tax figures. Prices of potatoes and pulses raised food inflation to 19.95% in the first week of Dec’09 against 19.05% in the previous week and experts feel RBI may raise rates earlier than expected. Leading steel companies like SAIL JSW, ESSAR and BHUSHAN may hike prices next month to cash in on the demand surge in domestic markets after steel prices internationally have improved by about $30 a tonne in the past one month. DLF's over all debt will go up by Rs 2,200 crore as a result of integration of its whollyowned subsidiary DLF Cyber City Developers Ltd with Caraf Builders & Constructions and it may be further overhang on the stock which is already looking weak from REALTY space.  Both the BSE and NSE have postponed the implementation of new trade timings to January 4, 2010, from the earlier decided December 18, 2009. In its mid-year review of the economy, the government said GDP growth could top 7.75% during the fiscal to March 2010, as attention turns to policy measures that will be required to keep inflation under check. 
Nifty has broken down from the range-bound trade and the triangle is also broken which indicates any sustained move below 4950 and Nifty may test 4840/4805 as next support in this fall. Move past 5100 would be necessary to show some strength but the formation of triple top is very bearish and it seems to have started working now. Avoid leveraged positions and invest where value is available. GLENMARK, SUZLON, PTC, EMCO would provide margin of safety.

Supp 4939/4841/4730 Res 5068/5153/5228

Monday, December 21, 2009


CMP Rs 91.35 Market Cap Rs 538 Cr
Book Value - Rs 71 EPS - Rs 9.03 (FY09) Debt-Equity Ratio - 0.84
Ratios - Price to Earnings : 10.11  Price To Book : 1.28 Price To Sales: 0.52
The Company was incorporated in 1964. The main object of the Company is to manufacture various types of high tension transformers. 
What's the business?
EMCO offers Transmission & Distribution (T&D) solutions in the power sector.  
  • Through it's TRANSFORMER DIVISION it offers widest transformers range up to 315 MVA, 400 KV for power generation transmission & distribution. It is the largest producer of specialised rectifier & furnace transformers in the country. In addition it also manufactures Loco-Motive & Traction Transformers.  
  • Through it's METERS DIVISION it offers state of the art metering solutions like tamper proof electronic energy meters, automatic meter reading solutions like drive by, walk by or fixed network, prepayment metering solutions & High end metering like Trivector Meters, Grid Metering etc. It also offers a total Energy and revenue management solutions. 
  • Through it's PROJECTS DIVISION it offers turnkey solutions from concept to commissioning for large electrical substation projects in the power generation, transmission & distribution area. It offers a Cellular Indoor Substation (CIS) as an alternative and less cost solution to the expensive gas insulated substation (GIS) up to 132 kV in the areas where space and cost is a major constraint. It also undertakes entire industrial electrification work from designing to execution. The SCADA group offers IT solutions for power distribution management. It undertakes large distribution automation and sub-station automation projects.  
  • Through its INTERNATIONAL DIVISION EMCO offers Transformers and Energy Meter confirming to the latest International specifications. Emco Transformers have been commissioned in USA, Europe & West-Asia also. 
How fast is the company growing?
Companies are judged by their sales and earnings growth rates than on the absolute value of their sales and earnings. Look for companies that consistently grow faster than there peers.
EMCO had posted Rs 235.9Cr Sales in FY05 and has grown Sales to Rs996Cr in FY09 which gives a (Compounded) Annual Growth Rate of 43% over the last 4 years and similarly profits have grown 53% to Rs 53.1Cr in FY09 (despite a fall in profits from Rs 64.4 Cr in FY08).
How profitable is the company?
Investors prefer companies that give consistent profit margins -- the percentage of sales that they keep -- every year. This is accomplished either by lowering expenses or raising prices. EMCO Operating Profit Margins have stabilized around 13% for the last 5 years which gives it a strong record of squeezing out consistent profits from every rupee of sales.
Key Features:-
  • Amongst Top 3 Transformer Companies in India(20,000 MVA)
  • Manufacturing widest range of Transformers in India (5kVA –315 MVA/400kV)
  • Largest Transformer commissioned-315 MVA, 400 kV
  • Leading Player in 132 kV,220 kV & 400kV market segments in India
  • Leaders in special application Transformers like Furnace, Rectifier and Locomotive
  • Exporting to more than 30 countries aroundthe world
  • Constant Dividend payout for the last 5 years
  • Manufacturing Electronic Energy Meters forover a decade and having complete product range of Single Phase,Three Phase, Trivector meters 
Recent Data:-
  • Order book at the start of Oct 1, 2009 was Rs 1600 crore as compared to Rs 1300 crore as on corresponding previous period. Of the order book Govt. and private share is in the ration of 70:30.
  • Majority of the orders i.e. transformer, substation and transmission line is covered with price variation clause.
  • Sale in value-terms were down by 13% (to Rs 201 crore) largely on account of fall in commodity prices. But Volume sales for the first half ended Sep 2009 was up to 5100 MVA compared to 4800 MVA in the corresponding previous period.
  • The company is planning to double transmission tower capacity from 45000 MT to 1 lakh MT. Further the company is also proposing to augments is substation building capacity.
Major Catalyst:-
India is expected to add a generation capacity of 62000 MW on certainty basis in the 11th five-year plan out of the plan target of 78700 MW. Against this the country has added just 14337 MW during the first two and half years of April-Sep 2009. Thus to capacity to be added in the remaining two and half years will be over 45000 MW. This translates into a capacity addition of about 19000 MW per annum. 
Limited pricing worries:-
Majority of the orders i.e. transformer, substation and transmission line is covered with price variation clause and any fall/rise in commodity prices may not affect EMCO to a large degree.
Conclusion:-
EMCO is a large player in transformers business but being valued at a cheap price given recent slowdown in global economy but India is a power-deficit country and meeting generation targets is of prime importance. Being the largest producer of specialised rectifier & furnace transformers in the country, EMCO stands to benefit given its experience of 4 decades in the industry. Technically the stock is looking very strong as it looks being accumulated near current levels and low valuations would provide much-needed margin of safety even if broader markets are looking weak. EMCO is trading in an up channel on weekly graph and 1-year target can be Rs 150. Investors accumulate this stock in declines, this can be an Electric Performer!

Saturday, December 19, 2009


Weekly Update 19 Dec, 2009 by Tanmay G Purohit
Nifty closed down 129 points or 2.53% Week-on-week and it has hit 14-day low at 4979 closing at day and weekly lowest level. HEALTHCARE stocks had big buying interest this week as BSE HC Index rose 3.76% this week and RANBAXY, CIPLA, SUN PHARMA were among top gainers in Nifty. TECH stocks remained resilient through the week on the back of gains in TCS, WIPRO, INFOSYS and HCL TECH. Major draggers for index have been BANKING and REALTY as both indices fell more than 5% this week. OIL and GAS index too retreated 4% after nearly 5.5% decline in RELIANCE INDUSTRIES.
Advance Tax numbers for Q3 were out and the all India direct tax collection, which includes corporate and personal taxes, increased 8.1% to Rs 2.27 lakh crore, according to figures that are currently with the income-tax (I-T) department. Corporate tax collection has gone up by 11.3% to 1.48 lakh crore.The tax collection from foreign banks operating in India has also come down significantly, affecting the rate of growth in tax collection. Large tax-payers such as SBI, RIL, HINDUNILVR, TATA STEEL have paid higher advance tax this quarter. Overall, companies in the auto industry and pharmaceuticals have paid higher advance tax. BANKING was a dampner as the Adv Tax payments were pretty flat while the stock performance has been amazing the last one year that is why the sector is witnessing large profit-taking after disappointment in Adv Tax figures. Prices of potatoes and pulses raised food inflation to 19.95% in the first week of Dec’09 against 19.05% in the previous week and experts feel RBI may raise rates earlier than expected. Leading steel companies like SAIL JSW, ESSAR and BHUSHAN may hike prices next month to cash in on the demand surge in domestic markets after steel prices internationally have improved by about $30 a tonne in the past one month. DLF's over all debt will go up by Rs 2,200 crore as a result of integration of its whollyowned subsidiary DLF Cyber City Developers Ltd with Caraf Builders & Constructions and it may be further overhang on the stock which is already looking weak from REALTY space.  Both the BSE and NSE have postponed the implementation of new trade timings to January 4, 2010, from the earlier decided December 18, 2009. In its mid-year review of the economy, the government said GDP growth could top 7.75% during the fiscal to March 2010, as attention turns to policy measures that will be required to keep inflation under check. 
Nifty has broken down from the range-bound trade and the triangle is also broken which indicates any sustained move below 4950 and Nifty may test 4840/4805 as next support in this fall. Move past 5100 would be necessary to show some strength but the formation of triple top is very bearish and it seems to have started working now. Avoid leveraged positions and invest where value is available. GLENMARK, SUZLON, PTC, EMCO would provide margin of safety.


Supp 4939/4841/4730 Res 5068/5153/5228

Last Weekly Update:-
Nifty closed very flat as it was up just 8 points week-on-week and the action has clearly shifted to individual stocks now. Telecom stocks IDEA, BHARTI AIRTEL and RCOM were among major gainers this week and one may take some profits in those stocks as the short-term up trend may have run its course; TATA COMM looks good as the stock trades near important support. BHEL & LT were other gainers in Nifty after positive IIP data and good Cap Goods growth numbers. Metal stocks looked weak with TATA STEEL, STERLITE being top losers this week.
The driest spell in nearly four decades and floods in some parts of the country have trimmed farm output and pushed up food prices as the food price index rose 19.05% in the 12 months to November 28.  Investments in mutual fund schemes saw a sharp 68% decline in November to over Rs 45,100 crore over the previous month, as investors preferred to stay away from equity market even if market breadth has improved this month. 
After Dubai being downgraded by global rating agencies, it was turn of Greece and Spain where agencies have cut outlooks from stable to negative and after 3 downgrades, the risk this time around is more of “sovereign” nature which can impact global sentiment faster than any other worry, Indian markets have a tendency to correct late but when it happens it overreacts. 
Nifty has formed a triple top at 5181 and the pattern has impacted weekly as well as monthly graphs too, so until we see a strong move above these levels, the trend may remain weak and lower levels of 4950/4800 are not ruled out. IIP data was quite positive and a growth at 10.3% is very impressive but market is always forward-looking and the best looks discounted by nearly 73% rally in 2009 for Nifty. Advance Tax figures would start coming in soon and those would give some cues for Q3 results in January.
India has signed Nuclear fuel supply deal with Canada and Russia and this would benefit India as power capacity would increase - NTPC, LT, HCC, THERMAX, ROLTA can benefit.

Supp 5040/4935/4806 Res 5188/5258/5366

Monday, December 14, 2009




Doom's Day nears for Dubai's $3.5 bn debt hurdle
  • Nakheel’s possible non-payment of its Islamic bond due on Monday will trigger defaults on two other securities, bringing the total of  affected securities to $5.25 billion, bond documents show. 
  • Investors are waiting to see if the Dubai state-controlled developer will pay the maturing $3.52 billion Islamic bond, known as sukuk. The Dubai government said on November 25 that state-run holding company Dubai World is seeking a “standstill” agreement on its debt, including for the Nakheel unit. 
  • A sudden u-turn and repayment would placate disappointed and confused investors in the immediate term. Dubai's handling of the situation has tarnished its reputation. 
  • If Nakheel does not pay on Monday, it would technically be in default, but it would still give its restructuring team a two-week grace period to reach an agreement with creditors. 
  • December 28 is the final cut off point. After that a cross default clause in its original prospectus will be triggered that covers Nakheel and its guarantor Dubai World, adding to the overall debt burden. 
The Dubai government and its affiliated firms owe non-financial Japanese companies roughly $7.5 billion in credit that had not been collected as of Oct. 31, a study by the Japanese government showed. The study covered 18 projects that involved Japanese general contractors, trading companies and electric machinery manufacturers, the Nikkei business daily. http://in.reuters.com/article/businessNews/idINIndia-44677520091213



Russian companies are sitting on a multi-billion dollar debt time bomb after allowing overseas borrowings to rise since April, heedless of default fears that dogged them in early 2009. Bankers say a failure to complete restructurings may hamper Russia's ability to borrow in the future and the absence of clearly defined negotiation guidelines between Russian and western lenders raises the risk of future defaults. http://in.reuters.com/article/businessNews/idINIndia-44639320091211?sp=true


Greece and Ireland are among countries in an “intolerable” economic situation, which may lead to bailouts or even an exit from the euro area by the end of next year, according to Standard Bank Plc. The absence of a mechanism to permit so-called fiscal transfers within the 16-nation region may undermine the exchange-rate system, said Steve Barrow, head of Group of 10 foreign-exchange strategy at the bank in London. http://www.bloomberg.com/apps/news?pid=20601087&sid=aRMkt.e8ujIo&pos=7





With three more American banks biting the dust, the total number of collapses in 2009 has touched 133, more than five-fold that of  last year. Battered by the financial turmoil, an average of 11 banks especially the small and medium ones, are going belly up every month in the country. Last year, just 25 banks had collapsed. The count of bank failures in 2009 is the maximum in 18 years. In the wake of the savings and loan crisis, a whopping 181 banks were shuttered in 1992.  http://in.news.yahoo.com/20/20091213/372/tbs-11-us-banks-collapse-every-month-133.html

Saturday, December 12, 2009


Weekly Update 12 Dec, 2009 by Tanmay G Purohit
Nifty closed very flat as it was up just 8 points week-on-week and the action has clearly shifted to individual stocks now. Telecom stocks IDEA, BHARTI AIRTEL and RCOM were among major gainers this week and one may take some profits in those stocks as the short-term up trend may have run its course; TATA COMM looks good as the stock trades near important support. BHEL & LT were other gainers in Nifty after positive IIP data and good Cap Goods growth numbers. Metal stocks looked weak with TATA STEEL, STERLITE being top losers this week.
The driest spell in nearly four decades and floods in some parts of the country have trimmed farm output and pushed up food prices as the food price index rose 19.05% in the 12 months to November 28.  Investments in mutual fund schemes saw a sharp 68% decline in November to over Rs 45,100 crore over the previous month, as investors preferred to stay away from equity market even if market breadth has improved this month. 
After Dubai being downgraded by global rating agencies, it was turn of Greece and Spain where agencies have cut outlooks from stable to negative and after 3 downgrades, the risk this time around is more of “sovereign” nature which can impact global sentiment faster than any other worry, Indian markets have a tendency to correct late but when it happens it overreacts. 
Nifty has formed a triple top at 5181 and the pattern has impacted weekly as well as monthly graphs too, so until we see a strong move above these levels, the trend may remain weak and lower levels of 4950/4800 are not ruled out. IIP data was quite positive and a growth at 10.3% is very impressive but market is always forward-looking and the best looks discounted by nearly 73% rally in 2009 for Nifty. Advance Tax figures would start coming in soon and those would give some cues for Q3 results in January.
India has signed Nuclear fuel supply deal with Canada and Russia and this would benefit India as power capacity would increase - NTPC, LT, HCC, THERMAX, ROLTA can benefit.

Supp 5040/4935/4806 Res 5188/5258/5366



Last Weekly Update:-
Nifty closed up 3.38% or 167 points at 5108 after strong Q2 GDP numbers at 7.9% which surpassed many expectations. RANBAXY was top gainer in Nifty with nearly 14% rise after the company launched generic version of Valtrex in US markets. Auto numbers were very strong once again and TATA MOTORS shot up 13% this week. Telecom stocks saw value buying support and BHARTI AIRTEL, IDEA & RCOM rose smartly. HERO HONDA and HIND UNILEVER lost 4% each this week.

The annual rate of inflation for food articles rose to 17.47% for the week ended November 21, 2009, data released on Thursday showed. This is the sharpest rise in food prices since 1998 and food inflation may become a major worry for the government later as it may impact manufacturing inflation also. Experts feel high food inflation coupled with 7.9% GDP growth may force RBI to resort to rate action earlier than expected.  Markets have shrugged off Dubai woes for now but UAE has become top receiver of Indian exports and USA as second top export destination for India, if both regions face some economic problems, India would be affected to some extent and a big part of remittance benefits comes from both these destinations only. The leveraged asset purchases of Dubai-based wealthy NRI in the past few years may begin to haunt them, as the collapse of real estate prices in the emirate prompts calls for additional funds as margins which may force them to sell some Indian assets, experts say. REALTY is one sector which is haunting the globe and caution is advised in this sector. India’s fiscal deficit during April-October increased to 2.45 trillion rupees Vs 1.17 trillion rupees (YoY) owing to falling tax receipts & rising spending and in percentage terms, the fiscal deficit is 61.1% of the government's full year budget deficit aim of 4 trillion rupees. Despite equity markets gaining almost 80% so far in the current year, the number of new FIIs coming to India has touched a six-year low as only 111 new FIIs got registered with SEBI till November, against as many as 375 in calendar year 2008. 
Nifty has hit double top at 5181 to its previous top in October and as long as it is not crossed comfortably, the trend may remain down. Once breakout above 5200 is seen, Nifty may test 5350-5500 levels on upside. Action has clearly shifted to cash stocks and index heavyweights are lagging for now, so stock-specific approach looks best in this market. Below 4950 caution is advised.
Stocks looking good for next week - RELIANCE, EKC, ORCHID CHEM, NEYVELI, ROLTA

Supp 5067/4943/4850 Res 5165/5250/5342

Wednesday, December 09, 2009

One More Sovereign Downgrade, This Time Around Its Spain!
Standard & Poor's Ratings Services lowered its outlook on Spain to negative, saying the country will likely see "significantly lower" gross-domestic-product growth.
Its long-term ratings are one notch below AAA and the outlook change comes as Spain deals with surging unemployment following the recession. It was 19.3% in October, the second highest in the European Union behind Latvia.
Formerly an engine of euro-zone job creation and economic growth, Spain last year suffered an abrupt reversal of fortune when the global financial crisis precipitated the collapse of the country's formerly buoyant construction industry. Though the wider euro zone returned to growth in the third quarter, the Spanish economy continued to contract. Spanish officials have said they expect Spain to return to growth in the first quarter.
In addition, S&P Wednesday noted Spain's "persistently high fiscal deficits relative to peers" in the absence of policy that emphasizes medium-term growth.
"Compared to its rated peers, we believe that Spain faces a prolonged period of below-par economic performance, with trend (gross-domestic-product) growth below 1% annually, due to high private sector indebtedness and an inflexible labor market," S&P added.
The ratings agency said a downgrade could come in the next two years if authorities don't take action to tackle fiscal and external imbalances. "If the government announces concrete fiscal measures that we believe could credibly achieve annual primary surpluses of 2% or higher by the end of the forecast period in 2012, downward pressure on the ratings may abate," said analyst Trevor Cullinan. 
(Source:- http://online.wsj.com/article/BT-CO-20091209-707060.html)
Comment-
In just one month we have witnessed 3 major downgrades by global credit rating agencies, first it was Dubai, then Greece and now Spain. These are not so small economies that it won't hurt the sentiment, slowly it is becoming like a house of cards, one falls and the whole house collapses.
Fresh Blow To Global Sentiment As Greece Debt Rating Downgraded
As world was slowly recovering after Dubai Debt Problems now Fitch has downgraded Greece's sovereign debt due to its huge budget deficit. The news has spurred selling in Europe. S&P warned Monday it might cut Greek debt. Moody's said the U.S. and U.K. must cut their deficits to keep their AAA ratings long-term; investors seemed more worried about the U.K. Also, Moody's cut several Dubai-owned firms, citing a lack of gov't support. Dubai shares dived.

  • In a statement, Fitch said it was cutting Greece's rating from A- to BBB+ -- the worst in the eurozone -- with a negative outlook. "The downgrade reflects concerns over the medium-term outlook for public finances given the weak credibility of fiscal institutions and the policy framework in Greece, exacerbated by uncertainty over the prospects for a balanced and sustained economic recovery," the statement said.
  • The Fitch rating agency on Tuesday downgraded Greece's four of the largest banks also, describing prospects for Greek public finances as negative.
  • Tuesday's action was a fresh blow to Greece, saddled with high public deficits and debt, as it came a day after another agency, Standard and Poor's, placed Greek debt under "negative" watch and warned of a downgrading if the government did not rein in its overspending.
  • The moves by the agencies rattled European markets, with the Athens exchange closing more than 6.0 percent in negative territory. Markets fell elsewhere in Europe, which analysts partially attributed to nervousness over the Greek situation.
  • Copper slipped on Tuesday as investors retreated from riskier assets such as commodities and as the dollar rallied against the euro.
  • The dollar made ground against the euro on concerns about Greece's fiscal health after Fitch downgraded the country's credit rating.
First Dubai, Now Greece - How Many More To Come?
The Dubai Desert Storm was just settling and Greece has hit a fresh blow to global market sentiment. We saw how Bear Stearns became bankrupt after sub-prime mess but then slowly many companies including Lehmann faced problems creating a downward spiral in global markets. Those were just companies going bankrupt but now the risk is "Sovereign" - Dubai is a city-state and Greece is an important country as it is one of the 16 countries using Euro as the currency. 
While the macro economic impact on India and most other nations may be limited, the fear of a debt default from Dubai may end up being a much needed reality check for global investors, who seem to have forgotten one of the worst financial crises in history a little too fast.
One needs to be cautious with momentum picks especially those related with Dubai :-
Property Market-

  • The Indian property developers who did venture into Dubai are likely to be impacted in a big way.
  • Jones Lang LaSalle Meghraj's chairman and country head for India Anuj Puri says "There will be a negative impact on Indian developers in Dubai, since this is a situation where prices are expected to come down in Dubai. These players would have acquired projects to sell them at a particular price. With pricing taking a beating, the profitability of these projects is reduced.
  • "Construction companies who had gone to Dubai to carry on contract jobs would also be affected, since payments would get delayed and project sizes will be curtailed, thereby affecting their bottom-line. Many projects will get delayed or trapped, meaning a decrease in business. Commitments from Dubai-based companies into India will also reduce."
  • Those involved in construction in Dubai include Nagarjuna Constructions, Larsen & Tubro, Omaxe and BSEL Infra.
Banks-
In recent years, Indian banks have made significant progress in expanding their network overseas and Dubai is one city where many set up shop. According to experts, the crisis may not have a major impact on India's big banks, barring Bank of Baroda. That bank's total exposure in Dubai is around Rs4,000 crores.
Media and Entertainment-
The crisis rattled Bollywood initially. The Middle East, particularly Dubai, is one of the biggest overseas markets for the Mumbai film industry,generating almost 50 per cent of its international revenue.
Movie analyst Komal Nahata told the Hindustan Times: "For an A-grade film, over 40 per cent of the collection comes from overseas and Dubai contributes a major 10 to 15 per cent. Dubai is one of the few overseas markets where Hindi films release on Thursdays.
Other impacted Stocks-
MM Miyajiwala, Executive VP and CFO at Voltas, said the company is executing a Rs 900-crore project in Dubai as part of a joint venture where Voltas has 37% stake. “We are executing the project for Emaar and the client has fully funded the project. Thus, we are not anticipating any delays,” he said. “Our order book is primarily from Abu Dhabi and Qatar. Dubai also has not defaulted on any of our payments.”
Aban Offshore, the oil exploration company has deployed six rigs in West Asia.
Dubai World’s investment arm, Istithmar, holds 13% stake in SpiceJet
Macro Impact-

  • Remittances from Dubai account for nearly 10% of overall remittances to India and any slowdown may affect forex reserves of India to some extent.
  • The UAE was India's top destination for exports for the year ending March this year, displacing the US. The country's total exports to the UAE grew by a phenomenal 53% this financial year.
  • Dubai has investments in India too. DP World, part of Dubai World, runs five container terminals in India, accounting for 40% of India's container traffic. The company has invested over US$2 billion in India and had said it would spend US$12 billion more in the next five years.

India’s central bank has told banks to furnish details of their exposure to Dubai World http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/RBI-tells-banks-to-reveal-exposure-to-Dubai-World/articleshow/5277428.cms
Indian Banks' Exposure to Dubai http://www.vccircle.com/500/news/indian-banks-exposure-dubai
Dubai: From growth to crisis http://www.thehindubusinessline.com/2009/12/01/stories/2009120150680900.htm
Asian stocks fell, led by finance and mining companies, after Japan’s economy grew more slowly than estimated and Fitch cut Greece’s credit rating, denting confidence in the global economic recovery. http://www.bloomberg.com/apps/news?pid=20601087&sid=aCyfcjCHGoy4&pos=2
Greek and Dubai debt in downgrade http://www.cityam.com/news-and-analysis/t4ay2v3v5z.html

Saturday, December 05, 2009


Weekly Update 05 Dec, 2009 by Tanmay G Purohit
Nifty closed up 3.38% or 167 points at 5108 after strong Q2 GDP numbers at 7.9% which surpassed many expectations. RANBAXY was top gainer in Nifty with nearly 14% rise after the company launched generic version of Valtrex in US markets. Auto numbers were very strong once again and TATA MOTORS shot up 13% this week. Telecom stocks saw value buying support and BHARTI AIRTEL, IDEA & RCOM rose smartly. HERO HONDA and HIND UNILEVER lost 4% each this week.

The annual rate of inflation for food articles rose to 17.47% for the week ended November 21, 2009, data released on Thursday showed. This is the sharpest rise in food prices since 1998 and food inflation may become a major worry for the government later as it may impact manufacturing inflation also. Experts feel high food inflation coupled with 7.9% GDP growth may force RBI to resort to rate action earlier than expected.  Markets have shrugged off Dubai woes for now but UAE has become top receiver of Indian exports and USA as second top export destination for India, if both regions face some economic problems, India would be affected to some extent and a big part of remittance benefits comes from both these destinations only. The leveraged asset purchases of Dubai-based wealthy NRI in the past few years may begin to haunt them, as the collapse of real estate prices in the emirate prompts calls for additional funds as margins which may force them to sell some Indian assets, experts say. REALTY is one sector which is haunting the globe and caution is advised in this sector. India’s fiscal deficit during April-October increased to 2.45 trillion rupees Vs 1.17 trillion rupees (YoY) owing to falling tax receipts & rising spending and in percentage terms, the fiscal deficit is 61.1% of the government's full year budget deficit aim of 4 trillion rupees. Despite equity markets gaining almost 80% so far in the current year, the number of new FIIs coming to India has touched a six-year low as only 111 new FIIs got registered with SEBI till November, against as many as 375 in calendar year 2008. 
Nifty has hit double top at 5181 to its previous top in October and as long as it is not crossed comfortably, the trend may remain down. Once breakout above 5200 is seen, Nifty may test 5350-5500 levels on upside. Action has clearly shifted to cash stocks and index heavyweights are lagging for now, so stock-specific approach looks best in this market. Below 4950 caution is advised.
Stocks looking good for next week - RELIANCE, EKC, ORCHID CHEM, NEYVELI, ROLTA

Supp 5067/4943/4850 Res 5165/5250/5342


US employers cut far fewer jobs than expected last month in the best showing for the labor market since the recession began, lifting the beleaguered US dollar as investors bet a sustainable recovery was building. The economy shed only 11,000 jobs in November, well below the 130,000 loss financial markets had braced for, while the unemployment rate 

Last Weekly Update:-
Nifty closed down 110 points or 2.19% week-on-week at 4941 as markets consolidated for first 3 sessions but Thursday and Friday proved to be weak days for indices. F&O expiry put pressure on longs as markets were overbought and were not able to move higher with volumes which resulted in heavy unwinding pressure on Thursday and markets fell on record volumes. Dubai debt problems gave a feeling of Black Friday but both Nifty and Sensex recovered from intraday lows after Government allayed fears and European markets opened positively which infused some buying support for our markets too. BPCL and GAIL were among top gainers on Nifty this week after Crude fell towards $73. HERO HONDA, RANBAXY and CIPLA were other major gainers. JP ASSO, SIEMENS, IDFC fell more than 7% this week after they faced heavy profit-taking. TELECOM stocks remained resilient through the week as value buying looks to emerge there.
The six ‘core' infrastructure industries have registered a 3.5-per cent year-on-year growth during October, compared to the 4.1 per cent and 7.8 per cent levels of the preceding two months and the 2 per cent for October 2008.  Hurt by production cuts and higher restructuring costs due to layoffs at Anglo-Dutch unit Corus, TATA STEEL swung to a consolidated net loss of Rs 2707 Cr for the second quarter from a year-earlier profit of Rs4772 Cr a year earlier; consolidated net sales fell 43% to 25270 Cr rupees from 44050 Cr rupees. But Tata Motors returned to profit in the second quarter after it cut costs at its Jaguar Land Rover (JLR) unit and earned returns from investments in group companies. The consolidated net profit in the quarter ended September 30 was Rs 21.78 crore, compared with a loss of Rs 942 crore a year earlier; Sales fell 8.5% to Rs 20,889 crore.
Nifty took important support around weekly trendline at 4800 and the recovery was very sharp intraday. 6 weeks have elapsed since we have seen yearly highs at 5181 on Nifty and so far we have seen Nifty hitting 5138 this week which is a lower top. Nifty needs to move past this top quickly to regain the lost momentum. Nifty has closed below its short-term 8 and 15 Day Moving averages and as long as it stays below 5025, the trend is expected to be weak. Below 4700 major panic selling is not ruled out. Being stock-specific would be a better way to look at this market and investors may look at stocks like IGL, BHARTI AIRTEL, TATA COMM, IDEA where value buying is still possible. EKC, IFCI, HUL look good for short-term buying. Avoid BANKING and REALTY stocks. GDP data for Q2 to be announced on Monday, Q1 GDP was at 6.1%.
Supp 4830/4762/4610 Res 5025/5110/5228

Thursday, November 26, 2009

World Markets Into Downspin After Dubai Debt Problems

Just a year after the global downturn derailed Dubai's explosive growth, the city is now so swamped in debt that it's asking for a six-month reprieve on paying its bills — causing a drop on world markets Thursday and raising questions about Dubai's reputation as a magnet for international investment.

Dubai has shocked investors by asking for a debt standstill at Dubai World, the government’s flagship holding company that has developed some of the world’s most extravagant real estate projects. Dubai’s surprise move angered some investors who had been reassured by local officials for months that the city would meet all obligations on its $80bn (£48bn) of gross debt in spite of recession and a real estate crash. Bond markets reacted sharply to the news with investors demanding higher premiums to hold debt from the region. In London trade it cost about $460,000 annually over five years to insure $10m worth of Dubai government debt against default, compared with $360,000 on Tuesday. Prices rose for its neighbours with Abu Dhabi protection $100,000 more than on Tuesday. State-run Dubai World has $59 billion of liabilities, its subsidiary Nakheel said in August, a large proportion of Dubai's total debt of $80 billion. 
Without much oil revenue, Dubai is reliant on debt markets not only to pay for its ambitious infrastructure projects, but also to service previous borrowing that funded explosive growth in recent years. It and its corporate entities have nearly $50 billion in debt coming due over the next three years, according to Standard & Poor's.
Debt Standstill
Mechanism by which a country agrees to cease payments on its debts until a restructuring agreement has been negotiated with its creditors.
Aftermath of Dubai Debt Problems:-

  • European banks were hit by concern about potential exposure to debt problems in Dubai on Thursday, while companies where Middle Eastern investors own big stakes also came under pressure. 
  • By 1230 GMT on Thursday the DJ Stoxx European bank index was down 3.3 percent at 222 points, putting it on track for its biggest daily fall since June. 
  • Companies with significant Middle Eastern shareholders, such as the London Stock Exchange, were also hit by concern the holdings could be cut to meet obligations at home. Among the biggest fallers were HSBC, Royal Bank of Scotland , Lloyds Banking Group and ING, whose shares all fell over 4 percent.

Shares in Asia tumble before Europe started panicking:-

  • Japan's Nikkei stock average has hit a 4-month closing low on Thursday as the dollar sank to a 14-year low against the yen, pressuring exporters. 
  • Stocks in Hong Kong and China ended down on Thursday as China Minsheng Banking made a disappointing debut, weighing on recently battered banking stocks, while concerns over asset prices put pressure on the Shanghai market.
  • China's key stock index sank 3.62 percent in heavy trade on Thursday, with banks weak as investors fled the market amid mounting worries that the government may take steps to clamp down on surging asset prices. Chinese banking stocks have come under pressure from concerns over potential cash calls by the sector on expectations the government may lift capital-adequacy ratios for larger state lenders next year follwoing a lending boom.
  • Indian shares fell 2 percent on Thursday, the most in more than three weeks, led by losses in banks as investors unwound positions on the last day of monthly derivatives taking cues from lower world markets.

UK bank shares tumble on Dubai debt woes http://www.citywire.co.uk/personal/-/news/markets-companies-and-funds/content.aspx?ID=370043
Moody’s Investors Service has downgraded the ratings of all six government-related issuers (GRI’s) in Dubai and left them on review for possible downgrade http://www.ft.com/cms/s/0/c56003be-da12-11de-b2d5-00144feabdc0.html
Dubai debt `standstill' raises alarms about image http://www.google.com/hostednews/ap/article/ALeqM5hihmivQQAAa6vYldwnJrO0FK3TDgD9C79GKG0
Dubai shock after debt standstill call http://www.ft.com/cms/s/0/46b4065c-d9f7-11de-b2d5-00144feabdc0.html
Will It Affect Indian Markets?
UK and European stocks have reacted negatively to Dubai Debt problems and Japan, Hongkong, China have fallen because of their own problems. India has historically corrected in global equity meltdowns and in such a time it shows high-beta nature by falling more than the rest, this we saw when Lehman went bankrupt during subprime crisis. Banking stocks in many parts of the world looked vulnerable - China bank stocks fell on expectations the government may lift capital-adequacy ratios for larger state lenders next year, European banks have fallen after Dubai problems and here in India too Banking stocks saw selling after RBI comment on merger and Government may also delay bank merger had a negative impact. 
Is this the start of the correction for overstretched Indian equities? 
Nifty has returned 69% this year but after hitting 5181 in October, we have not yet seen a new top even after more than a month of trading activity. Volumes have dropped and FIIs have been in selling mode recently. Nifty crucial supports are at 4900 and 4750 below which the correction may deepen. For rally to shape once again, a move past previous top around 5181 with large volumes is necessary.

Monday, November 23, 2009


Weekly Update 20 Nov, 2009 by Tanmay G Purohit
Nifty closed up 53 points week-on-week at 5052 as markets consolidated around 4950-5070 after Monday rally. DENA BANK rose nearly 16% this week after news reports talked about possible merger between DENA and CANARA BANK. GLENMARK gained 14% this week after the company settled all pending litigation with Medicis Pharma. PFC and SAIL were among major gainers on the back of disinvestment talks and government is set to cut its holding in SAIL by 20%. SUZLON, ULTRATECH, TATA STEEL were other major winners. PATNI COMP lost 12% after promoters denied any stake sale possibility and chose open market to shed some stake. REL INFRA, BHARTI AIRTEL, HCL TECH, UNITECH were major losers from Nifty this week.
The government has asked the country’s largest state-run banks to look out for mergers and acquisitions opportunities, saying  consolidation is imperative to augment efficiency, and prop up the country’s GDP.  There are 27 public sector banks operating in the country and consolidation in the sector will allow them to achieve scale that would have other ways taken them years, all bank stocks rose on Friday in late trade after the news hit the market. Parliament Winter Session started on Thursday but adjourned in quick time after protests from opposition parties against Centre's sugarcane price move that discourages states from fixing higher prices. Food inflation rose to 14.55% in the first week of November Vs 13.68% fuelled by higher prices of staple items like potatoes, onions and pulses. 
Nifty has comfortably traded past 5050 so far but we have seen a lower top of 5079 against 5181 seen in October, going by lower top lower bottom theory, we may still see a low below 4538 but disinvestment announcements and banking sector consolidation are two positive developments which may drive the short-term trend for markets. India to announce GDP numbers for September Quarter on 27 November and this will be watched closely.
Value Buys - IDBI, TATA COMM, BHARTI AIRTEL
Supp 5000/4932/4790 Res 5115/5180/5300


European Central Bank President Jean-Claude Trichet said the bank will gradually withdraw the emergency cash it has pumped into the economy in order to ensure it doesn’t fuel inflation. http://www.bloomberg.com/apps/news?pid=20601087&sid=aJKfoYdTlLpM&pos=2
Telecom regulatory Authority of India (TRAI) on Friday announced the charges for mobile number portability (MNP) which enables subscribers to switch telecom operators without getting their phone numbers changed. TRAI said the MNP users will have to pay a maximum of Rs 19 to change the telecom operator while retaining the old number. Number portability will be a reality in Metros and A category circles by December 20 and across India by March 2010. http://profit.ndtv.com/2009/11/20175633/Mobile-users-to-pay-Rs-19-to-r.html


Last Weekly Update:-
Nifty closed up 4.23% or 202 points as markets continued the pullback that started last week. HCL TECH, SAIL, TATA MOTORS, IDFC and TCS were major gainers in Nifty this week while RELIANCE rose more than 8% on the back of reports about acquisitions by the company. REALTY and TELECOM stocks were on the losing side as BHARTIAIRTEL, DLF, UNITECH  and RCOM were dragging the Nifty. PSU stocks such as NEYVELI, EIL, NMDC and REC rose sharply after disinvestment announcements from Government. Nifty has completed nearly 3/4th of the correction in quick time which gives a feeling that this is still just a pullback. Though breadth has been very strong, volumes have remained quite low to make the rally dubious. Last 3 consecutive sessions, Nifty has made tops at 5016, 5014 and 5017 which is a kind of triple top formation and in case Nifty is not able to close past 5050 comfortably this week, a serious wave of selling may start once again. 4800 is an important support level below which caution is advised.
IIP data for Sep'09 was out and the industrial growth came in at 9.1% which was very encouraging as far as recovering of the economy is concerned. Prime Minister in G-20 meeting has said India would exit Stimulus as growth as picked up, so in next few months roll back excise and customs duty can be possible and which would lead to re-rating in stocks as few sector enjoyed higher profit as they didn’t pass on the full benefits to end users. PM has said deficit and inflation can be a threat to Indian recovery and if stimulus measures are rolled back, many sectors like Auto may see decline in profits and rise in costs. India’s sovereign rating won’t be raised unless the government works toward reducing its budget deficit and debt, according to Moody’s Investors Service as the agency feels India has a lot of domestic-currency debt, a very high debt-to-GDP ratio, and a very high budget deficit year after year. Govt plans 30% hike in gas price and it would be beneficial for GAIL, GSPL, OIL and ONGC. Nifty making new highs above previous levels around 5181 would indicate a euphoric rally ahead where the gains will be fast but may not last long, for now being stock-specific is only advised - GAIL,BHARTI AIRTEL, PTC, IGL show promising signs and can be held as downside looks limited there. 
Supp 4920/4860/4780 Res 5055/5120/5205 

Thursday, November 19, 2009

Market Crashes After Politics Takes Centre Stage
The Nifty closed below the psychological 5,000 mark. The benchmark indices opened flat and tumbled in the second half of trade. The sell-off was seen across all the sectors; realty, oil & gas, technology, telecom and metal were the major losers in today's trade.
SUGAR Turned Astringent!

The first day of Parliament's winter session on Thursday was rocked by protests from Opposition parties against Centre's sugarcane price move that discourages states from fixing higher prices. The entire Opposition raised the sugarcane price issue. Lok Sabha was first adjourned till 1200 hrs IST after Opposition parties and even some United Progressive Alliance (UPA) constituents came out against the Union Government's new ordinance to replace statutory minimum price for sugarcane.
The ordinance fixes the fair remunerative price for sugarcane at Rs 130 per quintal, much below the Rs 280 per quintal that farmers have been demanding. Earlier, thousands of sugarcane farmers launched massive protests in Delhi to coincide with the opening day of the Winter Session of Parliament.
http://ibnlive.in.com/news/lok-sabha-shuts-down-over-sugarcane-politics/105550-37.html?utm_source=IBNdaily_MCDB_191109&utm_medium=mailer
Sugar stocks fell massively after the commotion in Parliament about Sugarcane prices -

Farmer protest, delay in crushing pull sugar stocks down http://www.moneycontrol.com/news/market-edge/farmer-protest-delaycrushing-pull-sugar-stocks-down_425949.html
Insurance Bill Makes Market Players Nervous
A bill to reform the insurance sector is unlikely to be cleared by the parliament's winter session, a finance ministry official said on Thursday. "The insurance bill is unlikely to be passed in the current short session," the official, who did not wished to be named, said. The winter session began on Thursday. The bill, which was stalled in the last parliament, proposes raising the foreign investment limit in insurance companies from 26 percent to 49 percent.
The positive sentiment in stocks quickly turned negative - HDFC, ICICI BANK, DABUR, EXIDE, MAX are having tie-ups with foreign Insurance players.
HDFC Standard Life - HDFC holds 72.43% and Standard Life holds 26%
ICICI holds 74% and Prudential Plc 26%
Max holds 74% while New York Life holds 26%
Dabur has 74% stake and Aviva has 26%
Exide 50% shareholding in ING Vysya Life Insurance Company
Parliament nod unlikely for insurance bill http://in.reuters.com/article/businessNews/idINIndia-44087720091119
JSW-JFE deal adds to the market panic
JSW STEEL saw profit-taking after deal between JFE of Japan and JSW STEEL was announced, initially many news reports suggested that JFE would be buying 10% stake in JSW but tie-up announcement led to panic sale in Metal stocks. 
JSW Steel Ltd has informed BSE regarding a Press Release dated November 19, 2009 titled "JFE Steel Corporation & JSW Steel Limited come together in a strategic collaboration" http://www.bseindia.com/xml-data/corpfiling/announcement/JSW_Steel_Ltd_191109.pdf
India may take steps to slow capital inflows if foreign investments surge, Finance Secretary Ashok Chawla said amid exporter concerns of a stronger currency reducing their competitiveness abroad. “As the situation evolves we’ll see what needs to be done,” Chawla told reporters in New Delhi today. “As of now, inflows are not a cause for serious concern.” Foreign funds purchased a net 732.5 billion rupees ($15.77 billion) of Indian stocks this year, after being net sellers in 2008, sending the rupee higher by 4.8 percent and hurting sales at exporters including Gokaldas Exports Ltd. Over the past month, Brazil and Taiwan imposed capital controls to check appreciation in their currencies. http://www.bloomberg.com/apps/news?pid=20601091&sid=aa7xKpqe_PA4

Tuesday, November 17, 2009

EDUCOMP CMP Rs 780 - The stock looks bearish

  • EDUCOMP has multiple support near Rs.680-690 but the stock has clearly failed to participate in the recent rally for the last 4-5 sessions. 
  • The improving outlook for the IT sector has seen the CNX IT index soar while EDUCOMP has distinctly under-performed, in spite of a 1:5 stock-split and good revenue growth of 92% this quarter. 
  • If the stock sustains below Rs.690 it would be a major breakdown and a further decline of 15-20% may be seen where the stock may grossly underperform the broader indices. Next support around Rs 540-560 may be tested.
  • The stock shows a huge bearish Head & Shoulders formation where breakdown happens below Rs 690. It will be a fatal breakdown once that happens as the stock would move below all major moving averages.






Monday, November 16, 2009


Weekly Update 14 Nov, 2009 by Tanmay G Purohit
Nifty closed up 4.23% or 202 points as markets continued the pullback that started last week. HCL TECH, SAIL, TATA MOTORS, IDFC and TCS were major gainers in Nifty this week while RELIANCE rose more than 8% on the back of reports about acquisitions by the company. REALTY and TELECOM stocks were on the losing side as BHARTIAIRTEL, DLF, UNITECH  and RCOM were dragging the Nifty. PSU stocks such as NEYVELI, EIL, NMDC and REC rose sharply after disinvestment announcements from Government. Nifty has completed nearly 3/4th of the correction in quick time which gives a feeling that this is still just a pullback. Though breadth has been very strong, volumes have remained quite low to make the rally dubious. Last 3 consecutive sessions, Nifty has made tops at 5016, 5014 and 5017 which is a kind of triple top formation and in case Nifty is not able to close past 5050 comfortably this week, a serious wave of selling may start once again. 4800 is an important support level below which caution is advised.
IIP data for Sep'09 was out and the industrial growth came in at 9.1% which was very encouraging as far as recovering of the economy is concerned. Prime Minister in G-20 meeting has said India would exit Stimulus as growth as picked up, so in next few months roll back excise and customs duty can be possible and which would lead to re-rating in stocks as few sector enjoyed higher profit as they didn’t pass on the full benefits to end users. PM has said deficit and inflation can be a threat to Indian recovery and if stimulus measures are rolled back, many sectors like Auto may see decline in profits and rise in costs. India’s sovereign rating won’t be raised unless the government works toward reducing its budget deficit and debt, according to Moody’s Investors Service as the agency feels India has a lot of domestic-currency debt, a very high debt-to-GDP ratio, and a very high budget deficit year after year. Govt plans 30% hike in gas price and it would be beneficial for GAIL, GSPL, OIL and ONGC. Nifty making new highs above previous levels around 5181 would indicate a euphoric rally ahead where the gains will be fast but may not last long, for now being stock-specific is only advised -GAIL,BHARTI AIRTEL, PTC, IGL show promising signs and can be held as downside looks limited there. 
Supp 4920/4860/4780 Res 5055/5120/5205 



Last Weekly Update:-
Nifty ended the shortened week up by 84 points or 1.79% at 4796. Nifty hit its lowest point in 10 weeks at 4538 on Tuesday and pulled back smartly to high of 4836 on Friday. Volatility was high owing to fierce battle between buyers and sellers but volumes were missing. Rally was backed by PSU stocks after the government said all profitable, listed state-run firms must have at least 10% of their shares in public hands, and unlisted firms that had a positive net worth, no accumulated losses and a net profit over the past three years should list. Since August, the government has raised USD 1.8 billion by selling shares in NHPC and Oil India, and last month it approved share sales of NTPC, Satluj Jal Vidyut Nigam and Rural Electrification Corp. Ministers and officials have also named firms such as Steel Authority of India, NMDC, Shipping Corp and Coal India as potential candidates for stake sales. The US unemployment rate has hit double digits at 10.2% for the first time since 1983 and shows how weak the economy remains even though it is growing. Rising unemployment also could threaten the recovery if it saps consumers' confidence and makes them more cautious about spending as the holiday season approaches. The Monsoon here was weakest in nearly 40 years and now the effects are starting to be felt as data showed food inflation remained firm at 13.39% for the 12 months to October 24. This correction has started after RBI announcing tighter monetary policy and now data to watch out would be IIP on 12 November along with Inflation on same day.
Going ahead Nifty needs to close past 4860 on a sustained basis to show the trend has reversed and volumes have dropped by 20-25% this week on the back of lower participation. For any reversal of downtrend, a breakout with large volumes is needed and if volume is lacking, even if the up trend starts it may not last long, 4650 is an important level to watch for support. For now the rally looks more of a pullback and one may lighten the positions as many are still stuck with Margin Funding and F&O which can pressurize more if market recovery stops here. TATA TEA, GRASIM, IDEA look good for investment.

Supp 4650/4530/4400 Res 4862/4948/5050

Friday, November 13, 2009

View On Crude:-
Crude ($76.69) has hit high of $82 in October’09 but after that it has not been able to hit new highs and shows distribution around current levels. A move below $75 would be a breakdown and we may see levels near $65 for the Crude. CAIRN would be highly impacted as the stock has a tendency to move along with Crude.


http://in.reuters.com/article/businessNews/idINIndia-43882120091112    ANALYSIS - Dollar trouble, oil's bubble could derail recovery

Wednesday, November 11, 2009

Update On MARUTI:-
We had talked about weakness in MARUTI in last post and the stock has remained an underperformer so far. This one talks about further possibility.
The stock has broken down of a bearish Head & Shoulder formation and completed pullback towards neckline also. Technically the selling can get fearsome now and a rapid fall towards Rs 1220-1250 is not ruled out and that is one major support for the stock going ahead. A sustained move past Rs 1550 would negate this view. The stock was recommended near Rs 500 on this blog in Dec-08 and it seems the time is near to take profits now.



Previous Posting on MARUTI http://tanmaygopal.blogspot.com/2009/10/maruti-blows-reverse-gear-horn-maruti.html

  • Indian Car market to get more competitive after Nissan-Renault signing a deal with Bajaj Auto for an ultra low-cost car and Volkswagen looking forward to 8% market share – very positive for long term growth of the industry but more competition may give way to margin pressures for existing car makers. 
  • Car companies have benefited immensely after Indian government giving out stimulus package and most of the profits have been on the back of lower excise duty payment which will not be there when stimulus is stopped and that may impact demand for cars. Finance Minister Pranab Mukherjee raised concern that domestic demand is still needed to support the economy when he said fiscal stimulus measures will be withdrawn.

Auto Firms may hike prices http://www.bloombergutv.com/industry-news/other-industry-news/36980/auto-firms-may-hike-prices-2-2-5-.html
India’s Stocks Fall on Demand Concerns; Maruti Leads Declines http://www.bloomberg.com/apps/news?pid=20601091&sid=aL.dhEanyOus

Monday, November 09, 2009


Weekly Update 07 Nov, 2009 by Tanmay G Purohit
Nifty ended the shortened week up by 84 points or 1.79% at 4796. Nifty hit its lowest point in 10 weeks at 4538 on Tuesday and pulled back smartly to high of 4836 on Friday. Volatility was high owing to fierce battle between buyers and sellers but volumes were missing. Rally was backed by PSU stocks after the government said all profitable, listed state-run firms must have at least 10% of their shares in public hands, and unlisted firms that had a positive net worth, no accumulated losses and a net profit over the past three years should list. Since August, the government has raised USD 1.8 billion by selling shares in NHPC and Oil India, and last month it approved share sales of NTPC, Satluj Jal Vidyut Nigam and Rural Electrification Corp. Ministers and officials have also named firms such as Steel Authority of India, NMDC, Shipping Corp and Coal India as potential candidates for stake sales. The US unemployment rate has hit double digits at 10.2% for the first time since 1983 and shows how weak the economy remains even though it is growing. Rising unemployment also could threaten the recovery if it saps consumers' confidence and makes them more cautious about spending as the holiday season approaches. The Monsoon here was weakest in nearly 40 years and now the effects are starting to be felt as data showed food inflation remained firm at 13.39% for the 12 months to October 24. This correction has started after RBI announcing tighter monetary policy and now data to watch out would be IIP on 12 November along with Inflation on same day.
Going ahead Nifty needs to close past 4860 on a sustained basis to show the trend has reversed and volumes have dropped by 20-25% this week on the back of lower participation. For any reversal of downtrend, a breakout with large volumes is needed and if volume is lacking, even if the up trend starts it may not last long, 4650 is an important level to watch for support. For now the rally looks more of a pullback and one may lighten the positions as many are still stuck with Margin Funding and F&O which can pressurize more if market recovery stops here. TATA TEA, GRASIM, IDEA look good for investment.

Supp 4650/4530/4400 Res 4862/4948/5050


Last Weekly Update:-
Nifty (4711) closed down 5.71% or 285 pts to hit 7-week low; all 5 sessions had negative closing this week. Weekly Adv-Dec 548-2499 BSE and 157-1167 on NSE.
Nifty closed down by 7.32% in October and Adv-Dec for the month 918-2247 on BSE and 361-1004 on NSE. Telecom stocks were major losers this month with RCOM losing -43%, IDEA -31% and BHARTI AIRTEL down -30% after pricing power worries made investors dump those stocks and RCOM came out with 50% drop in Net Profits. REALTY stocks lost after IT department gave show-cause notice to DLF and results in that sector were below expectations. RBI raised provisioning requirements for loans to Real Estate companies and it added to negative sentiment in REALTY stocks. ADAG stocks faced major hammering RNRL down -28%, RELINFRA lost -14%, RPOWER dropped -18%  after RCOM was accused with accounting mis-statements. ADAG results were bad and now more sell-Off can be seen. SUZLON lost 27% and the company has widened its loss to Rs 356 Cr from Rs 22Cr last year in Q2. SESA GOA lost 6.6% in the week after SFIO probe gave way to large profit-taking in the stock.
RBI raised SLR by 100bps to 25% on Monday in its Policy Meeting and selloff started after RBI joined Australia and Israel to tighten the monetary stance. After showing a healthy expansion of 7.1% in August, the growth in core infrastructure sector dropped to 4% in September, making analysts wonder whether robust industrial recovery can be sustained and IIP data on 12 November would be watched closely. Poor results from Corporate India added to the negative sentiment and volumes rose to all time high just before expiry. For the 1893 companies announcing results, Sales have dropped by 5.7% whereas Profits have grown by 39.5% and Other Income component has risen by 7%. Reduction in excise duties as part of the Government-sponsored stimulus plan helped in expanding margins in some sectors with companies preferring to keep the savings rather than pass it on to customers. The numbers continued to show sharp divergence between sectors. While auto and cement companies reported strong sales, led by improved volumes, others such as metals, steel and realty players reported a fall in sales, due mainly to depressed realisations. 
Nifty has fallen nearly 9.5% from its top at 5181 and liquidity which was driving force for the rally has disappeared just at the symptoms of tightening monetary conditions. F&O unwinding was over at Expiry but margin call pressure needs to be watched with caution as it may give to further panic in market. Redemption for hedge funds would be known this week and one would wait for 4550-4600 levels for some value picks - IDEA, PTC, GRASIM, IGL can be picks for an investor. 

Supp 4645/4548/4402 Res 4850/4928/5035