Saturday, October 24, 2009

Weekly Update 24 Oct, 2009 by Tanmay G Purohit
Nifty closed down 2.82% or 144 pts at 4997  in a shortened week. Indices fell for first 3 days on trot and Friday we had a little bounce which normally happens after 3-4 day correction. RELIANCE shares ended down 4% on Friday after HARDY OIL abandoned D9 block. Stock of HARDY fell 41% on London Stock Exchange yesterday on the back of this news. Hardy in May this year had said that it estimated the prospective resources at Block D9 at 10.8 trillion cubic feet of gas and 143 million barrels of oil, almost equal to the reserves in the country’s most prolific KG-D6 block, whose monetary value is estimated to be $50 billion. It was then pulled up by the Director General of Hydrocarbon (DGH) saying it was premature to publicize the prospects of reserves.  Reliance, which surrendered a third of the 45 exploration blocks to the government for unsuccessful exploration with sunk cost of Rs 1,400 crore, said on Friday it would not surrender this block, but would drill three more wells. The stock has weakened as it has closed below 75Day EMA and in case more negative newsflow for the stock continues with Supreme Court hearing between RIL-RNRL going on, Rs 1900 may become next support for RIL, the stock needs to be watched closely as it has more than 10% weightage in the Nifty and more than 13% in Sensex. 

Nifty has broken down from a rising wedge which indicates bearishness ahead and it is poised at make or break level as it trades near crucial support of 4900 which is lowest point in last 5 weeks. Move past 5120 is needed this week to show strength once again. FMCG stocks look good on the back of above-expectation results from ITC and HINDUNILVR would be good as an investment pick. Current stir going on in Gurgaon auto belt may impact AUTO stocks negatively. COAL INDIA has hiked coal prices by 11% which is first rise in last two years and GUJNRECOKE may also be benefitted. Hike in coal prices can impact METAL, CEMENT and POWER stocks . SAIL once again has denied any price increase owing to possibility of lack of demand and it indicates low pricing power for the PSU Steel company. RBI meeting on Oct 27 would set the trend for BANKING stocks. Current rally is driven by liquidity as earnings season is not giving so healthy signals, the growth in Sales for 426 companies announcing results so far has been 1.8% while PAT growth is 28% which is mostly driven by Other Income component which has risen 71% this September quarter. Most of the good news looks priced in and liquidity would be first to reverse at slightest of fears, so caution is advised. 

Supp 4930/4878/4782 Res 5055/5123/5185

RBI to hike cash reserve ratio by 50 bps on Oct 27: Moody's

Global trade flows slipped in August after rising for the two previous months, an indication that the economic recovery is more fragile and anemic than previous data have hinted. The Netherlands Bureau for Economic Policy Analysis said trade volumes fell 2% from July, according to an algorithm based on customs data from 23 developed countries and 60 emerging markets, accounting for 95% of global trade.

SEBI has allowed stock exchanges to extend the trade timing from 10-3.30 p.m to between 9 a.m and 5 p.m. The move adds nearly 2-1/2 hours of trading if both the exchanges - BSE and NSE - extend the trade timing as per Sebi permission.

Friday, October 23, 2009

Cash Level Of Equity Funds Lowest Since Jan ’08 Peak, Is The Liquidity Tap Drying Out?

  • After a swift rise in share prices since early March, cash available with equity mutual funds has fallen below 7 per cent of assets under management, a level last seen during the market peak in January 2008. Even till April end, equity fund managers were ca utious and held 14.35 per cent of their assets in cash. The scenario changed after the Congress-led alliance won a comfortable majority in general elections boosting investors’ confidence in political stability in the country. Between April 30 and September 30, cash available with 297 open-ended equity schemes declined from Rs 14,637.18 crore to Rs 9,675.15 crore, data available from Delhi-based mutual fund tracking firm Value Research showed. During this period, cash as a percentage of total equity assets declined from 14.35% to 6.25%. 
  • After witnessing heavy inflows in July and August, mutual funds lost favour last month as investors pulled out over Rs 1.44 lakh crore, the highest monthly outflow so far this fiscal. The combined net outflow from the 36 fund houses stood at Rs 1,44,327 crore in September, as per the Association of Mutual Funds in India (AMFI) data. At the end of September, investors pulled out money from the four major fund schemes -- income, equity, balance and liquid or money market. 
  • Domestic institutions had been pumping fresh money into the markets for the last four months putting in Rs 14,207 crore in total, unmindful of how FIIs behaved. Even in July when FIIs withdrew Rs 1,365 crore from the market, domestic institutions were investing and helped the Sensex close 8 per cent higher, by bringing in over Rs 5,800 crore. But the situation has changed in recent weeks. From the average Rs 4,000 crore brought in every month between June and August, domestic institutional investment in the market in September dipped to Rs 770 crore and turned to net sales in October. 
  • Retail investors haven’t participated in the market’s rally since March and have pulled out Rs 13,355 crore (net) between March and now. Even in the post election surge that took markets up in May, retail investors didn’t join in. In September they took Rs 4,285 crore out of the market and in October till date they have pulled out Rs 462 crore.
  • The mutual fund industry’s assets under management declined in September even as equity markets touched a 17-month high of 17,000 during the month. Profit booking by investors, the new no-entry load regime and redemption pressures from corporates and banks are exerting pressure on the mutual funds’ asset base. Mutual funds assets fell by almost one per cent during September, while the benchmark BSE Sensex rose by more than nine per cent. Of the 38 mutual fund houses, 21 of them reported a fall in their asset base, while the asset base of the rest increased. The average assets have dipped to Rs 7,42,919 crore in September compared with Rs 7,49,915 crore in August, according to the data released by Association of Mutual Funds in India.
  • "Mutual funds are sitting on whopping Rs 13,957.4-crore of cash, but fund managers are anticipating correction before deploying it in the market," Sharekhan Ltd's Mutual Fund analyst, Sapna Jhawar, told PTI but in my view if one more month of AUM fall is seen, it may be enough for taking away all the cash they have as redemption pressure may lead to rapid selling to generate cash.
  • Many believe October to be a cruel month for stocks as many of the biggest crash have happened in October only and by the end of this month we would come to know amount of redemption pressure on hedge funds industry as Sep 30 was deadline for them, this is the reason why we saw accentuated selling last October also. Not necessary that it will be repeated, but worth a caution! If new money is hard to come by, liquidity gets dried up and current rally has been fueled mostly by liquidity, but we have to remember that liquidity is one thing that is very fragile, it disappears at slightest symptom of fear also.
  • Domestic institutional investors have, for the first time after May, turned net sellers in the stock market this month. In the 13 trading sessions in October, domestic institutions have taken out over Rs 2,600 crore on a net basis. This is the largest single month withdrawal since January 2008. 

Domestic institutions turn cautious, Take out Rs 2,600 crore this month.

Thursday, October 22, 2009

MARUTI after nearly quadrupling itself from Dec-08 lows has broken the 8-month old up channel. Now the stock is showing a bearish H&S pattern and below Rs 1450 it may give downside of Rs 200-250 more also. 

Caution advised in this stock :-

  • Exports were an important part of revenues for MARUTI in last 2-3 months and now with Rupee appreciating by more than 13% will impact negatively.
  • GERMANY and AUSTRIA are not extending the Scrappage Incentive Scheme which was launched in EU this year to boost car sales, major beneficiaries were MARUTI and HYUNDAI and slowly these benefits will disappear as EU countries stop the incentives for car buyers.
  • MARUTI has more than 50% market share in Indian car industry and it has hit all time high sales almost every month in 2009. This was on the back of stimulus from government, 6th pay commission and festive season recently but now higher base effect will impact sales as it is always difficult to raise the performance every month for an indefinite period.
  • Crude Oil prices have touched above $81 which may  make policy-makers rethink on fuel pricing, any increase in Petrol/Diesel rates will impact the sales of MARUTI negatively.
  • Metal prices have risen along with other commodities and rising input costs can be one more disturbing factor.
  • Labour unrest in auto belt of Gurgaon has hampered production of many companies in that area and MARUTI is the one which was affected to some extent. 
The stock has gone up from Rs 433 to Rs 1737 in 10-months and 50EMA at 1332 would be a level to watch. Rs 1200 is strong support for the stock as it has been previous top for MARUTI. 50EMA-1477, 100-EMA1332, 200EMA-1132

[Dow Jones] Most auto shares down today, local analyst says sector after significant rise over last one year is likely due for correction. "The attraction for various auto players in India is the cost advantage, but the lack of labor reforms in the country and now with strikes at various units in recent times it is advisable to take profits in automobile shares," says A K Prabhakar, an independent analyst; adds, expects 1,600-2,000 point fall in BSE Auto index which now at 6,662.17 points, up 113.26 points on year, and much higher than its 52-week low on December 2, 2008 level of 2,127.86 points. Adds high raw material cost, high crude prices, generally stronger rupee vs dollar likely to hurt exports Please save in Favorite webpage - all the info about BSE listed stocks can be found. Always be an informed investor, never invest blindly!

Tuesday, October 20, 2009

Gurgaon workers plan stir after violence at Rico Auto
Sona Koyo Steering Systems Ltd, Hero Honda Motors Ltd, and Lumax Industries Ltd are among those likely to be affected

Gurgaon, Haryana: Workers at some 60 factories in Gurgaon and Rewari in Haryana plan to strike work on Tuesday protesting against the death of a worker at Rico Auto Industries Ltd on Sunday, a union representative said.

Sona Koyo Steering Systems Ltd, Hero Honda Motors Ltd, and Lumax Industries Ltd are among those likely to be affected, according to Suresh Gaur, president of the Gurgaon branch of the All Indian Trade Union Congress.

This development comes after one person died and several people were injured in a confrontation between two groups of workers at the factory gate late on Sunday evening. While authorities place the number of injured at between five and 11, Rico workers said at least 40 of their colleagues were injured.
Workers at Rico struck work on 21 September after 17 of their colleagues were expelled on disciplinary grounds. They allege their expelled colleagues had been victimized for helping form a trade union.

“After working for 13 years, I take home only Rs10,500 a month,” said Pankaj Kumar Singh, a worker. “Forming a union is the only way we can air our grievances.” His colleagues are also peeved with their annual raises that are capped at Rs500. Management employees are given much higher raises, they say.

The Haryana government termed the strike illegal on 1 October, after conciliation efforts between the workers and the company management failed. The state government has referred the matter to the labour court, said M.R. Anand, additional labour commissioner in Gurgaon.

The workers have demanded a judicial inquiry by a high court judge into Sunday’s incident. They alleged that the police fired upon them without provocation. They also want the 17 suspended workers to be reinstated.

The management at Rico Auto could not be reached despite repeated attempts.

The incident at the Rico factory represents growing unrest between company managements and workers across the country. In May this year, several hundred workers employed at Nestle India Ltd’s plants in Punjab, Harayana and Goa converged at the firm’s headquarters in Gurgaon to demand recognition for union activities. Mint reported in May that Nestle’s management had moved court in January, seeking a permanent ban on all union activities, including meetings, within 200m of its factories.

Worker trouble has also been simmering at Honda Motorcycle and Scooter India Pvt. Ltd, based in Manesar, Haryana, for about a month now.

Sunday’s incident was provoked by a group of striking workers who prevented their colleagues from entering the factory, according to S.S. Deswal, Gurgaon police commissioner.

The workers denied this and claimed that trouble began as a result of an altercation between private security personnel and the police, which later spilled out of the factory gates and engulfed the striking workers.


A three-member Supreme Court bench, headed by Chief Justice K.G. Balakrishnan, will on Tuesday commence the final hearing in the case between Mukesh Ambani-owned Reliance Industries Ltd (RIL) and Anil Ambani’s Reliance Natural Resources Ltd (RNRL) in the dispute over the supply of gas from RIL’s D6 block in the Krishna-Godavari (KG) basin. On Monday, the Union government, in a reply to RNRL’s contention, asserted its right to file a petition in the Supreme Court against the Bombay high court verdict of 15 June, claiming the high court verdict had adversely affected its sovereign rights over natural gas. The Bombay high court had ruled that RIL should honour a June 2005 family agreement to supply 28 million cu. m per day (mscmd) of gas at $2.34 per million British thermal unit (mmBtu) for 17 years to RNRL. While RNRL has sought the apex court’s intervention for the immediate supply of gas, RIL, in its affidavit, has opposed this, stating that the price is 44% lower than that mandated by the government and it cannot supply gas at a price not approved by the government and to a user not listed in the country’s gas utilization policy. 
Source: Mint research

Key milestones in the legal dispute:-
15 June: The Bombay high court rules in favour of Anil Ambani's RNRL, ruling that RIL should honour a June 2005 family agreement to supply 28 mscmd of gas from its KG basin fields at $2.34 per mmBtu for 17 years to RNRL.

3 July: RNRL appeals to the Supreme Court to restrain RIL from supplying natural gas up to 40 mscmd to any party other than itself and asks the court to give a specific direction to RIL to implement the family agreement for supply of gas.

4 July: RIL files a petition in the apex court against the Bombay HC order, claiming the high court erred in deciding the three terms—quantity, tenure and price—of gas supply to RNRL.

7 July: The Supreme Court refuses to stay the high court ruling and posted the matter for hearing on 20 July.

18 July: The government files a special leave petition in the apex court, asserting its sovereign rights over gas and stating that the KG basin gas is not a personal property of the Ambani brothers. It asks the court to declare the June 2005 family memorandum of understanding (MoU) as null and void.

20 July: The Supreme Court defers a hearing on the gas dispute until 1 September.

28 August:  The Supreme Court further defers the hearing to 20 October. 

1 September:The government files an amended petition in the Supreme Court asserting its sovereign rights over gas, but clarifying that it no longer wanted the family arrangement between the Ambani brothers to be declared null and void.

9 September:  RNRL files a detailed reply to RIL petition, alleging that Mukesh Ambani firm was changing its position on the MoU that had set the rules of the demerger of the Reliance businesses. It further stated that the MoU was not affected by the gas utilization of the country and RIL was wrongfully seeking to add government approval as a condition.

16 September: RNRL asks the Supreme Court to make state-run power utility NTPC a party in its legal dispute with RIL. 

18 September: RNRL urges the Supreme Court to dismiss the government petition, arguing that the Centre has no role in the legal spat over the KG basin gas between the Ambani brothers.

6 October: RIL, in its filings before the Supreme Court, challenges the Bombay high court verdict and presents new evidence such as minutes of board meetings, which seek to undermine RNRL’s claims. RIL also questions RNRL stand of seeking a majority share of KG D6 gas despite the fact that RNRL had not built any power plant to utilize the gas.

Billionaires at war: How Ambani dispute ups India's investment risks
Mumbai: The wrangle over an energy deal between billionaire Ambani brothers has highlighted the risks inherent in an economy dominated by big family businesses and spurred calls for the government to intervene.

The latest dispute between the feuding brothers could discourage investment in India's energy sector as the country scrambles to shore up its energy security.

It also tests governance standards for a nation that ranks a lowly 180 when it comes to enforcing contracts on the World Bank's index on ease of doing business. Only Benin ranks worse.

The near-three-year battle between India's top conglomerate Reliance Industries, headed by Mukesh Ambani, 52, and Reliance Natural Resources, led by estranged brother Anil, 50, will be heard in Supreme Court on July 20.

The two sides are fighting over terms of a gas-supply agreement struck when the Reliance empire was split in 2005. The Bombay High Court ruled last month that Reliance Industries should supply gas to Reliance Natural at nearly half the price it had set in an interim order in January.

The gas in dispute comes from the vast Krishna Godavari (KG) basin, and some in India have said terms of access to such a crucial resource in an energy-starved country should not be left in private hands.

"If a private MOU (memorandum of understanding) can involve something that belongs in the public domain, it gives the sense that large corporations can bend rules and influence policy -- that's surely got to be the biggest political risk," said Seema Desai, an analyst at risk consultancy Eurasia Group in London.
The government has largely been silent, which could make investors wary, said strategist Arun Kejriwal at KRIS Research.

"It sends a message that the law is different for different people. This is not trivial, it is a matter of national interest," said Kejriwal.

The chief minister of the state of Andhra Pradesh, where the KG basin is located, has also called for New Delhi to step in.

"The dispute over sharing of gas is not an issue to be settled by their mother. It is for the Centre (central government) to decide who should get the gas at what price," Y.S. Rajasekhar said on Sunday, according to the Times of India.

Family business

Big business families in India, as in many other countries, have long played an outsized role in the broader economy and have used political patronage to smooth their way. Some analysts say that too much is at stake now for the government to stay silent.

"The government's call is important ... the verdict could have an impact on the gas-allocation policy as it is likely to impact the flow of gas to priority sectors going ahead," Angel Broking wrote in a recent client note.

Macquarie estimates the proposed oil and gas production from just 4 percent of the KG-D6 block and Cairn Energy's Rajasthan block could add $20 billion to India's GDP, cut its oil imports by 23 percent and add $59 billion in government profit-sharing and taxes.

Disputes like this "may dissuade future exploration and exploitation of India's mammoth upstream potential," it said.

This is not the first time that a fight between two of the wealthiest men in the world has grabbed newspaper headlines and sparked debate about the balance of power in corporate India. Mukesh was ranked 7th by Forbes in its list of global billionaires in March, with a net worth of $19.5 billion. Anil was at No. 34 on the list, with a net worth of $10.1 billion.

Reliance Industries last year cited a first right of refusal clause in the agreement to sink a bid by Anil Ambani's Reliance Communications for a merger with South Africa's MTN.

The details of the family settlement, which was brokered by the Ambanis' mother, have not been made public, and at least a dozen issues still need resolution, analysts say, ranging from properties to shares in companies.

But some expect the rule of law to ultimately prevail.

"Family disputes among corporate houses in India, and the world over, are not new," said Manoj Vohra, director of the Economist Intelligence Unit in India.

"The rule of law in India is better than in several developing economies. Opportunities are massive and fundamental in nature and unlikely to be clouded by this slugfest.

Brothers at war: Ambani gas hearings must clarify policy
Ambani Gas Hearings Must Clarify Policy
Ambani vs. Ambani: A Dispute over Natural Gas Prices Flares Up

Sunday, October 18, 2009

Indian Companies’ Qualified Institutional Placement (Table) 
(Source: Bloomberg -
By Paresh Jatakia and Manish Modi
Oct. 16 (Bloomberg) -- Following is a table showing Indian companies selling shares through a qualified institutional placement, or QIP, according to company filings to the Bombay and National Stock Exchanges.
Indian companies plan to raise a further $15 billion* in addition to the $7 billion* they’ve already raised since the start of April.

Companies                     Announced       Proposed  Completed      Raised
                                    on        (Million)       on      (Million)
3i Infotech                    08/31/09 Rs.     5,000 *  09/22/09 Rs.   3,178
Ackruti City                   06/05/09 USD       500    09/10/09 Rs.   3,024
Axis Bank                      08/04/09 Shares   71.4 *  09/24/09 Rs.  33,568
                                                      #  09/24/09 Rs.   4,582
Bajaj Hindusthan               03/24/09 Rs.    15,000    07/01/09 Rs.   7,232
Cipla                          08/26/09 Rs.    15,000 *  09/29/09 Rs.   6,760
Delta Corp. Ltd.               05/22/09 Rs.     1,500 *  09/04/09 Rs.     833
Dewan Housing Finance          06/27/09 Rs.     3,000 *  07/07/09 Rs.   2,258
Educomp Solutions Ltd.         07/07/09 Rs.     6,067    07/13/09 Rs.   6,067
Companies                     Announced       Proposed  Completed      Raised
                                    on        (Million)       on      (Million)
Emami                          05/28/08^15% Shares       07/02/09 Rs.   3,100
GVK Power & Infrastructure     06/09/09 Rs.    25,000    07/07/09 Rs.   7,168
HCL Infosystems                08/14/09 Rs.     5,000 *  10/14/09 Rs.   5,250 IO
Hindustan Construction         05/25/09 Rs.    15,000 *  06/30/09 Rs.   4,801
Housing Dev. Fin. Corp.        07/22/09 Rs.    40,000    08/24/09 Rs.  43,012
Housing Development & Infra.   05/25/09 USD       600    07/02/09 Rs.  16,884
Indiabulls Financial Services  06/25/09 USD       200    07/21/09 Rs.   9,600
Indiabulls Real Estate         04/24/09 USD       600    05/23/09 Rs.  26,566
IndusInd Bank                  07/24/09^25% Shares       08/13/09 Rs.   4,803
ING Vysya Bank                 09/04/09 Shares   16.8    09/11/09 Rs.   4,159
Lanco Infratech                05/30/09 Rs.     2,500 *  08/05/09 Rs.   7,274
Larsen & Toubro                08/28/09 USD       600    10/15/09 Rs.  24,000
Nagarjuna Construction         06/29/09 Rs.     5,500    09/07/09 Rs.   3,674
Network 18 Media & Inv.        03/02/09 Shares     25    06/12/09 Rs.   2,050
Opto Circuit India             06/03/09 Rs.     4,000 *  09/15/09 Rs.   4,000
Orbit Corporation              06/03/09 Rs.     5,000 *  08/14/09 Rs.   1,450
Parsvnath Developers           05/25/09 Rs.    25,000 *  10/07/09 Rs.   1,680
Companies                     Announced       Proposed  Completed      Raised
                                    on        (Million)       on      (Million)
PSL                            06/10/09 Rs.     3,000    08/24/09 Rs.   1,493
PTC India                      04/16/09 Rs.     5,000 *  05/27/09 Rs.   5,000
Punj Lloyd                     07/27/09 Rs.    15,000 *  08/05/09 Rs.   6,702
REI Agro                       05/16/09 USD       150 *  07/23/09 Rs.   1,827
Shree Renuka Sugars            06/20/09                  07/03/09 Rs.   5,060
Sobha Developers               05/22/09 Rs.    15,000    07/03/09 Rs.   5,269
Texmaco                        06/22/09 Rs.     2,000 *  07/31/09 Rs.   1,706
Unitech2                       01/19/09 Rs.    50,000 *  07/01/09 Rs.  27,893
Unitech1                                                 04/22/09 Rs.  16,211
United Spirits                 09/30/09 USD       350    10/14/09 Rs.  16,814 IO
Webel-Sl Energy Systems        06/05/09 Rs.       600    08/06/09 Rs.     454
ABG Shipyard                   06/12/09 Rs.       200 *
Adani Enterprises              05/20/09 Rs.    15,000
Adhunik Metaliks               06/30/09 Rs.     2,500 *
Adinath Bio-Labs               06/17/09
Ajel Infotech                  09/30/09 Rs.       720 *
Allied Digital Services        08/31/09 USD        50
Companies                     Announced       Proposed  Completed      Raised
                                    on        (Million)       on      (Million)
Anant Raj Industries           06/25/09 Rs.    20,000 *
Anil Products                  06/30/09 Rs.     1,500 *
Ansal Properties & Infra.      06/15/09 Rs.    15,000
Anu’s Laboratories             06/11/09 Rs.     2,500 *
Asian Electronics              06/24/09 Rs.       700 *
Austral Coke & Projects        05/28/09 USD       200 *
Bajaj Electricals              10/12/09 Rs.     1,750
Bank of Rajasthan              06/29/09 Rs.     2,500
Bharat Forge                   10/01/09 USD       150 *
Birla Power                    09/01/09 Rs.     1,000 *
BL Kashyap & Sons              06/29/09 Rs.     4,500 *
Bodal Chemicals                08/29/09 Rs.       600 *
City Union Bank                06/30/09 Rs.     3,000
Core Projects & Technologies   08/05/09 Rs.    12,500 *
Country Condo’s                08/10/09 Shares    100
Crazy Infotech                 09/30/09 Rs.       500 *
Decolight Ceramics             07/31/09 Rs.       300 *
Companies                     Announced       Proposed  Completed      Raised
                                    on        (Million)       on      (Million)
Development Credit Bank        07/25/09 Rs.     1,000
Dhanus Technologies            06/18/09 USD        30 *
Dollex Industries              06/10/09
Electrosteel Castings          09/15/09 Rs.     6,000
Entegra                        07/31/09 Rs.     7,500 *
Epic Energy                    09/04/09 Rs.       650 *
Era Infra Engineering          07/09/09 USD       200 *
Ess Dee Aluminium              10/14/09
Essar Oil                      05/19/09 USD     2,000 *
Everest Kanto Cylinder         06/12/09 Rs.     1,500
FCS Software Solutions         08/12/09 USD        40 *
Financial Technologies India   09/25/09 Rs.     1,500 *
Glenmark                       07/27/09 USD       250 *
Glory Polyfilms                08/31/09 USD        25 *
Gremach Infrastructure         06/27/09 USD       100 *
GTL Infrastructure             07/10/09 Shares  1,000
Himadri Chemicals              08/22/09 Rs.     1,000 *
Companies                     Announced       Proposed  Completed      Raised
                                    on        (Million)       on      (Million)
Hindalco Industries            10/15/09 Rs.    29,000 *
Indage Vintners                07/04/09 Rs.     1,100
India Cements                  08/07/09 USD       100 *
Indian Metals & Ferro Alloys   07/06/09               *
Interworld Digital             06/09/09 USD        10 *
IOL Netcom                     12/16/08 USD        10
J Kumar Infraprojects          07/30/09 Rs.     2,000
Jai Balaji Industries          06/30/09 Rs.     4,500
Jai Corp                       09/23/09^25% Shares
Jaiprakash Hydro Power         07/03/09 Rs.    15,000 *
Jet Airways                    08/31/09 USD       400 *
JSW Steel                      05/28/09 USD     1,000
Jupiter Bioscience             08/31/09               *
Jyoti Cosmetics Exim           05/11/09 Rs.       200 *
Karnataka Bank                 05/26/09 Rs.     5,000
Karur Vysya Bank               06/26/09 Rs.     5,000
KEI Industries                 07/13/09 Rs.     1,000
Companies                     Announced       Proposed  Completed      Raised
                                    on        (Million)       on      (Million)
Kiri Dyes and Chemicals        08/31/09 Rs.     2,500 *
Koutons Retail India           09/30/09 Rs.     2,000 *
KSK Energy Ventures            07/29/09 Rs.    20,000
Lancor Holdings                10/15/09               *
LIC Housing Finance            06/01/09 Shares     10 *
Lok Housing & Construction     08/10/09 USD       200 *
Magma Fincorp                  06/06/09 Rs.     4,000
Marg Ltd.                      09/29/09 Rs.     5,000
Max India                      07/01/09 Rs.     4,500
MIC Electronics                09/09/09 USD        30 *
Neha International             08/07/09 USD       7.5 *
Nexxoft Infotel                06/27/09 Rs.       300 *
Nitin Fire Protection Ind.     06/04/09 USD        50 *
Omaxe                          06/08/09 Rs.    18,000 *
Omnitech InfoSolutions         10/01/09 USD        50 *
Oudh Sugar Mills               08/26/09
Patel Engineering              06/26/09 USD       500 *
Companies                     Announced       Proposed  Completed      Raised
                                    on        (Million)       on      (Million)
Prakash Industries             08/21/09 Rs.     5,000 *
Puravankara Projects           05/25/09 Rs.     7,500 *
Pyramid Saimira Theatre        09/11/09 Shares     10
Radhe Developers India         09/02/09 Rs.     5,000 *
Rainbow Papers                 06/30/09 Rs.     2,500 *
Ram Kaashyap Investment        08/22/09               *
Reliance Communications        06/01/09^25% Shares
Reliance Infrastructure        05/25/09^25% Shares
Richa Industries               09/26/09               *
Ruchi Soya                     09/30/09 Rs.    10,000 *
S.Kumars Nationwide            06/30/09 Rs.     5,000
Sanwaria Agro                  09/30/09 Rs.     2,000 *
Sarang Chemicals               08/24/09 Rs.       700 *
Sejal Architectural            09/15/09 Rs.     2,000
SEL Manufacturing Co.          08/26/09 Rs.     3,000 *
Sesa Goa                       09/24/09 Rs.    60,000 *
Shantivijay Jewels             08/21/09               *
Companies                     Announced       Proposed  Completed      Raised
                                    on        (Million)       on      (Million)
Sheetal Bio Agro Tech          08/24/09 Rs.       650 *
Shiv Vani Oil & Gas Exploratio 06/09/09 Rs.     6,000 *
Shree Ashtavinayak Cine V.     09/28/09 USD       150 *
Sterlite Industries            06/23/09^25% Shares
Sunteck Realty                 07/30/09 Rs.     5,000
Sylph Technologies             07/15/09               *
Sylph Technologies             07/15/09^50% Shares
Tantia Constructions           10/12/09 Rs.     2,500 *
Tata Steel                     08/27/09 Rs.    50,000 *
Tata Teleservices Maharashtra  09/29/09 USD       250 *
Tech Mahindra                  07/23/09 Shares   13.6
Teledata Informatics           10/08/09 USD       100 *
Teledata Technology Solutions  08/31/09               *
Tricom India                   08/21/09               *
Triveni Engineering            08/17/09 Shares     30 *
Uniflex                        09/23/09 Rs.     7,500 *
Unity Infraprojects            09/24/09 Rs.     2,500
Companies                     Announced       Proposed  Completed      Raised
                                    on        (Million)       on      (Million)
Vishal Retail                  09/26/09 Rs.     2,500
Wellworth Overseas             04/21/09 Rs.       250 *
Yes Bank                       07/21/09 USD       250 *
Notes:  * Proposed figures include possible fund raising by QIP, foreign
          currency convertible bonds, American and Global Depositary Receipts.
        ^ Proposed percentage of companies paid-up share capital.
       PA:Pending Allotment.
       IO:Issue Oppened.
        # Global Depository Receipts Placement.
Source: Bombay Stock Exchange, National Stock Exchange of India.

Saturday, October 17, 2009

“May this Diwali bring you great luck and happy moments,
May this Festival Of Lights bless you with great joy
And May all your trades bring you profits always!"

Wish You All A Very Happy Diwali!!!

Tuesday, October 13, 2009

No Diwali cheer for second quarter earnings
Leading Indian brokerages have forecast that net profits for the Sensex companies would shrink or at best stay flat this September quarter, compared to the same period last year. The most optimistic of them expect total profits for the Sensex basket to inch up one per cent; the most pessimistic expect a 16.5 per cent profit fall.

Profits for Sensex companies declined one per cent in the preceding June quarter. Forecasts for the aggregate sales of Sensex companies are more varied — ranging from a 9 per cent decline to a 7 per cent growth

Results This Week:-

Sonata Software
Motilal Oswal Financial Services
Parsvnath Developers
Transformers and Rectifiers
Ashapura Minechem
Bajaj Finserv
Infotech Enterprises
Rallies India
Container Corporation
Gandhi Special Tubes
IndusInd Bank
KCP Sugar
Maharashtra Scooters
Gruh Finance

Bajaj Auto
Reliance Industrial Infrastructure
Jindal Saw
Jaiprakash Hydro-Power
KPIT Cummins Infosystems
Bajaj Holdings
State Bank of Bikaner
Balaji Telefilms

Ultratech Cement
Television Eighteen
IBN18 Broadcast
Monsanto India
Raj Television Network
BASF India
Emkay Global Financial Services
Prime Focus
VST Industries
GTL Infrastructure
State Bank of Mysore

The BSE Sensex is poised to touch the 19000-mark in 2010 fueled by global equities’ rising growth premium, favourable demographics, diminished policy risks and inexpensive valuations of Indian stocks. Prabhudas Lilladher(PL), a leading equity research and brokerage firm for FIIs, said in its ‘India Equity Strategy´ report that Indian equities were on a long-term bull phase.

CLSA cuts Sensex EPS target by about 10%

Buffett selling means you shouldn't buy?
Jonathan Weil

It's not often that Warren Buffett gives the investing public a reason to believe he's not on their side.

Then again, it's not every day that Buffett's Berkshire Hathaway shows up on the list of selling shareholders in another company's initial public offering (IPO).

This brings us to today's question: If Buffett is a seller, should you be a buyer? Probably not. This is the same fellow, after all, who is famous for saying that the best time to sell a stock is never.

The possible IPO comes from Symetra Financial, a life-insurance carrier based in Bellevue, Washington. Berkshire began accumulating its 26% stake in Symetra in 2004 when a group led by Berkshire and White Mountains Insurance Group bought the business for $1.4 billion from the insurance company Safeco Corp.

Symetra filed this week to raise as much as $575 million from new shareholders, and said it intends to use its portion of the proceeds for general purposes, which may include fresh capital for its insurance subsidiaries. Naturally, if this is such a good investment opportunity, you might think Buffett would be increasing Berkshire's stake in the company. He's not.

Symetra didn't disclose how many shares Berkshire and White Mountains may sell though it did say they would continue to own some after the IPO, assuming it goes through. It's also possible they could decide not to sell any even though the company's prospectus identifies them as "selling stockholders."

Slick Math

When I looked through Symetra's registration statement - which is 1,000 pages long, including exhibits - what struck me was the slickness of its numbers. The first financial metric Symetra touted on the opening page of its prospectus was something it called adjusted book value, which was $1.4 billion as of June 30. That figure turns out to be a lot of hot air.

Symetra's actual book value, or shareholder equity, was $763.7 million. The company arrived at the $1.4 billion by adding back $642.9 million of pent-up losses, mainly from investments, and acting as if they don't matter. That's no small detail. Symetra's equity looks thin at 3.6% of the company's $21.1 billion of assets. Berkshire's equity, by comparison, is equivalent to 43% of assets.

Additionally, Symetra's prospectus said the company's "internal control over financial reporting does not currently meet the standards" required by federal law for publicly traded companies. That's quite a disclosure, considering Symetra was a unit of a large public company as recently as 2004. It tells you there's a chance that Symetra's financial statements might not be reliable.

Mining for Fees

As for the business itself, Symetra's owners have operated a lot like private-equity deal whizzes, extracting large sums of cash through dividends and fees.

For 2006, Symetra reported net income of $159.5 million and paid $100 million of dividends. In 2007, when net income was $167.3 million, Symetra paid its shareholders $200 million of dividends - which it financed in part by issuing $150 million of new debt. Perhaps if Symetra hadn't paid such large dividends before, it wouldn't need money from the public markets now.

The company hasn't paid dividends since 2007. Net income fell to $22.1 million in 2008, driven by investment losses, before rebounding to $52.1 million during the first six months of 2009. This year's earnings come with a caveat, though.

Help From FASB

Symetra's pretax profit would have been 92% less were it not for rule changes by the Financial Accounting Standards Board (FASB) last spring. That's when the FASB caved to pressure by Congress and rushed to expand the range of investment losses that banks and insurance companies can exclude from their reported earnings even when they conclude the losses aren't temporary.

Additionally, White Mountains collects fees for managing Symetra's investments - $57 million in all since the start of 2006. For example, when White Mountains invests Symetra's money in a hedge fund or in corporate equities, it gets an annual fee equivalent to 1% of the investment's value.

White Mountains' $14.6 million of fees last year exceeded Symetra's $13 million of pretax income. Nice work if you can get it. (Symetra's net income was greater than pretax profit because of a large deferred-tax benefit.) Like Berkshire, White Mountains has a 26% stake in Symetra. Berkshire also had been White Mountains' second-biggest shareholder until it sold its stake back to the company last year.

We can't blame Buffett for wanting to sell some of his company's Symetra shares, which amount to a tiny fraction of Berkshire's $275 billion of assets. Berkshire's shareholders should be pleased if he can. Symetra also filed to go public in 2007, only to cancel the offering when the IPO market dried up.

You have to wonder, though, why anyone would want to be on the other side of this trade.

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

Saturday, October 10, 2009

Weekly Technical View by Tanmay G Purohit 10 Oct 2009:
Nifty (4945) closed down by 138 points or 2.72% compared to last week and it is the lowest closing in 4 weeks. FMCG, METALS and PHARMA stocks were gainers this week - HUL +8%, TATA STEEL +4%, JSL +8%, LUPIN +8%, AUROPHARMA +4%. Telecom stocks got de-rated this week post tariff war, which hammered four days of this week - RCOM plunged 22%, IDEA down 15% and BHARTI AIRTEL tumbled 21.4%. Selling was seen in technology stocks as well due to appreciation in the rupee. HCL TECH lost 12%, TCS down 11%, WIPRO down 9.3% and INFY down 6.9%. 
Nifty has broken a crucial trendline support on Friday. Below 4900 Nifty may witness rapid selling and levels around 4770-4800 may be tested quickly. Sustained move above 5070 is necessary to regain the lost momentum in the market. Results season has started and Infosys Technologies Ltd. posted a 7.5% increase in quarterly profit and raised its full-year outlook, a sign that information-technology  spending is starting to rebound globally. The company beat its own as well as street’s estimates for the quarter, and raised revenue forecast for the year ahead but Indian Rupee has appreciated more than 13% recently and that can weigh down on growth prospects of Tech companies. Rising rupee will help in reducing import bill but exports will be impacted badly and that can put export-oriented industries once again on slowdown track. RIL announced its audited results for FY09 and gave away 1:1 bonus and Rs 13 interim Dividend which would be available to RPL shareholders as well but the stock hasn't shown any strength even after such an announcement as honestly bonuses don't impress as the investor is left with more shares but same amount of wealth. Next week important results will be HDFC BANK, AXIS BANK, HDFC, EXIDE, SINTEX, ULTRATECH and one is advised not to take positions keeping result impact in mind as the volatility can kill an expert trader as well, always read fine print and then take informed decision. Sensex has gained more than 18% in September Quarter and more than 72% so far this calendar year which indicates all the good news is already priced in, even if we see results along expected lines it is not going to make a big difference to valuations, but a small disappoint may also make investors nervous resulting in fall in prices; even 20-30% correction is not ruled out in Nifty/Sensex in my view. Invest only 20-30% of the corpus and rest set aside for future opportunities which may materialize in weeks to come. GAIL and CASTROL accumulate in dips for long-term investment.
Supp 4888/4780/4710 Res 5005/5070/5145

Last Week Recap Of Technical View:

Nifty (5083) closed 2.51% up week on week after both Nifty and Sensex have closed above psychological levels of 5000 and 17000 respectively. India's annual June-September monsoon rains, vital for farm and overall economic growth in Asia's third-biggest economy, were 23 percent below average in 2009, the worst since 1972, government data showed on Thursday. But because of lower rains this season, Inflation has inched up towards 0.83% as of September 19 and analysts expect the rate of price rise to cross 7% by this fiscal end. India's finance minister Pranab Mukherjee warned "there is inflationary potentiality and inflation may go up further. When it goes up it is a matter of concern.". India's exports fell by annual 19.4% in August for the 11th straight month, but exporters bleeding under the global recession foresee better times around Christmas. But amid hopes of economic revival and worries of rising unemployment, the US economy has been in recession for 23 months, one of the longest periods since the 1930s Great Depression. Auto Sales for the month of Sept 2009 have hit record high after GM, Hyundai, Honda and Ford sold record number of vehicles on the back of festive season and banks flooded with deposits provided easier credit norms. The director general of hydrocarbons has blamed the fight over gas supplies between the Ambani brothers for the poor response to 70 oil, gas and coal-bed methane blocks on offer. “Fewer numbers of bids may come in for Nelp-VIII due to negative publicity because of the fight between two corporate giants,” said V K Sibal, director general of hydrocarbons indicating the transparency of Indian firms is at stake owing to the Ambani Fued. Nifty crucial support exists around 4880-4900 and as long as that is sustained, one should not worry much about trend reversal. But risk-reward is still not favourable and traders would enjoy this market, investors need to be cautious and 60-70% cash may be kept aside for future investment picks. NTPC and GAIL look good and one can accumulate these stocks for long-term gains. Caution advised if 4880 is broken.

Supp 5015/4955/4880 Res 5125/5188/5296

Bonus issues cheer market, but do they make a difference?
ET Bureau

The 1:1 bonus issue from the country's most valuable company has buoyed sentiment. But do bonuses add to your wealth? Why do cos issue bonuses? We bring you the answers.

What are bonus shares?

Bonus shares are those allotted by the company to existing shareholders, free of cost. The company does this by capitalising its free reserves. Assume a company with an equity capital of Rs 500 crore and free reserves of Rs 1,000 crore. If this company issues a 1:1 bonus (one free share for every held), its equity capital will double to Rs 1,000 crore.

The extra Rs 500 crore is shifted from the free reserves to the equity capital, and the shareholders given the bonus shares. The company’s equity capital is now Rs 1,000 crore and its free reserves Rs 500 crore (Rs 1,000 crore minus Rs 500 crore).

Why do companies issue bonus shares?
Bonus shares are usually issued to improve liquidity in a stock, and give a feeling to the investor that the stock price has become more affordable. This helps in improving the sentiment for the stock, especially among retail investors, as he can now own more number of shares for the amount of one share earlier.

Following the bonus issue, the stock price will correct to the extent of the bonus ratio. For instance, if the ratio is 1:1, the stock price will halve, if the ratio is 2:1 (two bonus shares for every one share held), the stock price will become one-third.

Will Reliance shareholders benefit from the 1:1 bonus issue announced a couple of days ago?
That depends on whether the company will maintain the per share dividend payout at Rs 13 next year also.

If the company pays a dividend of Rs 13 per share next year, it would mean doubling of dividend for shareholders, since they will now be owning twice the number of shares.

What could have been the reason for Reliance Industries to announce a bonus issue at this stage?
Market view is divided. Some say the move is a genuine gesture to reward the loyal base of retail shareholders.

Others point out that the company is trying to boost sentiment for the stock at a time when it is mired in a legal battle with ADAG over gas supply, and grappling with subdued growth in earnings near term.

Should investors be excited about the RIL bonus share issue?
A liberal bonus issue does indicate confidence on the part of the management to be able to service the expanded equity base. Besides, in India, the general trend has been that of stock prices factoring in the bonus issue faster than expected.

What this means is that if a stock is quoting at a pre or cum-bonus price of Rs 100, and falls to Rs 50 after the bonus issue, it will climb back to Rs 100 faster than a corresponding rise in earnings. Though irrational, this has been the general trend

Does a bonus issue make a difference to the fundamentals of the company?
No. It does not change anything for the company. The net worth of the company (equity capital + free reserves) will remain the same, growth in absolute profits and profitability will depend on the company's efficiency levels and market conditions.

Earnings per share (earnings divided by the number of shares in issue) will come down in absolute terms, but the price to earning multiple (stock price divided by earnings per share) will remain the same, as the stock price too would have reduced to the extent of the bonus issue.

Other than the prospect of more dividend, what is the attraction of a bonus issue?
Many investors use bonus shares to offset short-term capital gains tax. For instance, an investor can buy a stock just before the bonus issue, sell the bonus share once the stock price adjusts, and show that transaction as a loss while retaining the original share.

This loss can be adjusted against the short-term capital gain the investor has made in some other transaction.

Is a bonus share issue the same as a stock split?
No. In a stock split, the face value of the share is reduced. If the company reduces the Rs 10 rupee face value of a share to Rs 5, an investor with one share of Rs 10 face value will have two shares of Rs 5 face value.

In case of a stock split, the equity capital remains unchanged, but the number of shares in absolute terms, increases.