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.

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 

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

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.

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 

October WPI inflation at 1.34 pct y/y - govt http://in.reuters.com/article/businessNews/idINIndia-http://in.reuters.com/article/businessNews/idINIndia-43942720091114

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

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

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

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

US jobless rate hits 26-year high at 10.2% http://www.moneycontrol.com/news/world-news/us-jobless-rate-hits-26-year-high-at-102_423407.html

Tata Steel witnessed 38 per cent rise in its sales http://www.business-standard.com/india/news/tata-steel-sales38-in-october/77709/on

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

TATA TEA LTD CMP Rs 860

Book Value Rs 287 Debt/Equity 0.42 Reported EPS Rs 25.72 (FY09) Dividend Yield 2%

About The Company:-

Set up in 1964 as a joint venture with UK-based James Finlay and Company to develop value-added tea, the Tata Tea Group of Companies, which includes Tata Tea and the UK-based Tetley Group, today represent the world's second largest global branded tea operation with product and brand presence in 40 countries. Among India's first multinational companies, the operations of Tata Tea and its subsidiaries focus on branded product offerings in tea but with a significant presence in plantation activity in India and Sri Lanka. 

Brands:-

The company has five major brands in the Indian market - Tata Tea, Tetley, Kanan Devan, Chakra Gold and Gemini -- catering to all major consumer segments for tea. The Tata Tea brand leads market share in terms of value and volume in India and the Tata Tea brand is accorded "Super Brand" recognition in the country. With an area of approx 15,900 hectares under tea cultivation, Tata Tea produces around 30 million kg of Black Tea annually.

Subsidiaries:-

Tata Tea has subsidiaries in Great Britain, United States and India.

• The Tetley Group has been a member of the Tata Group since March 2000 and now contributes around two thirds of the total turnover of Tata Tea Ltd. Tetley has offices in Australia, Canada, Poland, Russia, South Africa and the US, as well as joint ventures in Pakistan and Bangladesh. Today, Tetley is the second largest tea bag brand in the world, and Tetley products are on sale in over 40 countries.
• Tata Coffee with Instant Coffee manufacturing facilities, R&D capability and plantation assets of around 8000 hectares, producing over 9000 MT of Coffee annually, is the largest coffee plantation company in Asia. The company grows both the Robusta and Arabica varieties of coffee and markets both instant and "ground" coffee.
• Tata Tea Inc. in the United States processes and markets Instant Tea from its facility in Florida, based on sourcing of Instant Tea products out of Munnar, Kerala.

Q2FY10 Performance:-

Tata Tea Q2FY2010 results were ahead of expectations on the back of a good operating performance. The consolidated net sales of the company grew by 18.2% (yoy) to Rs1,402.8 crore in Q2FY2010, substantially driven by the price hikes implemented by the company to combat the increasing price of its raw material (raw tea).

The stand-alone (domestic) business registered a price-led growth of 31.5% yoy while Tata Coffee (consolidated) registered a growth of 13.7% yoy during the quarter.

The operating profit grew by 16.2% yoy to Rs173.9 crore during the quarter.

The exceptional items include gains on foreign currency translations of Rs39.7 crore and a profit of Rs180.4 crore arising out of the sale of shares of Rallis India to Tata Chemicals. Consequently, the reported PAT stood at Rs287.4 crore in Q2FY2010 as against Rs217.8 crore in Q2FY2009. 

For H1FY10, Tetley has 28.7% volume and 28.4% value market share in Great Britain. It has 41% volume and 36.5% value market share in Canada.

For H1FY10, Tata Tea has 20.2% volume market share in India.

For H1FY10, Good Earth has been launched in UK and Canada 

For H1FY10, Tetley's green tea has market share of 18% in Great Britain.

For H1FY10, Tetley's Redbush has market share of 33% in Great Britain.

Eight O Clock grew 30% for H1FY10.

Grand Coffee has been introduced in the company portfolio after purchase of Russian company. The company is deciding to launch its Tetley brand initially in Middle East before going to multi brands launches.

For Q2, USA grow by 61%, Canada & South America by 12%, Great Britain & Africa 32%, Europe & Middle East by 40%, South Asia by 100% while Asia Pacific de-grew by 6%.

Value Of Holdings:-

TATA TEA holds shares in other Tata Group companies, some of them being INDIAN HOTEL, RALLIES INDIA, TATA CHEM, TATA COFFEE, TATA INV CORP, TATA MOTORS, TATA STEEL, TCS, TITAN. Total value of these holdings has nearly trebled now and adds more strength to the balance sheet of TATA TEA.
TATA TEA holds huge Rs 1099Cr as Cash (FY09) which works out to around Rs 178/share.  

Stock Performance And Growth Prospects:-

With the company entering into large tea and coffee markets like the Middle East and South America, revenue growth from the international business is set to improve. Moreover, with the Grand acquisition, the company has acquired a distribution foothold in the 4bn$ tea & coffee market in Russia. 

The stock hit Rs 1017 in August'09 which was a 2-year high but has corrected by more than 15% after that. Considering the long-term growth prospects of the company, the stock looks like a good candidate for investment. Also, the stock has a vastly experiencecd promoter backing and good dividend yield makes it a compelling buy at current levels. 

The stock is breaking out of a down trendline and looks to reverse its recent downtrend soon. Buy and accumulate in dips for target of Rs 1045 in 1-2 years.

Govt mulls sops for tea industry

The union commerce ministry will soon come up with a fiscal package for the plantation sector. It will also provide a debt relief package to some plantation crops, including coffee.

"The government is very serious of addressing the problems of indebtedness of the plantation sector. A note has been sent to the Cabinet Committee on Economic Affairs (CCEA) and we will come out with a package shortly," Jyotiraditya Scindia, union minister of state for commerce and industry, said. http://www.dnaindia.com/money/report_govt-mulls-sops-for-tea-industry_1307315

India can be a brand for tea, spices: Scindia

“Out of the 980 million kilograms of tea produced in this country every year, we export 200 million kilograms, which is mostly CTC (crush, tear, curl),” the minister said at a seminar organised by Bharat Chamber of Commerce. http://www.thaindian.com/newsportal/business/india-can-be-a-brand-for-tea-spices-scindia_100269907.html

Tata Tea seeks distribution tie-ups on a global scale http://www.business-standard.com/india/news/tata-tea-seeks-distribution-tie-ups-onglobal-scale/375024/

LIC raises stake in Tata Tea to 16% http://www.telegraphindia.com/1091103/jsp/business/story_11692651.jsp

Weekly Update 01 Nov, 2009 by Tanmay G Purohit

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

New Wholesale Price Index series for more accuracy http://economictimes.indiatimes.com/features/financial-times/New-Wholesale-Price-Index-series-for-more-accuracy/articleshow/5185150.cms

Nine US banks seized in largest one-day haul, 115 banks go belly-up in 2009 http://www.dnaindia.com/money/report_nine-us-banks-seized-in-largest-one-day-haul_1305481

Last Weekly Update:-

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