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Mukherjee said the economy can grow 7.75% in current FY and the fiscal stimulus given to the industry will not be withdrawn before the budget.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

EMCO LTD - http://www.emcoindia.com/

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!

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

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

Investors have little choice as Nakheel looks set to default http://economictimes.indiatimes.com/markets/global-markets/Investors-have-little-choice-as-Nakheel-looks-set-to-default/articleshow/5334677.cms

Dooms Day near for Dubai http://economictimes.indiatimes.com/news/international-business/D-Day-nears-for-Dubais-35-bn-debt-hurdle/articleshow/5333728.cms

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

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

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

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 

http://www.moneycontrol.com/news/world-news/us-recovery-appears-firmer-as-unemployment-drops_429192.html

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