STEEL AUTHORITY (SAIL) LOOKS BEARISH:-
SAIL (Rs 148.10) has broken down the trendline support and also major support near Rs 157-158 levels. The stock rose 3.5 times from lows of Rs 55 in November'08 and now looks to take a breather before further rally as it now trades in a down-channel. The downside target can be Rs 125-130 for SAIL where gap-up level is formed after election results. The stop loss for the downside target can be Rs 159 which was previous strong support.

On Weekly Graph, the stock formed an evening star pattern which is bearish in nature, good support in weekly graph too comes near Rs 120-125 levels before which one can postpone buying.

Thai authorities are about to slap up to 32% anti-dumping duty on import of a vital steel product from India, if implemented the same can impact SAIL negatively as they are exporters of flat hot-rolled coils to Thailand. Indian steel makers are demanding a similar duty curb against inflows from China, Ukraine, Egypt and other countries but so far Indian government has remained silent on it. Even though the duty is slapped it may still not fulfill the needs of Indian Steel makers and notwithstanding prices here can remain higher than imported steel.

http://economictimes.indiatimes.com/articleshow/4683333.cms

While the Indian steel companies are still negotiating hard for their coking coal contracts for the fiscal year, they may face a bumpy road ahead.   Xtrata, a Swiss mining major and UK-based Anglo American that together own the second largest reserves of metallurgical coal in the world are talking merger. The united company will be second only to BHP Billiton.   The merger is expected to weigh heavily on the steel companies like SAIL, Tata Steel, JSW Steel as India is deficient in coking coal. 

http://profit.ndtv.com/2009/06/22221200/Xtrata-Anglo-American-merger.html

ITC LTD CMP Rs 200.60

http://www.itcportal.com/

Probable Catalyst:-

Nifty starts trading in Free-float mode from June26 and stocks where promoter holding is low will get higher weight in Nifty, ITC is the major beneficiary and it is one of those few stocks which can gain attention of fund managers as they will have to adjust respective portfolios owing to weight-changes in Nifty. Now we will have a look at the technical and fundamental feasibility of investing in ITC.

Equity Rs 376 Cr Market Cap Rs 75374 Cr EPS Rs 8.65 D/E Ratio 0.01

ITC is one of India's foremost private sector companies with a market capitalisation of nearly US $ 19 billion (31Mar2009) and a turnover of over US $5.1 Billion. ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products. While ITC is an outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market  share even in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care and Stationery. ITC employs over 25,000 people at more than 60 locations across India and has more than 3,75,000 shareholders.

ITC honoured globally - http://www.itcportal.com/sets/global_honours_frames.htm

ITC Group companies - http://www.itcportal.com/sets/group_com_frames.html

FY09 Performance:-

Notwithstanding turbulent market conditions, ITC Ltd. delivered a steady performance with Gross Turnover at Rs.23144 crores reflecting a growth of 8.4% over the previous year. Net Turnover at Rs.15388 crores grew by 10.3%, driven by a robust 20% growth in non-cigarette FMCG businesses and a healthy performance by the Paperboards, Paper & Packaging segments. This performance was achieved despite the increase in various taxes on cigarettes. 

Highlights of results:-

• Robust 20% growth in non-cigarette FMCG businesses.
• Segment revenues of Paperboards, Paper & Packaging grow by 23%.
• Agri business profits up by 98%.
• Biscuits sales grows by 14%.
• The Stationery business recorded a robust sales growth of 60%, positioning the Company as the largest marketer of notebooks in India.
• Net Turnover of ITC has risen by 16.8% CAGR over the last 9 years and PAT has grown by 17% over the same period.

Environment-friendly approach even being a cigarette-making company:-

ITC is Carbon Positive for the consecutive 4th year - greening over 90,000 hectares, Water Positive for the 7th year - benefiting 44,000 hectares with Soil and Water Conservation. Solid Waste Recycling Positive.

ITC expanding vastly to lessen dependence on Cigarettes:-

ITC is primarily looked at as a Cigarette-maker but statistics show that ITC has been able to reduce its dependence on that business. Though it still remains a flourishing business, the %age of revenues from Cigarettes has come down from above 80% in 2002 to just below 60% in 2009.  Cigarettes business has actually grown in this period but ITC has expanded so much in other areas like Agri, Biscuits, Stationery etc that automatically the Cigarettes revenue %age has come down but that business too has not saturated yet.

Though India ranks third in tobacco consumption in the world, a large percentage of them don't consume tobacco through cigarettes but through other means like bidis, chewing tobacco and other means. The ratio of bidis to cigarettes in India is nearly 10:1 and punitive taxation makes cigarette consumption a thing for the upper-middle class. Average Indian consumes only 129 cigarettes per annum against world average of 1213 

http://www.nationmaster.com/red/graph/hea_tob_cig_con-health-tobacco-cigarette-consumption&b_map=1

http://www.economist.com/displaystory.cfm?story_id=13766483

Global Tobacco Consumption Map http://www.scribd.com/doc/16604267/Global-Tobacco-Consumption-Map

Heard on the street:-

ITC, is likely to report a maiden profit this year, due to strong growth in sales of biscuits and staples, a senior company official said. The business, which sells brands, such as Sunfeast and Aashirwad, could report a revenue of over Rs 2,200 crore, up 25-26% over the previous year, the official added. “We could be turning profitable this year, if we see a growth of around 26% in FY10. Growth is the oxygen, even as we work on driving cost efficiencies,” the source said.

Technical Outlook:-

ITC has been an underperformer in recent rally as it has moved only sideways but if we look at the larger picture, it has outperformed. Both Nifty and ITC hit their AllTimeHighs (6357 and 239.40 respectively) in Jan2008 but now ITC has to rise just 19% to regain the  lost ground whereas Nifty has to gain more than 47% from here, so that way it is an outperformer for sure. Looking at graph, now it trades in an up-channel and breaking out of a triangle. Strong support exists around Rs 175-180 levels and breakout above Rs 210 looks near. ITC is a buy at current levels (Rs 200) and once again we can see Rs 235-240 levels on this stock. ITC has nation-wide presence with many properties in their name and is a defensive stock for any investor. Keep accumulating this stock in dips as it is still a growing company and will benefit by rising consumption levels in India.

Corporate Presentation:- http://www.scribd.com/doc/16604273/ITC-Corporate-Presentation


Nifty trades in Free-float mode:- http://www.thehindubusinessline.com/2009/06/20/stories/2009062051551000.htm
http://www.business-standard.com/india/news/nse-moves-towards-free-float/352831/

Hedge Fund Managers Cautious About the Year Ahead


   By Barbara Kollmeyer

Better fasten those seat belts, investors, because if hedge fund managers have any insight at all, the credit crunch and market turmoil may not be over yet.
About 800 gathered for the GAIM International hedge fund and alternative investment event in Monaco. A year ago, with 1,000 in attendance, the conference was kicking off just as markets were starting to fall apart, with the biggest slump yet to come. Of course, it should be noted that hedge funds have been blamed by many for contributing to last year's financial mess. As for the look ahead, a survey of attendees by conference organizers revealed that 65% of those polled expect the crisis to "rumble on," with just 17% saying it was over and that same amount expecting the crisis to diminish significantly. It was an almost even draw for the question about whether market volatility has permanently jumped higher or not. Of those polled, 54% said yes, while 46% said no. Their biggest concerns, in descending order, are market liquidity, lack of alpha, risk management and counterparty risk. Russell Abrams, founder and senior portfolio manager of Titan Capital Group, which manages hedge funds using volatility arbitrage strategies, said 2009 could shape up as mirroring 2008 somewhat. Overly optimistic earnings expectations for the second half could be one big catalyst, he said. "The second half of the year has built in very high expectations and if they're not met, we're going to see nervousness that is going to move very rapidly," said the New York-based Abrams.
The other catalyst that markets will be looking for, he said, is signs that Federal Reserve Chairman Ben Bernanke may not be nominated for a second term. President Barack Obama has praised Bernanke for his efforts in the financial crisis but has been mum on whether he'll reappoint the Fed chief. Investors can protect themselves the next time around, he said, by understanding that they need a plan for when an event happens - and need to stick to it. Abrams said their four funds did well because "we know what we do if the stock market falls 5%. Our basic investment advice to anyone is if you don't know what you'll do if the stock market falls 10%, you shouldn't be in the stock market," he said. "What they need to know is the higher people's expectations of volatility, the more it becomes a self-fulfilling reality - once you have an expectation of wider moves, they will be occurring," said Abrams. "People are still very complacent in terms of not doing the research themselves to know what's really going on."


   Talking Strategies

The GAIM poll revealed that managers are focusing strategies over the next 12 to 18 months on distressed securities, global macroeconomics - based on primarily on overall economic and political views of various countries - and commodity trading advisers, or CTAs - funds that trade futures on raw materials. Abrams has two types of funds that trade volatility: One has an absolute return strategy, while the other is a defensive bias fund set up to do much better if there is a crisis. He said a lot of volatility is now priced into the stock market, meaning he's looking elsewhere for returns. "We're seeing a lot of opportunity in the currency space, a lot of countries' currencies are perceived as very stable. We don't know what the catalyst will be. Historically, if the U.S. ever starts raising rates, it creates tremendous pressure on emerging market countries. They have to raise their rates and it hurts their economies," he said.
Most affected, he said, would be Eastern Europe and highly leveraged countries where there seems to be no way out of the mess without devaluing the currency. He notes that forward markets are pricing in a devaluation of 50% for the currency of Latvia, one country hard hit by the financial crisis. Seppo Leskinen, the London-based chief investment officer of Skandinaviska Enskilda Banken, said emerging currencies are a big theme for him as well. He runs the SEB Multi-Manager Currency Fund and said they've had a bias toward emerging markets the past two years. As for the major currencies in the short term, he said the dollar will benefit as stimulus efforts begin to kick in: "I feel once [stimulus efforts] they start to bite, the American economy is ready to go and could go really, really strongly." But for the longer run, Leskinen said, the strength is not that convincing. "I think the shift of the world's economies has gone to China and India and these BRIC (Brazil, Russia, India and China) economies. They are the new economy superpowers in the economic world. "I wouldn't be surprised if in five to 10 years from now, China's currency is freely floating so these countries are still very tiny but the shift of the investments will continue to go that direction very strongly and then the same has to happen in the currency markets," said Leskinen.


   Looking At Credit

Neal Neilinger, the Stamford, Conn.-based vice chairman of Aladdin Capital, said that looking at the broader market, he doesn't expect the second half of the year to be as good as the first half. "But I also wouldn't say I'm negative. We will see probably a leveling off of the market and maybe from today, slightly up from where we are today." He said big issues for the hedge fund conference have centered on transparency, liquidity procedures and due diligence - logical given what happened at the end of last year. "I think that the tone is cautiously optimistic. I think investors are looking for ideas, looking for ways to deploy capital, but they're looking to do it in a very directed and strategic approach. They're not coming here to find out what they want to do; in most cases they know what they want to do." Neilinger, whose firm has traditionally operated as a fixed-income manager, said he still believes in credit as an investment idea.
"Yes, it's had a big run since the beginning of the year, but it's still far cheaper than it was toward this time last year, so I do think there's value in it and I do think you can deploy capital intelligently right now whether it be on some of the higher-yielding names, which offer still very wide spreads - even in the high-grade investment range, which still is attractive," he said. Neilinger sees big interest returning to the corporate credit markets and likes non-investment grade, leveraged loans and distressed debt. New issue markets are having record years in terms of volume in the U.S., and Europe investor demand is tremendous, he said. "Every deal that gets priced is many times oversubscribed. In some cases when a deal gets launched, it's oversubscribed in less than in less than 20 minutes," Neilinger observed. "We're now back to being able to do non-investment grade bond issues, which for all intents and purposes last year was closed, and leveraged loan markets are starting to wake up again. We're seeing the beginning of some of the sponsors being able to do bond deals again." He notes that those deals have to be well-priced transactions and well structured. While cautious on auto-industry suppliers and some retailers and airlines, he says oil or gold-type companies seem to be holding up a lot better and probably have better prospects. "You still have to be very careful about how you select what you're going to invest in. ... We find there are opportunities still to pick up individual names and credits at spreads that are attractive and avoid pitfalls of buying companies that are in a more precarious position."


Again, caution is the byword for Neilinger, something that would probably ring resoundingly well with most of those present here this week. "You can explain to your boss once why you lost money in credit. I wouldn't want to be there the second time," he said.
(Source: Dow Jones)

EXIDE INDUSTRIES CMP Rs 63.70

http://www.exideindustries.com

Equity = Rs 80 Cr Market Cap = Rs 5104 Cr Face value=Re.1 Book Value=Rs.15.20 Debt/Eq = 0.35

Exide Industries is the largest manufacturer of lead acid storage batteries in India with 25% revenue share. It dominates the branded automotive battery market with over 72% market share and the industrial battery market with nearly 45% market share. Exide has manufacturing presence in India, Sri Lanka, UK, Singapore and Australia. It also has 50% stake in ING Vysya Life Insurance Co.

Demand for batteries going up:-

Exide is a key beneficiary of the rising demand for branded lead acid batteries, driven by stricter rules on lead usage -

• India being a power-deficient country, load-sheddings and shut-downs are a regular phenomenon in metro cities also. Demand for batteries is being driven up by increased usage of invertors in India.
• Auto sales are on the rise and players like Maruti have posted AllTimeHigh sales in India when even General Motors is failing in USA, car and two-wheeler market here is still in demand because of less impact of slowdown on Indian economy than rest of the world. This rise in demand can benefit Exide also as many other battery makers. Exide is seeing improvement in demand from auto OEMs, it is a key long-term positive since higher OEM sales will eventually translate to higher replacement sales also because customers tend to largely replace worn-out batteries with the same brand which is pre-fitted in the vehicle.

FY09 Performance:-

For the year ended March 2009, Exide has reported a 19% growth in net sales to Rs. 3393 Cr, mainly driven by the volume growth in replacement segment. PAT for the company stood 13% higher at Rs.284Cr for FY09 Vs Rs. 250Cr last year. 

Lead constitutes about 65% of the manufacturing cost of the company. Exide Industries had recently acquired two lead smelting plants (Tandon Metals and Leadage Alloys) which now contribute 28% of total lead requirement for the company. Nearly 10% appreciation in Rupee may help Exide reduce its Raw Material cost somewhat and positively impact margins.

Heard on the Street:-

Automobile battery manufacturers such as Amara Raja, Exide Batteries, Eveready Industries and Indocel Technologies are firming up plans to set up lithium battery manufacturing plants in the country. Lithium batteries are the latest in electric vehicle technology. These environment-friendly batteries take less time to charge and offer longer driving range than conventional lead-acid batteries. Domestic battery majors which do not have lithium technology patents are planning to set up manufacturing plants either by picking up stakes in or entering into joint ventures with foreign players. Even Exide Industries, being the largest automobile battery manufacturer in the country, may enter the lithium battery space which can creat a separate revenue stream for the company.

Fresh Trigger:-

Exide Investment of 50% shareholding of ING Vysya Life Insurance Company Limited for Rs.231crs in 2005 is valued from Rs.10 to Rs. 15 by different analysts. And for the past 2 days there has been activity in holding companies of insurance - MAX planning to offload 23% stake for Rs.3000 Crs and Aditya Birla Nuvo Ltd issuing warrant has given rise to hopes of insurance bill getting passed in current budget session. In Stock market knowing the downside is more important, reward will automatically come. Even without the insurance stake the company is a value buy for long term investor and Insurance will add more value.

Technical Outlook:-

The stock is trading in a broadening triangle and is now near support. Buy in the range Rs 59-64 for handsome long-term returns. Even Rs 85-90 looks possible on this stock in 1-2 year timeframe.

View Latest reports on Exide Industries:- http://www.scribd.com/share/upload/12881731/2ic64glzvvos5ifbp1dj

MAHINDRA & MAHINDRA
CMP Rs 755 Book Value Rs 187 P/E 26
M&M's FY09 Sales grew 12.5% but PAT fell 17%. The automotive business witnessed a turnaround in later part of the year after stimulus packages from the government and agriculture loan waiver. But now the stock looks expensive at more than 25 P/E and with just Rs 187 as Book Value, the margin of safety doesn't attract much. The company depends to a fair extent on tractor sales in this period of the year but failure of Monsoon so far may hamper the demand for its products. Technically the stock looks to resist near up-channel and can see downside towards Rs 640-650 at least.