Wednesday, May 31, 2006

Bad market makes open offers look good


The massive downswing on the equity bourses has made most of the ongoing open offers lucrative as the current ruling market price has fallen below the open offer price. Investors can now tender their shares in the open offer and profit even at a time when the markets are falling.

Interestingly, this is in sharp contrast to the earlier days when the markets were trading at all-time high levels and the open offer prices were pushed way below the then market prices of the shares.

The last financial year saw over 100 open offers and in nearly 80% of the cases, the stock prices gained massively and so investors were hardly keen to tender their shares. Selling in the secondary markets proved more profitable. i-flex (where Oracle made the open offer) and Thomas Cook were the most notable examples where the open offers hardly managed to garner any subscriptions.

Currently, there are four ongoing open offers in the market where the offer price has now moved higher than the ruling market price. These offers are for the shareholders of Mphasis BFL Ltd, Financial Eyes (India) Ltd, Shin Ho Petrochemicals (I) Ltd and GTL Ltd. In some of the cases, the open offer price is at a premium of 3-10% over the ruling market price.

In the case of Mphasis BFL Ltd, where Electronic Data Systems Corporation has made an open offer for acquiring 51.72% of the capital, the open offer has been made at Rs 204.50 per share. On Wednesday, the stock closed at Rs 190.50 on BSE.

Even in the case of GTL Ltd, the price has fallen to Rs 146.50, as against the open offer price of Rs 151. A similar trend can be witnessed in the case of Shin Ho Petrochemicals and Financial Eyes Ltd.

NEWS

Jet joins hands with Thai, Austrian Airlines
Jet Airways has joined hands with Austrian Airlines and Thai Airways International to offer a reciprocal frequent flyer programme.The agreement enables frequent travellers of the Mumbai-based airline -Jet Privilege members- the benefits of the frequent flyer programmes on the networks of both, Austrian Airlines and Thai, an airline release said on Thursday.The agreement comes in to effect from June 1, it added.

Jindal Steel to ink mega mine deal with Bolivia
Bolivia's government has said it was nearing a deal with Jindal Steel and Power Limited on a potential $2.3-billion mega-mine concession for one of the world's biggest deposits of iron ore.Juan Ramon Quintana, a presidential spokesman, said on Wednesday that the last phase of negotiations was on the share of profits reserved for the Bolivian state "so that the one benefiting most is Bolivia."The government had expected to make an announcement sooner but one was now expected possibly as early as the weekend, Development Planning Minister Carlos Villegas said.Jindal is the lone bidder on the concession in Mutun, in the country's east, believed to hold 40 billion tonnes of iron ore and 10 billion tonnes of magnesium.Quintana said Jindal was expected to invest $2.3-2.5 billion over the next eight years, and that the project could create 10,000 jobs directly and 30,000 indirectly.Socialist President Evo Morales ordered troops to occupy oil and natural gas sites run by foreign investors on May 1, and ordered the companies to renegotiate their contracts with state-owned oil company YPFB to bring them into line with Bolivia's Constitution.
While the measure rattled world gas markets, 75 per cent of Bolivians backed the surprise order. Morales and labour unions of coca farmers helped bring down his two predecessors with demonstrations demanding Bolivia receive a greater share of its natural gas proceeds.Bolivia is the poorest country in South America.

FIPB puts RCoVL's FII proposal on hold
The proposal of Reliance Communication Ventures (RCoVL) to raise the permissible FII holding up to 74% under the portfolio investment scheme, has been deferred by the foreign investment promotion board (FIPB). This is pursuant to the advice of the Department of Telecom(DoT).

RCoVL had sought increase in limits for purchase or sale of shares and convertible debentures of the company by FIIs up to 74%, by way of purchase or acquisition from the market under the portfolio investment scheme.

According to the existing policy, foreign investment up to 74% is allowed in an Indian telecom company. The ceiling is with respect to the total composite foreign holding including, but not limited to FIIs, NRIs, FCCBs, ADRs, GDRs, convertible preference shares, proportionate foreign investment in Indian promoters/investment companies including their holding companies.

Thus, 74% foreign investment can be made directly or indirectly in the operating company or through a holding company. The remaining 26% has to be owned by resident Indian citizens or an Indian company. The proportionate foreign component of such an Indian company is also counted towards the ceiling of 74%.

While FDI up to 49% continues to be through automatic route, FIPB approval is required for foreign investment beyond 49% and up to 74%.As on March 31, ’06, RCoVL had a total foreign share holding of 26.2%, out of which, FIIs were holding 19.8% stake in the company.The FIPB, on the advice of DoT, has also deferred the proposal of Bharti Tele-Ventures, which is now renamed as Bharti Airtel. Bharti had filed a proposal with FIPB to take note of the fact that it has become an operational company and would therefore, be governed by the provisions of automatic route of investment with respect to FDI policy.DoT has sought deferment of the case, so that it can submit its recommendations on verifying that the total FDI is within the permissible limit.

Hot News

Monthly sales data buoys Maruti Udyog
Maruti Udyog advanced 1% to Rs 742 after it reported robust monthly sales figures for May 2006.A total of 2.58 lakh shares were traded in the counter on BSE.The stock witnessed a recent slump in line with the recent market meltdown. From 964.75 on 09 May 2006, the stock slumped to Rs 760.35 on 24 May 2006, on selling pressure. Here, it found support to finish at Rs 765.70 on 30 May 2006.

Maruti Udyog said on Thursday, it had sold 53,396 vehicles in the month of May 2006, up 26% from 42,286 units sold in the same month last year. It sold 50,904 units in the domestic market, up 27% from 40,006 units a year earlier. The company exported 2,492 units in May, up 9% from 2,280 units last year.

Maruti Udyog's runaway success with its premium hatchback model, the Swift, set a new record by clocking over 61,000 units in the first year of launch. Swift, which was launched exactly a year ago, has so far clocked 61,200 units. In the first week of launch, the Swift had clocked bookings of more than 15,000 units and the company had to increase production subsequently.

Maruti is set to launch five new models in the next five years, including a new diesel-engine vehicle later this year that could help boost its sales volumes in this growing segment, where it has no presence now.

Recently, Maruti purchased 30% stake in parent Suzuki Motors in a new car manufacturing subsidiary, Maruti Suzuki Automobile India (MSAIL), for Rs 12 crore.

Maruti Udyog has reported 39.1% growth in Q4 March 2006 net profit to Rs 360.92 crore (Rs 259.45 crore). If one factors a one-time expenditure, the net profit growth has exceeded market expectations. Net sales has risen 7.6%, to Rs 3,277.01 crore (Rs 3,045.18 crore). Net sales growth has been in line with market expectations.The company said it had to bear a one-time expense of Rs 34.92 crore during the quarter to support its dealers following a tax-cut on small cars in the Union Budget presented on 28 February 2006.

Sterlite Industries shines on sterling Q4 results
Sterlite Industries jumped nearly 5%, to Rs 450.90 on the back of strong Q4 March 2006 results.The stock has been quite volatile in the last few days due to high volatility in metal prices on LME.

Sterlite Industries has reported a profit after tax before extra-ordinary items of Rs 240.71 crore for Q4 March 2006 as compared to Rs 86.60 crore for Q4 March 2005. Net sales has risen 117.8% to Rs 2,515.40 crore (Rs 1154.62 crore). Higher metal prices boosted Sterlite’s performance in Q4 March 2006.

Sterlite manufactures and markets cast copper rods, copper cathodes, aluminium cold rolled products and conductors. Its presence in aluminium is through a subsidiary, Bharat Aluminum Company (Balco). It also has a significant presence in zinc through another subsidiary, Hindustan Zinc.

Stock Alert

Sterlite Industries may gain on strong Q4 outcome
Sterlite Industries has reported a profit after tax before extra-ordinary items of Rs 240.71 crore for Q4 March 2006 as compared Rs 86.60 crore for Q4 March 2005. Net sales has risen 117.8% to Rs 2515.40 crore (Rs 1154.62 crore).

Bhel has reported a net profit of Rs 867.95 crore for Q4 March 2006 as compared to a net profit of Rs 584.63 crore for Q4 March 2005. Net sales has risen to Rs 5515.69 crore from Rs 4466.61 crore.

EIH has reported a net profit of Rs 37.33 crore for Q4 March 2006 as compared to a net profit of Rs 20.78 crore for Q4 March 2005. Net sales has risen to Rs 227.10 crore from Rs 176.58 crore. The company’s board recommended a 1:2 bonus issue and 5-for-1 stock split.

Five stocks Reliance Capital, Bajaj Hindustan, Jaiprakash Associates, Indiabulls and Siemens enter Morgan Stanley Capital International standard index series starting today. All these five stocks staged an intra-day rebound on Wednesday 31 May ahead of their inclusion. The lone exclusion from the index is Castrol.

Hero Honda Motors said on Thursday it sold 3,03,000 units in May 2006. Sales in corresponding period last month were not available.

The board of NTPC has approved the proposal to take over Government of India owned Badarpur Thermal Power Station (BTPS) pursuant to the decision of the Government to transfer power business of BTPS to NTPC. Following the transfer of BTPS to NTPC, NTPC’s installed capacity will go up to from 23,935 MW to 24,640 MW.

Dr Reddy’s Lab reported a net loss of Rs 23.60 crore in Q4 March 2006 compared to a net loss of Rs 51.90 crore in Q4 March 2005. The loss in Q4 March 2006 was because of weak gross margins from its international operations such as Mexico and UK. Revenues, which were pressured the previous year by changes to the tax system, rose 64% to Rs 690 crore from Rs 420 crore. The latest quarter revenues include 28 days of revenue from Germany's Betapharm and its active pharmaceutical ingredients business in Mexico which it bought from Roche.

How Will The Markets be Today?

Recovery expected on steady to firm global markets
The market may stage a recovery today taking cue from recovery in global markets. However, sustained outflow of FIIs may cap gain.

Volume may remain low as higher securities transaction tax (STT) proposed in Union Budget 2006-07 becomes applicable from today. STT on delivery-based trade has been raised from 0.1% of the value of the transaction to 0.125%, on both buy and sell side. STT for day traders has been raised to 0.025% from 0.02%. This is applicable only at the point of sale and it is not applicable on purchases. STT on F&O trades has been raised to 0.017% from 0.0133%, applicable on sales and not applicable on purchases.

Asian shares rose on Thursday (1 June) after a rebound in US stocks eased fears of a slowdown in the world's biggest economy, and the dollar held firm after gaining on signs the Federal Reserve could keep raising interest rates. Key benchmark indices in Hong Kong, Japan, Australia, Taiwan, Indonesia, Malaysia and Singapore were up by 0.2% to 0.9%.

US stocks rose on Wednesday, reversing the previous day's sharp sell-off, as a drop in crude oil prices overshadowed renewed concerns about higher interest rates. The Dow Jones industrial average rose 73.88 points, or 0.67 percent, to end at 11,168.31. The Standard & Poor's 500 Index gained 10.25 points, or 0.81 percent, to finish at 1,270.09. The Nasdaq Composite Index climbed 14.14 points, or 0.65 percent, to close at 2,178.88.

Oil was steady on Thursday after falling the previous day as the United States held out the prospect of talks with OPEC producer Iran, and gold fell further as the firmer dollar prompted selling. NYMEX crude for July delivery edged 5 cents higher to $71.34 a barrel. US crude fell 74 cents on Wednesday.

As per provisional data, FIIs sold shares worth a net Rs 651 crore on Wednesday 31 May, the day when Sensex had lost 388 points or 3.6% to 10,398.61. FIIs were net buyers to the tune of Rs 255 crore in index based futures & options. They were net sellers to the tune of Rs 96.57 crore in individual stock futures.

Mutual funds continue to remain net buyers. Mutual funds bought shares worth a net Rs 267 crore on Tuesday 30 May, the day when Sensex had lost 66 points in volatile trade. The inflow of mutual funds in May 2006, till 30 May, totaled Rs 7573 crore.

Nifty 50 Quotes At End Of Day

Company Prev Close LTP % Change
NSE Sensex 3185.3 3071.05 -3.59
ABB 2412.2 2324.05 -3.65
ACC 779.95 762.9 -2.19
BAJAJAUTO 2836.85 2741.15 -3.37
BHARTI 374.6 366.6 -2.14
BHEL 1951.35 1903.3 -2.46
BPCL 412.35 396.25 -3.9
CIPLA 241.5 229.35 -5.03
DABUR 143.15 134.9 -5.76
DRREDDY 1370.2 1357.1 -0.96
GAIL 241.2 236.25 -2.05
GLAXO 1151.25 1130 -1.85
GRASIM 1876.95 1773.25 -5.52
GUJAMBCEM 95.35 92.8 -2.67
HCLTECH 523.35 504.2 -3.66
HDFC 1179.1 1123.55 -4.71
HDFCBANK 750.1 745.2 -0.65
HEROHONDA 801.8 770.2 -3.94
HINDALC0 185.25 177.6 -4.13
HINDLEVER 241.6 233.45 -3.37
HINDPETRO 311.6 306.75 -1.56
ICICIBANK 569.9 537.5 -5.69
INFOSYSTCH 3026.5 2909.85 -3.85
IPCL 243.85 238.95 -2.01
ITC 176.5 165.4 -6.29
JETAIRWAYS 762.65 738.6 -3.15
LT 2450.95 2318.35 -5.41
M&M 611.55 610.9 -0.11
MARUTI 768.85 735 -4.4
MTNL 167.7 157.5 -6.08
NATIONALUM 238.85 222.7 -6.76
ONGC 1179.15 1116.25 -5.33
ORIENTBANK 210.25 202.45 -3.71
PNB 414.85 404.95 -2.39
RANBAXY 419.45 411.3 -1.94
REL 516.65 492.55 -4.66
RELIANCE 954.95 954.15 -0.08
SAIL 84.2 79.5 -5.58
SATYAMCOMP 709.95 691.65 -2.58
SBIN 860.25 832.65 -3.21
SCI 140.5 137.15 -2.38
SUNPHARMA 812.2 805.4 -0.84
TATACHEM 235.45 229.35 -2.59
TATAMOTORS 788.6 788.05 -0.07
TATAPOWER 517.3 500.1 -3.32
TATASTEEL 547 517.2 -5.45
TATATEA 727.9 716.25 -1.6
TCS 1860.35 1782.9 -4.16
VSNL 400.55 380.5 -5.01
WIPRO 471.1 449.7 -4.54
ZEETELE 238.25 232.05 -2.6

Markets Today

Fresh MSCI stocks outperform in weak market
The stocks which are supposed to be included in the Morgan Stanley Capital (MSCI) Emerging Markets index effective from close of 31 May 2006 largely outperfomed the weak key indices today.

The BSE Sensex is turning out to be a package of surprises for after having tanked as many as 675 points, to 10.911.96 during afternoon trade, it managed to end lower by only 388.02 points (3.60%), on 10,398.61.Broad-based selling across the board was witnessed. The BSE mid-cap index slumped 2.74% while the BSE small-cap index plunged 4.06%.On cue from a global meltdown in equities, the benchmark index opened with a negative bias, at 10,679.49, which was also the day's highest. It oscillated 675 points amid high volatility.The S&P CNX Nifty lost 111 points (3.48%), to 3,074.45

A sharp recovery in the index heavyweight Reliance Industries (RIL) and ONGC from the lows, helped the market to gain some respectability.Local bourses witnessed a sell off as a plethora of negative factors dampened sentiment. The impact of weak global markets persisted beyond opening trade and the BSE Sensex slumped sharply under acute selling pressure.A host of other factors such as lower base metal prices and drooping auto, banking and cement shares for the second successive day ripped apart the domestic bourses in early trade. However, there was some damage control witnessed later during the day.

The Nikkei 225 index slipped 2.47% on Wednesday, after earlier dropping to a three-month low, as shares of Sony Corp., and other exporters lost ground on concerns about a potential slowdown in the key US market.The Nikkei finished 392.12 points lower, at 15,467.33, its lowest level since February.

US stocks tumbled overnight on Tuesday as higher crude oil prices and a disappointing sales report from Wal-Mart Stores Inc., stirred worries about a potential slowdown in consumer spending. The Dow Jones industrial average slid 184.18 points, or 1.63%, to end at 11,094.43. The Standard & Poor's 500 Index dropped 20.32 points, or 1.59%, to finish at 1,259.84. The Nasdaq Composite Index fell 45.63 points, or 2.06%, to close at 2,164.74.

Worries about the strength of consumer spending at home dented shares of Japanese retailers, with Fast Retailing Co Ltd., dropping more than 2%.The consistently soaring prices have also become a concern in the past few months. Crude oil prices edged higher on increasing demand from China, with the Nymex light crude oil for July delivery moving up 66 cents, to $ 72.03 a barrel.The Indian rupee has plunged to its lowest level since June 2003. The rupee is now quoting at 46.55 to a dollar.

The market breadth on BSE recovered a bit in last session of trade, which still ended negative, with advances to decline ratio pegged at 1:4. Only 413 shares progressed compared to 2,005 that receded. A meagre 41 shares remained unchanged.The total turnover on BSE amounted to Rs 3,521 crore, which has picked up since that of Tuesday’s Rs 3,215 crore.Among the Sensex constituents, 27 slid while 3 managed to head higher. For most of the day, all components were in the red.

FMCG major, ITC lost 6.62%, to Rs 164.95 on 49.01 lakh shares.Tata Steel slumped 6.07%, to Rs 514.25 on 34.42 lakh shares.

Oil exploration major ONGC plunged 6% to Rs 1,109 on reports that it is likely to share a large subsidy burden of oil marketing companies. The government mulls raising the subsidy by a staggering 71% this fiscal, to Rs 24,000 crore as part of its bailout package for oil marketing companies. As many as 7.55 lakh shares changed hands in the counter. It recovered from a low of Rs 1,052.05.

Grasim lost 5.10% to Rs 1,781 while L&T slipped 5.73% to Rs 2,310.Bike makers, Hero Honda Motors (down 4.2% to Rs 754) and Bajaj Auto (down 2.65% to Rs 2754), were dented on concerns about pressure on margins and higher fuel prices. The Indian government is expected to review retail fuel prices and taxes on oil products by Friday.

Among the gainers, Reliance Industries (RIL) witnessed a smart pull-back from the day’s low of Rs 918.60. It finished 0.5% up, at Rs 960 on 32.44 lakh shares.HDFC Bank rose 0.49% to Rs 754 on 66,998 shares.Dr Reddy’s added 0.23% to Rs 1,374, after it recommended a liberal 1:1 bonus issue. It had hit a low of Rs 1,282.10.Reliance Industries (RIL) was the top-traded counter on BSE with a turnover of Rs 303.70 crore, followed by Tata Steel with Rs 176.25 crore.

NTPC clocked a turnover of Rs 101.26 crore, after a staggering block deal of 80 lakh shares was struck in the counter at Rs 112.50 by 12:24 hours. It closed 1.92% to Rs 112.50, on cumulative volume of 90.08 lakh shares.

The MSCI India Index has added five stocks, while deleting one. Stocks as a part of the India index now go up to 68. All the additions made by the index surged in the second half of the day.After this recast, India weightage in MSCI EM Asia goes up from 11.93% to 12.09%.

Bajaj Hindustan, which slumped to a low of Rs 355.50 during the day, closed with a surge of 12%, to Rs 454.80 on 3.74 lakh shares.Indiabulls Financials surged 7.42% to Rs 302 after slipping to a low of Rs 263. A massive 13.32 lakh shares changed hands on the counter.Jaiprakash Associates (up 1.60% to Rs 450, after hitting a low of Rs 410), Reliance Capital (up 3.60% to Rs 512.60 after hitting a low of Rs 462.30) and Siemens India (up 0.15% to Rs 4948, after hitting a low of Rs 4624.90) all surged from the lows of the day.

Castrol India, which was discarded from the index, slumped 3.40% to Rs 181.90 on 1.12 lakh shares.

The BSE metal index slumped 4.31% tracking global commodity prices. After opening on a mixed note, metals have tumbled across the board on the London Mercantile Exchange (LME). While Aluminium dropped $ 101 to $ 2,698, Copper plunged $ 280, to $ 7895. Nickel has plummeted $ 1,400, to $ 21,100, and Zinc is down $ 101 to $ 2,698. Shares of Nalco (down 6.51% to Rs 225.05), Hindalco (down 3.90% to Rs 187.10), Hindustan Zinc (down 1.15% to Rs 729.90) and SAIL (down 5.90% to Rs 78.90) were the major losers.

Bombay Dyeing plunged 10.17% to Rs 665.10 after it posted a net loss of Rs 7.40 crore for the quarter ended 31 March as compared to a net loss of Rs 3.44 crore for the same quarter in 2004-05. Total income for the fourth quarter in 2005-06 dipped 24.73% to Rs 218.85 crore from Rs 290.73 crore in the year-ago period.

Uttam Galva Steel plunged 6.82% to Rs 35.50 after it reported 16% fall in fourth-quarter net profit to Rs 31.10 crore (Rs 26.05 crore). Net sales slipped to Rs 427.35 crore (Rs 537.90 crore). For FY 06, net profit declined to Rs 74.33 crore (Rs 94.67 crore). Net sales amounted to Rs 1,788.20 crore (Rs 2,091.71 crore).

Tata Chemicals slipped 3.1% to Rs 228 after it posted 42.03% decline in net profit for the quarter ended 31 March 2006, to Rs 64.42 crore from the previous corresponding Rs 111.13 crore. Quarterly net sales rose 4.66% to Rs 753.09 crore (Rs 719.56 crore).

Ipca Laboratories jumped 7.60% to Rs 310 on the back of improved Q4 March 2006 results. Ipca’s profit-after-tax before extra-ordinary items rose 14.4%, to Rs 17.96 crore. Sales rose 13.7% to Rs 180 crore. The results were better on a sequential basis, mainly the company had reported disastrous performance in Q3 December 2005 mainly due to pricing pressure in European markets. The company’s net profit in Q3 December 2005 was a meager Rs 2.67 crore.

Emerging markets have seen a sell-off by foreign funds this month on concerns about high valuations, rising interest rates in Japan and the United States and volatile commodity prices. Indian investors are also worried about rising foreign fund sales, which totaled $ 2.47 billion over 13 sessions to Monday, trimming net investment in Indian stocks this year to $ 2.38 billion.

On 29 May 2006, FIIs were net sellers of stocks to the tune of Rs 81.80 crore. They have been on a selling drive as they remained net sellers for the eleventh consecutive session.

Hot News

Dr Reddy’s Lab rebounds on liberal bonus issue
Dr Reddy’s Laboratories staged a solid intra-day rebound after it recommended a liberal 1:1 bonus issue.The stock gained 0.2% to Rs 1,374. It had dropped as much as 6.4%, to a low of Rs 1,282.10 earlier during the day, in a weak market. The announcement of bonus hit the market at the fag end of the trading session. As many as 1.05 lakh shares changed hands in the counter on BSE.The stock had declined sharply in the recent market fall. From a peak of Rs 1,645.40 on 17 May, it had retreated to Rs 1,370.85 on 30 May.

Dr Reddy’s Lab is seen benefiting from a US court ruling early this month, when a federal court ruled that the US Food and Drug Administration (USFDA) had unfairly denied Israel-based Teva Pharmaceutical Industries’ permission to exclusively market generic forms of Merck’s $4 billion drug Zocor. In February, Dr Reddy’s had struck a deal with US-based Merck to sell generic versions of Zocor, if some other company won a 180-day exclusivity deal after the patents expire. The patent on Zocor, or the generic simvastatin, expires on June 23. If the US FDA rules in favour of Teva, Dr Reddy's will be able to start selling a generic version along with the Israeli firm.

Dr Reddy's Labs (DRL) is planning to step up focus on its manufacturing capabilities, hike API (active pharma ingredients) sourcing from China and join the SEZ bandwagon. The pharma major is planning to double its manufacturing capacities of finished dosages in three years. Bulk of its finished dosage capacity is in Andhra Pradesh, except for the one in Baddi, Himachal Pradesh.

Recently, Dr Reddy’s Lab introduced a European research product Doxofylline, a second-generation xanthine bronchodilator. Doxobid is meant to treat patients suffering from asthma & COPD (chronic obstructive pulmonary disease). According to the company, Doxobid would further help it consolidate its position in the asthma & COPD segment as the company has been moving towards strengthening its respiratory portfolio.

In early March 2006, Dr Reddy’s Lab had completed the acquisition of 100% of Betapharm Group, the fourth largest generic pharmaceuticals company based in Germany, for a total enterprise value of Euro 480 million in cash.

REI Agro gains in value and volume
Rice processing firm REI Agro jumped 3.5%, to Rs 134 on strong growth prospects.The stock rose on high volume of 9.4 lakh shares on BSE. This was much higher than the average daily volume of 33,421 shares in the past one year.

The stock had spurted 20% on Tuesday (30 May) to Rs 127.85. The rally in the stock materialized after Kotak Securities reiterated a 'buy' on the stock with a price target of Rs 218. Earlier during the month, the stock had witnessed a battering. From a recent high of Rs 171.80 on 3 May 2006, the stock had plunged to a low of Rs 106.55 on 29 May 2006.

REI has shifted its focus from raw rice to par boiled rice. Par boiled rice fetches lower value in terms unit price, but the margin in par boiled rice is 5% higher than that in raw rice, according to the company’s annual report for FY 2005 (year ended 31 March 2005).

The company is also expected to continue its focus on branded sales, which has higher operating margins, according to Kotak report. The thrust on exports is also likely to continue helping to increase the operating margins of the company, it states.

The company has expanded the basmati rice processing capacity from 37 tonnes per hour to 49 tonnes per hour in end February 2006. The full impact of expansion will be reflected in the coming quarters.For Q4 March 2006, REI Agro’s net profit rose 8.4%, to Rs 14.23 crore. Sales declined 13.7%, to Rs 216.41 crore.

Hot News

FMCG stocks knocked down by market fall
Marico Industries plunged 7% to Rs 444, ITC dropped 7.9% to Rs 162, Tata Tea lost 6.6% to Rs 677, Dabur lost 6.6% to Rs 133.60, Hindustan Lever shed 5% to Rs 228, Colgate lost 5.7% to Rs 354 and Nestle lost 5% to Rs 1,083.90.

FMCG stocks had lost ground earlier this month in a broad early this month. From a high of Rs 209.30 on 4 May 2006, ITC dropped to Rs 176.65 on 30 May. Hindustan Lever declined to Rs 241.20 on 30 May from Rs 294.05 on 3 May. From a recent peak of Rs 170.80 on 12 May, Dabur had declined to Rs 143.05 on 30 May.

Analysts feel that the demand for consumer goods is going to be strong over the next few months Almost all FMCG companies have reported good sales for the March quarter, especially. More importantly, profit margins have been expanding due to selective price rises and internal operational efficiencies employed by companies. Today, consumers are willing to experiment with new products, be it innovation or brand extension. This appetite for buying stems from the fact that disposable income of people in urban as well as rural India has gone up.

As long as the economic growth sustains itself, leading to a rise in disposable incomes, the FMCG sector will continue to ride the wave.The government’s focus on agriculture sector in Union Budget 2006-07 bodes well as far as rural demand is concerned.

FMCG major Hindustan Lever’s profit after tax and before extra-ordinary items in Q1 March 2006 rose 34% to Rs 298.48 crore. Net sales of the company grew 12% to Rs 2798.05 crore on the back of 16% rise in the soaps & detergent business and 27% growth in the personal care categories.

Possible subsidy bill hike proves millstone around ONGC's neck
ONGC plunged nearly 9%, to Rs 1,076 on reports that the government is planning to hike the subsidy bill.The government mulls raising the subsidy by a staggering 71% this fiscal, to Rs 24,000 crore as part of its bailout package for oil marketing companies.

The stock had plunged nearly 6% on 24 May 2006, to Rs 1,164.75 hit by reports that high-profile chairman and managing director of the company has not been given an extension by the government. Raha’s five-year term as chairman and managing director ONGC came to an end on 24 May. Raha is credited with the company's success in cleaning up its contract system, its overseas foray, where it has committed investments of $4.5 billion in properties across 14 countries, and in vertical integration by acquiring MRPL.

After the sharp fall on 24 May, the stock was range-bound later, when it moved between Rs 1,177-1,204 from 25 May to 30 May.Fund managers have been shying from ONGC due to regulatory concerns over the company’s financial performance which has been weighed down by a higher share of subsidy, even in a rising crude price scenario. The holding of mutual funds in ONGC as on 31 March 2006 was a meagre 0.69% of ONGC’s equity. The FII-holding in the last one year in ONGC has been almost stagnant at a little over 8%.

ONGC, the biggest upstream company, will have to foot most of the increased subsidy burden of Rs 24,000 crore for this fiscal.ONCG paid subsidies worth nearly $20 per barrel in the last fiscal year. ONGC's subsidy bill nearly tripled to Rs 12,000 crore in the year to March 2006, compared with Rs 4,100 crore in the previous year.

As per provisional results, ONGC reported a 9% rise in profit for the year ended March 2006 on Sunday (16 April). The PSU said its profit-after-tax rose to Rs 14,175 crore between April 2005 and March 2006, up from Rs 12,983 crore in the previous year.

ONGC which was hit by a fire at an oil platform in its oldest field -- Mumbai High -- in July 2005, will restore offshore production to pre-accident levels by August 2006, and then step-up production to 3,00,000 barrels per day on a sustained basis in 2006/07.ONGC through its subsidiary, ONGC Videsh, had acquired 10 blocks in the last fiscal year outside India, and increased production of oil and gas from its assets abroad by more than 30%. ONGC already has interests in Sudan, Libya, Myanmar, Iran, Iraq, Syria, Russia and Ivory Coast.

Global investor sentiment moulds Indian market
The latest trend shows that domestic bourses now take direction primarily from global investor sentiment.The global sentiment has been driven of late by expectations of US interest rate rises.A fresh bout of fall in global markets spooked domestic bourses today. At 11:39 IST, the Sensex was down 547 points at 10,239.

A stronger-than-expected reading of US consumer confidence for May led investors to see an increased likelihood of rate rises. Stocks in Asia and US declined sharply. Key benchmark indices in Japan, Australia, Indonesia, Malaysia, and Singapore were down by 0.98-2.33% today.

While prospects of US interest rate worries spooked domestic bourses for a better part of this month, it was seen that a sudden turn in global investor sentiment for the better, led to a bounce back in some of the trading sessions. For instance, on 17 May, the Sensex had jumped 344 points when tame inflation data in the US generated hopes of a curb to further interest rate hikes. A day earlier, on 16 May, the Sensex had risen 52 points for the day to settle at 11,873.73, having risen nearly 500 points from an intra-day low of 11,378.96. Similarly, on 26 May, the benchmark index rose 143 points after a weaker-than-expected US first quarter GDP data helped alleviate some concerns about rising US interest rates.

The Sensex had gained 44 points on 29 May as US economic reports raised no new worries about the outlook for interest rates.

Tuesday, May 30, 2006

Stock Alert

Oriental Hotels may gain on strong Q4 results
Oriental Hotels reported a 67.6% growth in Q4 March 2006 net profit to Rs 10.41 crore (Rs 6.21 crore). Revenue rose 34% to Rs 50.12 crore (Rs 37.38 crore).

Oilfield services firm Aban Loyd Chiles Offshore said it is in talks to buy a further 32.152% stake in Indonesian offshore and onshore drilling contractor PT Apexindo Pratama Duta Tbk. The company said on Tuesday it was in talks with Asian Opportunities Fund I and CLSA for the stake buy. Aban had said on May 18 it was in talks to acquire 51.97% of Apexindo

Tata Chemicals (TCL) on Tuesday reported 42% fall in Q4 March 2006 net profit to Rs 64.42 crore (Rs 111.13 crore). TCL has one time repair expense of Rs 25-30 crore and non-recurring provisions across its domestic manufacturing facilities. Further, tax provision in the year-ago quarter was low. Net sales rose 4.6% to Rs 753.09 crore (Rs 719.56 crore).

The board of directors of FCI OEN Connectors has approved the sale of its electrical business including its facility at Chennai. This decision is in line with the parent company’s decision to sell off its electrical business globally, excluding America and Japan. With this divestiture, the company reinforces its focus on its strongest positions in automotive, communication, data, consumer and microconnection, the company said.

Foreign funds can resume buying shares in Associated Cements Company (ACC), Ashok Leyland and Bharat Heavy Electricals without its permission, the Reserve Bank of India said. The central bank said on Tuesday the combined holdings of foreign funds had fallen below prescribed limits in these companies. The RBI, however, said foreign investors must take its permission to buy any more shares of Andhra Bank as their holding in it had reached 18%

Tata Power has drawn a capital expenditure plan of Rs 18,000 crore on what it called its `significant and aggressive growth plans’ to increase its capacity by 4,500 megawats in four years. This is apart from the funds that would be invested in ultra mega power projects.

NEWS

Kpit Cummins allots 3.11 lakh shares to IFC
Kpit Cummins Infosystems Ltd on Tuesday said it has alloted 3.11 lakh equity shares to International Finance Corporation (IFC) on a preferential basis.The Board of Directors of the company approved the allotment of the shares to IFC at its meeting held today, the company informed the Bombay Stock Exchange.The company also appointed Amit B Kalyani as its Additional Director, it added.

Mauritius FII buys 2.13cr SAIL shares
Some 2.13 crore shares of Steel Authority of India (SAIL) were mopped up by a foreign institutional investor (FII), Deutsche Securities of Mauritius. The block deal, representing only a minuscule 0.52% of the steel major’s total paid up capital were bought at Rs 83.92 a share.

While the official site of the Bombay Stock Exchange (BSE) indicated the buyers’ name, it did not name the seller compelling market analysts to conclude that the shares were bought from open market. Information trickling in also suggested the same.

When contacted, company officials said, “We do not comment on market deals.” They, however, added that the shares might have been offloaded by financial institutions (FIs).

On Tuesday, the Rs 10 paid up SAIL stock opened at Rs 85.50, touched an intra-day high of Rs 85.85 a share before closing lower at Rs 83.85 on the BSE. The scrip closed at Rs 84.20 on the National Stock Exchange (NSE) after touching an intra-day high of Rs 85.50 and an intra-day low of Rs 81.50 during the trading session. Over 3.51 crore shares changed hands on the two exchanges collectively during the day.

As per the company’s shareholding pattern, some 85.82% of the equity is held by the government. Some 9.98% of SAIL’s massive equity base of Rs 4,130 crore is held collectively by FIIs, FIs, banks, insurance companies and mutual funds. Among the institutions, Life Insurance Corporation of India (LIC) holds about 4.44% (or 18.35 crore shares), while FIIs collectively hold 5.08% (some 21 crore shares) of the company’s total paid up equity.

Incidentally, records suggest the counter witnessed huge deals in the last week of the financial year ’05-06. While, some 1.27 crore shares changed hands on March 30, ’06, the preceding days also saw high volumes traded on the counter. For example, some 2.02 crore shares were traded on March 23, ’06, followed by 2.69 crore shares traded the next day and another 1.73 crore shares traded the day after. The closing price of the stock on these days were Rs 73.05, Rs 80.85 and Rs 84.40, respectively.

In ’05-06, rising input costs and a dip in prices of finished steel led to a 41% decline in SAIL’s net profits to Rs 4,013 crore. But the outlook for the sector is positive with growth in steel consumption expected to keep pace with the Indian economy’s 8%-plus GDP growth rate.

How Will The Markets be Today?

Weak global markets to weigh on domestic bourses
Weak global markets will see domestic bourses losing further ground today after Tuesday’s 66 points’ fall. The call on the market these days is a call on global investor sentiment which in turn is linked to concerns on interest rates in the US. As long as global investor sentiment remains weak, the markets could continue on its downward trend.

The possibility of higher rates on safe-haven US Treasuries has drawn investor interest away from riskier assets in emerging markets. US interest rate increases tend to heighten the lure of US debt investments compared with riskier emerging market assets, siphoning off portfolio investment from developing nations.

As per provisional data, FIIs sold shares worth a net Rs 213 crore on Tuesday (30 May), the day when Sensex lost 66 points in volatile trade. There has been heavy outflow of FIIs this month. The cumulative outflow for May 2006, till 29 May, aggregated Rs 7346 crore.

FIIs were net sellers to the tune of Rs 473 crore in index based futures & options on 30 May. They were net sellers to the tune of Rs 94.54 crore in individual stock futures.

Asian shares fell sharply on Wednesday. Lower base metals prices hit miners. Key benchmark indices in Australia, Indonesia, Malaysia, Japan and Singapore, were down by between 0.9% to 1.9%. Stock markets in Hong Kong, South Korea and Taiwan were closed.

Stocks in major Latin American markets lost more than 3% on Tuesday and their currencies also fell on fears that rising U.S. interest rates could further tarnish the allure of emerging markets. The stock drop was the steepest in the region since last Wednesday (24 May), when rate worries also spooked emerging markets.

US stocks tumbled on Tuesday as higher crude oil prices and a disappointing sales report from Wal-Mart Stores Inc. stirred worries about a potential slowdown in consumer spending. The Dow Jones industrial average slid 184.18 points, or 1.63 percent, to end at 11,094.43. The Standard & Poor's 500 Index dropped 20.32 points, or 1.59 percent, to finish at 1,259.84. The Nasdaq Composite Index fell 45.63 points, or 2.06 percent, to close at 2,164.74.

Mutual funds continue to remain buyers. They bought shares worth a net Rs 145 crore on Monday 29 May, the day when the Sensex had risen 44 points.

NEWS

Kotak Mahindra Prime to raise Rs 7k cr
Kotak Mahindra Prime Ltd on Tuesday said it will raise Rs 7,000 crore through the issue of non-convertible redeemable debentures on a private placement basis.The board resolved to issue the debentures at the meeting held earlier this month, subject to necessary approvals, Kotak Mahindra Prime informed the Bombay Stock Exchange.Kotak Mahindra Prime Ltd formerly known as Kotak Mahindra Primus Ltd was formed with the objective of financing retail and wholesale trade of passenger and multi utility vehicles in India.

Nifty 50 Quotes At End Of Day

Company Prev Close LTP % Change
NSE Sensex 3214.9 3185.3 -0.92
ABB 2542.7 2412.2 -5.13
ACC 799.95 779.95 -2.5
BAJAJAUTO 2867.35 2836.85 -1.06
BHARTI 382 374.6 -1.94
BHEL 1953.75 1951.35 -0.12
BPCL 412.8 412.35 -0.11
CIPLA 237.55 241.5 1.66
DABUR 149.95 143.15 -4.53
DRREDDY 1383.95 1370.2 -0.99
GAIL 246.35 241.2 -2.09
GLAXO 1157.8 1151.25 -0.57
GRASIM 1885.75 1876.95 -0.47
GUJAMBCEM 97.9 95.35 -2.6
HCLTECH 510.35 523.35 2.55
HDFC 1203.4 1179.1 -2.02
HDFCBANK 764.3 750.1 -1.86
HEROHONDA 848.2 801.8 -5.47
HINDALC0 188.85 185.25 -1.91
HINDLEVER 241.45 241.6 0.06
HINDPETRO 314.85 311.6 -1.03
ICICIBANK 569.3 569.9 0.11
INFOSYSTCH 2967.7 3026.5 1.98
IPCL 248.05 243.85 -1.69
ITC 177.95 176.5 -0.81
JETAIRWAYS 784.4 762.65 -2.77
LT 2444.85 2450.95 0.25
M&M 591.75 611.55 3.35
MARUTI 791.3 768.85 -2.84
MTNL 171.65 167.7 -2.3
NATIONALUM 253.15 238.85 -5.65
ONGC 1194.65 1179.15 -1.3
ORIENTBANK 216.6 210.25 -2.93
PNB 429.55 414.85 -3.42
RANBAXY 422.2 419.45 -0.65
REL 526.9 516.65 -1.95
RELIANCE 955.95 954.95 -0.1
SAIL 84.8 84.2 -0.71
SATYAMCOMP 705.65 709.95 0.61
SBIN 881.85 860.25 -2.45
SCI 142.95 140.5 -1.71
SUNPHARMA 828.15 812.2 -1.93
TATACHEM 237.35 235.45 -0.8
TATAMOTORS 823.65 788.6 -4.26
TATAPOWER 507.3 517.3 1.97
TATASTEEL 562.15 547 -2.7
TATATEA 751.65 727.9 -3.16
TCS 1850.55 1860.35 0.53
VSNL 424.95 400.55 -5.74
WIPRO 470.65 471.1 0.1
ZEETELE 247.3 238.25 -3.66

Markets Today

Sensex sheds 66 points on fall in auto, cement stocks
Weak global markets on concerns of rise in US interest rates led to meekness on the domestic bourses today. After calling the shots for most part of the session, infirmity in auto, cement, banking and non-ferrous metal scrips pulled the market down in a spiral during the last hour of trade. Selling accentuated in the last half an hour of trade.The bourses remained volatile as the Sensex squandered 100 points after having gained over 100 points at one point of time in early afternoon trade.

The 30-share BSE Sensex lost 66.51 points (0.6%) to settle at 10,786.63. The Sensex had risen as much as 135 points at one point of time in early afternoon trade, to a high of 10,988.23. It moved 265.31 points for the day between 10,722.92-10,988.23.
The S&P CNX Nifty lost 29.60 points (0.9%) to 3,185.30. As per provisional figures, Nifty June futures settled at 3,105.55, a steep discount of 79.75 points over the spot Nifty closing of 3,185.30.

BSE clocked a turnover of Rs 3,208 crore. Although the turnover was much higher than Monday’s Rs 2,486 crore, it still was a low key affair. In March-April 2006 and in the first half of May 2006 turnover had hovered between Rs 4,000-5,000 crore.The market breadth weakened in late trading when blue chips faltered. Whereas 1,350 stocks declined on BSE, 1,098 rose. A substantial 82 stocks were unchanged. Losers outpaced gainers by a ratio of 1.22:1.

Asian markets were mostly subdued-to-weak and European shares were in the red in early trade on Tuesday, dogged by worries that interest rates in the US may rise.
Global emerging markets had witnessed a massive fall recently on prospects of a rise in interest rates in the US. Selling was primarily by hedge funds as money is being taken out of emerging markets on inflation concerns and on prospects of further rise in US interest rates. The possibility of higher rates on safe-haven US Treasuries has drawn investor interest away from riskier assets in emerging markets. US interest rate increases tend to heighten the lure of US debt investments compared with riskier emerging market assets, siphoning off portfolio investment from developing nations. India, Brazil, Mexico, Argentina, South Korea witnessed their biggest losses in years in a short period of time.

FIIs pressed heavy sales in Indian stocks over the past few days. Their cumulative outflow for May 2006, till, 29 May, aggregated Rs 7,346 crore.A possibility of further correction cannot be ruled out, given that the rally was quite steely over the past few months. The Sensex has corrected 1,825.75 points (14.4%) from a lifetime closing high of 12,612.38 on 10 May 2006. Even after the correction, it is still up 3,100.99 points (40%) from a low of 7,685.64 on 28 October 2005.

Analysts feel that the fundamentals of the Indian corporate sector remain strong and strong corporate earnings growth would limit downside on the domestic bourses.

Hero Honda plunged 7.6% to Rs 780. A huge 2.7 lakh shares changed hands in the counter on BSE. "Operating margins in the current fiscal are going to be under tremendous pressure because of steeply rising input prices," Hero Honda’s Managing Director Pawan Kant Munjal told a news conference. The company would not raise prices this year due to increased competition.Hero Honda today reported strong Q4 results. Its net profit rose 29% in Q4 March 2006 to Rs 267.19 crore (Rs 207.11 crore). Net sales rose 16.2% to Rs 2,255.88 crore (Rs 1940.33 crore).

A host of other auto shares weakened. Tata Motors lost 5.8% to Rs 777, TVS Motor shed 4.8% to Rs 123.90, Maruti Udyog shed 4.4% to Rs 756, and Bajaj Auto shed 1.9% to Rs 2,811.But tractor and utility vehicles major M&M rose 3% to Rs 610. A block deal of 8.8 lakh shares was witnessed in the stock on BSE at Rs 616 in early trade. North India-based tractor major Punjab Tractors gained nearly 4% to Rs 260.

Metal shares retreated in volatile trade. Nalco plunged nearly 8% to Rs 235, Sterlite Industries lost 3.3% to Rs 430 and Hindalco lost 2.3% to Rs 184.Steel shares eased on profit-taking after last two days of gains. Tata Steel shed 2.9% to Rs 544.60 and Sail shed 0.4% to Rs 84.40.

Cement shares weakened. ACC lost 3.3% to Rs 774, UltraTech Cement shed 4.5% to Rs 625, Gujarat Ambuja Cements shed 3% to Rs 94.80.Reliance Industries lost 1.1% to Rs 945.75. The stock did a total reversal after the early firm trend. It had gained as much as 2% at one point of time in early afternoon trade, to a high of Rs 976.60. A massive 13.4 lakh shares changed hands in the counter on BSE.

Select IT stocks edged higher as the rupee fell to its lowest level of calendar 2006. IT bellwether Infosys rose 1.8% to Rs 3,020. A total of 2.3 lakh shares changed hands in the counter on BSE. While TCS gained 1.4% to Rs 1,873, HCL Tech rose 1.5% to Rs 518.30.Among second line IT stocks, Infotech Enterprises jumped 8% to Rs 590, Mastek gained 6% to Rs 389, NIIT Tech gained 3.6% to Rs 197, Nucleus Software rose 2.4% to Rs 340, Mphasis BFL gained 1.6% to Rs 193.95

Rice processing firms surged. REI Agro jumped 20% to Rs 127.85, KRBL gained 10% to Rs 190.70 and Satnam Overseas rose 10% to Rs 95.75.EIH jumped 9% to Rs 710. The company’s board meets tomorrow to consider bonus issue.Nestle rose 4% to Rs 1,146.50. Only 6,743 shares changed hands in the counter on BSE.Blue Dart Express rose 3.3% to Rs 480 after the company announced induction of two Boeing 757-200 freighters into its air express fleet.Titan Industries jumped 4.4% to Rs 701. As many as 9.6 lakh shares changed hands in the counter on BSE.Vishal Exports jumped 20% to Rs 6.64. The company said on Monday that it has chalked out plans to enter into real estate development. The company has formed a new company Vishal Reality Management for this purpose. It has also participated in the tender for development of 65,000 sq. mt. of prime property near Ghodod Road, Surat.

Jindal Steel & Power rose nearly 3% to Rs 1,789 on reports that it had emerged as the sole bidder for developing Bolivia’s largest iron ore mines. These mines have proven reserves of 40 billion tonnes. JSPL has been looking at various options in the domestic market as well as overseas to meet its iron ore needs. Its mega investment plans include a 6 million tonne steel plant in Orissa, another five million tonne plant in Jharkhand and a 1,000 MW pithead power plant in Raigarh.

Nagarjuna Construction rose 1.1% to Rs 351.10 after the company, on Monday, declared a liberal 1:1 bonus.

Hot News

L&T flourishes on IOC contract
L&T rose 2% to Rs 2,490 after its consortium bagged a naphtha cracker contract worth over Rs 2,600 crore.A uge 1.09 lakh shares were traded in the counter on BSE.The counter has been on a strong uptrend since mid-January 2006. From Rs 1,791.30 on 12 January 2006, it surged to Rs 2,813.55 on 10 May 2006 on sustained buying interest. From here, the scrip slipped to Rs 2,268.95 on 24 May 2006. Here, it found support to finally close at Rs 2,443.80 on 29 May 2006 as buying resumed.L&T’s board will meet on 07 June 2006 to consider the issue of bonus shares.

L&T announced that the consortium of the company and construction organization and Toyo Engineering Corporation (Toyo), Japan, has won a large scale turnkey contract valued over Rs 2,600 crore from Indian Oil Corporation (IOCL) for project management, engineering, procurement and construction of a naphtha cracker and associated units at its Panipat petrochemical complex in Haryana.

Toyo, the leader of the consortium, would undertake work for the cracker plant section on EPC basis and overall project management, while the company would undertake work for cracker heaters and associated units: C4 hydrogenation, pyrolysis gasoline hydrogenation, and benzene extraction units.L&T’s share in the contract is Rs 900 crore.Once operational, this naphtha cracker would be one of the largest and world-scale capacity plants in India. IOCL would process naphtha from its Panipat, Mathura and Gujarat refineries to produce ethylene, propylene and benzene at this naphtha cracker.The technology for the cracker is licensed by IOCL from ABB Lummus of USA.

Engineering & construction major L&T posted 40% growth in net profit at Rs 466.85 crore for the quarter ended 31 March 2006, compared with Rs 333.68 crore reported in the previous corresponding period. Total income, during the fourth quarter of the year, increased 8.70% from Rs 4,364.95 crore to Rs 4,744.97 crore.For the year ended March 2006, L&T has posted a net profit of Rs 1012.14 crore, a growth of 2.87% compared with the previous year's Rs 983.85 crore. Total Income of the company, during 2005-06, grew by 10.54% from Rs 13,748.26 crore to Rs 15,198.63 crore.For the year ended March 31, 2006, E&C segment recorded 51% growth in order booking at Rs 19,609 crore. International orders at Rs 3,786 crore constituted 19% of the total value of orders.

Madras Cement springs on quality results
Madras Cement jumped 4.5% to Rs 2,615 after it reported robust results for the quarter and year ended March 2006.Only 3,366 shares changed hands in the counter on BSE.The stock witnessed sharp correction from its recent peak, in line with the recent market meltdown. From Rs 3,195.55 on 02 May 2006, the stock slipped to Rs 2,431.05 on 25 May 2006. Here, it found support to finish at Rs 2,503.20 on 29 May 2006.

Madras Cement reported 42.10% rise Q4 March 2006 net profit to Rs 32.56 crore (Rs 22.92 crore). Total income rose 44.10% to Rs 299.84 crore (Rs 208.13 crore).For FY 06, Madras Cement reported 36.30% rise in net profit to Rs 79.02 crore (Rs 55.92 crore). Total income rose 36.30% to Rs 1,008.45 crore (Rs 739.97 crore).

The company has proposed to establish a green field cement plant near Ariyalur, Tamil Nadu, with a capacity of 2 million tonnes per annum at a cost of about Rs 613 crores and additional clinkering facility at its existing factory at Jayanthipuram, Andhra Pradesh, leading to an increase in cement capacity of 2 million tons per annum at a cost of about Rs 439 crores.Both projects are slated to be commissioned in the year 2007-08.

Madras Cements is the second largest cement player in the southern region next to India Cements. It is also one of the most cost-effective producers of cement in the country.

Hero Honda skids on tenuous margins
Hero Honda skid 7.62% to Rs 780.10 after it said that operating margins would be under pressure.The motorbike manufacturer reported a decent set of results today.As many as 2.79 lakh shares were traded in the counter on BSE.The stock witnessed a pre-results rally in the past few trading sessions. From Rs 773.25 on 24 May 2006, the stock surged to Rs 844.45 on 29 May 2006 in anticipation of robust results from the company.

Hero Honda reported a 29% increase in net profit for the fourth quarter ended 31 March 2006, to Rs 267.19 crore when compared with Rs 207.11 crore in Q4FY05. Net profit was more than expectations.Total turnover increased to Rs 2,298.91 crore from Rs 1,976.09 crore in Q4 FY 05.The company posted a net profit of Rs 971.34 crore for the year ended 31 March 2006 as against Rs 810.47 crore in FY 05. Total turnover increased to Rs 8,866.71 crore from Rs 7,558.55 crore in FY05.

A total of 9 brokerages had forecast a growth between 15.6-26.9% in the company’s Q4 March 2006 net profit to between Rs 239.37-Rs 262.70 crore, compared to a net profit of Rs 207.11 crore in Q4 March 2005.

Hero Honda Motors said on Tuesday it expects double-digit volume growth in the fiscal year to March 2007.It also added that operating margins would be under pressure because of steeply rising input prices.Hero Honda has announced plans to set up its third factory, which is expected to become operational within a year. The initial capacity of the unit would be 5 lakh units, which will be increased to 10 lakh units.
The company is planning to sell eight new models in FY07.

Hero Honda is seen benefiting from an expected strong growth in motorcycle sales in coming years. The thrust of the government on the rural economy in the budget, is positive news for two-wheeler companies, which accounts for 45-50% of sales. Availability of finance, improved road infrastructure, rising incomes and favorable demographics will lead to higher penetration of motorcycles, analysts say. Meanwhile, replacement demand is also emerging as a strong growth driver.Hero Honda’s total sales rose 6.3% in April 2006 to 2,50,366 units as against 2,35,422 units in the same month last fiscal.

Monday, May 29, 2006

Hot News

Block deal strengthens M&M
Mahindra & Mahindra rose 3.38% to Rs 611.50 after a block deal of 8.84 lakh shares was executed in the counter at Rs 616.05 per share.The counter clocked a cumulative volume of 10.08 lakh shares on BSE.The stock slipped sharply in the past few trading sessions on account of selling pressure, in line with the market meltdown. From Rs 708.10 on 17 May 2006, the counter slumped to Rs 577.40 on 24 May 2006. Here, it found support to rise up to Rs 591.50 on 29 May 2006.

M&M’s standalone net profit spurted 110.40% in Q4 March 2006 to Rs 321.18 crore (Rs 152.67 crore). Net sales rose 19.80% to Rs 2,288.83 crore (Rs 1,910.68 crore). During the current quarter, Stokes Group, Jensand, Stokes Forgings, Stokes Forgings Dudley, Plexion Technologies (India), Plexion Technologies (UK), Plexion Technologies GmbH, Plexion Technologies Incorporated, Tech Mahindra (Thailand) and Tech Mahindra Foundation became subsidiaries of the company.

For FY 06, the company’s net profit rose 67.20% to Rs 857.10 crore (Rs 512.67 crore). Net sales rose 23.50% to Rs 8,222.68 crore (Rs 6,660.55 crore).M&M sold 65,393 vehicles and tractors in Jan-March, up 9% from a year ago but lagging behind the market growth of 11%.The company has about 30% of India's tractor market and is the world's biggest in terms of volume.Meanwhile, M&M’s bid for Romanian tractor company, Tractorul Brasov, has been suspended by the Authority for State Assets Recovery (ASAR) in Romania, dealing a blow to its ambitions of building up a significant presence in Europe.

This is the second major setback for the tractor major in Romania and the third in Europe. Last year, M&M pulled out of bidding for Universal Tractors due to a change in the bidding process. In 2003, AGCO, the US tractor giant beat M&M to buy Valtra, a Finnish tractor maker.M&M has a presence in some of the biggest markets for tractors like US and Australia through its own assembly facilities, and in China through the acquisition of Jiangling Tractor Company last year.

Nagarjuna Construction thrives on generous bonus issue
Nagarjuna Construction rose 2% to Rs 355 after it declared a liberal 1:1 bonus issue.
Further, the company’s board has also accorded its approval for increasing the investment limit by FIIs from the existing 24% to 49%.As many as 64,821 shares were traded on the counter on BSE.The stock witnessed a pre-results' rally in the past few days. From Rs 322.30 on 22 May 2006, the stock surged to Rs 348 on 29 May 2006, in anticipation of strong results from the company.The company has a face value of Rs 2 per share.

For the Q4 March 2006, Nagarjuna Construction reported a 47.90% rise in net profit to Rs 34.94 crore (Rs 23.62 crore). Net sales grew 42.30% to Rs 640.45 crore (Rs 450 crore).For the FY 2006, Nagarjuna Construction reported 81.40% spurt in net profit to Rs 103.90 crore (Rs 57.27 crore). Net sales grew 54.9% to Rs 1840.44 crore (Rs 1188.50 crore).

Earlier this month, Nagarjuna Construction Company secured orders aggregating Rs 362 crore. These orders comprise a pipeline project for Sohar Water Network, Phase-I, valued at Rs 116 crore awarded by the Muscat Municipality, Muscat, Sultanate of Oman. This is the first international project bagged by the company. The other orders totaling Rs 246 crore have been procured from various agencies in India.

In February the company had bagged three orders aggregating to Rs 243 crore. The orders were from NTPC, Chennai Metropolitan Water Supply & Sewerage Board and AD Hydro Power, Noida.

A number of construction companies like Jaiprakash, Gammon and Nagarjuna Construction, have taken up hydel-power projects on a build-operate-transfer basis. Nagarjuna Construction, along with SSJV Projects and Maytas Infrastructure, is jointly promoting a 100 Mw hydel power project in Himachal Pradesh.

Stock Alert

EIH may gain on bonus issue proposal
The board of EIH will meet on Wednesday (31 May) to consider a bonus issue of shares, the company that runs the Oberoi hotel chain said on Tuesday.

Auto components maker Sundram Fasteners said on Monday it plans to set up a unit in Uttaranchal state to make fasteners, water and oil pumps and metal parts. The unit will be operational before March 31, 2007, the company said. The company also plans to set up export-oriented manufacturing facilities in the special economic zone near the southern city of Chennai, it said in a statement.

Adlabs Films has set up wholly owned subsidiaries in the UK and USA for its overseas distribution of Indian films, film co-production and post production business.
Shree Renuka Sugars has entered into a Memorandum of Understanding (MoU) for a period of 3 years with Copersucar, Brazil for supply of high-quality raw sugar and allied technical support for the company’s port-based sugar refinery coming up at Haldia, West Bengal. Copersucar is Brazil’s largest sugar-milling & marketing group and one of the largest sugar and alcohol producers in the world. It has 29 sugar mills, processing over 58 million tons of cane each year, producing about 3.7 million tons of sugar and 2.78 billion litres of ethanol.

Chambal Fertilisers & Chemicals has signed a shipbuilding contract with Hyundai Heavy Industries Co., South Korea for building/acquisition of one Aframax Tanker (dwt 1,05,830). The vessel is expected to be delivered towards the end of the first quarter of year 2009.

Vishal Exports Overseas has chalked out plans to enter real estate development. The company has formed a new company Vishal Reality Management for this purpose. The company has also participated in the tender for development of 65,000 sq. mtr. of prime property near Ghodod Road, Surat.

Jindal Steel and Power (JSPL) has reportedly emerged as the sole bidder for developing Bolivia’s largest iron ore mines. These mines have proven reserves of 40 billion tones. JSPL has been looking at various options in the domestic market as well as overseas to meet its iron ore needs. Its mega investment plans include a 6 million tonne steel plant in Orissa, another five million tonne plant in Jharkhand and a 1,000 MW pithead power plant in Raigarh.

Japan's Toyo Engineering Corp. said on Tuesday it and Larsen & Toubro (L&T) have received a 75 billion yen ($ 670 million) order from Indian Oil Corp. to build an ethylene plant in the country.

Madras Cement has decided to set up a two million tonne plant near Ariyalur in Tamil Nadu, for Rs 613 crore.Tata Power reported 19% fall Q4 March 2006 net profit to Rs 139 crore (Rs 171 crore). Total income rose 8% to Rs 1247 crore (Rs 1154 crore).

D-Link (India) has reported a 40% fall in Q4 March 2006 net profit to Rs 4.92 crore (Rs 8.22 crore). Net sales has declined 15% to Rs 72.60 crore (Rs 85.54 crore).
Arvind Mills is setting up a state-of-the-art design center in New York, targeting premium US customers. The company has roped in veteran textile designer Tony Carnot to head the Lab.MIRC Electronics reported a 3.5% growth in Q4 March 2006 net profit to Rs 4.03 crore (Rs 3.89 crore). Sales rose 27% to Rs 290.41 crore (Rs 228.61 crore).

Hero Honda announces its Q4 March 2006 results today. As per information available with capitalmarket.com, 9 brokerages have forecast between 15.6-26.9% growth in Hero Honda’s Q4 March 2006 net profit to between Rs 239.37 crore-Rs 262.70 crore, compared to a net profit of Rs 207.11 crore in Q4 March 2005. These brokerages have forecast between 7.9-17.5% growth in net sales, to between Rs 2,094.50 crore-Rs 2,280.60 crore from Rs 1,940.33 crore in Q4 March 2005.

NEWS

Sundram Fasteners to set up unit in Uttaranchal
Auto components maker Sundram Fasteners Ltd.said on Monday it plans to set up a unit in northern Uttaranchal state to make fasteners, water and oil pumps and metal parts.
The unit will be operational before March 31, 2007, the company said.The company also plans to set up export-oriented manufacturing facilities in the special economic zone near the southern city of Chennai, it said in a statement.The company did not give financial details of the projects.Shares in the company closed 1.7 percent higher at 152 rupees in a firm Mumbai market.

Toyo, L&T win $670 mln India ethylene plant order
Japan's Toyo Engineering Corp. said on Tuesday it and India's Larsen & Toubro Ltd. (L&T) have received a 75 billion yen ($670 million) order from state-owned Indian Oil Corp. to build an ethylene plant in the country. Shares in Toyo rose as much as 6 percent in morning trade.A Toyo spokesman said the company will take a 60 percent share in the facility, which will have annual output capacity of 800,000 tonnes. Operations are slated to begin in 2009, he added.Toyo has had an Indian joint venture for more than 30 years, whose approximately 950 workers are all locals except for its Japanese president.Under its new mid-term business plan, the company planned to boost its sales by one-third in the next three years to 260 billion yen by strengthening its overseas businesses. Toyo also said earlier this month that it would increase its work force overseas, while maintaining the size of its staff in Japan.On Monday, L&T shares closed up 3.4 percent at 2,443.80 rupees.

NEWS

Brokers worried over falling volumes
The market has turned hollow in the absence of any major buying support from foreign institutional investors (FIIs) in the current market. After a massive 2,000-point fall from a high of 12612 on May 10, the sensex has recovered some ground with gains of 280 points in the past three sessions.

But the matter of concern, according to brokers, is that the trading volumes (quantity of shares traded) have gone down significantly, reflecting lack of much buying interest on the Indian bourses.The trend on the BSE showed a sharp decline in volumes from as high as 36.5 crore shares on May 10 to seven-month low of 13.5 crore shares on Monday. Similarly, the NSE witnessed a fall from 71.2 crore shares on May 11 to 24.4 crore shares.

Traumatised by last week’s biggest stock market crash, investors will take some time to regain the kind of confidence they showed in the market during the bull run, according to brokers.Domestic investors, especially retail players, are unwilling to take large positions in the wake of uncertain market conditions triggered by global concerns like rising US Fed rates and massive FII outflows from emerging markets including India, say brokers. Though mutual funds have been on a buying spree, their activity is not large enough to reflect positively in volumes.

“Volumes have fallen to the extent that markets could swing easily in the direction of order flows. Outstanding positions in F&O have declined substantially, leading to a fall in intra segment & inter exchange arbitrage volumes. Negative cost of carry in F&O offered less opportunities for Cash/Futures arbitrage,” said Ajit Sanghvi, director, MSS Securities, a BSE member.

Investors had built up large over-leveraged positions in the F&O segment on expectations that FII-driven bull run will continue on the back of strong India story.However, fears of a further rise in Fed rates and slump in global commodity prices spook the rally as investors rushed to cut drastically their positions in the market, said brokers.

FIIs have been pressing large sales with their net outflows mounting to Rs 7,264 crore, or $1.6 bn, in the current month so far (till May 26), compared with their net purchases of Rs 573 crore in April.According to market sources, provisional FII sales were about Rs 150 crore on Monday when the sensex rose 44 points to end at 10,853 in a volatile session. FIIs had pumped in funds of $4.5 bn during January-April ‘06, in addition to the $10.7 bn in ‘05.Local mutual funds, however, remained buyers. They bought equities worth Rs 7,161 crore in the current month, compared with Rs 3,121 crore in the previous month.

Karvy exploring options on Sebi order
Karvy on Monday said it is exploring various options in the matter of Sebi restraining it from opening new demat accounts and participating as registrars to IPOs."The senior management is in discussion with legal counsel and we are exploring various options in the matter," Karvy Vice President (Corporate Affairs) J Ramaswamy said.He said Karvy's worry continues on the embargo in opening new demat accounts and participating as registrars to IPOs."The restraint on opening new demat accounts and the mandate for acting as registrar for IPOs would be decided after the completion of the enquiry proceeding initiated by Sebi. Sebi has appointed an enquiry officer for this purpose," he said in a statement.With respect to the Sebi order of allowing Karvy Stock Broking to service its existing 7.25 lakh clients as depository participants, Ramaswamy said it came as a breather to us.The order is also positive to the extent that the Mutual Fund registry business has been kept out of the purview of this order, he said.This means that Karvy Mutual Fund registry can service new AMCs and act as registrars for new fund offers, the statement said.Karvy on an average is visited by 60,000 investors across the country for various financial services.The order was issued by Sebi in lieu of its interim order issued last month after Karvy made submissions before the market regulator.

FIIs, MFs, banks can now trade in commodities
Large Institutional players — FIIs, MFs and local banks — are set to finally participate in the growing commodity markets, with the government signalling its approval.In the initial phase, FIIs and MFs will be allowed to trade in only bullion and crude futures — in line with the recommendations of a committee constituted by the commodity regulatory body — the Forward Markets Commission (FMC). MFs will have to float separate commodity funds.

Earlier reservations expressed by the banking regulator relating to the entry of FIIs into commodity futures seem to have been allayed. The finance ministry had earlier considered a phased entry for these players into the market with FIIs at the tail end.

The participation by banks could be kicked off in the form of them offering commodity derivatives, especially to enable farmers to hedge their risks. Banks also have an important role to play by providing institutional finance to farmers by lending against warehouse receipts.However, banks may have to wait for a while to get in as trading members on the commodity exchanges.The government has now agreed in principle to the participation of FIIs, MFs and banks in the commodity markets, a senior government official said.The government is expected to issue a notification to allow banks to participate in the market. Banks are now barred from the commodity business except for dealing in bullion. Sebi will also firm up the norms for MFs to enter this segment, the official said.

According to the chairman of FMC, S Sundareshan, the commission has taken the broad macro view that the activities of FIIs, MFs and banks could be governed by Sebi and RBI. “As far as their involvement in commodities is concerned, we will regulate only things like position limit and so on. We are not getting into finalising networth norms or entry norms, but some operational issues have to be sorted out,” he said.

For the last year or two, it has been debated within the government and regulators in the financial sector as to whether these institutional players ought to be allowed to enter the market. India’s commodity futures market which is now restricted mainly to brokers, corporates and traders as members has seen an impressive growth, especially over the last two years. Once FIIs, banks and MFs gain access to this market, it is reckoned that they could enhance liquidity besides providing depth.

Once FIIs are allowed, the Indian markets could be more attractive considering that they would be in a position to hedge their risks across market segments and not just equities as is the case now.

The volumes in local exchanges on which there is futures trading in over 60 commodities surged to close to 20,00,000 crore at the end of the ‘05-06 fiscal, up from just Rs 35,000 crore in ‘01-02. India has a history of over 100 years of forward trading in commodities.However, trading in many such commodities was prohibited in the 1960s and 70s owing to speculation. However, this was lifted in ‘03 and since then there has been a liberalisation in the sector. The FMC, he hinted, would not get into evolving a complex set of regulations or turf issues.

How Will The Markets be Today?

Market may remain range bound
The market may remain range bound with negative bias. Subdued to weak trend in Asian markets may weigh on the domestic bourses.Sensex gained 44 points in a volatile trade on Monday (29 May). Volumes were quite low on 29 May. BSE clocked a turnover of Rs 2486 crore, the lowest daily turnover over the past few months.

Asian shares fell on Tuesday (30 May) as foreign investors fretted about the outlook for interest rates in Japan and the United States, and the yen eased after slightly weaker-than-expected Japanese industrial output data. Key benchmark indices in Hong Kong, Japan, South Korea, Australia and Malaysia were down by between 0.01% to 0.93%. Stocks in Taiwan, Indonesia and Singapore were slightly higher. US markets were closed on Monday.

NYMEX crude for July delivery was up 33 cents, or nearly 0.5 percent, at $71.70 a barrel in Asian trading on Tuesday.

As per provisional data, FIIs were net sellers to the tune of Rs 117 crore on 29 May, the day when Sensex had risen 44 points. FIIs were net sellers to the tune of Rs 198 crore in index based futures & options. They were net sellers to the tune of Rs 212 crore in individual stock futures.

Domestic mutual funds continue to mop up stocks. Mutual funds bought shares worth a net Rs 222.79 crore on Friday 26 May, the day when Sensex had risen 143 points on the back of recovery across global markets. The inflow of mutual funds for May 2006, till 26 May, reached Rs 7160 crore.

NEWS

Cipla gets US approval for AIDS generic
The US Food and Drug Administration has tentatively approved Indian drug maker Cipla Ltd's oral form of anti-AIDS generic efavirenz, the US regulator said on its web site.Efavirenz is an anti-viral that is used with other AIDS combinations to help block the spread of HIV, the virus that causes AIDS.

Zenith Comp plans to raise Rs 1 bn
Zenith Computers Ltd will meet on June 3 to consider raising up to Rs 1 billion through issue of convertible bonds, the company said on Monday.Zenith shares rose 2.3 per cent to Rs 87.10 in a firm Mumbai market.

IVRCL to allot shares on FCCBs conversion
IVRCL Infrastructures and Projects Ltd on Monday said it has alloted 18.80 lakh shares upon conversion of Foreign Currency Convertible Bonds worth $9.6 million.
The company allotted 18.80 lakh shares at Rs 234.03 per share in two tranches, IVRCL informed the Bombay Stock Exchange.Out of the $65 million bonds issued by the company in December 2005, it received conversion notices from holders of convertible bonds due on 2010 of $ 9.6 million, it added.Bonds worth $55.4 million are still outstanding, it said.Shares of the company closed at Rs 239.30, up 2.49 per cent on the BSE.

L&T issues shares upon FCCBs conversion
Larsen and Toubro Ltd on Monday said it has issued 61,122 equity shares upon conversion of $15,15,000 Foreign Currency Convertible Bonds.The company issued 61,122 underlying equity shares on May 25, upon conversion of 15,15,000 dollar FCCBs, L&T informed the Bombay Stock Exchange.Shares of the construction and engineering major closed at Rs 2443.80, up 3.44 per cent on the BSE.

Triveni Engg to raise Rs 550 cr via FCCBs
Triveni Engineering and Industries Ltd has decided to raise Rs 550 crore by way of Foreign Currency Convertible Bonds (FCCBs), equity shares, or other instruments.
The EGM held last month approved the proposal to raise the amount through the issue of FCCBs, GDRs, ADRs, shares, warrants or other convertible securities, the company informed the Bombay Stock Exchange.The meeting also decided that the limit of investment by Foreign Institutional Investors would not exceed 49 per cent of the issued and paid-up equity share capital.A borrowing limit of Rs 1,800 crore was also approved by the shareholders at the meeting.

JSW plans integrated steel plant in J’khand
Jindal Steel West (JSW) is likely to set up its proposed 10-million tonne steel plant at Nimdih block or Chandil block of Jharkhand where it has identified a combined 7000 acre land for the Rs 35,000 crore project.JSW Vice-Chairman-cum-Managing Director Sajjan Jindal has urged for Munda's assistance in acquiring at the earliest, the required land while informing him that 1250 acres out of the total identified land belonged to either Forest Department or the state Land Revenue department, an official release said today.Jindal also requested for early allotment of coal blocks and iron ore for the proposed plant during his meeting with Munda at the latter's official residence yesterday. The Chief Minister assured all help.On November 9 last year, the JSW limited had signed an MoU with the state government for a greenfield steel plant and an 800 MW captive power plant in Seraikela and Kharsawan district. The steel plant would be set up in two phases.

L&T Infotech eye $1 bn turnover by ‘10A
L & T Infotech, wholly-owned subsidiary of India's $4 billion conglomerate Larsen & Toubro Limited is looking at a turnover of $1 billion by 2010, a top company official said."We plan to exceed $ 250 million in 2006-07 and are looking at a target of $ 1 billion by 2010," L&T Chairman and Managing Director A M Naik told reporters inaugurating L & T Infotech's new software development center on Monday.The conglomerate handling 52 different businesses, from construction and manufacturing to IT, is focusing on a turnover of $ 5 billion this year and "plans to reach $ 7.5 billion by 2010," he said.The group, which has witnessed a 45 per cent growth in the last two years, is optimistic about achieving 50 per cent growth this year and wants to "keep up the momentum in the coming years," Naik said.The company has hired the McKinsy group to improve its business processes and strengthen its delivery engine for emerging as a "strong midsized company by 2008, when we will also be coming out with an IPO," he said.The new infotech development centre called the "Technology Campus", spread over 12.04 acres, is three-phased development out of which two phases have already been completed, Naik said.The first phase comprises the administration block, two software development blocks besides an auditorium, cafeteria, gym and a utility block.This 2000 seat facility will be extended to 3,000 seats in another two years, Naik said.This is the third development centre after the ones in Chennai and Faridabad, Naik said.Three more centres will be coming up in Mumbai East, Mumbai West and Navi Mumbai, he said.L & T Infotech, is "planning to add 200 more seats in its embedded centre in Mysore and is looking at 1,500 seats by 2008," he said.Overall, the group will be adding 8,000 seats in IT and 2,000 seats in engineering in the coming year, taking the number to 25,000 by 2009-10, he said.The conglomerate, which is the first to diversify from manufacturing to IT, will foray into ship building and "also build a new shipyard in the east or west coast," Naik said, adding that the group is also getting more and more into defence.As far as the company's outside ventures go, it is growing in the Gulf to increase its construction and projects businesses, he said.
L & T will soon build switchgear factories in China and Saudi Arabia, Naik added.
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