Indian Stock Market Blog

Past Performance. December 21, 2006

Do have a look at our past performance :

~~Adviced to remain away specially in FNO and also avoid any longs on Thursday night as well as Friday Morning=> Market cracks by 172 points.
~~Same message passed for Monday=> Market cracks by 400 points.
~~Same message passed on Tueseday=> Market cracks by 402 points.

~~On Tuesday Night advice all of you to buy any stock saying “Special Christmas Discount” also said buy any TOM, DICK or HARRY. And a Huge list of stocks to Buy at my site=> Market zoomed by 186 points.
~~Same Message Passed on Wednesday=> Market zoomed by 306 points.
~~Same message passed on Thursday=> Market zoomed by 126 points to end week at 13614.50.
~~Same message passed on Sunday & Monday Morning=> Market zoomed by 117 points on Monday marking very good start of the week.
~~Same message passed on Tuesday=> Market goes down by 390 points…due to concerns over Thai Subject…and one wrong advice after 7 Days.

~~On Wednesday everyone to stay away for the timebeing and be very stock specific=>Market cracks by 42 points.

Query Corner November 26, 2006

What is the outlook of Agro Dutch Industries bought at Rs 27 and State Trading Corporation bought at Rs 160? Suresh Kamath

Agro Dutch Industries (Rs 24.7): This stock is in a long-term downtrend. It has not been able to recover from the slide it witnessed since October 2005. The stock is currently reversing after hitting its 200-day moving average positioned at Rs 29. A small spike was witnessed on Friday, which can take the price to Rs 27 or Rs 29. Exit in this rally if you are a short-term investor. Long-term investors can hold this stock with a stop at Rs 22. A breakout past Rs 30 is required to take the price towards Rs 36 and then Rs 41.

State Trading Corporation (Rs 158.6): This stock is moving in a broad range between Rs 70 and Rs 200 since 2001. Short-term resistance for this stock exists at Rs 160. This level needs to be breached for the stock to rally to its previous highs of Rs 212. The narrow range bound moves seen since September is encouraging. An upward breakout is possible. So hold the stock with a stop at Rs 135.

What is prospect of Bharat Forge bought Rs 371? Omprakash Malu

Bharat Forge (Rs 376.9): The movement of Bharat Forge since late July can be fit in to an upward moving channel that has the upper boundary at Rs 425. That is the target for this stock over the medium-term. Hold with a stop at Rs 345. If Rs 345 is breached, the stock can head lower towards Rs 320.

Can I buy Suzlon and Geometric Software at current levels? Savita Jain, Thamaraiselvan

Suzlon (Rs 1474.6): Please refer to the Techtrail column of July 23, where we had analysed Suzlon, when the price was at Rs 954, as follows: The momentum is picking up in both the daily as well as the weekly chart of Suzlon since it formed a higher bottom at Rs 910. Long-term investors can hold with a stop-loss at Rs 750. Buying in dips is also recommended with the same stop-loss. Price can move to Rs 1,400 or Rs 1,500 in one year’s time.

The price has already achieved the long-term target set out by us. If the momentum continues, the scrip can head upwards towards Rs 1,942 and then Rs 2,167. Fresh buying can be made at this point with a stop at Rs 1,370.

Geometric Software (Rs 115.4): A study of the volumes of Geometric Software reveals that maximum interest was displayed by the investors in this stock in 2002 and 2003. The trading interest is picking up slightly since October this year.

The stock has been moving in a range between Rs 80 and Rs 130 since September 2005. It has made three attempts to get past the high of Rs 130 since then. Entry at this level is not recommended, as the price is positioned near the upper end of the range. Wait for a close above Rs 140 before going long with a target of Rs 172 and a stop at Rs 225.

I have been holding shares of Polyplex Corporation for the last one year. Kindly advise me whether I should hold this share or sell it. D. S. Rao

Polyplex Corporation (Rs 114.6): This stock had lost 70 per cent from the high of Rs 279 made in September 2005.

The recovery seen since June lacks conviction. Long-term support for the stock exists at Rs 100. Exit the stock if Rs 100 is breached. Price would have difficulty rising above Rs 170 in the next three months.

I have purchased shares of Jyoti Structures. What are the short- and long-term targets for the share? Vinod

Jyoti Structures (Rs 128.8): This stock has made a stunning recovery from the July lows of Rs 59.

Chart patterns suggest consolidation taking place at higher levels. Once the resistance at Rs 130 is breached, we can see a rally to Rs 175 or Rs 185. Hold the stock with a stop at Rs 108. Fresh longs can also be initiated here with the same stop.

What are the prospects of Everest Kanto and Gokaldas Exports? Can I buy at current levels? Ramachandran. V, Subur Basha Shaikh

Everest Kanto (Rs 503.5): This stock has been one of the stronger performers in the post-June rally in the mid-cap stocks.

The price scaled a new all-time high of Rs 518 in late September and since then there has been a consolidation in a narrow band between Rs 460 and Rs 520.

Positions can be taken in this band with a stop at Rs 450.

The price has the potential to move upwards to Rs 608 and then to Rs 703 over the next one year.

Gokaldas Exports (Rs 629.7): This stock is moving in a band between Rs 600 and Rs 700 since September. Since this move comes after a sharp upward move from Rs 452, it can be construed as a consolidation move with an impending upward thrust to Rs 800 or Rs 850 over the long term.

For the short term, the price will face resistance from the zone between Rs 660 and Rs 700. Fresh positions can be initiated is dips with a stop at Rs 580

Nifty futures at critical level November 26, 2006

Outlook on Siemens appears negative

——————————————————————————–
Critical factors
Trading remains active with higher volumes
Nifty futures in premium to the Nifty
Firmness PCR indicates a cautious picture
——————————————————————————–

Nifty moved up further last week, tantalisingly close to the 4,000-mark. It gained 2.5 per cent last week to close at 3850.85, against the previous week close of 3852.80. However, in the intra-week Nifty had a tough time, particularly on Monday, but bounced back with some vigour. Trading activity was also healthy on both derivative and cash segments with volumes picking up.

Rollover of positions from November contract to December series was also decent. About 22 per cent of Nifty contracts witnessed rollovers, while about 20 per cent in the case of stock futures. Among them, the construction sector stocks saw a healthy rollover of positions.

The overall open interest positions witnessed a sharp surge to Rs 57,675 crore last week, breaking the previous record of Rs 56,991 crore, reached on April 27.

The bullish undertone still remains intact as long as Nifty futures stays above 3695-3700. However, sentiment indicators such as put/call ratio and other technical indicators such as Bollinger Band and RSI present a mixed indication. Nifty futures appear to be at critical levels.

Though the undertone looks bullish, a drop below the support level (3930 points) could weaken Nifty futures sharply. If the momentum continues, Nifty/Nifty futures may touch the magical mark of 4,000 points.

We advise investors to go short on Nifty futures, if it dips below the support level. With the current week being the settlement week for November futures, the markets tend to witness volatile condition. So, we advise investors to be cautious and book profits, however, small it may be.

With options trading rich, it may not be wise to consider the strategy of using options. Risk-averse investors can stay away from the market.

Put/call ratio

Open interest put/call ratio decreased to 1.49 (1.4) and volume-wise PCR to 1.31 (0.82). This indicates that some put positions have been added by market participants to hedge against any fall. Interestingly, 4,000 strikes of call and puts of January month contracts also witnessed strong activity. This indicates that market could hover around this level for the next couple of months.

Contango: Nifty futures now rules at a premium against the spot index. Ever since Nifty futures’ introduction, it has been trading in backwardation trailing the spot index. However, this time, it has narrowed down to about four points. The premium was as high as about 20 points a couple of weeks ago. The narrowing down of premium indicates some nervousness in the market.

Stock follow-up

Siemens (Rs 1,177): The outlook on Siemens appears negative. The stock witnessed some sharp run up in the price last week, but fell last Friday. Investors may consider go short on the Siemens futures if the spot price dips below Rs 1,165. In that event, it could touch Rs 1,060-65 levels. Risk-averse investors could avoid this strategy.

FIIs trend last week displayed a mixed trend; they were net buyers on one day and sellers on the other few days. However, the cumulative FII positions as percentage of total gross market position on the derivative segment as on November 23 hovers around 28.7 per cent.

Securities in ban period:

The NSE has suspended the trading in the derivative contracts of SRF, NDTV, Escorts and JP Hydro, as the market wide position crossed the 95-per cent limit. NSE advised all clients/members to decrease their positions in these companies through offsetting positions. Any increase in open positions shall attract appropriate penal and disciplinary action, NSE has warned.

CASINO ROYALE- Bond Keeps Changing. November 19, 2006

It may have been a winning week. But the bears did make their presence felt, especially on Friday. If bulls thought they could happily watch James Bond’s latest flick Casino Royale, the bears changed the show on Friday. As different stocks and sectors gain flavor, the markets at regular intervals change their bonds from the Sean Connerys and Pierce Brosnans to something more sophisticated. The bulls will have to find a Daniel Craig or a number of such suave agents to keep moving ahead. While the celluloid James Bonds continue to enthrall audiences with their on-screen action adventure, the market has been witnessing the gravity-defying journey of the bulls for quite some time now. Despite concerns over overstretched valuations, rising inflation, and hardening interest rates the bulls managed to scrape through the week and closed with marginal gains in a highly choppy week. Strong inflows from FIIs and select buying from Mutual Funds continue to lift the key indices. Firm global markets and sharply lower oil prices also helped the bulls to scale new highs.

Cement, IT, Banking and Power Transformer companies were among the major gainers. Auto stocks continued to be the laggards. Pharma, FMCG and Consumer Durable stocks were the other major losers. The markets witnessed good support at lower levels after every bout of selling at the peaks, contributing towards the volatility in the market. ACC, HDFC Bank, SBI, ICICI Bank and NTPC held the market firm over the week from a major fall. While, Dr Reddy’s, HLL, Reliance and ITC were among the major losers. The Sensex added 147 points or 1.1% to close at 13429 and the NSE Nifty gained 18 points or 0.47% to close at 3852.8.

Auto stocks continued their loosing run. Two-wheeler major Hero Honda slipped 4.3% to Rs693 and Bajaj Auto was down 1.3% to Rs2562. Maruti declined 2% to Rs889 and Tata Motors fell 0.9% to Rs810.

Pharma stocks were in the limelight after Ram Vilas Paswan, the Union Chemicals Minister promised that the new pharma policy would increase the tax breaks for encouraging R&D for domestic producers. But profit booking towards the end of the week brought these scrips down. Dr Reddy’s lost 6.7% to Rs736 and Cipla fell by nearly 3% to close at Rs260. However, Glenmark Pharma surged by over 15% to Rs537, Divi’s Labs was up by over 2904 and Sun Pharma added 1.6% to Rs973.

Fresh buying was seen in IT stocks. Infosys added 2.2% to Rs2186, Satyam rose 2. 2% to Rs433, TCS advanced 2.2% to Rs1092 and Wipro gained 2.3% to Rs549. Among the Mid-Cap stocks, Mphasis BFL rallied 13% to Rs263 and Rolta surged 4.9% to Rs248. FMCG stocks witnessed profit booking. HLL declined 5.1% to Rs239, ITC fell 2.2% to Rs181, Dabur was down 5% to Rs139 and Nestle slipped 1.6% to Rs1031.

Cement stocks were among the major gainers led by gains in ACC and Grasim. Holcim, the world’s second-biggest cement maker, bought 50mn shares in Gujarat Ambuja Cements, raising its share in the company to 18.4%. Gujarat Ambuja rose 1.3% to Rs136, ACC advanced by over 8% to Rs1097. Prism Cement increased 1.6% to Rs37, Birla Corp advanced 2% to Rs360 and Gujarat Sidhee Cement was up 7.4% to Rs28.

Banking stocks once again proved to be the star performers. The BSE Bankex touched a new high led by gains in ICICI Bank and SBI after bond yields dropped to six-month low. Hopes that sustained credit demand would also help boost profits contributed towards the gains. SBI rose 7.9% to Rs1224, HDFC Bank advanced 7.8% to Rs1126, ICICI Bank surged 5.1% to Rs874. Bank of India rose 8.5% to Rs190, Union Bank advanced 4.4% to Rs136 and Canara Bank added 3.4% to Rs300.

Thermax surged after the company announced impressive Q2 results. Its second-quarter net profit stood at Rs350.8mn (up 38.6%), while revenue were at Rs4.9bn (up 57.8%). The company is also planning to spend Rs1.75bn to increase capacity at its plant in Gujarat. The scrip added over 5% to close at Rs366.

Airline stocks attracted a lot of attention following reports that full-service carriers will raise fares by between 3% and 5%. Jet Airways surged 4.4% to Rs647 after the company received an approval from the US Department of Transport for its flights to America. Deccan Aviation soared to Rs147, adding a whopping 38% over the week. SpiceJet gained 7.9% to Rs47.95.

Dr Reddy’s was a major loser. The company plans to raise $200mn through a sponsored ADS issue to fund potential acquisitions and increase capacity. However, the company’s price of $16 per ADS is at a significant discount.

Reliance Industries witnessed profit booking to close at Rs1259, down by 2.1%. The company’s stock was downgraded from ‘ Buy’ to ‘Neutral’ by Motilal Oswal, citing weaker refining margins and lack of adequate information on its retail and E&P ventures. Meanwhile, the company signed an agreement to explore for oil and gas in East Timor, and said that it was willing to supply gas to Ratnagiri Power, the erstwhile Dabhol Power Project.

Wrong Questions. Wrong Conclusions. November 12, 2006

“How’s the market doing” or “what’s happening in the market”! People ask these questions all the time, and expect short answers. The problem is whatever the answer, it usually leads to faulty understanding and wrong conclusions.

Let’s take all three market scenarios — it has been rising, it has been flat or it has fallen. If the market has gone up, one has to answer, “the market is doing well”. However, once these words register, the person hearing it usually becomes emboldened to put money into stocks. If the market has been flat or falling, the answer of the market not doing well is instantly interpreted as a signal to avoid investing. Clearly, such conclusions may be wrong and may not even have been intended by the person answering the question. If one were to analyse the causes of such miscommunications, they would be, one, an undue focus on the recent past and, two, a short attention span.

The way out is to communicate clearly that the past behaviour of the stock market has little bearing on its future, and that a more reflective and studied approach should replace relying on sound bytes and one-liners on the market.

The more appropriate question, of course, would have been to ask, “what factors will influence the market” over whatever timeframe the investor is considering an investment/exit decision. And a sensible discussion will focus on the future and include:

expected future growth in corporate profits in relation to price earning multiples;

trends in liquidity and capital flows; and

impact of various economic and political events on corporate profitability. Thereafter, there has to be a view on how India’s market compare on these factors to other developed and emerging markets. This analysis should give investors a basic idea on how much of their financial assets can be allocated to India’s market.

It must be remembered that this broad understanding of the market will serve only those investors looking for a diversified equity portfolio or mutual fund. Those seeking to invest in individual stocks will need to study that company in depth before taking an exposure.

While deciding on an investment plan, there is always a multitude of expert opinions available in various forms. A sound approach is to ignore those analyses which dwell on the past and give a rear-mirror perspective on why the market behaved in a particular way. Also, distrust brokers who motivate you to transact often as they may be looking to profit at your expense.

So next time you feel like asking or have just been asked how the market is doing… pause, rephrase the question and take time to engage in a meaningful discussion. If there is a shortage of time, the best response is “only God knows”.

Who Is Funding? November 5, 2006

A study of the Nigerian militant attacks, treats, disruption and just overt chaos shows an interesting correlation between the oil price and timings of such events since 2005 March. Whenever oil prices dipped more than 4% in three days, these strange militants do something. This time it was no exception. The crude oil rose after the U.S. government learnt and warned that Nigerian militants are preparing to stage a large-scale attack on oil facilities in the Niger delta.

The timings of these militants, their actions and activities become intensified whenever the oil prices dip significantly. Another interesting thins is that the oil market start moving up two to three hours before these militants do something. This time the market did not have a clue about the Nigerian militant activities because the information came from US Government. The market rose after the announcement.

Based on US Government intelligence the Nigerian militants are preparing for a major assault. But who is funding them to time their activities whenever the oil dips below certain levels?

Pension Funds, Insurance Company at risk. November 5, 2006

The Governor said that pension funds and insurance companies are more at risk as they are not as regulated as banks.

The RBI Governor Y V Reddy has deemed hedge funds to be potential risk to financial markets due to difficulty in determining their source and lack of transparency in accounting and disclosure. As of now hedge funds are invested in the country through participatory notes.

The Governor said that pension funds and insurance companies are more at risk as they are not as regulated as banks and stated examples of controversies regarding hedge funds in the US.

While on the topic of risks faced by emerging economies Reddy emphasized that the Indian banking sector was resilient to absorb any external shocks that might arise. However, the Governor warned that those who will have risk factors like weak public sector balance sheets, large current account deficits and less well-anchored inflation expectations may be vulnerable to global changes.

Do Check. November 2, 2006

According to brokerage house, Dabur India trades at 31.2x FY07E and 25.3x FY08E earnings at the CMP of Rs 155. At current levels, they feel that the stock price has little scope for appreciation and thus downgrade it to Market Performer, with a price target of Rs 171.

According to bokerage house, Prithvi Information Solutions has posted a very strong performance in Q2 FY07: robust revenue growth of 21.5% qoq (and 68.2% yoy), coupled with 320-bp qoq improvement in the EBITDA margin, led to a 20.1% qoq (and 85.6% yoy) growth in net profit, to Rs 222m.
It is finalising plans for an overseas acquisition, for which it is considering raising about $50m to $70m through an FCCB issue.
They further added, At the CMP of Rs 391, the stock trades at 8.3x FY07 estimates and 5.3x those of FY08. These seem undervalued from a 12-month perspective. Hence they re-iterate our buy rating, with a target price of Rs 525.

#Cera Sanitaryware Limited is planning to pump in Rs 30 crore for expansion of its existing plant in Kadi near Ahmedabad. It proposes to expand its production of bathroom solutions and sanitaryware pieces from existing 1.2 million to 2 million pieces, reports CNBCTV18.

#Broking house, ICICI Securities has maintained buy rating on Mahindra & Mahindra, M&M.
ICICI Securities report on Mahindra & Mahindra:

“Mahindra & Mahindra (M&M) registered 13% volume growth in October ’06, which was led by 18.3% YoY and 9.1% YoY growth in tractor and automotive segments respectively.”

“Total volumes for the tractor segment rose 18.3% YoY to 13,384 units. While domestic volumes increased 18% YoY to 13,017 units, exports surged 37% YoY to 367 units. Total volumes for the automotive segment rose 9.1% YoY to 17,109 units. While domestic volumes rose 6.7% YoY to 16,173 units, exports rose a strong 81.4% YoY to 936 units.”

“Among various sub-segments, utility vehicle volumes declined 3.8% YoY to 11,789 units. The company’s flagship brand Scorpio registered sales of 2,947 units in October (13% YoY decline). Three-wheeler volumes increased 55.5%YoY to 3,626 units on the back of strong response to company’s Alpha. Light commercial vehicle segment volumes also saw strong 31.6% YoY growth to 758 units. The stock currently trades at FY07E P/E of 16x and EV/E of 11x. We maintain Buy on the stock.”

#Anil Manghnani of Modern Shares Stock Brokers is of the view that ONGC has target of Rs 860.

#Broking house, DSP Merrill Lynch is not so bullish on VSNL. It has recommended neutral rating on the stock.

#Broking house, Prabhudas Lilladher is bullish on Bombay Rayon Fashions. It has maintained outperformer rating on the stock.

#Executive Director of Sunil Hitech, Sunil Gutte says that there will be fresh orders of Rs 200-250 crore in another twothree months. He feels that the there was a shortfall in targets for the second quarter because of monsoon and other procedural delays.

#R Systems International is picking up a 15% stake in AISEL corporation to cater to its japanese customers.In return AISEL will pick up a 5% stake in Rsystems at Rs 250 per share which is substantialy higher than the current market price reports CNBCTV18.

#Sharmila Joshi of Asit C Mehta is of the view that one can stay invested in Sterlite Industries at current levels.

#Ashish Kapoor, CEO of Investshoppe is of the view that one can buy IDFC.

#Ashish Kapoor, CEO of Investshoppe is bullish on Siemens.

#Emkay Research is bullish on HEG. It has maintained buy rating on the stock.

#Paul Calello, CEO Asia Pacific at Credit Suisse is positive on banking, infrastructure and services, going forward. He believes that India offers a compelling picture on the growth front, however, India does not get its fair share of FDI.

#Unity Infraprojects bags Nagpur Shopping Malls contract in JV. Q2 Income at Rs 103 cr, PAT at Rs 8.8 cr

India Story. September 17, 2006

The real question (on overseas investments and capital account convertibility) asked in one-way or the other is “why should I invest overseas when there are ample opportunities at home?” India has offered and continues to offer one of the best investment opportunities over the long term especially in a scenario of oil prices coming off.

We do not doubt that the economy will have a strong growth path. Even then it makes sense to invest overseas. There are basically two reasons for doing so – first it allows one to diversify across investments as a lot of us have all our investments in India. Although India has a lot of untapped potential, one needs to look at the risks as well and the second issue is that casting the net far and wide gets one a better chance of a better catch.

An open capital account also serves as a notice to the government in power to adhere to some basic financial discipline, which is very important in judging the value of one’s currency.

Franklin Templeton Investments

At present, there is a distinct lack of clarity on the likely magnitude and spread of slowdown in the U.S economy. If it is more pronounced than what is widely expected, it could have an effect on corporate India, though not in the ongoing fiscal. Such a macro-trend could, however make emerging markets more attractive for investors, albeit with a time lag. This is reflected in the trends in flows into different categories of funds in the U.S.

While investors pulled money out of U.S-specific stock funds in July, inflows into international stock funds continued to be at healthy levels. At the global level, China and India continue to attract a substantial proportion of the inflows into country-specific funds, though this year a bias towards the Land of the Dragon is clear unlike the preceding three. The trend is, however, encouraging for India from a long-term perspective.

Sundaram Mutual

India brings to the table four advantages that are long-term value drivers for equities. The macro story lends itself to strong dividend growth, with falling growth volatility. The demographic story could translate into a favourable structural liquidity story, while robust capital market infrastructure allows investors to leverage India’s ROE-obsessed entrepreneurs.

In terms of growth, we believe that India’s economic growth will continue to be one of the fastest among the emerging economies after China.

The demographic story remains the most positive and this is expected to provide long-term and sustainable triggers in terms of consumption led growth as well as a large and productive workforce.

No immediate cut in fuel prices. September 12, 2006

Crude prices have scaled down to a five-month low of $63.97 a barrel in world markets. Bharat Petroleum traded at Rs 386.40, down 0.27 per cent, on the BSE today. Share prices of the company had appreciated by 26.52 per cent through August.

Hindustan Petroleum ended the day at Rs 305.40, up 0.13 per cent, on the BSE. Share prices of the company have been ruling steady over the past month, appreciating by about 37 per cent. Indian Oil Corporation closed the day at Rs 510.90, down by 0.79 per cent, on the BSE.

Reliance Petroleum ended the day at Rs 63.90, down 2.74 per cent. Trading volumes have been decent.

Crude prices have come down by $10 over the past two weeks, infusing life into stock prices of oil marketing companies. According to analysts, the fall is substantial considering that the Indian crude basket had touched a high of $76 a barrel in August 2006.

“Crude prices had gone up due to an escalation in demand and fears of a disruption in supplies due to the Israel-Lebanon conflict. The price fall should lift margins of oil marketing companies,” said Mr Rajiv Thakker of Parag Parekh Financial Services.

Industry watchers are hoping to see some good times ahead with stocks of these companies seeing some consolidation.

“Fall in crude prices would automatically reduce the subsidy burden on oil marketing companies. Once the prices stabilise at such levels, it will slowly begin to reflect on the topline and bottomline of the company,” said Mr Janish Shah, Head – Research, Networth Stock Broking Ltd.

“It is too early to comment on the effect of a drop in crude prices on stocks of oil marketing companies. We are safe, if crude prices hover around the current lows and rule normal in the coming days. Investors should wait for some more time before investing in oil stocks. However, if you have a good investible sum of money, there is no harm in holding 15 per cent oil stocks in your portfolio,” said Mr Gaurang Shah of Geojit Financial Services.

Almost all market analysts rule out an immediate cut in domestic fuel prices.

Fears Fears Everywhere- Leads To Huge Crack. September 11, 2006

Indian Market crashes with all round selling from morning. Check Al-Quaeda’s latest release http://www.cnn.com/2006/US/09/11/zawahiri.911/index.html

Thanks,

Bhavin.

Other Analysts. September 4, 2006

Ambareesh Baliga of Karvy Stock Broking is of the view that one can buy Tata Steel at Rs 450 level.

Deepak Chhabria of IL&FS Investsmart is of the view that one would not see a huge outperformance in pharma sector but some money will be attracted towards it.

Deepak Chhabria of IL&FS Investsmart is of the opinion that Maruti Udyog looks like an interesting play in the auto sector.

Deepak Chhabria of IL&FS Investsmart is of the view that the long term story in sugar is still intact but one will see some correction in stocks for the time being.

Deepak Chhabria of IL&FS Investsmart is of the view that traders can look at metal if they want to play.

Jaideep Goswami of HDFC Securities is positive on Cipla in the frontline sector and among midcap stocks, Dishman Pharma and JB Chemicals.

Jaideep Goswami of HDFC Securities is bullish on Balrampur Chini Mills and Bajaj Hindustan.

Ambareesh Baliga of Karvy Stock Broking is of the view that Balrampur Chini should touch Rs 140-150. So one should hold on.

Jaideep Goswami of HDFC Securities remains positive on the outlook of cement sector and is of the view that Gujarat Ambuja Cements looks quite bullish.

Basant Agro – Avoid. September 3, 2006

Investors can consider giving the rights offer of Basant Agro Industries a go-by. The stock trades at about eight times its trailing 12-month earnings on an expanded equity base. Though the offer is at a 30 per cent discount to the market price, a substantial expansion in the equity base is a damper. Earnings are unlikely to match the growth in equity as the company plans to use a large part of the proceeds to meet its burgeoning working capital requirements.

Businesses

Basant Agro’s fertiliser business contributes 95 per cent of the revenues and 90 per cent of earnings. Apart from manufacturing single super phosphate (SSP) and sodium phosphorous potassium (NPK) mixture granulated fertilisers, the company also makes and sells hybrid seeds. Though the latter business has grown rapidly pace, it contributes only marginally to revenues. Basant Agro is among the smaller players in the fertiliser business. The fertiliser industry depends to a large extent on imported rock phosphate/phosphoric acid as indigenous supplies meet only a small part of the industry’s requirements.

Concerns

To increase its revenues and profitability, Basant Agro has entered into a tie-up with Deepak Fertilisers to market its products in Maharashtra for three years.

Though this would contribute to revenue and earnings growth, it is unlikely to match the expansion in equity base.

Basant Agro’s earnings are highly susceptible to regulatory policies with the Government fixing the maximum retail price of SSP and the subsidy thereon. Its low value-addition model, with raw material costs accounting for 80 per cent of operating expenditure, means thin margins.

With the Government keen on reducing its subsidy bill, it may not recalibrate the subsidy payable to manufacturers as frequently or adequately as warranted by increases in input costs.

As a consequence, the company may face further erosion of margins. Though the rights offer would enhance its debt-service ability, sluggish cash flow from operations, along with a high debt-equity ratio, is a cause for concern.

Objective

The company plans to use about Rs 9 crore of the rights offer proceeds to meet working capital requirements. Basant Agro also plans to expand the capacity of its SSP plant by 44 per cent to 1.2 lakh tonnes.

It proposes to convert unsecured loans from promoters, which were used for the recent acquisition of its NPK granulated fertiliser plant at Sangli, Maharashtra, towards their rights obligations.

Offer details

Basant Agro is offering rights shares on 3:2 basis at Rs 25 each. Keynote Corporate Services is the manager to the offer and Sharex Dynamic the registrar. The offer that opened on August 24 closes on September 8.

Silverline Technology-Buy September 1, 2006

I genrally dont recommend such scripts for investment, though I would advice you to invest a small quantity if you have earned through my recommendations. With 3 years investment horizons only. Current Market price Rs.5.35/= had touched Rs.8/= recently and strong support at Rs.4.75/= which is also touched recently. But I am expecting more then Rs.50/= after 3 years on this script.

One should not enter in these scripts if:
He is new investor,
He is not patient,
He gets worried with small changes in price specially when investment involves Z-Category,
He is not ready to wait for target,
He has better options available to him.

Thanks,
Bhavin.

Strategies For Next Week August 19, 2006

Experts believe investors are coming back to markets with renewed vigour and recommend stocks like Gitanjali Gems, Nava BharatFerro Alloys, Hindustan Motors, Indian Hotels, HPCL, BPCL, IOC, and Gail. They are also positive on midcaps like Micro Technologies and IndusInd Bank.

**S P Tulsian, Investment advisor

Investors should take a sector-specific call

Investors should take a sector-specific call now. I’ve been bullish on real estate, hotels, capital goods and electrical equipment maker companies.

Stock Picks:

In realty and hotels:

One could look at Mahindra Gesco, Gitanjali Gems, Nava BharatFerro Alloys, Hindustan Motors, and Indian Hotels.

In capital goods amd pharma:

In the capital goods one can look at midcap stocks like Areva T&D, Bharat Bijlee, and Lakshmi Electrical Control Systems. In the pharma sector I like Merck, Wockhardt and Cipla.

In the frontline space:

In the frontline space one could look at Reliance, Hindalco, and Hindustan Zinc.

Investors should keep staggering their investments

Investors should keep staggering their investments and take a long-term call on the markets. Be invested in fundamental stocks where tradability is good.

**Sachin Chavan, Technical analyst

Cement sector stocks have shown some life

Cement sector stocks have shown some life in the past couple of days. You don’t want to chase sectors that have already moved up like technology has moved up considerably. If one is a trader then s/he can look at cement and select pharma scrips.

Exit metal stocks if you are a trader

There is no shortage of sectors when one is in a good market but metals, particularly non-ferrous, look very vulnerable. This is the sector where I’d like to exit if I were a trader.

Strategies:

Traders should keep booking profits at desired target levels

Traders should keep booking profits at their desired target levels. As a trader one needs to watch whether her/his individual stock has become overbought. You have to rotate positions as one rotates sectors. That is the best way to ride a bull wave.

Investors should continue to stay invested

Investors, on the other hand, should continue to stay invested and stick on to frontline counters. Midcaps and smallcaps that have eroded, say, 50% of their value and if those are now bouncing back by say 10-15%, should not be looked at for investment by long-term investors. This strategy should pay off.