BSEIndia: All Stock Market News: Flash News Investment August 4, 2008

Page 1

Flash News Investment August 4, 2008 1

he Reserve Bank of India (RBI) Governor, Y

V Reddy, is fond of springing surprises. For

yet another time, he has lived up to his reputation,

be effecting a higher-than-expected hike in the repo

rate – rate at which banks borrow from the central

bank – and a hike in the cash reserve ratio (CRR)

– the amount of funds banks have to keep with the

central bank.

In what is technically his last monetary policy

review, Dr Reddy raised both CRR and the repo

rate to a more than seven-year high of 9 per cent.

With the unexpected move, where most of the

markets players were only expecting a CRR hike of

25 basis points, the stock market promptly reacted

and stocks tumbled on that day.

The impact of rate hike was further buttressed by

the RBI's lower GDP projection of 8 per cent, down

from 8.0 -8.5 per cent earlier, clearly indicating that

it is planning to control the inflation at the cost of

growth. Now, the inflation rate is projected close to

7 per cent by end March 2009, which is still higher

from earlier target of five per cent. Now with RBI's

forecast of higher than anticipated inflation, and

lower than expected growth, which was coupled

with the tough medicine by the way of double dose

was enough to spook markets.

Now to be fair with RBI, domestic macroeconomic

signals remain ambiguous and there is no clarity

on the global scenario hence we believe that the

Vol 24, No 18, August 4, 2008, Subscriber's Copy Total 8 Pages

A NEWSLETTER TO MAKE YOU WEALTHY

RBI Call Based On

Long-term Vision

TURN TO PAGE NO 2

Market Capsule

RNI No : MAHENG / 2000 / 986 Reg No : MH / MR / South - 123 / 2006 - 08LICENCE NO. South - 68 / 2006 - 08.

Licence to post without prepaymentPosted at Mumbai Patrika Channel Sorting Office, Mumbai - 400001 on every Friday

CHANGE OF THE WEEK

Net Investment

Turnover

Top 5 Gainers

Sensex

Volume

(in crore)

Editorial

(Rs.Cr)

Scrip

30-July-08

24-July-08

% Gain

Scrip

30-July-08

24-July-08

% Loss

31-July-08

Rise/Gain

NSE

BSE

Combined

Rs 50

FII

Top 5 Losers

Samtel

15.60

11.10

40.54

Shriram Epc

224.05

162.45

37.92

Alchem

94.10

74.15

26.90

Alph Ageo

430.75

341.80

26.02

Sterlin Bio

251.05

200.35

25.31

24-Jul-08

17670

7,445.00

25,115.00

25-Jul-08

14742

5,867.00

20,609.00

28-Jul-08

11098

4,632.00

15,730.00

29-Jul-08

12191

5,103.00

17,294.00

30-Jul-08

12734

5,354.00

18,088.00

Zandu Pharm

20181.50

24017.25

-15.97

Sun TV

232.85

276.65

-15.83

BEL

990.10

1162.75

-14.85

Supreme Tex

10.00

11.70

-14.53

ABB

789.65

904.45

-12.69

23-Jul-08

1635.60

334.50

24-Jul-08

556.30

-270.40

25-Jul-08

-546.30

-32.90

28-Jul-08

-609.30

203.70

29-Jul-08

-332.30

-249.40

Total

704.00

-14.50

(Rs.Cr)

Sensex

14355.75

80.80

Nifty

4332.95

21.10

24.07.08 - 30.07.08

Advance

Decline

Unchanged

BSE

1203

1346

NSE

653

545

Sensex

olume

KRBL

Buy Rs 142.85

Parsoli Corp

Buy Rs 078.65

(Closing prices of 31/07/2008)

Asian Paints

Buy Rs 1210.00

Areva T&D

Buy Rs 1635.00

HERE'S A FLASH

TECHNICAL RECOMMENDATIONS

Page 2

Flash News Investment August 4, 2008 2

Link to profit

Good amount of investor interest has

been seen in the scrip of D-Link India

(BSE Code 532419) trading at Rs 78.50.

High risk investors can enter the scrip

with medium term perspective.

High on Delivery

High risk appetite investors can take

exposure to the scrip of Madhav Marbles

(BSE Code 515093) trading at Rs 39.

The counter has witnessed good traded

and delivery volume in the last few

trading sessions.

Tuesday August 5

FOMC Meeting Announcement

The Fed determines interest rate policy at FOMC meetings. For

weeks in advance,

market participants speculate about the possibility of an

interest rate change. But this time no change in Interest rate is

expected.

Wednesday August 6

EIA Petroleum Status Report

The Energy Information Administration (EIA) provides weekly

information on

petroleum inventories in the U.S., whether produced here or

abroad. The level of inventories helps determine prices for

petroleum products.

With crude prices impacting the global economies, it is most

sought after data.

Thursday August 7

India Wholesale Price Index Inflation Numbers

It is the most important factor at current level. With Inflation

becoming a major

threat RBI is taking tuff stance. Any increase in the inflation will

lead to further tightening of monetary policy.

Jobless Claims

New unemployment claims are compiled weekly to show the

number of individuals who filed for unemployment insurance

for the first time. An increasing (decreasing) trend suggests

a deteriorating (improving) labor market. Just remember, the

lower the number of unemployment claims, the stronger the job

market, and vice versa.

current increase in monetary measures is justifiable, as

high inflationary expectations could have deprived long-

term economic growth. Now, whether the long-term gain

will be worth the short-term pain or whether it will prove

excessive is something we will know only some quarters

from now.

Now as impact of this, going forward we expect banks

to increase the PLR. Interest rate sensitive sectors like

auto and real estate will be further hit. The after effect

of the measures affected today will have a lag effect and

impact of the same could be seen in firmness in interest

rates. The interest rate sensitive sectors real estate and

financials could come under pressure for some more time.

As a result the growth in Q2FY09 looks quite subdued

and could extent itself to Q3FY09 also.

Now as far as the Q1FY09 results are concerned, much

was talked about the earning downgrades. But the results

are out and our study of 1114 companies which have

announced results so far shows that, although the figures

are not great these are better than expectations. Here the

1114 companies have posted a topline of growth of 28.41

per cent and bottomline growth of just 5.93 per cent.

Now at the first go this does not appear good. But the

impact on overall bottomline has been caused by Oil

marketing companies. If we consider the results without

considering oil marketing companies, topline growth of

India Inc stands at 25 per cent and bottomline growth

stands at 12.45 per cent.

But there are certain alarming factors, the raw material

cost has shot up by 31 per cent or Rs 52481.95 crore,

which is huge, thus keep the operating margins flat.

The interest cost for India Inc too has gone up by 30.77

per cent. Even on adjusting for interest cost of banks

and financial institutions, the net interest cost shoots up

by 72.23 per cent. In absolute terms also it is only Rs

3059.47 crore, which we feel is on the higher side for

India Inc.

Regarding the performance of Sensex based companies,

27 companies have announced the results and have

posted a topline growth of 25.56 per cent and bottomline

growth of 15.58 per cent. Now the Q1 results have been

better than expectation. But the moot question is, is it

sustainable? As stated earlier the rising interest cost will

STREET TALKS

EDITORIAL

Next Week Events

make its impact in the Q2FY09 and Q3FY09. And hence

the expected EPS for Sensex for FY09 is estimated at Rs

975-980 from the earlier levels of Rs 1000. So we will not

be surprised if some slow down happens in next quarter.

Coming back to the markets, with no major triggers

available in the near term much will depend on the

performance of global markets. As regards the expected

movement, we expect the market to be range bound with

some negative bias.

Page 3

Flash News Investment August 4, 2008 3

• Asian Paints is the leader in the Indian paint industry. It

has an overall market share of around 30 per cent and a 54

per cent market share in the decorative paint segment.

• Asian Paints, through in a 50:50 joint venture with PPG

Industries (US), also has a presence in the automotive paint

segment. Of late, the company has gone on an acquisition

spree that would increase contribution from international

operations significantly in the coming years.

• It is a strong brand portfolio. The strength of its brands

enables it to push products to its dealers without giving

high incentives. The performance of the company on

the exterior paint segment (leadership position within a

period of five years) strengthens our view. With the paint

sector witnessing increasing customer involvement, we

believe that the strong brand portfolio is of significance

from a long-term perspective.

• Asian Paints has also been active in launching products

in the high-end segments in a bid to improve the product

mix, which we believe will enable the company to sustain

its operating margins going forward despite the firm

crude prices.

• Even the capacity expansion of Rs 400 crore is on track

APL is increasing its annual capacity by 150000 KL

by 4QFY10 at its new facility in Rohtak. The capacity

expansion will entail an investment of Rs4b excluding the

cost of land in phase I. The company would look at phase

II after stabilization of phase I. This would enable it to

cater to the anticipated demand growth beyond FY10.

• On the valuation front, CMP of Rs 1210, discounts its

FY09E earnings by 23x. Although it seems to be higher

we are of the opinion that being a leader in the industry it

deserves the higher P/E. It is true that there are some raw

material related pressure on the company but the Crude

price are cooling off and hence will help the company in

next quarters.

Ticker: 500820

H/L: Rs 1334/811

Equity: Rs 95.92 crore

ASIAN PAINTS

Face Value: Rs 10.00 BUY: Rs 1210.00

SCRIP MOVEMENT

AREVA T&D

• Areva T&D is engaged in the business of power

transmission, distribution & manufacturing of other

industrial equipments. The company offers an entire

range of products and systems like energy automation

and information, electrical distribution systems, high

voltage switchgear, medium voltage switchgear, and

transformers.

• Areva has been by far in talks with some Indian

companies for setting up a nuclear power equipment

manufacturing base in India, and if the talks with

IAEA prove fruitful, the company shall stand as a core

beneficiary due to its expertise in the nuclear field.

• Areva plans to set up a uranium mining and recycling

plant once it gets the nod from Nuclear Power Corporation

of India using Mitsubishi boiler technology and would be

in a better position to take up project abroad and access

more related overseas technologies without hassles,

thereby opening door for immense future earnings

opportunities.

• The company has lined up investment in new green field

projects in Vadodara, Hosur and Padappai in addition

to in-creasing capacities at existing manufacturing

plants which shall be ready for production by Dec

2008. Vadodara and Hosur facilities will make power

transformers up to 765 KV and later till 1200 KV in

order to meet the growing needs with an investment of

around Rs 500 crore.

• In the past financial performance of the company has

been strong and we expect the company to maintain

the same. In addition the FII have not sold in the

counter during current downtrend which provides some

confidence. But with strong order book position we

expect the same to trade at lower valuations and hence

recommend the investors to buy the scrip at current levels

with a target price of Rs 2100 in next three quarters.

Ticker: 522275

H/L: Rs 3280/1199

Equity: Rs 47.82 crore

LAST FIVE QUARTERS (Rs/Cr)

Jun 08

Mar 08

Dec 07

Sep 07

Jun 07

Sales

995.24

868.51

916.24

891.20

740.21

Other Income

15.95

11.20

16.89

25.71

8.78

Operating Profit

143.68

132.45

154.14

151.16

116.25

Interest

2.26

1.28

2.69

2.55

1.75

Depreciation

11.60

11.40

11.19

10.75

10.43

Net Profit / Loss

98.55

88.07

105.63

109.96

74.23

Equity Capital

95.92

RECOMMENDATIONS

For last 1 year

Face Value: Rs 10.00 BUY: Rs 1635.00

SCRIP MOVEMENT

LAST FIVE QUARTERS (Rs/Cr)

Jun 08

Mar 08

Dec 07

Sep 07

Jun 07

Sales

621.75

555.70

816.70

469.20

430.18

Other Income

1.67

3.50

8.30

4.70

2.44

Operating Profit

110.12

79.20

140.40

78.70

60.11

Interest

4.02

2.90

4.90

1.10

1.62

Depreciation

9.56

5.90

6.60

6.30

3.30

Net Profit / Loss

64.66

54.10

83.90

48.00

37.85

Equity Capital

47.82

47.80

39.88

For last 1 year

Page 4

Flash News Investment August 4, 2008 4

Company Name

Per cent

XDividend Date

DIVIDENDS DECLARED IN LAST FEW DAYS

Company Name

Ratio

XSplite Date

SPLITS DECLARED IN LAST FEW DAYS

Company Name

Ratio

XBonus Date

BONUS DECLARED IN LAST FEW DAYS

PERFORMANCE OF WORLD INDICES

MAJOR BULK DEALS, FOR LAST WEEK

Company

Deal

Buy/

Client

Quantity

Price

Name

Date

Sell

Name

(Rs)

LAST 5 DAYS CONTINUOUSLY MOVING UP

PERFORMANCE OF OTHER INDICES

Bliss GVS Pharma