Indian stock market and companies daily report (January 04, 2012, Wednesday)

Indian markets are expected to open in the green following positive cues from the European markets and the Asian markets. Asian stocks trading in the green after U.S. manufacturing increased at the fastest pace in six months. Indian shares rallied on Tuesday as inflation worries seem to be abating and the Reserve Bank of India said it might ease monetary policy to address concerns about economic growth.
The US markets ended in the green as markets benefited from positive reactions to the latest batch of economic data. The early rally on Wall Street was partly due to the release of a report showing a modest rebound in Chinese manufacturing activity in the month of December. A separate report showing a notable drop in German unemployment also generated some buying interest. Stocks saw continued strength following the release of a report from the Institute for Supply Management showing that its index of activity in the U.S. manufacturing sector rose to a six-month high in December.

Markets Today
The trend deciding level for the day is 15,850/4,738 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,060 – 16,180/4,800– 4,835 levels. However, if NIFTY trades below 15,850/4,738 levels for the first half-an-hour of trade then it may correct up to 15,730 – 15,520/4,703 – 4,641 levels.

Cement Dispatches – December 2011
Ambuja Cements’ dispatches stood at 1.93mn tonnes for December 2011, up by modest 5.7% yoy on a high base of last year. For CY2011, the company’s dispatches grew marginally by 4.2% to 20.96mn tonnes. During CY2010, the company added 2mtpa of capacity, post which its overall capacity stands at 27mtpa. We continue to remain Neutral on Ambuja Cements.

Reliance Industries gets nod to develop new D6 fields
The government has approved Reliance Industries' US$1.5bn plan to develop the new D6 block, which has the potential to produce additional 10mmscmd gas. RIL and, its partner, BP have four months to start work on the project as the KG D6 block faces adverse weather during the rest of the year. Until further clarity on the anticipated production from the block, we maintain our estimates and maintain our Buy rating on the stock with a target price of Rs.1,006.

HCC bags order worth Rs.289cr
Hindustan Construction Company (HCC) has received a Letter of Acceptance (LOA) for a Rs.289cr contract to construct a bulk water transmission system for  Gujarat Water Infrastructure Limited, a Government of Gujarat Undertaking. The work involves construction of a 57km-long water transmission pipeline between Dhanki and Maliya villages under the Swarnim Gujarat Saurashtra-Kutch, Water Grid Programme. The project will be completed in 12 months. With this order, HCC’s outstanding order book now stands at ~Rs.16,967cr (4.1x FY2011 revenue). We maintain our Neutral view on the stock.

Economic and Political News
- DoT to demand Rs.1,593cr from companies for under-reporting revenue
- Government may okay Rs.300cr for marketing support to MSMEs
- Union Budget to be presented on March 16, 2012
- Companies Bill may be cleared in Budget session: Law Minister

Corporate News
- RIL to fund Network 18’s Eenandu stake buy
- IDFC to raise upto Rs.4,500cr via infra bonds
- Bajaj Auto unveils its first-ever four-wheeler, RE60, in New Delhi
- Suzlon Energy bags order to supply 57 wind turbines in the U.S.

Indian stock market and companies daily report (January 03, 2012, Tuesday)

Indian markets are expected to open in the green following positive cues from the European markets and the Asian markets. Asian stocks rose as manufacturing growth from Australia, China and India added to optimism that the region’s economies will withstand Europe’s unresolved sovereign debt crisis. Indian shares ended a choppy session modestly higher on Monday after the government said it would allow qualified foreign investors direct access to Indian stock markets from January 15. While the manufacturing PMI for India jumped to a six month high of 54.2, cheering investors, slowdown in exports to 3.9% yoy for the month of November restricted major upside movement in domestic equities. European stocks though kicked off the New Year in style on Monday, as the markets open for business rallied on hopes that 2012 will bring an end to the region's sovereign debt crisis. Also, German factory sector contracted less than initially estimated in December which led to further gains for European markets on Monday.

Markets Today
The trend deciding level for the day is 15,473/4,624 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 15,588 – 15,658/4,659 – 4,681 levels. However, if NIFTY trades below 15,473/4,624 levels for the first half-an-hour of trade then it may correct up to 15,403 – 15,288/4,601 – 4,566 levels.

Auto sales update – December 2011
Maruti Suzuki (MSIL)
MSIL registered a 7.1% yoy (flat mom) decline in overall volumes to 92,161 units, led by weak performance in domestic markets. Domestic performance during the month witnessed a 13.4% yoy (6.5% mom) decline to 77,475 units, primarily due to subdued demand for passenger cars. Export volumes, however, overshadowed the weak domestic performance, as it recorded impressive 50.5% yoy (65% mom) growth to 14,686 units. The mini segment registered a decline of 15.6% yoy (flat mom), while the compact segment posted flat yoy (6.8% mom) growth. Production during the month was impacted, as the company’s plants were shut for six days in December on account of annual maintenance.
Hero MotoCorp (HMCL)
HMCL reported in-line growth of 7.8% yoy (0.7% mom) in total volumes to 540,276 units. New product launches and refreshed product ranges continued to support HMCL’s volume momentum across product segments. Management has indicated that it further intends to consolidate the company’s leadership position with new product launches and network expansion.
Bajaj Auto (BJAUT)
BJAUT posted lower-than-expected volumes for December 2011, led by moderate growth in the motorcycle segment. Total volumes recorded modest growth of 10.4% yoy (18.4% mom decline) to 305,690 units, primarily due to weak 8.2% yoy (substantial fall of 20.6% mom) growth in the motorcycle segment. Three-wheelers, on the other hand, sustained their strong momentum, reporting 26.8% yoy (down 1.2% mom) growth. Exports also maintained their growth trajectory, witnessing growth of 25.5% yoy (down 7.4% mom) in December 2011.
TVS Motor (TVSL)
TVSL reported poor numbers for December 2011, as total volumes declined by 0.8% yoy (2.9% mom) to 170,428 units. The weak performance can be attributed to slowdown in TVSL’s motorcycle segment, which declined by 7.7% yoy (9.5% mom). The scooters and mopeds segments also witnessed moderate growth of 7.2% (1.1% mom) and 2% yoy (flat mom), respectively, in December 2011. Three-wheeler volumes during the month fell steeply by 26.5% yoy (6.8% mom) to 2,523 units.

Govt. raises export duty on iron ore; Sesa Goa to be the worst hit
The government has raised export duty on iron ore to ad valorem 30% on lumps and fines, with effect from December 30, 2011, compared to 20% earlier. Iron ore exports from India have already declined by 25.2% to 35.4mn tonnes from April- October 2011 on account of export ban in Karnataka, stringent measures in issuing export permits in Odisha, a sharp decline in international iron ore price and increased export duty. Post the export duty hike, rise in rail freight and the recent iron ore price decline are expected to severely affect iron ore exports from India. Before the export duty hike (as per Federation of Indian Mineral Industries), total iron ore exports during FY2012 were estimated to be 60mn tonnes compared to its previous estimate of 75.0mn tonnes. We now expect iron ore exports to be lower than 60mn tonnes during FY2012.
We do not expect any impact on NMDC’s financials due to hike in export duty, as we do not anticipate any exports of iron ore by NMDC during FY2012 and FY2013. However, we have lowered Sesa Goa’s EBITDA estimates for FY2012 and FY2013 by 8.1% and 9.1% to Rs.3,314cr and Rs.3,712cr, respectively. Also, we believe some of the Karnataka iron ore would now be sold domestically. Nevertheless, we believe the current stock price discounts negatives such as acquisition of a minority stake in the unrelated oil business via acquisition of Cairn India’s stake, increased export duty, higher railway freight and lower volumes from Goa mines. We recommend Buy on the stock with an SOTP-based target price of Rs.195 (Rs.213 earlier).

L&T bags orders worth Rs.2,056cr
Larsen & Toubro's (L&T) construction arm has bagged new projects worth Rs.2,056cr across various categories in December 2011. Of these projects, two orders worth Rs.1,262cr in the water and effluent treatment segment was bagged by the company. In the buildings and factories category, a project worth Rs.388cr was bagged for constructing residential towers. In the rail infrastructure segment, orders aggregating to Rs.406cr have been grabbed from various clients. With these orders, the company’s outstanding order book stands at ~Rs.1,52,609cr (3.5x FY2011 revenue), providing good revenue visibility. This order booking takes the company’s total declared orders to ~Rs.10,420cr in 3QFY2012 against orders worth Rs.13,336cr received in 3QFY2011. The drying up of order inflows is one of the major concerns for the stock and has led to underperformance in the recent past.
At the CMP of Rs.1,009, the stock is trading at PE of 9.7x FY2013E earnings, after adjusting for investments, which is below the historical trading multiple for L&T and we believe factors in most of the negatives surrounding the stock. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in the different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs.1,453, which provides 44.0% upside from current levels. Hence, we maintain our Buy recommendation on the stock.

IVRCL bags orders worth Rs.732cr
IVRCL has bagged orders aggregating to Rs.732cr across the buildings, transportation, mining, water and solar power divisions. The company’s buildings division has secured orders worth Rs.404.6cr, including those from the Indian Institute of Science Education and Research, Bhopal; Indian Oil Corporation Ltd.; Jindal Steel & Power Ltd.; and National Institute of Biomedical genomics, West Bengal. While the transportation division secured an order worth Rs.251.4cr from Mahanadi Coalfields Ltd., the mining division bagged an order worth Rs.45.4cr from Hindustan Copper Ltd. Further, orders worth Rs.19.4cr and Rs.11.4cr have been bagged for water and solar power projects, respectively. With these orders, IVRCL’s order book stands at ~Rs.26,232cr (4.6x FY2011 revenue).
We have valued IVRCL on an SOTP basis. The company’s core construction business is valued at P/E of 6x FY2013E EPS of 4.6 (Rs.27.8/share), whereas its stake in subsidiaries, IVR Prime (Rs.10.9/share) and Hindustan Dorr-Oliver (Rs.2.9/share), has been valued on mcap basis, post assigning a 30% holding company discount. At the CMP of Rs.29, the stock is trading at 6.3x FY2013E EPS and 0.4x FY2013E P/BV on a standalone basis. Thus, on the back of the company’s robust order book-to-sales ratio (4.6x FY2011 revenue) and attractive valuations, we maintain our Buy view on the stock with a target price of Rs.42.

Economic and Political News
- November exports rise 3.9% to US$22.3bn yoy
- November imports rise 24.5% to US$35.9bn yoy
- No outside control must be imposed on media: PM

Corporate News
- ONGC to invest Rs.15,000cr in KG gas find
- Coal India expects higher revenue to offset wage hikes
- M&M tractor sales for December 2011 rise marginally

Which stock should you buy?

Which stock should you buy?

In the equity market, stock tips are aplenty. Everyone believes themselves to be an expert just because they have a Trading and Demat account and have made some investment in the equity market! Therefore it is very important to have some basic knowledge about share market before you start investing in stocks according to share tips.
There are more than 6000 shares listed in India. But, broadly they can be categorized into four types:
Growth stocks: They are companies which grow faster than its industry or the market. Growth shares do not believe in paying dividends but reinvest profits for expansion and growth. They are marked by high P/E ratio and are always in demand due to potential price appreciation.
Value stocks: They are companies which have good fundamentals but are underpriced as they are temporarily out of favour. Value shares are great picks as they have a greater potential of growth. They have a low P/E ratio and low PBV ratio.
Income stocks: They are companies which regularly pay high dividends. These shares are often less volatile and may limited growth options. Profit from these stocks is in the form of regular dividends declared by the company. They are marked with higher dividend paying ratio.
Penny stocks: They are stocks with low price and low market capitalization. These shares are easy to manipulate because of low volumes. Investing in penny shares is extremely risky as these are extremely speculative in nature, illiquid and marked with volatile movements.

How to invest in Gold?

Gold is a popular avenue of investment and is generally bought as hedge against inflation and economic crisis. It has a cult following in India where it is considered to be a symbol of Goddess Lakshmi and an epitome of wealth and prosperity. Although gold prices have gone through the roof in recent years, Indians continue to be major buyers of gold across the world.
You can invest in gold in many ways. It can be bought in the form of jewellery, coins or bars or through ETFs. The purpose of your purchase determines the form of holding.
Jewellery: Jewellery is the traditional and most popular way to own gold in India. However, in commodity it is a comparatively expensive way to invest in gold due to incidental charges or costs associated with it. Jewellery has making charges which adds around 5% of the cost. Also, you need buy a locker or pay rent for bank locker to keep gold in physical form. This further adds to the cost of buying jewellery. It is better to jewellery if you intend to wear it. But if you intend to use it for investment, it defeats the purpose due to high costs associated with it. Also ensure that you buy KDM or hallmark gold jewellery to ensure purity.
Gold coins & bars: Coins and bars are also a popular way to invest in gold. You can buy them from any jeweller, banks or even from post office. Although, it is a convenient way, it is not a prudent one. Coins and bars come at a premium from the gold rate prevailing in the market which is more than 10%. Also, in many cases, it is difficult to sell them and is generally sold at a discount.
Gold ETF: Gold ETF is emerging as the most convenient and cost-effective way to invest in bullion. It tracks the price of gold and is traded on stock exchange. Here 1 unit of ETF is equivalent to 1 gram of gold. Also, you do not have to worry about storage and purity issues.
To know the current gold rate and gold prices in India, visit www.angelcommodities.com

Gold shines as economic uncertainty prevails

In the last week, Spot Gold prices gained around 1.0% as rising uncertainty over the global economic scenario led to higher demand for the yellow metal as a safe-haven asset. Economic data from the major economies in the recent past has not been satisfactory and has led to concerns over slow recovery in growth in countries like the US, UK, Euro Zone and China. Investor sentiment continues to remain mixed due to no clear direction over economic progress. In the global financial markets, economic recovery has currently taken centre stage and data from major economies is currently driving risk sentiments. Fears of a double-dip recession have gripped the financial markets and this is the main factor which is boosting demand for gold.

Spot Gold prices touched a high of $1,237/oz in the last week and prices on the MCX touched a high of Rs18,790, gaining 0.9% on a week-on-week basis. Sharp gains in gold prices on the MCX platform were capped on the back of Rupee appreciation. But festive season buying in India is expected to boost demand and lead to higher prices. The Rupee is expected to trade on a volatile note as market sentiments remain mixed. If risk aversion holds grip in this week then the currency is expected to depreciate, thereby helping gold prices on the MCX to rise.

Holdings of the SPDR Gold Trust rose to 1,295.51 metric tons as of 18th August from 1,294.60 metric tons the previous day. SPDR Gold Holdings had touched a record high of 1,320.43 metric tons on 29th June. Uncertain economic scenario is expected to lead to increased demand for gold in the short-term.

Factors that will boost demand for gold

·         Gold imports in India gained 18.9% to 155.6 tonnes in the first six months of this year. Demand for gold in the Indian markets is expected to rise as a good monsoon is expected to raise rural incomes. Rural consumers are expected to flock to gold for investment as well as jewelry requirements.

·         China is allowing more banks to import and export gold for consumption purposes. The country has also opened up gold trading to foreign companies. China is the world's largest gold producer but the country had to import 100 tonnes of gold on the back of rise in demand. China's share of global gold demand has risen to 11% in 2009 from just 5% in 2002.

Fundamental Outlook

Global financial markets are currently concerned over a double-dip recession. Recovery in the US, the world's largest economy is under doubt as unemployment rate in the country continues to hover around 10%. This indicates that the US job market is currently weak. Also, credit is locked up tight and the housing market is awash in unsold and uninhabited homes. The US Federal Reserve left its benchmark interest rate at 0-0.25% and said that it would keep rates low for an exceptionally long period. The central banks said that it would buy government debt by reinvesting proceeds from its mortgage bond portfolio into long-term Treasury securities.

Growing uncertainty over the impact of the Euro area sovereign debt crisis coupled with slow progress on the US economic front is dominating market sentiments. Debate on whether economic recovery has picked up pace or no also continues. Chinese economic growth is also witnessing a slowdown as the GDP growth in the second-quarter in China slowed down to 10.3% against growth of 11.9% in the first-quarter. The overall global economic scenario is bleak and demand for precious metals as a safe-haven is expected to rise.

We have a positive view on Gold from a short-term perspective as growing economic uncertainty will raise demand for gold as a safe-haven. But sharp gains in Gold prices could be capped as the DX is expected to strengthen.

Commodities Update – August 7, 2010

International Perspective

The commodities segment made substantial gains in the last week, with natural gas prices being the exception. Base metal prices continued to lead the rally in the commodities segment, whereas gold prices also rebounded after falling drastically in the earlier weeks.

Zinc prices were the top performers in the base metals pack, gaining more than 4.5% on the MCX in the last week. The metal prices were supported by improving inventory scenario on the LME coupled with decline in zinc output in China. Zinc experienced the sharpest production decrease among all the base metals in June, posting a drop of 26,000 tonnes from the previous month. LME zinc inventories declined in all the sessions of the last week.

Lead prices continued to post strong gains for a third consecutive week, gaining more than 4% in the last week. Lead prices touched a 14-week high of Rs 102.80/kg, mainly helped by the weakness in the US dollar index (DX). However, long-term fundamentals for lead continue to remain mixed. China's June lead output rose by 14.29 percent from the previous month. Estimates from International Lead and Zinc Study Group (ILZSG) suggest that the lead mine production will total 4.2 million tons in 2010; 5% greater than the previous year.

Natural gas prices lost more than 8% in the last week on reports that natural gas drilling rigs rose by 11 rigs to 983 rigs in the last week. Despite expectations of hot weather increasing demand for the commodity, the ample supplies in the US storage seem sufficient to meet the needs. Natural gas storage increased by 29 bcf as against the previous of 28 bcf in the w/e July 30th.

Agri Perspective: Soybean and refined soy oil gains substantially in agricultural commodities in the last week. Soybean prices surged sharply on account of continuous rise in overseas market due to dry and hot weather in USA and US Department of Agriculture's weekly export sales figures of soybean was well above trade expectation. As per Solvent Extractors Association of India (SEAI), India's oil meal exports in July 2010 increased 39% to 241,182 metric tonnes from 173,329 tons a year earlier also provided support to the bulls.

Refined soy oil surged in tandem with overseas market. Crude Palm Oil (CPO) futures at Bursa Malaysia Derivative Exchange surged due to increased demand of edible oil from Muslim countries ahead of Ramadan (fasting month). Also, cheaper prices of CPO compared to other edible oils, added bullish market sentiments as India is a major importer of Palm oil. India is likely to import 5.5 to 6 lakh tone of Palm Oil for August. India is the world's second-largest vegetable oils consumer after China, may purchase more palm oil in the next two months than soy oil, as palm oil discount has widened.

Maximum fall was witnessed in NCDEX Turmeric, Jeera, Pepper, Chana and Guar Seed.

Turmeric Prices slipped more than 4 % due to higher production estimates for 2010-11 and poor demand from overseas market.

Jeera prices witnessed downtrend due to lower quotes offered by Syria in international markets. Syria is one of the major producing nations of Jeera.

Black Pepper prices closed in red in last week due to harvesting progress and fresh arrivals in Indonesia. Lower quotes by Indonesia in international market are also pressurizing prices in the domestic market. Indonesian origin was being offered at $3,950-$4,000/tonne whereas Indian origin was offered at $4,400-$4,450/tone.

Weekly Performance of Currencies

The Indian Rupee (INR) delivered good performance in the last week as the currency appreciated more than 1% to close at 46.42 against its close of 46.94 in the previous week. The currency rose to a one-month high in the last week as initial public offerings on the domestic equity front led to a rise in capital inflows. FII inflows in the month of July 2010 stood at Rs16,617cr against Rs10,508cr in June 2010. Year-to-date FII inflows in India totaled Rs47,694cr. Weakness in the US Dollar Index (DX) also provided strength to the INR. The RBI raised the repo rate by 25 basis points to 5.75%, whereas the reverse repo rates were increased more than market expectations. Reverse repo rate was increased to 4.5% from the previous of 4%. However, the CRR rate was left unchanged at 6%. The central bank also raised its March-end inflation forecast to 6% from the previous estimate of 5.5%.

Economic data from the US, the world's largest economy has come on the negative side in the last few days. This has led to lower expectations of a rise in interest rates in the US any time in the near future. On the back of this, the DX depreciated in the last week to close at 81.54. The DX weakened despite mixed sentiments in the financial markets, which is neither too positive nor very negative. Performance of the Euro was good as the currency gained 1% in the last week as slow and steady recovery in the Euro Zone and positive economic data provided support to the currency.

The German consumer climate index increased to 3.9 in July as against expectations and the previous figures of 3.6. Moreover, the M3 money supply in the Euro zone grew by 0.2% in June as against the expectations of 0.1% decline. In the previous month of May, the money supply had declined by 0.1%.
Loans to the private sector rose by 0.3% in June as per data reported by the European Central bank (ECB). Positive economic data has led to re-emergence of demand for the Euro despite the impact of the ongoing sovereign debt crisis.

Economic Update
• Moody's Investors Service upgraded India's currency rating to Ba1, just a notch below the investment grade, taking into consideration the recent reforms adopted by the government to reign in the fiscal deficits.
• New Home sales in the US increased to 330,000 in June as against 267,000 in May. Markets had expected the new home sales to increase to 317,000.
• The advance GDP figures reported on Friday indicated that the US economy grew at a slower pace in the second quarter on the back of slowdown in consumer spending. The world's largest economy grew at 2.4% in the second quarter as against expectations of 2.5%. In the first quarter, the US economy grew by 3.7%.
• The revised consumer sentiment index improved slightly in July. The index reported figures of 67.8 in the current month from 66.5 in the previous month. Markets had expected the consumer sentiment to rise to 67.3. Moreover, the Chicago PMI also increased to 62.3 in July as against 59.1 in the previous month.
• The IMF in its stress tests said that the US financial system remains fragile and might need around $76 billion in additional capital. Despite the financial system approaching towards stability, poor economic scenario has enough potential to bring the financial system into trouble.
Outlook
In this week, we expect the Indian Rupee to trade with an appreciation bias as weakness in the DX coupled with continuing inflows in the domestic markets will help support gains in the currency. Poor economic data from the US will continue to cap rise in the DX and we expect the currency to weaken in this week. We expect the Indian Rupee to trade in the range of 45.85 to 47.15 in this week.