Monday, March 16, 2009

Closing Bell 16-03-09

Persistent buying activity led the Indian indices to continue their upwards journey during the final hour of trade. The Sensex closed higher by around 190 points, while the Nifty closed higher by around 60 points. Stocks from the mid-cap and small-cap indices ended the day on a firm note as well. Buying activity was witnessed in stocks across sectors, with stocks from the realty and energy space leading the pack of gainers.

Most other Asian markets closed on a mixed note. The European indices are currently trading firm. Rupee was trading at 51.46 against the US dollar at the time of writing.

Telecom stocks ended the day on a firm note led by Reliance Communications, Idea Cellular and MTNL. As per a leading business daily, RCOM has announced the launch of its hybrid network high-speed internet service, ‘Netconnect Broadband Plus’. The broadband service will have a downlink speed of 3.1 mbps (megabits per second) which is expected to be 30% higher than any other wireless broadband service. The service can cater to both laptop and home PC users. These services will be rolled-out in 35 cities during the week. The company has invested close to Rs 6 bn to establish a pan-India presence for the offering. It may be noted that the broadband segment recorded a 43% YoY growth during 3QFY09 and contributed to about 10% of RCOM’s revenues.

Realty companies ended the day on a firm note led by Akruti City and Mahindra Lifespace. As per a leading business daily, Emaar MGF is likely to be the first beneficiary of a government package for the real estate sector. Based on the result of a study being prepared by the Delhi Development Authority, it is believed that the government is looking to buy out flats in bulk at negotiated prices or give the company a loan. Earlier, the realty player was given a nine-month deferment to pay a Rs 5 m installment to SBI. Considering that the sector is facing tough times, this development can be considered as a precedent for other realty players. So far, the government has refused to give any concession to the sector and has been asking for price corrections.

The latest report released by Manufacturer’s Association of Information Technology (MAIT) indicates that personal computer (PC) sales for the quarter ending 31 December 2008 dropped by 19% YoY as compared to the corresponding period in the previous year. The total number of PC sales (which includes desktops and notebooks) during the quarter stood at 1.4 m units. Due to the decline in PC sales, MAIT expects the sales growth for FY09 to remain flat (7.3m units).

The Indian markets recovered from their previous hour losses on account of buying activity witnessed during the previous two hours of trade. Stocks from the auto, telecom and aluminium sectors are leading the pack of gainers, while select stocks from the construction, pharma and power sectors are trading weak. The overall advance to decline ratio is poised at 1.8 to 1 on the BSE.

The BSE Sensex and the NSE Nifty are trading higher, up by almost 150 points (1.6%) and 45 points (1.7%) respectively. The BSE Midcap and Smallcap indices are also trading higher by 1.8% and 1.5% respectively. The rupee is trading at 51.40 to the dollar.

Software stocks are trading mixed. While HCL Tech and Infosys are trading higher, Satyam is trading lower. As per a leading business daily, HCL Tech has bagged a US$ 350 m outsourcing contract from Reader’s Digest Association (RDA), a media firm. As per the deal, HCL Tech will provide IT services and infrastructure support to RDM for seven year period. Revenues from this contract are likely to flow in from the 1QFY10. It may be noted that as per the HCL Tech management there has been a sudden rise in demand from the media, publishing and entertainment vertical in the last few quarters as advertising revenues are declining. Hence most of these companies are planning to cut costs and are considering outsourcing. In fact, the company has a healthy pipeline of such deals. This deal is a positive development for the IT company as it would enable HCL to seize upon the opportunities in this sector. HCL Tech earns about 6% of its revenues from the media sector.

Power stocks are trading mixed. While NTPC and Tata Power are trading lower, Power Grid Corp. is trading higher. As per a leading business daily, NTPC plans to set up power plants in Kazakhstan in order to secure coal imports from that country. The company has proven capabilities of installing, operating and maintaining huge thermal power plants. It may be noted that Kazakhstan has an estimated coal reserves of around 35 bn tonnes and are keen to offer some of the mines to NTPC in return for setting up power plants. NTPC is currently facing acute shortage of coal at its projects in India. Its total coal requirement stands at around 125 mtpa. The company plans to import around 8 mtpa of coal in FY09, while its long term plans are to import are 15 mtpa in order to meet its coal shortages. Interestingly, this investment could also turn out to be a strategic move as Kazakhstan is world’s second largest producer of uranium. Hence, the company could source the nuclear fuel supply going forward.

The Indian markets remained volatile during the previous two trading hours due to alternate bouts of buying and selling activity. Stocks from the banking, auto and telecom sectors are leading the pack of gainers, while select stocks from the power and software sectors are trading weak. The overall advance to decline ratio is poised at 1.3 to 1 on the BSE.

The BSE-Sensex and the NSE-Nifty are trading lower, down by around 15 points and 5 points respectively. However, the BSE-Midcap and BSE-Smallcap indices are trading higher, up by 0.7% each. The rupee is trading at 51.62 to the dollar.

Energy stocks are trading mixed. While GAIL is trading firm, ONGC and Reliance are trading weak. As per a leading business daily, two of ONGC’s subsidiaries plan to raise a debt Rs 100 bn during the month. The two subsidiaries - ONGC Petro-addition (Opal) and ONGC Tripura Power Company (OTPC)- in which ONGC owns 26% and 50% respectively intend to borrow Rs 80 bn and Rs 20 bn to fund their projects. Opal is setting up a Rs 124 bn petrochemical project in the Dahej special economic zone. On the other hand, OTPC plans to set up a Rs 35 bn power project in Tripura with a capacity of 726 mw. Interestingly, ONGC plans to dilute stake in these companies through initial public offerings which are expected before the completion of the projects in 2012.

Auto stocks are also trading mixed. While M&M is in the green, Maruti is trading in the red. As per a leading business daily, M&M has cut its capital expenditure plan for the next three years by Rs 5 bn. However, M&M does not plan to differ any of its projects but has managed to cut the capex through cost management initiatives like renegotiating with its vendors, lesser automation and a focus on outsourcing. This is a positive development for M&M as it will lower its dependence on debt.

Taking cues from their global peers, the Indian markets have started the day’s proceedings on a positive note. While stocks from the realty, banking and consumer durable are leading the pack of gainers, stocks from the power, metal and software sectors are at the receiving end. The overall advance to decline ratio is poised at 1.8 to 1 on the BSE. As regards the global markets, the US market and European markets ended in the green on last Friday. The Asian markets are currently trading firm.

The BSE Sensex and the NSE Nifty are trading higher, up by around 40 points and 4 points respectively. The BSE Midcap and Smallcap indices are trading higher, up by 1% and 0.75% respectively. The rupee is trading at 51.63 to the dollar.

As per a leading business daily M&M Financial Services has invited fixed deposits from the public. The minimum amount which an investor can invest is Rs 10,000. The rates are 11%, 11.5% and 12% for 12 months, 24 months and 36 months respectively. Amidst global financial crisis and economic slowdown the company is finding it difficult to raise funds from the banks and financial institutions. Hence M&M Financial has chosen this route to raise funds for their incremental growth. The company currently has assets under management of Rs 83 bn.

Energy stocks are trading mixed. While pack of gainers is being led by HPCL, BPCL and Chennai Petro, ONGC and Gujarat Gas are leading the pack of losers. As per a leading business daily, Reliance Industries is likely to sell or lease out its 1,432 petrol pumps to Indian Oil Corporation (IOC). Reliance may propose to transfer its petrol stations into a joint venture company run by the state firm. This partnership with IOC would help the company overcome the problem of not being able to use fuel from its two refineries at Jamnagar in Gujarat because they enjoy only-for-exports unit status. Furthermore, it would enable the pumps to avail of subsidy if the government does not free fuel pricing and international oil prices bounce back.