Friday, March 20, 2009

Closing Bell 20-03-09

Closing Bell 

Weak ending to the week
The final hour of trade witnessed considerable volatility as alternate bouts of buying and selling led the Indian indices to hover around the dotted line. The BSE-Sensex closed with losses of around 35 points, while the NSE-Nifty ended flat. Stocks from the mid-cap space ended the day in the red. However, small-cap stocks remained in the limelight and ended the day on a firm note. Stocks from the metal and FMCG sectors ended the day in the green, while stocks from the realty and capital goods space led the pack of losers.

Most other Asian markets closed on a mixed note. The European indices are currently trading weak. Rupee was trading at 50.4 against the US dollar at the time of writing.

Power stocks ended the day on a mixed note with Tata Power and Reliance Power leading the pack of gainers. NTPC led the pack of losers. As per a leading business daily, NTPC plans to add 3,000 MW (megawatts) of capacity in FY10. This translates to a 70% higher capacity addition than what the company is likely to add in FY09. It had earlier planned to add nearly 2,000 MW in FY09. However, in the current fiscal the company has added only 1,000 MW and expects to add nearly 750 MW by March end. Currently, NTPC has a capacity of almost 29,900 MW. It may be noted that the company is aiming to add nearly 22,430 MW in the eleventh five-year plan (2007-2012). Considering the current rate of capacity addition, NTPC seems to be lagging much behind its original plan.

Capital goods sector stocks ended the day on a weak note led by Thermax, Crompton Greaves, Siemens and BHEL. As per a leading business daily, the government is likely to introduce a seven year equity lock-in period for the foreign companies who are looking to set up manufacturing units and bid for new power generation equipment projects in India. Further, the companies who do not have the requisite track record will also be barred from bidding for the new projects. The new regulation would be applicable primarily for the bulk tender for eleven units which would be floated by NTPC and the Damodar Valley Corporation. Each of these units will require power equipment with capacities of 660 MW based on critical technology. The government expects some Chinese, Russian and East European companies which lack the requisite characteristics, to bid for projects. As such, these companies would not be entertained.

As per a leading business daily, the world’s fourth largest mobile maker, Sony Ericsson is likely to make a pretax loss of US$ 459 m to US$ 526 m in 1QFY09. This will be mainly on account of weak consumer demand and de-stocking. It may be noted that during 4QFY08 the company had posted a pretax loss of Euro 261 m. Furthermore, the company expects global demand to shrink by at least 5% this year. Amidst the economic slowdown, the company is aiming to preserve its profitability and is giving less priority to market share.

Power stocks are trading mixed. While NTPC is trading lower, Tata Power and Power Grid Corp are trading higher. As per a leading business daily, the government may make it mandatory for power distribution companies to derive a certain minimum portion of the power they supply from renewable sources. Penal action would be taken against distribution companies that fail to comply with this norm. It may be noted that although the Electricity Act, 2003 has for long directed state electricity regulatory commissions to promote the use of renewable energy, it does not prescribe the minimum percentage. As such, this move will encourage generation of power from renewable sources and is likely to give a fillip to companies like Suzlon, who cater to the sector.

Best Performing
Stocks & Funds
Friday 20th March, 2009
Closing
Weak ending to the week
The final hour of trade witnessed considerable volatility as alternate bouts of buying and selling led the Indian indices to hover around the dotted line. The BSE-Sensex closed with losses of around 35 points, while the NSE-Nifty ended flat. Stocks from the mid-cap space ended the day in the red. However, small-cap stocks remained in the limelight and ended the day on a firm note. Stocks from the metal and FMCG sectors ended the day in the green, while stocks from the realty and capital goods space led the pack of losers.

Most other Asian markets closed on a mixed note. The European indices are currently trading weak. Rupee was trading at 50.4 against the US dollar at the time of writing.

Power stocks ended the day on a mixed note with Tata Power and Reliance Power leading the pack of gainers. NTPC led the pack of losers. As per a leading business daily, NTPC plans to add 3,000 MW (megawatts) of capacity in FY10. This translates to a 70% higher capacity addition than what the company is likely to add in FY09. It had earlier planned to add nearly 2,000 MW in FY09. However, in the current fiscal the company has added only 1,000 MW and expects to add nearly 750 MW by March end. Currently, NTPC has a capacity of almost 29,900 MW. It may be noted that the company is aiming to add nearly 22,430 MW in the eleventh five-year plan (2007-2012). Considering the current rate of capacity addition, NTPC seems to be lagging much behind its original plan.

Capital goods sector stocks ended the day on a weak note led by Thermax, Crompton Greaves, Siemens and BHEL. As per a leading business daily, the government is likely to introduce a seven year equity lock-in period for the foreign companies who are looking to set up manufacturing units and bid for new power generation equipment projects in India. Further, the companies who do not have the requisite track record will also be barred from bidding for the new projects. The new regulation would be applicable primarily for the bulk tender for eleven units which would be floated by NTPC and the Damodar Valley Corporation. Each of these units will require power equipment with capacities of 660 MW based on critical technology. The government expects some Chinese, Russian and East European companies which lack the requisite characteristics, to bid for projects. As such, these companies would not be entertained.

As per a leading business daily, the world’s fourth largest mobile maker, Sony Ericsson is likely to make a pretax loss of US$ 459 m to US$ 526 m in 1QFY09. This will be mainly on account of weak consumer demand and de-stocking. It may be noted that during 4QFY08 the company had posted a pretax loss of Euro 261 m. Furthermore, the company expects global demand to shrink by at least 5% this year. Amidst the economic slowdown, the company is aiming to preserve its profitability and is giving less priority to market share.

 
Markets in Motion

2:30 pm
L&T, Grasim to settle terms

The markets continued to languish in the negative territory on account of sustained selling activity witnessed during the previous two hours of trade. Stocks from the auto, banking and engineering sectors are leading the pack of losers, while select stocks from the metal, cement and media sectors are trading firm. The overall decline to advance ratio is evenly poised on the BSE currently.

The BSE Sensex and NSE Nifty are trading lower, down by almost 75 points and 10 points respectively. However, the BSE Midcap and Smallcap indices are trading flat. The rupee is trading at 50.12 to the dollar.

As per a leading business daily, L&T and Grasim are close to settling their long standing legal dispute over their crossholdings. L&T has not only agreed to pay dividend on Grasim’s stake along with arrears, but will also pay interest at a rate of 18% per annum. It may be noted that L&T had earlier spun of its cement division (renamed Ultra Tech) by selling the majority stake to Grasim, while retaining a 11.49% stake. In return, Grasim had sold around 14.95% stake in L&T to a trust belonging to L&T employees and had retained a 0.62% stake. Grasim’s remaining stake in L&T had been the bone of contention. While L&T claims that the stake should be sold to L&T employees trust at the pre determined rate under the agreement, Grasim argues that there is no such clause in the agreement. Hence, it will sell the stake at market price.

Power stocks are trading mixed. While NTPC is trading lower, Tata Power and Power Grid Corp are trading higher. As per a leading business daily, the government may make it mandatory for power distribution companies to derive a certain minimum portion of the power they supply from renewable sources. Penal action would be taken against distribution companies that fail to comply with this norm. It may be noted that although the Electricity Act, 2003 has for long directed state electricity regulatory commissions to promote the use of renewable energy, it does not prescribe the minimum percentage. As such, this move will encourage generation of power from renewable sources and is likely to give a fillip to companies like Suzlon, who cater to the sector.


Metals, telecom buck the trend

The Indian markets continued to trade in the red during the previous two hours of trade as selling activity continued across the index heavyweights. Stocks from the banking, engineering and realty sectors are leading the pack of losers, while select metal and telecom stocks are trading firm. The overall decline to advance ratio is poised at 1.1 to 1 on the BSE.

The BSE Sensex and NSE Nifty are trading lower, down by around 60 points and 15 points respectively. While the BSE Midcap index is trading lower by 0.5%, the BSE Smallcap index is trading flat. The rupee is trading at 50.15 to the dollar.

Software stocks are trading mixed. While Tech Mahindra and Satyam are trading in the green, TCS is in the red. As per a leading business daily, Tech Mahindra has secured a credit line of Rs 15 bn from five banks to back its expression of interest (EoI) for bidding for Satyam. It may be noted that as per the proposal request, the bidders must show proof of Rs 15 bn as a cash balance. However, the company has only Rs 1 bn cash balance. In fact, if required, the company’s parent M&M is also likely to infuse part of the funding requirement for the bid. Tech Mahindra has shown interest in acquiring stake in Satyam as this would reduce its dependence on the telecom segment.

Energy stocks are trading mixed. IOC and Reliance are trading weak, while ONGC is trading higher. As per a leading business daily, Reliance Industries is likely to separate it fuel retailing arm. It is also looking at diluting the stake to existing players. Interestingly, IOC and Shell have shown their interest for acquiring 50% stake in the same. It may be noted that the company has over the years invested around US$ 1.4 bn in the fuel retailing segment which has a network of 1,432 outlets across the country. The company had recently halted the business due to mounting losses. This is a positive development for Reliance as it will help the company to reduce the losses in this segment.

Dr. Reddy’s plans restructuring 

The Indian markets started the day’s proceeding on a subdued note. While stocks from the FMCG and metal sectors are trading firm, realty, capital goods and banking stocks are at the receiving end. The overall decline to advance ratio is poised at 1:1 on the BSE. As regards global markets, while the European markets ended in the green, the US markets closed in the red yesterday. The Asian markets are currently trading weak.

The BSE Sensex and NSE Nifty are trading lower, down by around 60 points and 14 points respectively. While the BSE Midcap index is trading lower by 0.20%, BSE Smallcap index is trading up by around 0.17%. The rupee is trading at 50.14 to the dollar.

Pharma stocks are currently trading mixed. While pack of gainers is being led by IPCA Labs, Panacea Biotech and Dishman Pharma, pack of losers is being led by Dr. Reddy’s, Biocon and Torrent Pharma. As per a leading daily, Dr Reddy’s Laboratories is planning to restructure its business. In order to realign its global generics business, the company has decided to exit from the small distributor-driven markets. However, it would continue its operations in markets where the company’s finished dosage sales are growing. It would now focus more on the domestic market and other key markets like the US, Russia & CIS and Germany which accounts for 90% of the global generics revenue. This move would lead to redeployment of resources which would help in controlling cost and use its resources effectively.

Stocks from the FMCG sector are trading mixed. While Godrej Consumers and Colgate are garnering investors’ interest, Dabur, P&G and HUL are out of favour. As per a leading business daily, Dabur is planning to scale down its retail expansion plan. The company is now looking at opening around 10 to 12 health and beauty stores as compared to 25 stores planned earlier by FY10. Dabur has taken this decision in the wake of the ongoing economic downturn which has taken toll on retailers in India forcing them to delay or scale back operations. Lower sales and higher inventory levels have put significant pressure on margins of the retailers. The company would be investing Rs 200 m for this venture. Dabur expects losses of around Rs 320 m during the next 2 years in the retail venture.