Monday, June 22, 2009

Closing Bell 22 Jun 2009

Closing Bell 22 Jun 2009

Persistent selling activity during the final hour of trade led the indices to end the day on a weak note. The BSE-Sensex ended lower by around 200 points, while the NSE-Nifty closed lower by about 80 points. Stocks from the mid-cap and small-cap spaces ended the day on a weak note as well, recording losses of about 0.6% and 0.3% respectively. While stocks from the oil & gas and metals space led the pack of losers today, stocks from the FMCG and capital goods sectors managed to garner investors’ interest.

Other Asian markets ended the day on a mixed note today. The European indices are currently trading in the red. The Rupee was trading at 48.55 against the US dollar at the time of writing.

Retail stocks ended the day on a mixed note. While Shopper’s Stop ended the day on a firm note, Trent and Pantaloon ended the day on a weak note. Retail major, Pantaloon is planning to invest about Rs 2.5 bn within the next eighteen months for setting up ten ‘Central malls’ across India. As per the management, the company will be expanding its retailing space by about 10% to 12% as it plans to add nearly 1.5 m to 1.7 msqft (million square feet) to its existing retail space of about 14 msqft. Some of the locations the company has identified include Ahmedabad, Bangalore, Vizag, Raipur and Jaipur. As per a leading business daily, the company has already tied up funds for the same. Last month, the company had raised about Rs 3.7 bn through a preferential allotment. Further, it is believed that the company will raise long term funds to the tune of Rs 10 bn by issuing securities to various investors.

Energy stocks ended the day on a weak note led by Reliance Industries, GAIL and Gujarat Gas. As per a leading business daily, upstream energy major, ONGC has made oil and gas discoveries in three regions – Cambay basin, Matar (Gujarat) and KG Basin. The company is believed to have found oil in the Cambay basin, oil and gas in Matar and gas in the KG basin. However, the reserve estimates for these locations are still unknown. This is a welcome development for the company at a time when it is actively scouting for hydrocarbon assets both in India and abroad in order to boost India’s energy security.

Apparel exports for the month of April 2009 have fallen by about 10% YoY. According to official numbers, garment exports dropped from US$ 886 m in April 2008 to US$ 800 m in April this year. Considering that demand from Europe and the US has been on the decline over the past few months, the industry is expecting a 10% to 15% YoY fall in exports during the month of May 2009. In addition to this, the industry’s exporters have also been facing stiff competition from countries such as Vietnam, Cambodia and Bangladesh.

Markets in Motion

ICICI Bank to slash costs, stock up
(2:30 pm)

The Indian markets could not hold on to their early hour gains and slipped into the red during the previous two hours of trade on account of huge selling activity witnessed across the index heavyweights. Stocks from the cement, aluminium and software sectors are leading the pack of losers, while select stocks from the banking, energy and FMCG sectors are trading firm. The overall decline to advance ratio is poised at 1.2 to 1 on the BSE.

The BSE Sensex and NSE Nifty are trading lower, down by 60 points and 20 points respectively. However, the BSE Midcap and BSE Smallcap indices are trading marginally higher by around 0.3% and 0.2% respectively. The Rupee is trading at 48.41 to the Dollar.

Banking stocks are trading mixed. While ICICI Bank and Axis Bank are trading higher, HDFC Bank and SBI are trading lower. As per a leading business daily, ICICI Bank is aiming to save up to Rs 13 bn in FY10 by trimming costs on sales agents. The bank is reviewing its business model and is planning to drive a greater share of its consumer business through its branch network. It may be noted that the bank has been rationalising its workforce of direct marketing and sales agents as well as renegotiating rentals. This is in line with the banks cost cutting exercise which began in FY08. As a matter of fact, ICICI bank decreased its direct marketing agents cost by 65% to Rs 5.3 bn in FY09. Also, it has doubled its branch network to 1,400 in the last two fiscals and plans to add another 600 branches in the next one year. This is a positive move by the bank, as it will not only help it to grow its network but will also enable it to earn revenues from the branches.

Telecom stocks are trading mixed. While Rcom and Bharti Airtel are trading lower, Spice Communications is trading higher. As per a leading business daily, Reliance Communications (Rcom) has started preliminary talks with China Mobile for a strategic alliance and a likely equity participation of around 5% to 6%. However, the company has not disclosed anything on the same. It may be noted that Rcom would require cash of around Rs 40.4 bn in order to bid for licenses for 3G services auctions which are likely to be held in the current fiscal. As a matter of fact, the company also announced its plans to issue equity shares to qualified institutional buyers to fund its 3G bid, expand its broadband network and strengthen its financials. Interestingly, RCom is not the only Indian company which is looking for the international alliances. Recently, Bharti Airtel signed an agreement with South Africa’s MTN, while Tata Teleservices has sold around 26% of its stake to Japan’s NTT DoCoMo.

DLF to raise more funds, stock up
(12:30 pm)

Despite some volatility, the BSE remained in the positive territory during the previous two hours of trade gaining 35 points. The NSE traded in the red, down by 5 points. Currently, stocks from the banking, consumer goods and realty sectors are leading the pack of gainers, while select stocks from the auto and oil and gas sectors are trading weak. The overall advance to decline ratio is poised at 1.7 to 1 on the BSE.

The BSE-Midcap and BSE-Smallcap are also trading firm, up by around 1.12% and 0.81% respectively. The Rupee is trading at 48.29 to the Dollar.

According to a leading daily, Tech Mahindra, the new owner of the scam-hit India's IT major, Satyam Computer Services Ltd., has decided to re-brand the latter as "Mahindra Satyam". The management decided to retain a part of Satyam's identity as a testimony to the commitment, purpose and proficiency of the company. This, as yet another step towards the recovery of the company, is expected to be well-received from all the stake-holders of the two firms.It is believed that Satyam which has a strong-hold in the area of ERP can complement Tech Mahindra's expertise in the telecom and business support systems vertical. Stocks of both the firms along with other major stocks like Infosys, TCS from the IT sector are trading in the green.

DLF, India's biggest real estate developer, is all set to increase its debt by US$ 300 m through external commercial borrowings (ECB). In order to fund its integrated township projects, the cash-strapped firm will be taking a long-term loan from Standard Chartered Bank at a considerably lower rate of 7%. DLF already has a net debt of Rs 140 bn on its books at the end of March and has been raising long-term loans in the domestic market to replace its short-term debt. The stock of the company is trading in the positive. The other stocks from the realty sector are trading weak.

Sun Pharma sued, stock down
(10:30 am)

In line with its global peers, the Indian markets too have started the week's proceedings on a positive note. Baring select energy stocks, all the stocks on the Nifty are trading higher. The overall advance to decline ratio stood at 3.5 to 1 on the NSE. As regards global markets, while the Dow ended in the red last Friday, the NASDAQ ended marginally in the positive. The European markets ended higher last Friday, while the Asian markets are trading firm currently.

The BSE Sensex is trading higher by around 80 points. The NSE Nifty is up 15 points. The BSE Midcap and the BSE Smallcap indices are up 1% each. The rupee is trading at 48.02 to the dollar.

Ess Dee Aluminium (EDAL), which recently acquired India Foils (IFL), is planning to pump in Rs 2 bn to add fresh capacity at the latter's Hoera unit. As part of the plan, EDAL has decided to add nearly 60,000 tonnes of capacity to manufacture aluminium packaging foils at Hoera. The latter unit will thus be positioned as IFL's main growth engine. EDAL had acquired 90% stake in IFL, from Madras Aluminium (MALCO), a Vedanta Group company. The company along with MALCO had infused Rs 2.61 bn in IFL in the form of equity and preference shares which would help repay all outstanding debt IFL has with various lenders, thus making it totally debt free. EDAL has a capacity of 18,000 tonnes. The move would enable Ess Dee Aluminium to more than double its capacity and meet the growing demand from the pharma and FMCG sectors. The stock, along with India Foils, is trading firm.

US pharma major Pfizer has charged Sun Pharma of violating a patent when the latter sought approval for its generic version of 'Lyrica', a blockbuster drug used to treat seizures. In a case filed earlier in the US courts, Pfizer had alleged that Sun Pharma infringed on a patent that Pfizer and Northwestern University held. Pfizer's patent protection for this drug is valid till 2018. 'Lyrica' currently ranks third in the anti-seizure market, and is estimated to have global sales of approximately US$ 1.2 bn. Pfizer is seeking an injunction that would bar Sun from marketing and manufacturing generic versions of 'Lyrica' (Pregabalin) prior to patent expiration as well as monetary relief (if Sun were to sell its generic product) besides fees and costs. This move by Pfizer is in the normal course of things with respect to Para IV filings, wherein the innovator company (in this case Pfizer) sues the generic company who has made the Para IV filing (in this case Sun Pharma). Pharma stocks are trading mixed.