Sunday, November 15, 2009

Indian Stock Markets Review and 9-13 Nov Outlook BSE and NSE

e bulls managed to sustain last week’s momentum, with the BSE Sensex adding 4.3% to close at 16,848 and the NSE Nifty rising 4.2% to 4,998. Better-than expected IIP numbers helped the market in maintaining the bullish tempo. However, the Nifty continued to witness resistance at 5,000 levels through the week.

The BSE Sensex hit an intra-week high of 16,910 and low of 16,147 while, NSE Nifty hit an intra-week high of 5,017 and low of 4,790.

The Foreign Institutional Investors (FIIs) bought shares worth Rs30.15bn during the week. The Domestic Institutions were net buyers to the tune of Rs4.90bn during the week.

The top gainers: The top gainers in the Sensex were Tata Motors (up 8.8%), Reliance Industries (up 8.3%), TCS (up 7.7%), ICICI Bank (up 7.1%) and Infosys (up 6.4%).

The Top Losers: The top losers in the Sensex were Bharti Airtel (down 5.6%), DLF (down 3.1%), Hindustan Unilever (down 1%), Ranbaxy Labs (down 0.5%) and Reliance Power (down 0.2%).

The BSE IT Index (up 6.5): The top gainer in the IT sector was HCL Tech. The stock rose over 10% during the week. The company is reportedly looking for small acquisition over the next year to close gap in service offerings in certain areas like healthcare and lifesciences.

TCS rose over 7.7% during the week. The company said it plans to expand its strategic business alliance with US-based Dow Chemicals.

Infosys was up by over 6% during the week after the company announced that its BPO arm had acquired the US-based back-office firm McCamish Systems for around US$38mn.

Mahindra Satyam surged over 6% during the week. Nearly 27.25mn shares or 2.3% of the company’s equity were offloaded by L&T in a single block trade on the BSE on Friday. The transaction was seen at an average process of Rs112.45, raising almost Rs3.03bn for L&T.

Wipro surged over 6% during the week. According to a report released by IIFL during the week, “While margins are likely peaking at other IT services vendors, we believe Wipro’s IT services margins will continue to expand. Further, margin expansion in the combined entity could be greater, as its badly affected infrastructure unit (WIN) turns EBITDA-positive. YoY, Wipro has improved EBITDA margins in its IT services division by 350bps against 150-250bps of competitors. This is despite its higher hedges putting it at a marginal disadvantage during a period of rapid depreciation of the rupee (11% vs US$). Apart from tighter hiring (1.3% decrease in headcount vs Infosys’s and TCS’s 5% to 7% increase YoY in 2QFY10), the shift in pricing models (~9ppt increase in contribution from fixed-price projects YoY) has released new delivery levers. Guidance for 3QFY10 is strong (4.5% QoQ at top end) and we expect Wipro’s outperformance vs Infosys to continue (Wipro had better QoQ US$ revenue growth than Infosys in six out of the last nine quarters). We reiterate Wipro as our top pick in IT services and recommend a switch from Infosys to Wipro”.

The BSE Consumer Index: The top gainers in the consumer durables space were Su-Raj Diamonds (up 4.2%), Whirlpool (up 4%), Videocon Industries (up 1.8%), Blue Star (up 1.7%) and Mirc Electronics (up 0.9%).

Samtel Color lost over 5% during the week.

The BSE Healthcare Index (up 2.2%): The top gainers in the Pharma sector were Morepen Labs (up 34%), Panacea Biotec (up 12.5%), Strides Arcolab (up 9.9%), Orchid Chem (up 7.2%) and GlaxoSmithKline (up 4.9%).

The top losers were Aurobindo Pharma (down 6.1%), Cadila Healthcare (down 5.2%), Glenmark Pharma (down 2.4%), Dishman Pharma (down 2.3%) and Zandu Pharma (down 1.3%).

Lupin ended almost flat during the week. A report released by IIFL stated that, “Key takeaways from investor meetings that we recently hosted for Lupin’s management add to our confidence that the company will continue its strong performance. The company believes that active promotion of the newly acquired Antara can push its sales significantly above the historical run rate of US$70m per year. Its entry into ophthalmology and oral contraceptives in the US will significantly contribute to overall growth rate. USFDA issues surrounding the Mandideep facility will be resolved sooner rather than later, and the weak margins of 2QFY10 were an aberration. We are raising our FY10 and FY11 core earnings estimate by 3-4%. We also raise our price target to Rs1,610 from Rs1402 and maintain our BUY rating”.

The BSE Banking Index (up 5.3%): The top gainers in the banking space were ICICI Bank (up 7.1%), IOB (up 6.5%), Axis Bank (up 6.2%), Kotak Mahindra Bank (up 6.2%) and Canara Bank (up 5.5%).

The top losers were Karnataka Bank (down 1.1%) and Andhra Bank (down 0.1%).

According to a report released by IIFL during the week, “Bank loan growth has been on a declining trend since peaking in October 2008 and grew at just 9.7% YoY for the fortnight ended 23 October 2009. The lower loan growth can be attributed to lack of demand from individuals and corporates alike. Alternate sources like QIPs and commercial paper have partly offset the fund flow to corporate sector. Banks have been parking their excess liquidity with mutual funds, which in turn have been subscribing to corporate CPs. While we expect some pick-up in loan growth in 2HFY10, full year growth is likely to be below 15%, well below RBI’s targeted 18%. But most private and front-line government banks are expected to grow their loan book at well above the system growth rate. Axis, Yes, PNB, BOB and SBI remain our preferred picks”.

The BSE Auto Index (up 4%): The top gainers in the auto sector were Hindustan Motors (up 27.9%), Tata Motors (up 8.8%), Eicher Motors (up 6.4%) and M&M (up 5.9%).

Hero Honda was up 3.2% during the week. According to reports, Honda said it is committed to its joint venture with the Hero Group, putting to rest speculations of a rift between the partners.

Maruti was marginally up by 0.5% during the week. According to a report released by IIFL during the week stated, “Reports of foreign automakers planning to set up plants in India have been a big overhang for Maruti stock for some time now. For a case study, we looked at the impact new entrants had on incumbents when a similar situation played out in Brazil ten years ago. In the last ten years, since the likes of Renault, Peugeot, Toyota and Honda set up shop in Brazil, they have been able to take only 10% market share from the top four auto makers (Fiat, Volkswagen, GM and Ford), who even now constitute 80% of the market. This corroborates our view that concerns over market share loss for Maruti are overdone. While we agree that increasing competition from the likes of Honda and Toyota will mean some market share loss for Maruti over the next few years, we think the decline will be far slower than what the market seems to be pricing in currently”.

The BSE Oil & Gas Index (up 5.3%): The top gainers in the oil & gas space were Hindustan Oil (up 12.4%), Gujarat NRE Coke (up 7.1%) and MRPL (up 4.3%).

Reliance Industries surged 8% and ONGC added 2.2% during the week after media reports stated that the Oil Minister has proposed a 31% hike in regulated gas prices.

GSPL rose by over 4% during the week after the company announced that it plans to lay, build and operate a natural gas pipeline from Gujarat to Orissa.

The top losers were IOC (down 5.9%), Jindal Drilling (down 1.2%) and Great Offshore (down 0.3%).

The BSE Capital Goods Index (up 3.4%): The top gainers in the capital goods space were LMW (up 7.4%), Greaves Cotton (up 7.2%), Siemens (up 6.7%), Praj Industries (up 5.9%) and HEG (up 5.2%).

The top losers were Dredging Corp (down 4%), Alfa Laval (down 1.8%), BEML (down 0.9%) and BEL (down 0.3%).

The Cement Sector: The top gainers in the cement sector were Gujarat Sidhee (up 18.4%), Grasim (up 5.6%), Kakatiya Cement (up 3.7%), Shree Cement (up 3.2%) and ACC (up 2.9%).

The top losers were JK Cements (down 7.3%), Birla Corp (down 1.5%) and Ultratech Cement (down 0.8%).

According to a report released by IIFL during the week stated, “Cement exports from India declined 40% YoY in the September 2009 quarter, as the key Middle East region turned from supply shortage to excess supply. Withdrawal of Saudi Arabia’s ban on cement export from second week of October further depressed the already-declining cement prices in the Middle East. For exports from India, FOB prices are currently at ~US$40 per tonne—down from US$60 per tonne two quarters ago. With diversion of supplies meant for exports, cement prices in Gujarat have declined sharply in the past month. We expect the decline in export volumes to continue, as supply in the Middle East region is likely to increase sharply”.

The Telecom Sector: The top gainer in the telecom space was WWIL. The stock shot up over 30% during the week after Union Cabinet approved the proposal of the Information & Broadcasting Ministry to issue policy guidelines for Headend-in-the-Sky (HITS) operators. The policy guidelines provides for a framework within which the HITS service providers has to provide services in the country.

Among the other major gainers were Gemini Comm (up 12.8%), Shyam Telecom (up 12%), MTNL (up 7.3%) and Himachal Futuristic (up 1.9%).

The top losers were Bharti Airtel (down 5.6%), RCom (down 2.6%) and Idea Cellular (down 0.2%).

A report released by IIFL during the week stated, “Industry’s QFY10 financial report released by TRAI shows a 0.4% QoQ drop in aggregate gross revenues (GR). The decline was led by B-circles (32% of total gross revenues), in which GR declined by 3.3% QoQ, while metro and C circles grew 2.5% and 2.8% respectively (A circles were flat). In the nine circles where Tata DoCoMo (TD) launched the per-second billing tariff plans, their revenues were up (12% QoQ), RCOM grew 3% QoQ (with this and the decline in the mobile revenues in 2Q reporting to exchanges, the hitherto inexplicable gap is decreasing), while revenues of Bharti, Vodafone and Idea dropped by 2% each. Expect more revenue declines when TD goes national”.

The Realty Sector (down 2.3%): The Realty index was the only loser among the sectoral indices. The top losers in the real estate space were Unitech (down 3.8%), DLF (down 3.1%) and HDIL (down 0.6%).

The top gainers were Sobha Developers (up 10.5%), Akruti City (up 8.8%), Parsvnath (up 4.2%), Mahindra Lifespace (up 3.4%) and Omaxe (up 1.1%).

The Metals sector (up 7.1%): The top gainers in the metal space were JSW Steel (up 17.7%), Bhushan Steel (up 6.4%), Jindal Steel (up 6.1%) and Tata Metaliks (up 4.9%).

SAIL rose over 10% during the week. The Finance Ministry is in talks with the Steel Ministry to sell stake in SAIL.

Source: Indiainfoline

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