BSE / NSE Weekly Review 20 Jan 2012

High volatility is expected in a truncated week ahead as traders roll over positions in futures & options segment as the January F&O contracts expire on 25th January 2012. The stock markets will remain closed on 26th January 2012, on account of Republic Day.

The RBI is widely expected to keep its key lending rate viz. the repo rate steady at the Third Quarter Review of Monetary Policy, scheduled on 24th January 2012, as headline inflation remains high. Investors’ focus is on Q3 results as well. The Q3FY12 results are likely to be weak due to lower volume growth in a slowing economy, higher raw material costs and higher interest charges. The focus will be on guidance from  the company managements on outlook for the remaining part of the year and for the next year.

Some of the companies declaring their results in the next week include L&T, Maruti Suzuki India, Sterlite Industries, Idea Cellular, GAIL and Kotak Mahindra Bank on 23rd January. Lupin, Cairn India, Grasim and Biocon on 24th January. Bank of Baroda, Sesa Goa, Union Bank of India, Rural Electrification orporation, Indian Hotels and Tata Communications on 25th January. Blue Star, NHPC, BHEL, NTPC, Bank of India and Canara Bank on 27th January




Indian Markets 
Strong results from HDFC Bank, ITC, Bajaj Auto, Wipro, TCS, HCL Technologies and Hero MotoCorp, and sustained buying by foreign funds pushed key benchmark indices to their highest level in more than six weeks. The S&P CNX Nifty moved past the psychological 5,000 level. Firm global stocks underpinned sentiment. The market gained in four out of the five trading sessions during the week ended 20th January 2012. Foreign institutional investors (FIIs) bought shares worth Rs 4441.37 crore in eight trading sessions from 10 to 19 January 2012, as per provisional data from the stock exchanges.

The BSE Sensex rose 584.39 points or 3.62% to 16,739.01, its highest closing level since 7 December 2011. The S&P CNX Nifty gained 182.60 points or 3.75% to 5,048.60, its highest closing level since 7 December 2011. The BSE Mid-Cap index rose 1.75%


Strong results from HDFC Bank, ITC, Bajaj Auto, Wipro, TCS, HCL Technologies and Hero MotoCorp, and sustained buying by foreign funds pushed key benchmark indices to their highest level in more than six weeks. The 50-unit S&P CNX Nifty moved past the psychological 5,000 levels. Firm global stocks underpinned sentiment. The market gained in four out of the five trading sessions during the week ended Friday, 20th January 2012.

Gains in world stocks triggered by stronger-than-expected GDP growth in China, the world's second biggest economy, in the fourth quarter of 2011, strong Q2 December 2011 results from IT major HCL Technologies and data showing buying of Indian stocks by foreign funds over the past few days, triggered a rally on the domestic bourses.

Trading for the week began on a positive note. Key benchmark indices registered small gains to reach 5-1/2-week closing highs on Monday, 16 January 2012 as the headline inflation hit 2-year low. This reinforced expectations that the central bank could start cutting interest rates in the coming months to revive slowing economic growth. The BSE Sensex rose 3.62% to 16,739.01and The S&P CNX Nifty gained 3.75% to 5,048.60, its highest closing level since 7 December 2011. The BSE Mid-Cap index rose 1.75% and the BSE Small-Cap index gained 1.71%. Both these indices under performed the Sensex.

Realty: 
The BSE Realty index rose 7.97% to close at 1708 levels. Among the heavyweights, Unitech, DLF, Oberoi Realty and HDIL gained 11.9%, 8.8% 8.7% and 8.3% respectively. India's largest realty firm by net profit DLF rose 8.8%. The company is reportedly planning to sell a convention centre project in Delhi and its wind power business for about Rs 1800 crore early next fiscal to reduce debt.

Metals: 
The BSE Metals index rose 4.10% to close at 11198 levels. All the industry majors were gainers. Hindaclo, Jindal Steel, Tata Steel and Coal India rose 7.7%, 6.4%, 5.0%, and 0.1% respectively.Metal stocks rose as data showing China's manufacturing gauge remaining in contraction mode in January 2012, boosted case for monetary policy easing in the world's second largest economy. Tata Steel rose 5.0%. The company  secured a major contract from Siemens Wind Power to supply 25,000 tonnes of high-quality profiled steel plate for wind towers.

Oil & Gas:  
The BSE Oil & Gas index rose 6.4% to close at 8325 levels. Among the heavyweights, Reliance, ONGC and Cairn India gained 8.4%, 5.9%, and 2.8% respectively. Reliance Industries jumped 8.4%. The stock surged after company said its board will consider a proposal for buyback of equity shares along with Q3 December 2011 earnings on Friday, 20th  January 2012. The last buyback program by RIL was done in the year 2004. Then, the company could only deploy around 5% of its planned purchase as the stock price had zoomed quite high.

Capital Goods: 
The BSE Capital Goods index rose 5.49% to  close at 9807 levels. Among the heavyweights, L&T, Siemens, and Bhel gained 8.6%, 4.1% and 2.6% respectively. Capital goods stocks rose on bargain hunting after a steep decline last month. India's largest power equipment maker by sales BHEL gained 2.6%. The company unveils its Q3 results on 27th January 2012. Larsen and Toubro is likely to register a 10%  growth in sales from its automation business in the next financial year

Bankex: 
The BSE Bankex index rose 5.9% in the week to close at 10912 levels. All the large players, namely SBI, Axis Bank, ICICI Bank, and HDFC Bank were gainers, gaining 8.7%, 7.3%, 6.7% and 4.1% respectively. Interest rate sensitive banking stocks rose on expectations that the Reserve Bank of India will start cutting interest rates in the coming months to prop up slowing economy. HDFC reported 31.4% growth in net profit to Rs 1429.70 crore on 35.6% increase in total income to Rs 8622.64 crore in Q3 December 2011 over Q3 December 2010. Bank said its asset quality remains healthy. The bank's capital adequacy ratio (CAR) remained strong at 16.3% as on 31 December 2011, against he regulatory minimum of 9%


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10 Stocks for 2012

Unicon Investment has come out with its top 10 stock picks for new year 2012.

Company Name	CMP	Target Price
State Bank of India	1627	1949
Yes Bank	239	345
Coal India	299	350
Jindal Steel & Power Ltd	465	550
Bharat Heavy Electricals	237	290
Larsen and Toubro	1001	1250
Opto Circuits India	203	330
Mundra Port	123	136
Eros International Media	200	300
United Phosphorous	126	192

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Momentum Stocks - What Next ??

Billionaire investor Rakesh Jhunjhunwala, whose long-term bets have earned him popular titles such as 'the big bull', now faces a lot of red in his portfolio. 

Since December 1, as the market benchmark declined 6%, stocks that Jhunjhunwala owns have lost up to 30%. VIP Industries, a big chunk of the billionaire's portfolio, led the list with the maximum notional loss of 30.5%. 

Other losers include Provogue India, Subex andReliance Broadcast Network, Aptech and Delta Corp, all of which are down 16-25%. Broadly, Jhunjhunwala's entire portfolio is in the red, with 25 out of 28 stocks analysed by ET recording a decline in December. 

The other three counters include Sterling Holiday Resorts, which is up 3%, and Autoline Industries, up 22%. However, among those caught in the red are stocks that analysts believe have good fundamentals, and have been facing undue pressure due to the 'Rakesh phenomenon'. 

Reportedly, the investor has been selling his positions recently to cover for losses from loss-making silver trades. In a nervous market, any news of such a sell-off triggers a much broader sell-off from the investor's many followers. 

In a response to ET last month, Jhunjhunwala rubbished the claims and said, "People can say anything they want, I have no comments. I never talk about my trading bets." 

One stock caught in the crossfire of rumours is Lupin, in which the billionaire holds around 2%. Since December 1, the pharmaceutical company's shares have lost 7.6% and are trading around Rs 430. 

"Here is a huge sentimental overhang on the stock. However, weakness in the stock should be seen as a buying opportunity," Sarabjit Kaur Nangra, vice president of research at Angel Broking said. 

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Gainers & Losers BSE , NSE Week ending 25 Nov 2011

Sensex top gainers: 

The top gainers in the Sensex were L&T (up 1.7%), Maruti Suzuki (up 1%), Tata Motors Ltd (up 0.9%) and Cipla (up 0.6%) 

 

Sensex Top losers: 

The top losers in the Sensex were Reliance Capital (down 9.9%), Hindalco Inds (down 8.2%), Hero Moto Corp (down 7.2%), ICICI Bank (down 6.7%) and Reliance Inds (down 6.7%), 

 

BSE IT Index (down 1.7%): 

The largest losers in IT sector were TCS (down 2.6%), Infosys (down 2.5%), Sasken Comm (down 2.4%), HCL Tech (down 1.7%) and Mphasis (down 1.1%), 

 

BSE Healthcare Index (up 0.6%): 

The biggest gainers in Pharma were Morepen Labs (up 3.2%), Dishman Pharma (up 3.2%), Ranbaxy Labs (up 2.7%), Ipca Labs (up 2.6%) and Orchid Chem (up 2.5%),   The top losers in Pharma were Natco Pharma (down 4.8%), Strides Arcolab (down 2.6%), Dr Reddy's Labs (down 2.5%), Sun Pharma (down 2%) and Astrazeneca Pharma (down 1.6%), 

 

BSE Banking Index (down 4.1%): 

The notable gainers in the banking space were Union Bank of India (up 5.6%), Karnataka Bank (up 2.7%), Yes Bank (up 1.4%), Bank of Baroda (up 1.3%) and PNB (up 0.4%).  The top losers in the banking space were ICICI Bank (down 6.7%), Federal Bank (down 6.6%), Hdfc Bank (down 6%), Kotak Mahindra Bank (down 5.9%) and Andhra Bank (down 4.9%). 

 

The BSE Auto Index (down 0.8%):

The top gainers in the auto space were Maruti Suzuki (up 1%) and Tata Motors Ltd (up 0.9%).   The top losers in the auto space were Hero MotoCorp (down 7.2%), Swaraj Mazda (down 5.5%), M&M (down 4.3%), Bajaj Auto (down 3.1%) and Hindustan Motors (down 2.4%), 

 

The BSE Oil & Gas Index (down 3.2%):

The top losers in the oil & gas space were Hindustan Oil Exp (down 11.7%), GSPL (down 8%), Great Offshore (down 7.3%), Gujarat NRE Coke (down 7.3%) and Chennai Petro (down 7%).   The largest gainers were MRPL (up 4%), BPCL (up 3.1%), IOC (up 1.3%), Essar Oil (up 0.9%) and HPCL (up 0.3%). 

 

The BSE Capital Goods Index (down 10%):

The top gainers in the Capital Goods space were Greaves Cotton (up 3.8%), Dredging Corp (up 2.8%), L&T (up 1.7%), Astra Microwave (up 1.3%) and Thermax (up 0.2%).   The top losers in the Capital Goods were LMW (down 8.2%), Gammon India (down 6.8%), Jyoti Structures (down 6.7%), SKF India (down 6.4%) and Alstom Projects (down 6.2%).

 

The Cement Sector: 

The top gainers in the cement sector were Shree Cement (up 1.9%). 

 

The Telecom Sector: 

The top gainers in the telecom  space were Gemini Comm (up 10.8%), Shyam Telecom (up 3.4%) and Tata Communications (up 0.1%).  The top losers in the telecom were Tata Teleservices (down 6.7%), Bharti Airtel (down 5.6%), RCOM (down 4.9%) and Idea Cellular (down 3.2%). 

 

The Realty Sector (down 3%): 

The top gainers in the real estate space were Peninsula Land (up 2.3%), Unitech (up 1.1%) and Sobha Developers (up 0.1%).  The top losers were Parsvnath Developers (down 41%), HDIL (down 10.9%), Ansal Properties (down 10.4%), Mahindra Lifespace (down 3.7%) and Anant Raj (down 2.4%). 

 

The Metals sector (down 3.8%): 

The top losers in the metals sector were SAIL (down 12.9%), Jindal Steel (down 9.2%), JSW Steel (down 9%), Lloyds Metals (down 7.6%) and Sunflag Iron (down 6%).

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Pledged Companies - Avoid

MUMBAI: Pledged shares continue to hang like a sword over the stock market. According to the latest data, promoters of about 376 companies, out of the listed 1,214, with market capitalisation in excess of Rs 100 crore, have pledged their shares to raise funds.

Total promoter pledge positions in terms of value touches Rs 1.1 lakh crore as on mid-November, said a Crisil Research note.

In as many as 14 companies, promoters have pledged 90% plus of their holding, thereby exposing the companies to the risk of losing promoter control and also higher share-price volatility if the prices fall from its current levels.

Over 100 companies have pledged 50% of their owners' equity as lien, while promoters of 183 companies have placed 25% or more of their shareholding as lien. Companies in power, IT & ITeS, infrastructure and pharma sectors have seen higher levels of pledging, the Crisil note said.

"Markets have been volatile due to concerns of high domestic inflation, rising interest rates and tepid global economic environment. These concerns have triggered a fall in the stock prices, creating pressure on promoters who have pledged shares to make good the loss in the value of the collateral," said Mukesh Agarwal, senior director, Crisil Research.

According to brokers, investment in companies with higher promoter pledge exposes investors to severe price volatility. About half of the 300-odd mid-cap companies on BSE have fallen in the range of 20-85% over the past one year.

The trend is even worse in the small-cap segment where over 375 of the 500-odd actively-traded stocks have declined in the range of 20-95% in a year's time. With funding costs remaining high, promoters who have pledged their holdings will not be in a position to cough up money or more shares to prevent lenders from dumping the shares. This will lead to a further fall in prices.

As per reports put out by leading brokerages, promoters of companies like Ganesh Benzoplast, Spentex Industries, XL Energy, Gujarat Pipavav Port and Tata Coffee have pledged their entire shareholding to raise funds.

SpiceJet, Gujarat NRE Coke, United Spirits, Gati, Gayatri Projects, Raj Oil Mills, Birla Power Solutions, GTL, Koutons Retail, Western India Shipyard and Edserve Softsystems, among others, are companies where its promoter groups have pledged 85-99% of their equity. Almost all these stocks have fallen 5-45% since the beginning of November.

"Promoters of large corporates may be able to withstand margin pressures associated with pledged shares. Mid- and small-cap companies may find it extremely difficult in the scenario of a collapse of share prices and eventual trigger of margin calls," said Jagannadham Thunuguntla, strategist & head of research, SMC Global Securities.

According to Krishnakumar Karwa, managing director of Emkay Global Securities, financiers have started selling shares that are being held as collateral. "Volumes in mid-cap counters have come off sharply over the past few months. Every sell order at lower prices is causing stocks to correct deep. The sell-off has been aggravated because of margin calls," Karwa said.

Our Recommendation :

As the market has decisively turned negative investors should avoid these shares which are more vulnerable to wild fluctuations.  The lenders will look at best price to exit in case of deep cuts.


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IT Stocks - beneficiary of $ appreciation

Information technology (IT) stocks, which had underperformed the broader markets until mid-September, are now back in favour. Since 12 September, the CNX IT index of the National Stock Exchange has outperformed the benchmark Nifty by nearly 20%, more than making up for its underperformance earlier in the year.

Needless to say, this is because of the sharp depreciation of the rupee since August. It closed at 52.73 against the dollar on Tuesday, nearly 20% higher compared with levels of around 44 in early August.

According to an analyst with a foreign brokerage firm, every Rs. 1 increase in the rupee to dollar rate leads to an increase of around 3.5% in earnings for Infosys Ltd. The increase in earnings will be lower for firms such as Tata Consultancy Services Ltd, since they have hedged to a much higher extent. Even if one were to assume that the rupee to dollar rate in the medium term will average 50, this will lead to an over 20% increase in earnings estimates for Infosys compared with August.

Besides, the sharp rise in the rupee will provide a large margin buffer for IT companies, which will not only offset the pressure of wage inflation, but also companies’ leeway to spend more on sales and marketing to generate demand.

This is a welcome relief for companies in the sector as well as investors. In fact, a number of importer firms as well as companies with unhedged foreign currency borrowings are reeling under the pressure of a falling rupee. Given the widening trade deficit and the drop in portfolio and capital flows into the country, the fall in the rupee is expected to continue. In this backdrop, IT stocks may continue to outperform the broader markets.

Of course, the rise will be limited, given the weakening global macroeconomic situation. Infosys’ chief financial officer said on Monday that the company may miss the upper-end of its sales target for the December quarter and the fiscal year because of a deterioration in the global economic environment.

Even so, IT firms seem much better placed compared with firms catering to the domestic economy, which are grappling with high inflation, high interest rates as well as the impact of a declining rupee on their imports and borrowings.

Our Advise

Large Caps - Build your portfolio - hold long term

1. Infosys - Monthly High Rs.2875 and Low of Rs.2487 - Buy around 2500 on dips
2. HCL Tech - Monthly High Rs.380 and Low of Rs.450 - Buy around 400 on dips
3. Wipro - Monthly High Rs.387 and Low of Rs.327 - Buy around 350 on dips
4. TCS - Monthly High Rs.1040 and Low of Rs.1132 - Buy around 1060 on dips
5. Tech Mahindra - Monthly High Rs.640 and Low of Rs.543 - Buy around 550 on dips

Small Caps - Purely Trading bets - hold short term

1. Onmobile Monthly High Rs.640 and Low of Rs.543 - Buy around 550 on dips
2. Educomp Monthly High Rs.280 and Low of Rs.175 - Buy around 170 on dips
3. Mahindra Satyam Monthly High Rs.76 and Low of Rs.64 - Buy around 65 on dips
4. Mindtree Monthly High Rs.380 and Low of Rs.420 - Buy around 400 on dips
5. Patni Monthly High Rs.444 and Low of Rs.343 - Buy around 380 on dips

Source Livemint.com

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9 Diwali Stocks from Kotak

The last Samvad year has been challenging for the markets with both, global and domestic concerns weighing on the indices. The new Samvad year brings hope of some solution to the global economic crises and speedy action from the Government in India.

In this background, broking firm Kotak Securities has selected some stocks which look attractive from an investment perspective. It opines these stocks may have a relatively lower downside in case of a sharp fall in markets. The same are as follows:

TCS:

CMP - Rs.1,049

Current TP - Rs.1,240

> We opine that, recent management commentary reflects greater optimism, likely on the back of strong pipeline and better deal flow.

> Management has seen continued revival in discretionary spends as well as in cost efficiency initiatives, which is encouraging.

> Stock is available at about 16.9x FY13 estimates.

ICICI Bank:

CMP - Rs 871

Current TP- Rs 1,364

> ICICI bank is better placed vis-à-vis its peers with robust liability franchise (CASA mix at ~42% at the end of Q1FY12), improving asset quality, healthy margin (NIM at 2.6% in Q1FY12).

> After achieving substantial success on 5Cs (Credit growth, CASA, Cost optimiza-tion, Credit quality and Customers), ICICI Bank is likely to continue its focus on profitable growth.

> After stripping the value of subsidiaries (Rs.236), stock is trading reasonable at 1.25x its FY12 ABV.

JP Associates:

CMP-  Rs 70

Current TP-  Rs 90

> Cement volumes are likely to jump going forward due to incremental capex while construction division revenues would start picking up by FY13.

> Along with this, post completion of cement capex, company is expected to utilize free cash flows for debt reduction.

> Thus, debt reduction and decline in interest rates would be positive for the company.

> Stock is available at about 9.2x EV / EBIDTA on FY12 estimates.

BEL:

CMP- Rs 1,522

Current TP - Rs.1,913

> The company enjoys a dominant status in the defence sector and has a steady growth profile, a key positive in the current economic environment.

> Order backlog is strong at Rs 230 billion, providing revenue visibility of 43 months, one of the highest in capital goods sector. We thus see revenue growth rates to move up in the future.

> The business is high-end with rich profitability and strong cash generator.

>  BEL would remain a preferred vendor to the Indian defence sector.

> Stock is available at about 11.2x FY13 estimates.

Cummins India:

CMP - Rs 393

Current TP - Rs 507

>Company is well poised to benefit from recovery in the infrastructure spending in India.

> Commencement of mega production site at Phaltan is likely to ease out capacity constraints and would add to cash flow generation from Q3FY12E.

> Company has committed a Capex of USD 300 million funded mainly through internal accruals.

> Stock is available at 10.3x FY13 estimates. 

IRB infra:

CMP - Rs 160

Current TP - Rs.246

>Company has a strong order book for its EPC division and is also ideally positioned to benefit from toll rate hikes in line with inflation in most of its toll projects.

>It also has sufficient funds to meet equity requirements of existing and new projects and is best positioned to capture upcoming opportunities in the road segment.

>Stock is available at 8.6x FY13 estimates.

Indraprastha Gas: 

CMP - Rs 400

Current TP - Rs 450

>Looking at the growth potential in the City Gas Distribution, rich experience, huge demand of natural gas and strong promoter background, we are bullish on IGL.

>We believe that the strong trends in CNG and PNG segment will continue and IGL is best placed to benefit from rising gas consumption in India.

>Based on our estimates, the stock at current market price of Rs.400 is trading at 8.3x EV/EBIDTA and 14.5x P/E on FY13E earnings.

HT Media:

CMP - Rs.138

Current TP - Rs.200

> Investments in three large markets (HT-Mumbai, Hindustan-UP, and Mint-business newspapers) over the past five years shall provide industry-beating growth in the coming years as readership reaches threshold levels in market share in key markets.

> Two of the company`s properties (HT-Mumbai, Mint) are set to achieve breakeven towards FY12-end.

> Valuations are reasonable at 11.8x PER FY13E.

NIIT Tech:

CMP - Rs.230

Current TP - Rs.300

>The company reported eight successive quarters of high volume growth.

>Non-linear revenues continue to grow at the company average and form about 27% of revenues.

> The order bookings in 2QFY12 were high at USD 200 (USD 86 million), indicating a conducive macro scene.

> The company may have net cash of about Rs.65 a share by FY13 end, as per our estimates.

> Stock is available at 6.3x FY13 estimates.

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