Experts pick stocks/sectors to buy ahead

After a bout of correction, Indian equity markets seem to have changed track again, upwards. The National Stock Exchange’s Nifty 50 closed Monday at 4,898 bouncing back after a brief but strong correction to about 4,600 levels.

The road ahead

The Indian market has been rising on the back of the weakening dollar, feels Jitendra Sriram, VP & Fund Manager – Equities at HSBC. “The markets will remain volatile ahead because the amount of cues that’s are coming in from global sources whether be the euro zone or US remains mixed,” he said.

The market looked a little expensive at Nifty 5,000 levels, Sriram said. “To our mind, either there is a time value where corporate earnings catch up or there is a pullback in the index, which will tempt investors to come back and buy into the market.”

“A lot of people are still convinced that market is just not yet a buy on rallies or aggressively buy on dips,” said Sajiv Dhawan of JV Capital Services. “There are a lot of people looking to short and they are expecting the markets to fall further in month of November-December.”

“Personally speaking we are on the long side as we do follow strict levels, there is no reason as of now to short, I think that time is obviously gone but sentiment remains skittish,” he added.

Dhawan’s advice is to keep buying but with strict stop-losses.

View on stocks/sectors

Banks: “It’s an investment call; you buy the dips,” Dhawan said. “The stocks corrected maybe 10-15% plus from their highs. The negative news in the form of higher interest rates ahead if factored in into the prices to an extent. It’s still full of potential of mergers and acquisitions, you have seen ministers discuss their state banks saying they would like bring their down holding into that stock. You have seen private sector banks like ICICI Bank, HDFC Bank having several ‘buy’ recommendations,” he added. “Across the board whether it’s a PSU, private banks for us it’s an investment call and you buy on any sharp decline.”

Aviation: “From a near-term perspective there are various triggers,” said Sriram. “One is you are entering the busy season in terms of tourist arrivals, generally the monsoon quarter tends to be little weak and you are entering a phase where load factors will go up,” he said, adding that air tariffs were also showing some kind of strength. “These are the two factors, which are driving up space.”

Sugar: Sriram said he was positive on the sector, adding that the fair and remunerative price (FRP) the nation introduced recently was a plus for the long term. “It brings down the impact of the vagaries of local state level regulations on the space.”

Upto exchanges to extend trading hours: SEBI

In the wake of brokers raising objections to the extension of trading hours, market regulator Sebi today said it is entirely upto the exchanges to increase the market timings.

"There is perhaps a misconception in the market that we extended the market hours, we have told the exchanges that they can choose any hours between nine am to five pm for trading. Now the exchanges have to decide what is practical for them. We don't have any regulatory concerns," Sebi Chairman C B Bhave told reporters here.

Bhave was replying to a query about some brokers raising objection against the extension of trading hours.

Asked whether Securities and Exchange Board of India (Sebi) was in talks with RBI for extending banking
hours to align with extended trading session, Bhave said, "If the exchanges ask us for help to approach any institution, we will help them."

Country's two prime bourses, the National Stock Exchange and the Bombay Stock Exchange, are likely to extend trading time by two and half hours from next month and a formal notification to this effect is expected shortly.

"Both the exchanges (BSE and NSE) have discussed the issue (extension of trade timings) and a formal notification is expected shortly," a senior exchange official has said.

Last month, Sebi approved extension of trade timings by up to two-and-a-half hours from 9 am to 5 pm. The current market hours stand from 9.55 am to 3.30 pm.

RIL investors get richer by Rs 11,000 cr

MUMBAI: Investors of Reliance Industries on Monday got richer by more than Rs 11,000 crore as the country's largest private sector company closed with a gain of over 3 per cent on the bourses.

Shares of the company continued their northward journey for the fourth consecutive day, settling at Rs 2,024.55 on the Bombay Stock Exchange, up 3.46 per cent over the previous close.

On the National Stock Exchange, RIL closed higher by 3.45 per cent at Rs 2,025.05.

At close, RIL added Rs 11,140.37 crore in market cap in a single day. The valuation of the company stood at Rs 3.32 lakh crore, up from Rs 3.21 lakh crore on Friday last week.

The surge came amid reports that RIL is likely to acquire a part of the assets of troubled LyondellBasell. Reliance Industries today said that "RIL is reviewing a number of global opportunities for growth in its core business."

Equities Head of brokerage firm
SMC Capital, J Thunuguntla, said, "Positive sentiments helped in boosting the trading activity in RIL. Besides, the news about foreign acquisition would start showing some impact on the stock when the details of the transactions would be disclosed."

On the volume front, over 32.78 lakh shares exchanged hands on NSE and over 7.65 lakh shares got traded on BSE.

The Sensex closed at 16,498.72 points, a gain of 340.44 points or 2.11 per cent.

Mahindra Satyam restarts hirings, recalls bench

Mahindra Satyam is back to hiring once again. It is set to hire 120 employees and recall its employees who were on the bench, reports CNBC-TV18’s Kritika Saxena.

Mahindra Satyam has lifted its hiring freeze and is set to hire 120 employees in the next one month. And that's not all. It has also called back 1,400 of its 6,000 employees who are on the bench. CNBC-TV18 learns that this hiring comes after new deals being signed this quarter especially in the emerging markets.

Says CP Gurnani, CEO, Mahindra Satyam, “For our business strategy and growth, we started working with Bain & Company, a high-end consulting. With them, we have come out with a new value proposition for our clients. We are definitely engaging and trying to get some additional leverages from opening new markets like defence and providing new service offerings like ICT.”

Gurnani believes that this quarter has been better than expected and is confident that Mahindra Satyam will meet the deadline of June 2010 to submit its re-stated accounts.

“As of date, KPMG is confident that they will be able to declare the accounts and give it within the stipulated period. It’s not about one day. It is going to take one step at a time. If one step I take everyday like this, I will be in good shape,” Gurnani adds.

Clearly Mahindra Satyam has fast-tracked its plans to acquire customers. This move also comes after some clients have increased their IT spends. Going forward, Mahindra Satyam expects to hire a larger number of employees and call back more from the bench.

Gas row: RIL, RNRL oppose shareholder plea

NEW DELHI: Mukesh Ambani Group firm RIL and Anil Ambani's RNRL on Tuesday joined hands to oppose the plea of a shareholder in both the companies to be made party in their ongoing dispute in the Supreme Court (SC) over the gas price to be supplied from th e KG basin.

“For a change we are on the same side,” RIL and RNRL's counsel Mr Harish Salve and Mr Mukul Rohatgi, who have been attacking each other over the dispute, told a Bench headed by the Chief Justice, Mr K G Balakrishnan which refused the plea of the sharehol der to be impleaded as the party in the high-voltage legal battle, the hearing of which will resume tomorrow for the seventh day.

Mr Vishweshwar Madhavrao Raste, claiming himself to be the shareholder of RIL and RNRL, had also sought tabling of the family MoU of 2005.

“We are not allowing anybody to intervene. In this way this court will have to hear three million shareholders,” the Bench, also comprising Justices Mr V S Sirpurkar and Mr P Sathasiva, said.

The apex court said it will not issue notice and simply post the application along with the main matters. It is hearing the dispute between RIL and RNRL relating to pricing of gas from KG basin for which the two brothers Mukesh Ambani and Anil Ambani are engaged in a bitter fight.

RNRL is seeking gas from his brother's group RIL at rates 44 per cent lower than Government-approved price. RIL says it cannot honour the commitment made in the 2005 family agreement due to Government's pricing and gas policies. – PTI

Mkt won't correct below 4500

Experts Nilesh Shah, Ashwini Agarwal feel:

Nilesh Shah, MD and CEO, Envision Capital, does not rule out another 5% correction from here. "The Nifty can go to 4,500. Also, valuations look reasonable at those levels. The market is likely to consolidate at lower levels."

He sees the Nifty trading in a 4,500-4,800 range next quarter. He says valuations are challenging above the 5,000 Nifty. "We see significant resistance at 5000-5200 levels. But implementation of reforms can take the range higher."

Ashwini Agarwal of Demeter Advisors too sees Nifty finding support at 4500 in this correction. He rules out a fall below 4,000 Nifty and 14,000 Sensex. But was quick to add that India can fall further if global markets correct. "A deeper correction is likely if liquidity reverses."

Agarwal says investors can invest 5% lower for a 12-month perspective.

Parameters to look at before exiting from any stock

When to sell? What are the parameters to look at before selling a stock? These are the questions that Sujan Rao, working in an Indian
company, asked after seeing a sharp rise in the equity markets. With over 90% appreciation in the Sensex since March this year, a large segment of the investor community is in a fix on whether to sell or hold.

While the views are divided as far as the direction of the market is concerned, SundayET has some insights on the parameters to look at before exiting from any stock.

SundayET has been telling its reader that they should have a return estimation before buying any stock and hence the best time to exit is when your target is achieved. However, if one expects further upside due to any development, it makes sense to go for partial profit booking.

Also, according to Anil Chopra, group CEO, Bajaj Capital, if the target return fixed for a particular stock has been achieved one should exit. For example, if you have invested in a stock at Rs 100 per share with a target return of 20% in one year and in case stock appreciates to Rs 120 in two months then it is wise to exit that stock and book profit.


Since it is difficult to buy stocks at the bottom, experts suggest opting for systematic investment plan (SIP), where investors make periodic investments rather than putting a lump sum amount. Similarly, it is impractical to sell at the top and hence one should go for systematic selling plan (SSP) and at every level of the upward rally investors should book some profit.

However, it is not advisable for investors to decide on selling triggers right at the beginning.
Valuation of the company is another parameter to look at for deciding whether to hold or sell the stock. Although, it may be possible that a stock goes up further even after reaching the fair valuation, experts suggest that investors should sell once the stock price goes beyond the fair value.

Also, one has to look at the options available. If you find any other investment option more attractive compared to your current investment in a particular stock, you may consider switching. The market trend, which is mostly driven by sentiments, is crucial. According to Kapur, frontline stocks are usually less volatile than mid caps. They may offer less return than mid caps but have a relatively higher safety level.

Mid caps generally do well only in very firm and positive markets. Some of the large cap stocks like realty majors also have a high beta and are very volatile. The moment the sentiment in the market changes or uncertainty starts creeping in, it is better to exit all mid-cap and high beta stocks regardless of whether the target one has in mind while investing has been achieved or not.


In addition, according to Vineeta Jain, head research & index management at Eastwind Capital Advisors, when one notices that insiders are
BSE
Why realty is good investment
Key to maximising returns
How to gauge market movements
What moves the stock markets?
selling stocks substantially, it is better to exit from that stock. Also, one should exit from companies which do not react positively to good news coming in or do not fetch higher valuation even after showing impressive quarterly results.

When it comes to investors of mutual funds, parameters to take a sell call may differ a bit. Investors need to evaluate the performance of the invested schemes on a regular basis. The moment there is any major discrepancy from the benchmark indices and peers, one can consider an exit.

The performance of a mutual fund is dependent on the capability of the management team. Hence, any change in the ownership or fund management team may impact the fund performance. It is advisable to avoid schemes where the management team has been changed recently even if the schemes of that company were performing well because the past performance and track record is no longer relevant.

Mutual funds are managed by fund managers and logically a buy or sell call should be taken only by them, however, partial profit booking may be done in case of extraordinary returns even if the scheme is doing much better than peers and the benchmark. This is just to be cautious and safe as usually very high performing schemes in bull markets take a lot of risk and suffer in a big way when the market sentiment reverses.

Unit-linked insurance policies (ULIPs) are for long-term products, but with the sharp rise in the stock market, the net asset value of ULIPs also goes up. And as part of balancing the portfolio one may consider a switch to conservative portfolio, whereby a part of the equity exposure is shifted towards debt instruments.

Given the current market condition, Kapur says, "It makes a lot of sense to switch to a conservative portfolio and reduce your equity exposure. Insurance anyway is a conservative investment option where safety scores over return."

Six remarkable unknown PSUs

Till recently, not many people had heard of Satluj Jal Vidyut Nigam. Then the government announced that the company would a candidate for divestment in the coming months and now everyone is suddenly interested in knowing more about Satluj Jal Vidyut Nigam.

With the government preparing for another round of divestment, a fresh new set of public sector undertakings (PSUs) are preparing to capture the limelight. They’re not the big ticket ‘navratnas’ like ONGC, SAIL and GAIL which the public has come to recognise. Instead, they are hitherto unknown companies and nobody is quite sure what they do. The companies picked by the Government for divestment are all set to become familiar names for investors in the months to come.

Meanwhile, Corporate Dossier decided to pre-empt matters by taking a close look at six little-known PSUs that have executed remarkable turnarounds in recent years.

EDCIL












Under Banerjee’s leadership, EDCIL’s turnover has grown from just Rs 25 crore to over Rs 54 crore and its grading by the Department of Public Enterprises has moved up from ‘fair’ to ‘excellent’. In educational projects, typically, the gestation is long but Banerjee seems to be happy with the 10-16% margins her business bears.

Also, she has sketched out high-value areas for her company, quality certification and school accreditation, technical audit for institutional construction, IT education, educational fairs and online testing facilities. Categorised as a ‘Mini Ratna’ by the government, EDCIL provides placement to international students from over 30 countries and sends expert faculty to more than 15 countries.

Today, 65% of the work comes from the government and the remaining 35% from the private sector. Banerjee wants a 50:50 ratio. “I want to get more private and international clients. I’d like to add more professionals and specialists to add value to our client base,” she says.

Heavy Engineering Corporation















People do move from the public to the private sector, but Pillai’s reverse swing from the Sanmar Group in Chennai to HEC at nearly one-tenth the annual remuneration was an eye-opener.

Pillai takes pride in the fact that for the first time in the company’s 50-year-history, it has booked a profit for three consecutive years. The turnover per employee has improved from Rs 4.41 lakh in 2004-05 to Rs 15.73 lakh today.

In 2007-08, sales spiked to Rs 413 crore from Rs 297 crore in the previous year. And in 2008-09, the sales have touched Rs 454 crore with a profit of Rs 18 crore against a targeted profit of only Rs 6 crore. In 1958, the company was created to serve the steel and coal sectors. But Pillai chose a strategic shift. “I want HEC to serve strategic sectors like defence, space and the nuclear.”

In other words, he realised it was time to de-commoditise the company, away from market fluctuations, toward the sweet spot of exclusivity. In line with the new thinking, HEC has developed a very special material for nuclear-grade steel and also supplied the heaviest (810 tonnes) launchpad for India’s space mission.

WAPCOS

At times, a name change can have profound implications. Until 2003, WAPCOS used to be Water & Power Consultancy Services Ltd. That year, the success rate of proposals dipped and the company’s turnover slipped from Rs 45 crore to Rs 42 crore.

Today, the diversified space accounts for 25% of WAPCOS’ business. And though 50% of its revenue comes from turnkey projects, RK Gupta, CMD of WAPCOS, wants to focus on pure-play consulting since turnkeys are typically bogged by long gestation.

Now in the corner room, Gupta is confident of achieving a turnover of Rs 325 crore this financial year and taking the leap beyond the Rs 500-crore mark next fiscal, amid fierce competition from the likes of Tata Consultancy Services, Tahal Engineering, Matt McDonald, Feedback Ventures and RITES.

Gupta should know for he has worked directly with four CMDs in his 20 years at WAPCOS. Having said that, over the last month, there has been a significant shift in the management style of the company. Gupta now works from the Gurgaon office, closer to the 400-odd workforce, instead of the more centrally-located registered office at KG Marg in Delhi. “It’s a more inclusive management system,” he says.

Bharat Pumps & Compressors Ltd
















When Abhay Kumar Jain took up the reins of Chairman-cum-Managing Director (CMD) four years ago, Bharat Pumps & Compressors Ltd (BPCL) was down and out. He inherited a net loss of Rs 10.86 crore, a demotivated workforce with wages frozen since 1992, run-down machinery, and more.

Three months into his new job, Jain clocked a turnover of Rs 37 crore for the company through process re-engineering and customer orientation. This translated into BPCL bagging “very good” orders from the subsequent year. Capacity utilisation increased from 26% in 2005-06 to 78% today.

Spurred by diversification to high-pressure and CNG cylinders, the demand from clients such as Oil India, ONGC, Mittal Group and Reliance have peaked. This year, the company has bagged its first overseas export order from Iran for the supply of compressors worth Rs 45 crore.

In 2008-09, BPCL clocked Rs 236 crore, a figure that Jain wants to better by about Rs 50 crore this financial year. Will he get there? Going by Jain’s just-in-time interventions, it certainly looks par for the course.

Projects & Development India Ltd

















When the 52-year-old RG Rajan arrived on the scene as CMD of the Rs 73 crore Projects & Development India Ltd (PDIL), the company clearly needed to refine itself. There were about 1,000 people on the rolls and the books showed patchy progress.

Apart from rationalising the workforce to 600, Rajan ensured the churn rate fell below 1%. Within 12 months of taking charge, Rajan directed 20 of his departmental heads to draw up a corporate plan. The refineries started taking notice and the company received fresh orders from IOC, OBGC, CPCL and HPCL.

For the first time in its 31-year history, PDIL paid dividend to the government to the tune of Rs 1.75 crore in 2007-08 and Rs 3.46 crore in 2008-09.

Rajan put the foreign contracts to good use as bait for recruitment. “People got the opportunity to go abroad on deputation, always a major lure,” he says. Alongside, the recommendations of the government pay commission kicked in and salaries improved to such an extent that the overall economic downturn proved to be a blessing in disguise. Last fiscal, for 35 positions, the company received 16,000 applications.

Rajan has been on a hiring spree over the last three years, picking up 200 people, mostly engineers. Beating the recession and turning the corner, PDIL bagged the prestigious Scope Award from Prime Minister Manmohan Singh earlier this month.

Hospital Services Consultancy Corporation













With a turnover of Rs 32.73 crore for 2008-09, HSCC offers single window project management services, from concept to commissioning, setting up hospitals, medical colleges, diagnostic centres, research facilities, clinical facilities and manages procurement of high value medical equipment. On the consulting side, it offers expertise on how to manage large-scale medical infrastructure. The company has moved up the PSU rating order from ‘good’ in 2004-05 to ‘excellent’.

Sharma joined HSCC in 2006 and was with infrastructure major RITES prior to his new assignment. For him, the driving force remains the pool of toppers the organisation maintains. He personally checks his people power every three months. “We are careful we don’t get overstaffed. I carry out a manpower review with regard to the business scale and the skills available to us every three months, we go to the market to hire and create a panel for skills that are in short supply (like architects and structural engineers) for large and complex structures,” he says.

Impressive was the number of desktops in Sharma’s office, too many to take in at one glance. “I brought in e-culture to the organisation,” he says with a certain pride. That explains the lack of PA’s and secretaries in the building, so typical of a government or public sector undertaking. Sharma knows the value of self-reliance. Along with empowering his workforce, he’s following autonomy to the ‘T’.

Safe havens to protect your money in a falling mkt

It was a very disappointing day for markets as things took a turn for the worse. The cuts deepened through the day and key technical levels got breached. A more than 100 points shave-off on the Sensex and more than 350 points gash on the Nifty resulted in the Nifty close below 4,850 and the Sensex slip below 16,500 levels today. The markets witnessed their biggest single-day fall since August 17.

Hawkish statements from the credit policy created nervousness in the interest rate sensitives. The real estate space got badgered today with Unitech and DLF down 7-8% post hiking of real estate provisions, while banks went home with biggest loses with State Bank of India and ICICI Bank down 4-6% post the tightening of non-performing asset norms.

Is the correction in markets over?

Dipan Mehta, Member, BSE, sees markets correction for a few more trading sessions. "The result season has been hanging a little bit of a cloud on the market. Actually all the results that we have seen so far are pretty ordinary and hardly exciting. There is nothing to make you excited and run to buy stock. The RBI policy has just been the trigger where now the reality of interest rate hikes is in a matter of months, not years. The market is just factoring it. The RBI policy has just been a trigger in a situation where anywhere the trends were quite weak."

Sudarshan Sukhani of Technical Trends is the most bearish. He feels the intermediate trend has broken which means that we are already in a correction. "The correction could be deeper, it is not necessarily going to stop in a day or two.

Rajat Bose, Technical Analyst, rajatkbose.com, says the markets might go down to sub-4,800 levels. "Sub-4,800 levels have been the place where there has been some support in the past. When the rally happened from July to early October, this was the place when the market consolidated when it was moving up, so between 4,800 and 4,743 there would be some support. But looking at the market picture what I find is that the trend line that you could actually draw from that low of 2539 on March 6, and 3918 on July 13 has been broken. Today, is the third day of the break. When you break a long-term trendline or at least an intermediate-term trendline which lasts for more than six months, a three-day fall should not be considered as too much of a damage because you require at least a couple of weeks to spend below that level."

Bose sees a pullback in market. "Generally, we find a pullback happening towards the trendline, although the trendline currently is above 5,000 levels. It is far cry at the moment, but there would be a pullback. The pullback might well happen from a level between 4,800 and 4,743. Still there is some downside left."

However, Technical Analyst Ashwani Gujral does not read too much into today's market fall. "In a couple of months, the market comes back and retests its 50 DMA (daily moving average). The last time it was around 4,400 and the market turned from there. The 50 DMA is important because a lot of institutions tend to buy at those levels."

Satish Betadpur of Independent International Investment Research too does not see the markets correcting further from these levels. "The market was priced for perfection from an earnings and inflation-interest rate perspective. There are inflation expectations in the system and also earnings were not as good as expected. We wanted a perfect earning scenario where the topline grew, but here we have got better bottomline but the topline has not been very good in many sectors. Even if there is a correction, it won't be very deep because fundamentals on a medium-term are very strong in the economy. But we have to reset ourselves to lower earnings expectations going forward. So, maybe another 100-200 points on the Nifty."

Should you buy on dips?

Gujral advises investors not to panic and buy at these levels. "Investors should look at getting into the market around 4,730 to about 4,800, which was the breakout kind of zone. Right now, people should be looking at buying instead of trying to short the market. Those you short from higher levels should now be actually looking at covering those shorts. The next 50, 80 points is a good buying zone for most stocks. Even interest rates sensitive stock because the rates really haven’t been raised."

Like Gujral, Betadpur too advises investors to buy if the markets correct 100-200 points on the Nifty. He says IT, fast moving consumer goods (FMCG), and pharmaceuticals seems to be a safe haven in this market.

However, Sukhani says the next significant support for the Nifty is at 4,550. He advises investors not to buy in a hurry. "It is very difficult to say what’s going to happen between 4,900 and 4,550."

On earnings:

Ajit Dayal, Director, Quantum Advisors, expects the December quarter profits to be one of the better ones in this financial year. "A lot of upgrades will continue to come through from analysts. Even the CMIE data that I looked at a few weeks ago indicated that the profit of a larger base of Indian companies will grow by some 24%. Assuming there are dilutions through QIPs, rights offerings and everything else, the EPS number will be in 18-22% range depending on how much dilution has happened across a corporate India. So, while the September quarter may have disappointed for some companies, the December quarter will be even better."

RBI keeps key rates unchanged

The Reserve Bank of India in its second quarter review has left key rates unchanged, but signaled a move toward a tighter monetary policy by hiking the statutory liquidity ratio and increasing the provisioning norms for advances to commercial real estate sector.

The central bank has increased its statutory liquidity ratio to 25 per cent from 24 per cent.

The central bank has kept its reverse repo rates and repo rate unchanged at 3.25 per cent and at 4.75 per cent respectively. Reverse repo rate is the rate at which the RBI borrows money from banks while repo rate is the rate at which our banks borrow rupees from the central bank.

The hike in SLR will not impact liquidity, the RBI said. SLR is the minimum percentage of deposits that banks have to park in assets like government bonds.

Keki Mistry, MD of HDFC, said that hike in SLR signals that some degree of monetary tightening may happen in the future but for now the central bank would focus on supporting the growth process. SLR has historically been at 25 per cent and banks are currently holding bonds beyond this limit, he said. So the SLR hike will not impact liquidity but is a signal that the tightening process might happen in the future, he added.

However, the RBI has raised FY10 inflation forecast to 6.5 per cent vs earlier estimate of 6 per cent.

Surjit S Bhalla, managing director of Oxus Research and Investments, said, the RBI is recognising correctly that rate hike could not combat food inflation. He expects the RBI to continue this policy stance for a while.

In a move that could have a bearing on the realty sector, the RBI increased the provisioning requirement for advances to the commercial real estate sector classified as standard assets, from the present level of 0.40 per cent to 1 per cent. “In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets,” the central bank said.

The bank also tightened the non-performing assets norms for banks. The RBI said, it would “advise banks to augment their provisioning cushions consisting of specific provisions against NPAs as well as floating provisions, and ensure that their total provisioning coverage ratio, including floating provisions, is not less than 70 per cent. Banks should achieve this norm not later than end-September 2010.”
But the central bank has cut its FY10 credit growth forecast to 18 per cent vs earlier estimate of 20 per cent. The non-food credit growth estimate has been cut to 18 per cent from 20 per cent.

It has also cut its money supply growth estimate to 17 per cent from 18 per cent. In addition, the central bank has cut its export credit finance to 15 per cent from 50 per cent.

The central bank noted that there is a critical need to downsize government borrowing plan to ward off upward pressure on interest rates. In its FY10 GDP forecast, it has kept its forecast unchanged at 6 per cent, with an upside bias.

Sensex tumbles as RBI signals tighter policy

The Indian markets tumbled on Tuesday after the Reserve Bank of India took its first step toward tightening of the monetary policy. Banking and realty stocks were among the worst hit after the central bank tightened norms for these sectors. The Sensex fell 387 points to 16,353 while Nifty slipped 124 points to finish at 4,846. Market watchers said the correction was long due. Bharat Sheth, president of institutional sales at Techno Shares and Stock Broking, said, “The expectations that were built-up for second quarter results have been disappointing. The reaction was long due.” Upendra Kulkarni, director & CEO of Fortress Financial Services, said investors with a long-term view can take advantage of these corrections which were long due to pick up good quality stocks. The Reserve Bank of India in its second quarter review has left key rates unchanged. But it signaled a move toward a tighter monetary policy by hiking the statutory liquidity ratio and increasing the provisioning norms for advances to commercial real estate sector and tightening non-performing asset norms for banks. The RBI also withdrew some refinance facilities provided to banks with immediate effect. The central bank also discontinued banks’ special financing to mutual funds, NBFCs and housing finance companies. Realty, metal and banking stocks were hammered in today’s trade. The realty index on the BSE plunged 6.3 per cent. Omaxe, HDIL and Unitech plummeted over 7-9 per cent each. The BSE metal index fell 5.8 per cent amid a correction in commodity prices across the globe. The banking index lost 3.5 per cent. In the metal space, Sesa Goa dropped 12 per cent while Tata Steel and Hindalco lost over 7 per cent each. Among the banking stocks, ICICI Bank fell 4.4 per cent while SBI felll over 6 per cent. In global markets, Asian stocks retreated on Tuesday, following losses on Wall Street amid rising concerns the markets have gotten ahead of economic realities. European markets gained modestly. Major Asian markets dropped by around 2 per cent or more, with shares in resource companies hit after a steep fall in commodity prices overnight. Oil recovered only modestly to trade near $79 a barrel, while the dollar was slightly weaker against the yen and euro following a sharp rise.

Maruti Q2 net up 99.3%, sees FY10 capex at Rs 2,100 cr

Maruti Suzuki has come out with its second quarter FY10 results. Its net profit shot up 99.3% to Rs 570 crore versus Rs 286 crore, on year-on-year basis (YoY).

The company's net sales increased 45.94% to Rs 7,049 crore as against Rs 4,830 crore (YoY).

The topline as well as the bottomline numbers were below expectations. CNBC-TV18 was expecting net profit at Rs 597 crore and net sales at Rs 7,091 crore.

Raw material cost went up 46.9% to Rs 5,255 crore versus Rs 3,578 crore (YoY).

In a press conference, Maruti said buoyant exports helped strong growth in second quarter. However, the company said they would be cautiously optimistic on volumes in near future and margins will be seen under pressure going forward. "High commodity prices and strong Yen will tighten margins."

The company's Q2 domestic passenger car market share stood at 54.9%, it added.

Maruti Says

-Development of new models on track
-Concerned that input costs could go up
-Target 1.3 lakh units exports in FY10
-Remain watchful of interest rates, inflation
-Domestic demand broadly good
-See good market potential for CNG vehicles
-Expect higher steel prices in October-March
-FY10 capex seen at Rs 2,100 crore
-FY11 capex seen around Rs 2,000 cr
-Company has cash reserves of Rs 5,300 cr
-Not sure strong demand to continue after October

Hardy Oil to abandon 1 well in KG D9 block; RIL stock down

UK-based Hardy Oil and Gas, which has 10% stake in Krishna-Godavari D9 block on the east coast of India, will abandon exploration of one well. The Hardy Oil stock was down 36% on the London Stock Exchange on the announcement.

India’s Reliance Industries (RIL), the field's operator, holds 90% in KG D9. RIL’s stock was seen under pressure after the news came out and was down about 4% on the National Stock Exchange at 14.35.

In response, RIL said it would comment only after informing the Directorate General of Hydrocarbons (DGH), the government body that overlooks the management of oil and natural gas resources in India.

The DGH in June had complained to market regulator Securities and Exchange Board of India (SEBI) when Hardy had “prematurely” announced its assessment of reserves in the KG blocks.

Changes in Nifty: JP Assoc, IDFC in; Nalco Tata Comm out

The benchmark index, the National Stock Exchange's CNX Nifty 50, has undergone a re-composition that comes into effect from October 22. Nalco and Tata Communication will be excluded from the index and Jaiprakash Associates and IDFC will be added.

Among the new entrants, Nalco has a free-float weight of 0.21 while Tata Communication has free-float weight of 0.22.

Jaiprakash Associates trades with free-float weight of 1.24 and IDFC with free-float weight of 1.4, which will have FFF (free float factor) of 0.49 and 1, respectively.

Trailing 12 months profit (TTM) for Nalco was at Rs 873 crore while Tata Communication’s TTM stood at Rs 448 crore. IDFC reported TTM of Rs 643 crore and JP Associates of Rs 1,144 crore. The Nifty's net profit thus adds about Rs 466 crore, as a result of the change.

Free-float market cap also increases significantly. The market cap of Nalco and Tata Communication stood at Rs 6,179 crore (Rs 2,968 crore + Rs 3,211 crore) while the ones on the way out — IDFC and JP Associates — have Rs 38,691 crore (Rs 20,475 crore + Rs 18,216 crore) in market cap: an increase of Rs 32,512 crore.

Price-to-earning ratio also increases 7% while EPS drops by Rs 0.50.

Govt plans 20% stake sale in SAIL this fiscal

The government on Wednesday said the disinvestment process in steel giant SAIL will start in the current fiscal.
"The first phase of disinvestment will happen in the current fiscal," Steel Minister Virbhadra Singh said in New Delhi after a conference wherein trading firm MSTC presented a dividend of Rs 15.31 crore to the minister.
Singh has already approved a proposal for 20 per cent two-phase Follow-on-Public Offer (FPO) of SAIL. The next phase is likely the next fiscal, the minister said.
Giving details of divestment plans, Steel Secretary P K Rastogi said that the FPO will be a combination of five per cent dilution of government's equity and five per cent issue of additional shares by the company.
The government will mobilise around Rs 8,000 crore through the FPO at current share prices The amount may vary depending on the share price of SAIL, he added. Rastogi further said the proposal has got in-principle approval from the Disinvestment Department of the Finance Ministry and SAIL's board is now finalising the proposal.
SAIL would be informing market regulator SEBI about the planned FPO. Once the regulator approval is obtained, the ministry will prepare a note to be sent to the Cabinet for its approval, which is likely by December.
SAIL, which will also raise about Rs 8,000 crore through two-pahse FPO, will use fund part finance its Rs 70,000-crore expansion projects.

Ambani gas row: Final Apex Court hearing from today

Oct. 19 The corporate battle between the Ambani brothers will reach the last stage of a legal face-off on Tuesday. The Supreme Court will begin the final hearing on the case. At stake is revenue close to $28 billion.

The dispute started due to a demerger pact between Mukesh and Anil on natural gas supply from Mukesh Ambani-led Reliance Industries Ltd (RIL) to Anil Ambani group company, Reliance Natural Resources Ltd (RNRL).

RNRL is suing RIL for not honouring its commitment of 2005 for supplying 28 mscmd of natural gas from the Krishna-Godavari Basin D6 block at $2.34/mBtu.

RIL’s stance

RIL is maintaining that it neither has the marketing freedom nor the authority to supply gas to RNRL at subsidised rate, as the Government has determined a price of $4.2/mBtu and also allocated the gas according to the utilisation policy.

If the valuation and selling price of gas is taken at $4.2/mBtu then the Government earns $14.9 billion and the contractors (RIL and Niko) make $11.5 billion through the life of the field. But, if the valuation and selling price of gas is taken at $2.34/mBtu then both the Government’s and the contractors’ earnings will fall to $4.2 billion and $5.3 billion, respectively.

However, if the price of the gas is taken at $4.2/mBtu for valuation purpose and the selling price is taken at $2.34/mBtu then the Government earnings stand at $14.9 billion and the contractors make a loss of $5.4 billion.

Issues

Some of the issues likely to be argued before the Apex Court include the question whether a family MoU can be given priority over the production sharing contract (PSC) and if a contractor has marketing freedom for sale of gas?

In June, a Division Bench of the Bombay High Court upheld RNRL’s position on the gas issue with RIL, and ordered that the dispute be resolved in a month through a fresh arrangement.

Timeline

RIL on July 4 moved the Apex Court challenging the Bombay High Court judgment asking it to supply gas to RNRL at 44 per cent lower price than fixed by the Government. On July 19, the Government stepped in and filed a petition in the Supreme Court saying gas is national property. The matter is posted for hearing on October 20.

In another development, the Government told the Apex Court on Monday that its legal rights were affected by the Bombay High Court order in the matter.

The Government said this in its rejoinder to an affidavit filed by RNRL in the RIL-RNRL case.

Keep keen watch on both the stocks as soon the decision will out the favoured stock will rock 2de...

NTPC stake sale to boost market sentiment: analysts

Government's nod for stake sale in state-run power utilities - NTPC and Satluj Jal Vidyut Nigam (SJVNL) - is expected to bolster investor sentiment and propel the stock markets in days to come, analysts said.

The Cabinet Committee on Economic Affairs (CCEA) said on Monday approved five and 10 per cent disinvestments in NTPC and SJVNL respectively. “The government is confident about the recovery in market and the economy that is why it is going ahead with its divestment plans. The market is expected to react positively to the news and it indicates a rally in the days ahead,” Geojit BNP Paribas Financial Services Research Head Alex Mathew said.

Kotak Mahindra Mutual Fund Equities Head Mr Krishna Sanghvi said, “The government has reaffirmed that it is prone to adopt a more liberalised economic policy and is committed to increase investors' wealth. However, the move would not add any value to the company's financial position.”

Marketmen believe a follow-on public offer (FPO) of NTPC, the second most valued public sector unit with a market capitalisation of over Rs 1.77 lakh crore, would help increase trading volumes at the counter.

“PSU stocks generally have less volume and low volatility. The market would now look at the issue price of the FPO and an increase in demand would help to shore up supply,” SMC Global Vice President Rajesh Jain said. - PTI

Best 5 mid-cap stocks

It’s that time of the year again when many investors rejig their portfolio and take position on their favourite stocks. With most of the blue chips having turned expensive, the only option for most investors is the mid-cap sector.

We at ET Intelligence Group bring you a list of 5 mid-cap stocks that could make your next Diwali brighter. But, as always, make sure you’ve done the due diligence before placing your bets on these.

Tata Teleservices (Maharashtra) Ltd

TTML, which has recently joined hands with Japan’s NTT Docomo, is the Rs 2,000-crore Tata Group company that provides telecom services in the circles of Mumbai and Maharashtra, including Goa. TTML has reported net loss in each of the past six years. However, the picture is likely to change soon.

The company is aggressively adding new subscribers and has topped the 10-million mark, following its innovative pricing methods. Higher users would improve network efficiency, thereby reducing cost per user. The company has undertaken necessary capex in the last few years.

TTML has reduced the level of net loss in the last three quarters. It is likely to post quarterly profit by the March 2010 quarter.

Indian Hotels Company Ltd

Indian Hotels (IHCL), which has underperformed the markets, is currently trading below its book value. This appears pretty cheap as it has always traded between 1.4 and 5 times the book value in the last five years. The last few bad quarters indicate that the scrip is trading 28 times its past 12 months earnings.

The hospitality industry is now going through a tough phase. However, being the industry leader, IHCL could well be the first one to move up once the tide turns. The Commonwealth Games being held in Delhi next year can be one major trigger for the industry, apart from the global economic revival.

Supreme Industries Ltd

Supreme Industries, India’s leading plastic goods manufacturers, has always enjoyed a healthy history of profit growth, cashflows and dividends. Its decision to exit unprofitable businesses, coupled with rising domestic demand for plastics and a likely glut situation in polymers, are likely to keep its profit growth strong in the coming quarters.

At the same time, the company has constructed a commercial complex at Andheri with 2.5-lakh square feet of saleable area at a cost of Rs 115 crore. The sale proceeds from this property will boost the company’s bottomline for the next few quarters. The scrip at Rs 363 values the company just 8.6 times its earnings for trailing 12 months, much cheaper compared to its peers.

IndusInd Bank Ltd

IndusInd Bank has made a huge turnaround in the past one year, reporting a dramatic improvement on key parameters such as non-performing assets (NPAs), net interest margin (NIM) and business per employee. Its gross NPAs or bad loans as a percentage to gross advances have halved in the quarter ended September 2009 against the year-ago period, with NIM rising to 2.86% from 1.68%.

The bank has cleaned up its balance sheet and has more than doubled its profit in the September quarter. The next growth driver will be expansion of its loan book beating the industry growth and continued improvement in its NIM, which can transform it into one of the fastest growing banks.

Dalmia Cement (Bharat) Ltd.

Dalmia Cement (Bharat) (DCBL) is aggressively expanding its cement capacity and is shortly bringing on stream 38% additional cement capacity, taking its total capacity to 9 million tonnes. It is also well positioned in the booming sugar business with a combined capacity of 22,500 TCD (tonnes of cane per day) at three locations in UP. These two businesses should help the company grow its net sales aggressively in the next two years.

In the past four years, the company has quadrupled its revenues and is expected to maintain its growth trajectory in the next few years. Dalmia Cements recently announced plans to raise nearly Rs 3,000 crore to fund its expansion plans. The company plans to add a further 10 million tonnes capacity across the country in a phased manner over the next three years. At Rs 169.3, Dalmia Cement (Bharat) trades at a P/E of 8.2 and looks cheap.

8 stks that were buzzing last week & how to trade them now: Expert's view

The market closed at a new 17-month high. This week the Bank Index advanced 8.3%, SBI zoomed 17.8%, ICICI Bank gained 6.5%. The Metal index surged 8%, Jindal Steel & Power rallied 16%, SAIL and Tata Steel surged 6.8% and 6.5% respectively. The top index gainers this week were Cairn India up 11.8%, TCS up 6.3% and RIL up 5.3%. However, telecom stocks like Reliance Comm and Bharti lost 6% and 5.3% this week respectively. Mehraboon Irani, VP-PMS, Centrum Broking, Technical Analyst, Sudarshan Sukhani and Dipan Mehta, Member, BSE/NSE discussed various stocks. They were bullish on Unitech, Torrent Power, Hindustan Unilever (HUL), Jindal Steel & Power, LIC Housing Finance and SBI while were bearish on Bharti Airtel. However, they had mixed views on Larsen and Toubro.

Bharti Airtel

Mehta told CNBC-TV18, "Telecom has been on underperformer over the past two-weeks or so since the news came out that Reliance itself was offering at very competitive rates for outgoing and on the whole we are seeing that there could be regulatory change as far as shifting from per minute to per second billing takes place. That could impact the profitability in the short to medium-term quite drastically and therefore my sense is that one should remain underweight on the sector. My specific advice would be to look at exiting out of Bharti Airtel and the other telecom stocks. But then again it could be at a trading bounce and need not necessarily be at this price.”

Irani told CNBC-TV18, "The one space we are advising investors really exit is the telcom. It is not fair to state that Bharti is a great company – no doubt about it – but buy this stock if it gives you an opportunity. It has come down so sharply because this is not the way you look at stocks. The fact of the case is as far as telcom goes, according to me the story for the time being is certainly over. So, a bounce back here and there of 5-10% not ruling out but for an investor I don’t think this is the way one should be looking at stocks. One can definitely wait for a bounce back but learn to exit at higher levels. There are better opportunities elsewhere.”

Sukhani told CNBC-TV18, "My sense is that telecom stocks are on the verge of bottoming out, which means Bharti Airtel may not be Rs 330 but it could be Rs 300 or Rs 290. That’s a different issue. For a long-term investor, this is the right time to go and invest in telecom stocks; I would say that on the basis of long-term views on the charts.”

Unitech

Sukhani told CNBC-TV18, "I don’t think Unitech is going to outperform the market. What we saw was a bounce in what is essentially a downtrend and my assumption is that if the market were to remain cheerful we could see Rs 140 or Rs 150. But at this point it looks very unlikely that Unitech would touch Rs 200 again.”

Irani told CNBC-TV18, "I feel that when Unitech managed to raise funds for itself some month’s ago – the problems for Unitech were behind it. At that time we started liking the stock and we had a target of Rs 125 for it. At the present level it is more of a trading play but we don’t enter a stock for a 10-15% return at this particular level of the indices. For the last seven months the company has made bookings of nearly Rs 40 billion (Rs 4,000 crore) which is ahead of most estimates. They are also concentrating more on the affordable homes, which could bring down the rate per square feet with the company books it had. But all said and done according to me the stock could possibly definitely move at least 10-15% up from here. The problems for the entire real estate are going to continue for some more time to come.”

Torrent Power

Sukhani told CNBC-TV18, "In a bull market everything goes up and so will Torrent Power. So, I am looking at a level of around Rs 370 as a price target. My stoploss is Rs 260 so if the price comes close to that and in a correction it could then you average because you know that at Rs 260 you might as well get out of the averaged quantity.”

HUL

Irani told CNBC-TV18, "In Hindustan Unilever (HUL) we have a price target of slightly over Rs 300 for the stock and I personally feel that in this market conditions, which have been very buoyant over the last couple of months FMCG normally has taken a back seat. Normally as and when possibly this shows signs of petering out as FMCG is going to come back into focus and Lever is going to be a decent player in that particular segment as far as the stock price performance goes. I think it is taken a back seat as a stock right now but sooner or later it will attract attention. The management has done wonders over the last 7-8 months as far as taking measure to improve sales volumes goes and those types of measures is going to offset the possible loss because of rural consumptions slightly coming down because of the kharif crop failure. On the whole we are quite positive on HUL and I would advise the investor to hold on to it.”

Sukhani told CNBC-TV18, "Hindustan Unilever (HUL) has been in the trading range for almost 5 years now. It is just coming out of that range but it has been a clear under performer. As it comes out of that range it promises higher levels, somewhere around Rs 350 and that is assuming the market does what it is already doing now but I do not see it going more than that, then that could be a painful ride up. So unless you are fascinated by the stock you might as well move to some other momentum shares.”

LIC Housing Finance

Sukhani told CNBC-TV18, "LIC Housing Finance charts are excellent. The stock built a base for 5-7 or 10 years then has broken out of it. I see it crossing Rs 1,000 very easily. It is a very good quality stock. One shouldn’t worry about the high price – don’t worry about correction – stick to it.”

Mehta told CNBC-TV18, "What we have observed over the past year or so is the valuation gap in LIC Housing and HDFC has narrowed and a large part of it is on account of there being some amount of stability coming into the earnings. Also, past 2-3 quarters earnings have surprised the street and our sense is that now it is getting into a nice rhythm as far as its performance goes and it is gradually building on its market share and in an environment at present were interest rates are benign and companies like LIC Housing and HDFC would find fund raising easier – at the same time with real estate prices the way there would be good appetite for real estate loans as well. Investor could remain invested – in fact look at aggregating or adding to the stock at every correction.”

SBI

Irani told CNBC-TV18, "We need to look at the overall market and if we are positive on the market – one cannot ignore SBI. I think 27% of personal loans in this country are from this largest PSU bank. Even at the present level which has gone up too sharply the fact that this stock is available just around 1.6 times its book value for 2010-11 as per our estimate. SBI has gone up too sharply. One should buy it. It should be in the portfolio and therefore as one cannot afford to ignore the market, you definitely need have SBI in one’s portfolio.”

JSPL

Sukhani told CNBC-TV18, "JSPL is a dream now that we know what it is done but I think the stock that moves up relentlessly is telling us that it is much more steam ahead we can look towards Rs 950-1000 and I would not be surprised if this is a conservative target."

Larsen and Toubro

Mehta told CNBC-TV18, "L&T is one of the few stocks which can classify to be as a part of the core holding of any portfolio. My advice would be to remain invested for the next 2-3 years or so. There could be corrections as the market corrects but by and large the company has gone from strength-to-strength and we are seeing decent pick up in the order book position as well. There is decent visibility as we go ahead.”

He further added, “The only problem is that valuation is bit on the higher side, so there could be a disappointment on that count and if the results are slightly below expectation one could see it correcting. Considering the stock has outperformed the market over the past few months one could expect sideways movement or mild underperformance but that should not deter long-term investors who should remain invested in L&T. I don’t think one should try and trade the stock – just keep it and the stock will give fantastic returns over the next 24-36 months.”

Irani told CNBC-TV18, "At the present level I personally feel that L&T as a stock definitely looks a little bit expensive for the time being. We have been very positive on the stock. We rank it as one of the best managements in the country. It is definitely the best play as far as the Indian growth story goes. But all said and done a lot will depend on the E&C order inflows. If we have an E&C order inflow of around 30-35% for 2010-11 then possibly the stock in a very bullish scenario can even go up another 15-20%. But at the present level valuation-wise the stock looks a little bit stretched. Investors can continue to hold on to it but I don’t think it is going to be an outperformer in the 3-6 months.”

Stock market predictions for Samvat 2066

• After 17 October 2009: Correction
  
  • 05-01-2010 to 21-01-2010: Correction
  • 02/04/2010 TO 16/04/2010: Very Crucial
  • 02/05/2010 TO 19/05/2010: Market breadth negative
  • 30/09/2010 TO 01/11/2010: Negative trend
  • 07/12/2010 TO 31/12/2010: Panic amongst investor

• Do the stars suggest that global economy is out of recession?

The global economy is not completely out of recession. The recession started in January 2008 and now we can safely say that the the worst is over. However the recovery will still take a long time and there are a few patches of turbulent times before the economy will fully recovers. I presume that the world economy will be out of the blues by 2011.

• How does the current financial year look like?

There will be a correction around the second half of October, 2009 after which the market will be somewhat afloat. I foresee a correction once again in the second and third week of January, 2010 (around the period of Makar Shankaranti) and the markets position will be very crucial during the first half of April 2010. During the first 20 days of May, 2010 the market breadth will be negative wherein the market will seem healthy however these may be false sentiments. The market will show a negative trend during the last quarter of 2010 creating a panic amongst the investors. In short if we are to summarise:

• What is the maximum level you see the Sensex and Nifty touching this financial year?

Sensex: Maximum 18500 and Minimum 13200
Nifty: Maximum 5500 and Minimum 3900

• And where do you see the indices 5 years from now?

Sensex will touch 50,000 mark

• Which sectors according to you would be among the best performers?

• Pharmaceutical
• Energy
• Banking
• FMCG
• Media

• What is your take on sectors like realty and retail that have taken a beating?

Mars, the karaka planet for realty was is in Gemini till 5th October which is an inimical house and then transits to Cancer on 06th October which is its fall sign. Similarly Venus, the karaka planet for Retail is in Leo till 10th October
2009 which is its inimical house after which it will transit to Virgo, which is its fall sign. Hence these two sectors have been afflicted and are bound to remain so in the next year.

• Since equity markets are improving do you think commodity markets will maintain their upward trend?

Yes

• What is the future of gold and crude oil?

The future of Gold is bright and the range that I foresee would be between Rs 14500/- to Rs 17500/- per 10 grams while that of Crude will be highly fluctuating but range bound. Both will bear good returns over long range investments.

• Do you foresee the recurrence of another financial crisis?

Refer my answer for question 1

• Do you see India as a super power among global economies?

No

( Bejan Daruwala's view on market )