Sparkling gains for Sensex…up 4.5%

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Sparkling gains for Sensex…up 4.5%

This article was posted on Aug 28, 2009 and is filed under Market News

For the week, the BSE Sensex and NSE Nifty closed the week higher by 4.5% each.

The expiry week saw the birth of a new high for the year. The Nifty closed at 2009 peak ignoring any possible fallout from drought, inflation, fund flows and of course global cues. Impressive rollover of derivatives contracts in the month of September boosted sentiment. Finally, the BSE 30-share Sensex and NSE Nifty closed the week higher by 4.5% each.

The BSE Sensex hit an intra-week high of 15,957.6 and low of 15,362. While, NSE Nifty hit an intra-week high of 4,743.7 and low of 4,536.9

The Foreign Institutional Funds purchased Rs20.76bn during the week and the Domestic Institutional Funds were net buyers to the tune of Rs13.88bn during the week.

The top gainers: The top gainers in the Sensex were Tata Motors (up 13.3%), Wipro (up 10.1%), L&T (up 9.1%), Reliance Capital (up 8.3%) and DLF (up 8.1%).

The Top Losers: The top losers in the Sensex were Tata Steel (down 1.4%), ONGC (down 1.1%), HDFC Bank (down 0.6%) and Hindustan Unilever (down 0.2%).

The BSE IT Index (up 8%): The top gainers in the IT sector were Mahindra Satyam (up 15.5%), Wipro (up 10.1%), Oracle Financial (up 8.9%) and Mphasis (up 8.4%).

HCL Tech surged over 9% during the week. According to an IIFL report released in the week, “Higher transitioning on new deals, mostly related to the infrastructure services space, led to a better-than-expected 4% QoQ growth in revenues (constant-currency) at HCL Tech during 4QFY09. The expansion in EBITDA margin, however, was only 80bps QoQ, despite headcount remaining roughly flat. Margins in infrastructure services fell ~250bps QoQ, mostly because of an increase in contracting (to third-party vendors). Moreover, the nature of new deals would necessitate the higher contracting. Recent deal flow has been worrying, with no material deals being signed in 4QFY09 (for comparison, US$1.5bn of new deals were signed in 9mFY09). Against other vendors, HCL Tech’s dependence on new deals is high (only 88% of HCL’s revenue in 4Q came from repeat business, vs ~99% at Infosys, Wipro and TCS) and the ebb in new deal flow would have a larger impact on its growth. Our concerns over the bankruptcy of a large customer, continued decline in its BPO business and poor demand environment for Axon remain. We maintain Reduce”.

The top loser was Sasken Communication. The stock fell 5% during the week.

The BSE Consumer Index: The top gainers in consumer durables space were Mirc Electronics (up 22.2%), Videocon Industries (up 20%), Samtel Color (up 14.4%), Whirlpool (up 8.4%) and Blue Star (up 5.2%).

Videocon Industries shot up over 20% during the week. According to reports, the Maharashtra government has cancelled Videocon Industries proposed 2,000 acre SEZ in western India. After this decision, the notifications on 7/12 extracts which bears Maharashtra Industrial Development Corporation’s (MIDC) name will be deleted. The report stated that the company had decided to set-up an SEZ with the focus on the entertainment industry in Pune.

The BSE Healthcare Index (up 3.8%): The top gainer in the Pharma sector was Suven Life Science, the stock rallied by over 45% during the week. The Chairman & CEO, Venkat Jasti said the company is in talks with four global Pharma majors, who are evincing keen interest about the possible out-licensing deals for SUVN-502, the company’s lead candidate for Alzheimer’s disease. If everything goes well Suven will receive substantial upfront payments / milestones payments and royalties and it will be known only after Completion of due diligence around December 2009. Irrespective of the outcome of these deals, our Company is preparing for the commencement of Phase IIa studies for this molecule during next year and also for fund raising activity.

Marksans Pharma (up 21.2%), Orchid Chemical (up 17.8%), Torrent Pharma (up 15%) and Natco Pharma (up 12.3%).

The top losers were Emami (down 5.4%), Astrazeneca Pharma (down 2.4%) and Cadila Healthcare (down 1.3%).

The BSE Banking Index (up 1.4%): The top gainers in the Banking space were OBC (up 7.9%), BOI (up 6.6%), Axis Bank (up 4.1%), IOB (up 3.1%) and Karnataka Bank (up 3.1%).

The top losers were Federal Bank (down 1.3%) and Allahabad Bank (down 1.3%) and HDFC Bank (down 0.6%).

Yes Bank was down 2.1% during the week. A recent IIFL report stated, “ Yes Bank is capitalising on the opportunity provided by the withdrawal of foreign banks and conservative approach of larger private banks. It has gained traction with many new corporate clients and should deliver robust 28%+ loan growth for FY10. Going forward, the focus is clearly on building a strong retail deposit franchise, especially CASA. A proactive provisioning policy has ensured that the bank has the highest total NPL coverage in our universe. While Tier-1 CAR remains healthy at 10.3%, the bank plans to raise capital to meet its aggressive growth plans. We are raising our FY10 and FY11 net profit estimates by 4-6% on account of higher estimated loan growth. The stock is trading at 2.0x FY11ii P/B with FY11ii RoE of 22%. We maintain BUY with a revised target price of Rs212 (previously 204), based on 2.5x FY11ii P/B”.

The BSE Auto Index (up 5%): The top gainers in auto were Ashok Leyland (up 13.5%), Bajaj Auto (up 7.1%) and M&M (up 3.3%).

Tata Motors surged over 13% during the week. The company plans to begin trial production of the Nano, at a new plant by January or February. According to reports, the company expects sales of commercial vehicles (CV) to get better in the coming months, stated reports.

Maruti Suzuki ended 2.5% higher. The company reportedly expects its sales to expand by more than 10% in the year ending March 2010 as it aims to sell 800,000 units during the period, up from 722,000 units a year earlier.

Hero Honda gained 1.6% during the week. According to reports, company will introduce nine new models this fiscal year, which ends in March and plans to invest Rs3.5bn for expansion.

The BSE Oil & Gas Index (up 4.7%): The top gainers in the oil & gas space were Jindal Drilling (up 27%), Hindustan Oil (up 20%), Essar Oil (up 11.6%) and GSPL (up 7.8%).

Reliance Industries surged 7.5% during the week. The Supreme Court on Friday postponed the hearing on petition filed in regard to the Ambani gas dispute to October 20. The cross appeals filed by Mukesh and Anil Ambani group firm on the petition filed by the government was to come up for hearing on September 1.

Aban Offshore was on fire during the week, the stock shot up over 33.4% after the company won a contract for the deployment of 3 newbuild jack-up rigs (from the Deep Driller series) in the Middle East for a period of 3 years each. The estimated revenues from the Contract is approx. Rs29.25bn. The deployment is likely to commence in the third quarter of 2009.

Further, a contract has been signed for the deployment of a newbuild jack-up rig (from the Deep Driller series) in Latin America for a period of 25.5 months. The estimated revenues from the contract is approx Rs4.46bn. The deployment is likely to commence in the third quarter of 2009.

The top losers in the oil & gas space were BPCL (down 7%), HPCL (down 6.9%), IOC (down 2.8%), Shiv-Vani Oil (down 1.4%) and ONGC (down 1.1%).

The BSE Capital Goods Index (up 6.8%): The top gainers in the capital goods were Dredging Corp (up 26.6%), Praj Industries (up 18.7%), Crompton Greaves (up 12.3%) and Gammon India (up 11.4%).

The top losers were BEL (down 3.2%), Elgi Equipments (down 2.7%) and Usha Martin (down 0.5%).

The Cement Sector: The top gainers in the cement sector were Dalmia Cement (up 31.8%), Kakatiya Cement (up 10.9%), Gujarat Sidhee (up 7.2%), Ultratech Cement (up 6.6%), JK Cements (up 6.6%) and Grasim Industries (up 3.5%).

JP Associates rose 10% during the week. According an IIFL report released in the week, “Jaiprakash Associates is well set to be among the top five players in power, cement and real estate in India. Doubling of cement capacity in three years, launch of 13m sq ft residential projects in two years and expeditious award of thermal power projects to established E&C players lend credibility to the group’s ambitious expansion plans. Treasury stocks in the parent company and consolidation of all power assets under the listed subsidiary (Jaiprakash Hydropower Limited, or JHPL) provide funding flexibility. More than doubling of cement volumes over FY09-11 and peak construction at captive projects, we estimate, should yield 44% earnings CAGR over FY09-11, similar to growth rates achieved over FY05-09. We initiate with BUY and an SOTP-based target price of Rs250 per share. At our target price, the standalone entity would be valued at P/E of 8.4x FY10ii and 6.4x FY11ii”.

Another IIFL report stated, “The Indian cement industry’s capacity utilisation for the last five months was flat YoY, compared to the sharp decline of more than 5% YoY for the period March-November 2008. We expect monthly capacity utilisation on YoY basis to start declining from September 2009. For capacity utilisation to be flat YoY, cement despatches should grow at 17% through the rest of the year. The continued sluggishness in urban housing construction and likely easing in rural housing construction on account of the poor monsoon makes us believe that consumption is unlikely to grow more than 10% for the rest of the year. We expect tougher times for southbased producers, with their capacity utilisation likely to dip further and erosion in pricing discipline as small producers increase supplies with their new capacities getting stabilised. We expect northern region capacity utilisation to start declining from 4QFY10, but the decline is likely to be moderate. We expect price declines in the southern region to continue and stable prices in northern region for the medium term”.

The Telecom Sector: The top gainers in the Telecom space were Shyam Telecom (up 7.7%), RCom (up 6.9%), WWIL (up 5.9%), Gemini Comm Ltd (up 5.1%), TTML (up 3.2%) and Tata Communication (up 2.9%).

Bharti Airtel rose 5.7% during the week. The company is reportedly planning to offer MTN Group US$13.1bn in cash and shares for acquiring a 49% stake in the South African telecom major and the two sides are close to an agreement, according to The Wall Street Journal (WSJ). There is no certainty that the MTN shareholders will agree to the Bharti Airtel offer, and could ask for a higher offer from the Indian company, the US-based financial newspaper said in its online edition today. Shareholders holding a combined 75% in MTN must approve the deal.

RCom gained 7% during the week. S Tel and Reliance Infratel signed an end-to-end telecom infrastructure agreement for telecom towers, transmission for BTS sites and fibre backbone for intercity connectivity. RCom will execute this agreement through its tower subsidiary Reliance Infratel.S Tel’s agreement with RCom covers six circles-Orissa,Bihar, Himachal Pradesh, NorthEast,Assam and J&K where the telecom operator plans to roll-out its GSM services soon.

The Realty Sector (up 10.9%): The top gainers in the real estate space were Ansal Properties (up 24.2%), Omaxe (up 18.5%), Anant Raj Indus (up 16.9%), Unitech (up 15.6%), Sobha Developers (up 14.5%) and DLF (up 8.1%).

According to an IIFL report released during the week, “We recently met Kamal Nath, Union Minister of Road Transport and Highways. The minister reiterated his target of adding 20km of highways a day, or 7,000kms every year. Based on execution cycles of highway projects, the target can be achieved only if there are ~20,000km of projects under implementation. This would imply that substantially the entire 16,922km yet to be awarded under various phases of National Highway Development Programme (NHDP) needs to be bid out in a condensed time frame. In addition to acceleration in award activity, there needs to be substantial improvement in hitherto lacklustre implementation. The minister emphasised the need for institutional strengthening and capacity building at all levels—National Highway Authority of India (NHAI), contractors and consultants. He is also leveraging his earlier experience as Commerce Minister to attract higher foreign participation in the sector. Though there are few signs of change of gears on the ground yet, the intent of purpose is indeed reassuring”.

The Metals sector (up 3.5%): The top gainers in Metal space were Sunflag Iron (up 14.1%), Bhushan Steel (up 10.4%), Tata Metaliks (up 8.1%), Tata Sponge (up 5.1%) and Jindal Steel (up 4.1%).

Tata Steel fell 1.4% during the week. According to a recent IIFL report released during the week, “Tata Steel reported consolidated loss of Rs22.6bn for 1QFY10, worse than even the most pessimistic estimate on the street. Subsidiaries reported losses of Rs17.7bn and Rs30.5bn at the EBIDTA and PAT level respectively. Consolidated EBIDTA turned marginally negative. Tata Steel’s current stock price already factors in a strong recovery in Corus’s volumes and profitability in FY11. Initial signs of weakness in steel prices are already visible, with Chinese steel prices correcting over 10% in the past 15days. We retain our negative stance on Tata Steel as we expect post-recovery demand to settle much below 2007 levels. This, we believe, will keep capacity utilisation lower, which in turn would put pressure on conversion margins. We will review our earnings after the conference call”.

Monnet Ispat fell 6.8% during the week.

source: Indiainfoline

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