Market extends gains for third straight week

The key benchmark indices extended gains for the third straight week in the week ended Friday, 25 July 2008, buoyed the Congress-led coalition government winning confidence vote in parliament, sharp correction in crude oil and short covering of derivatives positions.

The barometer index BSE Sensex gained 639.54 points or 4.69% to 14,274.94 in the week ended Friday, 25 July 2008. The S&P CNX Nifty edged up 219.60 points or 5.36% to 4,311.85 in the week.

The BSE Mid-Cap index rose 333.20 points or 6.35% to 5,572.59. The BSE Small-Cap index advanced 322.89 points or 5.01% to 6778.78.

Foreign institutional investors (FIIs) were net buyers to the tune of Rs 43 crore in the month of July 2008 so far, till 24 July 2008. FIIs sold shares worth Rs 25,422.30 crore in the calendar year 2008. Mutual funds have bought shares worth Rs 882.20 crore in the month of July 2008 so far, till 23 July 2008.

Trading for the week started on an upbeat note. The 30-share BSE Sensex gained 214.64 points or 1.57% at 13,850.04 and the broader based S&P CNX Nifty advanced 67.25 points or 1.64% at 4159.50 on Monday, 21 July 2008. Index pivotals were in demand on strong rally in Asian stocks.

Market extended gains on Tuesday, 22 July 2008 ahead of the government's trust vote in parliament. The 30-share BSE Sensex advanced 254.16 points or 1.84% at 14,104.20 and the broader based S&P CNX Nifty advanced 80.6 points or 1.94% at 4240.10, on that day.

Markets galloped on Wednesday, 23 July 2008 after the Congress-led coalition government won a confidence vote in parliament late on Tuesday, 22 July 2008, raising hopes for economic reforms. The 30-share BSE Sensex surged 838.08 points or 5.94% at 14,942.28 and the broader based S&P CNX Nifty advanced 236.70 points or 5.58% at 4476.80, on that day.

The market snapped its five-day rally on Thursday, 24 July 2008 as investors booked profits at higher level. The 30-share BSE Sensex lost 165.27 points or 1.11% at 14,777.01 and the broader based S&P CNX Nifty fell 43.25 points or 0.97% at 4433.55, on that day.

The market extended losses on Friday, 25 July 2008 following overnight sharp setback in US stocks. The sentiment was also hit by seven blasts that took place in Bangalore. The 30-share BSE Sensex lost 502.07 points or 3.40% at 14,274. 94 and the broader based S&P CNX Nifty fell 121.70 points or 2.74% at 4311.85, on that day.

India’s largest private sector firm by market capitalization and oil refiner Reliance Industries (RIL) rose 1.64% to Rs 2147.35 in the week. RIL reported 13.2% growth in net profit to Rs 4110 crore on 40.65% increase in total income to Rs 41,805 crore in Q1 June 2008 over Q1 June 2007. The results were announced after market hours on 24 July 2008.

India’s second largest listed telecom services provider by sales Reliance Communication galloped 15.60% to Rs 503.10 after it called off tie-up talks with South Africa's MTN Group, Africa's biggest mobile phone group, citing legal issues.

However, India’s largest listed cellular services provider by sales Bharti Airtel fell 0.69% at Rs 796.45. The company reported 44.86% growth in net profit to Rs 2046.79 crore on a 39.72% increase in revenue to Rs 7952.32 crore in Q1 June 2008 over Q1 June 2007.The company announced the results before trading hours on 24 July 2008.

Banking shares advanced in anticipation of reforms in the banking sector after the UPA government won trust vote in parliament. India’s largest private sector bank by assets ICICI Bank rose 6.36% to Rs 656.85 and India’s second largest private sector bank by assets HDFC Bank rose 9.06% to Rs 1127.15

India’s largest state run bank by assets State Bank of India vaulted 11.47% to Rs 1448.75. The Union cabinet approved the merger of unlisted State Bank of Saurashtra with its parent State Bank of India (SBI) on Thursday, 24 July 2008.

India’s largest drug maker by sales Ranbaxy Laboratories surged 10.01% at Rs 481.25 after the company said a UK court had quashed the country's Serious Fraud Office's (SFO) prosecution of the firm's subsidiary. Ranbaxy said in a statement the English Crown Court had also declined an application by the SFO for permission to appeal to the English Court of Appeal. However, the SFO retained a right to appeal to the court directly, the Indian firm said.

India's largest passenger carmaker by sales Maruti Suzuki (India) slipped 1.50% to Rs 614.40. Its net profit fell 6.8% to Rs 465.85 on a 20.9% increase in sales to Rs 4753.58 crore in Q1 June 2008 over Q1 June 2007. The company announced the results after trading hours on 21 July 2008.

India's largest power equipment maker by sales Bharat Heavy Electricals (Bhel) advanced 8.15% at Rs 1654.90. Its net profit rose 33.1% to Rs 384.41 crore on a 33.9% increase in sales to Rs 4329.24 crore in Q1 June 2008 over Q1 June 2007. The company's outstanding order book stood at Rs 95,000 crore as on 30 June 2008. The company announced the results after trading hours on 21 July 2008.

World’s sixth largest steel maker Tata Steel climbed 4.26% at Rs 617.90 after its Thailand unit reported a surge in quarterly net profit and on expectations for a domestic price rise.

Shares of firms which are potential beneficiaries of the Indo-US nuclear deal surged after the Indian government won parliamentary vote of confidence clearing the way for the landmark civilian nuclear deal with the US. Reliance Infrastructure (up 15.08% to Rs 984.65), Alstom Projects India (up 6.60% to Rs 428.70), Rolta India (up 5.41% to Rs 288.60), Walchandnagar Industries (up 4% to Rs 267.70), Areva T&D India (up 12.56% to Rs 1655.25), Larsen & Toubro (up 3.16% to Rs 2625.60), National Thermal Power Corporation (up 8.19% to Rs 187.50), surged.

Among mid-cap stocks, McDowell Holding (up 48.73% to Rs 141), Phoenix Mills (up 45.29% to Rs 165.85), ITI (up 44.42% to Rs 38.20), Reliance Natural Resources (up 38.11% to Rs 95.50), Adlabs Films (up 26.83% to Rs 528.05), HMT (up 41.82% to Rs 75.45), and Strides Arcolabs (up 38.56% to Rs 190.45), surged.

Inflation based on the wholesale price index rose 11.89% in 12 months to 12 July 2008, below the previous week's annual rise of 11.91%, government data released on 24 July 2008 showed. Inflation for the week ended 17 May 2008 was revised upwards to 8.66% from 8.10%.

Participating in a debate on the trust motion in parliament, Finance Minister P Chidambaram on 22 July 2008, said the gross domestic product (GDP) growth in the fiscal year 2007/08 was close to 9.1%. He said the government has targeted farm credit of 2.8 trillion rupees ($65 billion) for the fiscal year ending in March 2009. Debt waiver of Rs 66,477 crore was granted to farmers so far, he said.

RIL, RNRL may see action ahead of court hearing

Hearing on the petition of Reliance Natural Resources (RNRL) seeking the Bombay High Court to restrain Reliance Industries (RIL) from selling natural gas from its KG basin gas fields to third parties has been adjourned till Wednesday, 23 July 2008.

The petroleum ministry has reportedly sought oil bonds worth Rs 50,600 to partly compensate state-run oil firms for selling fuel at subsidised rates during the first half of 2008.

The founders of real estate developer Unitech are reportedly looking to enter the general insurance sector and would rope in a foreign partner. The founders have already diversified into the telecom sector.

Tech Mahindra reportedly plans a capital expenditure of $150 million over the next three years to ramp up its physical infrastructure such as buildings and real estate as well as enhance its technology.

Indian Oil Corporation reportedly plans to enter city gas distribution business and is in talks with Oil and Natural Gas Corporation (ONGC) and Gujarat State Petroleum Corporation for sourcing gas.

The Children's Investment Fund, a UK-based hedge fund, has reportedly picked up less then 10% stakes in Indian Overseas Bank, Punjab National Bank, Vijaya Bank, Bank of Baroda and Union Bank of India.

JP Morgan Chase is reportedly investing Rs 130 crore for 33% stake in a special purpose vehicle (SPV) of Alok Infrastructure, a unit of Alok Industries. The SPV will develop a realty project in a prime location in Mumbai.

Net profit of Siemens spurted 107.2% to Rs 169.43 crore on a 1.5% increase in sales to Rs 1809.68 crore in Q3 June 2008 over Q3 June 2007.

Net profit of Alfa Laval (India) rose 29% to Rs 25.92 crore on a 31.1% increase in sales to Rs 194.23 crore in Q2 June 2008 over Q2 June 2007.

Net profit of Bihar Caustic & Chemicals soared 101.8% to Rs 13.28 crore on a 55.9% jump in sales to Rs 52.78 crore in Q1 June 2008 over Q1 June 2007.

Net profit of NOCIL surged 473.4% to Rs 11.64 crore on a 73.9% increase in sales to Rs 128.39 crore in Q1 June 2008 over Q1 June 2007.

Zee Entertainment, Aztecsoft, Crompton Greaves, Gujarat Industries Power, Infotech Enterprises, J Kumar, Mahindra & Mahindra Financial, Mastek, Patni, Pidilite, SEL Manufacturing, Shree Renuka and Sterlite Technologies, among others will declare their June ended quarter results today.

Rally to gain strength as government retains power, oil falls

The market is set to extend solid gains registered over the past four days after the Congress-led United Progressive Alliance (UPA) government late on Tuesday, 22 July 2008, retained power by winning trust vote in parliament. The end to political uncertainty following the trust vote will boost share prices. The government had sought trust vote after Left front early this month withdrew support. A further fall in oil prices and firm global markets will also aid further upmove on the domestic bourses.

The Indian stock market had surged sharply in the past four days ahead of the trust vote on expectations that the government will win the vote. Sensex jumped 1528.4 points or 12.15% in last four trading sessions to 14,104.20 on Tuesday, 22 July 2008, from its close of 12575.80 on 16 July 2008.

As per provisional data released by the stock exchanges, foreign funds on Tuesday, 22 July 2008, sold shares worth a net Rs 597.35 crore. Foreign funds sold shares worth a net Rs 111.90 crore on Monday, 21 July 2008, data released by market regulator Securities & Exchange Board of India (Sebi) on Tuesday, 22 July 2008, showed.

A section of the market reckons that the government may push forward economic reforms given that it has retained power without the support of Left parties. There has been a virtual halt in reforms process in the last four years due to strong opposition to reforms from Left parties. Left parities had stalled privatisation of state-run firms, pension reforms, higher foreign limits in insurance and more liberal norms for foreign bank

But some analysts feel that a major big-bang push to reforms is unlikely as the government will focus primarily on bringing down inflation ahead of key state polls and parliamentary elections which are due in May 2009. Inflation is nearly 12% annually, its highest in more than 13 years.

A major relief for the Indian stocks and economy is cooling off of global crude oil prices from record high hit early this month. Oil was down 35 cents at $128.07 a barrel in Asia today, 23 July 2008, after falling more than $3 to a six-week low in the previous session as the threat of Hurricane Dolly to oil drillers and refiners eased, and concerns over faltering US energy demand increased. High oil and commodity prices have been a key cause for surging inflation and rising interest rates.

With political uncertainty over, the focus will now shift to quarterly review of the monetary policy by the Reserve Bank of India (RBI) on Tuesday, 29 July 2008 and Q1 results of India Inc. The results announced so far have been a mixed bag.

Fall in oil prices boosted US stocks on Tuesday, 22 July 2008. The Dow Jones industrial average rose 135.16 points, or 1.18%, to 11,602.50, while the Standard & Poor's 500 Index ended up 17.00 points, or 1.35%, at 1,277.00. The Nasdaq Composite Index was up 24.43 points, or 1.07%, at 2,303.96.

Asian stocks were firm today, 23 July 2008. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up between 1.2% to 3.3%. The key benchmark index in China was almost unchanged.

Avoid Vishal Information IPO: India Capital Markets

India Capital Markets has come out with a report on Vishal Information Technologies' IPO. It has recommended investors to ignore the issue.

The issue has opened for subscription with its initial public offering (IPO) of 2.79 million equity shares of face value Rs 10 each. The issue will close on July 24, 2008. The price band has been fixed at Rs 140-150 per equity share.

India Capital Markets' report on Vishal Information Technologies' IPO:

Given the nature of business, we believe that the entry barrier in the segment is very low. Moreover the work of digitizing out of copyright books can be done by any players in the data conversion business. Since this is an established market, overseas we believe there would be many other experienced players in this line of business, overseas. VITL is still to prove its ability in the POD segment.

The projects executed by the company are mainly for data conversion/ digitization which take around 6 months on an average for completion. It takes around 6-9 months for VITL to receive the payments from the date of submission of invoices. The average debtor days for FY07 & FY08 are 226 & 242 days, respectively.

VITL derives significant portion of its revenue from very limited clients with top 3 contributing 56% of total revenue. Its largest three clients – UK based client, European client & American client contributing 21%, 19% and 16% respectively in FY08. Management expects this trend to continue, going forward. Any slow down from volume of business from any of these clients can have significant impact on its financial performance.

Valuation:

Globally, digital publishing is a USD 430 billion industry. Out of the given industry, the addressable market for VITL is 10- 15% which works up to USD 43 -65 bn., which is a sizable market. Given, the top line performance of the company along with decent margins, explains the delivery expertise of the company. However given, the nature & size of the business, we believe there could be many other players in its serving segment. With presence of established players in this segment, VITL will have to take on these big players for expanding its reach, which seriously questions its scalability. Moreover, “out of copyright” books can be digitized, by any players in the digitization segment.

Though the financials of the company is sound, there’s nothing unique about the company which can give us the confidence to expect consistent flow of business. The issue is priced on lower & upper price band of Rs 140 & Rs 150, at a P/E multiple of 12.35 & 13.23 at diluted FY08 earnings. Based on the facts in RHP and the given economic & market conditions, we recommend to ignore the issue.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Reliance Communication may see action

Reliance Communications called off tie-up talks with South Africa's MTN Group, Africa's biggest mobile phone group, saying they could not reach a deal due to certain legal and regulatory issues. Reliance Communication announced on the BSE that owing to certain legal and regulatory issues, the company is presently unable to conclude a transaction. Accordingly it has been mutually decided to allow the exclusivity agreement to lapse.

Indian Oil Corporation reportedly plans to go ahead with its 15 million tonnes per annum refinery project in Orissa at a cost of Rs 30,000 crore despite incurring losses on its retail fuel sales.

Tata Communications has reportedly earmarked a capital expenditure of $2 billion over the next three years to set up fresh submarine cable capacity, broadband connectivity, data centres and expand its optical fibre network.

Hotel Leela Venture reportedly plans to invest $500 million for expanding its presence in key cities over the next four years. The total room capacity would go up to 2,400 by FY12 from the present 1,100.

Bharati Shipyard reportedly plans to invest Rs 1500 crore in two phases to build a ship building yard in the western state of Gujarat. The company may raise Rs 400 - Rs 500 crore from the market for the purpose.

Max India has reportedly raised its stake in the life insurance joint venture to 74% from 50%. Its partner, New York Life Insurance Co, holds 26%.

Global Vectra Helicorp has reportedly signed two-year contracts with Reliance Industries and Oil and Natural Gas Corporation (ONGC) to hedge its aviation turbine fuel (ATF) purchases. It may sign another deal with BG Group, the reports added.

Italy's Morellato SpA is reportedly planning to set up a unit with Gitanjali Group in Himachal Pradesh for assembling Morellato, MissSixty and Just Cavalli luxury watches and jewellery.

The board of Petronet LNG is likely to consider on Monday the revised deal for liquefied natural gas from Exxon Mobil's interest in Australia's Gorgon project. It is in talks to secure Exxon's entire stake of annual output, the reports suggested.

Net profit of Jaiprakash Associates declined 9.10% to Rs 127.26 crore on 21.9% increase in sales to Rs 1148.71 crore in Q1 June 2008 over Q1 June 2007.

Net profit of Cipla rose 16.93% to Rs 140.04 crore on 33.9% increase in sales to Rs 1207.12 crore in Q1 June 2008 over Q1 June 2007.

Bharat Heavy Electricals, Dr Reddy's Pharmaceuticals, Maruti Suzuki, SAIL, Aban Offshore, Abhishek Industries, Bank Of India, Bartronics, Canara Bank, Century Enka, Housing Development & Infrastructure, IL&FS Investsmart, ING Vysya Bank, Jindal Drilling, LIC Housing, Madras Fertilizers, Peninsula Land, Petronet LNG, Punjab Tractors, Rane (Madras), Tech Mahindra, Triveni Engineering, United Spirits, Voltas and Welspun Gujarat Stahl Rohren, among others will declare their June 2008 quarter results today.

Market may turn volatile after firm start

The market may extend solid gains registered in the past two trading sessions, tracking firm Asian equities. However political uncertainty ahead of the government seeking a vote of confidence in parliament will cap gains. Trading volumes are likely to remain low as institutional investors will remain on the sidelines ahead of the outcome of the confidence vote.

The government is seeking a vote of confidence in parliament in a special two-day session of the parliament starting today after it was reduced to minority following withdrawal of support of Left parties early this month. Voting will take place tomorrow. Media reports suggest that the government has wafer-thin edge of winning the trust vote.

A section of the market reckons that the government may push forward economic reforms if it survives the vote of confidence in parliament. There has been a virtual halt in reforms process in the last four years due to strong opposition to reforms from Left parties. Left parities had stalled privatisation of state-run firms, pension reforms, higher foreign limits in insurance and more liberal norms for foreign bank.

Asian stocks rose sharply on Monday, 21 July 2008, helped by a smaller-than-expected loss at Citigroup that provided comfort about the financial sector's stability ahead of more results this week from banks and industrial companies. Key benchmark indices in Hong Kong, China, South Korea, Singapore and Taiwan were 1.4% to 3.4%. Markets in Japan were closed for a public holiday,

A sharp fall in crude prices from a record high of above $147 a barrel and a good amount of buying by foreign funds which had pressed heavy sales over the past few weeks, triggered a solid rebound on the bourses late last week. The barometer index BSE Sensex jumped 1059.60 points or 8.42% to 13,635.40 on Friday, 18 July 2008 from its close of 12575.80 on 16 July 2008

Crude prices edged up today from late New York levels but remained below $130 a barrel as talks between world powers and nuclear ambitious Iran, the fourth largest oil exporter, proved inconclusive.

Meanwhile, a cause for concern on the inflation front is the uneven distribution of rains in this monsoon season so far which has raised concerns about some kharif crops. Though the Indian Meteorological Department (IMD) has estimated the cumulative monsoon rainfall till 15 July 18, 2008, at 6% above normal, rains have been scanty in southern peninsula, Maharashtra and parts of Gujarat and Rajasthan.

With inflation hovering at highest level in more that 13 years, the Reserve Bank of India (RBI) is expected to further tighten the monetary policy.

As per provisional data released by stock exchanges after trading hours, foreign funds on Friday, 18 July 2008, bought shares worth a net Rs 408.21 crore. Foreign funds purchased worth a net Rs 535.80 crore on Thursday, 17 July 2008, data released by market regulator Securities & Exchange Board of India (Sebi) after trading hours on Friday, 18 July 2008, showed.

US stocks finished mixed on Friday, 18 July 2008. Favorable results from No. 1 US bank Citigroup and technology leader IBM drove the Dow Jones Industrial Average higher, but the Nasdaq fell on disappointing results from tech icons Google and Microsoft. The Dow closed up 49.91 points, or 0.44%, at 11,496.57. The Standard & Poor's 500 Index added 0.34 points, or 0.03%, at 1,260.66. The Nasdaq Composite Index fell 29.52 points, or 1.28%, at 2,282.78.