Super Sixer Equity Trading Tips

According to the famous equity market investor Peter Lynch, the key to making money in stocks is not to get scared out of them. If you are new to equity trading or think that equity market is not your cup of tea, read on to discover six rules for investing smartly in the equity market!


1. Don’t buy stocks just because someone you know has recommended it! Before buying a stock, conduct preliminary research about the stock and the company. Read the financial statements and find out about the business, promoters and management.



2. Understand you risk tolerance level or how much risk you can take? Make investment in equity market based on your risk capacity.



3. Don’t wait for a correction to enter the market. More money is lost is waiting for market corrections to happen than in market corrections.



4. Do not panic when the equity market falls. Equity markets follow a cyclical trend and are influenced by many factors. The fundamentals and future prospects of the company do not change just because market undergoes a correction.



5. Be disciplined in equity trading. Create individual stop loss levels for all your equity investments based on the volatility of the stock. When the stop loss levels are hit, sell the stock instead of averaging it out at lower levels.



6. Don’t keep dud stocks in your portfolio in the hope that they will go up one day. Cut your losses and move ahead. Invest in some other stocks which will give you a better return in the same time frame.



Stick to these rules and invest smartly in the equity market!

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Markets extend gains

The broader indices continued their forward march, with the Sensex and Nifty ending higher by 2.0% and 2.1%, respectively. The BSE mid-and small-cap indices underperformed their large cap counterparts yet again. The BSE mid-cap index ended the week 1.2% higher, while the BSE small-cap index moved up 1.3%. The week began on a cautious note given the mixed cues from the global markets. However, towards end of the week, markets staged a strong rally backed by strong foreign inflows and firm global markets. Almost all the sectoral indices ended the week in the green, with the BSE Metals index gaining the most by 5.2% followed by the BSE Realty index, which gained 4.9%. BSE Metal index outperforms the Sensex The BSE Metal Index gained 5.2% over the previous week, outperforming the Sensex by 3.2% on the back of increase in metal prices. As per media reports, the domestic steel companies hiked the steel prices by 2-3% effective October 1, 2010. Tata Steel outperformed by 4.0% as the company executed the agreement for refinancing its debt in Europe. SAIL, JSW Steel and Jindal Steel outperformed the Sensex by 6.6%, 5.4% and 3.6%, respectively. Among the non-ferrous pack, Hindalco and Hindustan Zinc outperformed the indices by 4.9% and 0.3% respectively, as the base metals prices on the LME remained firm. However, Sterlite gained 1.7% in absolute terms but underperformed the Sensex by 0.3% as the High Court ordered closure of the company's copper smelter at Tuticorin. However, later the Supreme Court stayed the order till October 18, 2010. Nalco gained 0.9% during the week, but underperformed the indices by 1.1%.

Buy Tech Mahindra; Recommend Neutral on Satyam - (Switch Strategy): Mahindra Satyam reported its FY2009 and FY2010 numbers, which underperformed the market's expectations. The company reported revenue of US $1.1bn for FY2010, which was in line with our estimates. Mahindra Satyam has rallied by over 23% in the past month in anticipation of revenue run rate of over US $1.2bn and EBITDA margin of 15-18% for FY2010. The stock is currently trading at 16.0x FY2012E EPS of Rs6.2, which is on a higher side. On risk-reward basis, we recommend a switch from Mahindra Satyam to Tech Mahindra for an upside of 19%.  

Bayer CropScience India - AGM Note: Currently, the company is exclusively focus on food grains, going ahead it plans to increase it focus on fruits & vegetables. We maintain our Neutral view on Bayer.

CEBBCO - IPO Note: CEBBCO is one of the leading designers and manufacturers in India of vehicle bodies for goods CVs. To justify the implied market capital at upper price band, the company's wagon manufacturing plant would have to operate at 100% utilization within a year and generate profitability in line with existing players, which we believe at the current juncture appears stretched. We recommend an Avoid on the IPO.

Markets witness correction during the week

Markets ended on a weak note during the week, amidst sessions marked by volatility. The Sensex and Nifty closed lower by 2.2% each. BSE mid-cap and small-cap indices, after positively outperforming the large-cap indices in the previous weeks, lost ground during the week to their large-cap counterparts and ended lower by 2.4% each. The benchmark Sensex closed below the important psychological level of 18,000 for the first time since July 30, 2010. The decline in the index can mainly be attributed to the underperformance of financial, technology, realty, auto, capital goods and power stocks. Volatility in the Indian bourses was primarily witnessed due to negative global cues during the week. On the sectoral front, all sectoral indices ended in red, with the BSE realty index and BSE metal index losing the maximum by 8.5% and 3.3%, respectively.

Realty index down 8.5%
The realty index fell 8.5% during the week, widely underperforming the Sensex, which was down by 2.2%. The top losers in the sector were Sobha Developers (down 12.6%), HDIL (down 11.3%), Unitech (down 9.5%), DLF (down 8.1%) and Anant Raj Industries (down 8.1%). The underperformance of the index can primarily be attributed to profit-booking after a sharp run-up in the realty sector as a whole in the last two weeks. Also, there were news reports of an exercise of put option held by Lehman Brothers' realty fund in Unitech's reality project in Mumbai. However, Unitech has denied receiving any communication from Lehman Brothers to that effect.

PTC India - Event Update: PTC India Financial Services (PFS), a subsidiary of PTC India, has been given the infrastructure financial company (IFC) status by the Reserve Bank of India (RBI). Post this development, PFS would be allowed to have a higher exposure to lending and investment to a single borrower or a group of borrowers. Further, PFS would have better access to resources as the exposure limit for banks' funding to IFCs has been improved. As of 1QFY2011, PFS had sanctioned Rs1,953cr under debt and Rs500cr under equity, while the disbursements under these heads stood at Rs480cr and Rs398cr, respectively. PFS had a net worth of Rs650cr as of 1QFY2011. We maintain our Buy rating on the stock with a Target Price of Rs136.

Mphasis - 3QFY2010 Result Update : For 3QFY2010, Mphasis reported top-line growth of 4.8% qoq to Rs1,279cr. The company registered impressive volume growth of 7.6% qoq in the application segment and ~20% qoq growth in the ITO segment. EBITDA margin declined by 110bp because of the new rate card pricing model with HP, which brought down realizations by 9.6% in the application business. Net profit increased to Rs271.3cr despite flat EBIT due to tax write-back with retreatment of profits under Section 10AA related to SEZ. We maintain our Buy rating on the stock with a Target Price of Rs872.

Markets retain positive momentum

Markets ended positive during the week amidst volatility, with the Sensex and Nifty ending higher by 1.3% and 1.4%, respectively. BSE mid-cap and small-cap indices continued to outperform their large-cap counterparts, growing further by 2.3% and 1.7%, respectively, during the week. Factors such as food and fuel inflation tapering down to 10.4% (11.4%) and 12.6% (12.7%), respectively; marginal decline in WPI index to 9.97% (10%); healthy FII flows resulting in increased liquidity in the markets; and mixed cues from global markets weighed on investor sentiments during the week. On the sectoral front, all the sectoral indices ended in green, with the BSE FMCG index and BSE Bankex gaining the maximum by 2.9% and 2.7%, respectively.

BSE FMCG index outperforms Sensex
Overall, good 1QFY2011 results and the flavoir for defensives helped the BSE FMCG index gain 2.9%, outperforming the Sensex, which gained 1.3%. Gains in the FMCG index were largely driven by heavyweights ITC and HUL. While ITC increased 4.4% on improving fundamentals and robust outlook for cigarette volumes, HUL gained 1.2% after its management announced August 23 as the commencement date for the buyback of its shares. Amongst others, Godrej Consumer gained 6.8% on consolidation of its recent acquisitions and Marico moved up 8% aided by the news of its acquisition of Ingwe in South Africa. During the week, Asian Paints, Dabur and Nestle were up 2-4% owing to improving fundamentals and strong defensive buying. However, with most FMCG stocks trading at peak valuations, we are underweight on the sector.

Cairn India - Event Update: Cairn Energy Plc has entered into an agreement with Vedanta Resources Plc for sale of 40-51% stake in Cairn India. The all-cash deal is being executed at Rs405/share, wherein Rs355/share will be towards the sale and purchase agreement and the balance Rs50/share constituting the non-compete fee. Thus, the open offer to the minorities will be at the lower price of Rs355/share. We recommend Neutral on the stock.

Sesa Goa - Event Update: Vedanta Resources Plc, along with Sesa Goa, has entered into an agreement with Cairn Energy Plc to acquire a 51-60% stake in its Indian subsidiary, Cairn India. Vedanta, along with Sesa Goa, will make the 20% mandatory open offer to other shareholders of Cairn India at Rs355 per share; Sesa Goa will make a strategic investment of 20% in Cairn India. We maintain our Neutral view on the stock.

Gujarat Pipavav Port - IPO Note: Gujarat Pipavav Port (GPPL) is coming out with IPO for Rs500cr through fresh issue of 10.4-11.9cr shares in the price band of Rs42-48/share. GPPL also expects to retire high-cost debt utilizing Rs300cr from the issue proceeds resulting in reduction in interest expenses from Rs115cr in CY2009 to Rs92cr in CY2011E. Consequently, we expect GPPL to report profit from CY2011E onwards. Hence, we recommend Subscribe to the IPO at the lower price band with a long-term perspective.

Markets end flat

The Indian stock market ended almost flat during the week, amidst sessions marked by volatility, with the BSE Sensex and the NSE Nifty ending marginally higher by 0.1% and 0.2%, respectively. However, BSE mid-cap and BSE small-cap indices outperformed their large-cap counterparts by further extending gains by 1.5% and 1.6%, respectively, during the week. Factors such as strong numbers reported by Tata Motors and State Bank of India during 1QFY2011, lower-than-expected IIP growth at 7.1%, concerns over the pace and sustainability of the global economic recovery leading to mixed cues from global markets weighed on investor sentiments during the week. On the sectoral front, majority of the sectoral indices ended in green, with the BSE realty index and BSE Bankex gaining the maximum by 6.6% and 3.4%, respectively. However, the BSE IT index lost the maximum during the week, ending lower by 2.2%.

Realty index outperforms the Sensex
The realty index gained 6.6% during the week, outperforming the Sensex. The top gainers in the real estate space were Anant Raj (up 19.2%), Omaxe Ltd. (up 12%), Sobha Developers (up 8.8%), HDIL (up 7.5%) and Akruti City Ltd. (up 6.1%). The rally can be attributed to the firm trend witnessed in stability in residential volumes over last 2-3 quarters across markets, with improvement in leasing activity. We expect realty stocks to outperform on the back of a strong project pipeline, well-capitalised balance sheet and decent execution skills.

Nestle - Event Update: For 1HCY2010, Nestle registered robust overall top-line growth of 19% yoy. We recommend a Neutral view on the stock (post weak 2QCY2010 results, Nestle’s stock has corrected ~7%) with a fair value of Rs2,804 (based on P/E multiple of 29x FY2012E earnings and in line with its five-year historical average valuations).

State Bank of India - 1QFY2011 Result Update: For 1QFY2011, State Bank of India's standalone net profit grew 25.1% yoy and 56.1% qoq, which exceeded our estimates on account of better-than-estimated NII and lower operating expenses. Robust operating performance, with reasonable asset quality, was the key highlight of the result. We maintain an Accumulate view on the stock with a Target Price of Rs3,185.

Tata Steel -1QFY2011 Result Update: Consolidated net revenue increased by 16.8% yoy, down 1.1% qoq, to Rs27,195cr. Group deliveries increased by 8.9% yoy to 6mn tonnes; however, they declined by 7.5% on a sequential basis. EBITDA/tonne for TSE increased to US $79 as compared to a loss of US $117 in 1QFY2010. Consolidated EBITDA stood at Rs4,433cr as compared to a loss of Rs30cr in 1QFY2010. Consolidated net profit stood at Rs1,825cr as compared to a loss of 2,209cr in 1QFY2010. We maintain a Buy view on the stock with an SOTP-based Target Price of Rs702.

Markets bounce back

The Indian stock market ended on a positive note during the week, amidst sessions marked by volatility, with the Sensex and Nifty ending higher by 1.5% and 1.3%, respectively. BSE mid-cap and BSE small-cap indices continued to outperform their large-cap counterparts and closed higher by 1.7% and 2.5%, respectively, during the week. The market opened the week on a positive note and mostly traded above the 18,000 mark during the week. Factors such as strong sales reported by auto firms for July 2010, decent set of numbers from banking stocks and revival of the monsoons kept the sentiment positive during the week. However, worries that the Central Bank might raise interest rate again in a mid-quarter policy review also weighed on investors' sentiment. On the sectoral front, most of the sectoral indices ended in green, with the BSE IT index and BSE Bankex gaining the maximum of 3.0% and 2.2%, respectively.

BSE IT index up 3%, outperforms the Sensex

 The BSE IT index gained 3% over the previous week, outperforming the Sensex, which gained 1.5%. The weekly momentum of the BSE IT index gathered strength, with IT companies viz. Wipro, HCL Tech, Mphasis, TCS, Infosys and Tech Mahindra gaining 5.4%, 5.0%, 4.8%, 2.9%, 2.7% and 2.7%, respectively. This was despite the 0.8% appreciation in average INR v/s US Dollar during the week. The surge in the index can be attributed to strong operational results posted by some of these companies for the quarter ended June 2010, specifically TCS and Wipro amongst Indian IT companies, while the MNC IT company Cognizant delivered robust operational profitability for the quarter. Most of these companies have exhibited a positive IT demand environment and are witnessing a pick-up in discretionary IT spends, which would strongly drive their volume growth in the coming quarters. We remain positive on the sector.

Aditya Birla Nuvo - Quick take: Aditya Birla Nuvo (ABNL) is a diversified conglomerate and the holding company of several subsidiaries. We have valued ABNL on an SOTP basis and assigned 20% conglomerate discount. We recommend Buy on the stock with a Target Price of Rs1,166.

ICICI Bank -1QFY2011 Result Update: ICICI Bank's net profit increased 16.8% yoy, which was in line with our estimates. The key positive of the results was a sharp declining trend in slippages from retail loans for the fifth consecutive quarter and a huge reduction in NPA provisioning burden. We maintain Buy on the stock with a Target Price of Rs1,163.

Alembic -1QFY2011 Result Update: Alembic reported below expectation numbers for 1QFY2011, impacted by a decline in API exports. Domestic formulation sales grew by 5.5% yoy on the back of the restructuring exercise undertaken by the company over the last one year, which improved working capital management, resulting in lower debt levels. We maintain Buy on the stock with a Target Price of Rs74.

Market breaches 18,000 mark

The Indian stock markets extended their gains during the week, amidst sessions marked by volatility, with the Sensex and Nifty ending higher by 1% each. BSE mid-cap and small-cap indices after many weeks underperformed their large-cap counterparts, with BSE mid-cap ending higher by 0.5% and BSE small-cap ending almost flat. The market traded in a narrow range during the week but finally managed to close above the psychological mark of 18,000 on the BSE index, thereby boosting investor sentiment. Factors such as the ongoing earnings season, positive sentiments from Chinese markets and mixed cues from European and US markets weighed on investors' sentiment during the week. On the sectoral front, most of the indices ended in green, with the BSE metals and BSE capital goods indices gaining the maximum of 4.1% and 2.1%, respectively.

BSE Metals
The BSE metal index gained 4.1% over the previous week, outperforming the Sensex by 3.1%. While Tata Steel, SAIL and Jindal Steel were up by 5.3%, 4.2% and 2.5%, respectively, as steel prices are expected to firm up in the coming months, JSW Steel was up 8.8% on media reports that the announcement of stake sale to JFE may conclude next week. Sesa Goa also witnessed an appreciation of 6.3% during the week as it reported strong quarterly numbers, but NMDC was down 1.8% due to the ongoing Naxal issue in the Dantewada region. On the non-ferrous front, Hindalco led the appreciation by 5.3% followed by Sterlite Ind, Hindustan Zinc and Nalco gaining 4.7%, 1.8% and 0.1%, respectively, as metal prices at the LME rebounded. Our top picks in the sector are Tata Steel, JSW Steel, Hindalco, Sterlite and Hindustan Zinc.

RBI Policy Preview: In the coming Monetary Policy, the RBI’s priority would be to focus on controlling inflation using monetary policy tools. We expect the RBI to hike repo and reverse repo rates by 25bp each to 5.75% and 4.25%, respectively. However, considering the current liquidity situation, we do not expect a CRR hike in the coming policy.

Bajaj Auto - 1QFY2011 Result Update: Bajaj Auto (BAL) posted strong set of numbers for 1QFY2011. The company's top line was in line with our expectations, while bottom line was above our estimates because of higher other income. High growth was also aided by higher operating leverage and robust volume growth in the domestic as well as export markets. Capacity constraints, however, restricted volume growth to a certain extent. We recommend Accumulate on BAL with a Target Price of Rs2,762.

HDFC Bank -1QFY2011 Result Update: HDFC Bank reported net profit growth of 33.9% yoy and a decline of 3% sequentially to Rs812cr, close to our estimate of Rs806cr. A strong pick-up in advances and improvement in asset quality were the key highlights of the result. We recommend Buy on the stock.

Markets extend gains

The Indian stock markets extended their gains during the week with the Sensex and Nifty ending higher by 0.7% and 0.8%, respectively. BSE mid-cap and small-cap indices continued their outperformance to the largecap counterparts, further extending their gains during the week by 1.1% and 1.9%, respectively. The market opened the week on a positive note, crossing the psychological mark of 18,000 on BSE index but mostly traded in a narrow range during the week. Factors such as mixed global cues, lower-than-expected growth in industrial production in May 2010 and weak monsoon reports (24% below normal) weighed on investors' sentiment during the week. On the sectoral front, the performance was mixed, as there were equal number of sectors gaining and losing, with the BSE Realty and BSE Bankex indices gaining the maximum of 6% and 3%, respectively.

Real Estate index gains 6% during the week

The Real Estate index gained 6.0% for the week, outperforming the Sensex, which was marginally up by 0.7%. Top gainers in the real estate space were Parsvnath (up 10.3%), Unitech (up 9.1%), Omaxe (up 8.9%), DLF (up 8%) and HDIL (up 5.8%). A speculation about the likelihood of government relaxing the three-year lock-in period for repatriation of foreign direct investment in the realty sector led to the rally. This, coupled with the fact that the sector has underperformed the benchmark indices in the recent past, aided the positive sentiment.

Kesoram Industries - Initiating Coverage: The company’s cement and tyre businesses are currently trading at attractive valuations coupled with being at a substantial discount to its peers and replacement costs. The cement business is valued at a EV/tonne of US $65 which is at a considerable discount to the replacement costs of US$80/tonne. This gives an implied enterprise valuation of Rs1.4cr/tpd to the tyre business , which is at 35-63% discount to the peers. We Initiate Coverage on the stock with a Buy recommendation and Target Price of Rs437.

Infosys -1QFY2011 Result Update: In rupee terms, Infosys top-line grew 4.3% qoq to Rs6,198cr backed by 7.6% qoq volumes growth, while the blended pricing was lower by 1.6% qoq. However, on account of the annual wage hike, EBIT margins fell by 178bp qoq to 28.3%, while the PAT declined by 7.0%.We maintain our Accumulate rating on the stock, with a Target Price of Rs2,900.

Axis Bank- 1QFY2011 Result Update : The Bank registered net profit growth of 32.0% on a yoy basis to Rs742cr, which is better than our estimate of Rs710cr mainly on account of the better-than-estimated net interest income (NII). Strong operating performance with stable asset quality was the key positive of the result. We maintain our Accumulate rating on the stock with a Target Price of Rs1,477.

Where to invest your hard-earned money?

There are many investment options which are available in the market today. But, first you need to understand how to start investing and what to invest in.
Shares:
Shares are a type of security that represents the ownership in a company. Shares are traded in stock markets. Stock investment is a good long-term investment option as the returns on stocks over a long time horizon are generally higher than most other investment avenues. However, along with the possibility of greater returns comes greater risk. In India, stocks are traded on BSE and NSE. Sensex and Nifty are two popular indices which depict the stock market in India.
Mutual funds:
A mutual fund allows a group of people to pool their money together and have it professionally managed, in keeping with a predetermined investment objective. Mutual Funds are popular because of its cost-efficiency, risk-diversification, professional management and sound regulation. You can invest as little as Rs 100 per month in a mutual fund.
Bonds:
Bonds are fixed income instruments which are issued for the purpose of raising capital. Both private entities, such as companies, financial institutions, and the central or state government and other government institutions use this instrument as a means of garnering funds. Bonds issued by the Government carry the lowest level of risk but could deliver fair returns.
Deposits:
Investing in bank or post-office deposits is a very common way of securing surplus funds. These instruments are at the lowest end of the risk-return spectrum.
Real estate:
With the ever-increasing cost of land, real estate has emerged as a profitable investment proposition.
Gold:
The ‘yellow metal’ is a preferred investment option, particularly when markets are volatile. Today, beyond physical gold, a number of products like gold futures and gold exchange traded funds, which derive their value from the price of gold, are available for investment.

Market Ends Flat

The market ended almost flat during the week, amidst sessions marked by volatility, with the Sensex and Nifty ending marginally higher by 0.02% and 0.1%, respectively. However, BSE mid-cap and small-cap indices outperformed their large-cap counterparts by further extending gains during the week by 1.5% and 1.6%, respectively. Factors such as partial decontrol of Chinese currency against USD, negative cues from global markets, decontrol of oil prices in India and rolling over of positions in the derivatives segment on the eve of the monthly expiry contributed to the volatility during the week. Most of the sectoral indices ended in green, with the oil and gas index and healthcare index gaining the most by 3% each.

BSE Oil and Gas Index - Oil PSUs Shine
The BSE oil and gas index gained 3% during the week, outperforming the Sensex. The major spurt and relief was seen in OMC stocks and upstream oil companies following EGoM's decision to fully decontrol petrol price and hike diesel price. Prices of kerosene and domestic LPG were also increased. Following this, HPCL, BPCL and IOC gained 18%, 19.1% and 12.9%, respectively. ONGC, Oil India and GAIL gained 5.9%, 7.4% and 2.2%, respectively. Cairn declined 2% during the week, mirroring the 1.9% fall in crude price. RNRL gained 5.1% and RIL gained 0.8%. We have a positive view on the sector and our top pick is RIL.

Sun TV Network (Initiating Coverage): Sun TV Networks (STNL) is a leader in three out of the four lucrative southern TV markets through its bouquet of 20 channels across genres. We have modeled in 23.5%, 24.9% and 25.3% CAGRs in top line, core EBIT (post amortisation) and earnings, respectively, for STNL over FY2010–12E. We estimate STNL's cash balance to swell to a whopping Rs10bn (~Rs33 per share) in FY2012E. We initiate coverage on STNL with Buy and a Target Price of Rs497 based on 24x P/E FY2012E.

Indraprastha Gas - Company Update: The CNG price hike has eliminated key headwinds for IGL. We revise our target price on the stock to Rs301 (Rs210) owing to the upward revision in earnings estimates and lower WACC estimates. We upgrade the stock to Buy from Reduce earlier.

Reliance Industries - Event Update: RIL acquired 45% stake in Eagleford shale acreage. RIL will pay US $1.3bn to Pioneer and Newpek for its implied share of 118,000 net acres. The deal is valued at US $11,144/acre. We maintain a Buy view on RIL with a target price of Rs1,260.

Container Corporation of India - Management Meet Note: The management in its recent meeting has given volume guidance of 10–12% for EXIM and 12–15% for the domestic segment in FY2011E with operating margins expected to be rangebound. We maintain Reduce on the stock with a target price of Rs1,194.

Market ends in green

The Indian stock market ended on a positive note during the week. The BSE Sensex and the NSE Nifty ended higher by 3.0% and 2.8%, respectively, backed by positive global cues and higher first quarter advance tax payments. However, both BSE mid-cap index and BSE small-cap index underperformed the broader market, ending the week with gains of 1.3% and 2.4%, respectively. During the week, Fitch Ratings, a global rating agency, raised India's local currency rating outlook to stable from negative as windfall gains from the sale of spectrum raised expectations of a steeper cut in the country's fiscal deficit. On the sectoral front, all sectoral indices ended in green, with the BSE IT index and BSE capital goods index gaining the most by 4.6% and 4.5%, respectively.

BSE IT Index surges by 4.6%
The BSE IT index gained 4.6% during the week, outperforming the Sensex that gained 3.0%. The weekly momentum of the IT index gathered strength with Infosys, Wipro, HCL Tech, TCS, Mphasis and Tech Mahindra gaining by 5.6%, 5.6%, 4.9%, 3.0%, 1.4% and 1.2%, respectively. This was despite the 1.5% appreciation in average Rupee versus US Dollar over a week's time. The surge in the index can be attributed to certain positive events such as Infosys mulling over the long-awaited M&A, TCS's deal with Telenor and HCL Tech's deal with SGX. Further, during the week Tech Mahindra announced to disclose the audited financial statements of Mahindra Satyam by September 2010, which gave clarity on the ambiguity of the issue. Our top picks in the sector are TCS, Wipro, Tech Mahindra and Mphasis.

SpiceJet - Event Update: Sun TV promoter Kalanithi Maran has announced to buy 37.75% stake in SpiceJet from the company's promoter Bhupendra Kansagra (Royal Holdings Services) and investor Wilbur Ross at Rs47.3/share, which is at a 16.7% discount to the current market price. We recommend Buy on the stock with a Target Price of Rs65.

BWA - Event Update: The Broadband Wireless Access (BWA) auction raised Rs38,543cr for the government, over 3x of the budgeted estimate. Infotel Broadband bagged the pan-India spectrum (22 circles) for Rs12,848cr, backed by Reliance Industries, which acquired 95% stake in Infotel for Rs4,800cr. Aircel won 6 circles, Tikona won 5 circles, Bharti Airtel won 4 circles, Qualcomm won 4 circles and Augere won 1 circle. The operators will have to pay the amount before June 22, which would result in increased capex and incremental strain on their balance sheet position.

Cement Sector - Monthly Update: The growth in cement dispatches decelerated during May 2010 due to lower off-take from the real estate and infrastructure segments. Cement dispatches grew at a 8.1% yoy in May 2010 as against 10.7% yoy growth in May 2009. Cement prices declined across the country in May 2010, with the Southern region experiencing the highest price correction in the range of Rs20-45 per bag till date.

Markets end marginally lower during the week

Markets ended marginally negative during the week, amidst sessions marked by volatility, with the Sensex and the Nifty ending lower by 0.3% each. BSE mid-cap index also witnessed a negligible fall of 0.1% during the week while BSE small-cap index ended flat, marginally outperforming their large-cap counterparts. The week witnessed mixed investor sentiment with positive global cues and robust IIP data cheering investors, while concerns over the cyclone delaying the monsoon acting as a deterrent in the initial part of the week. On the sectoral front, most of the major sectoral indices ended in red, with the BSE realty index losing the maximum of 4% followed by the BSE IT index losing 2.5%. However, BSE auto index gained the maximum of 1.6%, followed by the BSE healthcare index rising 1.5%.

BSE Auto Index - M&M and Bajaj Auto outperform

Robust May 2010 vehicle sales triggered BSE auto index to outshine consecutively in the second week of June with a gain of 1.6%, outperforming the BSE Sensex that declined 0.3%. Growth was largely driven by heavyweights M&M and Bajaj Auto, having weightage of 19.6% and 12.4%, respectively. M&M increased 3.3% during the week on the back of prediction of normal monsoon by the Meteorological Department. Bajaj Auto gained 5% on account of robust sales growth in May. Other index members, including Maruti and Hero Honda, also posted steady gains of 1-2% during the week, aided by strong volume numbers. However, CV majors such as Tata Motors and Ashok Leyland recorded marginal declines of 0.9% and 2.2%, respectively. We remain positive on the Indian auto sector. We estimate overall auto volumes to register a CAGR of around 10% over FY2010-12E, aided by improved economic environment for the sector. We remain overweight on Maruti Suzuki, M&M and Tata Motors.

Hotel Leela Venture (HLVL) - Initiating Coverage: HLVL is one of the key players in the premium segment of the hospitality industry in India. We estimate HLVL’s Top-line and PAT to register CAGRs of 41.6% and 57.9%, respectively, over FY2010-12E. Although HLVL’s financials are currently recovering, we believe EV/Room is the ideal parameter for valuing the company on which it is expensive as compared to its peers. Hence, we Initiate Coverage on the stock with a Neutral view.

RIL - Event Update: RIL has announced the acquisition of Infotel Broadband Services (P) Ltd promoted by Nahata Group. Key factors to watch out for RIL will be the execution and ramp-up of the broadband foray. At 1.8x FY2012E P/BV, we believe that RIL is relatively undervalued at current levels. We maintain a Buy view on RIL, with a Target Price of Rs1,260.

Orchid Chemicals - Event Update: Orchid Chemicals has announced entering into an agreement to acquire Karalex Pharma, the US-based generic marketing and sales service company, through an all-cash deal. We maintain a Neutral view on the stock.

Markets extend gains during the week

The Indian stock market extended its gains during the week, amidst sessions marked by volatility, with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending higher by 1.5% and 1.4%, respectively. BSE mid-cap and small-cap indices were up during the week, gaining 2.0% and 1.7%, respectively, outperforming their large-cap counterparts. Positive global cues coupled with positive domestic triggers, such as robust GDP data and steady progress of monsoons, lifted investor sentiment during the week. On the sectoral front, most of the major sectoral indices ended in green, with the BSE auto index gaining the maximum of 4.4%, followed by the BSE FMCG index rising 3.6%. However, BSE metals and BSE realty indices were down 2.1% and 0.7%, respectively.

BSE Auto Index - Maruti and M&M outperform

Robust May 2010 vehicle sales triggered BSE auto index to gain 4.4% during the quarter, outperforming the benchmark BSE Sensex, which gained 1.5%. Gains in the index were largely driven by heavyweights Maruti Suzuki and M&M, having weightage of 15% and 19%, respectively. Maruti posted an increase of 8.8% during the week on the back of strong sales volumes in May. M&M gained 7.4% for the week on the back of strong 4QFY2010 results and robust sales growth in May. Other index members, such as Hero Honda, Tata Motors and Ashok Leyland, also posted steady gains of 3-6% during the week, aided by strong volume numbers. We remain positive on the Indian auto sector. We estimate overall auto volumes to register a CAGR of around 10% over FY2010-12E, aided by the improved economic environment for the sector. Among the pack, we remain overweight on M&M, Maruti Suzuki and Tata Motors.

FM directs listed companies to have 25% Public Float: There are almost 190 companies where the promoter holding is more than the stipulated 75% with around 80% of the same being accounted by the PSU companies. Post the current notification, the quantum money to be raised would be around 0.8% of overall market cap every year, which we believe can sail through without much impact on overall markets.

United Phosphorus - Initiating Coverage: United Phosphorus ranks among the Top-5 generic agrichemical manufacturers in the world. We expect UPL to report CAGRs of 9% and 17% in sales and PAT over FY2010-12E, respectively. We Initiate Coverage on the stock with a Buy and Target Price of Rs226, valuing the stock at 13x FY2012E EPS.

Auto Sector Update - May 2010: Indian auto companies continued to report impressive performance in May 2010. Maruti Suzuki and Hero Honda recorded the highest-ever monthly sales. Strong growth across segments continues, with demand surpassing supply in a few segments due to short supply from vendors. Demand is high despite increased vehicle prices announced by most auto majors to pass on the cost impact to consumers.

Markets re-bound during the week

The Indian stock market gained some ground during the current week of trade, amidst sessions marked by high volatility, with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending higher by 2.5% and 2.7%, respectively. BSE mid-cap and small-cap indices were up during the week, gaining 1.0% and 0.9%, respectively, though they underperformed their large-cap counterparts. Gains extended during the latter half of the week as world stocks rose after China signaled its support for the euro zone. The volatility in the market was immense, as traders rolled over positions in the derivatives segment from May 2010 series to June 2010 series. On the sectoral front, most of the major sectoral indices ended in green, with the BSE Realty index gaining the maximum of 4.1%, followed by the Oil and Gas index rising 3.4%.

BSE Oil and Gas Index - RIL leads the way

The week witnessed the BSE Oil and Gas index gaining 3.4%, outperforming the benchmark BSE Sensex, which gained 2.5%. RIL gained 5.0% post the scraping of the non-compete agreement with ADAG. RNRL also gained 17.8% on the announcement and was the largest gainer in the index. ONGC gained 3.5% during the week post the increase in APM gas price. Pegging some hopes on fuel price reforms, IOC and HPCL gained 3.3% and 2.8%, respectively. However, BPCL underperformed, gaining mere 0.7%. Crude prices continued to be volatile during the week, gaining 5.6%. Cairn India gained 4.1% during the week, largely mirroring the increase in crude oil prices. We have a positive view on the sector and our Top Pick is RIL.

Bhushan Steel - Initiating Coverage: We expect Bhushan Steel to register 26.2% CAGR in volumes over FY2010-15E, the highest in the industry, with the completion of Phase-III of the expansion plan. This will be further sweetened by EBITDA/tonne rising to US $331 in FY2011E, which is at the higher end of the industry curve. Further, its strong relationships with OEMs and growing investments by foreign OEMs will help mitigate demand risks. We Initiate Coverage on the stock with a Buy and Target Price of Rs1,634.

Piramal Healthcare - Event Update: Piramal Healthcare (PHL) has sold its Domestic Formulation business for US $3.72bn. This landmark deal signifies the growing interest of global MNCs in the Indian Domestic Formulation business and signals increasing likelihood of further consolidation in the Industry going ahead. We recommend Neutral on the stock.

Jagran Prakashan - 4QFY2010 Result Update : JPL reported strong results on both Revenues and Earnings front, reporting yoy growth of 17.4% and 66.8%, respectively. After the results we have marginally revised our estimates to take into account flat circulation revenues posted by Jagran this quarter. While we have not factored the Mid-Day deal in JPL's numbers, we believe that the deal is likely to be Earnings accretive by ~2% in FY2011E. We maintain a Buy, with a Target Price of Rs160.

Global concerns dampen the mood on the bourses

The Indian stock markets lost quite a bit during the current week of trade, amidst sessions marked by high volatility, with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending lower by 3.2% each. The BSE Mid- and Small-cap indices were also battered, with both the indices ending in the red, losing 3.7% and 4.5%, respectively. During the week, among the major policy moves, the government more than doubled the price of natural gas produced from nomination blocks. On the sectoral front, most of the major sectoral indices ended deep in the red, with the BSE Realty index losing the maximum of 8.8%, followed by the Metal index, down 6.5%.
BSE Metal Index - Stumbles on global cues
The BSE Metal Index lost 6.5% over the previous week, underperforming the Sensex by 3.3%, on the back of longer term worries about the outlook for the Euro zone and China. Moreover, there were media reports that the Indian government is also proposing a windfall tax on non-fuel minerals. SAIL and Jindal Steel outperformed the BSE Metal Index by 4.0% each, but JSW Steel and Tata Steel underperformed the benchmark metal index by 2.8% and 0.6%, respectively. On the iron ore front, NMDC outperformed the Metal Index by 0.5%, on reports that the company is seeking a 90% hike in its export contract prices, but Sesa Goa underperformed by 2.6% due to a fall in the prices of iron ore fines. Among the Non-Ferrous pack, Nalco outperformed the Metal index by 5.7%, while Hindustan Zinc, Sterlite and Hindalco underperformed by 3.7%, 2.0% and 0.7%, respectively, as base metal prices on LME declined during the week. Our top picks in the sector are JSW Steel, Hindalco, Hindustan Zinc and Sterlite.
3G Auction Outcome - Event Update: The 3G Spectrum auction concluded on Day 34, raising about Rs680bn for the Government, 2x of the budgeted estimate. Bharti won 13 circles (outlay of Rs12,295cr), RCOM won 13 (outlay of Rs8,585cr), and Idea won 12 (outlay of Rs5,972cr). The aggressive bidding would lead to increased capex spends, straining the leverage position of the companies. However, we believe that Bharti, Idea and RCOM managed to corner crucial and scarce spectrum in their required respective circles, which would cover up for their large existing subscriber base.
APM Gas Price De-regulation - Event Update: The Government has hiked APM gas price from Rs3.20/scm to Rs6.82/scm. In a related development, the cabinet has also approved the marketing margins of US $0.112/mmbtu (Rs200/scm) for GAIL on APM gas marketing volumes. The move is positive for State upstream companies and GAIL.
ICICI Bank - Event Update: The Board of Directors of ICICI Bank has granted its in-principle approval for the amalgamation of Bank of Rajasthan (BoR) with ICICI Bank, subject to further approvals. Based on the swap ratio, ICICI Bank has valued BoR at 5.3x FY2010E ABV, which is expensive in our view. That said, at about 3.2% of ICICI Bank's MCap and 4.5% of Total Assets, the acquisition is too small to have any material impact on ICICI Bank.

Markets gain some ground

The Indian stock markets gained ground during the current week of trade, amidst sessions marked by high volatility, with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending higher by 1.3% and 1.5%, respectively. The BSE Mid- and Small-cap indices too ended in the green gaining 1.6% and 1.25, respectively. The key indices recouped a portion of the previous week's losses after the EU announced a rescue package to aid Greece. On the sectoral front, the major sectoral indices mirrored a mixed trend with the BSE Realty and Auto indices gaining the maximum of 4.1% and 3.7% respectively, while the BSE Metal and CG indices ended marginally in the red.

BSE Realty Index

The Realty Index gained 4.1% for the week, outperforming the Sensex, which was up 1.3%. The top gainers in the Realty Index were Sobha Developers (up 15%), HDIL (up 6.6%), Peninsula Land (up 6.3%), DLF (up 4.9%) and Ansal Properties (up 4.6%). The IIP grew at 13.5% (vis-a-vis 0.3% last year) in March, albeit lower than market expectations. Also, with the EU debt crisis remaining grim, market expects the Central Bank to keep its monetary tightening on hold, thus providing interest-sensitive sectors some relief.

Elecon Engineering - Initiating Coverage: Elecon Engineering (EEC) is a leading player in Material Handling Equipment turnkey solutions and Gear provider for the core sectors of the economy. EEC has also built strong domain expertise in coal handling. We believe that EEC is well placed to capitalise on the burgeoning industrial capex, primarily power. We estimate Revenues and Adj PAT to post a CAGR of 15% and 37% over FY2010-12E. At Rs79, the stock is available at attractive valuations of 8x FY2012E EPS and 5x FY2012E EV/EBITDA, respectively. We Initiate Coverage on the stock, with a Buy recommendation and Target  Price of Rs102.

GCPL - Event Update: GCPL has agreed to acquire remaining 51% stake of its JV with GSL for a consideration of Euro 185mn (Rs1,050cr) valuing GSL at Rs2,065cr. While we have not factored the deal into our numbers owing to a lack of funding details, based on our assumptions of full equity funding (10.2% dilution at CMP of Rs300), we believe the deal is likely to be EPS accretive by 8-10%. We maintain a Buy with a revised Target Price of Rs357 (Rs329)

Hindalco - 4QFY2010 Result Update: Hindalco's standalone top-line increased 45.3% yoy and 1.4% qoq to Rs5,358cr, lower than our estimate of Rs5,684cr primarily due to lower copper production. EBITDA margins expanded by 707bp yoy and 144bp qoq to 15.6%, in line with our estimates. Net income increased 147% yoy and 55.4% qoq to Rs664cr ahead of our estimate of Rs486cr due to lower interest expense and tax write back of Rs113cr. We believe that the company is well placed to benefit from its low cost capacity expansions and expected turnaround at Novelis. We maintain a Buy on the stock, with a SOTP Target Price of Rs208.

Weekly Review---April 26, 2010

Markets consolidate

The Indian stock markets gained ground during the current week of trade, amidst sessions marked by high volatility, with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending higher by 0.6% and 0.8%, respectively. The BSE Mid- and Small-cap indices also ended in the green, but continued to outperform their large cap counterparts, with both the indices gaining 1.5% and 2.0%, respectively. At an all important meet, the Reserve Bank of India (RBI) announced a small increase in the repo rate, reverse repo rate and CRR by 25bp each, against an expected 25-50bp hike at the monetary policy review. Moreover, corporate India continued to post a good set of numbers. On the sectoral front, most of the indices ended in the green, with the BSE Bankex gaining the maximum; however, the BSE Metal and IT index ended in the red.

BSE Bankex zooms ahead:

The BSE Bankex outperformed the Sensex this week, ending up by 4.9%, as against a 0.6% rise for the Sensex. A large part of this outperformance was driven by a strong movement in SBI, which was up on the speculation that it may get an extension of 6 months to meet the provision coverage of 70%. Axis Bank was up by 7.2% on the back of strong operating performance reported during 4QFY2010. On April 20, RBI's 25bp hike in key rates provided a sentimental comfort to banking stocks, as there was a fear of a possible 50bp hike in the CRR. ICICI Bank, Federal Bank, IOB and OBC (among others) gave returns in the range of 4 to 6%. We maintain our positive outlook on the sector, and retain HDFC Bank, ICICI Bank, Axis Bank and SBI as our top picks.

RBI's FY2011 Annual Monetary Policy Review:

The 25bp hike by the RBI in the key rates were in line with our expectations as we do not believe that urgent monetary tightening is required at this juncture. One, excluding inflation related to crops and fuel which is basically supply-driven, other inflation is so far comfortable at 4.7%. Secondly, on account of the high current account deficit, forex reserves have not been increasing much over the last couple of quarters, due to which there is no situation of surging liquidity that needs to be sterilized.

4QFY2010 Result Reviews:

Axis Bank:
Axis Bank reported a strong Net Profit growth of 31.5% yoy, which was ahead of our expectations, on back of lower-than-estimated provisions for NPAs. The core business growth recorded a strong improvement, with advances and deposits growth of 27.9% and 20.4%, respectively. We maintain a Buy on the stock.

RIL:
Company declared below expectation results due to lower-than-expected Refining margins of US $7.5/bbl as against our expectation of US $8.5/bbl. On account of strong growth in Profitability over the next couple of years, improvement in GRMs, positive news flows from the E&P Segment and inorganic growth prospects, we maintain a Buy on the stock.

Weekly Review---April 19, 2010

Markets tread cautiously ahead of RBI meet

The Indian stock markets lost ground during the current week of trade, amidst sessions marked by high volatility, with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending lower by 1.9% each. The BSE Mid- and Small-cap indices also ended in the red, but continued to outperform their large cap counterparts, with both the indices losing only 0.9% and 0.5%, respectively. On the macro front, the Index of Industrial Production (IIP) grew by 15.1% in February 2010, as against a lackluster 0.2% in the same month last year, raising further expectations of monetary tightening by the RBI next week. On the sectoral front, most of the indices ended in the red, with the BSE Oil & Gas and BSE CG indices both losing 3.3% each; however, the BSE IT index was a clear outperformer, gaining 3.2%.

BSE IT Index - Strong 4QFY2010 performance of Infosys leads to positive momentum in IT

The BSE IT Index gained 3.2% over the previous week, outperforming the Sensex by 5.1%. The weekly momentum of BSE IT gathered strength with IT companies viz. Infosys, TCS, Wipro, HCL Tech and Mphasis gaining 4%, 2.8%, 1.7%, 2.6% and 3.2%, respectively. This is mainly attributed to the strong 4QFY2010 performance of Infosys and a slight 0.3% depreciation of the Rupee v/s the US Dollar over the week. Sequentially, the Top-line grew by 3.5% in Rupee-terms, while in US $-terms it grew by 5.2%, which was 3.9% and 3.7% ahead of its revenue guidance of Rs5,721cr and US $1,250mn, respectively, for the quarter. The company added a total of 47 new clients and entered two large transformational deals; thereby confirming the improved IT demand environment and the onset of discretionary IT spends. Our Top pick in the sector is Mphasis.

Simplex Infrastructure (SI) - Company Update:

SI has underperformed the BSE Sensex and its peers by ~15% YTD. Further, we believe that it has entered into a comfortable valuation zone and will catch the eye of investors. Therefore, we reiterate a Buy on SI, with a Target Price of Rs586.

Merchant  Tariffs - Sector Update:

Merchant Power rates have begun to surge since March 2010, as the intensifying summer has pushed up the mercury levels all across the country. The merchant rates are currently at their highest levels since August 2009, and have touched day-high rates of Rs10/unit. Companies like Jindal Power, JSW Energy and Tata Power are likely to be the key beneficiaries of the higher merchant tariffs.

Weekly Review----March 8, 2010

Markets on the upswing
The Indian stock markets gave thumbs up to the budget and took a sharp upswing during the current week of trade, with both the benchmark indices, the BSE Sensex and the NSE Nifty, each ending higher by 3.4%, respectively. The BSE Mid- and Small-Cap indices were back into the limelight (both the indices ending higher by 5.3% and 5.4%, respectively), outperforming their large cap counterparts. On the sectoral front, all the major sectoral indices ended in the green, with the BSE Metal index gaining the maximum of 7.1%, followed by the BSE Realty and Auto indices.
BSE Metal Index - rolls ahead
The BSE Metal Index gained 7.1% over the previous week, outperforming the Sensex by 3.7%, on the back of an increase in metal prices. The domestic steel companies hiked steel prices by 2-3%, to pass on the excise duty hike of 2%. JSW Steel, Jindal Steel, Tata Steel and SAIL outperformed the Sensex by 8.3%, 6.7%, 4.2% and 3.9%, respectively. During the week, JSW steel rose by 11.7%, as the company reported a 69% yoy rise in crude steel production, on the back of strong domestic demand, while Tata Steel sold its stake in Chindu Chemicals (unit of Corus). Sesa Goa gained 11.7% over the previous week, on the back of an increase in spot iron ore prices and positive sentimental impact of the NMDC FPO. Among the Non-Ferrous pack, Hindustan Zinc, Nalco, Sterlite and Hindalco gained 9.4%, 4.0%, 3.8% and 3.3%, respectively, due to strong base metals prices on the LME. Our top picks in the sector are JSW Steel, Tata Steel and Sterlite.
Balrampur Chini Millls (BRCM) - Initiating Coverage: We expect sugar prices to rule firm in SY2010E, which would in turn result in a higher switch-over to sugar in Brazil and an increase in cane acreage in India. As a result, supply would ease and prices are expected to soften in SY2011E. We expect BRCM's profitability to peak in SY2010E and decline in SY2011E. We e Initiate Coverage on the stock, with a Neutral recommendation.
DQ Entertainment (International) - IPO Note: DQE (International) is an animation services and production company, focused on both the Indian and International markets. At the upper band of Rs80, the market capitalisation post issue for DQE would stand at Rs634cr, which equates to rich valuations - P/E of 20.3x, P/BV of 1.6x and EV/Sales of 2.6x FY2012E estimates. We recommend a Neutral view on the issue.
Tata Motors - 3QFY2010 Consolidated Result Update: TML reported consolidated Net Sales of Rs26,044cr (Rs17,703cr) for 3QFY2010. The company registered a stellar recovery in 3QFY2010 and reported a Net Profit of Rs650.3cr (Net Loss of Rs2,599cr in 3QFY2009). This was mainly due to the good turnaround performance registered by the company's key subsidiaries, including JLR. We maintain a Buy, with a revised Target Price rice of Rs942 (Rs859).

Weekly Market Outlook---February 27, 2010

Market gives thumbs up to the budget
In a landmark week, the Indian stock markets gave a thumbs up to the budget (the first time in four years), with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending higher by 1.5% and 1.6%, respectively. The BSE Mid- and Small-Cap indices had a muted performance for the week, with both the indices ending lower by 0.5% and 1.7%, respectively. On the sectoral front, all the major sectoral indices witnessed a mixed trend, with the BSE Metal index gaining the maximum of 3.8%, followed by the BSE Bankex, while the BSE FMCG index led the pack of losers and ended down by 3.3% for the week.
BSE Bankex zooms ahead
The BSE Bankex outperformed the Sensex this week, ending up by 2.8%, as against a 1.5% rise for the Sensex. A large part of this outperformance was on the last day of the week, in reaction to the budget. The Union Budget 2010-11 generally contained positive measures for the Banking Sector, especially for PSU Banks. The real stand-out points were the commitment towards lowering the fiscal deficit, as well as the Rs16,500cr recapitalization of PSU Banks, which will be especially positive for smaller banks like Dena Bank, Syndicate Bank, etc. The Centre's Fiscal deficit has been targeted to be brought down to about 5.8% in FY2011 and to as low as 4.1% by FY2013. The decline in Fiscal deficit appears realistic, as it is predicated on tax buoyancy from rising corporate profits (Rs45,000cr increase), 3G auctions (Rs40,000cr) and divestments (Rs40,000cr). This will help in graduating the rise in interest rates going forward, once credit growth starts gaining momentum in FY2011E. We maintain our positive outlook on the sector, and retain HDFC Bank, ICICI Bank and Axis Bank as our top picks.
Union Budget 2010-11 Review:
Finance Minister, Mr. Pranab Mukherjee, managed to do the unexpected in the Budget. In what was largely being feared as an exercise that could have put some friction to the recovery that the Indian economy is currently witnessing, it actually turned out that the Finance Minister has managed to effectively conclude this exercise in a highly balanced fashion. This has left a lingering 'feel-good factor' in the minds of most segments of the society; be it corporates, individuals, economists, etc.
Railway Budget 2010-11 Review:
Ms. Mamta Banerjee’s second Railway Budget has turned out to be a non-event from the stock market point of view even though certain key points are worth highlighting, which makes this Railway Budget somewhat different from the earlier ones.
Godawari Power and Ispat - Visit Note:
We visited Godawari Power's (GPIL) iron ore mines and its recently commissioned 0.6 mtpa pellet plant. We believe that the stock is at an inflection point, as the pellet plant has started production, and savings of Rs125-Rs150cr are expected in FY2011E. We maintain our Buy rating on the stock, with a 15-month Target Price of Rs252.

Weekly Review: February 22, 2010

Markets consolidate around 16k
Amidst sessions marked by high volatility, the Indian markets consolidated their position during the current week of trade, with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending higher by 0.2% and 0.4%, respectively. The BSE Mid- and Small-Cap indices suffered a bigger blow, with each of these indices ending lower by 1.2%. On the sectoral front, all the major sectoral indices witnessed a mixed trend, with the BSE Healthcare index gaining the maximum of 1.9%, while the BSE Realty index led the pack of losers and ended down by 5.8% for the week.
BSE Realty Sector - on a weak foundation
The Realty Sector lost 5.8% on a weekly basis and underperformed the Sensex, which was up marginally by 0.2%. Apprehensions of a rate hike by the RBI and an overall risk aversion ahead of the Union Budget for FY2011 forced investors to take a cautious stand on the sector. The top losers were Unitech (6.1%), Ansal Properties (5.9%), DLF (5.2%), Parsvnath (4.0%) and Sobha Developers (3.4%), among others on the index.
Inside This Weekly
Union Budget Preview review 2010-11:
Partial Stimulus rollback and fiscal prudence setting in are already reflecting in the current behaviour of the market participants. Thus, any significant deviation from the expected can lead to heightened volatility in markets. However, considering the limited options at hand for the FM in this Budget, it seems unlikely that he can deviate from the path visible. Thus, the FM's moves are expected to be calculative so as to ensure that a move towards fiscal prudence is initiated without jeopardizing the country's growth prospects.
Man Infraconstruction - IPO Note:
Man Infraconstruction (MInfra) is a mid-sized construction company specialising in Residential buildings (83% of Order Book) in Mumbai and Pune. On the valuation front, the IPO is available at a P/E of 11-12x FY2012E Earnings on the lower and upper price bands respectively, which is at a premium to listed players. Moreover, due to the concentrated nature of business and subdued Earnings growth, we believe the stock should trade at a discount to its peers. Hence, we recommend an Avoid to the Issue.
Rural Electrification Corporation (REC) - FPO Note:
REC is a leading public financial institution exclusively focused on extending finance to the Indian Power Sector. Around 91% of REC's loan book comprises of loans to public sector entities. Around 91% of the loans are either secured by or enjoy government guarantee. At the floor price of Rs203, the stock is available at 1.5x FY2011E. Adjusted Book Value of Rs132 and 1.3x FY2012E Adjusted Book Value of Rs151. We believe that REC can command up to 1.75x on its FY2012E Adjusted Book Value, implying a reasonable upside. Hence, we recommend a Subscribe view on the issue.
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Weekly Review: January 30, 2010

Markets continue profit-taking

Markets continued to witness profit booking during the week, with both the BSE Sensex and the NSE Nifty, ending lower by 3.0% and 3.1%, respectively. The BSE Mid-Cap and Small- Cap indices also fell by 4.0% and 4.9%, respectively. Notably, the RBI in its Monetary Policy Review raised CRR by 75 bps to suck out excess liquidity from the banking system. However, other key rates were left unchanged. On the sectoral front, all the major sectoral indices ended in the red, with the BSE Metal index losing the maximum of 7.8%, followed by the BSE Realty and the BSE Auto indices.

3QFY2010 Monetary Policy Review:

RBI hiked CRR by 75 bps to 5.75% in its 3QFY2010 Monetary Policy, to drain out excess liquidity in the system. RBI also raised GDP projection for the year to 7.5%. We believe low interest rates and reducing leverage in borrowers' balance sheets (due to equity raising and rising earnings), will revive credit demand 4QFY2010E onwards.

Tyre-Sector Update:

With the sector set for a structural shift (higher investment needs in Radialisation) and apparent pricing flexibility, improvement in the RoCE and RoE of Tyre manufacturers is expected, going forward. With 12-month view, JK Tyre offers better risk-reward, and we rate it a Buy. However, we prefer Apollo Tyres in the long term for its comprehensive business strategy. We also recommend a Buy on CEAT, owing to attractive valuations.

Greenply Industries (GIL):

GIL is well placed to service future wood panel demand, as it has largest production capacity and distribution network in India. Owing to strong RoE profile and substantial expansion in lucrative organised markets of MDF and laminates, we assign a target multiple of 8x FY2012E EPS of Rs 36.4. We recommend a Buy, with a 15-month target price of Rs 291, implying an upside of around 57%.

DB Realty (DBRL) - IPO Note:

DBRL has launched an IPO (~30.9mn shares) in the Price Band of Rs 468-486/share to raise approx Rs 1,500 cr. DBRL has firmed up development plans for 100 mn sq ft with a total saleable area of 60.9 mn sq ft. We have assumed average realisation of Rs 6,000/sq ft, which gives us a Fair NAV of Rs 412/share. Hence, we believe that the IPO is expensive and recommend an Avoid.

Weekly Review: January 23, 2010

Markets witness profit booking

After remaining subdued for the past several weeks, the Indian markets witnessed profit booking during the current week of trade, with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending lower by 4.0% and 4.1%, respectively. The BSE Mid- and Small- Cap indices were also at the receiving end, losing 3.8% and 3.4%, respectively. The US President, Barack Obama's proposed new restrictions to limit the size and the risk taken by large banks weighed heavily on the global market sentiment, including that in India. On the sectoral front, all the major sectoral indices ended in the red, with the BSE Realty index losing the maximum of 8%.

Dishman Pharma - Initiating Coverage

Dishman would now reap benefits of Organic capex incurred in the last three years and with the Abbott-Solvay contract also expected to normalise post completion of the acquisition in 4QFY2010E. Thus, overall the company is estimated to report CAGR of 23.5% and 35.5% in Top-line and Bottom-line respectively, over FY2010-12E. We Initiate Coverage on the stock with an Accumulate recommendation and 15-month Target Price of Rs311.

GSPL - Company Update

We expect the GSPL stock to get re-rated on the back of improving availability of gas and increasing probability of the GSEDS tax not likely to get implemented. Also, current valuations are building in an over pessimistic scenario with regards to Transmission Tariffs. At 1.7x FY2012E Price/Adj Book Value, we believe the stock provides an attractive entry level for investors. Hence, we maintain a Buy on the stock, with a 15-month Target Price of Rs121.

Aqua Logistics (ALL) - IPO Note

ALL is primarily engaged in freight forwarding services with agents to provide end-to-end solution to its clients. At the lower price band, the IPO is available at 13.4x FY2012E EPS, which is in line with Allcargo, but at a premium to GDL on our estimated FY2012E EPS. We believe ALL should trade at a discount to Allcargo and GDL given that these players have a proven track record, diversified portfolio of services and stronger balance sheets. Hence, we recommend an Avoid on the IPO.