Nifty may slip towards 3900 in medium term

Nifty may slip towards 3900 in medium term

Emkay Global Financial Services Reliance Money Nirmal Bang

Pick your online broker wisely D-St's expectations from the Budget Top 5 picks of the day Mid-term picks of the day MUMBAI: Benchmarks indices are poised near psychological support levels following correction in the global markets in the wake of debt concerns in Europe and jobless claims in the US. Technical analysts hold bearish view on the market and expect Nifty to slip below 4000 levels in the medium term. PA Rajan, technical analyst, MF Global while speaking to ET Now said that the correction is not over and Nifty may slip to 3900 levels. “The correction is not over yet. Nifty is more volatile than other indices as its high-beta index. Nifty may find support at 4600 in the short-term but it may hit 3900 in the medium term,” Rajan added. “We are bearish on the market and see Nifty slipping to 3800-4200 in next three-six months time. Investors should book profits and stay in cash while traders should go short on the market,” said, Sarvendra Srivastava, technical strategist, Emkay Global Financial Services. “Till we don’t see consolidation around support levels of 4540, the Nifty is likely to slip lower and lower depending on the global economic situation. For positive momentum, Nifty should hold above 4960 levels,” said Bhavin Mehta, technical analyst, Reliance Money. However, Michael Pillai, technical analyst, Nirmal Bang, is not expecting a major downturn from 4710 levels. “Nifty trend is weak as the global sentiments are not in favour of the stock markets. If we look at the Indian markets, Nifty has fallen by only 11 per cent from their recent high of 5310 but technically trading near to its oversold region as the oscillator RSI is at 29 on the daily chart. In the short term we don’t see a major downtrend from this current level of 4,710 and chances are that we could bounce back from the level of 4,660 / 4,580 levels. And to the extreme the fall could extend upto 4,410 / 4,140 if any major negative news flows from the Asian or Western countries or if the Indian budget is not encouraging. In the near term strong resistance is seen around 4830 / 4950 levels and this downtrend could reverse only if Nifty holds above its 50-day moving average,” Pillai said.

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Biggest bubble in history is growing every day


Real estate, stocks, credit. China sure has its share of bubbles. Oddly, little attention is paid to the biggest one of all. China’s currency reserves grew by more than the gross domestic product of Norway in 2009. Its $2.4 trillion of reserves is a bubble all its own, one growing before our eyes with nary a peep out of those searching for the next big one. The reserve bubble is actually an Asia-wide phenomenon. And we should stop viewing this monetary arms race as a source of strength. Here are three reasons why it’s fast becoming a bigger liability than policy makers say publicly.

One, it’s a massive and growing pyramid scheme. The issue has reached new levels of absurdity with traders buzzing about crisis-plagued Greece seeking a Chinese bailout. After all, if economies were for sale, China could use the $453 billion of reserves it amassed last year to buy Greece and Vietnam and have enough left over for Mongolia. Countries such as the US used to woo the Bill Gross’s of the world to buy their debt. Now, they are wooing governments. Gross, who runs the world’s biggest mutual fund at Pacific Investment Management, is still plenty important to officials in Washington. He’s just not as vital as the continued patronage of state asset managers in places like Beijing.

You have to wonder what folks at the International Monetary Fund are thinking these days. Their aid packages tend to come with messy requirements, such as ‘get your economy in order’. China’s are merely about scoring resources or geopolitical points. We have already seen China throw lifelines to Wall Street giants, including Morgan Stanley. Entire countries seem like the natural next step.

China’s huge arsenal of reserves is increasing its global influence. The trouble is, China is trapped in an arrangement of its own making. As China and other Asian nations buy more and more US treasuries, it becomes harder to unload them without causing huge capital losses. And so they keep adding to them. “This is a titanically large foreign-exchange trade,” says David Simmonds, London-based analyst at Royal Bank of Scotland Group. “It’s the biggest one history has ever seen and there’s nowhere for these reserves to go.”

Also Read

→ Google facing many risks in standoff with China

→ Citi CEO Vikram Pandit says seeks China securities JV partner: Report

→ China Q1 GDP seen growing 11.5 pc: Govt think tank

→ China hits back at Obama over currency criticism

→ China and US spar on trade as row rolls on

China aims to diversify out of US treasuries into other assets and commodities. The question that governments are grappling with is which markets are deep enough to absorb China’s riches? Gold? Oil? Euro-area debt? The Madoff family’s next Ponzi scheme?

The challenge for China alone is like trying to park an Airbus A-380 super-jumbo in a Volkswagen. Like all pyramid schemes, there’s no easy end in sight and things could end badly. If the dollar collapses, panicked selling by central banks looking to limit losses would shake global markets more than the US credit crisis has.

Two, reserves are dead money. The wisdom of currency stockpiling came from the chaos of 1997. Speculators sensed authorities in Thailand were sitting on few reserves, and they were right. Their attack on the Thai baht set the stage for an Asian meltdown. Governments spent the 2000s determined not to repeat the mistake.


Src: ET

Negative global vibes send stocks into a tizzy

Negative global vibes send stocks into a tizzy

Top 5 picks | Mid-term picks

Pre-Market: Gap-down opening likely as global weakness persists

Screen looks ugly

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Heard on the Street

Advisory fees not enough to hard sell NTPC offer What explains the less-than-enthusiastic response to the NTPC issue? If some fund managers are to be believed, the paltry fee paid to lead managers is not quite pushing them to go the extra mile that makes the difference between a successful and not-so successful issue. This is not about a particular set of lead managers, but could well turn out to be the case with the upcoming issues, managed by other investment banks as well. "In the past, power companies with ambitious plans merely on paper have been able to raise astounding sums from the market, and are still quoting at exorbitant valuations. There is no reason why a company with a solid track record like NTPC could not have been hard-sold to investors at better valuations," says a fund manager. The government may save a few crores of rupees on advisory fees, but could end up losing much by way of indifferent response from global investors, brokers say. Then again, why do investment banks agree to work for a pittance in the first place, argue some others. So much for a free market. Bulls off St, busy hosting investor conference As FIIs continue to play hide and seek, domestic institutions, which otherwise provide some succour in choppy times, are also proving to be indifferent participants. In February so far, local institutions have net-bought shares worth Rs 483.60 crore. The buzz is that the spate of investor conferences in and outside Mumbai are keeping these institutions out of action. Nomura held its investor conference in Mumbai last week. Macquarie is holding an investor conference in Mumbai and JP Morgan is hosting its event in Goa. The BoA-Merrill Lynch conference is to kick off on February 15 in Delhi. Amongst the larger domestic broking firm, India Infoline is also holding its conference in Mumbai. Equity sales and dealing teams at other broking houses are awaiting the return of their domestic clients. Durable cos seen ‘safe bet’ ahead of Budget Shares of consumer durable companies like Whirlpool, TTK Prestige and Bajaj Electricals are being viewed as ‘safe haven’ by a certain section of the trading community ahead of the Budget. The rationale being that this is one of the few sectors that is unlikely to be impacted by any withdrawal of stimuli, and neither is in the running for any exemptions. Savvy players accumulating these shares believe these companies have a smaller but more steady clientele. Of course, good cash flows, a strong demand which is reflected in the month-on-month numbers are a definite positive, say analysts. Whirlpool shares ended the day flat at Rs 135.75, TTK Prestige at Rs 433.30 (down 1%) and Bajaj Electricals at Rs 179.20 (down 2%) on BSE on Thursday in an otherwise weak market.

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Daily News Roundup - Feb 5 2010

Friday fright on the street

Onmobile Global

Hindustan Dorr-Oliver

Biggest drop for bullion metals in three months

Src: ET, DP blog and etc

Heard on the Street and Morning calls

Heard on the Street

FIs lap up Bharati Shipyard on open offer hopes

Institutional investors have turned active in Bharati Shipyard shares amid speculation that the company may eventually go for a second open offer, after hiking its stake to nearly 46 per cent in oil and gas drilling services firm Great Offshore through the recently-completed open offer and subsequent secondary market acquisitions.

Leading foreign broking house Credit Suisse (Singapore) bought 7.6 lakh shares, or 2.8 per cent, recently to raise its stake to 6.6 per cent of Bharati Shipyard’s equity.

The stock has been on a roll in recent times and has more than doubled in the past two months. On Wednesday, it closed one per cent up at Rs 333, with a total of 10.8 lakh shares changing hands on BSE.

Dealers tracking the stock say if Bharati Shipyard increases its stake further to 51 per cent or beyond through the creeping acquisition route, it would be mandatory for the company to make another open offer under SEBI guidelines. However, this could not be confirmed from company officials.

Crompton, Kirloskar Oil withstand selling pressure

Shares of engineering firms like Crompton Greaves and Kirloskar Oil Engines have managed to withstand the sell-off in second-line shares over the past couple of weeks. Dealers tracking the counters say that fund managers already holding shares in these companies have been topping up their exposure.

Disappointing quarterly numbers from Larsen & Toubro (L&T) is prompting many fund managers to cut exposure to that company and deploy the money in other companies in the sector with a better earnings visibility, they say.

Punters use FII stake buy rumours to ramp up Selan

Some operators have been trying to ramp up shares of oil exploration company Selan Exploration Technologies by floating rumours that a couple of foreign funds would be buying stake in the company.

If market sources are to be believed, European bank ‘Beer Clay Capital’ and American hedge fund ‘Bone Pickens Capital’ are eyeing a stake — through secondary market purchase — in the company.

Sources close to the company denied knowledge of any such move by the above-mentioned institutional investors. According to analysts, Selan Exploration may need to raise capital to start and increase production in its Bakrol and Indrora fields. Shares of Selan Exploration ended 0.8 per cent lower at Rs 403.50 on the BSE on Wednesday.

Contributed by Apurv Gupta, Vijay Gurav & Shailesh Menon


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• Nifty trade band seen at 4800-5050: Satco Securities and Financial Services
• Hitachi Home may not be a cool bet
• Be prepared for some amount of negative market movement around the budget: Rajesh Jain

Top 5 picks of the day | Mid-term picks

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Daily News Roundup - Feb 4 2010

Lackluster opening on the cards

HEG

Oil India

Investment Ideas

Daily Newsletter - Feb 4 2010

Src: ET, DP blog etc

20 Indian banks in top 500 global banking list‎

20 Indian banks in top 500 global banking list‎


NEW DELHI: They may not be bankers to the world yet, but Indian banks have clearly set their eyes on that. In a year that saw the worst recession

20 Indian banks in top 500 global list Top 10 international banks in the world

for the global banking industry with several big daddies collapsing, resilient Indian banks have improved their brand value rapidly. There are 20 Indian banks in the Brand Finance® Global Banking 500, an annual international ranking by UK-based Brand Finance Plc, this year.

The State Bank of India (SBI) became the first Indian bank to break into the world’s Top 50 list, according to the Brand Finance study that saw HSBC retain its top slot for the third year in a row.

The study, released on Sunday and made exclusively available to ET in India, used discounted cash flow methodology to arrive at a net present value (NPV) of the trademark and associated intellectual property: the brand value. SBI’s brand value more than tripled to $4,551 million, up from $1,448 million in 2009 helping it grab the 36th spot in the list. ICICI Bank, the country’s largest private bank, joined it in the Top 100 list with a 130% jump in its brand value at $2,164 million.

Other big gainers in brand value include IDBI Bank (190%), Bank of Baroda (162%) and Union Bank of India (148%). The cumulative brand value of 20 Indian banks stood at $13,053 million. The 15 Indian banks that figured in last year’s list saw a whopping 130% rise in their combined brand value.

The number of Indian banks in the global list had more than tripled last year to 19 from six in 2007. Differentiation through strong brand and customer base value is becoming a key economic lever for Indian banks. This is as true in financial services as in consumer products.

“Indian banks need to recognise their inherent brand value potential and SBI’s remarkable performance by breaking into the top 50 financial services brands offers a lesson for others,” said Unni Krishnan, MD of Brand Finance India. SBI seems to be fast transforming into a brand-led business, with a broader, more holistic and sophisticated approach to managing the brand and stakeholder relationships.

“Brands act as a common glue that binds all the business functions, especially in financial services firms, resulting in greater coherence of strategy, service excellence and sustained business performance,” said Unni Krishnan, MD of Brand Finance India.

Asian aura shows Over all, HSBC remained the biggest bank brand for the third year in a row with its brand value rising 12% to $28,472 million. This must have been a relief to the bank that saw its brand value erode by 28% in 2009 league table.

The study notes that global banking sector has begun to show tangible signs of recovery, with the world’s 500 most valuable banking groups growing by 62% in terms of market capitalisation and their brand values cumulatively increasing by 49%.

“This year’s BrandFinance® Global Banking 500 shows how significant the recovery of global banking brands has been,” said David Haigh, CEO of Brand Finance plc. The total brand value of the Top 500 banks stands at $716 billion, up 49% over 2009 and 4% higher than in 2008, prior to the crisis.

“There has been a significant shift in the balance of power globally away from the US and towards banks in emerging markets,” said Mr Haigh.

The Asia region contributed 17% to the total global brand value, logging 31% growth in 2010. However, the number of Asian banks in the global 500 has dropped to 102 in 2010 from 120 the previous year.

Almost all banks in the Asian Top 10 have increased in brand value. However, this rise is not as strong as witnessed in more developed regions like Europe and North America, as they recover from the crisis.

Although the number of banks reported in the Top 500 from Asia has decreased, many banks in the region tend to be well capitalised and in countries such as India, banks have become far more competitive.

As such, the normalisation of markets has not had such a relatively profound increase in brand value in the Asian region. As was the case last year, the Asian Top 10 is dominated by Chinese banks with the gap between the major Chinese banks and the rest widening.

The biggest movement in the league table was made by SBI, which has seen its brand value more than triple to sixth biggest bank brand in Asia.

Another notable entrant is Standard Chartered, which has stepped up its Asian presence in recent years, saw a robust 59% growth in its brand value.

While the brand value increased, market capitalisation of the top 500 came down by 20% since 2008.
The US dominance of global banking has declined further with a decrease in the number in the global 500 down to 85 from 95 in 2009. The number of European banks in the list increased from 170 to 197, while that from the UK decreased from 24 to 22.

This suggests that the recovery on the European continent in particular France, Spain, and Switzerland has left British banks standing. The league table also notes that bank brands in emerging markets are slowly closing the gap. The top 20 bank brands in 2010, originate from nine countries, one more than 2009. It is for the first time that a Russian bank has made the top 20 (Sberbank) which has seen significant growth.

The Middle East has seen a 117% growth in brand value, based on high demand for Islamic banking products and services. On the other hand, Central America has seen a 40% decline in brand value. European bank brands have recovered significantly compared to the North American and Asian markets (78%, 30% and 26% growth, respectively).
Banks in the Pacific, including Australia and New Zealand have seen a recovery with growth of 58%.


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Small Cap Growth Stock To Buy From IT - Subex

Subex, provider of fraud management and revenue assurance solutions to global telecom players, was one of the worst hit companies due to a slump in the telecom sector in the last eight quarters globally.

The company struggled to remain afloat as its clients from the telecom sector postponed investments in new projects. Now, the worst seems to be over for the sector. Telcos are showing signs of revival, which means that the investments could get back in the sector. This augurs well for Subex.

BUSINESS:
Subex earned Rs 600 crore in the last fiscal from product licences and managed services. Though products contribute over 90% of the revenue, the company is keen on improving the share of the services component as this offers higher margins in the long term. Subex offers solutions to more than half of the top 70 telcos in the world. Apart from its biggest market in the US, it has 54 clients in the African continent and six in India. It has 1,200 employees on its payroll. Its clientlist includes Bell, Comcast, T Mobile, Telefonica, Verizon, BT, Zain, Vodafone, BSNL, Reliance Communications, and Telstra among others.

Inorganic growth has played an important part in Subexs growth strategy. In the last five years it has acquired four companies in the field of revenue assurance, fraud management, and services fulfillment.

FINANCIALS:
Between FY04 and FY07, the company grew its topline four times aided by acquisitions. Its net profit shot up by a similar magnitude during the said period. However, the next two years proved to be challenging given the slowdown in the global telecom sector. Though topline continued to grow, profits were hard to come by. The company reported losses at the operating level in FY08 and FY09 since costs escalated at a faster pace than the revenues.

The December 09 quarter reflects signs of revival as the company returned to profitability. It has also restructured foreign currency loans that are convertible into equity shares. This has reduced its debt burden by around 24%.

STOCK VALUATIONS:
Subexs trailing twelve month (TTM) P/E (price-earnings ratio) cannot be considered since the company had posted losses during the first half of FY10. Assuming stable earnings per share for each of the quarters in FY11, its forward P/E comes out to be 6.7 at the current market price of Rs 66 per share. This makes it reasonably valued among the other mid-tier IT players which command P/Es of eight-to-ten . The book value is at Rs.97 which makes this a value stock to buy.

GROWTH PROSPECTS:
Subexs 07 acquisition of services fulfillment player Syndesis went awry as global telcos cut new capex postsubprime crisis. Subex took a big hit because of this since it was betting on selling the next generation deliverables of Syndesis. Given the recovery in the telecom space currently, Subex is hopeful of reviving the Syndesis business. The company is also aggressively expanding its services portfolio, which would generate recurring revenue. With the restructuring of its FCCBs and other debts, its interest costs will fall. This will support its net margin in the future quarters. Investors can consider to buy stocks on a long-term basis.
Source:ET Investors Guide

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Large Cap Safe Stock To Buy - ITC

ITC is one of the most diversified companies and it is a classic defensive stock to buy which investors should be investing in.

Reason behind recommending ITC as large cap safe stock to buy is the company's dominant business of cigarettes. Over the years it has diversified into non-tobacco businesses such as, FMCG, hotels, paper & paperboards and agri-products . ITC offers investors an interesting contra opportunity. True to its defensive nature, the companys stock has been under performing the markets since February last year. However, this should not disappoint the investors, as investment in the companys stock remains protected irrespective of where the market is headed.

SEGMENT-WISE ERFORMANCE & PROSPECTS:
The companys cigarette business, its most important segment, is fraught by increasing taxes and prohibitory regulations. The company, on realising the limited growth prospects of thisbusiness, has followed the strategy of de-risking its business model.

ITCs cigarette business, which contributes around 45% to the companys topline and 85% to its bottomline, has been growing at about 9-10 % y-o-y . It is witnessing healthy volume growth despite an increase in VAT in few states, imposition of a ban on smoking and a presence of low-priced tax-evading illegal cigarettes. The companys FMCGbusiness, although still loss making, has been witnessing steady increase in volumes. Strong performance in packaged foods and personal care products has been the major growth driver. Price hikes, changes in the product mix to include high margin products, portfolio extension and cost control measures (especially in retailing) have facilitated growth. The company intends to reduce losses of the division by 20% in the coming fiscal.

ITCs hotel business, which suffered the most during recession, has started showing signs of improvement. With occupancy rates inching up to nearly 60% and average room rates rising 15-20 %, revenues from this segment have started showing sequential improvement. The Commonwealth Games this year and Cricket World Cup in 2011 are likely to augur well for the hotel segment.

In its paper business, ITC commands a premium in all its products of paper, paperboards and packaging materials. The company has been making increasedinvestments in this division. Doubling pulp capacity, increased capacity utilisation and valueadded product-mix has enabled the company to be cost competitive and consolidate its market standing. The companys agri-business provides good sourcing support to the cigarette segment and has been witnessing a steady improvement in earnings. Strong performance of leaf tobacco products has enabled this segment to register strong growth this fiscal.

FINANCIALS:
The company's net sales have grown at a compounded annual growth rate (CAGR) of 19% over the last five fiscal years to reach close to Rs 16,500 crore in FY09. The net profits have grown at a CAGR of 16% during the same period to Rs 3,300 crore at the end of FY09. At a 3-year average payout ratio of 45%, the companys dividends have grown at 23%, much higher than the CAGR at which companys net profits grew.

STOCK VALUATIONS:
The company's stock is currently trading at a priceto-earnings ratio of 25. But its market cap is at a little over six times its net sales much higher than that of any other FMCG company. It comes on the back of promising growth prospects of the company in diversified segments. As the company continues to achieve strong growth in non-cigarette businesses, it will reduce its dependence on the tobacco business for growth. While this transition seems to be happening at a slow pace, long-term investors are likely to benefit from the companys promising growth story.
Source:ETIG

Checkout: Stocks To Buy In 2010

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BHARTI AIRTEL - Stock Analysis & Quarterly Result Update

Stock analysis based on Bharti Airtel's December '09 quarter results by Centrum Broking, a stock trading broker. Analysis suggest good upside in an years time.

Reco buy price: Rs 321
CMP: Rs 306.50
Target price: Rs 400
Upside: 30.5%

Bharti’s December 2009 quarter performance remained flat due to sequential fall in RPM (revenues per minute) by 7.8 per cent to 52 paisa. However, mobile minutes registered growth of 6.7 per cent to Rs 15,300 crore on the back of elasticity from lower tariffs and lower base in September 2009 quarter. Revenue declined 0.7 per cent sequentially and grew 1.4 per cent year-on-year to Rs 9,770 crore.

Increase in network costs and selling, general and administration costs depressed margins. EBITDA fell 6 per cent sequentially to Rs 3,900 crore and margins contracted 204 basis points to 40 per cent. The brokerage expects revenue performance to remain subdued in the March 2010 quarter, as RPM has not yet bottomed despite competition.

Market Cap 116,604.40
* EPS (TTM) 24.68
* P/E 12.44
* P/C 9.27
* Book Value 72.49
* Price/Book 4.24
Div(%) 20.00
Div Yield(%) 0.33
Market Lot 1.00
Face Value 5.00
Industry P/E 13.21

At Rs 321, the stock trades at 12.1 times its estimated 2010-11 EPS.

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Sunday, January 31, 2010

IRB Infrastructure - Stock Report

A stock research report from Angel broking on IRB infrastructure with target price. Checkout..

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Morning calls

Top 5 picks of the day | Mid-term picks

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Heard on the Street

HDFC board members buy shares via stock options

This one could help in keeping the morale of its shareholders high, even amid falling share prices in the current market. Some of the board members of HDFC, the country’s premier housing finance company, have exercised their stock options to buy shares, thus displaying their confidence in the company. According to disclosures filed with stock exchanges, a few high-profile board members of HDFC, including JJ Irani and Bimal Jalan, acquired shares in small numbers through exercise of stock options even while the share price has been declining.

BS Mehta, another board member, also acquired a few thousand shares last month through the same route. According to analysts, their moves would send positive signals to the investors about high growth potential of the company which is the leading player in the housing finance sector. The stock has declined substantially from the recent high of Rs 2,681.6 on January 5 to Rs 2,383.3 on Monday. It, however, closed 1.5% higher at Rs 2,419 on Tuesday.

Going gets tough for JRG Securities on St
The going has not been too good for Kochi-based JRG Securities, whose board representatives have been removed from its Dubai-based subsidiary JRG International Brokerage DMCC. The reasons cited for this are “low shareholding and non-participation in business matters”. The Gulf-based subsidiary has also told Dubai Multi Commodities Centre Authority and Dubai Gold and Commodities Exchange to officially remove the name of JRG Securities from their records based on the decision taken by the board.

JRG International Brokerage is jointly owned by Hazza Bin Mohammed, an Arab national holding about 50%, Babu Lonappan, a NRI holding about 10% equity, and JRG Securities, which held about 40% in the subsidiary. JRG International Brokerage unveiled a rights issue last year which was subscribed to by only Hazza Mohammed and Babu Lonappan. This, in effect, decreased the shareholding of JRG Securities, while increasing the ownership of other partners. According to sources, after the rights issue, JRG Securities was not actively participating in the proceedings of the subsidiary.

“Its (JRG Securities) shareholding has come down to 20% and we are not really expecting any director board services from them,” said a senior official of JRG International Brokerage. On being queried as to whether JRG Securities would exit the subsidiary, the official said, “That is for JRG Securities to decide.” Senior officials of JRG Securities were not available for comment. Shares of JRG Securities ended 0.7% lower at Rs 40.60 on BSE on Tuesday.

Contributed by Vijay Gurav & Shailesh Menon

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Is market trying to price in - “WHAT IF”?

Spice Comm: Will History Repeat itself?

Daily News Roundup - Feb 3 2010

Firm start likely, beware the volatility

GNFC

Sasken

Ten success stories in unheard of sectors

Ten success stories in unheard of sectors

Mick Jagger, the only surviving dinosaur from the Jurassic period, said that he became interested in cricket when he watched a young Dennis Lillee tear into bowl. Business is less a spectator sport and more a narrative. But how do you figure out who is the big story? Only a few entrepreneurs manage to make it big. Those manage to grow big create wealth for themselves, their shareholders, their employees and suppliers.

Most entrepreneurs in Forbes India’s “hidden gems” list fit the bill. They make their money in businesses as varied as coal tar pitch, cooling solutions, water desalination, building truck bodies and even water treatment. They overcome adversity. Most are unlisted companies who will go public some time. There are a few that are listed but they are still small and have growth left in their sails.

Perhaps the most critical task for us was identifying these companies. We decided to use a surrogate way. We decided to follow the moneymen. We pored over a list of 800 deals private equity companies had done over the last four years and looked for companies seeing a sharp rise in sales, profits and valuation.

Then we did the taste test. A few discreet calls to a few private equity investors that have made some serious money told us that the companies in our list were thought of highly. We applied a third hurdle. If there were more than one private equity investor in the company then that was one more thing in the favour of the company. Having identified the gems, we got Dun & Bradstreet to verify the financial numbers that companies were disclosing to us. Only when the numbers added up did we move ahead.

The list that emerged had one very interesting common feature. Except for three companies, Acme and ACB (India) and Firepro, other seven companies are actually old businesses that been refurbished through smart business model changes and passionate entrepreneurship. Almost 90% of the businesses in India are family-owned. Once they were thought of as middling companies who would disappear once the IIT-IIM crowd took to business. That has not happened. Instead, the family-owned businesses have gone out, picked up new technology, learnt to value professionals and experimented with business models. For instance, Himadri Chemicals and Cebbco are such companies. The great thing is that the gems in our list are scattered all across the country — from Jabalpur to Thrissur.

This is why it is great to see blue-blooded Wall Street firms understand and finance some of these old businesses. Ten years ago, Goldman Sachs would have financed an IT services firm. A company like Sudhir Gensets would have been dismissed as an old entity with a commoditised business. But today, Goldman has put money in Sudhir because it knows that the company serves a real need that is unlikely to disappear in a hurry.

ACB (INDIA)

Promoted by G.C. Mrig, Capt. Rudra Sindhu and Major Satya Sindhu; Washes coal to reduce its ash content helping power plants to become more efficient and eco-friendly.
Secret Sauce Seasoned team, favourable regulation and sustained
demand for coal.
Financial Dashboard In 2006, Warburg Pincus bought a 24 percent stake for Rs. 310 crore. Aryan plans an IPO this year to raise Rs. 1,000 crore. Warburg will sell 10 percent. Aryan Coal’s valuation now stands nearly seven times its 2006 level.
What the Smart Set Saw First mover advantage.
Guiding Light To go beyond coal-washing and expand power generation capacity.

In 1998, when Mrig and his two friends founded Aryan Coal Benefications Ltd, the annual production of coal in India stood at about 250 million tonnes. Indian coal typically has high ash content that keeps combustibility low and affects the efficiency of power generation equipment. Only 5 percent of the coal production in the country was “washed” to reduce the ash content and most saw no need for this extra expense.

So it was not surprising when Mrig, who had spent 40 years in the industry including as managing director of Bharat Coking Coal Ltd., found it tough to get orders for his new company. His friends even wrote him off, saying, “Aapne toh paisa duba diya,” (you have wasted your money).

That was then. Now annual mining has increased to about 450 million tonnes. The government has made it compulsory for power stations located 1,000 kilometres or more from mines to wash the coal. Given that four out of 10 power stations in India are located in such faraway locations, the scope for the coal-washing business has expanded.

ACB has 62 million tonnes of coal-washing capacity, nearly half of the 130 million tonnes capacity in the whole of the country.

Private equity watchers now think that Aryan might do for Warburg Pincus this year what Bharti did for it nine years ago. And both investments were made by Pulak Prasad, who has since started his own hedge fund Nalanda Capital. Just the way Prasad spotted Sunil Mittal’s execution he was able to see Mrig’s understanding of this industry and execution skills.

Most of ACB’s washeries are located very close to the coal fields and the transportation costs are low. The company has massive operating profit margins of 44 percent that the company makes. Crisil expects ACB to benefit from the increase in demand for washed coal and stringent prequalification requirements that restrict new players. So, its market share is not under threat in the foreseeable future.

ACB doesn’t waste the coal reject that remains after the washing either. It uses the material to runs some small power plants. With 4 million tonnes of coal reject coming free every year, this has become a very profitable way for ACB to dispose the waste.

Mrig says he got the idea to recycle the waste when he saw gold miners in South Africa going after dumped mines and the Chinese extracting most out of low-quality coal.

But now it wants to enter the big league. It plans to build a 1,200 MW power plant in Madhya Pradesh and a 1,100 MW plant in Chhattisgarh.

by Prince Mathews Thomas

1 2 3 4 5 6 7 8 9


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Src: Moneycontrol

Intermediate downtrend confirmed

Intermediate downtrend confirmed

Prices slid through last week in a series of high volume, high volatility sessions. The Nifty hit a low of 4,766 points before making a partial recovery to 4,882.05, for a week-on-week loss of 3.05 per cent. The Sensex closed at 16,357.96 points for a loss of 2.98 per cent. The Defty lost 4.8 per cent as the rupee lost significant ground.

All the signals were negative. Breadth was dangerous – declines outnumbered advances by several multiples. The slide came on high volumes, even allowing for settlement considerations, this was a danger signal. Although domestic institutions bought over Rs 5,000 crore net, FIIs sold over Rs 6,000 crore. The BSE 500 was down 3.3 per cent.

Outlook: The market has probably moved into an intermediate downtrend in the past 15 sessions and is therefore, likely to see more losses. There is support between 4,750 and 4,800 but if this reading is correct, the market is likely to slide till around 4,650 levels. If it breaks 4,650, the long-term trend could be threatened.

Rationale: The peak of 5,310 on January 6th was the top of the last intermediate uptrend so this is week three of the new intermediate downtrend. The low of 4,766 on Friday established a new pattern of lower lows. There is key support at 4,650, where the 200-Day moving average is trending.

Counter-view: While intermediate trends can last up to 12-14 weeks, they can also exhaust quickly if they are running counter to the long-term trend. This is the case here, assuming the long-term trend hasn't reversed. So, there is a chance the intermediate trend will exhaust soon. If the 4,650 level holds, all is well. On the upside, the market needs to break past resistance at 4,950 to suggest a new intermediate uptrend. This would only be confirmed if it hits a new high beyond 5,310.

Bulls and Bears: Most sectors took a hammering. Metals, real estate and IT were among the weakest performers. The Bank Nifty lost 5.3 per cent at its low on Friday before bouncing dramatically to close only 1.4 percent down. It is too soon to say if this relief rally, post the RBI policy announcement will continue but quite a few bank stocks look bullish. The best long positions would probably be in Axis, Yes and Bank of Baroda.

In the IT sector, almost every counter went down with Wipro looking especially weak. The sector could recover next week if the rupee stays weak and the FIIs stop targeting it for sales. The selling is likely to continue in both metals and real estate. There could be some defensive investments occurring in pharmaceutical and FMCG and a relief rally is also possible in auto stocks. The engineering and construction sector appears to be another source of weakness with L&T, IVRCL and Punj Lloyd seeing heavy sales. However, there is some investment in power sector equipment with Suzlon, Bhel and Siemens looking good.

MICRO TECHNICALS

BHEL
Current Price: Rs 2,405.00
Target Price: Rs 2,525.00

The stock is consolidating on high volumes and testing resistance at around Rs 2,420-2,435. If it closes above Rs 2,435, it will probably hit Rs 2,525. Keep a stop at Rs 2,390 and go long. Increase the position above Rs 2,435 and move the stop up till Rs 2,425. Clear the position above Rs 2,520.

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MAHINDRA & MAHINDRA
Current Price: Rs 1,017.55
Target Price: Rs 1,080.00

The stock has landed on good support after taking a hammering. It has the potential to recover till around the Rs 1,080-1,090 mark. Keep a stop at Rs 1,000 and go long. Cover partially at Rs 1,050 and move the stop up till Rs 1,050. Hold the rest of the position till Rs 1,080 plus.

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PETRONET
Current Price: Rs 78.70
Target Price: Rs 84

The stock has consolidated on good support and is starting to move up on high volumes. It is likely to test Rs 84 on the next up move and may go further. Keep a stop at Rs 75 and go long. Book partial profits above Rs 83 and hold the remain-ing position with the stop up at Rs 80.

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TATA STEEL
Current Price: Rs 559.00
Target Price: 550.00

The stock has taken a hammering that has pushed it down to reasonable support. However, it has a downside till at least Rs 550 level and it could consolidate between Rs 550 and Rs 575 for a while. Keep a stop at Rs 575 and go short. Cover between Rs 550 and Rs 555.

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WIPRO
Current Price: Rs 647.95
Target Price: Rs 610.00

The stock has broken a key support on high volumes. It is likely to slide till around the Rs 630 mark at least and there is a possibility that it will fall further, till around the Rs 610 mark. Keep a stop at Rs 655 and go short. Book partial profits at Rs 630 and reset the stop till Rs 635. Clear the position at Rs 610.

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Smart Portfolios slips amid volatility 01-FEB-10 High volatility was the highlight of the week under review.

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Intermediate downtrend confirmed 01-FEB-10 Prices slid through last week in a series of high volume, high volatility sessions.

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'Returns in EMs will be lower than developed markets' 01-FEB-10 Japan’s financial firm Nomura has turned underweight on the Indian equity market as well as other emerging markets in 2010.

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Costly fabric 01-FEB-10 With India witnessing better growth thanks to robust consumption and capex, its flexible packaging sector appears to have a bright future.

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Market seen choppy to negative next week

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MUMBAI: The Indian stock market is seen choppy with a negative bias next week. With the end of the third quarter results season and Reserve Bank

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of India’s monetary policy review behind, traders will eye cues from overseas markets.

Last two days of the current week, already cut short by a holiday Tuesday for Republic Day celebrations, saw the bulls try to get a grip on a losing market. Whether they will be able to hold their own against the bear onslaught is the question.

Bombay Stock Exchange’s 30-share Sensex ended the week ended Jan 29 at 16,357.96, losing 501.72 points or 2.98 per cent from the earlier week’s close of 16,859.68.

National Stock Exchange’s Nifty closed the week at 4882.05, down 153.95 points or 3.05 per cent from Jan 22 close of 5036.00.

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The recent correction in stock prices was anticipated following the sharp run-up in stock prices on the back of expectations of good performance from India Inc. Overall, the third quarter results have surpassed or been in line with street estimates but with inflation becoming a worry, traders advise caution.

“We are very cautious at this juncture and suggest all short term players to lighten the position to avoid a sudden and sharp fall in the market. On the upside till Nifty does not move above 5000 levels we are not comfortable in suggesting in any long position to traders,” said an Anand Rathi report.

On Friday, in its Q3 monetary policy, the RBI raised the cash reserve ratio (CRR) by a higher-than-expected 75 basis points to 5.75 per cent against estimates of 50 bps hike. The central bank left its policy rates, repo and reverse repo--unchanged at 4.75 per cent and 3.25 per cent respectively. The CRR hike will be effected in two stages: by 50 bps for the Feb 13 fortnight and by 25 bps from Feb 27, sucking out Rs 36,000 crore of surplus liquidity from the banking system.

However, the sharp rise in food inflation led the RBI to revise upward its wholesale price index (WPI) inflation projection to 8.5 per cent end-March 2010 from 6.5 per cent. The apex bank also revised upward its GDP projection to 7.5 per cent for FY10 from 6.0 per cent, on the back of a strong rebound in industry and better prospects of Kharif crop.

“Increasingly confident of the economy's return to growth path (sustained domestic demand; early signs of revival in private sector demand for consumption and investment; growth in exports; signs of improvement in external demand factors), the RBI is moving further in reversing the crisis-driven expansionary stance. Capacities across many sectors could be stretched by this time next year. Hence, further upward pressure on product prices. There is upside risks to inflation from higher-than-expected commodity prices (including oil prices that have been range-bound). The RBI has also called for a gradual but simultaneous exit from the fiscal accommodative stance that was necessarily adopted during the crisis. This would be almost mandatory if the system interest rates need to be kept under check,” said Murali Krishnan, Head of Research, Ambit Capital, on the RBI’s policy moves.

Ambit expects WPI inflation to rise to double-digits in March, moving above the RBI’s projections once again. Thus, it expects 150 bps of repo and reverse repo rate hikes and a further 75 bps of CRR hikes between now and March 2011.

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Long-term investors can enter at 4000-4300 Nifty: CLSA

Long-term investors can enter at 4000-4300 Nifty: CLSA



Laurence Balanco, Asian Technical Research, CLSA, says 4,650-4,700 are key support levels for the Nifty. At 10.53 am, the index was trading down 58.05 points, or 1.19%, at 4,809.20. He feels a breach of 4,700 will lead to further losses and sees 4,000 as the next support in case the level is breached.

According to him, long-term investors can enter at 4,000-4,300 levels.

Here is a verbatim transcript of the exclusive interview with Laurence Balanco on CNBC-TV18. Also watch the accompanying video.

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Q: Where do you see significant support for the Nifty?

A: The old break out area, which is down at the 4,700- 4650 area, is the key support area in the short-term. What you see over the past three months is the Nifty was making new highs, the Sensex making new highs, but you had this momentum divergence, where momentum indicators weren’t confirming those new highs and that created the vulnerability. And a sell off in global markets over the past week has seen the short-term levels give way and now it’s really set up for test of 4,700 area, which includes a 200-day moving average (DMA), a break below that level does open a way for further losses then.

Q: One level, that is being talked about over here, for the Nifty is 4,500, is that the level you would watch if the index slides significantly lower from here?

A: If we break through the 4,700 level that really does open the way and the next significant support level is actually down towards 4,000 that is what we are really watching. There are some short-term levels in-between that, but if you are looking at the big macro numbers, 4,700 is the next and below that we are really talking about 4,000, around that mark is the next macro level of significance to watch.

Q: What are the Asian markets suggesting because many of them seem to have come back to 200 DMA and sort of paused there, do you see a major decisive breach of those levels for many of the key Asian markets?

A: It is quite interesting; in such a short space of time markets have given a lot of the gains that we saw early in the year. Literally in three days, the S&P 500 retraced what it had gained over a three month period. And if you look at the Asian markets, the China and the Hong Kong markets are back at their 200 DMA where they are finding some short-term support.

So looking at the Asian markets, looking at Taiwan and for instance we are short-term support levels, and potentially we see some kind of oversold rally. But with some key levels giving way, we probably still have more downside in the coming months.

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