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Indian stock market and companies daily report (March 19, 2010, Friday)

Contributed by Angel Broking

By Angel Broking

The Sensex slipped into the red soon after initial gains, hitting a fresh day's low in mid-morning trade. The market recouped its entire losses later. The Sensex hit a fresh intraday low in afternoon trade as Asian stocks fell. The key benchmark indices surged to the day's highs at the fag end of trade after global rating agency Standard & Poor's (S&P) revised India's rating outlook to stable from negative. S&P affirmed the 'BBB-' long-term and 'A-3' short-term sovereign credit ratings on India. Capital goods, FMCG stocks fell. Auto stocks were mixed. Banking and metal stocks rose. Stocks were volatile as traders rolled over positions in the derivatives segment from the March 2010 series to the April 2010 series, ahead of the expiry of the near-month March 2010 contracts on Thursday, 25 March 2010. Both the Sensex and Nifty gained 0.2% and 0.3%, respectively, while the BSE Mid-cap and Small-cap indices also gained 0.4% and 0.1%, respectively.

Markets Today

The trend deciding level for the day is 17495 / 5239 levels. NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17572 – 17626 / 5263 – 5280 levels. However, if NIFTY trades below 17495 / 5239 levels for the first half-an-hour of trade then it may correct up to 17442 – 17364 / 5222 – 5197 levels.

Electrosteel Castings – Initiating Coverage

Electrosteel Castings (ECL) is a leading player in ductile iron (DI) pipes and is venturing into steel making through its subsidiary Electrosteel Integrated (EIL), which is setting up a 2.2mn tonne steel plant expected to be commissioned by FY2012E. ECL's backward integration initiatives through allocation of coking coal mines are expected to result in expansion of EBITDA Margin by 1,304bp over FY2009-12E. The company is also awaiting final environmental clearance for its iron ore mine, which will further lower costs, but has not been factored in our estimates. Further, listing of EIL in which ECL holds 40% stake could unlock value for ECL. We Initiate Coverage on the stock, with a Buy recommendation and an 18-month SOTP Target Price of Rs72, valuing the Core business at 8x FY2012E FDEPS and its investments in the Steel business at 1x Book Value.

RCom partners with Polycom to launch wireless video conferencing

Reliance Communications (RCom) plans to partner with Polycom, a global leader in telepresence and video conferencing services. This partnership would introduce highresolution wireless video-conferencing services, to be marketed by Reliance Webstore, the retail arm of the Anil Dhirubhai Ambani Group. The service is expected to be commercially rolled out in over 40 cities immediately and reach 60 cities in four months. Reliance Webstore plans to expand it to 100 cities by the end of the year. Reliance Webstore already sells wired video conferencing services to over 1,500 companies. It does so through a network of 200 video conferencing suites. Polycom’s technology, coupled with its broadband services, reduces the cost of their wireless service. Reliance plans to extend this service to small and medium-sized enterprises, as well as individual consumers. The new offering comes with Polycom’s QDX6000 video conferencing system, with dedicated virtual private network connectivity through the Reliance Netconnect Broa band, with a wireless broadband data card. The entire equipment comes for Rs2lakh and has a connectivity plan of Rs1,500 per month for a usage of 10 GB. On a pay-per-use basis, a managed video conferencing service costs Rs1,500 for every half-hour. Reliance services 200-300 video conferences a day and 20,000 video conferencing hours a month. RCom expects a revenue upside of Rs400cr over five years for Reliance Webstore aided by thisnew partnership. We maintain a Buy on the stock.

Dr Reddy’s gets US FDA approval for Allegra D-24

Dr Reddy’s (DRL) has received the US FDA approval for the generic version of Allegra-D24, which is in-line with our expectation. Allegra D-24 is used for seasonal allergy symptoms and has a market size of US $200mn in the US. DRL is the exclusive FTF holder of the drug and could either launch as risk or settle with the Innovator, Sanofi-Aventis. We expect the product to be a limited competition opportunity for DRL for the next two-three years, contributing an NPV of Rs20 per share (EPS of Rs9.5 in FY2011E, Rs9.2 in FY2012E and Rs1.5 in FY2013E) if the company launches at-risk. The stock is currently trading at 21.1 FY2011E and 16.6x FY2012E earnings, we maintain a Buy on the stock, with a Target Price of Rs1,313.

Economic and Political News

- Govt. likely to infuse Rs9,500cr in banks in 1QFY2011
- 3G airwave race gathers pace, bids in April’10
- Food inflation eases, headline index expected to rise
- India to sign trademark protection treaty

Corporate News

- Glenmark unit gets USFDA nod for hypertension drug
- ArcelorMittal in stake buy talks with Bhushan Power
- NTPC, IOC plan JV for biodiesel, lubricants
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint