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Indian stock market and companies daily report (March 22, 2010, Monday)

Contributed by Angel Broking

By Angel Broking

The Indian indices opened marginally positive but maintained a trend of directionless trade, as they gyrated in a narrow band for most of the session. Volatility ruled the roost until mid-session, as the markets traded with minor, updown swings, although they sustained in the green. The markets slipped in the red in the final session, but a sharp recovery, led by benchmark heavyweight Reliance Industries, helped the indices close at their day’s highs. Both the Sensex and the Nifty gained 0.3% each, while the BSE Mid-cap and Small-cap indices registered gains of 0.1% and 0.4%, respectively. Among the front-liners, Bharti Airtel, RCom, Hero Honda, SBI and HUL were up by 1-4%, while HDFC, DLF, M&M, TCS, and ICICI Bank were down by 1-2%. In the mid-cap segment, Kirloskar Oil, United Breweries Holding, HSBC Investdirect, Deccan Chronicle and Apollo Tyres were up by 5-8%, while Motilal Oswal, Novartis, Carborundum, REI Six Ten Retail and IBREL were down by 3-5%.

Markets Today

The trend deciding level for the day is 17560 / 5257 levels. NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17619 – 17659 / 5276 – 5289 levels. However, if NIFTY trades below 17560 / 5257 levels for the first half-an-hour of trade then it may correct up to 17520 – 17462 / 5243 – 5224 levels.

RBI raises repo, reverse repo rates

The Reserve Bank of India (RBI) on Friday raised short-term borrowing and lending rates by 25bp each. The repo rate, or the rate at which banks borrow from RBI, has been increased by 25bp to 5%. Similarly, the reverse repo rate, or the rate at which surplus cash is parked with the central bank, was also increased to 3.5% (from 3.25% earlier). This is the second tightening move since January 2010, when the RBI announced a 75bp hike in the Cash Reserve Ratio (CRR) to 5.75%. The move was in-line with our expectations, aimed at taming inflation and anchoring inflationary expectations. Private banks have increased lending rates on home loans and auto loans by 25-75 bp. Among PSU banks, Union Bank, Bank of India and Punjab National Bank have already discontinued their special home loan schemes from March 1, 2010. Credit growth has started picking up, with a yoy increase in non-food bank credit at 15.8% as on February 26, 2010, which was significantly better than the 9.5% levels in October 2009. Liquidity in the mon y markets has also started to wane, with LAF balances close to Nil. Going forward, interest rates can be expected to gradually increase as credit growth continues to revive. In a rising interest rate environment, banks with a strong CASA ratio and a lower duration investment book are expected to perform better. Accordingly, within the sector, we prefer private banks, in light of their stronger core competitiveness and likelihood of CASA market share gains as GDP growth continues to pick up in FY2011E. ICICI Bank, Axis bank and HDFC Bank remain our top picks in the sector.

Shree Ganesh Jewellery House Ltd. – IPO Note

Shree Ganesh Jewellery House Ltd. (SGJHL) is one of the largest manufacturers and exporters of handcrafted gold jewellery in India. SGJHL’s products are primarily exported to countries such as the U.A.E, Singapore and Hong Kong. On the lower and upper end of the price band, the stock would quote at 5x and 5.2x its post-diluted FY2012E estimates, respectively. Considering the peer valuation on FY2010E estimates, we believe that the stock is fairly priced. Hence, we recommend a Neutral view on the IPO.

Bharti Airtel ties up funds worth US $8.3bn for Zain

Bharti Airtel is expected to arrange the funds for its proposed acquisition of the African assets of Kuwait-based Zain Telecom. It has arranged US $8.3bn (Rs37,750cr). The financing was oversubscribed, with major international banks committing to underwrite the total amount. Of the funds, US $7.5 bn (Rs34,072cr) is expected to be in dollars, and US $1bn (Rs4,550cr) in rupees. The loans in rupees would cover any associated transaction costs. Standard Chartered Bank, State Bank of India and Barclays are the major contributors to this debt portfolio. We maintain a Buy on the stock.

Punj Lloyd secures order worth US $40mn

Punj Lloyd (Punj) is a globally diversified infrastructure conglomerate, providing engineering, procurement and construction services in the Oil and Gas, Petrochemical and Infrastructure sectors. Punj has bagged an order amounting to US $40mn (~Rs200cr), relating to Engineering, Procurement and Construction (EPC) of NGI (Mixed Case) project in UAE from Abu Dhabi Gas Industries Ltd (GASCO). With the accretion of this work order, the outstanding order book stands tall at around Rs29,000cr or 2.3x FY2010E revenues. At the CMP, the stock trades at 9.9x FY2012E P/E and 1.3x FY2012E P/B. We maintain a Buy on the stock, with a Target Price of Rs261.

Merger of Leisure World with PVR

The board of director of PVR have in principle approved the merger of Leisure World a promoter's closely held Company and the owner of "PVR Anupam Multiplex" at Saket in New Delhi with PVR Limited. In connection to this, the Board has agreed to appoint either Deloitte or PWC to get the valuation of PVR and Leisure World, and to suggest swap ratio. Due to the lack of clarity in the recent development, we haven’t factored Leisure World in our numbers. Hence, we maintain a Buy on the stock, with a Target Price of Rs211.

Economic and Political News

- ONGC, partners bag 17 blocks under NELP-VIII
- NHAI raises net worth criteria for large projects
- World Bank gives US $1.05bn loan for education sector
- Oil ministry wants market-linked prices

Corporate News
- Bajaj Holdings raises stake in Bajaj Electricals
- Amtek Metal in pact with state for Rs15,820cr auto park project
- Vishal lenders near agreement on restructuring
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint