Indian Markets Snapshot

Issues and Risks

>This was coming, but its timing obeys the Law of Amazing Coincidence :
When things can go bad, they do.
When they can go terribly bad, they do.

S&P said after US markets closed that they had downgraded $270 billion of
CDO debt.
And that they may further cut ratings on another $264 billion.
That makes for $534 billion of paper to be written-down in the balance sheets of
American banks, even if they were held as "investments".
Imagine the MTM losses in American financials by the end of today !

The reductions may increase losses at European, Asian and U.S. regional banks,
credit unions and government-sponsored enterprises such as Fannie Mae,
Freddie Mac and the 12 Federal Home Loan Banks, S&P said. Many of those
institutions haven't written down their subprime holdings to reflect a drop in
market values and these downgrades may force them to recognize losses, S&P
said.

``It is difficult to predict the magnitude of any such effect, but we believe it will
have implications for trading revenues, general business activity, and liquidity for
the banks,'' S&P said. The ratings company will start reviewing its rankings for
some banks, especially those that ``are thinly capitalized,'' it said.

And you thought last Monday and Tuesday's MTM losses in our stock markets
were bad !

>The Fed will obviously keep doing what it has to. But the reality of a slower US
economy cannot any longer be met with fiscal or monetary measures. Recall that
after the dotcom collapse in 2000, Greenspan had cut the interest rates from the
then-5% to rock bottom at 1%. The Bush administration cut taxes and tried all
kinds of stunts to apply "stimuli" to kick the economy upwards.
Sorry. Nothing happened.
The American chap then lost only some $50,000 he had put into dotcom IPOs.
But this time?
In housing alone he's been wiped out with debts borrowed on the "Wealth Effect"
of the then-crazily-high house price.
And now he's in deep trouble.
And to get him to spend on designer this and that is a waste of time and money.
All these interest rate cuts and refunds of income taxes cannot any more budge
the American consumer into going out and buying any more
designer underwears, fancy cars, gold fittings in bathrooms and expensive
holidays in the Bahamas.

His credit card is unpaid for many months; the value of his borrowed-house is
dropping every month; and he's borrowed more on the market value of
this house... which he needs to return to the lending company with compounded
interest.

The US Commerce Department said economic growth in Oct-Dec rose only
0.6%, half of what economists had estimated. Meanwhile, inflation rose 2.7%,
much higher than the desired rate of the Fed.
Life isn't so good in the US.
For that matter, it's now all crap.
Thank goodness for nemesis and hubris showing up for the hedonistic
Americana.

>The impact of all this on global stock markets will unfold week over week and
not in just one day or week.
Stock markets are a require-confirmation machine.
They'll wait patiently like nothing has happened. But when a bad-news-like thing
is announced, these markets behave like it's the end of the world ! You saw the
reaction here last Monday and Tuesday.

>This Friday will see the US Jobs Report for January, the most important statistic
awaited at Wall Street on the first Friday of every month. Everyone knows things
aren't hot on the jobs front there, but they'll still want the number to be heard out
tomorrow night and then only will they price in their view on the future of stock
markets.

>They love spewing trashy cliches on TV like "This is a great buying opportunity".
Good for them.
Let them buy.
Be clear that ....."This is a selling opportunity".

>We stay bearish about the post-first-week-of-March scenario in our stock
markets.
Our Budget itself is another macroeconomic event that will first see expectationbuying
in stock markets, and then needs to be priced in with all its mid-termelection
bias.

Please stick to the strategy of coming to 100% cash in the "unbelievable" rally of
February.
And be prepared with NIL holdings...Because only then will you be prepared
psychologically to short the Nifty after the Budget gets priced in between 29th
Feb and around 1st-to-3rd of March.

What to expect today, this week, and going forward
>Today:
...Our banks and construction shares will obviously be viewed favourably today.
...But a drop in American interest rates means a weaker dollar, a recovery in the
rupee, and so a weak view about tech shares.
...A 50 bps cut is good enough for a rising opening this morning.
..Expect some profit booking during the day.
..However, expect short covering for most part of the day and so a spike in the
Nifty.
..No rolling over of any Nifty to Feb. Wait for that. Close last weeks' Nifty longs in
the spike and wait for tomorrow.

In Feb:
...Call it a dead cat bounce or whatever else expressions they'll invent.
But an "unbelievable" rally will ensue in Feb.
It's your chance to exit your holdings this month.
NOT to buy deliveries with a more-than-20-day perspective.

From March onwards after the Budget:
>Bad news.
This terminally ill patient may look healthy on given days in Feb.
But every passing week in the US will bring one new headache or the other.
Look at how the S&P popped up from nowhere last night and downgraded $270
billion of CDO paper ! Is 270 billion dollars to be sneezed away? Where the hell
were the S&P all these months?
Where in the world were they since July last?
And recall that most of that CDO paper was earlier rated by S&P themselves !
It's the time for you to give your stock to them because they are salivating at the
low prices.
Good.
Let them buy.
You sell out your holdings to them.
And go short from March onwards.
All for fat fees for rating them Triple A or at least Double A.

So expect Moody's and Fitch not to look like asses and say nothing.
Next, they'll downgrade.
And then God alone knows what next nuclear bomb will come from which bank
or financial in the US.

Best to get out of longs this month and no longer believe "stories" from our Indian
companies.
Best to stay 100% in cash...and then short from March onwards.

Corporation Bank

CMP: Rs. 338 Industry: Banking

Stock Info
Market Capital Rs :4988 cr Equity Capital Rs :143.44 cr Avg Trading Vol :131611(Qtly) 52 WK High/Low :485/211 Face Value : Rs 10 BSE Group :A
BSE Code :532179 NSE Symbol :CORPBANK Bloomberg :CRPBK IN
Reuters :CRBK.BO BSE Sensex :18092 NSE Nifty :5281

Shareholding Pattern (As on 31st Dec, 2007)
Promoters :57% Domestic Institutions :30% Foreign Institutions :10%
Corporate :0.5% Public & Others :2%

Result Highlights

The bank managed to give a faded result with around only 6% growth in NII and Operating income. However due to lower hit of provision the bank registered a 30% growth in net profit at Rs. 190 cr. We believe that in case the bank executes its planned strategies well, it might get well paid for its reasonable big size and the proven operating efficiency in the past.

Sliding Margin – NIM of the bank came down by 23 bps on a YoY basis to 2.74%. Though the bank improved its yield on advances from 9% in March 07 to 10.27% in Q308, the high cost deposit garnered during the beginning of 2007, at about 300 bps more than the average cost, took its toll on the margins. These deposits will mature only in the beginning of next fiscal year. Some of the impact was also due to the income on temporary surplus funds parked in investments which have been recorded as other income and not interest income.

Other Income – The core fee income for the first nine months increased by a mere 10% while the overall other income increased by a little above 6%. Not so active treasury business resulted in a flat trading income when compared to many other banks. The bank which once cornered a majority share of the Cash Management Services has seen a substantial decline due to fierce competition. It plans to revive the same with some active steps like outsourcing and opening of new centers in Tier II cities. The bank also plans to concentrate on cross selling activities with plans to outsource the sales activity.

Business growth – Over first nine months loan grew by 19% to Rs 34,458 cr while in the absolute terms the incremental QoQ growth in the third quarter was only 6%. This indicates the general slowdown of credit off take in the economy. Deposit increased by 24% and the CD ratio slid from 72.3% in the last quarter to 70.3% in Q308.

Asset health –The asset quality of the bank appeared comfortable with net NPA down to 0.33% against 0.47% in the corresponding quarter last year. The bank has been able to bring down the gross NPA to 1.71% from 2.13% last year, without making any prudential provision. The bank is well covered at 81% of provision coverage.

Company Sketch:

Corporation Bank is a 101 year-old PSU bank set in the south Indian city of Mangalore. Government holds 57% of the equity capital of the bank. Out of the remaining 43%, 26% is held by LIC, the largest insurance company. Bank’s future vision for the sector is cashless transaction in urban areas and branchless banking in rural areas through local agents.
As on December 2007 the bank had 949 branches, 33 extension counters and 941 ATM’s. It is amongst one of the most tech savvy PSU banks and has implemented CBS since 2000. It is
compact bank with an efficient use of manpower which is one of the main reasons for its low operating cost.

Other Key Takeaways From Analyst Meet

• Plans to opens new branches in South West and NCR region. 100 more high growth potential centres identifiedplanned for 2008
• Set up new format financial centre’s on a pilot basis called “ Invest Mart"
• Keen on improving EPS and ROA
• Training conducted for different business segments by the professors from IIM and MDI and employees of big banks like SBI
• Aims to achieve a Rs 1000 cr business
• Plan to focus on SME sector for credit
• Immediate goal is to improve CASA mix by concentrating on payroll accounts and youth
• More than 1 million new accounts opened on an YOY basis as against average 5 / 6 lakhs per year in the last 3 years
• Online trading of equity using the Internet Banking channel. Tie-up with various Broking firms like IL&FS, ShareKhan, UTI Securities, Reliance Money & Religare

Fundamental Pick of the Week - Power Finance Corp

Power Finance Corp.(POWFIN)

Current Price: 186.00 Target Price: 224.00
Time Frame: 3-6 mths Potential upside: 20%

Company Background

Power Finance Corporation (PFC) is a leading public financial institution and an NBFC providing fund and non-fund basedsupport for the development of the power sector.In 1999, the government granted a mini navratna status to PFC. PFC's clients include power utilities, both central and state, power departments, private power utilities(including independent power
producers), joint sector power utilities, power equipment manufacturers and power utilities run by local municipalities. The company channels investments into the power sector and functions as a vehicle to develop the sector. PFC came out with its first public issue in Feb 2007.
In FY07, the company clocked a net profit of Rs 1,152 crore.

Investment rationale

Huge opportunities in power sector.

High capital adequacy ratio, low leverage.
High operating efficiency.
Improving spreads to boost net interest income.

Key Concerns

Significant shortages in the supply of crude oil, natural gas or coal could adversely affect the Indian economy and the power sector projects to which company has exposure.
Political instability or changes in the government could delay the liberalisation of the Indian economy and adversely affect economic conditions in the country.

Power projects carry certain inherent risks attached to them. These could adversely affect business and financial performance as losses can be lumpy at times.

Financials

As of December 31, 2007, the company made cumulative sanctions of Rs 43,607 crore and cumulative disbursements of Rs 9,726 crore to power sector projects. PFC posted a net profit of Rs 911 crore for 9MFY08 as compared to Rs 615 crore during same period last year, recording a growth rate of 48% (this was on the back of healthy 39% growth in the net interest income, over 100% growth in other income and low operating expenses-to-assets ratio). The average interest spread has increased from 1.72% in 9MFY07 to 2.0% in 9MFY08. In addition, there has also been a decline in the gross NPAs from 0.21% to 0.03%.

We expect a 30% CAGR in PAT over FY07-9E.

Valuations

PFC has improved its RoNW to 14.36% from 12.15% giving a jump of 221 bps. Return on assets (ROA) has been consistently improving since listing with 9mFY08 annualised ROA at 2.45% as against 2.34% for FY07. Consultancy and advisory fees from power projects is also increasing rapidly showing 100% jump in first nine months. With business potential being huge for PFC,
we believe at 2x FY09E P/BV, the stock has more upsides. We value the stock at 2.5x FY09E BV giving a target price of Rs 224, a 20% upside from current levels.

Technical Outlook

The stock is currently trading near its 200-day EMA of Rs 194. Volumes have been gradually increasing along with the rise in prices, an indication the stock is being accumulated at current levels. We can expect a strong positive breakout in the coming days. On the charts, the stock has been trading range-bound between Rs 156 and Rs 185. A decisive move above the Rs 198
levels with good volumes could further propel it to Rs 210-232. On the downside, it has strong support at Rs 166. A fall below this level could see it go further down to Rs 148 levels.

Bharti Airtel Ltd

Initiating Coverage Report Under performer CMP Rs 850

Key data
Face Value : 10 NSE Code : BHARTIARTL
52 WEEK NSE High / Low : 1184 /606.35 Avg Volume (no of shares) : 585550

Shareholding Pattern 31.12.07
Foreign : 26.45% Institutions : 4.31%
Non Promoter Corp. Hold. :2% Promoters : 65.88% Public & Others : 1.36%

Company Background
Bharti Airtel Limited, a part of Bharti Enterprises, is India's leading provider of telecommunications services. The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU’s) - mobile services, telemedia services (ATS) & enterprise services. The mobile services group provides GSM mobile services across India in 23 telecom circles, while the ATS business group provides broadband & telephone services in 94 cities. The Enterprise services group has two sub-units - carriers (long distance services) and services to corporates. All these services are provided under the Airtel brand. The company also has passive infrastructure tower business through the subsidary Bharti Infratel.
Bharti has recently moved into life insurance business and has tied up with Walmart to enter retail business.

Rationale for Sell
- Revenue growth tapering: - A quarter on quarter analysis for the company shows that the revenue growth quarter on quarter is tapering down.
- Average Revenue Per User (ARPU) on the decline: - Bharti Airtel, which had ARPU at Rs 465 at the end of FY07, has showed a decline in ARPU and for the quarter ending Dec’07 ARPU was Rs 358. Going forward as competition intensifies ARPU can be seen to decline further to Rs 320.

- A decline in Minutes of usage per subscriber (MOU/SUB) in a month for Q2 vs Q1 is also evident that has come down from 478 min. to 469 min. The MOU had peeked out in Q1FY08 and has shown a decline in the next quarter. With competition on the rise and number portability in the offing MOU/SUB for Airtel is expected to go down further

- Competition increased: - With dual licensing policy, stiff competition is emerging in GSM Domain. New players and existing CDMA operators such as Reliance Infocom have been allotted start up spectrum in many of the circles in which Airtel is currently operating. Competition would intensify and Bharti Airtel’s margins would come under pressure.
- Competition slated to grow at a much faster rate: - With dual licensing and number portability to be implemented and a plethora of services to be offered by competitors, growth for competitors evident.
- Technology Barrier: - Airtel, which is on GSM domain, may find it difficult to shift to advanced and more capital intensive technology of CDMA, under the dual licensing policy. This would limit the company’s growth in its core business that is telephone services.
- Subscriber Base Forecasted to shrink: - With competition intensifying, and emergence of new players, Airtel, which is a market leader in 14 of the 23 circles, stands to loose subscribers to competition. Moreover with new TRAI policy such as number portability, subscriber shift may be expected to teleservice provider that offers better quality of services. These factors would reduce the current subscriber base of Airtel.
- Additional spectrum required to add more subscribers: - In some of the circles where Airtel is operating, the subscriber base is nearing saturation in terms of the spectrum available to Airtel.

Unavailability of spectrum and further addition of subscriber base (in the current allocated spectrum) would lead to deterioration of Quality of services. Moreover in some of the sectors, new entrants have been given spectrum instead of additional spectrum allocation to existing players. To increase subscribers base in the existing available spectrum that Airtel has, the company would have to undertake intensive capex that would erode company’s profitability.
- Bharti is diversifying into areas such as insurance and retail. These businesses have long gestation periods and are fairly complex businesses.
- In spite of being in the growth business for the past 5 years ,it has not given any dividend to its shareholders

Risk and concerns
- Our call is based on the current slowdown in the growth of revenue arising out of falling ARPU, falling MOU/SUB, Airtel growing at a slower rate than competitors, entry of new players, number portability are expected to impact the margins significantly going forward. In case Bharti is able to meet these challenges effectively the fall in margins may not come thru.
- With the passive infrastructure business to be hived off as a separate entity by 2010, value unlocking for the shareholders is on the horizon for the shareholders that might increase the scrip price.
- The company is foraying into other business areas such as insurance services and retail that might provide the growth drivers.

Quarter Three Results Highlights
• ARPU declined from Rs 366 to Rs 358.
• Decline in operating profits (Consolidated) quarter on quarter from 43.75% in Q2FY08 to 42.35% in Q3FY08.
• Consolidated PAT for Q3FY08 was at Rs 14.28 billion is lower than that of last quarter (Q2FY08), which was at Rs 16.43 billion.

Valuation
With the ARPU declining on a quarter on quarter basis and growth rate tapering off, Bharti Airtel is likely to under perform the market. The company is also in only one domain of telephone services i.e. GSM and is saturated in terms of number of subscribers in various circles in which it operates. Going forward with increased competition in GSM domain, particularly from RCOM and Idea, the company is likely to under perform on the bourses. Moreover to sustain the growth company would have to undertake extensive capex.
The company has reported a drop in profit margin and a drop in absolute profit after tax in Q3FY08 compared to Q2FY08
In view of the conditions this scrip would under perform the market. A price of Rs 880-900 would be a good price to sell.

3i Infotech (3IINFO) / Varun Shipping (VARSHI)

3i Infotech (3IINFO)
Current price : Rs 131 Target price : Rs 178
Potential upside : 36% Time Frame : 12 months
OUTPERFORMER

Unique business model boosts results …
3i Infotech’s results for Q3FY08 were ahead of our expectations with revenues growing 14.2% q-o-q to Rs 317cr in Q308 (our estimate: Rs304 crore). This outperformance was a result of a 27% q-o-q growth in products revenue. The recent acquisition of J&B Software & Services contributed around Rs 15 crore to revenue. Services, however, grew at a meagre 3%. EBITDA margins at 21.1% remained relatively flat compared to 21.2% in Q208. This was a result of 10 bps q-o-q improvement in Products Gross Margin and 50 bps q-o-q reduction in services gross margin. Net profit grew 21% q-o-q to Rs 48.5 crore ue to lower minority interest.

Key Highlights
The company is well insulated from the two factors concerning the Indian IT sector – namely rupee appreciation and the US sub-prime crisis. The company derives 37% of its revenues from India. Its net inflow of US dollars is around 6%, and hence it is not significantly impacted from rupee appreciation. The acquisition of J&B Software and Services, which contributed Rs 15 crore in the quarter, is in the business of check & payment processing and hence not impacted significantly by the sub-prime crisis. The company has cash of Rs320 crore and debt of Rs1,100 crore (including FCCB of Rs 600 crore) which would help them in future acquisition. The company has also reduced its debtor’s days from 154 days in Q208 to 133 days in Q308.

Valuations
The unique business model along with its acquisition-led strategy has driven the growth for the company. The 7.7% growth in pending order book also provides comfort on the future prospects of the company. We maintain our outperformance rating on the stock company with a price target of Rs178, which discounts FY09E EPS of Rs16.5 by 11x.

Varun Shipping (VARSHI)
Current price : Rs 80 Target price : Rs 123
Potential upside : 53% Time Frame : 12-15 months
OUTPERFORMER

Sailing strong …
Varun Shipping Corporation reported a 41% y-o-y increase in revenues to Rs 229.95 crore in Q3FY08 on the back of revenues from newly acquired vessels and higher freight rates. The reduction in bunker expenses to-sales ratio from 7.6% to 6.6% and repairs and maintenance-to-sales ratio from 11.5% to 5.0% enabled the company to report an improvement in EBIDTA margin from 54.5% to 64.2%. Despite depreciation and interest expenses being higher by 43% and 42% respectively, the company has been able to report a robust growth of 85.9% in net profit to Rs 73.69 crore.

Varun has been able to report strong revenue growth due to incremental revenues from the new vessels. Revenue growth was is mainly driven by new vessels in the offshore segment. Varun deployed two AHTS vessels having the highest bollard pull capacity in India with Reliance Industries at very lucrative rates. The company has a dominant presence in the less-volatile LPG carrier segment with a market share of 80%. Its strong presence in the niche LPG carrier segment and the buoyant offshore segment, along with a well established customer base that includes Indian public sector undertakings and reputed international charterers would provide visbility of its revenues and earnings in the next few years.

Valuations

Varun should report steady growth in revenues going forward. We expect the company to register a 14% CAGR in revenue over FY07-09E. We expect EBIDTA margin to improve from 55.86% to 58.7% over the same time. The stock trades at 4.1x FY09E earnings and 3.6x FY10 earnings, making it the cheapest stock available in the shipping sector. With steady revenue growth and improvement in operating margin we expect the stock to be re-rated. We believe that the stock is available at attractive valuations and maintain our outperformer rating with a target price of Rs 123, an upside of 53%.

Aurobindo Pharma Ltd

Aurobindo Pharma Ltd

Cmp : 360 Tgt : 550
BSE Code : 524804 NSE code : AUROPHARMA
Market Cap : Rs 1900 cr Industry : Pharma
TTM EPS : Rs 56 P/E Ratio : 6.4x
Pmt Stake : 55 % Dividend : 50 %
52W H/L : Rs 820/233 Book Value : Rs 177

Established in 1986, Aurobindo Pharma Ltd (APL) has come a long way to become India’s top five pharmaceutical companies and undisputed world leader in certain product categories. It has successfully transformed itself from a single-product API manufacturer to a fully integrated multi-product player, encompassing intermediates, APIs and formulations. After ensuring a firm foundation of cost effective production capabilities, APL eventually entered the high margin speciality generic formulations segment, with a global marketing network. Today it operates in over 100 countries and markets over 180 APIs and 250 formulations. It is one of the largest players in Semi Synthetic Penicillin and Cephalosporin space and is backward integrated into manufacturing key raw material P-Gen. The company mainly operates in six primary therapeutic categories of antibiotics, antiretrovirals, cardiovascular/diabetology, central nervous system, gastroenterology and anti-infectives/allergies apart from having small presence in antiinflammatory, anti-histamines, anti-asthmatics, erectile dysfunction etc. Presently,
APL derives nearly 70% of the revenue from the sale of APIs and intermediates while about 30% comes from formulations. And in couple of year company intends to take this ratio to almost 50:50. As company is focusing to expand its presence in regulated markets like USA, UK and European countries, exports constitute to around 55% of total revenue.
Over the years APL has made mammoth investments integrated company. Hence it is able to offer products at a competitive price as the cost of production is very low. Today it boasts of having 11 state-of-the-art manufacuturing facilities across the globe, around 6000 employees, 20 overseas subsidiaries and half a billion dollar revenue. Remarkably, almost all the company’s facilities are approved by regulatory authorities such as the US FDA, UK MHRA, MCC (South Africa), ANVISA (Brazil), Health Canada and the WHO.
However its overall capacity utilisation at API plants is less than 60%. Its R&D unit is spread across 1 lakh sq ft and has 700 scientists busy in developing intellectual property in the area of non-infringing processes and resolving complex chemistry challenges. Interestingly, APL is one of the largest DMF filer with the US FDA from India with 114 DMFs filed to date. Besides it has filed 100 ANDAs in US and 40 ANDAs in Europe, out of which 62 approvals (both final and tentative) have been received from US and only 7 approvals from Europe. Importantly, company has the infrastructure to market the new products at the shortest lead time and
convert the approvals into invoicing. So the additional product pipeline is expected to improve the income stream in coming years coupled with improved capacity utilization. In order to increase its foot hold in Europe, company acquired Pharmacin in Netherlands with a portfolio of 203 market authorizations; and Milpharm in UK having 100 market authorizations.
For future, company is planning to invest around Rs 200 cr in SEZ at Jedcherla near Hyderabad, and Rs 160 cr in Pharma city near Visakhapatnam. It is also setting up one more state-of-the-art R&D facility exclusively to meet the needs of increasing business of contract research. Further, APL is constantly looking to grow inorganically and scouting to make few acquisitions in Europe especially in Italy, Spain & Portugal. Meanwhile company has sold off its loss making Chinese subsidiary catering to the local Chinese markets. In short, company is on track to
make a strong presence in select premium markets such as US, Canada, Europeand Australia leveraging on the large product portfolio, well balanced therapeutic presence, world class manufacturing infrastructure and experienced marketing resources. To fund its growth plan APL has raised nearly Rs 900 cr thru FCCB route to be converted into equity shares @ Rs 1014 and Rs 879 in tranches. Financially, on a standalone basis, APL is estimated to clock a turnover of Rs 2400 cr and profit of Rs 280 cr for FY08. To be on a conservative side, even if total
FCCB gets converted at an average of Rs 550 the diluted equity works to Rs 35 cr having Rs 5 as face value. So the diluted EPS on a standalone basis for FY08 works out to Rs 40. Whereas, for FY09 it can post an EPS of Rs 50. Surprisingly, scrip hit a new low of Rs 233 in the recent carnage and has now bounced backed to Rs 320~330 levels. However on a consolidated basis it may report a topline and bottomline of Rs 2600 cr and PAT of Rs 240 cr for FY08 primarily driven by negative contributions from overseas subsidiaries. Still the consolidated EPS
comes to Rs 34 considering Rs 35 cr as diluted equity having Rs 5 as face value. Investors are recommended to buy at current levels with a price target of Rs 550 in a year.n building a mega infrastructure for APIs and formulations to eventually emerge as a vertically

Markets This Week

Currency
Rupee sharply strengthened & broke psychological level of 40.00 on 19th Sept.’07 when Fed trimmed rate by 50 bps on 18th Sept.’07. Possibility of a huge dollar inflow, because
of an interest rate arbitrage, was the chief reason behind this strength. Stock market also surged from 14,000 to 20,000 within two months. RBI did not take any action, to narrow
down interest rate difference. Again this week, Fed trimmed rate by 75 bps in an un-scheduled meeting. But Rupee remained stable. What happened? Forex market is not discounting any possibility of a Dollar inflow even after interest rate difference is widened by 175 bps?
Markets are always ahead of events. Forex market will tell us, whether fresh Dollar inflow will resume to take advantage of interest rate difference. 39.00 seems crucial level for a Rupee. As per market rumors, Central Bank seem actively defending this level. If Rupee breaches 39.00 in coming days then it indicates that huge Dollar inflow again started & RBI gaveup.
But if Rupee sustains 39.00 level then it hints two possibilities. First one is RBI succeeded in defending 39.00 level. Second one is FIIs changed their stance & only interest rate difference is no more a big excuse to pour money in India.
One should remember that after Fed’s rate cut by 75 bps in this week, FM stated that Govt will take every action to ‘moderate’ capital inflow rather than to ‘stem’ it. Curbing P-Notes by SEBI in Nov.’07 is not an old story.

Narration
FIIs are daily pulling out average Rs. 2,500 cr. from cash marketsince past two weeks. This is an indication of a genuine profit booking on investments. Despite Fed’s 75 bps rate cut in this week,
Rupee remained stable. Earlier Rupee broke psychological level of40.00 in Sept.’07 on fear of a further capital inflow when Fed trimmed rate by 50 bps. Rupee remained firm indicates that either RBI is protecting a Rupee or FIIs changed their stance & just an interest rate difference is no more a reason to pour money into India. 39.00 is a crucial level for next few days & might tell us whether fresh Dollar inflow will resume or not. IT stocks seems preparing itself for this movement in a Rupee. Hence IT index widely underperformed in a falling market. FM already hinted possibilities of a ‘moderation’ in capital inflow rather than ‘stemming’ if capital inflow affects growth. Flagship Infosys gained 3.9% in this week.Pressure is mounting on RBI to trim rate after Fed’s unexpected rate cut by 75 bps in this week. Bond Market seems already discounted 50 bps rate cut as yield on 10-year Govt paper came down from 7.89% to 7.39% within past four weeks. Sensex lost 9.5% in January while Bankex lost just 0.33%. This indicates players are betting on bank stocks hence expecting a bonanza of a rate cut in
RBI’s quarterly credit policy review in next week.
Capital Goods index seems main culprit behind market’s weakness since Nov.’07 peak. BHEL & ABB lost 16% while CG index lost 11.5% in January against 9.5% fall in Sensex. Alstom lost 25%, Areva 19%, BEML 16%, Crompton 12%, Kirloskar Bros. 26%, LMW 30%, Praj 31%, Punj Lloyd 18%, and Thermax & Voltas 15%. Only L&T and Siemens weathered in January by loosing around 6%.
Hero Honda surprisingly gained 0.15% on weekly basis while lost just 0.7% on monthly basis when Sensex lost 9.5% in January. Something is cooking in Hero Honda’s counter. But one should go long only above 800. Maruti lost just 1% while Tata Motors managed to close in green in this week. Exide is looking strong bet in Mid Cap segment. Players seems accumulating Auto stocks from weak hands on hope of duty reduction on Automobiles in forthcoming general budget, to spur manufacturing growth. HUL & ITC lost 6%. Tata Tea gained 2% on a chilled winter in past 46 years. Cipla, Dr.Reddy lost 10%, Glaxo lost 12% while Ranbaxy lost 5%. FMCG & HealthCare are the weakest link in current Bull Run since past three/four years.
DLF & Unitech lost 6%.
Interest rate sensitive Bankex managed to float while Realty lost 7%! This seems an anomaly & market might rectify this after RBI’s credit policy review in next week. Either Bankex should come down or Realty should climb. Metals lost 22% in January against 9.5% loss in Sensex. Ispat Ind. Lost 44% in January after rumor that promoter milked two months back! Nalco, Welspun & Sesa Goa managed to gain while Sterlite lost 10% despite its energy IPO buzz. Tisco lost 8%.
Reliance lost 6%, ONGC 16%, RPL lost 17%. There is no word to write anything about losses Mid & Small Caps.
Trees don’t grow to sky.

Market
Fundamental analysis of ‘strong hands’ drives markets, which creates technical levels.
Technical analysis is nothing but ‘following’ what strong hands are doing.
In previous week, on Friday 18th Jan.’07, Prime Minister’s economic advisory council head Dr. C. Rangarajan conducted one press conference. He predicted possibility of 8.9% growth for current financial year while 8.5% growth for next financial year.
Every one knows that economy is moderating after four year growth & 8.5% is not a surprise for market.
But Rangarajan added two very important points while projecting 8.5% growth. He predicted
possibility of a slow down in manufacturing because of worsening power situation & 3.6% growth in agriculture against current growth of 2.5%.
Central & various State Govts many times publicly acknowledged that power deficit will continue upto 2012.
Most aggressive project executer like Reliance energy, also clarified that first megawatt from UMPPs will be available in 2012 only.
This hints that odds are in favor of manufacturing slow down because of Power deficit. PM’s economic
advisory council is cautioning specifically on this front.
Weather is an act of God. PM’s economic advisory council is projecting very optimistic agricultural growth of
3.6% in next year against current 2.5%. What happened with Govt’s projections & planning in case of Sugar & Wheat is not an old story.
All market men & media is talking about excess leveraged positions in F&O segment & liquidity dry-up because of Reliance Power’s IPO. But very few participants seem taking note of this man, who is sitting on top of all economic data.
Govt is the strongest hand in any market as Govt is setting policies & priorities which set trends in economy. If already worsened power situation deteriorates further in coming months then manufacturing slow down is possible. If agriculture growth can not achieves 3.6% growth in next financial year then GDP growth may even not sustain at 8.5%.
In a nutshell PM’s economic advisory council hinted possibility of a less than 8.5% growth in next financial year on Friday 18th Jan.’07. On that Day Sensex closed at 19,013. 61.8% recovery of previous fall from 21,206 high to 15,332 low comes around 19,000.
This is a classic example how fundamental analysis (of strong hands only and not every he and
she on a street) & technical analysis are inter-woven & inseparable.
If Sensex sustains above 19,000 i.e. sustains 61.8% recovery, then it indicates that market discounted possibility of a less than 8.5% growth in next financial year. In such a case, market might see new high after some group rotation.
But if can not sustains above 19,000 level then one should listen to the man who is sitting at the top of all economic data.

Action Construction Equipment Ltd - Buy

Background:
Incorporated in 1995 by Mr. Vijay Agrawal and his wife Mrs. Mona Agrawal as a private Ltd. company, Action Construction Equipment (ACE) Ltd. came out with a public issue in Sept’06.The company is involved in manufacturing and assembling of material handling equipments like hydraulic mobile cranes, mobile tower cranes and earth moving equipments like backhoe loaders to cater to the needs of clients across various sectors throughout the country. The company has been awarded ISO: 9001by CVI (Conformity Verification International) and its products are registered with the Automotive Research Association of India (ARAI) for roadworthiness. In May 06, the company has been awarded with CNBC TV18 Emerging India Award in the Infrastructure category. As per recent CONSTRUCT WORLD-NICAR survey, ACE has emerged as ‘First” amongst the fastest growing construction equipment companies in India.

CMP: Rs. 460 Target price: Rs.557 Industry: Engineering – Heavy – Material Handling

Stock Info
Market Capital Rs.813 cr Equity Capital Rs. 17.9 cr Avg Trading Vol. 98427 (Qtly)

52 WK High/Low 495/162 Face Value Rs. 10 BSE Group B1
BSE Code 532762 NSE Symbol ACE Bloomberg ACCE IN

Reuters ACEL.BO BSE Sensex 19840 NSE Nifty 5900
Shareholding Pattern (As on 31th Dec, 2007)
Promoters 65.2% Domestic Institutions 15.6%
Foreign Institutions 5.8% Corporate 6.6% Public & Others 6.9%

Action Construction Equipment’s (ACE) results for the Q308 and 9M08 were in line with our expectations. Companyreported strong numbers due to buoyant demand for products profile from the user Industries. We expect the revenues to grow at a CAGR of 46.1% and PAT to grow at 53.2% CAGR for FY07-FY10E.

Value drivers:

Foray into tractors: ACE started assembling and selling tractors on trial basis from its Dudhaula plant and sold around 5-10 tractors during Q308. If the venture kicks off, the company plans to enter in this segment in a big way by setting up new capacities. As compared to its peers, the 35 hp tractor manufactured by the company boasts of features like 4 cylinder engine, extra life and better fuel efficiency. We have assumed revenues of Rs.4.8 crore, Rs.16.0 crore and Rs.48.0 crore for FY08E, FY09E and FY10E respectively.

New products to provide traction: To capitalize on the ongoing infrastructure boom, ACE has added new products like Crawler Cranes, Piling Rigs and Trailer Mounted Concrete pumps to its portfolio. These products will be sold through the existing dealership network enabling faster penetration and at a lower price as compared to the competitors.
We believe the future traction will be provided by these products and expect the revenues from this segment to grow at a CAGR of 160% for FY08-FY10E. ACE has in pipeline other products which include batching plant, truck mounted concrete pumps and road rollers which it plans to introduce through a JV sometime in FY09 or FY10.

Potential of margin improvement: Introduction of the above new products in the domestic market and commencement of business through the Romanian acquisition will help to expand margins going forward. We have assumed nominal revenues projections from Romania in absence of commencement of operations.

Valuation and View
At CMP, ACE is trading at 21.9xFY08E earnings, 15.5 xFY09E earnings and 11.5xFY10E earnings of Rs. 21, Rs.30 and Rs.40 respectively and EV/EBITDA of 16.5xFY08E, 11.2xFY09E and 7.8xFY10E. ACE being a dominant player in the construction equipment sector, is bound to benefit from huge investment planned in the construction, industrial and infrastructure sector. Introduction of new products and Romanian acquisition will drive the future growth and help to
diversify risk. We maintain the earlier price target at Rs.557. At this price ACE is available at 14xFY10E earnings and EV/EBIDTA of 9.7xFY10E.We maintain a BUY call.

Issues And Risks For 28-01-2008

>Our markets will take bets today on how much the RBI may cut tomorrow. The
75 bps cut in America resulted in our 2-year bond yield being 5.4% higher than
that of the US 2-year bond yield. This spread used to be 4% till last year, and
that's one of the reasons why dollars were flowing out of the US and into higheryielding
countries like us. But now the RBI will do something to make it less
profitable to shift monies into Indian bonds at those juicy yields.
A cut will help our stock markets tomorrow.
>Global markets will slow down on Wednesday, in wait for the US Fed to
announce the range of their cuts that night.
Whether they cut 50 bps or 25 isn't the key issue. The key story is that all know
the Fed has become a slave to global banks and investment banks, and will do
everything to shore up their health over all else. A credit market crisis for the Fed,
is ten times bigger than a stock or commodity market crisis.
So another cut on Wednesday is a given alright, but it's what the ECB may be
forced to do when they meet on Feb 7th, that matters to global markets. If the
ECB cuts, as reluctantly as Trichet might be forced into, a cut will do some more
good for credit markets. The trickle-effect, as economists love to call what they
cannot explain, will be that global stock markets too will rise...even if it were only
for a while.
>Chidambaram said at Davos that India will steam on.
He's right.
But know that he's talking about the economy, and not about stock markets.
He's a clever chap when it comes to metaphors, phrases and words.
The second one is a subject he knows he has no handle over, and for that
matter, neither does anybody in the whole wide world including us. Nor do any
other finance ministers or business chaps who attended that show.
So always listen to Chidambaram's words with much care.
>Gold will rise after the Fed cuts yet again.
When bond yields drop because of the cut, it results in monies leaving those
bonds, in shorting the dollar when that money leaves the US, and in buying gold.
The trend in gold futures, in our Commodities Trends table in the 2nd newsletter,
is on the Long Side even as of now. Take note of the reversal stops there and
stay long.
>Our markets will be awfully volatile till Thursday. So use any biggish drops in
the Nifty today to buy it and carry it over till Thursday. That's the day that all say
will see a big rise in our markets. All know that the Fed's cut on Wednesday night
will be celebrated on Thursday morning in all parts of the world. Here too.
So it'd be best to go long again in the Nifty in any big drop of over a 100 points in
this morning's weak open, and carry that into Thursday's biggish rise.
>The next three sessions will only be a battle between the short-only-Hedge
Funds and long-only FIIs. The short chaps are convinced about their religion,
while the long-only guys are dying to buy at these 30%-discount rates...and kill
the shorters in the process.
Exciting three days ahead...and you'd better stay out of it...save for looking for
when you can buy more Niftys in any deepish drop.
What to expect today, this week, and going forward
>Today:
A weak open. Then a recovery. And then profit booking.
But an end-of-day rise expected.
Use drops in the Nifty to buy to carryover till Thursday.
We have absolutely no single stock calls this week.
Thursday:
A big rise expected on massive short covering by the trapped-bears.
In Feb:
A rally all through. But that'd be your chance to come to 100% cash from ALL
deliveries.
All means ALL without any exception.
Stories about ETC or Videocon Inds haven't changed and neither will they.
But the Great Casino won't react to stories any more.
The MOOD has turned bad.
And that's a soft dynamic of markets that you've GOT TO recognise over
fundamentals and acquisitions and fund raises etcetera.
From March onwards after the Budget:
Good time for shorters.
Bad time for longs.
Take a view.
Talk and noise:
>March onwards will be bearish.
Not bearish like in a deeply dropping line.
Bearish as in "risk-monies now wants to stay off taking risks".
They want to hear many more months of how the American consumer is
racting to the housing drop, and whether he's really stopped or slowed
down his spending. Only developing monthly numbers will tell these Hedge
Funds when they should start taking risks yet again.
Till then, they want OUT.
And the short-only Hedgies are simply salivating at the prospects of an
undterred attack for two to three months.
Buy for 7-15 days :
>Nifty alone is bveat in today's early drop...carry it only till this Thursday.

Will The Market Sustain ?

Markets can stabilise
only if FIIs turn net buyers

Carnage and blood bath was witnessed on Dalal Street as markets collapsed on the back of weak global cues and lack of liquidity in the system. Traders and speculators were seen unwinding their positions in frontline index heavyweights and mid-cap and small cap stocks. Incidentally, FIIs remained net sellers in the cash segment but were net buyers in the derivatives segment. Moreover, domestic institutional investors were net buyers. The volumes recorded have been lower while the breadth of the market has remained weak during the course of the week.
Global cues have remained negative with weak US economic data and fears of the US reeling under a recession. However, the U.S. Federal Reserve’s decision to reduce interest rates by 75 bps has helped in improving the global sentiment. Crude oil remained range bound on news of the US economic slowdown. Lack of liquidity continued to be the bane of the markets. With IPOs sucking out liquidity and FIIs remaining net sellers, the marketmen faced a tough time paying for the margins, which triggered a sell-off on the domestic bourses.
The earnings season continued to meet market expectations. However, it has taken a back seat due to the continuing liquidity pressure, which is likely to improve from the first week of next month, as IPO refunds begin. Now it is important that FIIs also turn net buyers for the markets to stabilise and a sustainable rally to unfold. In the meanwhile, the markets would continue to take cues from global markets, crude prices and the monetary policy to be announced next week. Stock specific action will be witnessed amidst occasional bouts of volatility and choppiness.
Technically, the Sensex has support at the 16,545 and 15,699 levels. On the upside, if the Sensex can sustain above 17,475, it is likely to test the 18,526 and 18,715 levels. The 4482 is an important support level for the Nifty. On the upside, if the Nifty manages to sustain above 5156, it is likely to test the 5519 and 5575 levels.

Broad Market Review
None of the sectors or indices have shown significant recovery even though the Sensex made a significant pull-back. BSE Bankex has pull-back to almost 0.618 levels as the other indices struggled to pull back to 0.500 retracement levels. The strength has emerged on the BSE Bankex and the Bank Nifty. Both these indices need to maintain at a higher range and not collapse from hereon. Stock wise strength in the banking sector has been witnessed. It now depends on how banking stocks stand collectively to trigger the market further towards the highs.
In terms of weekly relative strength, which is based on the strength for the last 13 weeks, the strongest at this point are the Banking indices, followed by BSE Realty and BSE Oil& Gas. These indices have gathered strength because on the slide their fall was less sharp on relation to the overall Nifty/Sensex fall. On a recovery, banking, realty and oil & gas recovered sharply to support the Sensex/Nifty on the pull-back.

Strategy for the week
Overall strategy would be to book profit or exit long positions in loss on rally to the pull-back level of 18823-19569-20275.

Tower Talk & Ipo Buzz

* The current crisis started when authorities turned a blind eye to the runaway share prices of RPL, RNRL and Ispat Industries not even caring to enquire how it was happening or who was playing.
* Such a fall out at commodity exchanges is not ruled out as the attention of the fast buck makers shifts there.
* The risk management systems of the NSE are under the scanner and the government may clip the wings of this high-flyer exchange.
* You may have heard that ‘F&O is poison’. But are the brokers not prudent enough to manage risks? Everything is rosy when the going is good but when the wheel punctures, it’s just suicidal!
* Reliance Powers grey market premium beaten down. Massive withdrawal of applications speaks of the fear gripping IPO investors.
* IPOs opening this week will fund the going tough and give sleepless nights to promoters and lead managers as the fears of undersubscription are very real.
* The bright side to the recent crash is that one can find many value buys once again. Investors shouldn’t miss this chance and start accumulating scrips of their choice.
* Blue Bird, Ind-Swift Labs, Jupiter Biosciences, Micro Tech, Stone India, Lokesh Machines, Accurate Transformers, International Combustion, Hind Rectifiers, Ansal Housing are some fundamentally sound scrips that have been beaten down by around 50%. Grab them before they shoot back to their normal multiples.
* If the grapevine is to be believed, even the big bull has faced huge losses in this carnage.
* The recent massacre has once again proved that Indian markets haven’t yet matured. It reacted the sharpest compared to other global markets eroding most companies market cap by 30%-50%.
* Bhagyanagar India is allotting warrants at Rs.90 while the market price is Rs.48.There is a good upside possibility in the stock.
* Speciality Papers has announced its intention of a bonus issue but not the ratio. Stock is good to accumulate at current levels.
* Jetking India has spread its wings across the country. With a strong brand name and growth, the scrip is a good buy at current levels. It is an investor friendly company with a good dividend payout.
* Sanra Capital a Citibank offshoot holds over 14% Asian Oilfield Services. The stock has reacted sharply and can be accumulated for the long-term.
* Zenith Birla will soon declare interim dividend, bonus and subdivision of shares. It is also merging Tungabadra Holdings, a steel pipe manufacturing company with over Rs.50 cr. turnover and profit of Rs.2.5 cr. A risk-free buy for the medium-term.
* DIC India, Lanxess ABS, Bodal Chemicals are considered good to accumulate at current levels for the medium-term.
* Clelestial Labs is under consolidation. Circles close to the management have already bought a good chunk of shares in the recent downtrend and it may bounce back to Rs.70.
* The grey market premium on IPOs weakened last week with Reliance Power at Rs.180/190, Future Capital at Rs.360/370, On Mobile at Rs.75/80 and Emaar MGF at Rs.150/160.
*Traders and speculators can buy Apollo Tyres with a target of Rs.70-75 and a stop loss of 39.
*Nicholas Piramal: It can turn out to be a wealth creator given its large basket of brands acquired as well as its global business acquisitions, which will have a telling effect on its performance.
*Orchids Chemicals: The growth rate recorded in its recent quarterly results indicates of things to come in the next few quarters. It is bound to give good returns from the current levels.
*Divi’s Laboratories Ltd.: This young pharma company from Hyderabad is taking full advantage of CRAMS segment and it can give even around 100% return to the investors from the current levels.
*Ind-Swift Ltd.: With its new plants that were designed on a global scale, this company is expected to record impressive growth rates in the next couple of years. It is currently available at a low of around Rs.32 only against Rs34.80 at which price it was traded at the Sensex level of 5839 on 31-12-2003.
*Jupiter Biosciences: It, too, seems to be under priced looking at the potential for its products in the post-patent regime. However, in view of many angry responses from ardent readers (on its
* Weaker hands are out on this sharp reaction and stocks are to go into stronger hands. Stay invested in all good stocks.
* GTL Ltd.’s (Rs.268.05) net profit has flared up by 242.34% to Rs.33.72 cr. in Q3FY08 as against Rs.9.85 cr. during Q3FY07. Sales rose 67.05% to Rs.362.23 cr. in Q3FY08 from against Rs.216.84 cr. during Q3FY07. Profit on sale of business of Rs.142 million is also included in QE 31/12/07. Investors are advised to stay invested in this stock for good targets over the next one year. underperformance on the bourses for the last four years).
* MTNL (Rs.133.05) - On reaction, this stock is available at almost its 52-week low. A strong book value of Rs.184, good dividend of 40% and an attractive P/E multiple of around 12 compared to the industry average P/E ratio of 37, makes it an attractive buy at Rs.125 level.
* Gammon India (Rs.564.50) is attracting the attention of fund managers and large investors. Add it on reaction for good long-term growth.
* Madhucon Projects (Rs.722.90) - New developments are said to be taking place. Stay invested for better targets.
* Gujarat Apollo Industries (Rs.259.75) is another company that is into machinery & equipments for road construction and mining where the outlook is said to be very encouraging. Smart money is said to be accumulating this stock. The stock has reacted from high of Rs.400 to Rs.235 now.
* The recent rights issue of Hind Oil Exploration (Rs.112.60) was at Rs.125 whereas the stock is quoting lower which makes it is an attractive buy.
* Pratibha Industries (Rs.382.65) may see a good upside over the long run. Stay invested.
* Yuken (India) Ltd. (Rs.235) Q3 dispatches are less and it is expected that Q4 shall be much better. If the stock if reacts to Rs.225/240 level, it is a good long-term buy. In this sector, investors should not compare quarter to quarter results.
* IFCI (Rs.62), Oswal Chemicals (Rs.42), Ion Exchange (Rs.234), Khoday India (Rs.212), Shreeram Mills (Rs.275), Sharyans Resources (Rs.304), Nile Ltd. (Rs.220) are the other stocks attractively placed after the sharp reactions. Investors can add or keep holding them.

*Wockhardt Hospitals IPO opens on 31st January
Wockhardt Hospitals Ltd., one of the largest private healthcare services companies is entering the capital market with its IPO of 25,087,097 equity shares of Rs.10 each through a 100% book-building process in the price band of Rs.280 and Rs.310 per equity share. The issue will open on Thursday, 31st January and close on Tuesday, 5th February 2008. This issue will be listed in the BSE and NSE. Part of the Wockhardt group, a Pharmaceutical and Biotechnology company, Wockhardt Hospitals Ltd. has a super-specialty focus on areas such as cardiology and cardiac surgery, orthopedics, neurology, neuro-surgery, urology & nephrology and critical care, it specializes in minimally invasive surgery. It has pan-India presence with a network of ten super-specialty hospitals and five regional specialty intensive care unit (ICU) hospitals providing healthcare services in western, southern and eastern India. These ICU hospitals act as referral centres and the first point of critical care for the larger super-specialty hospitals and are also self-sustaining as they are strategically located to fulfill the demand for basic tertiary care and higher secondary care.
Wockhardt Hospitals is the only private hospital group associate of Harvard Medical International, a self-supporting not-for-profit subsidiary of Harvard Medical School and its super-specialty hospital in Mumbai has received international accreditation from Joint Commission International, the largest accreditor of healthcare organisations in the United States.
The company intends to utilize the proceeds from the issue to meet the cost of development and construction of greenfield and brownfield hospitals of the company, prepay some of the short-term loans and to meet general corporate expenses.

*SVEC Constructions plans IPO
Hyderabad based SVEC Constructions Ltd., which is engaged in civil and related electrical and mechanical construction works with the government, semi-government and private bodies, plans to issue 40,00,000 equity shares of Rs.10 each through the book-building process in the price band of Rs.85 to Rs.95 per share.
The issue will be open for subscription between Monday, 4th February and Friday, 8th February 2008 and is being made to help fund the company’s purchase capital equipment worth Rs.15.32 cr. and to meet its requirement of Rs.23.86 cr. long-term working capital apart from meeting the IPO expenses.

*Emaar MGF Land IPO opens on 1st February
Emaar MGF Land Ltd., a joint venture between a global real estate company, Emaar Properties PJSC of Dubai, and MGF Development Ltd. from India, is entering the capital market with an IPO of 102,570,623 equity shares of face value Rs.10 each for cash at a price to be determined through a 100% book building issue in the price band of Rs.610 and Rs.690 per equity share. The Bid/Issue will open for subscription on Friday, 1st February and will close on Wednesday, 6th February 2008. The Issue has been assigned an IPO grading of 4/5 by CARE, a credit rating agency, which indicates it 'Above Average’ fundamentals.
Emaar MGF commenced in India in February 2005. Its primary business is the development of properties in the residential, commercial, retail and hospitality sectors. In addition, it has also identified healthcare, education and infrastructure as business lines for future growth. Its operations span across various aspects of real estate development, such as land identification and acquisition, project planning, designing, marketing and execution.
As of 31st December 2007, the company had land reserves across India admeasuring to approximately 13,024 acres out of which it has development plans for approximately 12,028 acres, which in turn, is expected to provide it with a proposed saleable area of approximately 566 million sq. ft. The company estimates that its land reserves will provide it with a proposed saleable area of approximately 136.5 million sq. ft. of plotted residential development (including built up villas); 318.8 million sq. ft. of built up residential properties; 88.9 million sq. ft. of commercial properties; 18.0 million sq. ft. of retail properties; and 4,960 keys in hospitality properties as of 31st December 2007.
The issue proceeds will be used for part payment towards the acquisition of land and land development rights and related approvals for its ongoing and planned projects. The Issue proceeds will also be used for the development and construction costs for project Palm Drive in Gurgaon. Palm Drive is a high quality residential development designed for contemporary living in a green sanctuary setting and is expected to include amenities such as a clubhouse, health club and parks. The development is within 20 kilometres of Delhi’s international airport.
For H1FY08, its consolidated total income was Rs.501.74 cr. with consolidated net profit was Rs.129.83 cr.

*IRB Infrastructure Developers IPO opens on 31st January
IRB Infrastructure Developers Ltd. (IRB), an infrastructure and construction company with extensive experience in the roads and highways sector and currently involved in 12 BOT projects in this sector, proposes to enter the capital markets with an IPO of 5,10,57,666 equity shares of Rs.10 each through 100% book building process in the price band of Rs.185 to Rs.220 per equity share. The issue will open on Thursday, 31st January and close on Tuesday, 5th January 2008 and will be listed on the BSE and NSE. The IPO has been graded 4/5 by Fitch Ratings, a credit rating agency, indicating that the fundamentals of the issue are above average.
IRB is currently involved in 12 BOT projects in the roads and highways sector. Out of these projects, 11 projects are in the operational phase, i.e., engineering, procurement and construction phases have been completed on these projects and the project SPVs are currently earning revenues from toll collection under the relevant concession agreements.
IRB has recently diversified into the real estate development sector and it is in the process of acquiring land in the Pune district in Maharashtra on which it proposes to develop an integrated township. The proposed township project is in its preliminary stages of planning and development and will be its first real estate development project. Currently, the company’s land reserves consist of approximately 925 acres of land in the Mauje Taje and Mauje Pimploli Taluka in Pune district, and it intends to acquire an additional approximately 475 acres of land for its proposed township project.
The company proposes to utilize the net proceeds of the Issue for investment in subsidiary IDAA; prepayment and repayment of existing loans of the company and the subsidiaries Aryan Toll Road Pvt. Ltd, Modern Road Makers Pvt. Ltd, Thane Ghodbunder Toll Road Pvt. Ltd, NKT Road & Toll Pvt. Ltd and Mhaiskar Infrastructure Pvt. Ltd.
For FY07, its consolidated total income was Rs.325.08 cr. with consolidated net profit of Rs.29.96 cr. In the 5 months ended 31st August 2007, consolidated total income was Rs.285.26 cr. with net profit of Rs.36.38 cr.

*Bang Overseas IPO opens on 28th January
Bang Overseas Ltd. (BOL), a provider of fashion fabrics and ready-to-wear requirements in apparel, textile and retail segment, is entering the capital market with an IPO of 3,500,000 equity shares of Rs.10 each at a price to be decided through a 100% book-building process in the price band of Rs.200 and Rs.207 per equity share. The Bid/Issue will open for subscription on Monday, 28th January and close on Thursday, 31st January 2008. The issue has been graded 2/5 by CARE indicating below average fundamentals.
Incorporated in 1992, BOL has two apparel manufacturing units in Bangalore. Its ready-to-wear men’s garments are sold under the brand name ‘Thomas Scott’ since 2002. It has an installed capacity of 720,000 and 540,000 pieces per annum at its two units namely Reunion Clothing Company and Formal Clothing Company respectively. Its products are presently retailed through 157 points of sale comprising its own retail outlets large format stores and multi-brand outlets.
The proceeds from the proposed issue are to be deployed for setting up retail outlets across India; brand building; a new apparel manufacturing unit of 6 lakh pieces per month; warehousing and logistics facilities; general and corporate purposes and to meet issue expenses.
For FY07, it reported an income of Rs.996 cr. with PAT of Rs.107 cr. and for H1FY08 its income was Rs.651 cr. with PAT of Rs.70 cr.

*Manjushree Extrusion FPO opens on 31st January
Manjushree Extrusion's Ltd. (MEL) is entering the capital market with a Rights-cum-Follow on Public Offer of equity shares at Rs.30 per share aggregating to Rs.35.70 cr. The Rights Issue has already opened on 7th January 2008, while the Follow on Public Offer will open on Thursday, 31st January and both the issues will simultaneously close on Wednesday, 6th February 2008.
The 1:1 Rights Issue comprises of 42,10,800 equity shares of Rs.10 each for cash at a premium of Rs.20 per share aggregating to Rs.12.63 cr. offered to the existing equity shareholders the Follow on Public Offer will comprise of 51,26,100 equity shares of Rs10 each for cash at a premium of Rs.35 per share aggregating to Rs.23.07 cr. The IPO has been graded 2/5 indicating its below average fundamentals.
The fund being raised through the composite issue has proposed to utilize to part finance the company's expansion cum diversification project at a cost of Rs.53.70 cr., which is presently under implementation. A term loan of Rs.18 cr. has been sanctioned by SBI for the project.
MEL provides packaging solutions through manufacture of Speciality Plastic Packaging products for MNCs in FMCG, Pharma, Food Processing and Agrochemical sectors with whom it enjoys ‘preferred supplier’ status. The products include injection/Blow moulded PET/PP and multilayer plastic containers that are being manufactured by employing Japanese and European technologies. The major clients of the company include Hindustan Unilever, Nestle, Cadbury, Britannia, Glaxo SmithKline, P&G, Coca Cola, Tata Tea, Godrej, Wrigley’s, Hershey’s, Heinz, Pepsi, UB Group, Henkel etc. besides exports to customers in South Africa and Middle East countries.
Manjushree registered 22% higher turnover of Rs.80 cr. for FY07 with PAT of Rs.2.82 cr. and an EPS of Rs.6.70. For H1FY08, it registered a turnover of Rs.38 cr. with PAT of Rs.1.86 cr. The EPS after exceptional items for H1FY08 stood at Rs.4.42.
Manjushree is currently listed on Ahmedabad, Calcutta and Guhati stock exchanges and now proposes to list the existing shares as well as the new shares under the issue on the BSE and NSE.

*MCX to support computer literacy in rural Maharashtra
Multi Commodity Exchange of India Ltd. (MCX) has announced its support to an ongoing computer literacy programme of Microsoft and Indian Society of Agribusiness Professionals (ISAP) in rural Maharashtra.
This marks the launch of MCX’s Corporate Social Responsibility (CSR) initiative aimed at empowering the youth and women of rural areas of the state with technology skills. Till now, over 15,500 people have been trained and over 24,000 people are using this service across 16 districts by understanding the futures markets prices of the area specific commodities.

Stocks To Watch Out

Lok Housing & Constructions Ltd. (Code: 500256) Rs.235.60
Incorporated in 1986, Lok Housing & Constructions Ltd. (LHCL) is the flagship company of the Mumbai based Lok group, which specializes in mass housing and primarily caters to the needs of the middle-income group. It has contributed significantly to the development of Mumbai and its adjoining suburbs with over 40 mini and mega residential complexes, commercial centres, from single storey bungalows to multi storey towers, simple flats to penthouses and plush condominiums comprising 17,000 units spread across 9 million sq. ft. area. Lok Nagari (Ambernath), Lok Terraces (Vashi), Lok Upvan (Thane), Lok Vatika (Kalyan), Lok Nisarg & Lok Kailsah (Mulund), Lok Vihar (Powai), Lok Darshan (Andheri) etc. are few of its popular and big projects. It is among the first few real estate players to develop an estimated 1.2 million sq. ft. of land in a single year way back in 1994. It boasts of being the first to start an SRA (Slum Rehabilitation Authority) project in 1994. Notably, it is also among the very few construction companies in India to have instituted six sigma quality system for operational excellence, timely delivery and seamless execution of large scale projects. Presently, it has several residential projects under construction including Lok Everest (Mulund), Lok Amber (Ambernath), Lok Nirman (Khar), Lok Prabhat (Virar) and few others at Thane, Kalyan, Marol etc.
Importantly, LHCL has a land bank of whopping 1222 acres across Mumbai, Pune and Bangalore with a development potential of 62.5 million sq. ft. Of these, 356 acres under the company’s belt on merger with group companies. Most of the land has been acquired long back at very low cost and is located at Ambernath (80 acres), Kalyan (92 acres), Vasai (136 acres), Turbhe (180 acres), Pune (425 acres), Bangalore(240 acres) and the balance 69 acres spread across Andheri, Malad, Khar, Thane & Virar in Mumbai. In order to consolidate and emerge as a bigger player, the group recently merged Lok Shelter involved in urban rehabilitation and reconstruction projects, Lok Global- involved in diverse infrastructure projects and Lok Holding - key vehicle to acquire land with LHCL. Thus, the company has now got into two new promising business segments – infrastructure development and rehabilitation project. Although both have a huge potential, the company is betting high on the latter and is looking to participate in the National Urban Renewal Projects comprising slum eradication projects and demolition & reconstruction of old and dilapidated buildings. It has already submitted a proposal to the state government to rehabilitate tenants of about 300 unsafe cessed buildings in Mumbai and simultaneously develop 6 million sq. ft. in the heart of the city in association with MHADA. The government may cross subsidize the cost of redevelopment through sanction of Floor Space Index (FSIs). Hence it’s a win-win situation for either of them.
LHCL is holding nearly 180 acres as a salt pan land in Turbhe, which it intends to develop into a top quality township on getting clearance. The company also plans to come up with a grand project on 125-150 acres of land and to be called as ‘The Lok International City’, which will be a landmark mega township resembling a small independent civilization and possibly a first of its kind in the country.
Fundamentally, its equity stands enhanced to Rs.42.88 cr. against Rs.11.70 cr. due to merger of group companies/warrant conversion. At the same time, the promoters’ holding has increased to 51% against 23% last year. To fund its upcoming projects, the company is seeking to raise more than Rs.800 cr. through QIB/FCCB/GDR/private placement etc. Accordingly, it made a preferential allotment of 7,62,200 shares to Bennett & Coleman at Rs.197 and is planning to allot 50 lakh warrants to promoters at Rs.354 per share. Considering LHCL’s huge land bank position in metros like Mumbai, Bangalore and Pune coupled with rising property prices, this company is available fairly cheap at a market cap of Rs.800-850 cr. The scrip hit a new 52-week high of Rs.390 on 1st January 2008 but collapsed 50% in the recent carnage. Although it can go down further, investors can still expect 50% return from hereon in 12-15 months.

KLG Systel Ltd. (Code: 531269) (Rs.789.25)
specialises in providing technological solution for the entire business life cycle i.e. right from concept and creation, through plant design, project execution and management operations and from optimisation to expansion/revamp. It also provides on-line IT solutions to distribution utilities, using its self-developed software Vidushi, SG61 Technology and solution for determining the transmission & distribution losses, fixing the areas of power theft, on-the spot billing & cheque collection, increasing revenue collection efficiency of utilities and addressing consumer grievances. It already serves 16 of the 44 power distribution companies across the country, which will constitute more than 75% of its sales in a couple of years from 50% currently. On the other hand, to capitalise on its the Engineering Services Outsourcing (ESO) potential, the company has gained engineering design domain-expertise in various industry verticals and has ventured into planning, design and erection of large scale infrastructure projects in India. Hence, it is aggressively bidding for EPC (Engineering procurement and commissioning) contracts and has recently acquired 51% stake in Atlantis Lab Pvt. Ltd., a dedicated engineering solutions company. Further, it is looking for other companies in aerospace for acquisition. For FY08, it may report a topline and bottomline of more than Rs.300 cr. and Rs.55 cr. respectively. This works out to an EPS of Rs.42 on its diluted equity (post FCCB conversion) of Rs.13.20 cr. For FY09, however, it may register an EPS of Rs.55 on its fully diluted (post warrants conversion & ESOP) of Rs.14.50 cr. Accumulate only at sharp declines.

Selan Explorations Technology Ltd. (Code: 530075) (Rs.169.95)
is involved in onshore drilling for exploration of oil and gas and presently boasts of owning four oil fields Bakrol, Indrora, Lohar, Ognaj and one gas field Karjisan – all in and around Ahmedabad, Gujarat. Incidentally, the company has been producing crude oil from three oilfields as the mining lease for Ognaj oilfield is still awaited from the government of Gujarat. But its Bakrol field alone is stated to have oil/gas reserves of around 45 million barrels, which is huge by any standard. However, due to limited funds and not so aggressive management, the company produced only 1 lakh barrels of crude in FY07 and is expected to produce 140,000 barrels in FY08, which may move up to 2,00,000 barrels in FY09. With assured off-take of the entire oil & gas production by the government, there is zero marketing risk. Secondly, with international crude oil prices expected to remain high, its future earnings appear very encouraging. Although the company may report an EPS of Rs.11 for FY08, considering its oil reserve, it is available at a fairly cheap valuation.

KEI Industries Ltd. (Code: 517569) (Rs.89.10),
the second largest power cable company in India is engaged in manufacturing of high and low tension cables (HT and LT), control and instrumentation cables, house wires and stainless steel wires. In the near future, it plans to manufacture Extra High Tension cables that will serve the modern power transmission segment. It is also contemplating to move up the value chain from manufacturing and supplying cables to executing EPC contracts and manufacturing and supplying transformers. Last week, the company started commercial production at its new 100% EOU unit in Alwar - Rajasthan for manufacturing HT and LT power cables. Thus it has increased its capacity by 10,000 kms taking its total cable manufacturing capacity to 50,000 kms per annum. The company has already registered excellent performance for H1FY08 and may clock a turnover of Rs.900 cr. and PAT of Rs.58 cr. for FY08. This translates into an EPS of Rs.7 on its fully diluted equity (post conversion of all FCCB) of around Rs.15.75 cr. Considering its recent expansion and future growth plans, it is estimated to report an EPS of more than Rs.10 for FY09. Despite the company having huge debt of Rs.310 cr., investors are advised to accumulate at sharp declines.

Although small, Ram Informatics Ltd. (Code: 530951) (Rs.16.10)
is a budding company in the e-governance space. It has completed various IT projects for different divisions of the Government of Andhra Pradesh like computerized administration of sales tax, tourism, state road transport corporation, AP Housing Board etc. Besides, the company has designed, developed and maintains several government portals like BangaloreOne (Karnataka), eSuvidha (UP), iSetu (Maharashtra), Eseva, Sales Tax and Fire Service (AP) etc. Recently, it got an order from the Karnataka Government for executing 'Karnataka One' project, which is on BOOT model for a period of 7 years and the revenue model is based on a transaction basis. Of late, it has also won a contract to implement and manage the `Bus Pass' automation system in the city of Visakhapatnam, A.P. on a Build, Operate and Transfer (BOT) model for a period of 5 years. Few months back, the company launched an insurance portal through which it intends to tap 2% - 5% of the agents of LIC for subscription to its portal for a nominal price per year apart from generating income via hosting ads. On the other hand, it has developed smart software products for automation in banking, insurance & retail. It is also into education & training and offers courses for call centre training, corporate training etc. On the flip side, it has invested whopping Rs.32 cr. in its US subsidiary called Aravali Technologies Inc., which has not yielded much returns.


Gandhi Special Tubes BSE Code: 513108
Traded at NSE also as: GANDHITUBE Last Close: Rs.227.60
This week’s special is Gandhi Special Tubes (GST). This project was set up by the Gandhi group in Gujarat in April 1998 in technical collaboration with Benteler of Germany. Its association with GST has grown up in all directions.
Gandhi Special Tubes have also started producing tubular components like condenser coils & wires and have recently set up a unit in Pune. This company has a manufacturing unit for cold formed tube nuts for fuel injection tube assemblies. It has also given due importance to developing reliable quality systems and has been certified ISO\TS 16949: 2002 by M\S TUV.
Company also is making small diameter welded steel nuts and cold drawn seamless steel tubes. Customers for both these items are Godrej, Voltas, Electrolux, Carrier, TELCO, Ashok Leyland, M&M, TISCO, HMT, L&T, WIPRO, SAIL, BEML, BHEL, Bajaj Auto, Maruti etc.
GST has a small equity of just Rs.7.35 cr., wherein the promoters’ holding is 72%. Last year, the company made a profit of Rs.12.87 cr. whereas the profit of the first nine month’s of FY08 is Rs.14.02 cr.
Recently, it announced mind blowing December’07 quarterly results. Net sales jumped more then 50.28% in the December’07 quarter while net profit jumped more then 97%. For the first nine months of the current year it recorded an EPS of Rs.19.09 and declared 50% dividend and stock spilt into Rs.5 face value.
In the earlier week, the stock closed at Rs.231 but in the horrible last week it closed at Rs.227.60. Buy for short to long term investment with stop loss of Rs.198. On the upper side, it will zoom to Rs.245, Rs.270 in the short-term and can go up to Rs.350+ levels in the next 15 months. It is a great investment stock at current levels.

Steel Strips Wheels Ltd. BSE Code: 513262
Traded at NSE also as: SSWL Last Close: Rs.180
Mohali bases Steel Strips Wheels is engaged in auto ancillary. It has a small equity of just Rs.11.30 cr. wherein the promoter’s holding is 59%. Only 16.05% shares are with the public. GIC holds 3.54%, United Insurance holds 2.15% and Merryl Lynch holds 4.48% stake in the company.
Recently, the company got an order to supply 13,75,000 steel wheel rims worth about $75 million from Europe’s number 2 car company, PSA PE UGEOT CITROEN.
In the September’07 quarter, company’s sales went up 39.21% and profit jumped 45.09%. Tata Steel’s investment company, Kalimati Investments has purchased 12 lakh shares of this company at Rs.170. The company’s board will also allot 3,47,663 warrants to its 1company’s managing director at Rs.170.
Company’s future looks very bright. In the previous week, the stock closed at Rs.188.70 and last week closed at Rs.180, which may be the bottom level for this stock. Buy for investment with a stop loss of Rs.165. On the upper side, it will go up to Rs.201 in short time and Rs.260 level in the next 4-5 months.

UltraTech Cement (ULTCEM)
Current price:Rs 835 Target price : Rs 1018
Potential upside :22% Time Frame : 6-8 months OUTPERFORMER
Margin improvement …
• Sales up 10% in Q3FY08
Net sales during the quarter increased 10% to Rs 1,382 crore against Rs 1,260 crore in the corresponding quarter the previous year. Domestic volumes registered a growth of 6% from 3.21 million tonnes in Q3FY07 to 3.40 million tonnes. The effective capacity utilisation was 102%. Sales of ready mix concrete accounted for around 5% of the sales turnover.
• 32% increase in PAT
Profit before interest, depreciation and tax rose 23% to Rs 489 crore (Rs 397 crore). Profit after tax grew by 32% from Rs 212 crore to Rs 279 crore. The increase in variable cost per tonne was restricted to 4% as a result of improved production efficiencies. This was despite higher energy costs by 9%, primarily due to escalating coal prices.
• New developments
UltraTech has earmarked a capex of around Rs 3,300 crore to be spent over the next three years towards expansions, setting up captive power plants and de-bottlenecking. The capacity expansion at the unit in Andhra Pradesh, and the first phase of the captive power plant at the unit in Gujarat are expected to be commissioned in the Q4FY08. The other projects are progressing on schedule.

Valuation
At the current price of Rs 835, the stock is trading at $ 128 per tonne of its installed capacity of 17 million tones,
which is at replacement cost for setting cement plant. We expect the overall cement industry to trade at a premium
of 22% to replacement cost considering higher RoCEs of 25-30%. We expect the Ultratech stock would trade in line

We believe companies whose capacities were commissioned recently would show higher volumes and emerge as sector outperformers. These are Shree Cements, Dalmia, ACC and Kesoram Industries etc. We remai npositive on the sector with a one-year perspective as demand-supply statistics will favour the industry. Shree Cements, JK Cements, UltraTech Cements and ACC are out best picks. with large- efficient player as its cost initiatives would help improve its operating margin. We are also upgrading out rating to outperformer.

Flash News For Markets

A NEWSLETTER TO MAKE YOU WEALTHY

HERE‘S A FLASH
Glenmark Pharma. Buy Rs 495.75
Omaxe Buy Rs 302.25
GMR Infrastructure Buy Rs 162.90

TECHNICAL RECOMMENDATIONS
Advani Hotels Buy Rs 70.00
Everest Kanto Sell Rs 291.90
(Closing Prices of 24/01/2008)

Strategies To Ride The Volatility

The market movement that we saw last week is one of the worst movements in the history of Indian stock market. The way the Sensex collapsed from the 20000+ level to just above 15000 sent panic wave among investors across the country. The scenario was worse for the players in F&O, where some investors lost 100 per cent of their investments and in some cases investors had to fork out more money to pay the losses. The situation right now looks so grim that investors are not willing to park fresh money in the market. But this is where most investors make mistakes. This is not the time to panic but face reality. We understand that it is a bit difficult to maintain composure when you have made substantial losses. But the idea is to have a strategy to make good those losses and that can happen only if you think in a mature manner and not in haste. We are outlining a few strategies to play this volatile time. We are of the opinion that the market will not be in a hurry to stage a smart rally in the near future. It will keep giving more than 500 points rise each day only to fall with equal pace the following day.
The scenario that we see is also the function of global volatility as many Asian indices have fallen equally bad in 2008. So this is more of a global phenomenon than something restricted only to
Indian markets. Hence, there will be more surprises; sometimes even unpleasant ones. So expect the worst and be prepared with any of the strategies we have devised to deal with the current market imbroglio.
Strategy One
Do not sell your blue chips in a hurry. Indian fundamental story has not changed yet. India will be the second fastest growing economy in the world after China in 2008 and hence Indian
companies are expected to do well financially. There could be some amount of slowdown in the Indian economy but that will not be big enough to create panic in the market.
Strategy Two
Sell stocks that you bought based on rumors without understanding the fundamentals of companies. These stocks will take their own sweet time to bounce back. It does not make sense to hold them when momentum play will not work in the present market sentiment. In some cases, if you need to book losses please do so and park the proceeds into blue chip stocks. This will allow you to recoup your losses, as blue chip will give you good returns in the longer time horizon. Remember, many of the good scrips have taken a huge beating in the market due to bad market sentiment and that has made their valuations quite attractive.
Strategy Three
Expand your investment horizon. Many investors in recent time thought that one can easily double the money in four to five months. This is unlikely to happen looking at the present scenario. The Sensex in last four months saw major Bull Runs and this kind of Bull Runs are not expected in the near future. So invest for longterm so that you do not get disappointed even if your scrips do not move in the next three to six months from your buy level.
Strategy Four
Resist the temptation to play in the F&O market, as this will ensure that you do not take position beyond your limits. Further,F&O is always for playing short-term. As we are expecting the market to remain volatile in the short-term all stop-losses will trigger in no time. Also, do not play the market for short-term irrespective of how strong is your source in the market.
Strategy Five
Buy in a staggered manner because this market is not going to run away in a hurry. You can make purchases in small lots;maybe divide the same in four installments so that the law of average can work in your favour. For example, if you are planning to invest Rs one lakh, divide the same in four installments of Rs 25000 each.
Strategy Six
Do not look at the stock prices on hourly or daily basis if we do not wish to park fresh funds. Looking at the market movement in such a manner, you may do something that you are not
supposed to do and this could make your life a bit uneasy in the short-term. Just ignore stock market pages in newspapers for a couple of weeks. Even temporarily stop watching TV
channels that cover stock market as this could create panic and you might do something that is not warranted. Remember, the Indian equity market will give you good returns provided you go in a systematic manner. We do not feel that the bear run is here to stay for long. So remain invested in good quality stocks. It is time to face the reality and not to panic. Panic does not pay.

Street Talk
Alive and kicking. There are rumours in the market that there is a possibility of private placement in LIC Housing (BSE code 500253),currently trading at Rs 298.00, in the coming period and hence likely to be in momentum.

RECOMMENDATIONS

Glenmark Pharma. Face Value - Rs 1 Buy Rs 495.75
Ticker: 532296 Equity: Rs 24.39 cr. H/L: Rs 623.9/247.5
􀁺 Glenmark Pharmaceuticals (GPL) looks very attractive atthe moment in the pharma pack considering that the counter has corrected substantially recently. Currently down around 20 per cent to its peak, this scrip can give good upside in the medium term, but the long-term outlook is
anyway better.
􀁺 We expect good unlocking of value in GPL as the company is reorganizing its business. It is separating its generics business into a new 100 per cent wholly subsidiary as Glenmark
Generics Limited by April 2008 with an IPO of the same expected in Q1FY09.
􀁺 Besides, GPL has a robust business model, a reason for the scrip to get re-rated on the bourses a couple of years back. The company has a robust molecule pipeline of around six
Novell Chemical Entity (NCEs) and five biologics at different stages of development. Considering the fact that the company is active on the out-licensing deals and with this pipeline of molecules, there is a good visibility of similar deals taking place in the coming period. Hence, investors
can take advantage of this opportunity for long-term.

Omaxe Face Value - Rs 10 Buy Rs 302.25
Ticker: 532880 Equity: Rs 173.57 crore H/L: Rs 613/195
􀁺 This Delhi based company has more than 3200 acres of land of which 82.50 per cent of land in its own name. The company has experience across areas and has executed projects in
integrated townships, group housing, and retail, commercial properties, hotels IT as well as bio-tech parks and SEZ.
􀁺 One of the attractive IPO offerings from the real estate pack was the Omaxe IPO and no wonder it did get a good response from investors. However, the recent bloodbath on Dalal Street saw this counter correcting sharply from its high of Rs 613 in December 2007 to a low of Rs 224.
However, the scrip has started to recoup from its lows and is currently trading at Rs 302.25, down around 50 per cent from its peak.
􀁺 Thus the valuations have corrected in this scrip and it is time for investors to get into this counter at the current level, where there is a good room for upward movement,
giving investors a chance for better returns in the long-term.

GMR Infrastructure Face Value - Rs 2 Buy Rs 162.90
Ticker: 532754 Equity:Rs 331.07 crore H/L: Rs 268.7/65.43
􀁺 GMR Infrastructure (GMR) appears to be a better counter in the infrastructure pack today as it has a fairly de-risked business model and its revenue streams come from across sectors such as roads, power and airport rather dependent on any single sector.
􀁺 GMR is quite aggressive and has good success ratio in grabbing good projects across sectors, which includes the Delhi and Hyderabad international airports. The focus of the company is more on airport projects, which has immense growth potential in future. This augurs well for GMR and with Hyderabad International Airport to be commissioned in 2008, we will see good amount of revenues for GMR from FY09 onward.
􀁺 Currently, this counter has brushed off from its peak of Rs 268 and it is trading at Rs 162.90. This, we believe, is the perfect time to enter as GMR has the potential to give investors better returns in the long-term.

Street Talk Grow your networth

There is a rumour that a big broking firm is recommending Kotak Bank (BSE code 500247),
currently trading at Rs 1050,to its HNI clients for decent upside in the medium-term.

Technicals

MARKETS TO REMAIN WEAK

The Sensex seems to have created history by collapsing 5975 pts in nine trading sessions while it had taken 92 trading sessions to gain the same amount of ground. The outlook has obviously turned negative for the time being and has declined deeply and sharply beyond any expectations and has breached a plethora of support levels with amazing alacrity indicating that the weakness doesn't seem to be in a mood to go away in a hurry. It has reflected medium term weakness to breach the 16000 level indicating the possibility of further weakness. It will be prudent to stay away from the market till some stability returns.

Trend (Index): Down Last / Index Closing: 17594.07
Support:17494, 17361 /Resistance:17953, 18310
55-WEEK EMA: 16385.18 / 100-WEEK EMA: 14431.31
MACD: SELL MODE / MI: SELL MODE
ROC: SELL MODE / RSI: SELL MODE

ADVANI HOTELS Buy Rs 70.00
1st Target: Rs 96 2nd Target: Rs 102 Stoploss: Rs 64
Advani Hotels bottomed out by posting an intra-day low of Rs 29.65 on 07.03.07, moved upwards for quite a few trading sessions while continuous resistance came in the form of the 36
level (congestion area) and continuous support came in the form of the 125-day EMA. The scrip finally posted an intra-day low of Rs 32.16 on 03.04.07 and these levels have not been seen very
often since then. Advani Hotels commenced a short-term uptrend from here (there was enough clarity on the medium-term front), struggled but overcame the 55-day EMA, posted a series of
progressively higher tops and bottoms, started moving within the confines of an upward sloping channel, almost gave a throwover from this channel and finally peaked at an intra-day high of Rs
66.25 on 03.07.07. The scrip almost gave a downward key reversal from here, couldn't sustain these levels for long, entered a corrective phase, declined to post an intra-day low of Rs 44.83
on 23.08.07, rebounded smartly from here, posted a good but unsustainable rally to post a high of Rs 106 on 20.12.07 only for the scrip to enter a sharp correction. Currently, Advani Hotels
seems to be on the verge of entering a short-term uptrend (could commence a medium-term uptrend), could overcome the 55-day EMA and with the oscillators looking positive indicating the possibility of a further upside from here.

EVEREST KANTO Sell Rs 291.90
1st Target: Rs 230 2nd Target: Rs 218 Stoploss: Rs 330
Ekc peaked by posting an intra-day high of Rs 240.40 on15.05.07, but couldn't sustain these levels for long and finally declined to bottom out by posting an intra-day low of Rs 186 on 13.06.07 where strong support prevented further downside. The scrip finally posted an intra-day low of Rs 188.20 on 10.08.07 and these levels have rarely been seen since. Ekc commenced
a short term downtrend from here (this time around there wasn enough clarity on the medium-term front), struggled but eventually could overcame the 55 -day EMA, posted a
series of progressively higher tops and bottoms, started moving within the confines of an upward sloping channel, almost gave a throwover from this channel and finally peaked by posting an
intra-day high of Rs 370 on 19.11.07. The scrip almost gave a downward key reversal from here, couldn't sustain these levels for long, entered a corrective downmove, declined to post an
intra-day low of Rs 305 on 17.12.07, recovered sharply from here, posted a smart but slightly unsustainable upmove to post a high of Rs 385.35 on 03.01.08. Currently, Ekc is in the midst
of a medium-term downtrend, while it seems to have exhausted its weekly upmove (has comfortably breached the 55-day EMA) and with the mechanical indicators looking negative,
further downside from these levels cannot be ruled out.