COAL INDIA New FSAs: Who will foot the bill? :: Edelweiss

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Coal India to sign new FSAs with 80% threshold level
Media reports indicate that Coal India (CIL) would be required to sign 20-year FSAs
with power plants commissioned post March 2009 with a threshold level of 80% for
determining penalties instead of CIL’s proposal of 50%. The shortfall in meeting
this 80% level could have to be imported. As part of this, FSAs would be signed by
March 31, 2012 for power plants commissioned upto December 2011.
We estimate shortfall at 93mt by FY14E
Our power research team estimates that including ~22GW (based on CIL linkages) of
power capacity commissioned between FY10‐12, a total of ~42GW and ~54GW would
be eligible for FSAs by FY13 and FY14 respectively. Based on the potential ramp‐up of
these plants, the quantity of coal for meeting the 80% requirement is 120mt and 176mt
in FY13 and FY14 respectively. We estimate a shortfall of 77mt and 93mt (equivalent to
Indian coal grade) in FY13 and FY14 respectively which could have to be imported.
Uncertainty over sharing of imported coal costs
Adjusted for its higher calorific value, we estimate imported coal to be costlier than
domestic coal by ~USD30/t (FOB). This would mean an additional cost of USD2.3bn and
USD2.8bn for FY13 and FY14 respectively (see Table 2 for more scenarios). At this stage,
we lack clarity on who would shoulder this additional cost. Potential scenarios could be:
(i) sharing among Govt, CIL and power producers and (ii) an increase in power tariffs by
passing on this additional cost (though this is highly unlikely, in our view).
Possibility of faster clearances to ramp up coal output
We see the possibility of faster clearances by MoEF and land acquisition to ramp up
CIL’s production. However, this is likely in FY14 only. At this stage, we await clarity on
above issues. We currently have a ‘BUY/ Sector Outperformer’ recommendation/
rating on the stock (Target Price: INR430).

ADANI PORTS AND SEZ Kandla satellite port bid green lighted ::Edelweiss,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Event: Media reports indicate that Kandla Port has approved Adani Ports
and SEZ’s (APSEZ) bid to build and operate 14 mtpa cargo port outside
Kandla creek at a capex of INR10.6bn.
http://www.livemint.com/2012/02/15001029/Kandla‐port‐approves‐Adani‐bid.html?h=B
The Kandla Port Trust, which runs India’s biggest cargo‐handling port by volume at
Kandla (Gujarat), has approved the highest price bid submitted by APSEZ to build an
INR10.6bn satellite port outside Kandla creek to handle 14 mtpa cargo. APSEZ, India’s
biggest private port operator, had emerged the highest bidder for the project in
December by agreeing to share 25.09% of its revenue from the facility with the port.
The company has recently run into problems with the Union Home Ministry, which has
denied security clearance to the firm to participate in auctions for port contracts
without attributing any reasons.
Our view: Directionally positive
While the size of the port awarded is small compared to APSEZ’s existing capacity of
more than 150 MT at the flagship port at Mundra and 50 MT of Abbot point terminal,
this is directionally positive given that APSEZ has been denied clearance/bid not
accepted for a number of PPP projects in India during the past 6–9 months (JNPT fourth
container terminal, Vizhinjam port and Vizag port projects denied clearances. Also,
Chennai port did not accept APSEZ’s revised revenue share of 5% against 1.5% earlier
offered for the container terminal citing that it was much lower compared to recent
revenue share offered at other ports for similar projects).
At 70:30 Debt:Equity the Kandla satellite port project will entail equity investment of
INR3.2bn. While we await more clarity on project details from the company, this being
similar to most other PPP port projects could add a nominal INR2/share to the overall
SOTP. We currently have a ‘BUY’ recommendation on the stock with SOTP‐based TP of
INR168/share.

JSW STEEL Flexing realisation spreads :: Edelweiss

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


JSW Steel’s realisation spread has gone up to INR5,900/t for 9mFY12 vs
INR4,400/t in FY11. We revise up our FY13 spread assumption to
INR4,900/t from INR3,700/t assumed earlier, leading to 9% revision in our
EBITDA estimates. We are also revising up our fair value for JSW Ispat to
INR(52) vs INR(109) due to improved Q3FY12 performance and visible
decline in cost. We maintain our ‘BUY’ recommendation with a revised
price target of INR992/share (earlier INR775/share).
Revising realisation spreads on steady improvement
JSW Steel’s realisation spread (i.e. the premium of reported realisations over the
benchmark HRC price) has been improving steadily. From an average of ~INR4,400/t in
FY11, the 9MFY12 spread has gone up to an average of INR5,900/t. Factoring in this
trend, sustaining in the last three quarters, we revise our spread assumption upwards
for FY13 to INR4,900/t from INR 3,700/t assumed earlier.
Cheaper power to elevate JSW Ispat earnings
JSW Steel’s 49% associate company, JSW Ispat reported an improved performance in
Q3FY12 with an EBITDA/t of INR3,616 (vs INR2,357/t in Q2) on the back of 5.5% QoQ
surge in realisations. The entity has also secured power from the group company, JSW
Energy which will substitute the expensive power from the state grid, saving ~INR800-
1,000/t. With steel prices improving further in Q4 so far and benefits of lower costs,
we expect an improved performance going ahead. We now estimate the entity’s FY13
EBITDA/t to be INR4,497 vs INR3,200 assumed earlier.
Outlook and valuations: Better margins ahead; maintain ‘BUY’
With domestic steel prices inching up in spite of declining raw material costs and a
higher realisation spread, we expect FY13 EBITDA/t to improve to USD175 (vs USD159
estimated). Given the upward revision in JSW Ispat’s FY13 estimates, we peg its fair
value at INR(52) vs INR(109) earlier. With a revised price target of INR992/share
(INR775 earlier), we maintain our ‘BUY/Sector Outperformer’ recommendation/rating.

WATSON PHARMACEUTICALS Booster from Lipitor ::Edelweiss,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Watson Pharmaceuticals’ (WPI) Q4CY11 numbers were in line with Street
estimates and at the higher end of its guidance. Revenue growth of 62% YoY
included launch of Lipitor and Concerta. The company expects USD550mn‐
600mn revenue and USD250mn‐260mn gross profit contribution from
Lipitor during exclusivity and significant price erosion post exclusivity.
Management indicated slow down in growth post CY12, which suggests
revenue growth can decelerate for large Indian companies, especially for
those with a USD800mn‐900mn base in the US.
Strong growth from launch of generic Lipitor and Concerta
Watson’s Q4CY11 numbers were in line with revenue growth of 62% to USD1.5bn, EBIT of
USD372mn (up 172%) and EPS of USD1.77 (up 90%). EPS ex‐ Lipitor grew 22% YoY.
Revenue and profit form Lipitor was USD300mn and USD81mn, respectively.
Global generics growth led by US
Global generics grew 81% YoY largely led by 16 new launches in the US including generic
Lipitor. Ex‐US, growth was 23% YoY. Global brands segment grew 17% YoY and Anda
distribution division grew 24% YoY. Management has guided for 15‐21% growth in
generics with launches of Para IVs—Xopenex and Actos. Xopenex will be a three player
market during exclusivity including AG from Sanofi. Management has built in higher
competition in OCs and controlled substances products for CY12.
Slower growth momentum post 2012 form patent cliff in US
Watson has guided to earnings growth of 15‐20% in CY12 and 10% in CY13 vis‐à‐vis 30% in
CY11 which highlights that it expects a slowdown in the US market beyond CY12 as patent
cliff opportunity is likely to taper. We highlight that pace of growth for large Indian
generic companies can also decelerate beyond FY14, particularly for companies with
USD800mn‐900mn revenue base in US by FY13.
Read across for Ranbaxy: Lipitor sales at USD 550mn‐600mn
The company has guided to USD250mn‐260mn gross profit from Lipitor during exclusivity
which translates into sales of USD550mn‐600mn. We highlight that Watson had launched
Lipitor a week prior to Ranbaxy and garnered significant market share. We have built
USD350mn‐400mn revenue for Ranbaxy from Lipitor. Watson also highlighted that IMS
data is not painting the correct picture and it has almost 50% of the retail market

TECHNO ELECTRIC & ENGINEERING- Sedate quarter ::Edelweiss,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Techno Electric & Engineering (TEEC) reported weak Q3FY12 results. PAT
declined 3%, marginally below our estimate. Energy segment helped the
company post a revenue growth of 11% on the back of power capacity
additions even as EPC (82% of total revenue) was flat during the quarter.
EBITDA improved 40% YoY owing to (1) increased contribution from
Energy and (2) margin expansion seen in EPC. The management seemed
confident of achieving ~10‐15% growth in EPC with margins expected to
normalise to 14%‐15%. In Energy segment, plans are intact to add 100‐
150MW every year. We maintain ‘BUY’ with a target price of INR 312.
Moderate revenue growth, margin expansion continues
TEEC’s Q3FY12 consolidated revenue at INR 1.7bn grew 11% YoY, largely driven by the
wind power capacity addition (YoY) even though the average PLF was lower at ~10%‐
12% (due to seasonal nature) generating 46.4 mn units. Higher contribution from wind
power business helped expand EBITDA margin by 640bps YoY to 30.8% while EBITDA
grew 42% YoY to INR 522mn. Adj. PAT declined 3% YoY to INR 230mn on the back of
higher depreciation and interest expenses as the company added new capacity.
Wind power expansion on track, transmission project completed
TEEC did not add any new capacity during Q3FY12, but maintains that the company is
on track to achieve an annual capacity addition of 100MW‐150MW. It is on track to
commission Phase II of the wind power expansion by 100MW in 2012. The company
achieved a significant landmark, having completed the transmission line project in
Haryana in December 2011 to evacuate 1,320MW power from Jhajjar plant which has a
25‐year concession period. The EPC order book dropped marginally (down 4%) to INR
12bn while inflows were weak at INR 1.4bn.
Outlook and valuations: Positive; maintain ‘BUY’
We like TEEC’s conservative and bottom‐line centric EPC business model. The wind
power and transmission business also provides stability to the overall business. On our
EPS of INR 24.1 and INR 31.2, the stock is currently trading at PE of 10.7x and 8.4x its
FY12E and FY13E respectively. We maintain ‘BUY/ SP’ with target price of INR 312
(earlier INR 300).

PSL Order book adds musclePSL Order book adds muscle ::Edelweiss,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


PSL’s Q3FY12 standalone revenue at INR5.2bn (down 31.2% YoY, up 2.3%
QoQ) was in line with estimate. EBITDA and PAT dipped to INR0.8bn
(down 6.2% QoQ and 7.0% YoY) and INR0.1bn (down 36.5% QoQ and
67.4% YoY), respectively. The company’s standalone order book stands at
INR29bn with majority orders worth ~INR16bn announced in the last two
months. We have increased our FY13E EPS 6.3% to INR16.2/share to
incorporate higher EBITDA margin (against our earlier expectation).
Maintain ‘BUY’ with a target price of INR140/share (March 2013).
Revenue and EBITDA in line with estimates; pipe sales at 48.6KT
Q3FY12 standalone pipe sales at 48.6KT (down 35.4% YoY and 8.5% QoQ) were
marginally below estimated 50KT. However, revenue increased 2.3% QoQ due to
higher pipe realizations at USD1,117/mt (Q2FY12 realisation USD1,056/mt). Coating
segment recorded EBITDA margin of 12‐13% while pipes EBITDA was ~USD197/mt
(down 9.4% QoQ). Depreciation, interest and tax rate at INR278mn, INR408mn and
30%, respectively, were flat QoQ and in line with estimates. PAT at INR67mn was
lower than expected due to carried down effect of marginally lower EBITDA.
Order book at INR29bn; lower EBITDA margin on new orders
Recent announcement of orders propelled the order book back to a decent INR29bn
(provides visibility over next 3‐4 quarters). However, the EBITDA margin for new
orders seems to be lower at USD130‐150/mt than PSL’s 9mFY12 average of
~USD200/tn. Rising steel price regime leads to negative impact on EBITDA margin.
Management guided for 50‐60KT pipe sales for US facility in FY12; 100KT sales in FY13.
Outlook and valuations: Uptick in order book; maintain ‘BUY’
With no major capex plans for the next 12 months, PSL is likely to repay some portion
of its debt during FY13 (as per management), thereby reducing interest expenses. We
are rolling over our target price to March 2013 and peg the same at INR140/share. At
CMP of INR69/share, the stock trades at 5.6x/4.3x our FY12E/13E EPS. Our price target
estimate is based on average of P/E (7.5x) and EV/EBITDA (5.4x) valuations. We
maintain ‘BUY’ recommendation on the stock

How to work around bank charges ::Business Line,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

You can maximise benefits by registering and paying all your utility bills online or through an ATM as this is free of cost.

Amit was shocked when he logged into his internet banking account.

He checked the entries in his savings bank account and noticed deductions under various heads to the tune of Rs 1,000.

Amit isn't alone in experiencing these sudden deductions from his savings bank account. There are many of us who are caught unawares.

But the bank is mostly right in taking these charges.

SIGNIFICANT LEVIES

Charges or fees levied by banks broadly fall under three categories. Penal fee, such as those for non-maintenance of minimum balance, regular service charges such as those for ATM cards, internet banking etc. and finally specific fee, such as that for setting up a standing instruction. And, these charges are not small sums.

For example, public sector banks such as SBI, PNB, Canara Bank and Bank of Baroda charge Rs 150-250 for not maintaining a minimum quarterly balance of Rs 1,000.

In the case of private sector banks such as ICICI bank, HDFC Bank, Axis Bank and Federal Bank, the minimum quarterly/monthly balance requirement varies from Rs 1,000-10,000. And, charges are as high as Rs 750 for non-maintenance.

How do you minimise these charges and do you have recourse if you think you are unfairly penalised?

You may assume that opting for a ‘no frills' account with zero-balance facility would be a solution.

But, true to its ‘no frills' tag, these accounts have restrictions on withdrawals and limited availability of ATM or internet banking facilities. Moreover, what is offered as free, like an ATM card, may be free just for the first year.

Besides, in many cases everything else such as cheque leaves, passbook, internet banking, etc may come with a fee. Also, such accounts have upper limits for transaction amounts. In the event of exceeding it, the regular savings accounts rules would apply.

However, you may have some respite if the recommendations of the Damodaran Committee on Customer Service in Banks is implemented. On minimum balance charges, the report says that banks should not deduct penal fee without informing the customer.

Intimation should be done by an SMS/email/letter to a customer immediately on breaching the minimum balance amount.

That way, you could be more vigilant.

Further, there is also a suggestion to impose a charge that is proportional to the shortfall in minimum balance.

So if Rs 250 is the penalty for not maintaining Rs 1000 balance and you have Rs 500 in the account, a levy of only say Rs 125 may be imposed.

MAXIMISE ATM AND INTERNET BANKING USE

Charges for non-maintenance of minimum balance is only one part of the story.

Charges for ATM cards range from Rs 100-500 for many banks depending on the spending limits and the additional features provided to you. Besides, accessing accounts and executing transactions through internet banking is something that most banks are promoting. Many banks offer this for free in the first year and start charging from the second year. This can begin from Rs 100 a year.

These may seem small sums individually, but if all of them fall due in the same month, it can pinch.

Given the utility value of both these facilities, the charges may be reasonable for ATM cards and internet banking. But you can still maximise benefits by registering and paying all your utility bills online or through an ATM.

Payment of mobile bills, insurance premiums, electricity charges and such other services is free of cost.

In fact, you can even do away with internet banking as most transactions that are done through internet banking such as paying utility bills, fund transfer, or opening a fixed deposit can also be done through an ATM too.

Alternatively, you can opt for mobile banking.

Once you register with a utility, you would be prompted to pay the bill each time you log into your internet banking account if the due date is round the corner. Standing instructions can be a good source of income for banks, not so for you. If you are transferring amounts to someone regularly, say every month or paying an insurance premium with similar frequency, you tend to set up a standing instruction with the bank to debit the amount.

USE STANDING INSTRUCTIONS SPARINGLY

This isn't cheap. Setting up an instruction costs Rs 50-150 and executing it every month will mean up to Rs 25 taken away for a transaction.

So just for two such transactions, you would end up paying Rs 600 a year, in addition to the initial cost of setting up the instruction.

A better way is to pay your insurance premium online and use the NEFT mode to transfer money to your near ones. NEFT charges for transactions less than Rs 1 lakh is just Rs 5.

The Damodaran committee has also asked for banks to notify any new charges or penal fee at least one month before levying them.

Also, visit your bank's Web site that would give you the complete list of service charges for various transactions and compliance issues.

ESS DEE ALUMINIUM In the slow lane :: Edelweiss

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Ess Dee Aluminium’s (Ess Dee) Q3FY12 PAT at INR167mn was
significantly below our expectation. Volumes continued to disappoint,
declining marginally YoY as per our estimates. Management attributed
subdued sales to slower ramp up in production at IFL plants and
slowdown in demand. Outlook for Q4FY12 remains bleak. We maintain
‘HOLD’ with a target price of INR190/share.
Results below expectation
Ess Dee reported a 16% YoY decline in revenue to INR1.6 bn. This was driven largely by
a fall in LME prices (down 11% YoY in USD terms). While management did not disclose
volume numbers, they are likely to have dipped YoY in our view, which is a key
disappointment. EBITDA margin contracted 560bps to 23% due to expenses incurred in
stabilizing IFL plants. Thus, PAT for the quarter at INR167mn was down 56% YoY (27%
below our estimates).
Slow ramp up in volume from IFL plants a concern
Volumes were disappointing for the fourth consecutive quarter. Management
highlighted that it has been cautious in ramping up volumes from IFL plants to keep
quality under control and avoid any undue loss in the process of stabilizing the plants.
They also acknowledged some pressure on demand from pharma companies during
the quarter, but sounded confident of a revival in demand going forward. Volumes are
likely to remain flattish in Q4FY12 and a pick up in volumes is expected only in FY13.
Outlook and valuations: Cautious; maintain ‘HOLD’
We are revising down our EBIDTA estimates 5‐10% for FY12‐13 to factor in the
continued slow ramp up in volumes and lower margins. Ess Dee is currently trading at
FY12E and FY13E P/E of 7.3x and 6.1x, respectively. Our target price of INR190 per
share is based on 6x FY13E P/E. With no visibility of a volume ramp up in the near term
we maintain our ‘HOLD’ recommendation.

Jain Irrigation: MIS growth to remain slow as focus on cash :Nomura research,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Jain Irrigation’s 3QFY12 results were impacted by a higher-thananticipated
interest cost and high exchange loss on foreign currency
loans, which led to the company reporting only a tiny profit. Growth in
micro-irrigation systems (MIS) declined to an all time low as the
company was focused on controlling receivables. Agro-processing
disappointed massively, while the piping business surprised positively.
With the stock trading at 8.5x FY13F earnings we reiterate our Buy
rating.

Accumulate EVEREST KANTO: price target of Rs.42: Kotak Sec,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


EVEREST KANTO CYLINDERS LTD (EKC)
RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.42 CONS. FY13E P/E: 11.6X
EKC has reported poor set of Q3FY12 results. The indian operations reported
a sharp decline in revenues. Profitability deteriorated across all the markets.
We have revised our FY12 and FY13 numbers. We forecast steep decline
FY13 earnings due to higher interest burden as the company would have to
refinance its FCCB. This would take a toll of its earnings and return ratios
with ROE dropping to 4.7% in FY13. Recent appreciation in INR vs USD
should provide some relief to the company. In view of this, we have revised
our target price to Rs 42 and maintain Accumulate, thereby recommending
investors need to utilize declines to buy into the stock

Carborundum Universal: Electro-minerals spoil the day :: Kotak Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Carborundum Universal (CU)
Others
Electro-minerals spoil the day. CUMI’s 3QFY12 results were lower than estimates led
by sharp qoq decline in margins in the electro-minerals (EMs) business. We have long
highlighted the unsustainable margins and commodity nature of the EMs business:
3QFY12 brought that to the fore. The management inputs in its post-results call should
help in deciding whether 3QFY12 margins should form the base case for the future,
which would mean a significant cut in the Street’s earning estimates. Maintain REDUCE.

PFC: State sector drives growth :: Kotak Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


PFC (POWF)
Banks/Financial Institutions
State sector drives growth. PFC accelerated its loan growth to 28% (up from 25% in
2QFY12) due to higher lending to state power entities largely for pre-approved
generation projects. Core earnings were almost flat qoq, up 13% yoy (5% above
estimates) on subdued spreads and stable operating expenses. Other highlights: (1) A
gas-based power plant in AP (exposure of Rs3.9 bn) slipped into NPL and (2) PFC
booked forex gain of Rs4.2 bn following the change in accounting policy. We revise
estimates by 1-4%, retain ADD with price target of Rs225 (from Rs215).

HPCL • •Higher GRMs, inventory gains and government support turn Q3 bottom-line black :: Centrum

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Higher GRMs, inventory gains and government
support turn Q3 bottom-line black
HPCL reported Rs27.3bn PAT surprising our and street estimates on the back
of additional compensation from government (total support of Rs450bn for
9MFY12). The company received Rs65.8bn compensation from the
government for the under-recoveries incurred during Q2 and Q3.
Additionally, the company also benefitted from product inventory gains
(Rs2.5bn). It was a good quarter operationally with average GRMs at
US$4.8/bbl for its refineries and crude throughput at 7.5mmt.
􀂁 Revenue jump due to higher product sales: HPCL reported 41.1% YoY and
29.5% QoQ jump in revenues at Rs480.5bn backed by higher product sales
and high crude prices. Throughput during the quarter remained flattish at
4.1mmt while market sales jumped to 7.5mmt against 7.1mmt in Q3FY11 and
6.9mmt in Q2FY12.
􀂁 Higher than expected support from the government leads to profits: The
government approved Rs450bn compensation for OMCs for under-recoveries
incurred during 9MFY12 (of which Rs300bn was accounted for in Q3FY12).
Thus, HPCL accounted for Rs65.8bn compensation from the government in its
reported numbers which led to profits for the company. Refiners with lower
complexity gained during the quarter due to expansion in Naphtha-Crude and
Fuel Oil-Crude cracks, thus HPCL also benefitted from this and reported strong
GRMs of US$4.8/bbl in Q3. Also, the company had product inventory gains of
about Rs2.5bn which benefitted profitability.

Buy Financial Technologies: will GAIN a lot after MCX IPO (even after current run up)

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Buy Financial Technologies: will GAIN a lot after MCX IPO (even after current run up)

Our target for Financial Technologies  India Ltd (FTIL) is RS 1,200 (30%+ upside from current level of Rs 910). Even though stock has risen from 500 levels in Dec to 900 levels now; there is PLENTY of upside left

FTIL now holds 31.2 per cent stake in MCX, which will come down to about 26 per cent after the IPO. MCX is trying to rope in anchor investor in the public offering. MCX will be the first exchange in India to go public. CRISIL has rated IPO Grade 5 for this IPO indicating at strong fundamentals of the company

Dr Reddy's Laboratories: High FTF sales lead to outperformance :: Kotak Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Dr Reddy's Laboratories (DRRD)
Pharmaceuticals
High FTF sales lead to outperformance. Higher FTF sales led to outperformance in
this quarter; however, base business performance was disappointing due to no qoq
pick-up in US, flat sales in Russia yoy and significant increase in SG&A costs, in line with
base business sales growth. We expect muted base business EPS growth in FY2012E
due to (1) flat margin, (2) pick-up in tax rate and (3) higher interest costs. However, we
expect core EPS growth at 25% in FY2013E. We value DRL at (1) 20X base business EPS
of Rs86 (down 4% due to higher tax rate) and (2) Rs21 from limited competition in US
launches. Downgrade to REDUCE (was ADD), TP at Rs1,740 (was Rs1,800).

Grey market premium, Feb 19 :MCX IPO

Please Share::  India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Grey market premium, Feb 19 :MCX IPO

Price Band MCX IPO: Rs 860 to Rs 1,032

 Latest GMP MCX ipo Rs 280- Rs 290
 Kostak Buyer of Rs 3,700

 Expected retail over subscription: at least 10 times

 Apply maximum amount (if you have money) to get full benefit!

ONGC: Buy Target : INR 328 :: FinQuest

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


In Q3FY12, Oil and Natural Gas Corporation (ONGC.IN) (ONGC.BO) results were below our
estimates both on the top line as well as bottom line front on account of higher than expected
subsidy burden for the company.
Increase in subsidy drags the profit down but Cairn India's royalty adjustment saves
the day...
ONGC revenue declined 11% Y-o-Y and 19.2% sequentially to Rs.185.2 bn while PAT declined
4.8% Y-o-Y and 22% sequentially to Rs.67.4 bn. The company's adjusted PAT declined 33%
Y-o-Y and 45% sequentially to Rs.47.5 bn. Revenue and PAT were below our estimates on
account of higher than expected subsidy burden. ONGC subsidy burden increased 197% Y-o-
Y and 119% sequentially to Rs. 125.3 bn on account of increase in the subsidy sharing of
upstream oil companies.
Oil and gas production to increase on account of IOR/EOR projects, marginal field
development and ramp up in Rajasthan field production...
In Q3 FY12, ONGC's crude output declined 4.1% Y-o-Y and 1.4% sequentially to 6.74 mmt
which was marginally lower than our assumption while gas production increased 0.8% Y-o-Y
and 0.3% sequentially to 6.4 bcm which was in line with our estimates. We expect ONGC
crude oil and gas production to increase on account of increase in production at the Rajasthan
field coupled with increase in production at the marginal fields and IOR/EOR projects which
will more than compensate for the natural decline in nomination fields. It should be noted that
the company target to produce 28.76 mmt (domestic: 25.04 mmt and JV: 3.72 bcm) of oil and
27.02 bcm (domestic: 24.87mmt and JV: 2.14 bcm) of gas in FY13. The company expects oil
production to increase from 24.4 mn tonnes in FY11 to 27-28 mn tonnes in FY14.
Production hiccups at OVL but high crude oil prices for rescue...
We cut down production estimates at OVL to 8.8 mmtoe and 8.7 mmtoe for FY12E and FY13E
respectively in line with the company's target on account of decline in production at blocks in
Syria and Sudan. However, we note that, OVL's crude oil realization exhibits direct correlation
with Brent crude oil prices. For the last three years, OVL's crude oil realization stood at around
10% discount to the Brent crude oil prices.
Uncertainty over Subsidy mechanism will remain a drag…
For 9M FY12, the share of subsidy of upstream oil companies increased to 37.9% as against
33.3% in HF1Y12 and 38.8% in FY11. The uncertainty over the subsidy sharing mechanism
will continue to be a drag on the stock. We increase subsidy burden to Rs. 1,362 bn and Rs.988
bn, as against the earlier estimates of Rs. 1,168 bn and Rs. 820 bn for FY12E and FY13E
respectively, to factor in higher than expected crude oil prices and depreciation in the rupee
vis-à-vis dollar. We increase the subsidy share of upstream companies to 40% on account of a
weaker fiscal position of the government.
Valuation
We revise EPS estimates to Rs. 29.5 and Rs. 32.6 as against the earlier estimates of Rs. 31.6 and
34.0 for FY12E and FY13E respectively to account for increase in the gross under recoveries of
OMCs, change in subsidy sharing mechanism and a lower production volume at OVL. At
CMP, ONGC is trading at 9.5x FY12Eand 8.6x FY13E EPS of Rs. 29.5 and Rs. 32.6 respectively
and at an EV/EBIDTA of 4.0x FY12E and 3.4x FY13E. We value ONGC standalone business at
Rs.263 per share at a EV/ EBIDTA of multiple 4x and OVL at Rs.48 per share at EV/ boe of $5
per bbl for its 2P reserves. We value investments at Rs 17 per share, a 20% discount to the
market value. We maintain buy rating on the stock and based on sum-of-parts valuation (SOTP),
we arrive at a revised fair value of Rs.328 (earlier target price of Rs. 331 per share), implying a
16.4% upside from the current levels and a 30% upside from our initiating price of Rs. 252 per
share.

Thermax: Weak order inflows affect visibility :: Kotak Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Thermax (TMX)
Industrials
Weak order inflows affect visibility. Thermax reported sharp fall in backlog to Rs51
bn leading to guidance of decline in FY2013E revenues. The company may lower
margin requirement if inflows continue to remain sedate. It expects domestic business
to be challenging in 1HFY13E with steel and cement supporting recovery in 2HFY13E
and power recovering only in FY2014E. Supercritical JV on track for Sep 2012
completion. Retain REDUCE on back of weak inflows, competition and margin pressure.

PDF link to reports - Infosys, telecom, utilities:: Kotak Sec,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

http://www.kotaksecurities.com/pdf/indiadaily/indiadaily16022012.pdf


Company
Infosys: Infosys Consulting - takeaways from management interaction


Sector
Telecom: NTPP (NTP in parts) - few more policy guidelines, lot still remains
Utilities: FSAs in place, but where's the coal? And who will pay for it?

3QFY2012 Result Update -Aurobindo Pharma: reliance sec

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Performance boosts sequentially
Key highlights of the result
 Better than expected 3QFY2012: Aurobindo reported better than expected
top-line growth of 17.7% yoy (19% qoq) led by low margin ARV API (up 106%
yoy) and healthy formulations growth in EU and ROW markets (up 45.1% yoy),
partially aided by weak INR. The US formulations grew 14.9% qoq despite the
ban on non-betalactum plant, which is commendable. The licensing income
remained low at Rs22.8cr.
 Margins improved sequentially: Despite higher contribution from the low margin
ARV tender business, the gross margins improved 60bp qoq to 44.1%. Further,
favorable currency led the EBITDA expansion by 400bp at 13.3% qoq as
exports remain unhedged.
 APAT up 10.2% qoq: Aurobindo reported net loss of Rs28.5cr in 3QFY2012,
affected by USFDA issues and forex loss of Rs144.5cr on account of loan
restatement. Adjusting for the one-time expense, the APAT stood at Rs116cr,
above our estimate.
 Concall takeaways: (1) The Company expects USFDA inspection by March,
2012 for Unit III and by June, 2012 for Unit VI, (2) It has guided for 25 product
launches in US out of which 11 from Unit III and 14 through Unit VII post
USFDA resolution in FY2013E, (3) AstraZeneca contract is likely to start from
October, 2012 and it expects to launch ~80 products (worth US$30-50mn) by
December, 2013, (4) Pfizer contributed Rs67cr in 3QFY2012, expected to
double in 4QFY2012, (5) Company guided to improve margins by cost saving of
US$1.5mn per quarter on Unit VI, (6) Capex guided at Rs200cr for the next 2
years, while, tax rate at 20% for FY2013, (7) Gross debt stands at Rs3,360cr,
cash at Rs225cr.
Outlook and Valuation
Aurobindo’s 3QFY2012 performance reflected strong growth traction on a
sequential basis. New launches in EU and ROW markets, gradual improvement in
US through shift of products from affected units and favorable currency led to better
than expected quarter. Despite management’s encouraging picture of strong
visibility (US$2bn sales guidance by 2015) led by new launches in US, ramp up in
filings in niche OCs and OTC segments, pick up in Pfizer and AstraZeneca sales
and sustained growth in EU and ROW, we believe that the growth would remain
under pressure until the USFDA resolution is obtained. We factor in the sequential
improvement of the company and revise our EPS to Rs13.3 (Rs11.9 earlier) and
Rs14.5 (Rs13.9 earlier) for FY2012E and FY2013E respectively.
The stock has corrected 51% in the last 1 year due to slippages in growth affected
by import alert on manufacturing plants and high forex losses. Further, high fixed
costs relating to facility up-gradation and import alert on Unit VI impacted its
operating performance. CBI raids with regards to financial misdeeds by promoter
also added to its woes. We believe that stock correction is overdone (up by 25% in
the last 3 months) and a likely rebound in growth and margins would drive growth.
Hence we maintain Hold with a price target of Rs139.
Risks to the view
 Delay in USFDA resolution and slowdown in the ramp up of Pfizer sales could
impact future revenues

PDF link - Hindustan Dorr Oliver, Voltamp Transformers, SCI :::Kotak Sec,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

http://www.kotaksecurities.com/pdf/dmb/MorningInsight16022012.pdf



HINDUSTAN DORR-OLIVER LTD (HDO)
RECOMMENDATION: REDUCE
TARGET  PRICE:  RS.35
FY13E P/E: 11.1X


VOLTAMP LTD
 RECOMMENDATION: REDUCE
TARGET  PRICE:  RS.519
FY13E P/E: 11.8X


SHIPPING CORPORATION OF  INDIA
RECOMMENDATION: SELL
TARGET  PRICE:  RS.60
FY13E P/E: 58.5X

2012 will be year of M&As: Grant Thornton ::Business Line,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

The current calendar year would be one of mergers and acquisitions, according to an annual survey carried out by accounting and advisory firm Grant Thornton India LLP.

The report also highlighted that pharma followed by manufacturing would be the most promising sectors for 2012 both in terms of domestic and cross-border deal activity. Private equity investments would be expected to focus on pharma, healthcare and biotech followed by manufacturing and banking and financial services industry sectors.

84% OPTIMISTIC

The survey was conducted over the last quarter of 2011 and is based on responses from about 100 respondents covering key corporates and private equity funds.

The survey said 84 per cent of the respondents were optimistic about increased M&A activity in 2012 and 60 per cent of corporations were considering private equity as a source of funding in 2012.

Mr Harish HV — Partner, India Leadership Team at Grant Thornton India said, M&A in 2012 is expected to be driven by strategic alliances and acquisitions followed by debt restructuring, mergers or demergers and equity raising.

“While corporates are extremely positive about M&A as a core part of the strategy the top three reasons they adduce for failure of a transaction are leadership change, cultural issues and governance. We are also well aware that for every completed transaction there are several (estimated to be over three times) attempted transactions which do not close.”

GAPS

According to the survey the top reasons given for not closing transactions are gaps in valuation expectations, cultural incompatibility and findings thrown up during due diligence. “Inadequate or wrong disclosure is a strong reason for transactions not concluding,” quoted the report.

The survey points out that 37 per cent of respondents were involved in M&A activity in 2011, as against 38 per cent in the 2010.

“Thus, while inbound deal value was higher than outbound deal value in 2011, we saw higher outbound deal volumes. The survey hints at the possibility that Indian companies may be taking advantage of the relatively lower valuations in the face of global economic uncertainties to acquire companies internationally,” added the report.

An overwhelming majority of respondents (92 per cent) expect PE investments to either stay the same, or increase, in the next year. “A dormant IPO market and rising debt costs have encouraged the role of PE as a funding source.

“Industry captains also believe that this would be aided by factors such as the short-term uncertainty in the capital markets, the increasing acceptance of PE as a source of funding and the expectation that the high valuations seen in certain sectors will stabilise,” points out the survey.

Commenting on the PE outlook for 2012, Mr Siddhartha Nigam — Partner, Mergers & Acquisitions, Grant Thornton India said, “While private equity deal volumes in 2011 witnessed an uptrend with average deal size remaining constant, the PE activity in 2012 is expected to gain further momentum both in terms of volume and value on the back of PE-led industry consolidation and PE exits through trade sale in addition to the ever growing requirement of growth capital of dynamic Indian enterprises.”

Gold futures up at Rs 28,169/10 grams ::Business Line,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Gold prices rose Rs 42 to Rs 28,169 per 10 grams at the futures trade today, as speculators enlarged their positions, tracking a firming global trend.

At the Multi Commodity Exchange, gold for delivery in April rose Rs 42 or 0.15 per cent to Rs 28,169 per 10 grams with a business turnover of 2,304 lots. Similarly, the metal for delivery in June moved up by Rs 29 or 0.10 per cent to Rs 28,518 per 10 grams in 67 lots.

Market analysts said increased buying by speculators in tandem with a firming global trend mainly led to rise in gold prices at the futures trading.

Meanwhile, gold gained 0.2 per cent to $1,731.57 an ounce in Singapore.

Eye On The Market: Market springs a surprise ::Business Line,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Before you could say ‘bull', this particular stock market rebound has taken the Sensex up 18 per cent and the broader market BSE 500 up by 22 per cent. About twenty stocks listed on the NSE have, in fact, already doubled from their values on New Year's eve.

It is not just the quantum of gains that stocks have made in this two-month period that should surprise investors. It is also the identity of these stocks. Running down the list of top gainers, one finds stocks from sectors such as power generation, realty and infrastructure.

These were precisely the stocks that investors took great pleasure in thrashing to pulp last year on worries about high debt, a sluggish capex cycle and governance issues.

DRIVING HOME LESSONS

This rally has clearly caught market commentators by surprise too. Scrolling through some of their recent advice to investors, we find some of them asking investors to ‘go long' on previously shunned names in capital goods and infrastructure due to ‘attractive valuations'. Others gloomily intone that this is just a ‘dead cat bounce' (to put it more elegantly — a final stand by markets), before the global economy falls to pieces and a real bear market materialises. They are asking investors to sell ‘into the rally' and get out of stocks while the going is good.

Now, whom should you listen to? Preferably no one. For the recent stock market rally just drives home the lessons we have already learnt in 2008-09.

LIQUIDITY CALLS THE SHOTS

One, no one can accurately call turning points in the Indian market because this depends on the direction of FII (Foreign Institutional Investor) flows. Most market watchers did not predict a great start to 2012 because the picture on liquidity appeared quite bleak at that time. But what has lent this stock market rally wings is the fact that FIIs, completely reversing gear from last year, have poured $4.8 billion into the cash market in the first two months of 2012. This is after pulling out some $350 million last year.

Global market watchers now explain this in terms of risk appetite returning, the US Fed's decision to inject fresh liquidity into the system and optimism about a solution to the Greek crisis. Given that no one seems to have great predictive ability about the market, holding back equity investments in the hope of catching a market bottom appears to be a futile exercise.

Two, once a market rally begins, it acquires its own momentum. Though the initial rise may be fuelled by transitory factors such as short covering in badly beaten stocks, this can swiftly transform into a real bull market. especially if long-term investors jump on to the bandwagon and bid up prices further. In fact, the action over the past five years suggests that the multi-year range-bound market that many people talk of as a possibility for India may never materialise, with huge liquidity flows driving stock prices alternately up and down.

Investors looking to make long-term investments, therefore, need to act swiftly whenever they perceive a window of opportunity in terms of low market valuations.

ANTICIPATING FUNDAMENTALS?

Three, valuations of stocks or sectors may move up ahead of fundamentals. Looking at the many indicators of macro or corporate performance today, there are no clear signs of a recovery in the domestic economy or markets.

A few monthly indicators show a pick-up — cement despatches, auto sales, consumer goods production, but others (order flows, steel output) show no material improvement. Inflation is down but the RBI is displaying no urgency to begin trimming interest rates. Profits of Indian companies in the December quarter show no let-up from cost pressures either.

But all this is not to say that investors should hastily cash out of quality stocks after the recent gains. If there is anything at all that we have learnt from the previous bull market, it is that stocks of companies are often re-rated ahead of an actual improvement in fundamentals or profits.

Weighing all these factors, therefore, we wouldn't like to make any long-term predictions on whether this particular stock market recovery will continue or fizzle out.

But if you are a long-term investor in equity, we do know you shouldn't pay heed to the advice that is intended for short-term traders. Hold on to the equity in your portfolio and invest in quality stocks or funds in a phased manner. More on this subject next week.

BSE Sensex: Stock markets are rallying, but investors need to be cautious (ET)

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


The domestic stock markets have had a good rally in the last one and half months. From being a rank under-performer last year, they moved to become one of the top performers in this liquidity-driven rally. India has emerged, once again, as the most sought-after destination for investments as the foreign institutional investor (FII) inflows came seeking the most under-valued stocks.

The strategy for buying stocks in this rally seems to be 'buy the most shunned stocks' . They performed brilliantly whereas good quality stocks had a very sedate run. After a good 850-point rally on the Nifty, the question on everybody's mind is how long will this last?

Answering this question is not very easy for those closely involved with the markets. Many remain as clueless as they were at the beginning of the rally. This is due to the fact that this rally is liquidity-driven , and liquidity here is vast FII inflows that can continue to flow unabated till valuations become unsustainable .

The stock market valuations are still in the range of 'buy zone' rather than 'sell zone' here. Being a highly under-valued market last year due to mass exits by FIIs, the valuations have just moved up a few notches from an under-valued zone to a reasonablyvalued zone. FII funds are seeking domestic companies due to the TINA factor. Globally, there are few other places that offer returns that stocks here can offer, despite the macroeconomic headwinds.

With this rally, the macroeconomic concerns have been put aside by investors as they merrily jump into the stock markets to generate short-term returns. But the headwinds in the form of the fiscal deficit and inability to start the reforms process will resurface soon. For this rally to sustain beyond the current levels, it will need positive strokes from the Reserve Bank of India (RBI) and the central government in the next few weeks.

Investment strategy

Liquidity-driven rallies are like ocean waves. Like waves, liquidity comes and goes, and that has been the feature of the stock market movements in the last four years. Stock markets get these liquidity rushes, and then they dissipate leaving investors high and dry.


Investors should be cautious at this stage of the stock markets. This trend can happen again this year. So, for an individual investor, it is time to be cautious. There are too many other negatives in the fundamentals, and any one of them can trigger a wave of corrections.

Over the course of the last year, a downturn in growth and rising interest rates kept many out of the markets. This year, although the interest rates are going to come down, growth and government deficit worries can surface periodically. Corporate earnings are in a downtrend and the markets cannot ignore that reality forever.

Inflation has started to trend downwards slightly and that means interest rates will come down. However, the speed of the decline will be governed a lot by what happens on the fiscal front. If the government's fiscal position improves significantly or they commit to a major improvement, the interest rates can come down faster.

Hence, the key for the stock market rally to sustain further will be the Budget and its components. In 2012, the stock markets have benefited from lower inflation, a relaxing of foreign investor restrictions and the RBI's policy moves. All these factors could change very quickly and will impact the markets substantially. All in all, it indicates investing with caution and with a strict stop-loss trigger.

PDF link - IVRCL, Tecpro:: Kotak Sec,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

http://www.kotaksecurities.com/pdf/indiadaily/indiadaily16022012.pdf


Results
IVRCL: Asset sales hold out some hope; IVRCL cites challenges in execution

Results, Change in Reco
Tecpro Systems: Strong revenues, though inflow decline and high debt limit
upside

Pivotals: Reliance Industries, Tata Steel, Infosys, SBI, ::Business Line

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��



Pivotals: Reliance Industries (Rs 817.9)

Reliance Industries followed up the doji last week with a black candle in the weekly chart resulting in an evening star formation. This is a reversal pattern and can usher in a few more weeks of weakness.

The stock has strong resistance in the zone between Rs 880 and Rs 902. The medium-term term view will turn positive only once this zone is breached. Next targets are Rs 938 and Rs 1,000.

In the short-term, the stock has supports at Rs 810 and Rs 796. Short-term traders can buy in declines with stop at Rs 795. However, a breach of this stop can pull the stock down to Rs 775 or Rs 756. Resistances for the week will be at Rs 842 and Rs 864.

Technicals: Dena Bank, Bank of India, India Cements, Oil India, Nucleus Software, LKP, Zandu Realty ::Business Line,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Kindly advise on the future prospects of Dena Bank bought at Rs 78 and Bank of India at Rs 475. Please give short- and medium-term targets.

V. Karthik,

J.H. Krishnamurthy

Dena Bank (Rs 94.2): The stock found support at around Rs 48 in early January 2012 and started to move upwards. Since then, Dena Bank stock has been on a medium-term uptrend. The stock has almost doubled from its January low. After retracing 50 per cent of its prior downtrend from November 2010 peak of Rs 151 to January low at around Rs 48, the stock is now facing resistance at Rs 100. This is a long-term significant resistance level for the stock and, therefore, it would be little difficult to breach it in the first attempt. Failure to move above Rs 100 will be cue for short-term investors to take partial profits off the table.

Those with a medium-term perspective can prolong their holdings with stop-loss at Rs 70. Key support at Rs 85, Rs 80 and Rs 72 can cushion the stock on declines. Strong breakthrough of Rs 100 will give a medium-term price target of Rs 110 and Rs 122.

Whirlpool: Buy ::Business Line,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

 

Investors with a one-two year perspective can buy the stock of Whirlpool of India. Though the first nine months of FY12 were bad for the company with sales and profit dropping due to lower air-conditioner and refrigerator sales and higher input costs, we believe that the coming months should be better.

This year's summer sales of air-conditioners have begun in parts of the country and it appears that it could be better than last year. Also, with inflation easing and interest rates likely to soften, demand should receive a boost.

The rupee, whose sharp depreciation eroded the company's profit margins, has also winched up from its low of 54 per dollar last December to around 49 now. Besides, the price hike in air-conditioners and refrigerators in January should also improve profit margins, going ahead.

The stock price has corrected from Rs 295 last April to Rs 187 now. At the current market price, the stock trades at around 14 times its likely FY13 per share earnings. Historically, the stock has been trading at around 24 times.

Whirlpool's sales mix is skewed towards refrigerators and air-conditioners. These two products make up over 60 per cent of the company's sales.

PDF link - SCI, Simplex Infrastructures, IVRCL:: Kotak Sec,

Please Share::  India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

http://www.kotaksecurities.com/pdf/dmb/MorningInsight16022012.pdf



SHIPPING CORPORATION OF  INDIA
RECOMMENDATION: SELL
TARGET  PRICE:  RS.60
FY13E P/E: 58.5X


SIMPLEX  INFRASTRUCTURES
RECOMMENDATION: ACCUMULATE
TARGET  PRICE:  RS.230
FY13E P/E: 7.6X


IVRCL INFRASTRUCTURE LTD
RECOMMENDATION: ACCUMULATE
TARGET  PRICE:  RS.61
FY13E P/E: 15.9X

Sizzling Stocks - Lanco Infratech ; Provogue ::Business Line,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Sizzling Stocks - Lanco Infratech (Rs 22.6)

Lanco Infratech powered ahead last week gaining 39 per cent. This stock has been decimated in the last two years as it plummeted from a peak of Rs 75 to Rs 8.6. The long-term support between Rs 8 and Rs 10 helped cushion declines in October 2008 as well as in January 2009. Long-term investors can therefore hold the stock with stop at Rs 8.

Near term hurdles for the stock will be at Rs 31 and then at Rs 45. Medium-term view will turn positive only if the stock moves above Rs 45. Inability to move beyond will result in the stock oscillating in the band between Rs 8 and Rs 45 over the upcoming months.

Subsequent hurdles will be at Rs 42 and Rs 50.

Provogue (Rs 33)

This stock was in vogue last week as traders flocked to this counter, pushing the stock price 25 per cent higher. The prospects were looking extremely bleak in December as it made a new life-time low at Rs 17. But a promising uptrend is currently in motion that has already made Provogue gain 94 per cent from its trough.

Near term resistance for the stock is at Rs 37. If this level is crossed, a rally to Rs 50 is possible. The stock will face a strong hurdle around Rs 50 and an inability to move beyond this will result in the stock turning tail and moving down to Rs 25 or Rs 17 again.

Stock Strategy: Why it makes sense to buy June put on Nifty ::Business Line,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Nifty was able to breach all resistances in the recent rally. It has now closed at 5,565, after briefly touching 5,600 intra-day on Friday. While the bellwether has managed to overcome the negative outlook, thanks to the recent sharp rally, only a conclusive close above 5,610 will change its long-term outlook to positive. In that event, the chance of breaking previous high cannot be ruled out. Till such time, it will trade sideways.

While it finds a strong support at 5,525 and the next one at 5,400, a close below 4,720 will change its outlook to negative once again. In that event, the fall could be sharp and severe.

F&O pointers: The Nifty Futures witnessed a rollover of 24 per cent. Most of the Nifty stocks witnessed unwinding of long positions, signalling that this rally is tiring. Option trading also indicates that Nifty could face resistance going forward. The March series of 5,600 and 5,700 calls accumulated open position. However, since puts also added open position, the fall might not be that drastic. The 5,200 put and 5,700 call in March series have the highest number of open positions, suggesting that Nifty could move in this range.

VOLATILITY INDEX

The volatility index has been on the rise last week. It closed at 24.18 as against the previous week's close of 23.83. This suggests that fear could be creeping in the market despite Nifty showing resilience. The rise in fear gauge is generally negatively correlated with index movement. Cost of carry for March Futures stood at around 11.5 per cent, which indicates that traders are not willing to carry over their position.

Uncertainties: The following uncertainties at macro/micro level could deflate the bull party.

1) The results of Uttar Pradesh Assembly and other four States. If the Congress fares poorly in these elections, particularly in UP, then the market could see a fall, albeit temporarily.

2) The Union Budget is to be presented on March 16. If there are any unpleasant surprises for the market, there could be selling pressure.

3) If global uncertainties such as the Iran imbroglio, economy mess at Greece and other European nations escalate, the bull party would be in trouble.

4) Rising crude oil price could pose threat.

RECOMMENDATION

Traders can buy Nifty 5,100 and 5,000 puts of June contract. The latter closed at a premium of Rs 88.5 while the former closed at Rs 104. The 5,000 put is more liquid; in contrast, only six contracts changed hands for 5,100 June put. If Nifty falls sharply, then the premium of the put would start to rise. If that happens on or around Budget, then the chance of premium going up sharply would be very high. Due to time value, the premium will rise sharply.

The maximum loss could be the premium paid, which works out to about Rs 5,200 for a single contract.

Follow-up: Last week we advised traders to short SBI and Suzlon. We also advised traders to write a call on SBI. The strategy would not have yielded profits as the stock maintained its bullish momentum.

The other suggested strategy on Suzlon is still in-the-money. Traders could hold on to the position with the recommended stop-loss.

Note: The analysis and opinion expressed in this column are based on F&O data available at this point of time and on technical analysis based on past price movements. There is risk of loss in trading.