25 February 2012

India Goes Easy On Gold Buying In Oct-Dec As Rupee Slides ::ICRA

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D epreciating rupee and high gold prices have jointly forced to India to cede its long-held position as the world’s No. 1 con-sumer of the precious metal to China in October-December.
India and China together account for more than half of total global demand for gold, with demand from India typically surpassing that of China’s. But the fourth quarter of 2011 registered a change in the trend.
According to World Gold Council data, total demand for gold in India was 173 tonnes in October-December, down 42% from a year ago. Demand in China, on the other, increased marginally from a year ago to 190.6 tonnes.
While both countries registered high inflation, particularly in the first half of 2011, weakening of the rupee against the US dollar dampened demand for gold in India.
In October-December, while gold prices rose 23.5% in dollar terms from a year ago, in rupee terms, gold prices shot up a whop-ping 39%.
Rupee depreciated 8.4% versus the dollar during the quarter, while the Chinese yuan that appreciated 0.2% in the same period.
On December 16, rupee weakened to its all-time low of `54.30 versus the dollar.
Impact of rupee depreciation is also reflected in the fact that while international gold prices (in dollar terms) fell 0.8% in October-December on a sequential basis, Indian prices were up 8.8% dur-ing the same period.
In the quarter that went by India’s jewellery demand nosedived 44% from a year ago to 103 tonnes and investment demand plunged 38% to 70 tonnes.
It was mainly depreciation of rupee in the second half of the year that resulted in India’s gold demand during July-December weak-ening 33% from the first half.

Talwalkars Better Value Fitness – BUY ‘Getting in shape’:: IIFL

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We spoke to Talwalkars’ CFO to gauge the near term outlook
for the company. TALW has rolled out 19 gyms in nine months
so far and expects to open another 16 gyms in the current
quarter. Management also stated that a plan for roll out of
clubs has been put on hold and it would retain focus on gym
expansion. Mgmt targets FCF +ve in FY14 as a large chunk of
gym base would then be operating in the mature state and
expansion through franchisees would gather pace. Roll out of
HiFi gyms through franchisee route will ensure deeper
penetration without concurrent capex needs. Company expects
benefits of operating leverage to kick in considering the large
share of fixed costs which would help improve margins. We
revise lower our estimates and now expect a 33% EPS cagr
over FY12-14; retain BUY with revised 9-mth tgt of Rs190.
Club roll out plan put on hold; to focus on gym expansion
Talwalkars Better Value Fitness (TBVF) mgmt stated that plans to roll
out clubs - a different format compared to gym requiring much larger
investments and longer gestation periods - has been put on hold. It
would continue to focus on gym expansion where it remains bullish on
the opportunity in the market given the low penetration rates for
organized players.
To end FY12 with total gym base of 126
TBVF has rolled out 19 gyms in 9M FY12 and it is slated to launch
another 16 gyms in Q4, a traditionally strong quarter for the fitness
business. This would take its total gym base to 126 of which about 90
would be owned and rest would be through a combination of
subsidiaries, franchisees/JVs and HiFi gyms. Company plans to add 8
HiFi gyms in the current year through franchisee route which would
not entail any capex for the company. We also revise lower our owned
gym addition count to 18 in each of next 2 years.
Cut earnings on reduced owned gym count but retain BUY
We cut earnings forecasts for FY12/13 as we reduce owned gym
additions and now expect ~18 gyms to be added in FY13/14.
Expansion in HiFi gyms through the franchisee route would gather
momentum over next 2 years which would lower overall capex
intensity and generate free cash flow in FY14. Retain BUY rating with
revised 9-mth tgt of Rs190.

India Strategy-- Identifying Over-Owned/ Under-Owned Stocks 􀂄 BofA Merrill Lynch,

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India Strategy
Identifying Over-Owned/
Under-Owned Stocks
􀂄 FII portfolio: U/W on IT & Consumer and O/W on Industrial
fall; U/W on energy & O/W on telecom rise
􀂄 During the quarter while FIIs were net sellers, domestic MFs & LIC were net
buyers. FII holding in Sensex has come down marginally.
􀂄 FIIs were positive on defensives like Consumers & Telecom whereas they
sold across most of the other sectors like Financials, Metals and Industrials.
FII ownership in SBI is at all time low whereas Industrials has become an
U/W sector for the first time due to this selling.

Oil and money - QE, EM and monetary policy :: HSBC research

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 Higher oil prices reflect both supply
concerns and rising global demand
 QE is adding to oil price increases as
well by ‘turbo-charging’ EM growth
 Higher oil prices will imply more
monetary easing from the west but EM
will respond by quantitative tightening
Oil prices are edging up again. Why are prices rising?
Western policymakers have been accused of stoking oil and
wider commodity price rises through quantitative easing. We
believe that oil price increases are still a function primarily
of higher emerging market demand and supply side concerns
especially related to Iran. Our analysis shows only limited
impact of direct speculative activity on oil prices, but QE is
playing a role in pushing oil prices higher as well by turbocharging
EM world growth.
What will be the impact of further oil price rises? The
historical link between a slump in developed economy
growth and lower oil prices globally has been broken, since
emerging markets now account for nearly half of oil
consumption. Higher global oil prices lead to a drop in nonenergy
consumer spending in developed economies. In many
emerging economies, the biggest threats are inflationary.
What should the policy response to higher oil prices be?
Developed world monetary easing has been ineffective to the
extent that it has stoked oil price increases, resulting in an
unfavourable growth-inflation trade-off. But we expect
monetary easing including QE to remain the main response
to oil price increases. The costs to slow growth are much
higher than the risk of runaway inflation in an environment
of high unemployment and low wage increases.
For a number of emerging markets, inflation will ultimately
be the main concern, which will favour monetary tightening
albeit unconventional tightening. The first line of defence is
likely to be fiscal policy, in particular price controls and
subsidies, with monetary policy aimed at preventing second
round effects on inflation. In terms of fiscal health, it would
seem that Asia is better placed than other regions to deal
with an oil price shock (

Grey market premium, Feb 25 :MCX IPO

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Grey market premium :MCX IPO
Price Band MCX IPO: Rs 860 to Rs 1,032

 Latest GMP MCX ipo Rs 350- Rs 360
 Kostak Buyer of Rs 3,000




Click here to get tentative MCX IPO Share allocation for retail investor 

Hold IDFC; Target : 140 ::ICICI Securities (PDF link)

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N I M   u p ,   c r e d i t   g r o w t h  s h a r p e r   t h a n   e x p e c t e d …
IDFC reported strong profits growing 19% YoY to | 383 crore in Q3FY12.
Improvement of 30 bps in NIM to 4.3%  from  4%  sequentially  came  as  a
positive surprise. The NIM expansion and loan book growth of 25% YoY
and 12% QoQ led to NII growth of 17% YoY to | 546 crore. GNPA
doubled to | 148.3 crore from | 77 crore sequentially due to addition of a
single tourism account of | 70 crore. NNPA rose from | 36 crore to | 96.4
crore. Provisions increased substantially from | 63 crore to | 98 crore but
strong topline maintained profitability. The management has guided for
GNPA to remain under 1% for the next 18 months.
ƒ Loan growth, NII revised upwards...
The loan book grew 25% to | 43729  crore, which almost met our
FY12 targeted size. Growth came mainly from refinancing of road
sector loans and not fresh projects. We have revised our estimates
from the conservative growth of 15.4% to 20% in loan book to
| 454371 crore for FY12E and 22% for FY13E to | 55624 crore.
Hence, NII growth both from infra loans and treasury grew 14.5%
and 55% YoY to | 473 crore and | 73 crore, respectively. We have
revised NII growth upwards to ~9% for both FY12E and FY13E.
ƒ A look into investment book...
IDFC has a quoted an equity investment book of | 368 crore as on
FY11. Its current valuation is | 310 crore (CMP –February 21, 2012).
Andhra Cements, Jaypee Infratech, Torrent Power and JSW Energy
remain major investments in listed equity. The unquoted equity
book stands at | 488 crore excluding subsidiaries. NSE, Securities
Trading Corporation and ARCIL are key investments in the same. We
believe the unquoted equity book will result in substantial gains over
the next few years for IDFC.
V a l u a t i o n
Post strong NII growth, we have revised our PAT estimates from | 1794
crore to | 1842 crore for FY13E (20% CAGR over FY11-13E from 18%
earlier). The asset quality is expected to witness stress but overall
containment of GNPA to less than 1% over the next 18 months should
provide comfort on provisions. Return ratios remained strong with RoA at
3%. We have valued the loan book at 1.3x FY13E adjusted networth and
other subsidiaries on SOTP basis giving a TP of | 140 and HOLD rating.


http://content.icicidirect.com/mailimages/ICICIdirect_IDFC_Q3FY12.pdf

Buy Allcargo Global Logistics; Target : Rs 168::ICICI Securities (PDF link)

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T o p l i n e   b e a t s   e s t i m a t e s ,   b o t t o m l i n e
d i s a p p o i n t s …
Allcargo Global Logistics (AGL) declared its Q4CY11 results with revenues
at | 998.3 crore, EBITDA at | 99.3 crore and PAT at | 54.7 crore. While the
topline was above our estimates, PAT was below our estimates, mainly
due to higher depreciation & interest cost. Depreciation & interest
expense grew 35.8% and 324.4% YoY, respectively. The company
reported an EBITDA margin of 10%, contracting 290 bps sequentially,
mainly on account of lower EBITDA margin reported by ECU Line. The
company registered YoY volume growth of 17%, 8.7% and 14.5% in
MTO, CFS and ECU Line, respectively. Realisations in the CFS segment
continued to grow, registering 20% YoY growth. The realisation growth
was highest in Mundra (62.3% YoY), followed by JNPT (25.6% YoY) and
Chennai (5.9% YoY). We recommend a BUY rating the stock with a target
price of | 168.0.
ƒ Highlights of the quarter
Realisations of JNPT, Chennai  and Mundra increased by 25.6%,
5.9% and 62.3%, respectively, to | 13930/TEU, | 9003/TEU and
| 11121/TEU, respectively. The EBITDA per TEU also improved YoY
to | 7982/TEU for JNPT (Q3CY10 - | 6392/TEU), | 3493/TEU for
Chennai (Q3CY10 - | 3308/TEU) and | 3639/TEU for Mundra
(Q3CY10 - | 2151/TEU). Debt outstanding at the end of CY11 is
| 781.7 crore while cash at the end of CY11 stood at | 147.6 crore.
The company has given a capex guidance of | 250 crore for CY12.
V a l u a t i o n
At the current price of | 140, the stock is trading at a P/E multiple of 8.2x
its CY11E EPS of | 17.0 and 7.5x its CY12E EPS of | 18.7. The plan to
demerge its NVOCC segment in future would be positive for the
company. Lower volumes in CY12 would be partly offset by higher
realisations. We recommend a BUY rating on the stock with a target price
of | 168, 9.0x CY12E EPS.


http://content.icicidirect.com/mailimages/ICICIdirect_AllcargoGlobal_Q4CY11.PDF

Varun Shipping ::ICICI Securities (PDF link)

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E x t r a o r d i n a r y   i n c o  m e   e n  a b l e s   p r o f i t a b i l i t y   y e t
a g a i n …
Varun Shipping (VSL) continues to  report low EBITDA, which makes it
difficult to cover its interest and depreciation cost. For Q3FY12, VSL
reported revenues of | 79 crore, QoQ growth of 9% and YoY decline of
35%. Though EBITDA improved QoQ  from an operating loss of | 9.5
crore in Q2FY12 to an operating profit of | 6.2 crore, the quantum is
inadequate to cover its interest and depreciation cost. At the earning
before tax and extraordinary income level, VSL reported a loss of | 41.4
crore. The company has accounted an extraordinary foreign exchange
gain of | 123.93 crore in Q3FY12, which has enabled it to report a net
profit of | 82.5 crore. For 9MFY12, VSL reported revenue of | 234.6 crore
and net profit of | 147.6 crore (including extraordinary income of | 333.5
crore comprising exchange gain of | 284 crore and profit on sale of assets
of | 49.5 crore). VSL’s earning quality has deteriorated over the last eight
quarters and earnings have been  primarily driven by extraordinary
income.
ƒ Fleet status – reduction in owned vessels to lower EBITDA margin
Varun Shipping currently operates a  fleet of 21 vessels comprising 11
LPG carriers, seven AHTS and three crude carriers. Of the 21 vessels,
VSL owns only four vessels while the remaining has been sold on a salecum-leaseback arrangement with associate companies. The drastic
reduction in owned fleet would result in lower EBITDA margins, thereby
curtailing the profitability of the company.
V a l u a t i o n
At the CMP of | 19, the stock is trading at 0.37x FY13E book value of | 51.
Considering the reduction in owned fleet and sluggish demand scenario,
we expect VSL’s profitability to remain under stress. VSL’s deteriorating
financial health has led to the company selling its vessels to associate
companies on a sale and lease back arrangement. Sluggish industry
demand and VSL’s stressed financials would pose a serious challenge in
terms of achieving revenue and profitability growth, going ahead. Hence,
we are dropping coverage on the stock. Existing investors can exit the
stock.


http://content.icicidirect.com/mailimages/ICICIdirect_VarunShipping_Q3FY12.pdf

GVK Power & Infrastructure Ltd:Acquisition costs hit bottomline …: MSFL Research

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GVK Power & Infrastructure Q3FY12 result, not comparable on a YoY basis due to consolidation of MIAL, disappointed on operational as well as net profit front. On the operational front power division recorded lower PLF’s due to reduced gas supply from RIL while the pax traffic growth in airports moderated to sub-8% levels. Higher fixed costs & forex losses affected operating profits for both the divisions. The net profit was lower on account of interest cost on debt used for funding the 13% stake acquisition in MIAL. The company booked an additional interest cost of ` 0.5bln in Q3FY12. Improvement in global sentiment, decline in risk aversion has supported the recent buoyancy in capital markets and has seen the stock price almost doubling from its recent lows. We believe the current price factors in a lot of positives, the most important being raising of capital in the airports division and consequent de-leveraging of the balance sheet supporting future cash flow and profitability. However, the run-up in stock price is not expected to be supported by any improvement on the operational front given that the gas production from RIL is expected to further decline and the COD of under construction power plants has been delayed by at least a year. Escalation in project costs and the funding of the same of an already stretched balance sheet has cast shadow on the airports division. Significant project cost escalations, possibility of further delay in execution due to shortfall in finance, lack of clarity on regulations and delay in real estate monetization undermine the company’s ability to complete the projects within the stated timelines. In addition, the contingent risk of Hancock acquisition still remains. We roll over our target price to FY13 & continue to maintain Sell with a price target of ` 13. A significant reduction in the final cost escalation est., real estate monetization and equity infusion in airports vertical pose upside risks.
Debt funding of MIAL stake acquisition hits bottomline …
GVK increased its stake in MIAL by acquiring 13.5% stake from Bidvest. The transaction cost ` 11.5bln was entirely funded through debt. A part of the debt of ` 6.5bln was raised through securitization of Jaipur-Kishangarh expressway at an interest of 12.98% while the rest ` 5bln was raised as a corporate loan at 13.9% taking the total acquisition debt to ` 24bln for consolidation of its stake in BIAL & MIAL. This translated into an interest outgo of ` 820mln and a net loss for the company.
Valuation: price factoring in lot of positives, risks remain
We believe the current market price factors in a lot of positives for the company while the risks still remain. Significant cost escalations, further delay due to shortfall in financing the escalation, regulatory approvals and the contingent risk of Hancock acquisition pose significant risk. We roll over our target price to FY13 and continue to maintain Sell with a price target of ` 13.

Oil may breach $150 a barrel on mounting Iran crisis (ET)

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Oil, which touched $124 a barrel mark on Friday, appears set to touch a new record and breach the $150 mark on mounting Iran crisis. Analysts feel that the government is holding back from hiking fuel prices because of the ongoing elections and a steep hike is likely next month.

The highest that crude price has gone was $147 a barrel recorded in June 2008.

The Indian crude basket, which is pegged at $122 a barrel at present - its highest in the last nine months - is causing a daily loss of Rs 465 crore to oil companies on their sale of diesel, kerosene and cooking gas as retail prices have not been revised of late.

"Oil has surpassed our forecast price and is now trading at $124 a barrel. It will continue moving north on account of mounting Iran crisis. According to IEA forecast, the world has spare capacity of 3.8 million barrels, of which Saudi Arabia's capacity of 1.8 million barrels is never tested so oil prices will continue to go up unless there is a severe demand destruction," Jal Irani, MD, oil & gas at Macquarie Group told TOI.

He added that it will have severe impact on India as oil accounts for over 40% of India's imports and 80% of trade deficit.

Oil import bill is likely to surpass $142 billion this fiscal according to Prime Minister's economic advisory council ( PMEAC).

Oil may breach $150 a barrel on mounting Iran crisis (ET)

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Ahluwalia Contracts (India) Ltd.:Disappointing numbers : MSFL Research

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Ahluwalia Contracts Q3FY12 reported revenues was down 6% y-o-y at ` 3.5bln (3% lower than our expectation). Ahluwalia reported its first ever loss at the operating level. The erosion in operating margin resulted in loss of ` 168mln (as against our expectation of net profit of ` 35mln). The order inflow too has been disappointing at ~` 1.4bln. We cut our order inflow assumption from ` 12bln to ` 14bln and revise our FY13E sales downward by 6%. With the interest rate cycle expected to peak out in Mar’12 the business environment for real estate is likely to remain stable and can see meaningful improvement in H2FY13E. Incorporating such a scenario we have built in order inflows of ` 16bln and operating margins at ~8% levels. Even after incorporating a optimistic scenario the stock is currently trading at 11x its FY13E earnings which is only 8% discount to its long term average multiple. With risk of receivable turning bad yet to moderate we may see cost overrun pain continuing over next two quarters. We shall turn constructive on the stock on signs of improved execution rate & stable operating margins.Hence, we continue to maintain Sell with a price target of ` 66
Operating margin continues to disappoint
The company reported its first ever loss at the operating level. Slowdown in execution due to receivable issues with some clients has resulted in fixed costs like labour, site machinery and office expenses not getting absorbed. Delay in execution has also resulted in cost overruns in some of the fixed projects of the company. With interest rate expected to see a decline in FY13 we expect real estate sector to see some improvement and hence have factored in EBIDTA margin of 8%.
Order inflow declines; to miss on order inflow guidance
The management had guided for an order inflow of ` 26bln for FY12E but has bagged only ` 8.1bln in 9MFY12 with ` 1.4bln worth inflow in Q3FY12. We have cut our order inflow assumption for FY12E to ` 12bln. The total order book stands at ` 34.6bln. Residential forms 47% and Commercial segment about 11.4% of the orderbook and is comfortable at 2.5x of FY12E sales.
Valuation
Ahluwalia, being primarily dependent on real estate sector for orders, has been worst hit due to the real estate slump. Also, since it does not have requisite pre-qualification in other infrastructure segments we expect the company to struggle to return to normal growth & profitability levels in the immediate term. Any improvement in sentiment for the real estate sector shall be positive for the stock. However, given the recent run up in the stock it is trading at 11x FY13E earnings. We shall trun positive only on signs of stable execution rate & margins. We continue to maintain Sell with a price target of ` 66

63.5% Fe iron ore prices down USD5 WoW; power shortage forces FeCr production cuts in South Africa  :: Motilal Oswal

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63.5% Fe iron ore prices down USD5 WoW; power shortage forces
FeCr production cuts in South Africa
 Indian long steel prices increased marginally (up 0.7% WoW), while flat
steel prices remained flat. Sponge iron prices were up 0.8% WoW to
INR23,800/ton. Scrap prices also increased 2.4% WoW to INR25,903/ton.
 European HRC prices continue to increase and rose 0.8% WoW. Prices
also increased in China (0.3% WoW), Turkey (3.4% WoW) and the Middle
East (0.4% WoW). Prices declined in North America (down 0.7% WoW)
and Russia (down 0.1% WoW).
 63.5% Fe iron ore prices declined by USD5 WoW to USD144/ton, posting
their biggest weekly decline in a year.
 According to ILZSG, the zinc market continues to remain in surplus for
the fifth consecutive year. Production exceeded consumption by 353kt
in 2011. Similarly, the lead market turned into surplus from a balanced
market in 2010 with an excess of 156kt in 2011.
 Xstrata to take out of operation 0.1mtpa of charge chrome capacity in
South Africa. State power group Eskom has asked large FeCr producers
to cut production due to power shortage. Increasing power costs and
limited power availability in largest FeCr producer country will push
second-quarter benchmark higher.

Crompton Greaves: Management meeting: much potential but needs time to materialize:: Kotak Securities (PDF link)

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Crompton Greaves: Management meeting: much potential but needs time to
materialize
` Realigning the global manufacturing base (more low-cost sourcing)
` Increased integration in the group; potential for margin expansion in
overseas subsidiaries
` Cross-selling Indian manufacturing and leverage recent global solution and
technology acquisitions
` FY03-08 investment cycle allowed acquisitions with no integration; QEI
different from original idea
` Retain estimates and ADD rating giving partial benefit of doubt on potential
for improvement


http://www.kotaksecurities.com/pdf/indiadaily/indiadaily24022012.pdf

PMO directive on coal FSAs :: Motilal Oswal

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PMO directive on coal FSAs
Reading between the lines; understanding winners across sectors
 We interacted with bureaucrats, corporates and industry experts on the recent directive by the
Prime Minister's Office (PMO) assuring fuel security for power projects. The attempt is to put
in place a co-ordinated approach which addresses the viability issues for large number of
capacities under construction.
 Reading between the lines suggests: i) Only 35GW of the 70GW projects under construction
based on coal linkages to be eligible for FSAs ii) FSA commitment for 68% of capacity utilization,
entailing protection of debt servicing but equity returns unlikely iii) Coal India's production required to increase by atleast 110-120m tons
over next 3 years (CAGR of 8%), and will translate into a substantial operating leverage iv) Penalty for non-performance is possibly not
severe, as even the current max penalty rate of 40% on say 50m tons shortfall will be an impact of INR20b and thus unlikely to act as
a large deterrent / protection.
 The obvious beneficiary is the financial sector, where the risk of NPA threat has been partly mitigated given that the committed fuel
supply will ensure 68% capacity utilization. Thus, the project developers will start working for debt servicing, while equity returns
continue to be a question-mark. For Coal India, the possible upside is from a volume growth, leading to operating leverage. Capital goods
companies, particularly for power generation are likely to witness 'order intake holiday' and elongated execution periods.

Feb 25: Economy News 4 Kotak Sec

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Economy News
4 The finance ministry may levy excise duty on some of the exempted goods
in the Budget, to meet the objectives of moving towards Goods and
Services Tax (GST) and bringing more items under the tax net to increase
revenues. (BS).
4 India is likely to push for the restoration of generalized system of
preference (GSP) with the US during the upcoming visit of the US
Commerce Secretary next month (BS).
Corporate News
4 Raymond's  auto components arm, Ring Plus Aqua has acquired Punebased Trinity India for Rs540mn. The deal marks Ring Plus Aqua's entry
into the forging industry. (ET)
4 US health regulator the United States Food and Drug Administration
(USFDA) has said it will import cancer drug Lipodox from India's  Sun
Pharma to meet the shortage of another similar medicine Doxil (BS).
4 TRF  has entered into an exclusive agreement with Germany’s Schade
Lagertechnik GmbH to manufacture and market the latters yard
equipment in India. Schade will provide TRF the necessary know-how and
key components for making higher capacity yard equipment like stackers,
portal scraper reclaimers, circular storage systems and wagon tipplers.
(ET)
4 Bajaj Auto Ltd  has changed plan on utilising the plot of land it had
acquired at Chakan, near Pune, for the manufacture of 4-wheelers and
has now approached the Maharashtra Industrial Development
Corporation (MIDC) with a revised plan to make two- and three-wheelers
there instead (BL).
4 The Income-Tax Department has sought Rs2.4 bn in dues from Sesa Goa
and the company said it was mulling legal recourse against the demand
(ET).
4 Kingfisher Airlines has indicated the Directorate General of Civil
Aviation (DGCA) that it plans to induct another 16 aircraft within a week
thereby taking its operational fleet strength to 44 (BL).
4 Coal India Ltd (CIL) has said that it will seek offtake commitments from
power utilities before importing. Company  has been directed by the
Prime Minister's Office (BS).
4 Lupin said it has reached a patent litigation settlement agreement with
US-based firms Santarus and Depomed involving diabetes drug Glumetza.
The development, subject to review by US authorities, could help the
company launch its generic version of the drug by 2016 (ET).
4 Amara Raja Batteries Limited is planning to set up a greenfield project
and has earmarked Rs 1.9 bn for the first phase (BS).

Ranbaxy Laboratories: Guidance for 2012E is strong, but uncertainty over FTF launches remains:: Kotak Securities (PDF link)

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Ranbaxy Laboratories: Guidance for 2012E is strong, but uncertainty over
FTF launches remains
` 4Q2011 revenues were Rs37 bn, 5% above our estimates; company misses
2011 guidance
` Reported EBITDA at Rs8.6 bn, in line with our estimate
` Maintain SELL with TP at Rs380 (was Rs400) - 18X 2012E core EPS of Rs21

http://www.kotaksecurities.com/pdf/indiadaily/indiadaily24022012.pdf

Eicher Motors - Management meet update::ICICI Securities (PDF link)

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http://content.icicidirect.com/mailimages/ICICIdirect_EicherMotors_MagamentMeetUpdate.pdf

Dividend Yield Stocks: Feb 2012: ICICI Securities :PDF link

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High dividend yield stocks offer a safe haven to investors where safety has greater priority compared to high returns.
Hence, even if the market remains volatile, going ahead, an investor can still get a decent return on investment, thanks to
good dividend yielding stocks. The dividends are paid no matter what direction the stocks move and can provide a higher
yield on investment in a weak market.

GSK Pharma
Escorts
Castrol
GSK Consumer
Hexaware Technologies
ACC
KSB Pumps
Foseco
Eicher Motors
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MBL Infrastructure Ltd.:Growth in Order Book Inflow :BP Equities Research

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Growth in Order Book Inflow
Results Highlights
⇒ The topline of the company stood at Rs. 3,397 mn a growth of 26.9% yoy. Second half of the year
being strong in term of execution which is being reflected in the topline of Q3FY12 and we expect
the same run rate to continue. We saw good execution on the EPC front especially road segments.
Management has informed that substantial construction work has commenced on newly
procured road BOT projects.
⇒ EBIDTA margins stood at 15.3% a decline of 46 bps yoy, primarily due to higher operating expenses
as a percentage of sales by 66 bps yoy. Management has guided to maintain its margins
between 13% to 14%.
⇒ Adjusted net profit margins stands at 6.6% a decline of 208 bps yoy. High cost of borrowings,
rise in depreciation and higher tax outgo resulted in reduction of margins. Interest cost as a percentage
of sales stands at 4.6% a rise of 85 bps yoy. Average cost of borrowings for the company
stands at 13% and we expect steady margins for the next few quarters.
Other Highlights
⇒ Order book of the company stands at ~Rs. 22.2 bn constituting 21 projects and the major order
flow constitutes from govertment organization. The order book to bill ratio stands at 2.2x FY11
sales which gives us the revenue visibility for next two years. The fresh order inflow for last four
months stood at ~Rs 11 bn while year to date fresh order inflow stood at ~Rs. 14 bn. Outstanding
bids for various projects as on date stands at ~120 bn. We expect order inflow to improve which
was not the case nine moths back which saw aggressive biddings. Now we see upward correction
cycle in the industry which would increase the fresh order book inflow and we have estimated
fresh order inflow of ~Rs. 30 bn in FY13.
⇒ On the BOT projects front company has started booking revenue on the Rimuli Roxy Rajamunda
project, Orissa (Toll) where the company has 50% stake while, the balance is with SREI infra and
company has made equity investment of Rs 250 mn as on date. The other two BOT projects i.e.
Seoni Katangi, MP (Toll) bagged during second quarter and Waraseoni Lalbarra, MP (Toll + Annuity)
bagged last quarter has achieved financial closure and substantial construction work has
started as informed by the management. The new BOT project Bikaner Suratgarh, Rajasthan
(Toll) bagged in the month of Jan 2012 in 50:50 JV with SREI Infra costing ~Rs. 5 bn is expected
to achieve financial closure by end of FY12.
Outlook
In view of the growing order book flow form NHAI, efficient execution of ongoing projects, backward
integration and improving track record, we expect the company’s top line to grow at a healthy CAGR
rate of ~30% during FY11A to FY13E.The company is well poised to capitalise on the opportunities
and grow faster than its peers. The company is also diversifying into dedicated freight corridor which
will give company an opportunity in different line of segment. With the increase in BOT project from
one to five projects which will improve the cash flow of the company going forward. We maintain
“Buy” on the stock with a target price of Rs 265, an upside of 50% from the present levels based on
SOTP method of valuation.

CLSA: Green and Fear ::Bullet dodged

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Bullet dodged
Lugano
The Greek bullet has been dodged for now though the scheduled April elections in Greece
remain an obvious stumbling block. Accordingly, GREED & fear’s base case remains with the
“risk on” trade which means that any pullback in equities should be bought. A potential
moderate disappointment for the markets may be that the LTRO-2 is not quite as large as
previously expected because of the apparent reluctance of the big German and French banks to
be seen taking up the carrot of generous ECB funding. For this reason the amount raised may
be less than the €500bn-1tn previously guesstimated.
Still this will not be enough to end the “risk on” rally since those banks that really need the
funding, or the profits from the carry trade like the Italian and Spanish banks, seem likely to
participate again. Meanwhile, it is a telling sign of improving market conditions that Italian bank
Intesa Sanpaolo was able this week to issue an €1bn unsecured bond with a five-year maturity,
following its successful issuance of €1.5bn in unsecured 18-month bond at the end of January.
Such longer term funding would have been impossible prior to the LTRO.
It also continues to be clear that Flexible Mario would like all the major European banks to take
advantage of the LTRO. Indeed the ECB stance towards the banks is increasingly likely to be
either take funding from the LTRO or raise equity, rather than the other option of pursuing
deleveraging and balance sheet contraction. While, as previously noted here, it is also likely
that the European Banking Authority (EBA) will come under growing pressure to relax its capital
requirements even if nothing specific appears to have been announced yet.

Q3FY2012 Construction earnings review ::ShareKhan PDF Link

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Q3FY2012 Construction earnings review  
Key points
  • Stress continues; results below expectation: In Q3FY2012 the net profit of the engineering, procurement and construction (EPC) companies (ex Punj Lloyd) fell by 45% year on year (YoY; below our estimate) despite a decent revenue growth. This was mainly on account of a lower EBITDA margin and a higher interest burden. The revenue growth was decent across our universe except for NCC, IVRCL and Ramky InfraStructure (Ramky), which pulled down the cumulative revenue growth to 7.2% YoY (which was still marginally above our expectation). However, most EPC companies except Unity Infraprojects (Unity), Gayatri Infrastructure (Gayatri) and Ramky experienced pressure on their margins which caused our universe's (ex Punj Lloyd) EBITDA to fall by 5% YoY (below our expectation) in Q3FY2012. Further, the 42% year-on-year (Y-o-Y) rise in the interest cost (in line with our expectation) caused the stress to continue at the earnings level. 
In case of infrastructure developers, the aggregate revenue was up 44% YoY, in line with our expectation, on the back of the strong execution witnessed by IL&FS Transportation Networks (India) Ltd (ITNL). But on the margin front, while ITNL saw a contraction (as expected) due to a higher share of its revenue coming from its construction arms, IRB Infrastructure Developers (IRB) witnessed a stable margin (above our estimate), resulting in a cumulative 30% growth at the operating level. Despite a strong operating performance, the cumulative net profit was up by just 13% YoY on account of a high interest burden. However, it was better than estimated due to IRB's better than expected quarterly results.
  • IRB, Unity and Simplex outperform: In Q3FY2012 IRB, Unity and Simplex Infrastructures (Simplex) outperformed with regards to ours as well as the Street's expectations while IVRCL, NCC and Ramky were the laggards. IRB outperformed on the back of an expansion in its operating profit margin (OPM) along with a lower both depreciation charge and tax outgo. Even Unity outperformed on the back of margin expansion, a stable interest cost and a lower depreciation charge. Further, Simplex saw a pick-up in execution which resulted in a buoyant revenue growth; this supported by a stable interest cost led to its outperformance during the quarter. Even Pratibha Industries (Pratibha) saw a very robust revenue growth which led to its marginal outperformance at the earnings level.
On the other hand, IVRCL saw poor execution due to delays in obtaining approvals and acquiring land which resulted in poor revenue booking and lower OPM. Even Ramky saw a poor revenue growth due to slower execution on account of adverse weather conditions in some parts of India. This along with a high interest burden led to Ramky's underperformance. NCC recorded a multi-year low OPM which along with a high interest burden led the company to report a loss at the earnings level. Punj Lloyd seems to have gained some traction on the execution front which is well reflected in its revenue performance over the last two to three quarters. However, its OPM continues to be under pressure which along with a high interest burden continues to result in a poor show at the net profit level.
  • Outlook: For the EPC companies in our universe except IRB, we have marginally upgraded our estimates for FY2013 to factor in the better execution and higher margins as compared with our earlier estimates. However, we have revised our estimates downward for IRB to factor in the slower execution in a few of the company's projects and the substantial rise in the company's debt levels. The peaking of interest rates is a big relief for the sector and has led to a strong rally in the stock prices across the sector. The government is also slowly shedding its policy paralysis by taking a few initiatives. Now it remains to be seen when the government will speed up the decision making process in order to support the desired policy changes and will expedite the roll-out of the major projects as the same would boost investment in infrastructure. Quick policy actions will help the mid construction companies Like NCC, IVRCL to improve their execution and thus come out of the deep water. Till then we prefer being very selective and our top pick remains ITNL, Unity and Pratibha. 

    Click here to read report: Investor's Eye

GlaxoSmithKline Pharmaceuticals: TP: INR2,272 Buy ::Motilal Oswal

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 GlaxoSmithKline Pharmaceuticals (GLXO) posted net sales of INR5.66b (v/s our estimate of INR5.43b) for
4QCY12, up 15.4% YoY. EBITDA grew 15.8% YoY to INR1.71b (v/s our estimate of INR1.62b) while adjusted PAT
increased 20.5% YoY to INR1.47b (v/s our estimate of INR1.3b).
 While overall revenue growth was 15.4% YoY, revenue from the core pharmaceuticals business grew by an
impressive 18.2% YoY. Topline growth was led by revival in the Mass Market business and Anti-infectives
segments. Vaccines and Specialty segments including Oncology, Dermatology, Cardiovascular and Metabolics
reported robust double-digit growth, driven by new product launches.
 EBITDA grew 15.8% YoY to INR1.71b; EBITDA margin remained flat YoY at 30.1% (v/s our estimate of 29.8%).
EBITDA was higher than estimated, primarily led by better than estimated topline growth.
 Adjusted PAT increased by 20.5% YoY to INR1.47b (v/s our estimate of INR1.3b), led by higher than estimated
other income and lower effective tax rate. GLXO has declared INR45/share as dividend.
We believe GLXO is one of the best plays on the IPR regime in India, with aggressive plans to launch new products
in the high-growth lifestyle segments. These launches should bring in long-term benefits. While we expect
double-digit topline growth to sustain over the next few years, the growth trajectory should improve further
post CY13, as new launches start contributing meaningfully. This growth is likely to be funded through miniscule
capex and negative net working capital. GLXO deserves premium valuations due to strong parentage (giving
access to large product pipeline), brand-building ability and likely positioning in the post-patent era. It is one of
the very few companies, with the ability to achieve reasonable growth without any major capital requirement,
leading to high RoCE of over 45%. We expect GLXO to record an EPS of INR87.4 (up 17.2%) in CY12. The stock
currently trades at 23.9x CY12E EPS. Maintain Buy, with a target price of INR2,272 (26x CY12E EPS).

Engineers India: BUY :: TARGET Rs.312 :Sushil Finance Research

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Engineers India Ltd. (EIL) is a leading engineering consultancy and turnkey contracting company, which
executes projects on conventional and lump‐sum turnkey (LSTK) basis in refineries, petrochemicals,
pipelines, offshore platforms, metallurgy, infrastructure, fertilizer etc. Over the years, it has developed
an extensive track record of working with almost all the major players in hydrocarbon sector in India
and has significant indigenous technology and engineering expertise. Leveraging its strong track record
in India, EIL has also successfully expanded its business internationally with wide range of engineering
consultancy services, particularly in the Middle East, North Africa and South East Asia.

Result Update - Q3FY12: Amara Raja Batteries: MSFL Research

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Strong quarterly performance


Amara Raja Batteries (ARBL) recorded a 9% growth in sales sequentially driven largely by volume growth across segments. EBITDA margins improved 160bps q-o-q to 17.3% partially due to lower input costs and higher benefits of operating leverage. PAT grew 27% q-o-q to ` 659mln. We believe that company with increased capacity is adequately geared to benefit from the turn in automotive cycle, replacement demand and fast expanding industrial segment. We maintain Accumulate at a target price of ` 305.
Key takeaways from management call
• Sales growth driven by volume growth across segments. UPS segment drive industrial revenues. Telecom segment stable with lead cost increases passed on to customers
• Market share relatively stable, capacity constraints in the UPS segment (93% utilisation) restricting growth
• Q3 average lead cost at $2,360/t and guidance for 4Q is at $2,100-2,200/t
• Capacity utilisation has improved sequentially across segments and positive impact of operating leverage seen
• New capacity on 4W automotive segment (now 5.6mln units) to come in from end FY12 and management expects OEM:replacement ratio to maintain at 33:67
• Capacity expansion in 2W automotive segment (now 5mln units) completed. Sales to 2W OEM to begin in 1Q FY13 and management target to achieve OEM:replacement ratio of 1:1 by FY14. Currently it caters to aftermarket segment
• Will take action on pricing only if Exide, the market leader takes any further corrective action. We do not think any price war will take place
• The company has proposed a greenfield expansion to increase industrial segment capacity with overall capex of ` 1,900mln
Financial Summary
We expect a sales growth CAGR of 23% and EPS CAGR of 30% over FY11-13E. With lead prices below $2,000/t and currency stable we expect margins to be 15.9% and 15.7% in FY12E and FY13E respectively.
Maintain Accumulate at TP ` 305
ARBL is currently trading at 12.0x and 10.0x FY 12E and FY 13E EPS, respectively. ARBL has historically traded at a discount to the market leader Exide and expect that to continue in the near term. However with demand scenario in the industrial telecom segment (>40% of industrial revenues) improving and new capacity to kick in from early FY13 we expect the discount to narrow down. We therefore maintain our Accumulate rating at a target price of ` 319/share implying a P/E multiple of 10.5x FY13E earnings a discount of nearly 40% to Exide.

25 Feb: Edelweiss Technical Reflection (ETR)

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Edelweiss Technical Reflection (ETR)
Nifty traded choppily in a narrow range of 77 points for the day after previous day’s sharp decline. The index ended with a marginal loss of 0.40% and importantly below the 5500 psychological mark. However, it has managed to hold above the ‘rising gap’ area of 5460-5428 as well as the 10 day EMA at 5471. The steep upward sloping trend channel has been breached and the index is likely to trade lower in the short-term towards the 21 day EMA that also coincides with the broader trend channel base at 5355. Momentum oscillators have rolled bearish, with the daily MACD giving a sell crossover. Turnover for the expiry day was relatively lower and the market breadth remained in favour of declines with an A/D ratio of 1:2. The index is most likely to close in the red for the week, snapping the seven week uptrend suggesting a retracement of the rally. The short-term the trend has turned lower for targets of 5355 (21 DEMA) and 5250 (14-month falling trend line re-test). Traders should use any rallies to initiate trading stops with stop-loss above 5575.

Most of the sectoral indices ended in the negative with the exception of FMCG (+0.82%), Power (+0.64%) and Oil & Gas (+0.35%). The prominent losing sectors were Realty (-2.46%), Metals (-1.41%) and Auto (-0.79%). Among the broader market, the Mid-cap and Small-cap indexes underperformed their frontline peer with loss of -0.55% and -0.91% respectively.

Bullish Setups: ONGC, BHEL, INFY, PWGR, HPCL
Bearish Setups: TATA, STER, AXSB

Stocks in News :25 Feb :: Edelweiss

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 Stocks in News
RIL to raise $500 m via foreign bond sale (ET)
KFA to make 16 more aircraft operational (ET)
Tata steel seeks nod to increase borrowing limit (ET)
I-T dept claims INR 246 cr dues from Sesa Goa (ET)
Lupin settles patent disputes over diabetes drug (ET)
Adani group to spend $ 6 b on global expansion (ET)
BPCL & Videocon keen to hold on to High-value’ Mozambique block stakes (ET)
Bhushan steel promoters may raise holding via rights issue (ET)
LIC to buy 5% each in 3 more bank through Pref shares (Central bank, IOB, Punjab & Sind bank) (ET)
SBI to raise INR 7,900 cr by selling shares to govt (ET)
Coal India to seek offtake pact from power companies before import (BS)
Citigroup to exit HDFC for up to $2.1bn (MINT)

Pharmaceuticals - Q3FY12 Result Review - Reaping benefits from patent expiries :: Edelweiss PDF link

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The pharma universe reported all-round performance in terms of growth and profitability. Revenue growth was strong at 26% YoY (6% higher than estimate), led by outperformance in US and India. Operating margins expanded 390bps (up 270bps) YoY, reflecting the benefits of an improved product mix and favourable currency movement. Despite strong operating performance, PAT growth at 33% YoY was impacted by higher taxes and depreciation cost. Owing to rich valuations and higher risk appetite, pharma universe has underperformed the market. We continue to prefer a more stock-specific approach and prefer Lupin in large cap and Glenmark and Torrent Pharma among mid caps.

Strategy - Which way to turn(out)? Edelweiss pdf link

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In the first five phases of polling in UP elections (two phases are pending), the campaigning by major parties has been very hectic as stakes are high, although BJP seems to be losing some momentum. The highlight of the polling so far has been the record voter turnout, which history suggests, either favours the incumbent (if the prevailing perception is of good governance e.g., Bihar) or else it is a vote for change (e.g., West Bengal).
In UP, the latter seems to be more fitting, which in turn throws up two possibilities: (1) Congress improves its tally but lags behind SP; and (2) Congress gains massively, matching or surpassing SP’s strength. In the former, the SP-Congress alliance will form government in the state with SP strengthening the UPA at the centre. However, what we are worried about is the second option where Congress claims to form the government or otherwise goes for President’s rule, followed by elections shortly for a clear mandate. This will put at risk the prevalent hypothesis of SP supporting Congress at the Centre (replacing TMC) and reforms going through. Markets, surely, will not take it favourably.

       
       
       

Allcargo Logistics -Margins under pressure despite healthy realisations:: Centrum

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Margins under pressure despite healthy realisations
Allcargo Logistics’ (Allcargo) Q4 results were below our estimates. Though
revenue was higher on the back of higher realisations in CFS and volumes in MTO
business, margins were lower than expectations mainly led by both standalone
MTO and ECU Line. Allcargo had reported its highest ever operating margins at
12.9% during Q3. Overall volumes remained steady (up 8.6% YoY but flat QoQ) at
131,793 containers. We remain upbeat on Allcargo due to strong container
volumes and improvement in margins led by CFS and ECU Line.
􀂁 Q3 results mixed: Consolidated revenue grew 41.9% YoY to Rs9,983mn, 22.1%
above expectations. Operating profit at Rs993mn up 29.0% YoY was 1.3% below
estimates. EBITDA margins at 10.0% declined 100bp YoY, 236bp lower than
estimates. Adjusted net profit at Rs506mn was 11.8% below our estimate while net
margin at 5.1% was 195bp lower.
􀂁 MTO business helped by steady volumes: Domestic MTO revenue increased
14.0% YoY mainly on the back of healthy volumes. While average realisations
fell 2.5% YoY to Rs86,350 per container, volumes grew 17.0% YoY to 7,124
containers. ECU Line’s Q4 revenue improved 33.8% YoY to Rs6,868mn on the
back of both healthy volumes and realisations. While volumes were up 14.5%
YoY to 61,379 containers, realisations increased 16.9% YoY to Rs111,895 per
container.

MCX IPO overbid 54 times to Rs 35,000 crore (ET)

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After rushing to bet on the initial public offering of Multi-Commodity Exchange (MCX), investors, long starved of maiden issues, will next try their luck in the upcoming share sale of ONGC. The listing gains from MCX and the money investors make from ONGC's follow-on offer may pave the way for a revival in the primary market. The Coal India issue in October 2010 was the last significant IPO where investors made gains. The MCX IPO, which closed on Friday, was oversubscribed 54 times, with the retail portion oversubscribed by a record 24 times till 6 pm. Bankers to the issue had to seek extra time from exchanges for uploading investor applications. The bids from institutions and high net worth investors and corporates were oversubscribed 49.12 times and 150.35 times, respectively. MCX is the first Indian bourse to be listed. Investment bankers believe the success of its IPO will rub off on the proposed ONGC issue expected in early March. But the huge subscription can partly work against many investors, who may end up with only a fraction of the shares they have applied for. The gains may be thinner for HNI investors, who have borrowed money to make a quick exit minutes after listing - a practice better known as 'first day first show' on Dalal Street. These investors are waiting to find out how the new rule on listing day price cap, which will be tried out for the first time with the MCX issue, works out.

Q3FY2012 Cement earnings review ::ShareKhan PDF Link

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Q3FY2012 Cement earnings review  
The Q3FY2012 earnings growth of the domestic cement players was impressive and ahead of the Street's estimates. The companies with a larger exposure to south India saw a significant improvement in their bottom line during the quarter, as their realisation surged due to a supply discipline followed by the manufacturers in the region. On the other hand, after a sluggish offtake during H1FY2012 the cement offtake witnessed signs of a revival in Q3FY2012. Hence, the impact of the cost pressure during Q3FY2012 was largely offset by the healthy realisation for most of the companies. Consequently, we have upgraded our earnings estimates for most of the cement companies under our coverage to factor in the better than expected cement realisation and the improvement in the cement offtake. Going ahead, with the price hike undertaken in January this year, we believe cement companies are expected to post better profitability and earnings in the coming quarter. Our top pick in the sector is Grasim Industries (Grasim) in the large-cap space on account of its strong balance sheet, better profitability in the viscose staple fibre (VSF) business and attractive valuation. In the mid-cap space we prefer Orient Paper & Industries (Orient Paper) due to its diversified business model, improving market mix in favour of the non-southern regions and attractive valuation. 

Derivatives Insights and Analysis – (February 2012 Expiry) :: Emkay PDF link

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Derivatives Insights and Analysis – (February 2012 Expiry)
l         Indices Movement (Spot Basis)
l         Indices Movement (OI Basis)
l         Opening OI Status (Value wise)
l         Gainers and Losers (price wise)
l         Major OI changes (value wise)
l         Month-on-Month Comparison February 2012
l         % Gainers

Click here to read report: Derivatives Digest

Rollover analysis for March 2012 ::ShareKhan PDF linkRollover analysis for March 2012 Rollover analysis for March 2012

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Rollover Analysis
Highlights
  • Nifty futures started the current series with 2.54 crore shares in open interest.
  • The March series started the month with Rs29,562 crore in stock futures, Rs13,931 crore in Nifty futures, and Rs48,830 crore in index options and Rs2,198 crore in stock options.
  • Nifty current month rollover stands at 67.47% vs last month's rollover at 73.76%.
  • Market-wide rollover was 82.50% vs 81.81% last month.
  • Strongest rollover was seen in textiles, infrastructure, transport and media.
  • Fertilisers, cement, reality and FMCG witnessed poor rollover in the next series.
  • The highest price change on the positive side was in IFCI, Lanco Infrastructures, HDIL, BGR Energy and Dena Bank.
  • Divi's Laboratories, GSPL, GMR Infrastructures and McDowell-N were among the top price losers.

Click here to read report: Rollover