NSE/BSE STOCK MARKET TIPS

CLSA Asia Pacific Markets puts buy on Cairn India
1 Nov, 2008.

CLSA Asia Pacific Markets has rated Cairn a “buy” citing attractive valuations and expectations of a rebound in crude oil prices. “Cairn is discounting $35/barrel nominal Brent to perpetuity on our DCF (discounted cash flow) valuation models.

On a nearer term, the stock reacts more to spot crude but is now at $40/barrel on this regression,” the French brokerage said in a client note. “We do not see $30-40/barrel as sustainable despite a worsening global oil demand scenario given tight supply and rising costs of production; we model in $70-80/bbl Brent over 2009-10 ,” it added.

DLF buys back 2.5 lakh shares on opening of offer
19 Oct, 2008.

NEW DELHI: Country's largest real estate firm DLF bought about 2.5 lakh shares worth about Rs 7.6 crore on the first day on Friday from the open
market under the buyback offer.

The company purchased 2.5 lakh shares at an average price of Rs 304.19 per share, DLF said in a communique to the National Stock Exchange.

The company has bought back about 1.5 lakh shares from the NSE, while it purchased one lakh shares from the BSE, it added.

DLF today kicked off its Rs 1,100 crore offer to buyback 2.2 crore shares at a face value of Rs 2 each from the open market.

The company has appointed JM Financial Services and DSP Merrill Lynch as its brokers for placing orders on the bourses.
However, the offer failed to boost the company's share prices as the scrip fell by 10.34 per cent to close at Rs 291.30. It had closed at Rs 324.90 per share yesterday.

In July, the company had announced its plan to buy back shares from open market at a price not exceeding Rs 600 a share. Post-buy back, the shareholding of the promoters would increase from 88.16 per cent to 89.32 per cent.

The offer would end on July 9 next year. However, the board in its absolute discretion may decide to close the buy back at an earlier date, if the minimum offer shares have been purchased under the buy back, even if the maximum offer size has not been reached or the maximum offer shares have not been bought back.

Analysts' picks: NTPC
4 Oct, 2008.

CMP: Rs 171.85
Target price: Rs 208

Goldman Sachs Research has initiated coverage on the stock with a ‘buy’ rating, saying NTPC’s business model entails a high degree of earnings visibility with core business consistently yielding 20% plus return on equity (RoE).

“NTPC scores well as a defensive growth option. It has the lowest risk to funding amongst its peers, competitive cost of generation, RBI guarantee for payment realisation from its customers (financially-constrained SEBs) up to FY2016 and inexpensive valuations,” said Goldman Sachs Research in a note to its clients.

The firm expects the company’s net profit to grow at a compounded annual rate of 7.3% between FY2008 and FY2011E (estimated) on the back of a 30% growth in wholly-owned commercial generation capacity over this period.

“Net income growth would rise progressively over the next three years, as we expect around 45% of the 7,760MW of commercial capacity addition over this period only in FY2011E,” the note said.

Vishal Info: Acquisition boost

The stock gained 12.4 per cent from Rs 314.55 to Rs 353.65 in a falling market last week after the company announced that it was considering acquisitions in the UK and Europe. The company has announced a board meeting on October 1 to consider raising funds through external commercial borrowings and global depository receipts (GDRs).

The combined trading volume on the counter almost doubled, with 11 million equity shares changing the hands last week compared with 6 million shares traded in the week earlier. The stock, which got listed in August this year, has appreciated by 136 per cent from its issue price of Rs 150 on BSE.

The company covers almost all segments in IT-enabled services sector other than the voice call centre. Currently, the company’s revenues are generated from projects and services and e-publishing, including data digitisation.

Goldman Sacs retains 'buy' on Axis Bank
17 Sep, 2008.

Axis Bank
CMP: Rs 696.55
TARGET PRICE: Rs 1,010

Goldman Sacs has retained its ‘buy’ rating on Axis Bank, expecting the bank’s earnings per share of grow at a compounded annual rate of 33% between FY07 and FY10. The growth, says Goldman Sachs, would be driven by improvement in cost competitiveness, rising contribution from fee income and higher productivity arising from economies of scale.

“We believe Axis’ current valuation does not capture the upside potential from its rapid growth in franchise value. Investors appear to be concerned about the rapid growth witnessed by the bank in the past, and hence, the potential for increase in credit losses impacting the bank’s earnings growth prospects adversely in our view. We believe the bank’s credit portfolio is concentrated in the large corporate segment, which is less vulnerable to rapid deterioration in credit quality. As such, we believe increase in credit costs is unlikely to impair earnings growth expectations materially,” the note said.

Anand Rathi puts 'buy' on Bharat Electronics
8 Sep, 2008,

Anand Rathi Securities has a 'buy' call on Bharat Electronics around the current price of Rs 974 for target Rs 1,140 and stop loss of Rs 900.

Based on the chart pattern to date, the stock is likely to get support around Rs 930.

Bharat Electronics, after a descent consolidation, exhibits a trend reversal; rise in RSI from over sold zone indicates a medium term buy.

Analysts'Picks: Tata Motors
27 Aug, 2008.

Tata motors
cmp: Rs 433.50
target price: Rs 454

HDFC Securities has maintained its ‘sell’ rating on the stock with a revised target price of Rs.454 (from Rs.431 earlier). The brokerage believes due to uncertainties looming over the company’s Nano project at Singur and 24-35% equity dilution would cap the upside in the stock.

Also the Jaguar-Land Rover (JLR) acquisition would continue to be an overhang on Tata Motors’ stock, the note added. “We are revising our earnings per share estimate upwards by 9% (Rs.29.9 earlier) mainly on account of lower equity dilution by reducing the amount of funds raised through the equity route. We value the company on an SOTP basis with the core business valued at Rs 293 per share and subsidiaries at Rs 161 per share,” the note to clients said.

Analysts' picks:Future Cap Holdings, HCL Infosystems, HCL Infosystems, Vishal Retail, Wipro
13 Aug, 2008,

Future Cap Holdings
cmp: Rs 360.50
target price: NA

Edelweiss has initiated coverage on Future Capital Holdings with an ‘accumulate’ rating as it feels that the company with its vertically-integrated model is likely to capture value across the chain in the high-growth consumption space.

“The company is building a vertically integrated capital-cum-agency business model through its investment advisory, financing and financial products distribution businesses,” says the report. The company is a focused investment advisor with $1.5 billion funds under advice in consumption-related sectors, it adds.

The brokerage expects its assets under management to grow to $5 billion by FY11E. It also expects the “company’s net revenues to grow seven-fold to Rs 7.7 billion in FY10E and profit after tax to grow to Rs 1.8 billion in FY10E”. The stock is trading at 12.6 times FY10E earnings and 2.5 times FY10E book, says the report. Edelweiss recommends investors to accumulate the stock at current levels from a long-term perspective (2-3 years).

HCL Infosystems
cmp: Rs 121.80
target price: Rs 155

CLSA has maintained an ‘outperform’ rating on HCL Infosystems while lowering the target price from Rs 230 to Rs 155 due to the further slowing down of PC sales. “HCL Infosystems’ sales are slowing down further and we now expect flat to negative year-on-year revenue growth in the segment in the June’08 quarter,” says the brokerage.

Around 30% of the company’s PC sales go to the retail segment, where the slowdown observed since late CY2007 has deepened, it says. Lower computer systems revenue assumptions are driving around 4-11% further cut in EPS estimates for FY08-10, it goes on to add.

According to CLSA, the demand of PC seems to be waning due to “cost-led 5-7% price hikes passed on by vendors, plus the lower financing options available (higher interest rates plus cut back in new loans from financiers)”. A 6.4% dividend yield provides some buffers to the stock, but upsides seem limited as a weak quarter looms, it adds.

Vishal Retail
cmp: Rs 415.90
target price: Rs 485

Kotak Institutional Equities has initiated coverage on Vishal Retail with a ‘add’ rating as it feels that the company would benefit from its ‘value’ model that has national scalability, thereby offering economies of scale.

“The company’s transformation to an integrated retailer dilutes its dependence on apparel while its emphasis on private labels is likely to support margins,” says the report.

It goes on to add that the company’s product mix is likely to under go significant changes in the near future, with negative margin impact of FMCG sales offset by higher share of private labels. The brokerage, however, feels that the “proposed rollout is aggressive” and that it would be “tempered by funding constraints”.

“We expect the total retail space to grow at 48% CAGR to 7 million sq ft by FY2011E, which is 30% lower than management estimates, after factoring in funding constraints,” says the report. Inflation and economic slowdown are concerns given the company’s concentration on lower income categories, it adds.

Wipro
cmp: Rs 433.30
target price: NA

ICICI Securities has maintained a ‘buy’ rating on Wipro even while viewing that the risk-reward is unfavourable at current valuations owing to deteriorating earnings visibility. The brokerage believes that Wipro’s upswing in the past weeks and the resulting par-valuations with Infosys is unjustified in the short term and expects profit booking at current levels.

“With FY09E and FY10E PE at 17.2 times and 14.1 times (versus 17 times and 14.9 times for Infosys), we believe Wipro will witness profit booking in the short term given lower earnings visibility and similar EPS CAGR through FY08-11E,” says the report.

As against a historically strong second quarter, Wipro’s Q2FY09 dollar-denominated revenue growth guidance indicates that the company is witnessing client-specific ramp downs in Q2FY09, it adds. ICICI Securities, however, believes that client-specific issues in material accounts (GM, Nokia-Siemens, Alcatel-Lucent) are likely to lead to a bounceback in revenue growth only post Q2FY09.

A positive opening on the cards
August 10, 2008,

The major indices are likely to open strong on Monday due to extremely positive cues from the US markets. Market internals suggest selling bias at higher levels. While the indices managed to hold crucial support levels, an impending correction may see the indices break below the support levels in the coming days.
Sensex, has gained nearly 13 per cent (1,714 points) during the period. The index moved in a range of 919 points last week – it rallied from a low of 14,504 to a high of 15,423 - and finally ended with gains of 511 points at 15,168.

Among the Sensex stocks, Maruti zoomed over 21 per cent. HDFC Bank, ICICI Bank, Tata Motors, Grasim, Mahindra & Mahindra and ACC rallied 9-16 per cent each. Tata Power and Tata Steel, however, dropped 5 per cent and 4 per cent respectively.

The Sensex crossed the resistance level of 15,200 in intra-day trades during the last three days. However, the index could not close above it. The index may target 17,150 in the medium-term. But a sharp correction is not ruled out, given the high 14-day relative strength index (RSI) at 72 per cent. An RSI of above 70 per cent indicates overbought zone.

The index may face resistance around 15,625-15,740 this week, above which it may spurt to the 16,000-mark. On the downside, the index may seek support around 14,600 and 13,350-13,500.

The Nifty moved in a range of 253 points - rallying from a low of 4,363 to a high of 4,616 - before settling 116 points higher at 4,530.

The index has closed above the 4,500-mark for the last four straight days and looks set to target its 200-DMA (daily moving average) at 5,135 in the coming days.

However, it is likely to face resistance around 4,700-4,800 in the near term, and profit-taking at these levels could see the index slide to 4,170-4,050.

The Nifty is likely to face resistance around 4,625-4,690 and may find support around 4,430-4,370 this week.

Tata Steel makes it to Fortune Global 500 list for first time . 6 Aug, 2008.

MUMBAI: Steel major Tata Steel has for the first time made it to the prestigious Fortune Global 500 list of the world's largest corporations, a company statement said on Wednesday.

The company ranks 231 in terms of revenue, the statement said.

Interestingly, Fortune magazine in its July 21, 2008 issue, had for the first time included Tata Steel in its Global 500 list but the company was ranked 315th in terms of revenue.

This ranking was, however, based on the company's total revenues in the first three quarters of the current fiscal and the last quarter of the previous fiscal.

Following the announcement of the company's annual results, Fortune has re-ranked Tata Steel.

In a clarification on its website, Fortune has said: "Tata Steel's revenue for fiscal year end March 31, 2008 -- released by the company after the Global 500 publication deadline -- was $32.8 billion. Had the information been available, the company would have placed 231 on the list. The company ranked 315th in the listing, based on revenue for the four quarters ended Dec. 31, 2007, of $25.7 billion."

Nifty may re-test recent highs
WEEKLY TECHNICAL ANALYSIS

The markets bounced back sharply in the last two days of the trading week, mainly on account of short-covering in banking stocks, as the US markets rebounded. Realty and energy stocks logged smart gains.

The Nifty hit a fresh calendar low of 3,790 (close to the support level of 3,770 mentioned last week) and then pulled back to higher levels. The buying momentum was so strong that the index zipped past the 4,000-mark to a high of 4,118. The index finally settled with gains of 43 points at 4,092.

The Nifty MACD (moving average convergence divergence) and Stochastic Slow indicate more upside. The index could re-test its recent high of 4,215. If it sustains above this level, one may see the 4,500 level in the medium term.

The index closed above its short-term moving (20-days) average (4,064) after a gap of 41 days. The medium-term (50-days) moving average is 4,492. Going forward, the 3,850 level will be crucial. The Nifty may see a further upside as long as it trades above this level. But a dip below the mark could take the index up to 3,400-3,250.

The Nifty is likely to find support around 3,965-3,930-3,890, while it may face resistance around 4,215-4,255-4,295 this week.

The Sensex moved in a range of 1,170 points - from a low of 12,514, the index rallied to a high of 13,684 and finally ended with gains of 165 points at 13,635.

Among the index stocks, ONGC and Maruti soared 11 per cent each. Larsen & Toubro, Bharti Airtel, NTPC, Reliance Infrastructure and SBI gained 6-8 per cent each. On the other hand, Ranbaxy slumped 18 per cent to Rs 531, and Satyam, Wipro, Tata Steel, Hindalco and Infosys dropped 8-14 per cent each.

RCom, RIL shares to be most watched stocks on bourse

MUMBAI: With the deal between Reliance Communication and South African telecom entity MTN falling apart, amid the battle between the two Ambani siblings, the stocks of RCOM and Mukesh Ambani-led Reliance Industries will be the most watched ones when the market opens tomorrow.

Analysts believe the two stocks, though most watched by investors for any big movements, are expected to remain subdued this week due to the continuing tussle between Anil and Mukesh Ambani.

"RCom and RIL stocks will continue to face pressure this week amid the overall bearish sentiments in the market. The shares are expected to remain under pressure till the market situation improves," SMC Global Vice President Rajesh Jain said.

In another significant move, AAA Communications, a private company of Anil Ambani that holds 63.38 per cent equity in RCOM, wrote to RIL claiming it was "free to and shall deal with RCOM shares as it deems fit."