Markets succumb to Global cues, down 388 pts.

FII continue selling spree; Reliance, ONGC save the day

Nobody expected a miracle today and yes the Indian stock markets succumbed to the weakness prevailing in the other Asian markets. Markets opened with a downwards bias and selling intensified during the mid of the session with sensex tanking nearly 675 points intraday from yesterday’s close. However, heavyweight Reliance and ONGC helped the markets to recoup some of its losses at the later part of today’s session. Selling was witnessed across the breadth of the market. FMCG index suffered the most with 4.85% fall, followed by metals falling 4.31%. BSE Auto index suffered the least with 2% loss.

The markets would continue to take clue from Asian markets until fresh domestic triggers arise. Hardening Interest rates and crude oil prices are also contributing to the uneasiness in the markets.

Investment Guru is of view that the coming session would continue to be volatile for Indian markets with selling coming it at every rise. These are testing times for long term investors , however, investors are advised not to resort to selling under pressure and wait for markets to revive the momentum. Avoid overexposure to mid cap and small cap stocks as they would take much more time to recover as compared to large caps. Wait for clear signals from markets for revival of confidence and remain in cash for some more time to utilize opportunities in fundamentally strong stocks. Read More!

IPO Update : Prime Focus Ltd.

Nice Visual-effects, but an expensive IPO

Prime focus is entering the capital markets with a public issue of Rs. 115 crore at a price band of Rs.450-500. Investment guru is of opinion that though the company’s business prospects look good, the issue has been priced very aggressively which takes the sheen out of the offer. However, if we go by the track record of IPO listing, many aggressively priced IPO’s have also delivered good returns on listing. One should consider subscribing to the IPO with above factors in mind.

Let’s Focus on Prime Focus Ltd.

Prime focus is one of the leading integrated end to end post production and visual effects services house in India. The company offers a wide spectrum of services ranging from visual effects, digital film lab, telecine, editing, and motion control to High Definition production.

The post-production industry is currently estimated at Rs.500 crore and is expected to grow to Rs.1,000 crore by 2007. International outsourced work and mainstream films, currently accounting for Rs.65 crore of the total market is estimated to grow to Rs.400 crore.
The Indian film industry's contribution towards visual effects and postproduction is expected to grow from the current size of Rs.52 crore to Rs.143 crore by 2008

The company has posted net profit of Rs. 11 crore on a revenue of 33 Crore for the nine months ending 31st December,2005.

The weighted average EPS stood at Rs. 6.54 which translates into a P/E of 76 at the higher price band. Even if we consider the fact that the company is on a strong growth track and consider its last years EPS , the P/E comes to 53 at the higher band. The company has stated that there are no listed peers in the market.

Return on net worth was 26% for year ended 31st March 2005. Weighted average return for last three years comes to 22%. Net Asset Value for the nine months ended on December 31, 2005 is Rs. 64.49.

The company holds 55% of the share capital of VTR plc bought at a price of 35 pence per share against the current market price of 28 pence per share. VTR plc is a loss making company and is not doing well. The losses of this subsidiary will eat into the profits of Prime Focus.

Adlabs Films holds 482,000 shares of the company bought at a price of Rs. 97 per share. The company has an agreement with Adlabs wherein the terms give Prime Foces a non-transferable, non-exclusive right and license to use the brand of Adlabs Films in
consideration of royalty of Rs 12,80,000/- per annum.

Reliance capital holds 15,00,000 shares of the company.

Issue opens : 25-05-2006
Issue Closes : 31-05-2006
Regisrar : Intime Spectrum Read More!

IPO Update: Unity Infraprojects

Small fish at price of Big fish, Avoid it

Unity Infraprojects is entering the capital markets with a issue of 34 lac equity shares at a price band of Rs. 651-732. Investment Guru recommends Investors to avoid the issue since the company is asking too big a price to fit its mouth. The established peers in the sector are quoting at much lower valuations. The IPO may give some premium on listing (thanks to Indian stock markets!) but the risk reward ratio is not favourable for retail investors.

Lets look at the company :
The company provides integrated engineering, procurement and construction services for civil construction and infrastructure sector projects.

The company has put significant experience and strong track record ,operations in diverse segments, ability to execute turnkey projects in time, large fleet of sophisticated instruments , profitability and growth as its strength.

Company’s order book is Rs 1171.85 crore, which is 4.4 times FY 2005 revenue on 31 December 2005. Of this 50% comes from civil construction ,36% from construction for private corporates, 32% from irrigation projects; and 18% from transportation projects.

Net profit for nine months ended 31st December stood at 16 crores as compared to 7 crores last year.

The weighted average EPS comes to 8.66 . Weighted average return on networth comes to 21.64%.

At the higher band of the offer price the issue comes at a P/E of 84 times which is too high given that other leading companies are available in the market at much better price.

The company has recently ( March 2006) issued 6 lac shares to institutional investors at a price of Rs. 490 per share. So, why such a huge premium from public ?

Issue opens : May 19th, 2006
Issue closes : May 24th,2006
Registrar : Karvy Computershare Read More!

Investment Idea : Reliance Industries Ltd.

Aggressive expansion plans to drive growth
A must have in an investor’s portfolio

Company : Reliance Industries
CMP : Rs.978
ST Target (3-4 Months): Rs. 1200
LT Target (12-15 Months): Rs. 1800
Risk : Moderate

About the Company
Reliance Industries need no introduction. India’s largest private sector enterprise and fortune 500 company, RIL, founded by Sh. Dhiru bhai Ambani and now managed by his elder son Mukesh Ambani, enjoys global leadership in its businesses being the largest polyester yarn and fibre producer in the world and among the top five to ten producers in the world in major petrochemical products. It contributes about 3% of India's GDP and is the country's largest exporter.

How does the Financials look ?
Turnover of Rs. 89,124 crore (US$ 19,976 million) against Rs. 73,164 crore for the previous year, an increase of 22%

Net Profit of Rs. 9,069 crore (US$ 2,033 million) against Rs. 7,572 crore for the previous year, an increase of 20%

Earnings Per Share (EPS) for the year is Rs. 65.1 (US$ 1.46)

Exports of manufactured products were Rs. 32,691 crore (US$ 7,327 million), against Rs.25,532 crore for the previous year, an increase of 28%

If we take into account the above valuations the stock price is ruling at a P/E of 15.

Why such a optimism on the Reliance stock ?

Current business will continue to show robust growth
Let’s see each business separately :
Oil & Gas (E&P)
RIL is the largest exploration acreage holder among the Private sector companies in India with 34 domestic exploration blocks covering an area of about 331,000 Square Kilometres. This is in addition to its interest in one exploration block each in Yemen and Oman. Reliance also has 5 coal bed methane blocks covering an area of about 4000 sqkm. The exploration of new reserves would add significantly to the topline of the company over a period of 3-5 years

Refinery and Marketing
The refinery margins were robust in all the regions as product price increases were higher than the concomitant rise in crude oil prices. The crude oil prices are expected to remain firm in the medium term due to demand –supply mismatch and hence the refinery margin would also remain robust. The company has recorded 92% capacity utilization at its refineries.

Operating rates of ethylene crackers continued to be high globally on account of sustained demand and lack of new capacities. However the petrochemical business worldwide was affected by high crude oil and natural gas prices leading to increase in cost of raw materials and reduction in profitability margins.

Reliance is world’s largest producer of polyester fibre and yarn with a capacity of 1.7 million tonnes. Reliance has a domestic market share of 51% in PFY, PSF and PET. During the year, Reliance commissioned a new polyester plant at Patalganga and Hazira with capacity of 550 KTA

RIL operates one of the world's largest and most efficient, multi-feed crackers at its Hazira petrochemicals complex

Other Group Companies doing well
IPCL has reported a 2% increase in its turnover from Rs 9,386 crore to Rs 9,597 crore. The profit after tax for the year has increased by 28% from Rs 786 crore to Rs. 1,005 crore.

Reliance Industrial Infrastructure Limited (RIIL) For the year ended 31st March 2006, RIIL has reported a 22% increase in its turnover from Rs 53 crore to Rs 64 crore. The profit after tax for the year has increased by 6% from Rs 17 crore to Rs. 18 crore. RIIL would be major driver of reliance foray into infrastructure projects and the stock price movement over last few months has already told the story lying ahead.

Reliance plans for a mega foray in retail
This is the most exciting part that will be unfolded in the time to come. Mukesh , who is known for his aggressive planning style, has already shown his mettle by adding the telecom business (now headed by Anil Ambani) to the reliance portfolio. Now, with the loss of this business to his younger brother, mukesh has eyed entry to the retail sector. This is going to be a mega foray and the project could be in range of 50000-70000 crore. This expansion will change the total dynamics of Reliance industries and would project the company as the major retail player in India. (will talk in detail about this later in a separate post)

So what are you waiting for ?
Going by the promoter background, past performance and the aggressive expansion plans, Reliance Industries emerges as a stock which should be a “must-have” in an individual’s portfolio. The current downtrend in the stock markets can be used as a opportunity to enter the stock at a fair valuation. Read More!

Bears retaliate with full force

Markets witness highest single day fall ever, down 826 points

It was a scray session at the markets today with sensex registering its highest single day fall in the history of stock market. Therewas mayhem all around with stock prices plummeting on the trading bolts. It was red everywhere.

Today's fall can be attributed to following factors:

Heavy selling by FII's in view of government's plan to consider FII's earnings as a business income and not as capital gains. Currently long term capital gain is exempted from tax and short term gain is taxed at 10%. The proposal if brought would mean a tax rate of 40% for the FII's. Another big factor dragging the markets down was the exteremely weak indicators from the global stock markets specially the asian markets. To add to the woes were the disappointing results from Tata Steel and Punjab Ntional Bank.

What should the investor do now ?

The first thing to do is not to repeat the mistake that investors made on May 17, 2004. Those investors who had the courage to hold on to their stocks during that black monday were jumping with joy within six months. Those investors who used the opportunity to enter at those levels were rewarded with excellent returns.

Hence it is very important for investor to take a medium to long term call on their holdings and do not sell their stocks for dirt price. This is a correction phase and should be utilised to enter the markets rather than exiting the markets.

Pick fundamentally good stocks during the ongoing correction and take a view of at least 3-4 months and you would not repent later. At this stage prefer blue chips as compared to midcaps to avoid risk. Those who are already invested should maintain a hold and wait for markets to revive. It is very unfortunate that a big part of general public who invest in stock markets generally put their money at the high end of bullish phase and end up purchasing stocks at higher prices and when such correction occurs they start selling. I hope that the visitors of this bolg would not make such grave mistakes of making holes in their own pockets . We are inevsting here to earn and not to loose so invest smartly and be happy irrespective of the market moods.

Happy Investing !

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Bulls give a solid kick to the Bears !

Market plays Dhoni style on a crucial day

It was one way go for the markets on Tuesday with investors on the buying spree as if there is no tomorrow. Sensex gained 334 points and nifty jumped 112 points backed by surge in buying interest at lower levels and positive clues from the Asian markets. The firm trend in global metal prices also helped the sentiments on the bourses.

The stocks mentioned on the Investment Guru blog in yesterday's posts shined the whole day with good gains. Reliance Industry climbed to 1080 levels, adani was locked at upper circuit, sail and hindalco also put an impressive show. Skumars continued its upwards journey with good volumes. Bombay dyeing is continuing its party over the realty buzz with Bata India too joining the bandwagon.
Investment Guru expects markets to continue the firm trend in tommorow's trade. Investors should wtach out for firm trend in Adani Exports, Reliance Industries, Gujarat Ambuja,century textiles, Nagarjuna constructions, RIIL and Adlab films.

Read More!

Markets bounce back in closing hours

Heavywieghts helps market to deliver smile to Investors

The stock markets finally managed to break the hangover of the selling spree with investors rushing to enter the markets at lower levels. this resulted in pull back rally in the last hours of trading. Another positive development was on cement front, where the cement manufacturers signed truce with the government over price hike issue. Hindalco's announcement of rise in aluminium prices by Rs. 10000 per tonnee helped the metal stocks to bounce back from lower levels. Reliance Industries also staged come back after falling below 1000 levels.
Another pack which helped markets bounce back was the PSU sector with stocks like BHEL and NTPC ended higher.

It is worth noting that the mutul funds are sitting at around $2 Billion of cash and they would have used this fall to enter at lower levels. There is still a large chunck of cash to be absorbed in the markets and that would avoid a biiger fall. The DLF IPO may also help absorbing the excess liquidity in the markets.
Markets are expected to remain volatile on Wednesday with slightly upwards bias. Stocks like Adani Exports, Skumar, Dabur,Hindalco, Kotak Mahindra Bank are expected to remain strong.

Read More!

Sensex gets slimmer,sheds 800 points in 3 days

Positive for healthier market, look for opportunities

The much awaited correction has finally arrived. The sensex nose dived 463 points driven largely by global selling triggers. The selling was seen across the board baring few momentum stocks. Metal stocks tumbled on the bourses with the rumours that metal prices may witness corrections in short term.

Investment Guru is of view that long term investors should stay intact without panicking. Those who are sitting on cash would now get an opportunity to get in at better price. It would be good if sensex sheds further 500 points before rising again. This will give the upcoming rally more strength and will reduce the volatility. This blog has already given advance warning to the investors to keep booking profits at reasonable intervals and wait for better opportunity to invest.

Stocks like Hindalco, Reliance Industries, Sail, Gujarat Ambuja , Siemens, L&T and other fundamentally strong stocks can be accumulated at lower levels with a medium term perspective and low risk.
Read More!

Stocks Ideas for Short term

I could see a lot of comments on the message board requesting for short term investing ideas. However, it should be understood that short term investing is a play on momentum, newsflows and trading patterns. It is a high risk proposition and investors should have guts to set off their position if the stock idea does not work during the time frame. It is also important to keep a watch on the index movements.

Following stocks can be considered for a time frame of 1-6 sessions (i.e.,till next week)

Satnam Overseas:
The stock is in news with hike in stake by Fidelity. The short term target for this stock is 120 .

Patel engineering
The follow on issue has seen tremendous response and investor are busy stocking the scrip. The scrip has come to lime light after its association with L&T. The valuations looks stretched and those who get allotment would be minting money on this stock. The 7 day target for this stock is Rs.600

The stocks looks to be out of the hibernation between the 116-118 range and is poised to breakout for target of 130 if the volumes remain high

Reliance Industrial Infrastructure
Looks like there is no stopping for this stock. The stock may touch 850 levels before sellers pour in. A good stock even from medium term perspective.

Petronet LNG
The stock has bounced back from 57 levels with huge volumes. The 7 day target for this stock should be Rs.70

Reliance Petroleum's listing
Reliance petroleum would definitely be the darling of the stock markets tomorrow with stock listing on NSE and BSE. Investment Guru is of view that the stock may list in the range of Rs. 95-105. No doubt that trading would be very hectic on the counter and many people may want to hold on and not opt for selling tomorrow. This may put some pressure from supply side and may take the stock further up. So watch the listing tomorrow and take a conscious decision once you get a picture of how the stock is doing on the debut.

Happy Investing!

(Please read the Disclaimer clause before using any information provided on the blog )

Next on the blog : Investment Idea #

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Stocks in News: MTNL-BSNL Tussle, Satnam Overseas

The MTNL -BSNL tussle is going . BSNL has asked MTNL to pay outastanding dues of Rs. 900 crore. MTNl has also charged BSNL for not paying for call termination charges. MTNL is also parting ways with BSNL for NLD business. BSNL has said that either it will carry full traffic of MTNL or it will not carry any traffic at all. The ongoing tussle would impact the MTNl stock and it may see some offloading.

Sunil Hi-tech's announcement of expansion plans may lead to some upside in the stock price.

News of Fidelity's hiking stake in Satnam Overseas may trigger fresh buying interest in the stock. Interest rates hikes may keep the banking zone buzzzing.

Reliance Industries is expected to continue its bull run with Reliance Petro listing in the offing and Reliance Industry being the major beneficiary of a sparkling debut of Reliance petro.

Reliance Industrial Infrastructure is expected to contnue its onwards journey today with no stopping in the buyers for the stock.

The fresh interst generated in Surana telecom with huge volumes may take the stock at furher higher levels. GNFC may also see new highs backed by renewed interest . IFCI would continue its northwards journey. Read More!