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Today’s View: Positive bias

Expect a flat to negative opening due to CRR Hike .Interest rate sensitives like Auto, Banks and real estate to see some pressure at open Markets expected to recover after initial hiccup. Maintain a positive stand

STERLITE INDUSTRIES: Zinc & Lead metal reserves increase 17% to 27.5m tons of MIC; Upgrade DCF value by 4%; Maintain BUY

•  Sterlite Industries (STLT IN, Mkt Cap US$14.9b, CMP Rs 830, Buy) announced that its subsidiary Hindustan Zinc (64.5% stake, HZ IN, Mkt Cap US$6.3b, CMP Rs591, Buy) reserves & resources of Zinc and Lead metals have increased by 17% to 27.5m tons due to ongoing exploration activities in its mines, which HAVE been independently reviewed and certified as per JORC standard. The success of exploration has primarily been in the Sindesar Khurd and Rampura Agucha mines, with the potential of further addition in future.

• HZL will be ramping up its metal production to 1mtpa in coming years. The expanded reserves & resources are likely to last 27 years. We have carried our DCF valuation of Zinc and Lead metal .Expansion of reserves has increased DCF valuation of HZ by 4% to Rs1,072. Buy for investments.

BANKING: RBI raises CRR by 50bp again; Aimed at reining in rising inflation; Marginally negative for banks and rate sensitives

• Reserve Bank of India (RBI) today raised CRR by 50bp to 8% to be effected in 2 tranches of 25bp each effective from April 26 and May 10. CRR is the Cash reserve ratio that banks need to maintain with RBI as a percentage of their net demand and time liabilities. This CRR hike would take out Rs185b of liquidity from the system. RBI in a phased manner has increased CRR from 5% in Dec 06 to 8% in May 08 to moderate growth in money supply, demand and in turn inflation.As CRR balances do not earn any interest, CRR hike would put pressure on margins of the banks. In order to increase credit demand many large PSU banks (SBI, PNB, BoI, BoB, Canara) had lowered their PLR by 50bp in 4QFY08. Private banks except Axis Bank (by 25bp) have not cut their PLR.Post the current CRR hike, we believe the PSU banks would roll back their PLR cuts to counter the pressure on their margins and protect profitability. We estimate banks would have to increase their yields on advances by 7bp to recoup the revenue loss on account of the CRR hike. While bankers might wait for the RBI policy before taking their decision on lending rates, we expect lending rates to rise for the system.We believe that the valuationsfor the sector has already corrected owing to the large concerns on inflation, forex- & derivatives-related losses, slowing growth. We remain positive onstocks where earnings visibility is strong and valuations being reasonable. Our preferred bets are Axis Bank, HDFC,ICICI and IDFC among private banks / NBFCs (both HDFC and IDFC would not be affected owing to the CRR hike). Amongst PSU banks, we prefer Union Bank and Indian Bank.

Today’s View: Positive bias 

Expect a positive opening. Inflation figures expected to be at 7.22% vs 7.41% in the previous week.Financials and technology to remain in focus
“Maintain a strong buy on Rcom for investments: Strong macro tailwind continues: With ~260m subscribers, India has now become the second largest wireless market globally. India also remains one of the fastest growing wireless markets with penetration set to almost double from 22% to 40% over FY08-10E. The resulting average subscriber CAGR of ~40% should support 25-30% CAGR in revenue and EBITDA.

Market is attractive, but only for incumbents: Listed majors currently enjoy RoE of 22-39% and RoIC of 15-30%. While the return ratios are attractive, the wide range underscores their skewed nature - highly in favor of the market leader. Comparatively late entrants like Tata Teleservices and regional players like Spice Communications are still in the red. Considering this dispersed profitability profile, we believe greenfield rollouts will be unviable.

Incumbents on a strong footing: We believe incumbents continue to get stronger and enjoy (1) tremendous lead in scale, coverage, and distribution, (2) increased customer stickiness from longer validity plans and higher on-net volumes, (3) reducing capex and opex intensity from enhanced infrastructure sharing, and (4) opportunity to unlock value from the demerged tower business.

Regulatory situation stabilized for now: Despite inherent differences, most operators seem to have fallen in line with the interim measures taken
by the government on the two most controversial regulatory issues - dual technology and GSM spectrum allocation criteria. While the legal tussle
continues, the regulatory situation seems to have stabilized. We believe lower risk perception on regulatory front would provide better environment
for sector outperformance.”
” Larsen & Toubro Ltd has announced that its construction division has bagged a Rs20b order from Bombay Dyeing (BD IN; Mkt Cap USD0.6b, CMP Rs626, Buy), for developing 9msf of real estate, at its erstwhile textile plants at Worli (4msf) and Wadala (5msf). This provide clarity to investors on 1) total saleable area and 2) monetization timeline for the real estate.
- The turnkey construction project involves construction of mixed-use developments of approximately 4msf at the Textile Mills at Worli and 5msf at the Spring mills development at Wadala to be completed in the next 46 months by the end of March 2011 (total area 9msf). This is substantially higher than the ~4.3msf of developable area that we had assumed earlier. Considering L&T’s press release, BD’s total saleable area has increased from 4.3msf to 9msf, an increase of 4.75msf at the two mill properties.Recommend a strong buy”

Today’s View: Positive bias 

Expect a positive opening. Quarterly results would have a bearing on the markets. Maintain a positive bias. Strike prices of 4800 and 4900 on the nifty have seen decent put writing yesterday suggesting support on the dowside
“HCL Tech reported revenues of Rs 19.4b in 3QFY08 (Mar 08) as against our estimate of Rs 19.1b (+23% YoY; +6.3% QoQ). US$ revenues grew 33.8% YoY and 5.2% QoQ. EBITDA was at Rs4.33b vs our estimate of Rs 4.2b (90bps margin expansion QoQ). PAT was lower than our estimates at Rs3.43b vs our estimate of Rs3.52b (up 3.2% YoY and 2.2% QoQ).
HCLT reported forex exchange loss of Rs270mn against gain of Rs418 mn in Mar-07 quarter, pulling down YoY growth rates. The forex hedges outstanding as of 31st March 08 are to the tune of US$ 2.7b, off which $2.5b pertains to US$ and rest towards GBP, Euro etc, the average rate been Rs41.56.
On business outlook, HCLT reiterated a 35% US$ growth for FY08. While this implies a muted growth in 4QFY08, the overall numbers for FY08 are still in line with the company’s guidance given in Dec-07 quarter. HCLT does not foresee any significant impact due to US Sub prime crisis at this moment and would give perspective on the implications in next quarters results (around Jul-08).
At the current price of Rs246, stock trades at 11.1x FY09E EPS of Rs 22.1. Dividend yield is 3.3%.Recommend a strong buy for investments”
” Larsen & Toubro Ltd has announced that its construction division has bagged a Rs20b order from Bombay Dyeing (BD IN; Mkt Cap USD0.6b, CMP Rs626, Buy), for developing 9msf of real estate, at its erstwhile textile plants at Worli (4msf) and Wadala (5msf). This provide clarity to investors on 1) total saleable area and 2) monetization timeline for the real estate.
- The turnkey construction project involves construction of mixed-use developments of approximately 4msf at the Textile Mills at Worli and 5msf at the Spring mills development at Wadala to be completed in the next 46 months by the end of March 2011 (total area 9msf). This is substantially higher than the ~4.3msf of developable area that we had assumed earlier. Considering L&T’s press release, BD’s total saleable area has increased from 4.3msf to 9msf, an increase of 4.75msf at the two mill properties.Recommend a strong buy”

The weekly close of the Sensex at 15,808 was seen in positive territory, as it was 464 points up in comparison with previous weekly close of 15,343. But the required level of 16,000 is still intact and needs to be breach in upward for intermediate trend reversal. The RSI and other technical indicators are suggesting a continuation of directionless movements. The level of 15,900 is attracti ng profit booking while the buying is seen in the zone of 15,500 - 15,300. In this scenario, sector and stock specific approach can help the traders. For instance, Oil & Gas, Power and Sugar sector stocks are expected to ou tperform the indices if up move is seen. The stocks like Bajaj Hindustan, Reliance Energy, Gail from the above pack can be accumulated in the short-term corrective trends. Finally, the levels to watch on closing basis are 16,000 (upward trend reversal) and 15,300 (downward breakout).

Today’s View: Positive Bias 

Maintain a positive bias

Inflation figures to be keenly watched . Consensus estimates are at 7% -unchanged frm last week

“As per media reports ,Reliance Industries Ltd. may sell a 10 percent stake in a natural gas field in India’s Krishna Godavari basin area without Reliance may bring in a third company as partner to invest in the country’s biggest gas field, where production is expected
to start this year.Reliance owns 90 percent in the area off the east coast.Canada’s Niko Resources Ltd. holds 10 percent.We expect an EPS of 109 for FY09 and 238 for FY10 and added to this would be added upsides on account of new E&P finds
“

Today’s View: Positive Bias  

Maintain a positive bias .

YES BANK 4QFY08: PAT up by 109%; NII grew 134% had no losses / provisions related to forex derivatives;The above fact gives some comfort that the issue of forex derivative losses on banks’ s balance sheet may have been blown out of proportion . In that context and given the correction that private sector banks have seen in the recent past, ICICI bank , Axis Bank remain very good buys at current levels.

Today’s View: Positive Bias 

Expect a flat opening . Maintain a positive bias .

SW Steel and Ispat Ind raise prices by imposing a surcharge of Rs 5000 on steel products . Imposing a surcharge excludes it from the perview of inflation . We believe that Tata Steel and Sail would have no choice but to follow suit. .However the government’s action on this is something which remains to be seen ,especially when it is considering putting steel as an item under the Essential Commodities Act. We maintain our positive stance on both Tata Steel and Sail.

“During CY07, Bumi reported revenues of US$2.3b (up 22% YoY), PBT of US$383m (up 98% YoY) and core net income after minority interest of US$317m (up 66%). Including the divesture gain in KPC and Arutmin, the net income stood at US$ 789m (vs US$222m in CY06). During 4QCY07, the company reported revenues of US$620m, up 22% YoY (vs US$508m in 4QCY06), PBT of US$126m (vs US$10m in 4QCY06) and core net income (after minority interest) of US$71m, up 91.9% YoY. Tata Power has 30% stake in KPC and Arutmin Mines through a SPV, at a cost of US$1.2b. Also, the entire offtake agreement is from the KPC mine, which is currently the largest coal mine for Bumi Resource in terms of proven and measured resources. This, we believe, is a positive for Tata Power, given its strategic stake in the largest exporter mine in the world.

We expect Tata Power to report net profit (excluding share of profit from KPC and Arutmin mines of Bumi) of Rs7.3b for FY08, Rs8.1b in FY08 and Rs9.9b in FY10. We arrive at target price of Rs1,365/sh based on SOTP methodology comprising: power business at Rs437/sh, defense business at Rs13/sh, Delhi distribution business at Rs78/sh, Investments and cash balance at Rs431/sh, stake in mines of Bumi Resources at Rs301/sh, Mundra UMPP at Rs38/sh, Mandakini coal mine allocation at Rs134/sh, Maithon power project at Rs53/sh, less debt at Rs87/sh. At CMP of Rs1,134, the stock trades at PER of 30x FY09E and 27x FY10E. Buy for investments.”

10 year G-Sec yield notified by FIMMDA (Fixed Income Money Market and Derivatives Association of India) for valuing securities by banks as of March 31, 2008 increased by 15bps to 7.94% although the yields are lower on a YoY basis. This has raised concerns over earnings impact on banking stocks due to MTM provisions. While yields across maturities have decreased on a YoY basis, there is an increase in yields QoQ for 1- and 10-yr G-Secs. Banks had booked large MTM provisions on AFS book during 4QFY07 (Rs1.3b by OBC; Rs3.3b by PNB) as yields had shot up by 36-50bp QoQ. The increase in G-Sec yields during 4QFY08 has been significantly lower in 4QFY07. This implies that MTM losses, if any, would be significantly lower than 4QFY07. As yields are lower than March 07 levels across maturities, the banks are unlikely to have any MTM provisions on an annual basis. Our discussions with various bankers also indicate that the impact of rising yields would be very marginal during 4QFY08. We prefer Axis Bank, HDFC and ICICI Bank among private players and Union Bank, Bank of India and Indian Bank among PSU banks
The mobile telephony sector is apparently set for some new additonal spectrum to be allocated . The modalities of the allocation is something which has to be seen. We continue to like Bharti and Rcom which are trading at 18xFY09EPS and 16xFY09 respectively

Today’s View: Positive Bias

Expect a flat opening . Maintain a positive bias .

The district court in the Hague has upheld an order by the arbitration panel of the International Chamber of Commerce in 2006 directing Tata Communications to allow Reliance Globalcom to upgrade its bandwidth capacity at the cable landing station in Mumbai. The decision comes just ahead of a final verdict on the dispute in which Reliance Globalcom has seperately sought Rs 1600cr in damages for lost business. Positive developments for Rcom . Buy for investments Company trading at 16xFY09 EPS of Rs 32.

Allan Greenspan indicates that US Home prices may stop falling ‘well before’ early 2009. There is some easing of the logjam in the credit markets there, as is evident from the fact that banks have been able to raise capital and AAA rated securities have seen some narrowing of spreads. US dollar have also seen some strength against the Yen and the Euro . Buy ICICI bank for a positional trade where valuations are at 1xP/BV for FY09 .( Book Value of Rs 450 for FY09+Valuations of subsidiaries at Rs 350).

We expect a 18-20% increase in revenue(dollar terms) guidance from Infosys for the next year. This would be at the lower end of street estimates and would translate into an EPS of around Rs 90-92 for FY09. Avoid IT companies till the 15th of April

BHP Billiton has indicated of a 200% increase in coking coal prices for Japanese steel makers .If this was to happen ,then earnings of companies especially SAIL could be hit significantly

Market View : Positive Bias

Maintain a positive bias. Cairn India had its analyst meet on Saturday.Some of the key takeaways are as follows.

Acreage under exploration to move up significantly . The development of the Rajasthan block is on schecule.The company would be generating $2bn worth of cash every year post FY10 and has more than $1Bn worth of cash its books right now. Cairn India is highly leveraged to crude oil prices . At a brent crude assumption of $70 or target price stands at Rs 264. Maintain buy..

Palm prices have corrected 25% in the international markets, As it is an important raw material for soap manufacturers, would have positive implications for HUL and Godrej consumer productsHUL trades at 26xCY08 and 23xCY09 EPS.

Bhel reported numbers lower than market estimates. On a rough cut estimate basis, EPS for FY09 would stand downgraded from Rs 86 to Rs 75 for FY09 and from Rs 118 to Rs 95 for FY10. Investors  are advised to avoid the stock for the time being.

Sensex turned downwards from the consolidation zone and finally closed below the crucial intermediate of
15,500. The low of the day was seen at 15,303 i.e. near the earlier bottom of 15,297. The weekly close was also
down considerably by 1028 points in comparison with previous weekly close of 16,371. This is an indication of
weakening trend of the Sensex and after 15,300, the next lower intermediate zone is between 14,700 -
14,500. Sensex needs to surpass 16,000 level to re-enter in consolidation phase again and to avoid the
continuation of downtrend. In the current scenario, Indian stock market is bucking the global stock market
trend and a considerable gap down opening in the start of the coming week will be indication of probable
formation of new low in Sensex. If Sensex continues downtrend then this time the bear attack may be seen in
Auto, Banks, Real Estate sector stocks