Archive for December, 2007
Mumbai: Indian shares could bely most pundits and accelerate in 2008, pushing aside slowdown worries that will hamper global markets. A host of companies, from steel to car makers, are set to raise their prices in the new year - a move that will boost margins, while demand is unlikely to be dented.
Many analysts have projected shares to rise at a much slower pace of about 20-30 per cent in 2008, after gaining around 45 per cent annually on average in the previous four years. The popular wisdom is that foreign portfolio inflows will dwindle on the back of an expected economic downturn in the US.
“It is an overly cautious stance,” said equity strategist V. Venugopal. “The big boys don’t want to stick their necks out. They are just being conservative.”
Venugopal, who advises rich clients in Mumbai, said he expected the stock market to accelerate in the coming year with mergers and acquisitions providing a powerful engine.
On the hunt
“Indian companies are on the hunt for acquisitions,” he said. “A recession in the West should throw up some bargain opportunities. I am expecting some big ticket deals in 2008.”
Tata Steel Ltd, which took over Anglo-Dutch steelmaker Corus in a $12.9 billion deal in January this year, is hungry for more deals, while stablemate Tata Motors Ltd is expe cted to herald the new year by bagging Ford’s premium brands, Jaguar and Land Rover, for around $2 billion.
But the biggest deal would probably come in the energy sector from Reliance Industries Ltd, which is on the prowl for a global acquisition in the range of $15-$20 billion, Venugopal said.
Software services companies like Tata Consultancy Ltd, Infosys Technologies, Wipro and Satyam Computer are also known to be sniffing around for buys, especially in Europe and the Asia-Pacific, to expand their clientele and lower the dependence on their main market, the US that now provide more than half their revenue.
The financial sector is ripe for a big rise in M&As, with foreign firms expected to buy into brokerages and investment banks. Big lenders like State Bank of India, which plans to raise $4.2 billion through a share sale in the coming weeks, could also merge its associate banks with it ahead of the sector being thrown open to freer foreign competition in 2009.
“There will be a slowdown in M&A activity in the West in 2008,” Venugopal said. “But there should be a big rise in Indian mergers and acquisitions [M&As], both overseas and domestically.”
Companies that focus on domestic-led growth such as engineering and construction firms Larsen & Toubro, Bharat Heavy Electricals, Punj Lloyd, GMR Infrastructure, DLF and Unitech; as well as related firms like makers of cement, steel, aluminium should also outperform.
Hotels will continue to ride a booming economy, with high room tariffs boosting earnings while demand keeps rising.
Among laggards, sugar companies will be a good prospect for the new year, Dominic said. “Prices of sugar companies’ shares have risen 5-10 per cent in the past two weeks or so,” he said. “They could rise by half or even double in 2008.”
Companies in the sector have won large export orders for the crop year to September 2008, including from Dubai-based refineries, and the London-based International Sugar Organisation has forecast India could beat Brazil as the top sugar producer.
Although world sugar prices are forecast to remain subdued, greater diversion of cane to make the biofuel ethanol could eventually drive prices higher if crude oil continues its relentless rise.
Metal and car makers are set to raise prices in January, while the government may bite the bullet and announce an increase in domestic fuel prices that have been kept unchanged since February even as world oil prices soared.
Tax cuts
Although higher prices could accelerate inflation and douse any chance of an interest rate cut, there is also talk the government may cut taxes to woo voters - a move that will boost spending.
Investors can also breathe easy after the victory of Bharatiya Janata Party in Gujarat. This would put an end to worries the Congress party-led coalition at the centre would call for early national polls in 2008.
But geopolitical tensions in the region caused by the assassination of Benazir Bhutto will weigh on sentiment for some time.
The Sensex rose 5.5 per cent last week to 20,206.95, and is just 1.4 per cent away from its record high of 20,498.11 on December 13.
Source:gulfnews.com
December 30th, 2007
The 20K milestone has just been crossed: The Sensex closed at 20,207 this Friday, a rise of 46.57% over last year. And there’s no stopping this bull run as long as India continues to grow at around 9% and corporate earnings keep multiplying. A Goldman Sachs report is bullish about India’s domestic demand, high savings and investment rate, and relative insulation from the US economy.
Corporate honchos won’t specify a figure, but paint a rosy picture. Kotak Mahindra Bank MD Uday Kotak believes the fundamentals are strong and the regulators and government are doing a good job. But he cautions, “We have to make the India growth story a marathon, not a sprint.”
Boston Consulting Group chief Arun Meira also swears by India’s high savings and investment rate, while ICICI Securities senior VP Ravi Sardana believes high liquidity from both foreign and local funds should propel the markets to new highs in 2008. Much would, however, depend on the emerging political scenario, oil prices and scale of global recession.
The big question is, are stocks now overpriced? The average return on investment from earnings of equity shares has declined from 4.39% at the end of 2006 to 3.64% at present.
Shares of sensex companies are presently quoting at 27.46 times of their underlying income as against 22.76 times during the same period last year. At the end of 2005, it was only 18.61 times. With FIIs pouring money into India, most of the hidden value of the stocks is now reflected in the share price.
Therefore, a rise in share prices now will mainly be driven by earnings growth. According to equity research firm Enam, earnings growth in the present financial year is likely to be just 17%, against 33% in 2006-07. But it is expected to revive in 2008-09 to 20%. In 2007-08, the average earnings per share of the 30 sensex companies will be Rs 842. If the earnings grow at 20% and shares continue to quote at 28 times their average earnings, the sensex would cross 28,000. But if the earnings grow at 25%, the sensex may touch 30,000. Throughout 2007, corporates topped the forecasts. If they do so again, the sensex may touch 30,000.
Source:indiatimes.com
December 30th, 2007
It is that time of the year when we take a look at the twists and turns that lie ahead for the Sensex. When we did this exercise last year, our preferred view was that the Sensex would move sideways between 11,000 and 15,400 in 2007. Our outer limit for 2007 was 19,550, but we had added that ‘speculative excesses’ would accompany a move to these higher levels. The Sensex has moved beyond the upper limit.
The move past 15,400 proved beyond doubt that the long-term uptrend has resumed from the June-2006 trough of 8,800. But this move appears to be the final (fifth) part of the long-term move that commenced in May 2003. This final leg can take a few more months to complete during which the Sensex will move between 17,500 and 24,800. We place the outer target for the Sensex in 2008 at 27,145.
Fifth wave
To understand what can happen after the completion of the fifth wave from the May-2003 trough, we need to step back and take a longer term view, from 1980. It is then evident that this long-term bull market began way back, in 1988. Following a protracted correction between 1994 and 2003, a fresh up-move commenced in May 2003. The swiftness and the gradient of the move from May 2003 have all the characteristics of a third wave.
Third and fourth wave
Once the third wave from 1990 completes, our market could launch into a corrective fourth wave. Whether it will be another swift and sharp correction akin to May 2006 or if it will be a long-drawn one on the lines of the correction from 1994 peak remains a conjecture at this point. This correction can make the index test 15,200 or 13,700. But the long-term outlook (next 10 years) for the Sensex remains positive as the index will resume its upward trajectory after the completion of this long-term correction.
To put it simply, the first few months of 2008 could be fairly benign with the Sensex moving within the 17,500-24,800 band. But the index can form a significant peak anywhere between 20,000 and 25,000 and a long-term correction can then ensue. The initial support in the event of a major correction is 16,000. If this is breached, 15,200 would be on the cards.
We will revisit these forecasts if the upper (24,800) or the lower limit (15,200) for the year is breached by a significant margin.
Lokeshwarri S.K
BL Research Bureau
Source:thehindubusinessline.com
December 30th, 2007
Mumbai, Dec 28 The Indian stock Markets ended on a flat note on Friday in line with the Asian Markets, which in turn fell on the back of weak cues from the American Markets. Initial risk perceptions of geo-political concerns after the assassination of former Pakistani Prime Minister Benazir Bhutto melted down as the day proceeded. The 30-share Sensex of the Bombay Stock Exchange (BSE) lost 9.77 points or 0.05% before closing at 20,206.95 points while the broader S&P CNX Nifty of the National Stock Exchange (NSE) lost 1.8 points or 0.03% before closing at 6,079.70 points.
Amitabh Chakraborty president Religare Securities said, “The Markets opened on a negative note mainly on back of weak international cues. The news from Pakistan may come as a blessing in disguise to the Indian Markets as the money heading into Pakistan may now be routed into India.”
However, massive long positions were built in the mid and the small cap Companies and they once again managed to outperform the heavy weights. The BSE Small Cap Index actually touched its all time high of 12,909.82 points before finally closing the day for 12,901.29 points gaining 272.55 points or 2.16%. The BSE Mid Cap Index gained 145.71 points or 1.55% to close at 9,574.57 points. Due to heavy buying in the small- and mid-cap Companies, the overall market remained bullish with 2,270 Companies gaining in price as against 651 Companies which fell, while stock of 32 Companies remained unchanged.
According to the provisional data available from the stock exchanges (SE) on Friday the Foreign Institutional Investors (FII’s) were net buyers to the tune of Rs 653.76 crore while the Domestic Institutional Investors (DII’s) were net buyers to the tune of Rs 166.69 crore. Among the sectoral indices, all except IT, Teck and auto ended in green. The BSE CD (Consumer domestic) index led the way gaining 262.90 points or 4.15% to close at 6,602 points. This was followed by BSE Realty which gained 471.10 points or 3.90% to close at 12,551.26 points.
Source:financialexpress.com
December 30th, 2007
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