Professional Documents
Culture Documents
2010: Issue 225, Week: 2nd - 6th August (For private circulation only)
WISE M NEY
Brand SMC 50
From The Desk Of Editor
Contents
A
Equity 4-7 sian markets saw buying as more than half of the companies that announced
Derivatives 8-9 results in the MSCI Asia Pacific Index have exceeded the analyst's estimates,
boosting confidence about the strength of the recovery. U.S. economy
Commodity 10-13
expanded at a 2.4 percent annual pace in the second quarter less than forecast,
IPO 14-16
indicating that the world largest economy will see a moderate recovery.The jobless
Mutual Fund 17-18 recovery is curbing household purchases as consumer spending that accounts for
about 70 percent of the economy rose 1.6 percent in last quarter, compared with a
EDITORIAL STAFF 1.9 percent rate in the previous three months. U.S. financial system recovery is
Editor Saurabh Jain fragile and as per IMF stress tests banks may need as much as $76 billion in capital. In
Executive Editor Rajesh Jain
India, as per expectations RBI hiked the policy rates and indicated that monetary
+Editorial Team
Dr. R.P. Singh Nitin Murarka
steps will continue in order to moderate inflationary pressures. RBI chief said that
Kunal Sharma Vandana Bharti despite of the monetary measures, monsoon rains would play a critical role in
Tejas Seth Sandeep Joon
Dinesh Joshi Vineet Sood
moderating food prices. Now RBI will release eight monetary policy statements in a
Bhaskar Mandal Shitij Gandhi year that will cut short the time of monetary policy adjustments. The central Bank
Dhirender Singh Bisht Subhranil Dey
Ajit Mishra Parminder Chauhan
also revised its estimates for inflation and economic growth to 6 percent and 8.5
Shilpi Agarwal Asmita Satyendra percent from earlier estimates of 5 percent and 8 percent respectively.
Content Editor Kamla Devi
Graphic Designer Pramod Chhimwal The annual monsoon rains bounced back from a 17-percent deficit in the previous
Research Executive Simmi Chibber
week to 38 percent above normal in the week to 28 July 2010.Heavy, well-
CORPORATE OFFICE: distributed showers in the past week helped total rainfall rise to normal during July
11 / 6B, Shanti Chamber, Pusa Road, New Delhi 110005.
Tel: 91-11-30111000, Fax: 91-11-25754365
have raised the farm sector prospects thereby indicating a pickup in rural demand.
DELHI OFFICE:
17, 8B & 9B, Netaji Subhash Marg, Darya Ganj, New Delhi 110002 Till now the results announced so far have shown a mixed picture with some
Tel: 91-11-30111333, Fax: 91-11-23263297
disappointment coming from the large caps.The combined net profit of a total of
MUMBAI OFFICE:
Dheeraj Sagar, 1st Floor, Opp. Goregaon sports Club, Link Road 1,085 companies declined 12.6 percent to `47280 crore on 23.1 percent increase in
Malad (West), Mumbai 400064
Tel: 91-22-67341600, Fax: 91-22-28805606
sales to `609368 crore in Q1 June 2010 over Q1 June 2009. Going next week some of
COCHIN OFFICE: the top companies like SBI, Bharti Airtel, Tata Motors, Tata steel, etc will announce
212, D.D. Vyapar Bhawan, K P Valom Road, Kadavanthra, their quarterly numbers and would help in setting the undertone of the market.
Erunakulam (Cochin), Kerala-682020
Tel: 91-484-2312282-83, 3928894-95, Fax: 91-484- 2312281
CHENNAI OFFICE: Indian Stock Markets are holding on to the gains though the momentum for rise is
2nd Floor, Mookambika Complex, 4, Lady Desi, Kachari Road, lacking. But the world stock markets are slowly inching up with base metals
Mylapore, Chennai-600004
Tel: 91- 44 - 42957600, Fax: 91- 44 - 24661798 commodities also showing strength. The rise in Rupee and the midcap stocks rally in
SECUNDERABAD OFFICE: the week gone by gives a hope of further rally. It seems the market would take a
206, 3rd Floor, above CMR Exclusive, Bhuvana Towers, S.D.Road,
Secunderabad - 500003 clearer direction in the coming week. Nifty has support between 5315-5250 levels
Tel: 91-40-66179805-08
and Sensex between 17700-17500 levels.
AHMEDABAD OFFICE :
303, R K House, Behind Shilp Building, C G Road,
Ahmedabad-380009, Gujarat It is quite visible that good corporate earnings have propped up the sentiments of
Tel : 91-79-30074881-88, 26424222-33 financial market and commodity is not an exception. Hence we have seen that
10/A, 4th Floor, Kalapurnam Building, Near Municipal Market,
C G Road, Ahmedabad-380009, Gujarat capital inflow switched to riskier asset from safe asset like gold and dollar index.
Tel : 91-79-26424801 - 05, 40049801 - 03 Base metals are the major beneficiary and they are trading at multi months high
KOLKATA OFFICE:
18, Rabindra Sarani, “Poddar Court”, Gate No. 4, 4th Floor,
whereas crude is reacting on stocks pile up in US and ignoring other positive cues. If
Kolkata - 700001 positive outcome of economic indicators and earnings continue to come in near
Tel : 91-33-39847000, Fax No : 91-33-39847004
DUBAI OFFICE:
future then all base metals will trade in a range with upside bias and vice a versa.
312, Belshalat Building, Al Karama, Dubai, P.O. Box 117210, U.A.E. Even in crude oil some lower level buying may occur this week. Expect further fall in
Tel: 97143963120, Mobile : 971502612483
Fax : 9714 3963122 gold and if it breaches the mark of 17500 then we may see some spurt in physical
Email ID : pankaj@smccomex.com buying. In agro commodities, spices may trade in a range on mix fundamentals.
smcdmcc@gmail.com
4
INDIAN INDICES (% Change) SECTORIAL INDICES (% Change)
SMC Trend
Nifty Sensex BSE Midcap BSE Smallcap Nifty Junior S&P CNX 500
SMC Trend
Nasdaq Nikkei Hang Seng FTSE 100
Dow jones Strait times Shanghai CAC 40
S&P 500
BSE SENSEX TOP GAINERS & LOSERS (% Change) NSE NIFTY TOP GAINERS & LOSERS (% Change)
5
Beat the street - Fundamental Analysis
NHPC LIMITED
Business Profile Kishanganga, 240 MW Uri-II, 45 MW Nimoo-Bazgo VALUE PARAMETERS
NHPC Ltd is a Mini-Ratna Category-I Enterprise of the and 44 MW Chutak Projects are under active
Current Mkt.Price (`) 31.8
Government of India. The company is a hydroelectric construction, once completed they will increase
Face Value (`) 10.00
power generating company dedicated to the the overall capacity of the company and thus
52 Week High/Low 39.75 / 27.60
planning, development and implementation of an contribute to the sustainable topline growth.
M.Cap (` in Cr.) 2125.82
integrated and efficient network of hydroelectric ·NHPC in joint venture with Government of EPS (`) 1.73
projects in India. It execute all aspects of the Manipur and SJVN Limited is working on 1500MW P/E Ratio (times) 18.38
development of hydroelectric projects, from tipaimukh Hydroelectric (Multipurpose) Project P/B Ratio (times) 1.68
concept to commissioning of the projects. located in Churachandpur district of Manipur. Dividend Yield (%) 0.83
NHPC holds majority stake in the project Stock Exchange BSE
Investment Rationale estimated to generate 3800 Million Units of
·NHPC has an established track record in electricity per annum % OF SHARE HOLDING
implementing hydroelectric projects, so far it ·Country's giant hydro power company has
has successfully completed 13 hydroelectric diversified into thermal power generation
projects, including two through its subsidiary, business through its 51% subsidiary company
NHDC. The company's reputation as a successful NHDC, which has 2640MW of thermal plants in
and efficient project manager is a key advantage Madhya Pradesh. The remaining stake of NHDC is
for securing projects. held by Madhya Pradesh government.
· The company has successfully commissioned all Stock Chart
the three units of the 120 MW (40 MW x 3) Sewa-II 40 40
Hydroelectric Project in Jammu and Kashmir 38 38
With this the installed capacity of the company 36 36
Particular QE Jun’10 QE Jun’09 Var.(%) TTM
has gone up to 5295 MW. The project will 34 34 Total Income 1238.74 1159.67 6.8 4970.47
generate 534 Million Units energy annually from 32 32
Net Sales 1019.71 1060.26 -3.8 4178.35
these three projects which will be supplied to 30 30
Expenditure 204.67 179.04 14.3 1024.62
state like Jammu & Kashmir, Punjab, Haryana, 28 28
6
EQUITY
The stock closed at `164.90 on 30th July 2010. It made a 52-week low at `92.55
on 21st May 2010 and 52-week high of `169.40 on 16th July 2010. The 200 days
Exponential Moving Average (EMA) of the stock on the weekly chart is currently
at `156.
After the V shaped reversal from the bottom, it rose quite strongly from the all
time low zone and tested monthly resistance area around 140 levels (not shown
here). It retested the neckline area of the breakout zone and rebound again.
From the past one year, 90-140 levels remained the range of consolidation while
trading below the 200 EMA on the weekly chart. In the recent past, it managed to
overcome the resistance zone and now sustaining above the 200 EMA as well so
we expect further upside in the near term as the volume strongly supporting the
move. One can accumulate in a range of 157-163 levels with closing below stop
loss of 150 levels for the targets of 185-200 levels.
The stock closed at `46.55 on 30th July 2010. It made a 52-week low at `29.65 on
30th October 2009 and 52-week high of `49.40 on 28th June 2010. The 200 days
Exponential Moving Average (EMA) of the stock on the weekly chart is currently
at `38.
In line with decline in broader index, it retraced quite strongly from the high and
lost almost seventy percent from the top. From the later half of 2008 to till now,
it's trading in consolidation zone of 28-48 levels but now witnessing positive
volume pattern while the price chart indicating pause prior to breakout. For
confirming the above mentioned facts, positive readings from RSI oscillator
enforces possibility of upside break in near term so one can accumulate in a
range of 44-45 levels with closing below stop loss of 42 levels for the targets of
52-55 levels.
The stock closed at `336.80 on 30th July 2010. It made a 52-week low at `232.70
on 30th July 2009 and 52-week high of `356.50 on 30th April 2010. The 200 days
Exponential Moving Average (EMA) of the stock on the weekly chart is currently
at `255.
It was sustaining above the 200 EMA on the weekly basis till the later half of 2008
but resumed the overall declining trend afterward and fell dramatically
thereafter. In the last stage of selloff from 175-95 levels, it witnessed lack of
volume and positive divergence as well that resultant speedy V shaped recovery.
It's forming higher highs and higher lows on the weekly chart since then.
Currently, it has formed the fresh buying pivot and on verge of breakout from the
same as well so one can accumulate in a range of 326-333 levels with closing
below stop loss of 318 levels for the targets of 360-375 levels.
DERIVATIVE STRATEGIES
FII'S ACTIVITY IN F&O IN LAST TEN SESSIONS FII'S ACTIVITY IN F&O IN LAST WEEK
(DERIVATIVE SEGMENT) `(Cr) (DERIVATIVE SEGMENT)
8
DERIVATIVES
5440.00 25 Put Call Ratio Analysis :The Put-Call open interest ratio of Nifty has decreased
5430.00 to 1.42 from 1.63. At the end of week, the maximum stocks had a negative trend
5420.00 20 of change in put call ( open interest) ratio.
5410.00
5400.00 15 Implied Volatility Analysis :The Implied Volatility (IV) for Nifty futures this week
5390.00 has decreased to 16.04% from 19.25%. The IV of the stock futures has changed
5380.00 10 this week ranging from -13.80% to 3.46%.
5370.00
5360.00 5 Open Interest Analysis :The open interest for the index at the end of this week
5350.00 has decreased by 8.78% as compared to the previous week. All future stocks saw
5340.00 0 changes in their open interest ranging from -45.41 to 107.75. NTPC has the
maximum increase in open interest as compared to other stocks.
26-Jul 27-Jul 28-Jul 29-Jul 30-Jul
Nifty Close IV
Statistical Analysis·
Open 5460.00 High 5463.55
Low 5369.10 (Aug. Expiry) Close 5374.30 (Aug. Expiry)
DLF 11338000 13617000 20.10 1.04 0.35 -0.69 37.09 38.56 1.47
HINDALCO 21120000 19954000 -5.52 0.61 0.77 0.16 35.70 34.49 -1.21
HINDUNILVR 10233000 10570000 3.29 0.74 0.52 -0.22 23.37 19.22 -4.15
ICICIBANK 13298250 16388750 23.24 0.55 0.62 0.07 27.20 27.65 0.45
IDEA 28420000 30848000 8.54 0.75 0.72 -0.03 37.78 27.13 -10.65
INFOSYSTCH 2567625 2647750 3.12 0.46 0.28 -0.18 17.39 20.22 2.83
ITC 11624000 13021000 12.02 0.44 0.65 0.21 17.84 20.86 3.02
JPASSOCIAT 26112000 33096000 26.75 0.23 0.31 0.08 38.49 38.52 0.03
NTPC 9010000 18718000 107.75 0.53 0.30 -0.23 17.06 20.30 3.24
ONGC 2792250 1524250 -45.41 0.90 0.74 -0.16 23.03 25.71 2.68
RANBAXY 2668000 3014000 12.97 0.16 0.16 0.00 34.59 27.69 -6.90
RCOM 25836000 29062000 12.49 0.25 0.28 0.03 40.95 38.58 -2.37
RELIANCE 6523500 7853750 20.39 0.17 0.28 0.11 32.69 29.61 -3.08
RNRL 32584000 28000000 -14.07 0.17 0.06 -0.11 58.61 44.81 -13.80
S&P CNX NIFTY 30398900 27728650 -8.78 1.63 1.42 -0.21 19.25 16.04 -3.21
SAIL 6048000 5552000 -8.20 0.72 0.40 -0.32 27.97 31.38 3.41
SBIN 3600375 4872500 35.33 1.24 0.30 -0.94 18.74 18.28 -0.46
SUZLON 74804000 80040000 7.00 0.21 0.50 0.29 43.44 38.94 -4.50
TATASTEEL 16268000 20379000 25.27 1.06 0.48 -0.58 30.70 34.16 3.46
UNITECH 40884000 43136000 5.51 0.98 0.86 -0.12 39.96 38.16 -1.80
9
SPICES OIL AND OILSEEDS
Indian parity of pepper at the international market is being the key Lower crushing margin & poor demand for rapeseed meal in Sri
driver for the future market on the national bourse. The prices may Ganganagar may keep shaking the mustard futures. The prices may
move in lockstep with the other origins, keeping the trade in range face a resistance near 570 levels & struggle to remain in a sideways
of 19,600-20,600. Poor sales of turmeric at the regulated co- range. Soybean prices are likely to retain it's position within the
operative markets as to the international pockets, suggest more range of 2030-2100 levels. Given the current monsoon situation in
fragility in turmeric futures towards downside levels of 14000. As
the major growing areas of soybean, there is likelihood of a 25%
per Spices Board data, exports in April-June 2010 has decreased by
decline in crop. The industry expects 85 lakh tonnes (lt) of soybean
11% in volume term but increased by 106% in value term as
compared to same period last year. A higher rupee can take a toll on production in the country, which is far below last year's 95 lt. The
jeera futures & the markets may remain dominated in tight range of strength of U.S soybean futures may send bullish waves as investors
14000-15000. In international market now Syria prices are quoting are adding premium to prices despite favorable near-term crop
at $3450-3550 while Indian prices are hovering at $3250- conditions. The market is taking into account the risks associated
3300/tonne. Going by the daily chart, chilli futures is at the with a long growing season, particularly with U.S. soybeans heading
oversold phase, and flattened open interest signals that the trend is into their key development stage. Lower imports may remain a
waning and is probably near its end. Therefore, any fresh buying fundamentally supportive feature for the soy oil futures. India's soy
may pull back the market from its lower price range, taking a oil imports may slowdown in the coming months due to a rise in the
support at 4320 levels.
premium over palm oil and higher supplies of local crops.
OTHER COMMODITIES
Chana futures dwindling between a topsy-turvy futures market may ENERGY COMPLEX
trade in range 2290-2350. Considering the arrival of new moong in
Crude oil may trade on volatile path. Crude futures face resistance
the market, prices of other pulses may decline. Moreover, investors
at $80 in NYMEX and `3800 in MCX. U.S. crude oil imports in May
are being more interested in profit-booking due to absence of
buying activities. Guar complex may continue to sail sideways with soared by 9.4 percent from a year earlier to 9.622 million barrels per
weak sentiments in anticipation of good crop prospects because of day. U.S. demand for crude oil and petroleum products climbed 1.7
good rains. Weakness in by-products of churi & korma may instill percent in June from a year ago, as rising use of distillates and jet
bearishness on the counter. Churi prices at Jodhpur quoting @ fuels bolstered overall consumption. Meanwhile forecast severe
`1107/qtl have reduced by `66/qtl. while korma prices @ ` 1220 Atlantic hurricane season could bring further disruptions to oil and
have reduced by `47/qtl. The merits of govt. approving exporting a gas operations in the U.S. Gulf of Mexico can give support to the
total of 300,000 metric tonnes of rice and wheat to neighboring crude oil prices. Meanwhile China has now overtaken the US in terms
Bangladesh and Nepal may help offset the declines in wheat of energy use and is now officially the world's biggest combined oil
futures, taking a lower level support at 1230 levels. Dull trading
and energy user. Natural gas may also remain in range of 210-240 in
activities and concerns of mounting arrivals would continue to wane
near term. Recently natural gas prices are backed by firmer cash
sentiments of mentha oil futures. The prices may remain quite
volatile in range of 700-740. A decline in price, volume & open prices in US and inventory report showing another light weekly
interest indicates liquidation by discouraged traders with long inventory build despite ongoing concerns about too much supply.
positions. As long as this trend continues, it is a bearish sign.
BULLIONS
FERROUS AND NON-FERROUS METALS
Gold may remain on volatile path in near term and some short
covering will be seen at current levels. On last Friday the weak GDP Upside movement remained intact in base metal pack last week
numbers in US supported gold as they created safe haven with copper along with zinc and lead gaining on international as well
investment demand in the market. Gold can take support at current as on domestic bourses. Bullishness remained intact due to strong
levels of 17700-17800 in MCX. Recently both the dollar index and equities and continuing decline in inventories. Japan's shipments of
gold are moving southwards as the risk aversion demand seems to be
rolled aluminium for the month of June came in at 179,941 tonnes as
cooling off. Technically both dollar index and gold are moving in
against 158,605 tonnes a year earlier. This is the seventh
oversold zone and dollar index has key support of 80. Dollar index
has fell more than 8% from its high hit in mid June 2010 while gold consecutive rise. In this week some profit booking enquiries can
has declined more than 5%. Last week sharp drop of bullion holdings keep the metal pack under pressure but any down side in prices can
in the world's biggest gold-backed exchange traded fund combined considered to be buying opportunity. However, some bounce back is
with a loss of COMEX open interest indicated investors are moving also expected in dollar index which again can pressurize the prices
out of the precious metal into other assets such as the equity up to some extent. The dollar hit an 11-week low versus the euro,
markets. Silver is expected to take support at 28000 in MCX. Gold making dollar-priced metals cheaper for European investors. In
silver ratio was more or less unchanged at 62.7 compared last week. other news China Iron & Steel Association (CISA) reported that China
This week key data like US ISM manufacturing, nonfarm payroll and produced an average 1.65 million tonnes of steel per day in the
unemployment data along with ECB interest rate meeting will be middle of July, 2.4 percent lower than the first 10 days of the month.
closely watched.
COMMODITY
TREND SHEET
CLOSING
STOP LOSS
TECHNICAL RECOMMENDATIONS
ALUMINIUM MCX (AUGUST)*
ALUMINIUM MCX (AUGUST) contract closed at `99 on 30th July '10. The contract made its high of
`99.40 on 30th July '10 and a low of `88.40 on 7th June '10.The 18-day Exponential Moving Average of
the commodity is currently at ` 95.57
On the daily chart, the commodity has Relative Strength Index (14-day) value of 77.84.One can buy
near 97 with the stop loss of `94.20 for a target of `105.
ZINC MCX (AUG) contract closed at `92.05 on 30th July '10.The contract made its high of `93.00 on
29th July '10 and a low of `76.50 on 7th June '10.The 18-day Exponential Moving Average of the
Commodity is currently at `89.45
On the daily chart, the commodity has Relative Strength Index (14-day) value of 66.28. One can buy in
the range 91.50-91 with the stop loss of `88 for a target of `100 .
USD/INR (JULY)*
USD/INR (AUGUST): USD/INR (AUGUST) contract closed at `46.63 on 30th July '10.The contract made its
high of `47.75 on 26th May '10 and a low of `44.24 on 15th April '10.The 18-day Exponential Moving
Average of the Commodity is currently at `46.85
On the daily chart, the commodity has Relative Strength Index (14-day) value of 45.79. One can buy in
the range 46.50-46.70 with the stop loss of Rs 46.20 for a target of `47.50.
*Closing price as on 30.07.10 5.00PM
11
COMMODITY
NCDEX TOP GAINERS & LOSERS (% Change) MCX TOP GAINERS & LOSERS (% Change)
WEEKLY STOCK POSITIONS IN WAREHOUSE (NCDEX) WEEKLY STOCK POSITIONS IN WAREHOUSE (MCX)
COMMODITY UNIT 22.07.10 29.07.10 DIFFERENCE COMMODITY UNIT 22.07.10 29.07.10 DIFFERENCE
QTY. QTY. QTY. QTY.
CHANA MT 59072.00 57853.00 -1219.00 CARDAMOM MT 58.80 53.10 -5.70
CHILLI MT 3968.00 3912.00 -56.00
MENTHA OIL KGS 2384204.53 2423790.43 39585.90
GOLD 100 GMS TOTAL GMS 1600.00 1600.00 0.00
CHANA MT 32558.79 32558.79 0.00
GOLD KGS 7.00 7.00 0.00
GOLD KGS 99.00 99.00 0.00
GUAR SEED MT 16625.00 19377.00 2752.00
GUAR GUM MT 18701.00 19078.00 377.00 SILVER KGS 8734.00 11653.15 2919.14
JEERA MT 6201.00 5546.00 -655.00 GOLD MINI KGS 135.50 131.00 -4.50
MAIZE MT 188.00 188.00 0.00
PEPPER MT 4262.00 4249.00 -13.00
SILVER KGS 1537.00 1538.00 1.00
12
COMMODITY
SPOT PRICES (% change) Soybean oil….. “Prices sail along with the winds over harbor”
Soya bean oil is the second leading vegetable oil traded in the international markets
after palm. Palm and Soya bean oils together constitute around 68% global edible oil
trade volume, & Soya bean oil alone constitutes of 22.85% of the whole.
Hot talks………….. China, the world's biggest user of cooking oils, and Argentina remain in
talks about China's embargo on imports of soybean oil from the South American nation.
China imports all its soybean oil almost from Argentina and Brazil. India imports nearly 1
million tonnes of soya oil yearly from Argentina, Brazil and US. India imported 192649
tons of Crude Soya oil during June 2010. According to USDA, the country is estimated to
import 1.19 million tonnes of soy oil for 2010-11, while China is estimated to import 2.15
million tonnes during the same period.
China has frozen all Argentine soybean oil imports in retaliation for Buenos Aires decision
to restrict imports of Chinese products. The Chinese blocking of Argentine soybean oil
threatens a key hard currency earner for the South American nation, estimated at 2
billion US dollars for the current year.
Domestic scenario: India is the sixth largest producer of soya oil with account of 4% of
world production. In India, Madhya Pradesh produces estimated 53% of the country's
soybean followed by Maharashtra (34%) and Rajasthan (8%). It is sown during June-Jul
period and harvested by October in India. The domestic production soyabeen is around
1.4 million ton in 2009-10. Almost 70 to 80% of total oilseed production is crushed for oil
while the balance quantity goes for food, feed and seed use in the country. So total soya
oil production is around 0.7-0-8 million ton in 2009-10, While annual consumption is
around 2.0-2.2 million ton with a market value of `9000 crore.
The above chart shows that during January-June
2010, imports of soya oil totalled almost 7.36 lt
against 5.99 lt a year ago. According to the Solvent
Extractors Association, the increased imports have
resulted in inventories building up at the ports.
Imports getting surge in December 2009 primarily in
view of the kharif oilseeds crop hit by the erratic
weather and the rupee's rise against the dollar.
Kharif production has been estimated at 161 lt
against 178 lt last year. Rabi output, however, is
WEEKLY STOCK POSITIONS IN LME (IN TONNES) seen marginally up at 101.31 lt against 99.11 lt a
year ago.
COMMODITY STOCK POSITION STOCK POSITION DIFFERENCE Spot markets of Indore and Mumbai serve as the 'reference' market for Soya oil prices.
The prices in Indore reflects the domestically crushed soybean oil (refined and solvent
ON 23.07.10 ON 30.07.10 extracted) while Mumbai price indicates the imported soy oil price.
ALUMINIUM 4409975 4385300 -24675
COPPER 419650 413500 -6150 In exchanges….. Futures trading in soya oil essentially serve as the right tool for hedging
against market-linked risk by all those in the value chain of the commodity- the
ZINC 620775 620350 -425 soyabean producing farmers, processors, brokers, speculators, soyabean and meal
NICKEL 116814 117498 684 traders, traders of other oilseeds and oils, etc.
LEAD 183225 184150 925 CBOT is the biggest exchange for soybean oil. In India, NCDEX and NBOT are the major
exchanges for these commodities. Its contracts are traded with high liquidity. The
TIN 15620 15000 -620 domestic future prices of soya oil are largely influenced by the international edible price
movements (especially Malaysian palm oil and soybean oil at CBOT), soybean availability
in domestic markets, demand for meal and other associated supply-demand factors of
soybean and its derivatives.
PRICES OF METALS IN LME/ COMEX/ NYMEX (in US $)
Current scenario: Refined soyaoil futures is trading up with August and September
COMMODITY EXCHANGE CONTRACT 23.07.10 30.07.10 CHANGE% contracts moving up by 0.45% and 0.54% respectively. August soyoil futures traded at
COPPER LME 3 MONTHS 7021.00 7217.50 2.80 `484.70 while September futures were at `487.50 per 10kg. Crude Soya oil import price
is US$ 880 per ton at Mumbai port whereas Crude Palm oil import price is US$ 805 which
ZINC LME 3 MONTHS 1921.00 1996.50 3.93 indicates the difference of less than 10 percent between the two. There is zero import
ALUMINIUM LME 3 MONTHS 2024.00 2138.00 5.63 duty on crude soybean oil in India while it is 7.5% for refined oil.
NICKEL LME 3 MONTHS 20500.00 20640.00 0.68
TIN LME 3 MONTHS 18700.00 19675.00 5.21
INTERNATIONAL COMMODITY PRICES
LEAD LME 3 MONTHS 1953.50 2060.00 5.45 Commodity Exchange Contract Unit 23.07.10 30.07.10 Change (%)
GOLD COMEX AUG 1187.80 1168.40 -1.63 Soya CBOT Aug Cent per Bushel 1017.00 1026.60 0.94
SILVER COMEX SEPT 18.10 17.62 -2.67 Maize CBOT Sept Cent per Bushel 371.20 379.20 2.16
LIGHT CRUDE OIL NYMEX SEPT 78.98 78.36 -0.79 CPO BMD Oct MYR per MT 2498.00 2517.00 0.76
NATURAL GAS NYMEX SEPT 4.56 4.83 5.79 Sugar LIFFE Oct 10 cents per MT 559.20 585.70 4.74
13
IPO
14
IPO
Risks
Price Volatility: The main raw materials used for the manufacturing of process are stainless steel bars, Stainless steel sheets and seamless hollow pipes. PSL
also import raw material in the form of stainless steel coils mainly from South Africa, Spain, Middle East and Singapore. Since Indian Steel prices are driven by
International steel prices, raw material price fluctuations could affect the company's operations.
Foreign currency volatility: PSL is exposed to foreign currency fluctuations in respect of proceeds received in various foreign currencies. Major customers of
the Company are located in Europe and USA.The fluctuation in the exchange rate between the rupee and other currencies, including the U.S.Dollar, the British
Pound Sterling, the Euro etc. may impact the financials of the Company.
Competition: PSL faces competition from organized as well as unorganized players. It has stiff competition from some companies like Ratnamani Metal
Limited, Suraj Stainless Limited, Rajendra Engineering and Mechanical Industries Limited in the Domestic market and companies like TPS, Tubacex , Speciality
Steel etc. in the overseas market.
Industry Overview
India has become the 5th largest producer of steel globally. Producing about 53 million tonnes (MT) of steel a year, today India accounts for a little over 7 per cent
of the world's total production. Stainless steels are iron-based alloys usually containing at least 11.5% chromium. Other elements, nickeI being the most
important, may be added in combination with chromium to obtain special properties. Stainless steels are highly resistant to corrosive attack and to oxidation at
high temperatures. In general, resistance to corrosion and oxidation increases progressively, though not proportionately, with the increase in chromium
content.
Stainless steel pipe and tubing are used for a variety of reasons: to resist corrosion and oxidation, to resist high temperatures, for cleanliness and low
maintenance costs, and to maintain the purity of materials which come in contact with stainless. The inherent characteristics of stainless steel permit the design
of thin wall piping systems without fear of early failure due to corrosion. The use of fusion welding to join such piping eliminates the need for threading. Apart
from good demand in existing industrial use, there is a shift from using MS steel pipe and copper pipe to using Stainless steel. Many new areas are also adding to
demand for example, in plumbing also builder has started using stainless steel pipe.
Projections for 2010 to 2015 suggest a 4.2% annual growth in worldwide stainless steel demand, with growth reaching 7.7% per year for India and 6.2% per year for
China during the same period. For the last few years, Stainless Steel industry has been witnessing a boom period. Global demand for Stainless Steel has become
very strong. In India too because of so many infrastructural projects and vast expansion of construction activities coming up, demand for Stainless Steel Welded
& Seamless Pipes & tubes is very strong. The growth in infrastructure segment by the Government/Public/Private not only in India but across the world is the
major demand driver for this segment.
Valuation
Considering the P/E valuation, the company is trading at pre issue P/E of 6.31x on the lower side of the band and 6.94x on the higher side of the band of its FY10
EPS of `15.84.Looking at the post issue valuation,the company trades at P/E of 9.82x on the lower side and 10.82x on the higher side of its post issue FY10 EPS of
`10.18.At its P/B ratio it trades at 2.21 and 2.43 multiples of the lower and higher band of its pre issue book value of `45.23 and 1.46x and 1.61x on the lower and
higher side of its post issue book value of `68.50 respectively.
Business Overview
Bajaj Corp Ltd (BCL) is one of the India's leading producers of hair oils. It is a part of the Shishir Bajaj Group of companies (the "Bajaj Group"). The history of Bajaj
Corps dates back when Mr. Kamal Nayan Bajaj established Bajaj Sevahram ("BSL") in 1953 to market and sell hair oils and other beauty products. In 2001, the
business was demerged to Bajaj Consumer Care Limited ("BCCL"). BSL assigned the trademarks for all of the brands BCL currently sell to BCCL. Subsequently,
BCCL licensed these brands to Bajaj Corp. Limited pursuant to the Trademark License Agreement valid for a term of 99 years from March 12, 2008 and is
extendable for an additional ten years. Bajaj Corp Ltd. began its operation in April 2008.
BCL manufactures hair oil and markets them under the brand names “Bajaj Almond Drop”, Brahmi Amla, Amla Shikakai and Jasmine Hair Oil. It also produces
oral care products under the brand name Bajaj Black Tooth Powder. Its products are manufactured at three company-operated facilities in Parwanoo, Dehradun
and Ponta Sahib. It commenced commercial operations at Ponta Sahib in March 2010. In addition, it also engages third-party manufacturers at Parwanoo,
Himachal Pradesh for hair oils and Udaipur, Rajasthan to produce its oral care products. As of March 31, 2010, the combined production capacity for all
manufacturing units and third-party operated production facilities was 83 million litres per annum.
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IPO
Strengths
Strong Brand Position: Almond Drops is the leading product brand of the company. Currently it comprises approximately 92.4 percent of its net sales. Almond
Drops sells at the premium end of the hair oil market, and is among the highest priced hair oils in India. Moreover, unlike most hair oils which are packaged in
plastic PET bottles, Almond Drops is packaged in glass bottles, which retains the product's aroma, otherwise lost due to high temperatures experienced
throughout India. Strong brand positioning has allowed it to maintain premium pricing.
Wide Distribution Network: BCL manages a distribution network that includes 4,600 distributors, or "stockists", that sell to more than 1.56 million retail
outlets located throughout India. The company's distribution network is supported by a comprehensive management information system ("MIS") whereby sales
reports are generated by on-the-ground sales force.
Brand Heritage: The "Bajaj" name is a well-recognized Indian brand that consumers associate with quality products at competitive prices. Brahmi Amla was
manufactured in 1953. Almond Drops, manufactured since 1990, is BCL's the most successful product and currently captures more than 50.3 percent of the
market in the light hair oil segment in terms of both volume and value. 'Bajaj' enjoys a strong recall both in rural and urban markets that would provide leverage
while launching new products.
Manufacturing units in Tax free Zone: BCL's manufacturing facilities are located in tax-free zones and it currently enjoys exemptions from excise duty for 10
years from the FY09 and income taxes for the first five years followed by a concessional income tax rate for the following five years. Importantly, the capacity
utilisation at these facilities is less than 30 percent and is more than sufficient to service the expected growth over the next three-five years.
Strategies
To grow hair oil business: BCL's primary focus is to increase its share of the hair oil market. It intends to achieve this by differentiating light hair oil products
from those of its competitors, as well as by taking market share of coconut oil market. Coconut oils accounts for 60 percent of hair oil market by volume as
compared to 16 percent of light hair oils market. It plans to pursue a strategy of converting coconut oil users into consumers of light hair oil products through
sampling, targeted advertising campaigns and product innovation.
To increase focus on rural markets: The market for hair oils in rural India is growing due to the rural population increase in disposable income which is related
to farmers shifting to cash crops, rural employment generation schemes, general economic growth as well as a general monetary trickle-down effect from
increased urbanization. As a key component to growth in the rural market, it intends in shifting rural consumers to branded and packaged products from
unbranded products, by providing rural consumers with an appropriate value proposition including price, positioning, and packaging.
To enter new product line and segments: BCL intends to continuously evaluate changing tastes and preferences with the goal of creating a pipeline of new
products in FMCG space such as soaps, shampoos, creams and other hair care products. It intends to penetrate rapidly growing cooling hair oil market that offers
relatively high margins. Competition in the cooling oil market is less intense than in other FMCG markets in India.
To pursue inorganic growth: As a key enabler for its business to grow, the company foresees for acquiring suitable companies and form strategic relationships
that could bring significant synergies and form strategic combinations in FMCG and Hair oil markets.
Risks
One product as a major source of revenue: BCL depends on Almonds Drops for a significant portion of sales. For the fiscal year ended March 31, 2010, Almond
Drops hair oil contributed 92.4 percent and 93.0 percent of its total sales and gross profit, respectively. Contribution from Almond Drops represented
substantially all of its operating profit for the year ended March 31, 2010. Any drop in the sales of Almond Drops or any other factor that negatively affects the
product of the brand would adversely affect the business and financial performance of the company.
Intense Competition: BCL operates in a highly competitive FMCG market with players having stronger financial and other resources. Such players therefore
have the ability to spend more aggressively on advertising and marketing and more flexibility to respond to changing business and economic conditions. Any new
product launch in the hair oils segment by established players could impede the increasing market share of the company. Moreover lack of switching cost plays a
major constraint to brand loyalty in this industry.
Lack of long term contract with suppliers: Hair oil's principal raw materials comprise light liquid paraffin ("LLP") a derivative of crude oil, refined mustard oil
and ground nut oil, other active ingredients and perfumes. The price for LLP is impacted by changes in the international price of crude oil. Vegetable oil prices
could also fluctuate on account of agricultural produce, demand supply situation and inflationary trends. It does not use any hedging techniques to minimize the
impacts of changes in raw material prices and also lacks any exclusive supply arrangements with its suppliers. Being the player in the highly competitive nature
of the industry any shortfall or increase in raw material cost, it may not be able to effectively pass on the increased cost to the consumers.
Industry Overview
The FMCG industry represents consumer goods required for daily or frequent use. It can be broadly classified into personal care, health care, household care and
packaged food and beverages. In the past decade, this industry has witnessed significant growth. This has primarily been due to liberalization, urbanization, an
increase in disposable income, altered lifestyles as well as a heightened level of awareness among India's rural community consequent to the introduction of
satellite televisions. Of the estimated `1,611 billion FMCG market in India, hair care products make up approximately `91.5 billion. The 14% growth rate in the
hair care industry is also slightly higher than the overall industry average of 13.4%. Shampoo and hair oils, including coconut oils, continue to be the key
components of this segment. Rural distribution campaigns by hair oil manufacturers and dealers have helped to expand the geographic coverage of hair oil
products into the rural parts of the country. Light hair oil is an urban dominated segment primarily due to its comparatively high cost. Light hair oil sales also
tend to be more geographically concentrated, particularly in the northern regions of the country, namely Punjab, Delhi, UP and Rajasthan, due to higher
disposable incomes and the propensity of consumers to try new products.
Valuation
Considering the P/E valuation, the company is trading at pre issue P/E of 18.77x on the lower side of the band and 19.66x on the higher side of the band of its
FY10 EPS of `33.56.Looking at the post issue valuation,the company trades at P/E of 22.15 on the lower side and 23.20x on the higher side of its post issue FY10
EPS of `28.44.At its P/B ratio it trades at 61.50 and 64.43 multiples of the lower and higher band of its pre issue book value of `10.24 and 6.76x and 6.04x on the
lower and higher side of its post issue book value of `109.36 respectively.
Outlook
Having been driven from one of the strongest business house, BCL would definitely leverage the brand heritage image of Bajaj group. The company has strong
management team with requisite domain expertise who are well aware of business opportunities, threats and weakness. The issue is priced at a significant
discount as compared to peer FMCG players. But one has to keep in mind that the major chunk of its revenues is sourced from a single product. Company is yet to
establish its presence in the different product verticals within FMCG domain as per its strategy in an environment where some of the prominent players are
already competing to retain and enhance their market share. Investors with long term horizon can subscribe to the issue.
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MUTUAL FUND Pick of the month
17
MUTUAL FUND Performance Charts
EQUITY (Diversified)
Scheme Name Launch
NAV AUM NAV AUM Returns (%) Risk Market Cap (%)
Launch
Date(`) (Rs. inDate
cr.) (Rs.)(`. in cr.) 3M 6M 1Y 3Y Since Beta Jensen Std. Small Mid Large Other Debt
Launch Dev. Cap Cap Cap & Cash
Reliance Equity Opportunities Fund - Gr. 34.42 31-Mar-05 2191.04 6.87 22.52 57.24 13.73 26.08 0.85 0.61 2.66 7.45 44.40 33.66 8.93 5.56
DSP BlackRock Small and Midcap Fund - Gr. 17.29 14-Nov-06 893.41 6.34 18.95 56.60 14.29 15.91 0.79 0.62 2.62 14.57 74.77 7.03 0.38 3.25
UTI Master Value Fund - Gr. 50.86 1-Jun-98 497.92 5.47 18.03 55.82 16.83 23.71 0.88 0.60 2.94 28.00 39.94 26.14 2.04 3.88
ING Dividend Yield Fund - Gr. 22.64 24-Oct-05 42.42 6.59 20.17 53.60 20.51 18.70 0.67 0.61 2.24 9.43 39.46 42.81 0.00 8.29
UTI Thematic Mid Cap Fund - Gr. 32.22 9-Apr-04 345.74 5.78 16.65 53.21 11.88 22.15 0.86 0.58 2.82 22.92 61.34 13.9 1.72 0.12
Birla S L L T Advantage Fund - Series 1 - Gr. 12.68 31-May-07 229.64 3.28 19.67 53.15 7.34 7.77 0.85 0.56 2.85 33.78 54.59 7.78 0.44 3.41
SBI Sector Umbrella - Emerg. Businesses - Gr. 39.28 17-Sep-04 252.87 5.39 20.75 51.89 5.20 26.25 0.83 0.50 2.70 38.32 46.71 9.04 0.00 5.93
BALANCED
INCOME FUND
Scheme Name Average Yield Returns(%) Risk
NAV Launch AUM
(`) Date (`. in cr.) Maturity Till Annualised Since Sharpe Std. Dev.
(Days) Maturity 1W 2W 1M 6M 1Y 3Y launch
IDFC SSIF - MTP - Plan A - Gr. 16.07 8-Jul-03 229.9 1142.00 N.A. -10.78 -4.20 -1.35 7.13 9.11 9.19 6.94 0.85 0.21
Fortis Bond Fund - Regular - Gr. 11.87 8-Nov-08 36.75 164.00 N.A. 3.87 3.36 3.59 5.75 6.95 -- 10.48 0.60 0.23
Reliance RSF - Debt - Gr. 12.84 9-Jun-05 3252.22 485.00 7.11 -1.70 0.30 1.53 5.26 6.77 6.26 4.93 1.16 0.11
Birla SL Dynamic Bond Fund - Ret - DAP 10.89 8-Apr-09 8894.18 460.00 7.2 -0.62 0.43 0.66 5.86 5.92 -- 6.75 1.34 0.08
DWS Premier Bond Fund - Regular Plan - Gr. 15.93 21-Jan-03 24.29 1091.00 N.A. -18.21 -10.05 -5.14 6.00 5.73 8.61 6.38 0.35 0.36
ICICI Pru. L T P - Regular - Cumulative 19.97 28-Mar-02 170.39 752.00 7.64 -16.40 -6.88 -5.24 3.90 5.25 7.53 8.64 0.75 0.14
Sahara Income Fund - Gr. 17.90 22-Feb-02 155.08 73.00 N.A. 5.16 5.17 5.18 4.64 5.13 10.03 7.18 3.77 0.02
18
Mr Subhash C Aggarwal
CMD , SMC Group
awarded by Dr. Farooq Abdullah at
Business Sphere Award 2010 for
"Fastest growing retail network
of Financial Services "