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ValueNotes Market Insights

Telecom Tower Companies - willing to share?

The accelerated growth of wireless telecom subscriber base has created demand for supporting passive infrastructure - towers. Nationwide, the wireless subscriber is expected to grow to over 40 crore by 2010 supported by:

Increase in wireless coverage
Cheaper handsets
Lower calling rates
Increase in disposable incomes
Low wireless penetration (small base)

Bharti Infratel and Reliance Telecom Infrastructure are the leading tower companies in the country, both being subsidiaries of telecom operators. There are independent tower operators like GTL Infrastructure, Essar Telecom Infrastructure, Quipo etc also operating in the country. However, it would be safe to assume that subsidiaries of operators would have an added advantage in the form of higher occupancy ratio due to assured occupancy by the parent.

Towers Mkt Share Growth in no. of Towers by 2009
Bharti Infratel 35,000 38% 157%
Reliance Telecom Infrastructure 14,000 15% 271%

There are about 12 wireless operators in the country with no dominant player. Bharti Airtel enjoys the largest market share of about 24%, followed by Reliance Communications, Vodafone Essar, BSNL and Tata Teleservices. Hence, no player has a large enough network to provide it with a significant competitive advantage. Besides, a network to cover a country as large as India would require significant investment. Hence, sharing infrastructure will help operators reduce cost of services and enhance margins. For example, Vodafone Essar's deal with Bharti Airtel for sharing network to contain capex.

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Stock Market

Volatile market: Sensex loses 330 points in the week….

The markets witnessed extreme volatility during the week, with the Sensex and the Nifty losing about 330 and 120 points, respectively. On Monday, the Sensex reported handsome gains of 166 points. On Tuesday, after a witnessing a fairly volatile session, it ended on a positive note with the Sensex gaining 63 points. However, on Wednesday, the market not only witnessed increased volatility but also ended lower as investors opted to book profits. Thursday was a happy day for the markets as few more companies came up with good quarterly results- witnessing a strong session on the bourses with the Sensex went up by 76 points. Friday witnessed the 'third largest single day fall'. The BSE Sensex lost 541 points on the back of weak global cues and ended the week at 15,234.
As compared to the previous week, the BSE Sensex edged lower by 2.1%, while the Nifty by 2.6%. However, BSE Metal and Bankex indices were down by 5.8% and 5.7%, respectively while the FMCG was up by 5.4 %.




FIIs turned out to be net buyers to the tune of Rs 3,793.70 crore during the week. The gross purchases and sales for the period were Rs 19,994.70 crore and Rs 16,201.10 crore respectively. Domestic mutual funds turned out to be net sellers to the tune of Rs 486.70 crore during the first three days of the week.

The Top Gainers during the week were:ITC, Reliance Energy, Ranbaxy, NTPC , ONGC,Infosys, BHEL, Maruti , HLL

The Top Losers during the week were:ACC, Tata Motors, Tata Steel, Gujarat Ambuja,Rel. Comm. Vent, ICICI Bank, Cipla, SBI , Hindalco, Grasim, Dr.Reddy, Bharti Tele , HDFC Bank, Wipro, TCS, L&T,Satyam, Reliance, Bajaj Auto, HDFC


27-July-07 20-July-07 % Change
BSE Sensex 15,234.57 15,565.55 -2.1%
NSE Nifty 4,445.20 4,566.05 -2.6%


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Mutual Funds

More foreign players to foray into domestic mutual fund industry!

The booming Indian stock market is luring many foreign players like never before! Five new foreign asset management companies (AMCs) namely Nomura and Shinsei from Japan, Axa of France, Dawny Day of the UK and Mirae from Korea are all set to enter the Indian mutual funds industry shortly and have already received preliminary approvals from SEBI.

The domestic mutual funds industry has registered tremendous growth in recent years and the industry's total corpus crossed the Rs 4,00,000-crore mark as on June 30, 2007.

Presently, there are 32 players in the domestic market and once these five aspirants obtain approval to start their business; the tally will go up to 37.

Fidelity, Prudential, Principal, ABN Amro, BNP Paribas, ING Investment and Societe General are some of the foreign majors already operating in India. Most of them operate through the joint venture, either with public sector banks or private sector companies as their partners. However, AIG Global Asset Management and Franklin Templeton are operating independently without any tie-up with local players.


For more information on the NFOs, visit our NFO Diary section here


Commodity Market

MCX chooses Neutron as technology partner
Neutron Electronic Systems will act as technology partner for Multi Commodity Exchange of India Ltd (MCX) to deploy its modern video-based interactive system. Neutron's Distant Education Solution will be used to increase awareness on commodity trading among market participants. In the future, MCX is planning an all-India call center to facilitate interaction between exchange and members and customers with the help of Neutron.

23 commodity exchanges' turnover dropped 22%
Forward Markets Commission data shows that the MCX turnover during the fortnight ended July 14 dropped 26% to INR 81,936 crore compared to INR111,101 crore in the fortnight ended June 15.

NCDEX also reported a drop of 11% in turnover to INR29 709 crore, against INR 33,501 crore in the comparative fortnight last month.

NMCE (National Multi-Commodity Exchange) turnover was also down 9% to INR 598 crore in the fortnight against INR 658 crore for the same fortnight last month.

The total turnover of all the 23 exchanges, including the three national commodity exchanges, reported a drop of 22% at INR 1.17 lakh crore in the fortnight, against INR1.50 lakh crore in the comparative fortnight last month.

Declining interest in commodity futures trading due to frequent changes in regulation and curbs in open interest position in many commodities were sighted as main reasons of the drop.

Other Market News

The pepper futures market on 27 Jul fell on bearish activities, while the fundamentals remained unchanged. Spot sellers were limited at lower levels as the futures market continued its declining trend.

Physical rubber prices finished unchanged on 28 Jul. Overseas commodity exchanges were closed during the weekend that led to subdued domestic markets.


Weekly Poll Results :

What factor do you consider the most important when investing in the equity markets?
44% said Research was the most important factor
24% said they were influenced most by Analyst recommendation
15% said they relied on Charts
13% went with Brokers recommendation
4% considered recommendation from friends the most important factor

Post FPO analysis :
Our latest poll surprisingly revealed that 44% of retail investors research and study the markets before they make their investment decisions. 24% relied on analyst recommendation, 15% on technical charts and 13% on broker recommendation. A very small percentage relied on recommendation from friends.


ValueNotes in association with Sahara Samay brings to you the latest corporate news in our “Corporate Buzz” section.

The Week's Highlights

Punj Lloyd wins RGTIL contract for Rs 3,178.4 mn

Reliance Gas Transportation & Infrastructure (RGTIL) has given a contract worth Rs. 3178.4 million for its East-West Pipeline project to Punj Lloyd.
Punj Lloyd will build 48 pipelines with connected facilities for a 285 km stretch, which will include 2 compressor stations, 9 MLV stations, 2 tap-off stations and 7 river crossings. The company already has an order worth Rs 1,801.6 million from RGTIL. The current project is spread across the states of Gujarat and Maharashtra and is likely to be completed by December 2007.


NTPC shake hands with BARC, ADB

National Thermal Power (NTPC) has entered into an agreement with Bhabha Atomic Research Center (BARC). Under this contract, BARC will develop an automated boiler tube inspection system in coal based thermal plants. This will help NTPC in developing new technology for inspection of boiler tubes.
NTPC and Asian Development Bank have signed an MOU under which they will set up a joint venture for power generation.


Articles, News, Views and Analysis

K.R. Choksey Sun Pharmaceutical Industries has posted net sales of Rs.627.50 crores, registering a 22.8 percent growth (pdf 36kb)
Networth Stock Broking Investment rationale of Purvankara Projects
Networth Stock Broking Bharti Airtel's total revenues rose 9.5% to Rs.59047 million (pdf 111kb)
SKP Research Net sales of Balrampur Chini Mills were down by 7.11% for June Quarter, 2007 at Rs. 365.26 crores (pdf 189kb)
K.R. Choksey Asian Granito India (AGIL) is coming out with an IPO in the price range of Rs. 85-102 (pdf 40kb)


Happy Trading in the week ahead.

[adityakarnik (adityakarnik)]

www.valuenotes.com

Surprise Rise!

Highlights of the Q1 Review of the Annual Monetary Policy

CRR increased by 50bp to 7% (w.e.f. fortnight beginning 4 August 2007)
Bank Rate (6%), Repo rate (7.75%) and Reverse Repo rate (6%) unchanged
Cap of Rs. 3000 cr on daily absorption under reverse repo auctions removed
Inflation and real GDP targets for FY08 unchanged at 5% and 8.5% respectively

RBI's stance on the FY08 Monetary Policy

To reinforce the emphasis on price stability and well-anchored inflation expectations while ensuring a monetary and interest rate environment that supports export and investment demand in the economy so as to enable continuation of the growth momentum.
To re-emphasize credit quality and orderly conditions in financial markets for securing macroeconomic and, in particular, financial stability while simultaneously pursuing greater credit penetration and financial inclusion.
To respond swiftly with all possible measures as appropriate to the evolving global and domestic situation impinging on inflation expectations, financial stability and the growth momentum.

RBI concerns

Financial risks - The financial markets have been volatile with a lot of uncertainty about its direction. Stability of the markets in a necessity.
Commodity prices - The RBI is concerned about high international prices of commodities like crude oil. Also in the domestic market, commodity prices will be dependent on monsoons.

Stock Market

Sensex loses 96 points in the week…

This week, both the indices (Sensex and Nifty) edged lower by 1% each with the Sensex losing 96 points. Problems in the US sub prime mortgage market was the main cause for the market crash. However, the Sensex managed to close positive for four days out of five. For the week ended August 3, 2007, the Sensex stood at 15,138 (-0.6%) while Nifty at 4,402 (-1.0%) points.

On Monday, the Sensex opened at 15,278 and proceeded to trade strong most part of the day. Intense buying activity was seen in major stocks. Later, the Sensex could not sustain its strength and finally settled on a flat note at 15,260; gaining just 26 points. On Tuesday, the RBI's announcement to increase CRR by 50 bps to 7% from 6.5% pushed the market up by 290 points. The Sensex closed near the highest point of the day at 15,550. Wednesday was the 'black day' for the markets as the Sensex tanked 615 points to slip below the 15k mark and closed at 14,936 while the Nifty collapsed by 183 points. The market crashed after the global investment houses (Macquarie Bank and Bear Stearns) projected record losses in their funds due to US sub prime mortgage worries. However, the market witnessed quite a sharp recovery over the next two days and managed to close up from this low gaining 49 and 152 points on Thursday and Friday, respectively.

FIIs turned out to be net sellers to the tune of Rs 2,340.50 crore during the week. The gross purchases and sales for the period were Rs 15,925.70 crore and Rs 18,266.10 crore respectively.Domestic mutual funds turned out to be net buyers to the tune of Rs 554.90 crore during the first four days of the week.

Top Gainers during the week were:SBI, L&T , HDFC, BHEL , Gujarat Ambuja, Grasim, NTPC , Maruti, Rel. Comm. Vent, Bajaj Auto, ACC, ICICI Bank , Tata Steel, HLL

Top Losers during the week were:Hindalco, Tata Motors , TCS, Wipro , Infosys, Reliance, Dr.Reddy, Bharti Tele , ONGC, ITC , Reliance Energy, Ranbaxy, HDFC Bank, Cipla, Satyam
03-August-07 27-July-07 % Change
BSE Sensex 15,138.40 15,234.57 -0.6%
NSE Nifty 4,401.55 4,445.20 -1.0%

Mutual Funds

Mutual Funds: Updates….

According to the latest data by the Association of Mutual Funds in India (AMFI), the total corpus of domestic fund houses rose to Rs 4,86,513 crore at the end of July, registering an increase of 21.5%. Fresh capital raised through NFOs as well as good performance by the stock markets helped boost Fund Houses collections.
Escorts Mutual Fund has launched Escorts Infrastructure Fund, a five-year close-ended fund, which will invest predominantly in equity and equity related instruments of companies in the infrastructure sector. The NFO opened on 26 July 2007 and is open till 24 August 2007.
DSP Merrill Lynch Fund House has launched the first of its kind mutual fund scheme, the DSP Merrill Lynch World Gold Fund, which will invest in gold mining companies through an international fund. The fund is an open-ended Fund of Fund (FOF) scheme and will predominantly invest in units of Merrill Lynch International Investment Funds - World Global Fund (MLIIF- WGF). The NFO opened on 25 July, 2007 and is open till 23 August, 2007.

Commodity Market

NCDEX reports Bullion trading volume of 84.44% to Rs 10,761 crore

National Commodity and Derivatives Exchange's (NCDEX) has increased its focus on bullion and since April its gold trading volume has more than doubled to Rs 8,747 crore. Silver trading volume has also shown a marginal rise from Rs 1,929 crore in April 2007 to Rs 2,015 crore in July 2007.

The bullion volume including silver constitutes 85.44% of the total NCDEX trading volume and the value is Rs 10,761 crore.

Mr Shrikhant Subbrayan, head of products, NCDEX claimed "In the last few months we have been concentrating on boosting our bullion and energy businesses and made a few changes in gold contract specifications which has resulted in improved investor participation." Commenting on the delivery system improvements, he added, "The delivery period was extended to six days from one day. Investors are free to make deliveries on all the six days, which has improved the participation of genuine consumers and traders."

Physical rubber prices improved on 02 Aug as a result of international and domestic futures closing positively. However, raw material inflow continues to be meager.

The overall upward trend in bullion is expected to remain intact in 2008. For last few months gold has exhibited a mixed trend. It has traded high in East Asia, India and West Asia till now, except for the past few weeks because of low of investment demand.

The pepper futures market moved up on 02 Aug on some buying support and bullish activities. The commodity witnessed a decline for three days till 02 Aug.

Black Wednesday has minimal impact on Investor sentiment!
Investor confidence in the stock markets is quite high despite the volatility in the markets in the past week. This is indicative from the fact that more than half the number of respondents felt that the Sensex would stay above the 15000 mark despite the 615-point crash on August 1. This positive outlook can be attributed to the fact that the investors believe that the Indian markets are fundamentally strong. With the inflation in control at 4.3% and the GDP on target the investors seem pretty confident that the markets will rebound.


The Week's Highlights

UTI Bank re-named Axis Bank
UTI Bank has become Axis Bank. UTI AMC owns the UTI brand. It was necessary for the bank to change the name as many unofficial entities were operating under the UTI brand, creating brand confusion. The bank is likely to spend Rs. 500 million on advertising the new brand and has given a contract to well known advertising company, O&M.

Reliance Power wins Sasan 4000 mw project
Empowered Group of Ministers (EGoM) has awarded the 4,000 MW Sasan Ultra Mega Power Project to Reliance Power Ltd (RPL). The project cost likely to be Rs 200 billion. Among the three bidders, Reliance had quoted the lowest bid of Rs 1.196 per unit followed by Jai Prakash Associates, which quoted Rs 1.65 per unit and NTPC at Rs 2.126 per unit.
In the previous bid, which was later cancelled; Lanco-Globeleq was the lowest bidder for while RPL had quoted Rs. 1.29 per unit.

BSNL to spread CDMA network
Bharat Sanchar Nigam Limited (BSNL) is planning to expand its CDMA network in the state of Maharashtra. By end of 2007, the company will introduce its CDMA service- "Tarang "in industrial, tourist and commercial towns of the State. Kolhapur, Nashik and Aurangabad will have new main switching centers (MSC) each with a capacity of one lakh lines. Nagpur and Pune will acquire additional capacity and the networks will be modenised. BSNL expects to have all this in place by the end of August.

Happy Trading in the week ahead.
Best Regards.