Monday, April 20, 2009

>India to import 25-30 tons gold in April-Exec

New Delhi - India will import 25 to 30 metric tons of gold in April after no imports in the last two months, the president of the Bombay Bullion Association said Friday. Suresh Hundia said around 10 tons of gold have already been imported this month. India, which imports around 700 to 800 tons of gold annually, had virtually halted purchases as consumers weren't willing to buy because of high prices. But prices have been falling globally as a revival in equities markets has prompted many investors to shift out of gold. Friday, pure spot gold in Mumbai was quoted at INR14,160 per 10 grams, down sharply from INR15,725/10 grams at the beginning of March. "Although there has been some improvement in physical demand compared with a month ago, it is still around 50% below that of last year," said Daman Prakash, director with trading house MNC Bullion. He said that initially when prices started declining, big purchases were witnessed, but buying has slowed. However, with marriages and Akshaya Trithya around the corner, he expects demand to pick up again. The Hindu festival of Akshaya Trithya, at the end of the month, is considered an auspicious occasion to buy gold, and sales usually surge. "We could import around 30-35 tons of gold this month," he added. "Demand from jewelry manufacturers has risen to 150-200 kg on a daily basis in Ahmedabad after the fall in prices to INR14,000 levels," said Girish Choksi, a bullion trader At the INR15,000/10 gram level, demand was around 20 kg, he said, adding that as long as prices are below INR14,500, demand will be good.


>Karvy Bazaar Baatein

20 April 2009 to 26 April 2009

Sentiment resurrected…
Both the BSE Sensex and the Nifty completed a sixth consecutive week of gains, as investor sentimentcontinued to resurrect from the depths of despair. Although the Nifty crossed its 200-day movingaverage of 3400 levels during the week, it fi nally closed at 3385 levels, a gain of 1.28% W/W. Meanwhile,investors cheered as the Sensex closed above 11000 levels, a rise of 2.03% W/W. Since this rally beganfrom the March 9 lows, the Sensex has jumped nearly 36% while the Nifty has risen by more than 32%during the same period. Sentiment is a state of mind, and a rally as spectacular as this one has clearly got retail investors talking once again about the stock markets.

So is this rally sustainable? Well, to begin with, we continue to reiterate that the news fl ow from the USis key to global recovery. While a few economic data points came in lower than expectations, some keycorporate earnings exceeded market estimates—Wells Fargo, JPMorganChase, Citicorp, and Hewlett-Packard announced better-than-expected earnings, providing a fi llip to the global markets. Moreover,reassuring noises from policymakers provided the necessary support for the markets—while the FedChairman Ben Bernanke felt the “sharp decline” in the economy was easing, President Barack Obamaexpressed confi dence on the stimulus plan leading the way to “economic progress”.

However, one should not forget that there is a key local issue that is being intensely played out today—theGreat Indian General Elections. With the world’s largest democracy going to the polls, we have seentremendous volatility in the stock markets. With no clear winner in sight, there is a pall of uncertaintyhanging over the potential policies of the new government. What’s more, this time around, there is afeeling that the fi nal verdict may be more fractured than ever, and this, in turn, would limit the powersof the coalition government to introduce reforms and make timely decisions. In such a backdrop ofuncertainty, volatility in the stock markets could rise to unprecedented levels. Therefore, a cautiousinvestment approach is recommended until the poll results are out.

To see full report: KARVY BAZAAR BAATEIN

>Trade Winds (KARVY)

20 April 2009 to 26 April 2009

Investors during the great Indian elections
With the world’s largest democracy going to the polls, there has been tremendous volatilityin the stock markets. Without a clear winner in sight, the uncertainty about the policies ofthe new government has become a cause of concern for investors in the stock markets,particularly after having witnessed the market crash on May 17, 2004, during the post-electionand pre-government formation process. This time, the election environment is quite chargedup with three camps—UPA, NDA, and the Third Front—fi ghting intensely for the hotseat. As a result, volatility in the stock markets is set to rise to unprecedented levels. At thisjuncture, investors should be very cautious while trading in the stock markets.On the other hand, investors are also looking forward to participating in the global stockmarket rally. The unprecedented stimulus packages announced by major economies acrossthe globe are working and there are signs that the pace of global economic recession in theUS, China and EU is easing. The recent corporate earnings announcements have exceededmarket estimates—Wells Fargo, JPMorgan, Citicorp, and Hewlett-Packard announcedbetter-than-expected earnings, triggering a rally in the global stock markets.Given the need to participate in the global stock market rally and the major concern ofvolatility during the election process, we believe derivatives would be the right solution insuch a scenario. Futures and options come in handy, wherein investors can participate inthe stock market rally while handling the volatility during the election process. Investorswith holdings in the cash market can use put options to partially hedge their portfoliosfor a limited period. They can remove the hedge once clarity emerges about the newgovernment and its policies. Also, investors can buy call options which give them the rightto participate in the rally, and at the same time, limit the downside risk. Moreover, futuresand options hybrid strategies, such as long straddle and long strangle, can be used untilthe new government is in place. Overall, all kinds of investors can benefi t from the use ofoptions during these volatile days.

To see full report: TRADE_WINDS

>Infosys Technologies (ELARA CAPITAL)

Key Highlights

Infosys today declared full year FY09 and Q4Fy09 results with consolidated income of Rs 21,693 crores (up 30.0% YoY0 and Rs 5,635 crores (down 2.65 QoQ and up 24.1% YoY) respectively. EBITDA of Rs 7,195 crores (up 37.4% YoY) and Rs 1,891 crores (down 6.9% QoQ and up 27.9% YoY) respectively, and PAT of Rs 5,988 crores (up 28.5% YoY0) and Rs 1,613 crores (down 1.7% QoQ and up 29.1% YoY) respectively.

* Negative Growth in Q4 FY09 Revenue was led by volume decline of 0.94% QoQ (decrease of 0.77% in offshore volumes and decrease o1.4% in onsite volumes), currency depreciation (INR/USD) of 4.1% QoQ qand pricing in constant currency terms declined 2.1% QoQ (decline of 3% in offshore and decline of 1% in onsite). The companies expects the pricing decline in the range of 6% - 6.5% in FY10.

* Operating Profit Margins for the full year FY09 improved 180 bps. The margins for Q4 FY09 increased 110 bps YoY but declined by 150 bps QoQ. The improvement was led by reduction in selling & marketing expenses and general & administrative expenses as a percentage of sales to 5.09% and 7.51% in FY09 against 5.49% and 7.97% in FY08.

* PAT margins for the full year FY09 were stable with an improvement of 20 bps. The margins for Q4 FY09 improved 70 bps with higher non-operating income of Rs 252 crores. The management expects a likely fall of 200 bps in the PAT margins. The Eps increases to Rs 104.6 for full year FY09 from Rs 8.15 in FY08, YoY growth of 28.4%.

To see full report: INFOSYS

>Indian IT services (CITI)

4QFY09 Preview: Muted Quarter; FY10 Outlook in Focus

* Infosys FY10 guidance in focus; “buy side” expecting ~2.5% revenue decline — Investor focus will be on Infosys’ FY10 guidance. We believe the company is likely to guide to a revenue ($-term) decline of ~3-5% YoY – which is not too different from buy-side expectations of ~2.5% decline, as per our recent investor survey. With the quarter end exchange rate at ~Rs50.5/$, our analysis suggests that Infosys is likely to guide to flattish EPS (for details see:

* Most challenging quarter for Indian IT till date — 4Q will be the first quarter of revenue declines (even in constant-currency terms) across the board. Pricing should come under further pressure – a trend likely to continue over the next few quarters. We expect Tier-I companies to report ~2-3% QoQ revenue decline ($- terms). INR depreciation should partly offset the pricing-related margin pressures.

* Another quarter of significant currency moves — The sharp currency moves witnessed in 4Q (not as sharp as 3Q though) will result in: (1) Negative impact on $-term revenue growth due to the adverse movement of $ against GBP. (2) Positive impact of depreciating INR (against $) on the margins of companies. (3) Forex losses on account of hedge positions.

* Focus on margin defence — In our recent conversations, Tier-I companies seemed confident on maintaining margins in FY10 due to: (1) Offshore shift of revenues; (2) Lower variable payouts; (3) Favorable INR; and (4) Lower travel/communication costs, etc.

* Infosys best placed for depreciating INR; HCLT for appreciating INR — Due to lower quantum of hedges and no losses on balance sheet, Infosys is relatively better placed in a depreciating INR environment. On the flip side, HCL Tech has huge losses (~$207m at end of Dec’08) on its balance sheet and benefits more if INR appreciates.

* Sharp run-up leaves room for disappointment — From a near-term point of view, the sharp rally over the last month or so leaves little room for disappointment. Demand environment remains very challenging with no signs of recovery yet. Longer term, we wait for stability in business before becoming more positive on the sector.

To see full report: INDIAN IT SERVICES

>Pantaloon Retail (ANGEL BROKING)

PRIL masters the sustenance mantra

Same Store Sales growth sustains in March 2009

Pantaloons Retail's (PRIL) Standalone registered positive yoy Same Store Sales (SSS) growth in March 2009, indicating sustenance of growth and consumer confidence. The Value and Lifestyle Retailing Segments of PRIL Standalone registered yoy SSS growth of 5.3% and 4.3% respectively, in March 2009. The Home Retailing continued to register negative yoy SSS growth for the fifth consecutive month, at -10.3% in March09.

It may be noted here that in March 2009, all the three retailing segments of PRIL
Consolidated sustained yoy SSS growth at February 2009 levels, when the Value, Lifestyle and Home Retailing clocked yoy SSS growth of 5.3%, 4.4% and -10.2%, respectively. This indicates that consumer footfalls are being sustained and is expected to go up in the future following indications of revival of the economy, albeit at a sluggish pace. We believe that this sustenance of SSS growth was on account of regular promotions and discounts offered by PRIL through 3QFY2009 (June-ending).

To see full report: PANTALOON RETAIL