>FUND ANALYSIS JUNE 2009 (SHAREKHAN)

WHAT'S IN - WHAT'S OUT

Favourite stock picks in the portfolios of equity and mid-cap funds
An analysis has been undertaken on equity and mid-cap funds’ portfolios, indicating the favourite picks of fund managers for the month of May 2009. Equity funds comprise of all diversified, index, sector and tax planning funds, whereas mid-cap funds include a universe of 24 funds such as Reliance Growth, Franklin India Prima Fund, HDFC Capital Builder, Birla Mid-cap Fund etc.

What's in?

Top new stocks added to the portfolio of equity funds

• Brandhouse Retails
• Essar Oil
• Goodricke Group
• Hexaware Technologies
• Indiabulls Securities
• Jupiter Bio Science
• KLG Systel
• Mahindra Forgings
• Oil Country Tubular
• Parsvnath Developers
• Prism Cement
• Redington India
• Rohit Ferro-Tech
• Selan Expl.
• State Bank of Mysore
• Sterling Biotech
• Swaraj Engines

What's out

Complete exits in the portfolio of equity funds

• Solarson Industries
• Whirlpool of India
• Subhiksha Trading Services Pvt
• National Stock Exchange of India
• LG Household & Health Care

To see full report: FUND ANALYSIS

>EAGLE EYE ON 15/06/09 (SHAREKHAN)

BULL'S ARREST

After witnessing a rise in early hours, the stock market fell into the red on persistent profit booking all through the day. This week’s feeble closing sounds a ring of caution, as after thirteen consecutive positive weeks, we have a negative close. It seems that bull’s momentum has been arrested and the rally has come to a stand still. So from here a correction cannot be ruled out. The Sensex ended the day 173 points lower, while Nifty closed 54 points down. Stocks from the mid-cap and small-cap spaces also moved downhill as the BSE MIDCAP and BSE SMLCAP were
down by 2.10% and 2.21% respectively. On the daily chart, Nifty is forming a rising wedge with negative divergence in the momentum oscillator KST, which indicates there is high probability of wedge breaking in favour of bears. On the hourly chart, Nifty is still traveling aligned to the upper boundary of the channel, but on the other hand moving average support has been violated. Bears totally dominated the market breadth with 1,041 declines and 214 advances on the NSE.

The hourly KST is in sell mode. Our short-term bias is down for the target of 4200 with the reversal pegged at 4700, while our mid-term bias is still up for the target of 4850 with reversal placed at 3861.

Consumer goods, realty and auto sector scrips tanked the most, while buying was seen in metal and oil & gas stocks. From the 30 stocks of the Sensex, Reliance Industries (up 2%) and Sterlite Industries (up 2%) led the pack of gainers, while Ranbaxy Laboratories (down 6%), DLF (down 6%) and Reliance Communications (down 4%) led the pack of losers.

To see full report: EAGLE EYE 150609

>INVESTORS' EYE (SHAREKHAN)

INDEX

■ Stock Update -- Housing Development Finance Corporation

■ Stock Update -- Tata Tea

HOUSING DEVELOPMENT FINANCE CORPORATION

Housing Development Finance Corporation (HDFC) has received an in-principle nod from its Board of Directors for a combined offering of secured redeemable nonconvertible debentures (NCDs) along with detachable warrants. The issue size is pegged at Rs4,000 crore. The NCDs together with the warrants will be issued on a qualified institutional placement basis.

Investment in HDFC Bank and business growth
The capital raising is likely aimed at funding HDFC’s proposed investment in HDFC Bank as well as future growth in the mortgage business. Following the acquisition of Centurion Bank of Punjab (in a share-swap deal), HDFC’s stake in HDFC Bank has come down to ~19%. With a view to maintaining its ~23% stake, HDFC had purchased warrants (each convertible at Rs1,530) and made a 10% upfront payment. The remaining 90% (Rs3,600 crore) is to be paid by December 2009. Besides funding the warrant conversion, the fund raising would help finance growth in the mortgage business. However, the proportion of funds to be diverted towards HDFC Bank’s warrant conversion can be less than Rs3,600 crore.

Maximum dilution seen at 3.5%
According to the management, if and when the warrants are exchanged, the maximum dilution that could take place in future would not exceed 3.5% of the expanded equity. The fund raising structure (NCD + detachable warrant) would enable HDFC to raise near-term debt without diluting its near-term earnings. Importantly, the dilution would occur later (most likely after FY2011) and hence does not call for any change in our assumptions.

Right timing
According to media reports on the development, the tenure of the secured redeemable NCDs is three years with a coupon rate of 7.25-7.50%. The fund raising seems well timed considering that the corporate spreads have normalised to pre-Lehman Brothers levels. As evident below, the spread between the AAA banking company yields and government securities (GSecs) for three years maturity is currently at ~160 basis points down from +400 basis points in November-December 2008. Moreover, the warrant conversion option would act as a sweetener from investors’ perspective.

****************************

TATA TEA

Result highlights

■ Tata Tea’s Q4FY2009 numbers (derived from FY2009 and M9FY2009 numbers) are below our expectations. The top line grew by 9.4% year on year (yoy) to Rs1,226.1 crore in Q4FY2009, which is below our expectation of Rs1,319.7 crore for the quarter. Though the operating profit margin (OPM) is marginally above our expectation, a lower than expected top line and higher tax incidence led to a 43.1% decline in the adjusted net profit before minority interest and extraordinary items.

■ The OPM declined by 218 basis points yoy to 13.8% in Q4FY2009 mainly on account of higher raw material and employee expenses. As per our expectation, the raw material cost as percentage to sales surged by 327 basis points to 36.9%. Also, the employee expenses increased by 22.3% yoy to Rs156.0 crore during the quarter, which were higher than our expectation of Rs131.3 crore. However a 240-basispoint decline in advertisement and promotional expenditure as percentage to sales led the margins to be in line with our expectation of 13.5% for the quarter.

■ Consequent to a year-on-year (y-o-y) decline in the OPM the operating profit declined by 5.6% yoy to Rs168.9 crore during the quarter (as against our expectation of Rs178.8 crore).

■ Higher than expected depreciation charges and substantial jump in the tax incidence led to a steep decline in the profit after tax before minority and extraordinary items by 43.1% yoy to Rs56.3 crore during the quarter, which was below our expectation.


See Sharekhan Stock Ideas in report

• Evergreen stocks
• Apple green stocks
• Cannonball
• Emerging Star
• Ugly Duckling
• Vulture's pick

To see full report: INVESTOR'S EYE

>TOP PICKS (SHAREKHAN)

The domestic stock market created history in May 2009 driven by the decisive victory of Congress Party-led United Progressive Alliance, some positive news flow globally and strong foreign inflows into emerging markets. Consequently, the Indian stock market outperformed the global markets with the Sensex and the Nifty, the benchmark indices, surging by 27.2% and 26.7% respectively in May. Our portfolio of top picks substantially outperformed the benchmark indices registering a mammoth gain of 43.7% during the month, driven by hefty gains in the mid-cap stocks, such as 3i Infotech (gained 64.1%), Shiv-Vani Oil & Gas Exploration (gained 84.3%) and Unity Infraprojects (gained 116.3%; the stock was added during the course of the month).

We are making one addition, that of Bajaj Holdings & Investments, to our list of top picks, as we believe that at the current market price the stock is at a significant discount to its intrinsic value and this makes it attractive.

• 3i Infotech
• Bajaj Holdings
• Bharti Airtel
• Bharat Heavy Electricals
• Godrej Consumer
• ICICI Bank
• Larsen & Toubro
• Lupin
• Reliance Industries
• Shiv-Vani Oil & Gas
• Unity Infra Projects

To see full report: TOP PICKS

>EAGLE EYE ON 08/06/09 (SHAREKHAN)

Sign of caution

Markets on June 5, 2009: Listless session

After opening on a muted note, the Indian indices continued their northward journey throughout the day. However, during the final hour of trade, on account of profit booking, the markets came off from the day’s high. Finally the Sensex closed 88 points up, while Nifty ended 14 points higher. However mid caps and small caps ended lower with the BSE MIDCAP and BSESML ending 0.67% and 1.02% lower respectively. On the hourly chart though we saw a breakout from the bullish pattern, it does not seem to be favouring the current flow, which is a sign of caution. On the downside, if the 40-hourly exponential moving average is broken, we may see a sell-off. The daily momentum oscillator KST is still in the sell mode, which suggests that if in the coming two-three days we do not see a sell off, there is a very high probability that bulls will drag the markets in their corner. The overall market breadth was marginally positive with gainers outnumbering losers in ratio of 1.1:1 on the BSE.

The hourly momentum indicator KST is trading flat. Our short- and mid-term biases are still up for the targets of 4700 and 4850 with the short- and mid-term reversal pegged at 4134 and 3861 respectively.

Stocks from engineering, information technology and automobile sectors led the pack of gainers, while select realty and fast moving consumer goods stocks ended the day on a weak note. From the 30 stocks of the Sensex, Grasim Industries (up 6%), Tata Motors (up 5%) and Bharat Heavy Electricals (up 5%) led the pack of gainers, while ITC (down 5%), Reliance Infrastructure (down 4%) and State Bank Of India (down 3%) led the pack of losers.

In report following details are given:

• Smart Charts
• Day Trader’s HIT List
• Momentum Calls

To see full report: EAGLE EYE

>HIGH NOON ON 1/06/09 (SHAREKHAN)

GAP FILLED

After a strong gap-up opening today the markets have given up all the gains and filled the bullish gap. The Nifty has taken out a strong resistance of 4510 on the upside, which is a positive sign for the market.

The Nifty had formed an inverted head & shoulder pattern, which has already achieved its aggressive target of 4420. On the daily charts, the Nifty has the 20DMA and the 40DMA
at 3997 and 3748 respectively, which are crucial support levels. The momentum indicator is trading in the positive zone and has given a positive crossover.

The market breadth is positive with 974 advances and 275 declines. On the daily charts, support at 4300 and strong resistance at 4600 are indicated.

On the hourly charts, the momentum indicator has given a positive crossover and is trading in the positive zone.

Of the 30 stocks of the Sensex, Bharti (down 3.5%) and ICICI Bank (down 2%) are the top losers. ICICI Bank is looking negative and is likely to test Rs650 on the downside with strong resistance at Rs750. Of the sectors, the banking sector is looking negative and is expected to move downwards.

To see full report: HIGH NOON

>EAGLE EYE ON 01/06/09 (SHAREKHAN)

Optimism continues

Markets on May 29: Bulls pilot

Buoyed by better-than-expected GDP readings for March 2009, the market saw good buying all through the day. Sensex ended 329 points up, while Nifty 111 points higher. Mid caps and small caps also ended the day on a strong note with the BSE MIDCAP and BSE SML CAP ending 2.46% and 3.01% higher respectively. Though the move in Nifty has extended significantly, in the current scenario, the risk/reward is heavily tipped in the favour of bears. Also, Nifty is near a good resistance of 4509, where the probability of double top is very high. On the other hand, the daily momentum indicator KST has just turned positive with a positive crossover of the hourly averages. The market breadth was positive with 957 advances and 317 declines on the NSE.

The hourly momentum cycle is still positive. Our shortterm bias is down for the target of 3900 with trend reversal pegged at 4510. However, our mid-term bias is up for the target of 4550 with trend reversal placed at 3700.

Buying was witnessed across almost all the counters with realty, capital goods and consumer durables remaining at forefront. However, stocks from healthcare sector were at receiving end. From the 30 stocks of Sensex, ACC (up 9%), DLF (up 8%) and Jaiprakash Associates (up 8%) led
the pack of gainers, while Sun pharmaceutical Industries (down 8%), Grasim Industries (down 4%) and Tata Power (down 2%) led the bunch of losers.

To see full report: EAGLE EYE 010609

>EAGLE EYE ON 25/05/09 (SHAREKHAN)

Resistance at 4390

Markets on May 22: Rally in the second half of the day

The market rallied in the second half of the trading session on sustained buying that continued right till the end. The Sensex ended 150 points higher, and Nifty closed 27 points up. Mid caps and small caps also ended the day on a firm note. While buying was seen in capital goods and banking stocks, auto and realty stocks ended the day on a weak note. The observation on the daily chart is very unpleasant, as the momentum oscillator KST is at its all-time high; even higher than it was during the top of December 2007. Near 50% retracement level of the entire fall from the top of 6357; we are having such overbought reading in the momentum oscillator, which is not a good sign for the market. So, unless, Nifty moves above the recent high of 4510, bulls should remain cautious. Bulls with 957 advances and 309 declines on the NSE dominated the market breadth.

On the hourly chart, the gap between the momentum oscillator KST and the signal line is shrinking. On its positive crossover, we can see a bounce upto 4390, which is a good resistance level. Our short-term bias is down for the target of 3900 with the reversal pegged at 4510.
However, our mid-term bias is up for the target of 4550 with the reversal placed at 3700.

From the 30 stocks of the Sensex, Larsen & Toubro (up 5%) ICICI Bank (up 5%) and Reliance Industries (up 3%) led the pack of gainers, while Sterlite Industries (down 4%), Mahindra & Mahindra (down 4%) and Tata Motors (down 3%) topped the list of losing stocks.

To see full report: EAGLE EYE 250509

>MAN INDUSTRIES (SHAREKHAN)

Key points

■ A smart play on the pipe sector: With equal capacity for both HSAW and LSAW pipes, MAN Industries (India) Ltd (MIL) offers an exciting play on the Indian pipe industry. The pipe makers around the world are expected to benefit from the expected revival in global E&P capex on the back of the hardening crude oil prices and allaying concerns over the global economic scenario. The global opportunity for pipes is pegged at over $80 billion over the next few years while the domestic opportunity remains strong led by the heavy capex of GAIL, GSPL etc.

■ Strong order book: With the win of a huge order of Rs1,340 crore from the Persian Gulf, the current order backlog of the company stands at Rs2,000 crore. MIL also has L1 position in orders worth Rs1,100 crore which are likely to be awarded soon. Moreover, the margins were maintained in FY2009 despite a challenging environment and we expect them to sustain going forward as well.

■ Capacities already expanded; US plans put on hold: In the last couple of years, MIL has substantially raised its capacity to 1 million tonne currently. With its capex already completed, it does not have any meaningful capex lined up for the future. It has also put on hold its plans to set up an HSAW plant in the USA. In fact, the company has decided to buy back its FCCBs and the purchase would be funded out of the unutilised FCCB money and internal accruals.

■ Realty portfolio adds to the attraction: MIL’s subsidiary, Man Infra, is currently executing two commercial projects in Bandra and Vile Parle, and one residentialcum- commercial project at Nerul. In our valuations, we have not considered the value of the real estate portfolio as the realty business is at a very nascent stage. However, we have valued the realty projects of the group at Rs103.4 crore and if this value is included in our estimates the same could add about
Rs19 to the sum-of-the-parts valuation.

■ Attractive valuations: The stock is currently trading at about 3.1x FY2011E earnings and at an EV/EBIDTA of 1.2x, which is significantly lower than its historic average (of about 9x). With an expected revival in the industry, the valuation multiples are likely to improve. Further, its valuation gap with the larger pipe makers had widened significantly in recent times but the same is likely to narrow down. Assuming a substantial discount to the average multiple, we have valued MIL taking the average of 5x one-year forward PE multiple and 2x one-year forward EV/EBIDTA multiple. We recommend a Buy on the stock with a price target of Rs66.

To see full report: MAN INDUSTRIES

>EAGLE EYE (SHAREKHAN)

BEST MONDAY

Indian equities have stopped trading for the rest of the day and created a new historic Monday as the benchmarks have hit two consecutive upper circuits. The Sensex has frozen by hitting 17% upper limit for the first time and recorded its best start ever on hopes of a stable government at the Centre following the UPA’s win. The benchmark Sensex ended the day up a whopping 2,099 points (17.2%) whereas the Nifty closed the day with gains of 636 points (up 17.3%). The BSE Mid Cap and Small Cap indices surged 12% and 9% respectively. While all the sector stocks had a field day, gains in banking and realty sectors really stood out. The Nifty has cleared the triple top around 3720, which means the market is in third leg up. The monthly momentum cycle has turned positive, which indicates that from here even if we witness a correction, the probability of that getting deeper is very less. Also on the weekly charts the Nifty has violated the weekly averages, ie 20-WSMA and 40-WEMA. Bulls with 578 advances and six declines dominated market breadth.

Our both short- and mid-term biases are up for the target of 4550 with reversal placed at 3950 for the short term and 3700 for the medium term.

RECOMMENDATIONS

• RIL
• INFOSYS
• VOLTAS
• IRB INFRA
• MIC ELECTRONICS
• MAN INDUSTRIES

To see full report: EAGLE EYE

>Top Picks (SHAREKHAN)

The rally gained further momentum in April 2009, driven by better than expected economic data and easing risk aversion that resulted in sustained inflows into the emerging markets. Consequently, the Indian markets outperformed the global markets with the benchmark indices Sensex and Nifty surging by 14.8% and 12.8% respectively in the month. Our portfolio of top picks more or less performed in line with the benchmarks, registering a gain of 13.1% during the
period.

We are making three changes in our portfolio of top picks this month. In the FMCG space, we are replacing ITC with Godrej Consumer Products as we expect the mid-tier FMCG companies to significantly outperform the front-line peers in terms of financial performance in the coming quarters. We are removing Crompton Greaves as the stock has reached our price target and are adding Shiv-Vani Oil & Gas Explorations in view of its strong order book position and the firming up of oil prices. Lastly, we are removing Grasim Industries from our top picks basket, with its stock price closer to our price target, and are replacing it with 3i Infotech, as we feel that compared with the front-line technology companies the tier-2 technology companies would perform better due to the widened valuation gap.

To see full report: TOP PICKS

>Monthly Economy Review (SHAREKHAN)

Economy: All eyes on RBI monetary policy review

■ The Reserve Bank of India (RBI) will announce its annual policy review on April 21, 2009. The policy review is staged against the backdrop of near-zero inflation (in terms of the Wholesale Price Index [WPI]) but near double-digit increase in the Consumer Price Index (CPI) and slowing economic growth. Besides, the credit growth has witnessed a sharp deceleration while the banking system is awash with liquidity. In view of this, we expect the RBI to announce a token cut of 25 basis points each in the repo and reverse repo rates in keeping with its stress on a low interest rate regime. The central bank is expected to keep the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) unchanged. However, we feel the business growth target for the banking system and the outlook for the economy to be given by the RBI for the current fiscal will remain a key monitorbale.

■ India’s trade deficit stood at USD4.91 billion in February 2009 compared with USD6.07 billion in the previous month. The trade deficit for February 2009 declined (for the second consecutive month in FY2009) by 26.9% year on year (yoy) and by 19.2% on a month-on-month (m-om) basis. With this, the year-till-date (YTD) trade deficit has widened to USD104.98 billion from USD74.89 billion in the comparable period of FY2008.

■ In February 2009, industrial production growth once again entered the negative zone as it declined by 1.2% yoy. The fall in the industrial output was led by a y-o-y decline of 1.4% and 1.6% in the output of the manufacturing and mining segments respectively. On a
YTD basis, the IIP growth for the period April 2008- February 2009 stood at 2.8% and was significantly weaker compared with the 8.8% growth achieved during the comparable period of the previous year. Importantly, the Index for Industrial Production (IIP) figure for January 2009 has been revised upwards to indicate an increase of 0.4% yoy against a drop of 0.5% (provisional) earlier. While there has been some improvement in automobile sales, cement dispatches and steel production during March 2009 (indicating better industrial activity), the high base effect is likely to play a spoilsport.

■ Inflation continued its southward journey and stood at 0.18% for the week ended April 04, 2009 after touching a record high of 12.91% in August 2008. However, on a week-on-week (w-o-w) basis, the inflation rate inchedup by 0.4% on the back of higher food and fuel prices.
The inflation rate is at near zero levels and we believe it is likely to enter the negative territory in the coming few weeks as the high base effect comes into play. Furthermore, the Indian Meteorological Department (IMD) expects the monsoon rainfall to be near normal to normal this year (96% of the long-period average). We believe a near normal to normal monsoon would help in bringing down the food inflation, which is currently at elevated
levels.

To see full report: ECONOMY REVIEW

>Investor's Eye (SHAREKHAN)

• Stock Update >> Reliance Industries
• Stock Update >> HDFC Bank
• Stock Update >> Zee News
• Stock Update >> Esab India
• Stock Update >> HCL Technologies

To see report: INVESTOR'S EYE

>Investor’s Eye (SHAREKHAN)

• Stock Update >> Larsen & Toubro

• Stock Update >> ITC

To see full report: INVESTOR”S EYE

>Investor’s Eye (SHAREKHAN)

Pulse Track >> IIP back in the negative terrain
Stock Update >> Union Bank of India
Sector Update >> Automobiles

To see full report: INVESTOR'S EYE

>Top Picks (SHAREKHAN)

Driven by unanticipated strong global cues the markets rallied hard during the past month. Benchmark indices Sensex and Nifty surged by 24.3% and 22.6% respectively in March 2009. Given the conservative composition of our Top Picks basket, the portfolio provided relatively lower returns of 11.8% in the same period.

We had removed Crompton Greaves from our portfolio during the month on account of an unexpected corporate development in the form of an unrelated investment in a group company. We are re-introducing the stock in our list because of the clarity provided by the management for its move and the expectations of healthy Q4FY2009 results.

Another change includes the replacement of UltraTech Cement with Grasim Industries due to a gap in their relative valuations (much steeper appreciation in the price of UltraTech Cement). We are also introducing India Cements in anticipation of a healthy Q4 performance and increased weightage on the cement sector. On the other hand, Bharat Electronics has been removed from the list as it has appreciated by over 21% in the last two months and the expected trigger in terms of its Q4 results has already played out.

• Bharat Heavy Electricals
• Bharti Airtel
• Crompton Greaves
• Grasim Industries
• ICI India
• India Cement
• ITC
• Lupin
• Marico
• Reliance Industries

To see full report: TOP PICKS

>BHEL (SHAREKHAN)

• Stock Update >> Bharat Heavy Electricals
• Sector Update >> Banking
• Sector Update >> Pharmaceuticals

BHEL

Key points
■ Bharat Heavy Electricals Ltd (BHEL) will announce its provisional results on April 02, 2009. We expect the company to report a turnover growth of 31.6% year on year (yoy) and profits to grow at 8.3% yoy.

■ For the full year, the company would be making a provision of Rs1,313 crore for increment in wages, as recommended by the Sixth Pay Commission. For Q4FY2009, the provision would be to the tune of Rs475 crore. We expect the total order inflows for FY2009 to rise by 39%, while the backlog should settle at a 19% growth on a year-on-year (y-o-y) basis.

■ The street would keenly watch as the management issues its formal comment on the company’s performance in FY2010E. We expect the company to guide for a 20- 25% growth in its revenues. The operating margin is expected to improve on the back of lower raw material cost and operating leverage. The order flows would also continue to remain strong. In fact, in a recent conference call, the management has guided for an order inflow to the tune of Rs50,000 crore in FY2010E.

■ In Q4FY2009, the order inflows continued to be firm, as the company acknowledged orders to the tune of Rs13,076 crore. The company recently bagged an order for 700MWe steam generators from the Nuclear Power Corporation of India Ltd (NPCIL), valued at Rs345 crore.

■ BHEL’s strong revenue visibility (with an order book of 4.8x FY2008 revenues) coupled with its strong balance sheet makes it our preferred pick in the sector. At the current market price, the stock trades at 16.9x FY2010E earnings. BHEL’s premium valuation to the Sensex owes much to former’s resilient business model. We maintain Buy call on the stock with a price target of Rs1,546.

To see full report: BHEL

>Mahindra & Mahindra(Sharekhan)

Key points
The outlook continues to be challenging for the company’s automobile as well as
farm equipment segment. Apart from the ongoing economic downturn, the
tightening of credit by banks and financial institutions has been negatively affecting
the growth.

has been well received in the market, it clocked sales of about 4,095 vehicles
up till February 2009, while its bookings remaining strong. The roll-out of the
new products from the M&M stable is likely to continue, with the company planning
to launch the successor to Scorpio towards the end of FY2010. This is likely to be
followed by the launch of another global sports utility vehicle (SUV).

In the tractor segment, Punjab Tractor Ltd’s (PTL) volumes have been extremely
good and driven the company’s overall tractor sales in the recent times. The growth
of rural economy and the availability of credit remain the key to the future
performance of the tractor segment. There are already positive feelers from the
credit industry, which is expected to report a growth of about 3-5% in FY2010.

Mahindra and Mahindra (M&M) has slightly reduced its capital expenditure (capex)
plan to be implemented over FY2009-12 to Rs8,500 crore; of this Rs1,500 crore
has already been spent. Also, out of this amount, Rs5,000 crore has been
earmarked for the automobile business while the balance has been set aside for
investments in various other segments. The bulk of the capex (about Rs2,500
crore) earmarked for the automobile business shall be spent on setting up a
facility at Chakan. Further, constant negotiations are taking place with equipment
suppliers in order to further reduce the capex.

In future the company’s margins will depend mainly on the volume behaviour.
Though the company has been able to arrest the steep decline in volumes
witnessed in Q3FY2009, the volumes remain subdued. We believe that
operationally, the Q4FY2009 results will be much better than the Q3FY2009 results,
mainly on account of better volumes. In the automotive segment, we expect the
volumes to decline by 7.3% in Q4FY2009E as against the 24.4% year-on-year (y-o-y)
drop reported in Q3FY2009 that primarily affected the earnings.

Read full report Mahindra & Mahindra

>Eagle Eye (SHAREKHAN)

The final trading hour witnessed considerable volatility, as alternate bouts of buying and selling led the Indian indices to hover around 2800. BSE Sensex closed 29 points down and NSE’s Nifty ended flat. Stocks from mid-cap space ended lower. However, small-cap stocks remained in the limelight and closed higher. Daily chart of Nifty indicates one more day of indecision or consolidation by its second inside bar. On hourly chart, Nifty is forming a descending triangle, which generally breaks on the downside as per the definition. During the course of the day, the last hour rally was just a throw-over (bullish trap) and not a genuine breakout, and in the coming session Nifty will witness a downside breakout from the descending triangle. After long time, the market breadth was in favour of bears with 594 declines and 591 advances.

Hourly KST is still tilted in favour of bears. Our short- and mid-term biases are down for the target of 2630 and 2450 respectively and the short- and mid-term reversals pegged at 2840 and 3111 respectively.

Metal and fast moving consumer goods (FMCG) sectors posted gains for the day, whereas realty and capital goods sectors reported losses. From the 30 stocks of Sensex, Hindalco Industries (up 6%) and ONGC (up 3%) led the clutch of gainers and Tata Motors (down 6%) and ICICI Bank (down 5%) led the drove of losers.

To see full report: EAGLE EYE 230309

>Investor's Eye (SHAREKHAN)

STOCKS UPDATE

• Crompton Greaves
• Bharti Airtel
• HCL Technologies

To see full report: INVESTOR'S EYE