Can Stayam Computer be a takeover candidate?

From being the top four IT companies of India, Satyam is now reduced to a sinking ship, all because the father decided to bailout his sons. The love for his sons has now threatened to kill the very goose, which laid the golden eggs for him. One mistake and the company is now on an irreversible path of regret. Corporate governance, which seemed mere fashionable words to mouth has become a reality. This is probably the single biggest gain for India Inc – the top management of learning the bitter lessons of Satyam that it cannot take the shareholders for a ride, always.



The exodus of the independent directors has begun and there is news that even the employees in the senior and middle rung are busy circulating their resumes. The all important Board meeting is scheduled for 10th Jan 09’ and major decisions, mainly in the form of complete management reshuffle and probably Raju resigning is expected to keep all on tenterhooks. That is assuming that some PE fund or IT major like IBM or Accenture or Cap Gemini does not make a bid to takeover before 10th Jan.



Satyam is indeed the best takeover target right now. Any company looking for value need not look too far beyond. Corporate governance apart, Satyam is an ace IT player, not just in India but has deep trenched global footprints too. Satyam offers a variety of services from application development and maintenance to infrastructure management. India is a growing market and will add millions of internet and IT users within the next few years. The opportunity for tech companies in India is immense. An acquisition by a global company would mean it can increase its immense market share in Indian IT market as this is an opportune time to get a foothold.



If one removes all this shroud of shame surrounding the company, Satyam is actually a very good catch. The company, had a consolidated net profit of Rs 580.85 crore for the second quarter ended September 30, a growth of 42 per cent over the corresponding period a year ago. Total revenue earned was up 35% at Rs. 2,898.87 crore. For the fiscal 2008-09, the company has revised its guidance upwards and stated that its consolidated revenue was to be between Rs 11,273 crore and Rs 11,475 crore, implying a growth rate of 33.0 % to 35.4 % over fiscal 2008. EPS for the full year is expected to be between Rs. 33.57 to Rs. 34.10, implying a growth rate of 33.0 % to 35.1 %.



54% of its business now comes from offshore and 46% from onsite business. 62% of its revenue comes from USA, 21% from Europe and another 17% from rest of the world. Its subsidiaries includes Satyam BPO, Citisoft , CA Satyam , STI , Satyam in China and Bridge Consultancy. So we are basically looking at a US$2 billion company up for sale. Also, the good news is that more number of employees work offshore, almost 70% of the total workforce, than onsite. It currently has 690 customers, of which, 185 are Fortune 500 companies. But how many would renew their contracts after this would depend on how the company handles this situation. And given the fast image rescuing it would have to do, the beating down of the stock price makes it an excellent buy.



Also, the promoters might not have too much of a say in the matter now as they just not have enough shares to have any controlling stake. Raju family’s stake is now stated to have slipped below 5% after the shares pledged by the promoters was sold by the lenders. With margin calls coming in, the lenders would have had no option but to sell to cover the shortfall.



Satyam is sure to take a further beating on its image but its only way out now is through a strategic partner coming in or a takeover happening. The company, as a pure IT company, is a gold mine and would surely help escalate the standing of any company taking over. This is only silver lining in this otherwise bleak cloud.

Twiggs Money Flow indicator warns a trend reversal in Sensex

Chart shows 4 year chart of Sensex with Twiggs Money Flow indicator. Twiggs Money
flow indicator(13 Week) shows that a drop down below zero with negative divergence
show the confirmation of trend reversal towards downwards. And this is the third time
the indicator is dropping below zero. Every Upside should be use as an opportunity to
build shorts with a stop loss of 3050 for a minimum target of 2600

Twiggs Money Flow signals accumulation if above zero, while negative values signal distribution. The higher the reading (above or below zero), the stronger the signal.

* Go long if a breakout above resistance is supported by Twiggs Money Flow above zero.
* Go short if a breakout below support is confirmed by negative Twiggs Money Flow.

Divergences also provide good signals:

* Go long on a bullish divergence.
* Go short on a bearish divergence.

The strongest confirmation of the above signals is when either:

* Twiggs Money Flow is trending upwards and completes a trough without crossing below zero, or
* Twiggs Money Flow trends downwards and completes a peak without crossing above zero.

In other words: when Twiggs Money Flow respects the zero line.


Compiled from Marketscall.in

Weekly Nifty 50 Outlook and Trading Ideas

An Ominous end of Tumultuous Year

In Previous Week Nifty failed to pick gauntlet thrown by market by unable to cross 3110 and falling almost 7%.But this week if 2860-2820 Holds we can see a 3-4 % Santa Rally back to 3k on Nifty.But if war clouds Hover around we can see Nifty back to 2400-2500 Levels.

Nifty Views are updated on
http://2.bp.blogspot.com/_iAG8XurigTA/SVXXVXINK2I/AAAAAAAAAMM/6wTObrBcBQw/s1600-h/Nifty+50+Weekly+29-02+JAN+2009.bmp



Trading Ideas

BHEL has broken symmetrical Triangle can be shorted with SL as 1354 tgt 1280 and 1244

EDUCOMP BUY BETWEEN 2240-2355 FOR TGT 2525-2650 STOPLOSS BELOW 2210

RELIANCE POSSIBLE UPSIDE 30% FROM 1170-1180 LEVELS.

RELInfra can see a bounceback to 600+ Levsl Sl 512

TATA STEELAbove 215 it go for 221 to 231 level. At downside support at 206 and then 200.

ONGC It is possible to it come down upto 619 level and if break this then slide more upto 597 to 557 level. At upside it face hurdle at 659 if cross this then it go for 681 to 721 level.

United Spirits can be bought for a tgt of 925 and 956 Sl 853

Small Cap Pick

MSK PROKECT buy for 50-100% upside Buy back at 85 cmp around 50

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Regards,

Bramesh
9985711341

Nifty 50 Weekly 29-02 JAN 2009

Nifty is at very precarious situation 2860 is very important level from Technical Point of view.IF it goes below and sustain this level we can see a downside till 2700 Levels in near term.

But Santa Rally can take us back up to 3k level if 2860 is sustained.


Please click on Image to see Enlarged Image.

Reasons for Investment in Satyam Computers

Satyam Computers

The company has seen a severe beating because of a decision to buyout or say bailout Maytas ( satyam = maytas ) infra n maytas properties. This would have meant transferring shareholder money into promoters pockets indirectly whatever be the valuation given.

Although such a move has been a major sentimental and reputation blow to the stock and would continue to hamper any face saving move from the management. In such markets nobody likes uncertainty from management side.The World Bank news was another blow to the already beaten stock

Looking at the Positive side of the story

Now some positives :
The market cap of Satyam is roughly around 9500 cores.
The pure cash or asset side is 7000-8000 cores . They were going to give around 7.5-8k cores for Maytas infra and Maytas properties.

So it implies the cash component is around 80 rs or more per share for every share of Satyam. The debt is nominal.

The IT business continues to be decent enough with decent earnings growth although i am not an IT fan in current scenario.

The stock has corrected as investors are worried that the cash is not safe with this mgmt !. In such a scenario any face saving measure would mean management may possibly try to transfer cash into shareholders pockets through dividend , buy back or any other method . FIIs hold more then 45-50 % and promoters 8 % . Can FIIs dictate the mgmt ! , Will there be a mgmt change etc are favorable turns.


We have already taken positions in Satyam at 157(20%)and 118(30%).we will wait for more opportunities to come.

This type of stagger investment we should always do to conserve our capital

The risk component is any litigation , suit which may hit the cash otherwise the cash is much more secure then before as the management may no more try another coup.

This is just a personal view and can be wrong too ( numbers are not exact but an estimate ) . Investors may do their own research and take exposure with keeping in check of your risk profile.


Satyam management were aware that the deal is going to blow the stock that's why top management sold the stock a day earlier


Now another observation clearly shows the intentions of the top management !!!
As per the insider trading disclosure the

Satyam Computer Services Ltd A S Murthy 16/12/2008 S 19000

Satyam Computer Services Ltd V Murali 16/12/2008 S 20000

So some action from SEBI can come in near future.

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Best Regards,
Bramesh
09985711341

Restructuring of Jaiprakash Associates

Jaiprakash Associates (JPA), flagship listed arm of Jaypee Group is acquiring four companies and merging into it. Let us have a look to the scheme:-- i) Jaypee Hotels (JPH), a listed company, in which JPA is holding72.18% stake is being merged with JPA on share swap ratio of 1 share of JPA of Rs.2 each, for every 1 hare held in JPH, of Rs.10 each. The present paid up equity of JPH is at Rs.55.49 crores. So 15.44 crore shares of Rs.2 each of JPA would get issued to non-promoter shareholders of JPH and 40.05 crores shares would get parked in Trust, for promoters stake.



ii) Jaypee Cement Ltd (JPC) a 100% subsidiary of JPA, having paid up equity of Rs.355.95 crore is being merged on swap ratio of 1 shares of Rs.2 each of JPA, for every 10 shares of Rs.10 each, held in JPC. So, 355.95 lakh shares of JPA would get issued and shall be held in Trust.



iii) Gujarat Anjan Cement Ltd. (GAC) a 99.88% subsidiary of JPC having paid up of equity of Rs.333.95 crores, is being merged on a share swap ratio of 1 share of Rs.2 each of JPA for every 11 shares of Rs.10 each, held in GAC. So, 303.24 lakh shares of JPA shall be held in Trust and 0.35 lakh shares shall be issued to Non-promoter shareholders.



iv) Jaiprakash Enterprises Ltd (JEL) is engaged in infrastructure and property business with majority of its stake being held by the promoters of JPA in their personal capacity. No financial details of JEL is available, except that 3 shares of JPA of Rs.2 each shall be issued for every 1 share of Rs.10 each held in JEL. The present paid up equity of JEL is reported to be Rs.33 crores, being 3.30 crore equity shares of Rs.10 each. So, 9.90 crore shares of JPA shall be issued to JEL shareholders.



Now let us have a look to some other key features:--

a) JPA is not holding even a single share of JEL while JEL, is holding 801.98 lakh shares in JPA, being 6.83% of total issued capital of JPA, as part of promoters equity.

b) Paid up equity of JPA, as at 30-09-08, is consisting of 117.38 crore equity shares, of Rs.2 each, being Rs.234.76 crore as paid up equity. Of this, promoters stake is at 52.16 crore shares being 44.44% stake.

c) On acquisition of four companies by JPA, as stated hereinabove, 22.04 crore shares of JPA for Rs.44.08 crores would be issued, due to which, paid up equity of JPA would rise from Rs.234.76 crores to Rs.278.84 crores.

d) Of 22.04 crore new shares of JPA being issued, 10.60 crore shares would get parked in Trust, as Treasury stock while 11.44 crore shares would get issued to non-JPA shareholders. Of this 11.44 crore shares, about 9.90 crore shares being issued to JPE shareholders, is presumed to be coming to the promoters of JPA viz. Gaur family.

e) Equity dilution of JPA would be about 15.80% from Rs.234.76 crores to Rs.278.84 crores. Of this, 7.60%, would get parked in Trust while about 8.20% would get issued to non-JPA shareholders.

f) Of expanded equity of Rs.278.84 crores of JPA, promoters would be holding about Rs.124.12 crores (62.06 crore shares of Rs.2 each being 52.16 crore share held presently and 9.90 crore shares to be received on swap of JPE) which would be 44.51%. So, present stake of 44.44% in JPA would remain almost at same level at 44.51%. In addition to this, 7.60% would be held in Trust, which implies a holding of 52.11% by promoters, in JPA.

g) JPE got a valuation of about Rs.860 crores, if we multiply 9.90 crore shares to be issued by JPA for acquiring JPE with closing price of JPA of Rs.87, on 22-12-08. Though no financials of JPE is available, it is estimated that its PAT for FY 08 was at Rs.35 crores and a multiple of 25 times has been given for acquiring JPE. Promoters of JPA have valued the assets of JPE at around Rs.9,000 crores. It may not be correct to value JPE purely on earnings method, as some of its realty assets though may be having huge value may not be yielding any income. This would constitute about 7% of the total assets of JPA, post acquisition of four companies.



So it can be said that though valuation of JPH, JPC, and GAC seems to be correct, one may raise doubt on valuations of JPE. But we are not having any apprehensions or concerns on the valuations of JPE.



However, one needs to consider the rationale or objective behind this move of consolidation? We feel that cement, realty (including hotel) and construction having come under one umbrella viz JPA, we may see next round of restructuring in JPA with hiving off of cement business into a separate company, in which, strategic investor may get inducted at a later date. Presently, JPA has a capacity of 8 million TPA of cement, which is being increased to 24 million tonnes by end of calendar year 2009. So, JPA would be requiring another Rs.2,500 crores to complete this capex. Though JPA had issued 5 crore warrants in the past, to Jaypee Ventures, one of the promoter, at Rs.397 per share, but one needs to see the fate of these warrants. On consolidated basis, JPA has a debt of Rs.11,500 crores, on a net worth of Rs.5,000 crores as at 31-03-08. So, promoters need to look for alternatives to raise funds for cement expansion.



Coming on the other business of JPA, its infra projects need huge fund requirements. 160 km. long 6 lane Taj Expressway Project and 1,047 km. long 8 lane Ganga Expressway Project along with development of land parcels adjacent to Expressway projects are some of the big projects. In addition to this, huge hydro power capacity is being created. Since, JPA holds about 63% stake of J. P. Hydro Power, all funding for these projects have to be provided for, by JPA.



So maybe, to raise huge capex requirements of over Rs.12,000 crores one flagship is being created by Jaypee Group to expeditiously implement these projects. It seems that Jaypee Group would be able to succeed in its plan and this merger move may prove to be timely and result-oriented.

Nifty 50 and Stock Trading

HI all

Hope u all had rocking week as all our calls rocked like anything

Educomp gave up some 600 rs per share

Keep ur self tuned to This blog from more rocking calls

This week nifty can go down and which should be used to buy till 2820

For ur own insurance buy 3100 Put

Stocks specirfic

IOC has made breakout from it's inveted haed and shoulder patten buy for a tgt of 500 sl 380

IDBI buy for a tgt of 74 and 77 sl 67.50

Suntv can rock to 180

PNB will put a good shown in coming week keep sl of rs 500 on all ur positions


Hope u all have a rocking week

Bramesh

9985711341

Weekly Nifty Forecast (22-12-2008 to 26-12-2008)

Satyam-Maytas deal fiasco

Satyam means the truth. And Satyam Computers has defied the very name that it stands for. The way the Board of Directors and the promoters have tried to siphon off funds under the pretext of providing capex for the other two group companies – Maytas Infra and Maytas Properties has left the foreign fund managers completely stumped. There is a mood of complete distrust about India Inc and the general perception formed now is that all Indian companies openly flout rules of corporate governance and thus cannot be trusted. This is what Satyam has done – shroud the entire India Inc is a blanket of asatyam!



The first question which comes to mind is – how did the independent directors on the Board allow this to happen in the first place? The Board of Directors should first be made more accountable for this. Looking at the Rs.6,000 crore, which was lying in the balance sheet of Satyam, they probably salivated, thinking how it could earn them more, by merely lending it to another two group companies. But didn’t they think that they as Board of Directors were doing something so wrong? Apart from the core promoters, there are eminent names like Vinod Dham – father of Pentium; Professor Krishna G Palepu who is also on the Boards of Dr. Reddy's Laboratories Limited, Exeter Corporation, USA and Harvard Business School Publishing Co., USA; Prof. M Rammohan Rao who is the Dean of Indian School of Business (ISB); T. R. Prasad who apart from being a Cabinet Secretary has also been the Defence Secretary of the Government of India; Secretary, Industrial Policy and Promotion, Ministry of Industry; Chairman, Foreign Investment Promotion Board (FIPB); Secretary, Heavy Industry, and Chairman, Maruti Udyog Limited. And there is also Prof. V. S. Raju - former Director of the Indian Institute of Technology, Delhi; and was a professor and Dean at the Indian Institute of Technology, Madras and right now he is the chairman of the Naval Research Board, Defense Research and Development Organization, Government of India. Were they present in the Board meeting of Satyam having decided on this?



So what exactly is the credibility of these people if they could not see what the core promoters of Satyam were doing? What is their responsibility? Are they mere ornaments on the Board? And someone like Vinod Dham? Could he have ever dreamt of doing something in his company in the USA? Or is it that India mein kuch bhi chalta hai?



We talk of corporate governance but obviously it exists only on the papers of the balance sheet. Sterlite Industries too tried to take the investors for a ride. So when two big companies like Sterlite and Satyam have thrown corporate governance to the winds, what can one say about the others? Yes, at the same time, it is companies like these which will now spoil the names for the others who actually do practice corporate governance, It’s the rotten apple which spoils the whole basket.



And what was Satyam thinking? Rs.6,000 crore for infra and realty companies? Why was it forcing the shareholders of Satyam to get into infra sector against their will and judgement? If the shareholders wanted they would have invested themselves but what manipulate them? Also another question which comes to mind is – what is the need for Rs.8,000 crore for two infra companies, that too of the size of Maytas Infra and Maytas Properties? Even when we put together more credible and proven companies like Sobha Developers, Parsvnath, Puravankara, Omaxe, their present value do not add to Rs.8,000 crore. So how did Maytas group valued so much ? Greed? Avarice? These are the most obvious answers which come to mind. The

Rs 6,000 crore in the balance sheet was like a bone for the dog, enticing them to do something and get their teeth into it.



What also comes forth in this entire drama is the vigilance of the shareholders. They are the only ones who have played their role well, being the watchdog which was actually the job of the independent directors. This also goes on to show how shareholders can actually bring about the change, how they can, with their will and vigilance force companies to follow corporate governance. Just as we Indians need to be more vigilant about our security as the politicians have failed, we also need to take care of our money because the promoters and independent directors of companies are no longer trustworthy.



To think that Satyam could do this, that too at a time when there is a global financial crisis and even established companies are treading with utmost care to keep the faith intact; it is shocking!


India Inc will face the ire for some time but will manage to win over if they show they are serious about corporate governance but for Satyam – this blow to the image is irreparable as trust once broken can never ever be glued back together without the cracks showing.

Educomp Solution ready to roar

Weekly View

HI all Hope everybody had a very good weekend.

Nifty Views have been updated in http://1.bp.blogspot.com/_iAG8XurigTA/SUNp-S9i7VI/AAAAAAAAALw/xfVTP00gqW8/s1600-h/Nifty+Weekly++View+15-19+Dec.bmp

Stock Specific

Reliance is near its supply zone of 1335-1356 be cautious on this level.

SBIN near its resistance levels of 1220

Praj Industries Tgt 71 and 79 sl 58

JP Hydro Tgt 30 and 35 sl 26

ABG Shipyard tgt 109 and 120 Sl 94

STERLITE INDS BUY IF BREAKS 299 Tgt 311 and 318 Sl 294

Educomp can give a jump of 10% from cmp


Hedge all you longs with 2800 Put It is just for
your own insurance.

For stock Specific Quey send a mail to

bhandaribrahmesh@gmail.com

Regards,
Bramesh
9985711341

Nifty Weekly View 15-19 Dec

FCCB BUY BACK – MAKES PERFECT ECONOMIC SENSE

There is now one more “first” which Anil Ambani can add to his already overcrowded cap – his company Reliance Communication would most likely be the first company to announce buy back of its Foreign Currency Convertible Bonds (FCCBs), the first Indian company to do so after RBI relaxed the norms last Saturday.



As per the new norms issues by RBI, companies are now prematurely allowed to buy back their Foreign Currency Convertible Bonds (FCCBs) , financed by the company's foreign currency resources held in India or abroad. The only conditionality justifying the buy back using foreign currency held in India, including Exchange Earners Foreign Currency Accounts (EEFC) or foreign currency held overseas or raise fresh foreign borrowings, provided there was a minimum discount of 15% on the book value of the FCCB. Companies can also buy back using rupee resources, if there is a minimum discount of 25%, on the book value. The conditionality over ruling all this is that companies will use their internal accruals, which has to be certified by the statutory auditor.

R-Com had issued zero-coupon FCCBs in February 2007, to raise USD 1 billion. The bonds are now trading at a 35% discount to the issue price, meaning, its bonds worth has now come down to US$650 million. And as the RBI has allowed the companies to use internal accruals, this should not be too much of an issue with RCom, as it currently has over Rs.100 billion in cash reserves, which also includes about US$ 600 million worth of investments in mutual funds overseas. And if the other option which the company has, is, to also convert a portion of the rupee reserves into foreign currency for the buyback.

This move to buy back by Rcom is good, as it would help the company reduce its liability and also bring down its forex exposure. Converting the bonds into equity is not a viable option, or rather not workable option as almost all the stocks are today quoted at a huge discount to the conversion price. Another option then would be to raise ECBs which has also been relaxed by the RBI. That too might not come through as no one is today willing to lend, irrespective of the pedigree or the repaying capability. Also, with the dollar now becoming a precious commodity, coming across ECBs would be difficult. And thus this premature buy back is the best possible option available.



The premature buy back does not just reduce the liability, but this would mean that the companies after buying back these FCCBs, would now go for new FCCBs at today’s rates, thus keeping their capex plans intact and at the same time, adjusting their liabilities to current rates. For companies like Rcom and other bigwigs, reducing the capex is not an option – maybe they can postpone but not bring down. And going by all these circumstances, it thus makes more sense to buy back the FCCBs.



Rcom will be the first company to do so, but not the last. Others expected to follow suit at as majority of the FCCBs are today trading at an average discount of 30-70%. Prominent amongst them could be Aban Offshore which has a FCCB of Japanese Yen 11610 million, Aurobindo Pharma of US$150 million, Ashok Leyland of US$100 million, Bajaj Hindusthan of US$120 million, Educomp of US$80 million, HDFC of US$500 million, JP Associates of US$265 million, JSW Steel of US$325 million, M&M of US$200 million.



Suzlon Energy also has a FCCB of US$450 million, but, given its deferment of rights issue and need of internal accruals to buy additional stake in German RE Power and fund the expansion plans, maybe the company might not go for a premature FCCB buy back - unless the company decides to defer the expansion plans and the additional stake buy, which logically makes more sense under the present circumstances.



Another such company which has FCCBs but not enough internal accruals will be Tata Motors. It has a FCCB of US$ 890 million and another FCCB of Japanese yen 11,760 million. Tata Steel too has a FCCB of US$875 crore which could see premature buy back.

All in all, this is a good move by RBI to allow premature buy back of the FCCBs. And in the present circumstances, makes perfect economical sense.

Reliance keeping NIfty Dumb

Reliance is positive above 1160-1180 Can see 1220-1300 Levels

Govt to pump in Rs 300,000 crore to boost economy

The Government on Sunday announced a Rs 300,000 crore ($60 billion) package to boost the economy with specific measures for various sectors and contain the impact of the global financial crisis on India.

The amount is to be spent over the remaining four months on a host of areas and stake holders such as exporters, housing, infrastructure and textiles. A four-percent cut in Value Added Tax has also been announced to help the corporate sector in general.

"The Government has been concerned about the impact of the global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem," an official statement said, unveiling the package.

The measures come a day after the Reserve Bank of India reduced its key rates and eased the norms for accessing overseas funds to reduce the cost of borrowing for commercial banks and signal them to lower interest rate for India Inc.

These measures were overseen by Prime Minister Manmohan Singh himself, in consultations with now Home Minister P Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Commerce Minister Kamal Nath, officials said.

As a first step, the Government will seek Parliament's mandate for an additional allocation of Rs 200 billion to take the authorised plan and non-plan expenditure to Rs.3,000 billion in the remaining months of the fiscal. Parliament session is slated to open Dec 10.

“The economy will continue to need stimulus in 2009-2010 also and this can be achieved by ensuring a substantial increase in plan expenditure as part of the budget for next year,” the statement said.

The measures for exporters, who saw a decline in shipments in October for the first time in five years, include an interest support of two percent for labour intensive sectors like textiles, handicraft and handloom.

This apart, additional allocation has been made towards various incentives for exporters, guarantee of export credit, full refund of service tax to foreign agents and refund of service tax under the duty drawback scheme.

Instructions have also been given to state-run banks to unveil a scheme under which borrowers for houses under two categories—up to Rs, 500,000 and up to Rs.2 million—will get special incentives.

“Housing is a potentially very important source of employment and demand for critical sectors and there is a large unmet need for housing in the country, especially for middle and low income groups,” the statement said.

For small and micro enterprises, the limits under the credit guarantee scheme which gives access to working capital and other financial needs, have been doubled to Rs.10 million.

The lock in period for loans covered under the existing credit guarantee scheme is also being reduced from 24 to 18 months to encourage banks to extend more loans under the credit guarantee scheme, the statement said.

The government has also authorised the India Infrastructure Finance Co Ltd (IIFCL) to raise Rs.100 billion ($2 billion) through tax-free bonds to support financing of government-financed infrastructure projects.

“These funds will be used by IIFCL to refinance bank lending of longer maturity to eligible infrastructure projects, particularly in highways and port sectors.”

In a push to the automobile sector, government departments have been allowed to replace vehicles within the allowed budget, with a major relaxation in the time-consuming procedures.

This apart, import duty on naphtha for use by the power sector is being reduced to zero, while export duty on iron ore fines will be eliminated, and reduced to five percent for lumps.

“The government is keeping a close watch on the evolving economic situation and will not hesitate to take any additional steps that may be needed to counter recessionary trends and maintain the pace of economic activity.”

Nifty 08-12 Dec

Nifty Technical View

Nifty is on a precarious situation and can be bought at dips at weekly support and resistance.

Simple ways to spot multibaggers

"IF you stay half-alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall, and long before Wall Street discovers them." -- Peter Lynch.

Easier said than done? You can make it 'easier done than said'!

Here's how:

1. Keep your eyes and ears open.

A simple way to identify potential multi-baggers is to look around for emerging sectors and new trends and invest in the leading companies participating in these trends.

For instance, some of the mega sectors (organized retail, media, telecommunications, real estate etc.) helped to create wealth for many investors who participated in those sectors in the early phase of discovery. Let’s take the example of two mega sectors - telecommunications and organized retail. If you had invested in Bharti Enterprises during their IPO in 2002 or in Pantaloon Retail when you saw their first 'Big Bazaar' store, you would have grown your investment by 18 times in Bharti and by 65 times in Pantaloon!

2. Go out, explore and see 'what's in'
Peter Lynch used to spend some weekend time for going to malls and shopping with his daughters. According to him, this was a great place to spot new stock stories and do some real market / business research. He’s found amazing stock ideas by simple observations like the favourite toy store with kids, the restaurant people frequent the most, fashion trends with teens etc. Once he would get these answers, he would research the underlying companies and find out if they were attractive investment opportunities.

This might seem like a far too easy but difficult to implement strategy but trust me, it can work. See what products are in demand, what things get picked up from shelves in super markets the fastest and so on. It might give you good insights on stock picking.

BOOSTER REQUIRED – ECONOMICAL AND PSYCHOLOGICAL

Something is required to lift up the spirits. The terror attacks have left everyone wounded, so much so that it has taken over, at least for now, the entire spectrum away from the world recession knocking at our doors and the impact of the ongoing economic slowdown already making its presence felt in India.



Accountability and responsibility from our politicians would be hard to come by. After Shivraj Patil and R.R.Patil, neither any heads have rolled nor have any netas resignation been accepted. And probably hoping to shift this onus and to give the much needed kick start to the economy, the new FM and also the PM of our country, Manmohan Singh is working on a “booster” package. A committee working on the economic crisis has mooted a new plan which amongst a lot of things, proposes to set up a special infrastructure fund, provide interest subsidy for housing and export-dependent sectors like textiles, handicrafts and leather. The package also includes monetary measures, prime amongst which are interest rate cuts.



Improving credit off take and the overall liquidity scenario in the country would go a long way in rectifying the situation. High on the agenda is a cut in the repo and reverse repo rates which determines rates at which RBI accepts and lends to the other banks. The news is that RBI is flush with funds, with deposits coming in from the various commercial banks. Once the reverse repo rates are made more attractive and the repo rates – rates at which RBI will lend to the commercial banks is also made more attractive, the current situation of liquidity crunch is expected to get a breather. There is money in the system but no one wants to just lend and it is this which the Govt should be aiming at resolving.



News is that repo rate might be reduced by 150 basis points, which is currently at 7.5% and the reverse repo rates by a 200 basis-point cut, which is at 6% currently. News of brining down the CRR to 5-4.5% from the present 5.5% is also on the cards. This is expected to infuse an adrenalin rush of around Rs.60,000 crore into the system.



The Govt is planning to give impetus to infrastructure development by building more roads, ports, airports, bridges. This in turn is expected to give fillip to demand for cement, steel and all the other sectors which provide materials to build the infrastructure.



Another fiscal measure, aimed specifically at boosting the realty sector is providing funds to the National Housing Bank to finance small housing. It is also looking at the option of providing funds to NBFCs to finance infrastructure projects.



There is also talk of interest subvention. What does that mean? Interest subvention is when the Government steps in by picking up a part of the interest burden. The PMs panel is looking at interest rate subvention in housing loans and for the export oriented units. Exports declined 12% in October on a year-to-year basis to touch $12.8 billion, due to a severe demand slowdown in the US and Europe.



Another fiscal measure includes providing credit to the hardest hit sectors like textiles, leather, automobiles and handicrafts.



On the anvil are also import duty cuts, especially for auto, engineering and metals.



A slew of such measures are expected to be announced on Saturday. Manmohan Singh is known more for his skills for being a financial wizard rather than a politician. Maybe now its time for him to once again show his financial wizardry, which in turn could actually do some damage control to his image as a politician? And if he really shows some spine and takes those accused and responsible for the terror attacks to task, then maybe, he could actually save his party from a complete routing defeat in the coming elections.

BOOSTER REQUIRED – ECONOMICAL AND PSYCHOLOGICAL

Something is required to lift up the spirits. The terror attacks have left everyone wounded, so much so that it has taken over, at least for now, the entire spectrum away from the world recession knocking at our doors and the impact of the ongoing economic slowdown already making its presence felt in India.



Accountability and responsibility from our politicians would be hard to come by. After Shivraj Patil and R.R.Patil, neither any heads have rolled nor have any netas resignation been accepted. And probably hoping to shift this onus and to give the much needed kick start to the economy, the new FM and also the PM of our country, Manmohan Singh is working on a “booster” package. A committee working on the economic crisis has mooted a new plan which amongst a lot of things, proposes to set up a special infrastructure fund, provide interest subsidy for housing and export-dependent sectors like textiles, handicrafts and leather. The package also includes monetary measures, prime amongst which are interest rate cuts.



Improving credit off take and the overall liquidity scenario in the country would go a long way in rectifying the situation. High on the agenda is a cut in the repo and reverse repo rates which determines rates at which RBI accepts and lends to the other banks. The news is that RBI is flush with funds, with deposits coming in from the various commercial banks. Once the reverse repo rates are made more attractive and the repo rates – rates at which RBI will lend to the commercial banks is also made more attractive, the current situation of liquidity crunch is expected to get a breather. There is money in the system but no one wants to just lend and it is this which the Govt should be aiming at resolving.



News is that repo rate might be reduced by 150 basis points, which is currently at 7.5% and the reverse repo rates by a 200 basis-point cut, which is at 6% currently. News of brining down the CRR to 5-4.5% from the present 5.5% is also on the cards. This is expected to infuse an adrenalin rush of around Rs.60,000 crore into the system.



The Govt is planning to give impetus to infrastructure development by building more roads, ports, airports, bridges. This in turn is expected to give fillip to demand for cement, steel and all the other sectors which provide materials to build the infrastructure.



Another fiscal measure, aimed specifically at boosting the realty sector is providing funds to the National Housing Bank to finance small housing. It is also looking at the option of providing funds to NBFCs to finance infrastructure projects.



There is also talk of interest subvention. What does that mean? Interest subvention is when the Government steps in by picking up a part of the interest burden. The PMs panel is looking at interest rate subvention in housing loans and for the export oriented units. Exports declined 12% in October on a year-to-year basis to touch $12.8 billion, due to a severe demand slowdown in the US and Europe.



Another fiscal measure includes providing credit to the hardest hit sectors like textiles, leather, automobiles and handicrafts.



On the anvil are also import duty cuts, especially for auto, engineering and metals.



A slew of such measures are expected to be announced on Saturday. Manmohan Singh is known more for his skills for being a financial wizard rather than a politician. Maybe now its time for him to once again show his financial wizardry, which in turn could actually do some damage control to his image as a politician? And if he really shows some spine and takes those accused and responsible for the terror attacks to task, then maybe, he could actually save his party from a complete routing defeat in the coming elections.

SLOWDOWN GAINING SPEED

The terrorist attacks have made the chinks in the Indian economy jarringly visible. The Finance Minister who mouthed inane and utterly unbelievable optimistic quotes about the economy last week, now as the Home Minister, would probably get some home truths clear.



If some people had still nursed doubts that India was cocooned from the world recessionary pressures, would surely like to rethink their perceptions. The terror attacks have downed the sentiments to a new ebb and even economically, the tally of repercussions is starting to stack up.



In the aftermath of the terror attacks, India has been rated amongst the top 20 most dangerous places to visit, sharing the place alongside Iraq, Afghanistan, Pakistan, South Africa, Chechnya, Jamaica, Sudan, Colombia, Haiti, Eritrea, Democratic Republic of Congo, Liberia, Burundi, Nigeria, Zimbabwe, Lebanon. Touted to be the great rising Asian Tiger and constantly talked about in the same breath as China, this is a huge blow to the image, which would take a lot of repairing.



The immediate fallout is that the airline industry is expected to suffer a combined loss of Rs.200 crore in December and January with the passenger load feared to dip below 40% during the peak season. Tour operators and travel agents have already reported huge cancellations in their bookings for December and January. The hotel industry is expecting a 25-30% drop in its inbound tourists. As such the global slowdown had affected business and now with this also adding on to the woes, the cup seems to be overflowing.



This apart, India is also showing signs of a serious slowdown. Oil prices have come down below $50 per barrel and despite the fall in prices, sales of oil products, after a gap of 17 months has reported a drop in October, which is like an “official” confirmation of the slowdown. Sale of industrial fuel and diesel has dropped 1.7% in October. When prices of an essential commodity is down and yet demand falls, surely this tantamounts to a slowdown, right?



The automobile sector, which is the wheel of the economy, also seems to be turning at a very slow speed. Sales of cars and 2-wheelers dropped 20-40% in November. Maruti, Tata Motors and M&M have reported a drop in sales and so have two-wheeler majors like TVS, Bajaj Auto. Only Hero Honda bucked the trend and showed a positive.



The Indian realty industry, which was booming like never before has hit the ground with a resounding crash and the casualties are eking their way out from underneath. With sales not picking up at all and despite the realty companies having taken all measures to boost sales, no one seems to be buying. And for the realty companies, it is a question of survival and if they have to survive, they have to reduce costs. And that brings us to the biggest casualty of this fall in the sector – the employees. Huge job losses and an almost 50% drop in paychecks is what awaits those employed in this sector.



This is sure to affect many industries and job losses are bound to follow and when there is threat to job security, naturally, people cut down on spending and demand all over drops. This cycle has been set in motion and would continue till the world economies do not emerge out of this recessionary cycle. Actually recession is in but what we have to see is that it does not lead to depression, something which Bernanke says would never happen now.



Well, there are a lot of things which Bernanke and our politicians say and do. But their words, sounding hollow and not the least bit reassuring, cannot stop the ball of slowdown which is fast gaining speed.

Weekly OutLook

Before I begin my Nifty views for the forthcoming week, I would like to start by giving my share of tributes to our brave army and police officers. Not only the ones who lost there lives but also the ones who made the Operation cyclone a success.



As seen from the Nifty Weekly Chart we may see 2830 which in 20 DMA will act as a stiff resistance.

If that is crosses we may step into 3k range.Lets see what pane out in coming days.

Stock Specific:

Patni Computer has formed Bullish engulfing pattern can see a jump of 5-10% in coming week

Bharti Airtel coming out of Channel formation can see 700-730 Levels

ABB is a buy above 446

Reliance can see 1200 Levls in coming week.