Long Term Investment: MARG & TEXMACO

Following are the Stocks that You can not miss, Invest into these stocks with medium to long term perspective...

Marg Ltd @ 220-230 Levels (Long Term) [buy on every low]

Texmaco Ltd @ 160-165 Levels (Medium/Long Term) [buy on every low]

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Note: Do not invest into the above stocks with the intention of Trading

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Texmaco to make forays into housing development

K.K. Birla Group company Texmaco Ltd will soon make a foray into real estate development in the national capital. The company would be developing a residential-cum-commercial unit opposite Delhi University to begin with. (Texmaco chairman Saroj Poddar said)

Court had recently allowed Texmaco Ltd to develop one-third of a 31-acre plot opposite Delhi University.

The said land earlier belonged to Birla Mills and had been engaged in a legal tangle for some time.

The remaining two-thirds of the plot opposite the university would lie with Delhi Development Authority (DDA), the Delhi government’s developmental agency, which will share half the revenue received from any development with the company.

Poddar added that currently the finer aspects of the project are being studied with the DDA and would be finalised very soon.

He also pointed out the futility of setting up more wagon making units in the country when the ones operated by the private sector are not used to their optimum capacity.

It may be mentioned that Union Railway Minister Mamata Banerjee had announced setting up four wagon-making units while presenting the Railway Budget for 2010-11.

Texmaco has recently de-merged its core wagon making and steel foundry business to Texmaco Rail and Engineering Ltd retaining the real estate business with itself.

The de-merged entity is planning to venture into a new business of setting up logistics for the Railways via foreign collaboration, Ramesh Maheshwari, executive vice chairman, said without giving any further details.

Article on: How to analyze the company

Following are the points to be considered for value investing and getting decent returns, please note that if you are investing refering this article, then you should consider all the following points mentioned in this article

• What is Fundamental Analysis
• Invest in Good Company
• Earnings
• Current Valuations of the Shares
• Future Earnings Growth
• Debit status of the Company
• Company’s Announcements

What is Fundamental analysis?
Fundamental analysis is basically done for long term and mid term investment which is also called as delivery based investment or trading.
The main important aim behind is to study and understand the company in which you are planning to invest your hard earned money and get excellent returns.

How to analyze the fundamentals of the company? Basically one should be able to judge at least how the company has done in past years, its debit status, its current valuation, its future growth prospects, its earning capacity etc
So that based on these terms he can at least decide whether to invest in this company or not.

What you should look for in a company to invest?
1. About Company -
What the company is doing and what are its businesses?
How is the current demand for their products and how the demand will be in future like in next 3 to 5 years and so? (It is difficult to analyze the future demand yourself so you can visit financial websites or contact us)

2. Earnings -
This is very important parameter. Broadly look into its last 5 or 10 years earnings whether the company has posted profits or losses.
It’s all about earnings. The bottom line is investors want to know how much money the company is making and how much it is going to make in the future.
To find the earning status ratios used are EPS - Earning per share

3. Current valuation -
This is another very important factor which most of the investor forgets while doing their investments.
Generally most of the investors invest at higher valuations of shares and when share prices start coming down then they keep worrying, so this should not happen.
Before investing one should check the current valuation of the share price and invest only when the share price is at right price and not at over priced share.
This is what happened in January 2008. Most of the people invested at very high valuations and later on the share prices started to correct (falling down).
To find the current valuation of the stock the ratios used are
PE ratio - Price to earning ratio
Book value
PB ratio - Price to book value ratio

4. Future earnings growth -
It is very important to analyze how the company is going to do in future. How will be its returns or its profits etc?
Basically most of the investors invest in shares taking into consideration Company’s future growth prospects.
To find the future growth of the stock the ratios used are
PEG ratio - Price to earning growth ratio
Current EPS and Forward EPS
Price to sales ratio

5. Debit status -
For any company to perform well in the future it is very important to be debt free or less debit because if company is having large debits like borrowings, loans then it becomes difficult for it to plan for any acquisitions, expansion plans take over plans, dividend payout and very important its most of the net profit goes in paying the interest and loans and other debits.
So in other words if the company is having fewer debits or no debit then they are having lots of cash in hand and they are free to take any decision in coming future.
To find the debit status of the company the ratios used are
Debit ratio

So to accomplish above parameters fundamental analyst follow certain ratios which are mentioned below.



Earnings
Earning Per Share - EPS
EPS plays major role in investment decision.
EPS is calculated by taking the net earnings of the company and dividing it by the outstanding shares.

EPS = Net Earnings / Outstanding Shares
(Nowadays you will get this ready made, no need for you to do calculation.)

For example -
If Company A had earnings of RS 1000 crores and 100 shares outstanding, then its EPS becomes 10 (RS 1000 / 100 = 10).
Second example -
If Company B had earnings of RS 1000 crores and 500 shares outstanding, then its EPS becomes 2 (RS 1000 / 500 = 50).

So what is that you have to look in EPS of the company?
Answer - You should look for high EPS stocks and the higher the better is the stock.

Note - You should compare the EPS from one company to another, which are in the same industry/sector and not from one company from Auto sector and another company from IT sector.

Before we move on, you should note that there are three types of EPS numbers:

Trailing EPS - Trailing EPS means last year’s EPS which is considered as actual and for ongoing current year.
Current EPS - Current EPS means which is still under projections and going to come on financial year end.
Forward EPS - Forward EPS which is again under projections and going to come on next financial year end

But the EPS alone doesn’t tell you the whole story of the company so for this information, we need to look at some more ratios as following.
It’s not advisable to make your investment decisions based on only single ratio analysis.
EPS is the base for calculating PE ratio.

Importance of Earnings -
Earnings are profits. Quarterly or yearly company’s increasing earnings generally makes its stock price move up and in some cases some companies pay out a regular dividend. This is Bullish sign and indicates that the company’s is in growth.

When the company declares low earnings then the market may see bearishness in the stock price and hence its share price starts deceasing and corrects further if the company doesn’t provide any sufficient justification for low earnings.

Every quarter, companies report its earnings. There are 4 quarters.

Quarter 1 - (April to June and earnings will be declared in July)
Quarter 2 - (July to Sept and earnings will be declared in Oct)
Quarter 3 - (Oct to Dec and earnings will be declared in Jan)
Quarter 4/final - Also called as financial year end - (Jan to Mar and earnings will be declared in April)

Now by this time you would have understood how earnings are important for a stock price to move up or down. But depending only on earnings one should not make investment or trading decision. To make decision more risk free you should look into more tools as mentioned below so that your investment decision becomes more solid and you should get excellent returns in future.

Conclusion - Keep a close watch on quarterly earnings and trade or invest accordingly or manipulate your investing.

Following are the most popular and important tools/ratios to find excellent growth stocks which focuses on earning, growth, and value of the company’s.

Current Valuations of the shares
Price to Earnings Ratio - PE ratio
PE ratio is again one of the most important ratio on which most of the traders and investors keep watch.
Important - The PE ratio tells you whether the stock’s price is high or low compared to its forward earnings.
The high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. This generally happen in bull market and share price keeps on increasing. Basically in bull market share prices keep increasing without giving more importance to its current valuation and once market realizes that it is over priced then they start selling.
In bear market the low PE stocks having high growth prospects are selected as best investment options.

But, the P/E ratio doesn't tell us the whole story of the company.
Generally the P/E ratios are compared of one company to other companies in the same sector/industry and not in other industry before selecting any particular share.

The PE ratio is calculated by taking the share price and dividing it by the companies EPS.
That is
PE = Stock Price / EPS

For example
A company with a share price of RS 40 and an EPS of 8 would have a PE ratio of 5
(RS 40 / 8 = 5).

Importance - The PE ratio gives you an idea of what the market is willing to pay for the companies earning.
The higher the P/E the more the market is willing to pay for the companies earning.
Some investors say that a high P/E ratio means the stock is over priced on the other side it also indicates the market has high hopes for such company’s future growth and due to which market is ready to pay high price.
On the other side, a low P/E of high growth stocks may indicate that the market has ignored these stocks which are also known as value stocks. Many investors try finding low P/E ratios stocks of high value growth companies and make investments in such stocks which may prove real diamonds in future.

Which P/E ratio to choose?
If you believe that the companies has good long term prospects and good growth then one should not hesitate to invest in high P/E ratio stocks and if you are looking for value stocks which prove real diamonds in future then you can go with low PE stocks provided that companies has good growth and expansions plans.
At all if you would like to do PE ratio comparison then it has to be done in same sectors/industry stocks and not like one stock from banking sector and other stock from pharmacy sector.
So now you would have come to know how to choose stocks based on PE ratio.

What is book value?
Book value is the total value of the company's assets that shareholders would theoretically receive if a company were liquidated (closed).
By being compared to the company's market value, the book value can indicate whether a stock is under priced or overpriced.
So in other words if the share price is trading below its book value then it is considered as under priced and good for value investing.

Price to Book Ratio - PB ratio
Basically PB ratio is mostly utilized by smart investors to find real wealth in shares, so investing in stocks having low PB ratio is to identify potential shares for future growth.

A lower P/B ratio could mean that the stock is undervalued.

Like the PE, the lower the PB, the better the value of the stock for future growth.

Some of the investors become quite wealthy by holding stocks for the long term of such companies whose growth is based on their businesses instead of market and one day when every one notices this stock the value investor’s pockets are full of profit.

PB ratio is calculated as
PB ratio = Share Price / Book Value per Share.

Generally, if the ratio comes below 1 then it is considered as value investing. But this doesn’t mean that the ratio coming to 1.2 or 1.5 is not value investing. It also depends on its future growth prospects.

Future earnings growth

Projected Earning Growth ratio - PEG ratio
Because the market is usually more concerned about the future than the present, it is always looking for companies projected plans, financial ratios, and other future announcements.

The use of PEG ratio will help you look at future earnings growth of the company.

PEG is a widely used indicator of a stock's potential value.
Similar to the P/E ratio, a lower PEG means that the stock is more undervalued.

To calculate the PEG the P/E is divided by the projected growth in earnings.

That is PEG = P/E / (projected growth in earnings)

For example -
A stock with a P/E of 30 and projected earning growth for next year is 15% then that stock would have a PEG of 2 (30 / 15 = 2).
In above example what does the “2” mean?

Lower the PEG ratio the less you pay for each unit in future earning growth. So the conclusion is you can invest in high P/E stocks but the projected earning growth should be high so that companies can provide good returns.

Looking at the opposite situation; a low P/E stock with low or no projected earnings growth is not going to give you good returns in future because its PE is low means investors are not ready to pay high and its PEG is also low because companies do not have any good future growth or expansion plans so investment in such stocks could prove less or no returns.

A few important things to remember about PEG:
It is about year-to-year earnings growth.
It relies on projections, which may not always be accurate.
It’s forward earning estimation which market analyst or company calculates.

Following two ratios are again the projection or estimation done by either market analyst or by company resources.

Current EPS - Current EPS means which is still under projections and going to come on financial year end.
Forward EPS - Forward EPS which is again under projections and going to come on next financial year end.

Price to Sales Ratio
The question is, is it that companies having no current earnings are bad investments?
Answer is Not necessarily, because such companies may be new and trying to grow and expand but you should approach such companies with precaution.

The Price to Sales (P/S) ratio looks at the current stock price relative to the total sales per share.

You can calculate the P/S by dividing the market cap of the company by the total revenues of the company.

You can also calculate the P/S by dividing the current stock price by the sales per share.

That is
P/S = Market Cap / Revenues
or
P/S = Stock Price / Sales Price per Share

Conclusion - To find under valued stocks you can look for low P/S ratios.

The lower the P/S ratio the better is the value of the company.


Debit status of the Company

Debit Ratio
This is one the very important ratio as this tells you how much company relies on debit to finance its assets.
The higher the ratio the more risk for company to manage going forward. So look for company’s having low debit ratio.
Generally it is considered that debit ratio less then 1is good investment option. But even some investor considers higher debit ratio provided the company is having good growth prospects.

If company has fewer debits then company can make more profit instead paying for its debits like interests rates, loans etc.

Dividend Yield
If you are a value investor or looking for dividend income then you should look for Dividend Yield figure of the stock.
This measurement tells you what percentage return a companies pays out to shareholders in the form of dividends. Older, well-established companies tend to payout a higher percentage then do younger companies and their dividend history can be more consistent.

You calculate the Dividend Yield by taking the annual dividend per share and divide by the stock’s price.
That is
Dividend Yield = annual dividend per share / stock's price per share
For example
If a company’s annual dividend is RS 1.50 and the stock trades at RS 25, the Dividend Yield is 6%. (RS 1.50 / RS 25 = 0.06).

Important Note -
Any single tool or ratio should not be used to make your investment or trading decision nor will they provide you any buy or sell recommendation. All tools should be used to find growth and value stocks.
After making use of above all tools you will get excellent stocks which will give you excellent returns in mid term to long term.
You will find all these ratios in any financial website or you can contact us.


Company’s announcements
Always keep a close watch on stocks you are interested to buy or you already bought for any mergers, take over, acquisitions, stake sells, new product launch etc. This would make the major impact on company. This is important point

Profit after Tax
Check out company’s PAT (profit after tax) of every quarterly if you are short term to mid term trader and if you are long term investor then check out its yearly PAT. The company should have posted consistent growth.

Railways, metro plans make Texmaco a solid bet

Texmaco Ltd, the diversified engineering firm of K K Birla Group, manufactures and sells heavy engineering products. Incorporated in 1939, it has five factories near Kolkata. It provides equipment machinery and services to core-sector projects and process industries in India and internationally.

Business: Texmaco has three segments — heavy engineering division, steel foundry division and others.The products comprise railway wagons, hydro-mechanical equipment for hydel projects, heavy engineering machinery for shipbuilding and bridge construction. It produces industrial boilers and machinery for oil and fertiliser sector, machinery for textile mills, boilers, super heaters, economisers, chimneys, pressure vessels and equipment for chemicals, paper, cement, coke oven and iron & steel industries.Its prowess also lies in coal and other solid material handling and conveying plants and railway rolling stocks etc. The steel foundry division caters to castings for railway equipment, sugar machinery etc.

Texmaco derives a major portion of its revenues from large-scale contracts for wagons. Rolling stock accounts for more than half of its revenues and is a steady cash generator. Texmaco is the largest wagon manufacturer in India, enjoying a 25% market share. A leader in commodity specific wagons, it has a capacity to manufacture over 7,500 wagons. Texmaco in 2007 formed a 50:50 joint venture with United Group for the biggest railway hub in West Bengal and more are on cards.

Hydro mechanical equipment comprising penstock, trash gates, sluice gates and hoists contribute 8-10% to revenues. Process equipment such as low-pressure boilers contribute 5-6% to gross revenues.

The steel foundry division contributes 17-18% of gross revenues. Texmaco has a steel foundry for manufacturing bogies and couplers. Texmaco is also focusing on exports. The hydro mechanical equipment and structurals have been key contributors to the export revenues.

Investment rationale: The opportunities offered by Indian Railways are immense. The 11th Five-Year Plan has proposed a Rs 2,30,000 crore expansion for the Railways. Demand for wagons is on the rise from both the public and private sector. Rising investments in steel, cement and power sectors have added to growth in freight despite slowdown. Expediting development of the freight corridor would add to efficiency and, in turn, boost demand for wagons. Mass rapid transport system including electric multiple unit and metro railways are expanding.

Texmaco is all set to exploit these opportunities and has entered into tie-ups with several multi-national firms. Texmaco has a JV with end-to-end rail technology solution provider United Group Ltdfor manufacturing hi-tech wagon and locomotive railway frames. The work on hi-tech high-payload steel wagons would focus on exports to markets such as Australia.

It would manufacture 1,000 wagons to start with, and aims at an income of Rs 400 crore. The JV will also manufacture locomotive bogie frames. Texmaco has also forayed into manufacturing of metro coaches. It had been shortlisted for the upcoming Kolkata Metro Rail project.

A greenfield plant for manufacturing metro coaches at a cost of Rs 200-300 crore is also planned. Texmaco has raised Rs 170 crore through qualified institutional placement route and the entire amount will be spent on new projects. The metro and EMU project is expected to take off by the next financial year.

Texmaco has an order backlog of around 5,500 coaches. It is participating in tenders floated by Indian Railways, which plans to procure 18,000 wagons in 2009-10. A tender for 5,862 wagons was floated in July 2009 and more are expected in the third quarter. Texmaco will get some share in these tenders, and benefits of added orders would accrue in FY11E.

Hydro mechanical equipment offer opportunities, however, hydro projects have long gestation periods. Order-book thereby remains stagnant at Rs 200-300 crore. The benefit to profitability from these is expected to be visible in next 2-3 years.
Concerns: Major impetus to growth will be provided by wagon procurements by Indian Railways. Any deviation in procurement policy by Railways or delayed procurement can affect Texmaco’s estimated revenues.

Valuations: Texmaco reported a topline of Rs 183.40 crore during the last quarter, a decline of 6.82% over the same quarter last year. However, reduced raw material costs pushed operating margins up 98 basis points. Net profit at Rs 20.55 crore saw a slight decline year-on-year over the Rs 22.82 crore posted in the same period last year. Texmaco has a strong order book that is expected to grow well looking at the increased procurement targets by the Railways. Increased activity in the metro and EMU projects as well as freight corridors, all offer greater opportunities for which Texmaco is gearing up its capacities and engineering prowess. Stock is thereby a good addition to portfolio.

VLS Finance Hotel Case should be in VLS Finance favour

VLS Finance: There is talk floating around of a favourable outcome in an ongoing case over Sunair Hotels. According to a report in Business India magazine, in 1995, VLS invested in Sunair Hotel and for Rs70 million, it got a 25% stake in this five-star hotel in Delhi, which runs the Metropolitan Nikko at Connaught Place. The balance Rs220 million was brought in by the promoters, the Gupta family, while a Singapore-based hotel chain, Accor Asia, was to bring in Rs10 million at a premium of Rs90. VLS also mobilised loans of Rs850 million, agreed to manage the public issue, and gave Sunair a security deposit of Rs100 million at an interest rate of 20%. VLS claims that within a year, Accor withdrew, and Sunair was not paying the quarterly interest on the deposits. VLS and the Guptas are mired in a legal battle over the property which, in 2007 itself, was valued at Rs8 billion. VSL says that according to the agreement, it would become the majority stakeholder.

Govt moots relaxation in FDI rules on JVs

The government on Friday proposed a major relaxation in FDI rules to allow foreign firms to bring in new technology and set up new independent business without clearance from their existing local partners.

The move is aimed at attracting foreign direct investment (FDI) into the country, which has recently slowed down.

Under the present dispensation, a foreign player who had set up a joint venture (JV) in India before January 12, 2005 but now wants to open a new business independent of the existing domestic partner faces barriers.

The foreign player not only needs the government approval but also a 'no-objection certificate' from the domestic partner to the effect that the new forays would not "jeopardise" interest of the existing JV.

"The proposal is a welcome move it will attract more and more FDI and will also bring in high quality products for Indian consumers at competitive price," Naresh Makhijani, Executive Director, KPMG said.

The FDI rules proposed to be relaxed were not applicable to the joint ventures entered after January 12, 2005. Thus, the changes would help foreign investors who entered JVs before this date.

Suggesting abolition of this rule, the Department of Industrial Policy and Promotion (DIPP) said in a discussion paper, "There is a need to examine whether such a conditionality continues to be relevant in the present day context."

Alternatively, it has suggested that the stipulation of no-objection from the domestic partner should not be applicable to JVs which are 10-year old.

It has invited comments from the stakeholders till October 15.

The move follows representations from foreign investors pointing out that their domestic partners were using a string of press notes since 1998 "as a means of extracting unreasonable prices/commercial advantage. These press notes had become a stumbling block for further FDI coming into the country."

The DIPP, the nodal agency for FDI related matters, said India has entered into a number of free trade agreements and several others are under negotiations.

"In such a scenario if an industry (FDI) is discouraged from being set up in India, it could be set up in a neighbouring country with whom a trade agreement exists or is being negotiated," it said.

India received USD 25.8 billion FDI in 2009-10.

After a pick up in the first two months of the current fiscal, the inflows have slowed down for June and July.

10% blowout rally possible from here: Samir Arora

Indian markets are on a swing and the great moves will continue as long as FII flows continue. Claiming that recent inflows into the markets were the result of reallocation of existing funds, Samir Arora of Helios Capital told that these flows will continue if markets grind higher. He said he has turned bullish on India in the past three months and sees a 10% blowout rally from here. However, "a 15% rally is unlikely," he said.

Speaking on specific stocks and sectors, Arora said Delta Corp remains his top midcap pick, and he continues to hold S Kumars. "I remain short on telecom," he said.

July industrial output up 13.8% YoY

India's industrial output in July rose at a faster-than-expected 13.8% from a year earlier, sharply higher than the previous month's 7.1%, government data showed on Friday.

A poll had suggested industrial output to come in at 7.89%.

Industrial output rose 10.4% in the 2009-10 financial year (April-March) , faster than the 2.8% clocked in the previous fiscal year. India's headline inflation for July eased from double digits to 9.97%.

Commenting on India's July factory output figures, deputy chairman of Planning Commission Montek Sigh Ahluwalia said they were better-than-expected and there is a good case for the government to increase its economic growth target for the current fiscal year.

US sees widespread signs of economic slowdown: Fed

The US Federal Reserve has said that American economic activities saw "widespread signs" of slowdown in recent months, in yet another indication that recovery in the world's largest economy is losing steam.

The dour statement from the apex bank comes at a time when the US is grappling with high unemployment levels and high public debt.

"(There has been) continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods," according to the Beige Book released on Wednesday.

The book provides a snapshot of economic activities in the 12 districts in the US.

As many as seven districts including Minneapolis, San Francisco and Dallas witnessed modest pace of economic growth while economic activities were on decline in remaining areas.

"Reports on manufacturing activity pointed to further expansion, although pace of growth eased ... Home sales slowed further following an initial drop after the expiration of the home buyer tax credit at the end of June, prompting a slowdown in construction activity as well," Beige Book said.

After expanding at a healthy pace, the US economic growth turned sluggish to 1.6 percent in the 2010 second quarter. The economy is slowing down despite massive stimulus measures and the Federal Reserve maintaining key interest rates at near-zero levels.

Meanwhile, the unemployment rate in August rose to 9.6 percent and a staggering 54,000 jobs vanished during the same period.

French co Accelya buys 35.6% in Kale Consultants

French back office provider Accelya has acquired a controlling interest in outsourcing services firm, Kale Consultants. Accelya has acquired 35.61% stake at Rs 172 per share in Kale Consultants

Post- acquisition, promoters of Kale Consultants will completely exit the company. However the company says that its MD and CEO Vipul Jain will still remain in the post. The deal will help Kale to reach wider markets, adds the company.

As reported earlier in July, the acquisition will trigger an offer of 20%.

KRBL: Stock that gained 54% in 5 days

The catastrophic floods which have destroyed Pakistan's rice crop seem to have opened doors for India's Basmati rice producers. One of the beneficiaries has been Basmati rice exporter KRBL. Its stock price gained 54% over the last five days. Today, however, it managed just 1.80% or Rs 0.65 to end at Rs 36.80. It touched an intraday high of Rs 38.50 and an intraday low of Rs 36.05 and touched a 52-week high of Rs 38.50.

Why the run-up?

The most devastating floods in Pakistan’s history has destroyed crops and damaged infrastructure severely. A rice exporters’ group in Pakistan has forecast that exports may plunge significantly for the year.

In an interview, Anil Mittal, CMD, KRBL said, "The rice prices have increased by about USD 100 in the last 10-15 days. This is primarily because Pakistan floods have helped India to boost their prices. Since Pakistani prices have also increased by USD 100-150 in the last one month, that is the reason Indian prices have been boosted by USD 150 per tonne.

India, the second largesst producer of rice, had put into practice a trade ban on non-Basmati rice in April 2008 to increase the country's domestic supplies. The drought in 2009 further compounded issues for the government with a double-digit fall in rice production forcing it to continue with its restrictions in 2009.

Mittal however expects relaxations on export parameters for non-Basmati rice any time soon. "Looking at the monsoons and looking at the prospects of non-Basmati crop, I am quite confident that by October, the government will take the position of the crop and will definitely open the exports of non-Basmati rice."

As compared to about 2.8 million tonne of the total Indian export, KRBL's export this year is about 140,000 tonne. "We are expecting a 20% rise overall. The Indian exports of Basmati will jump by 20% this year because of the Pakistani floods," said Mittal.

What experts said during the week:

Rahul Mohindar, viratechindia.com told, "KRBL is pretty good from a long term count. But the stock has obviously run up to a good degree. It had a significant price and volume breakout over the last couple of weeks, which certainly makes this very potential longer run. But again if you are worried about the short term, Rs 36 to Rs 38 is a resistance area. We are still sitting in that zone where we might knock off 8% or 10%. So unless you are really worked out about the very short term I would still recommend holding on to the stock. We see this as a candidate for about Rs 52 and one has to be prepared that the stock can correct to something like Rs 31–32. So keeping that downside cushion, one should continue holding on to KRBL. It has made a case with the kind of volumes and price breakouts that we have seen over the last week where it shows that there is a lot more potential to come."

He added,"I am obviously looking at a timeframe of about 6 months plus. It’s a stock which can give you one of those sudden momentum moves. But again one should keep a timeframe of approximately 6 months in mind."

Mitesh Thacker, Technical Analyst, miteshthacker.com said, "We have seen a strong run-up in all the rice stocks. KRBL though it is difficult to give a price target on it, because it has broken into all time highs, but if we look at the momentum and the technical setup, there is at least a 15% upside, and Rs 40-42 should be easily tested probably even higher."

Ohio bans outsourcing of govt IT projects

In a bid to ensure maximum employment opportunities for local people, the US state Ohio has banned outsourcing of government-funded IT projects to other countries including India.

"There are pervasive service delivery problems with offshore providers, including dissatisfaction with the quality of their services and with the fact that services are being provided offshore," Ohio Governor Ted Strickland said in an executive order passed last month.

Ohio administration’s decision is a double whammy for Indian IT companies, which is already hit by the Obama administration’s decision to increase the H-1B visa fee.

The US is the largest overseas market of India’s IT industry.

With unemployment rate is running as high as 9.6 percent in the US, the Obama administration, which is facing a litmus test in November’s Congressional elections, is looking for all possible actions to create jobs.

Ohio’s unemployment rate is at 10.6 percent, higher than the national average. Foreign companies fear that other US states might also follow Ohio and ban outsourcing of government-funded IT projects.

However, analysts said this would not affect Indian companies much as they largely rely on private firms for the bulk of their business.

TCS is the only Indian company to operate in Ohio. It employs 300 people and gets USD 19 million in tax credit for creating local jobs, an Indian business daily reported Wednesday.

Inflation to come down in coming months: PM

New Delhi: Prime Minister Manmohan Singh Wednesday expressed hope that inflation, which is close to the double digit mark, will come down in the coming months.

"Let us hope, it (inflation) will come down in the coming months. I am not an astrologer," he told reporters here.

The overall inflation stood at 9.97 percent in July and the figure for the month of August is expected next week. The Wholesale Price Index (WPI) inflation has been over 10 percent for five straight months till June.

For the week ended August 21, food inflation stood at 10.86 percent.

When asked about ONGC disinvestment, the Prime Minister said, "it is an ongoing process. I don't know which company will be divested. We have an able Finance Minister who is dealing with the subject."

The government is aiming to mobilise Rs 40,000 crore from disinvestment during the current fiscal.

On inflation, the Prime Minister had last month said that the government is making every possible effort to control "high inflation" and insulate poor from its adverse impact.

While addressing the National Development Council meeting in July, Singh had said that inflation would come down to around 6 percent by December this year.

"I know that in the last few months high inflation has caused you difficulties. It is the poor who are the worst affected by rising prices, especially when the prices of commodities of every day use like foodgrains, pulses, vegetables increase."

"It is for this reason that we have endeavoured to minimise the burden of increased prices on the poor," Singh said while speaking on the 64th Independence Day.

The opposition BJP and the Left parties have attacked the government over surging food prices. The Parliament was disrupted for a week during the monsoon session on the issue.

After which an understanding was reached between the two sides and a resolution was adopted in the two Houses asking the government to take further steps to control price rise.

Bull of the Day: Stock that gained 10% in a muted mkt

The stock of Suven Lifesciences got a shot in the arm after the pharmaceutical firm announced its eighth product patent in Australia and Mexico for its new chemical entities. The stock gained 9.56% or Rs 2.80 to close at Rs 32.10. It touched an intraday high of Rs 32.75 and an intraday low of Rs 29. There were pending buy orders of 1,128 shares, with no sellers available.

Why the run-up?

The company secured two product patents, one each in Australia and Mexico, for a new chemical entity to treat disorders associated with neuro-degenerative diseases. The patents in Australia and Mexico will be valid till 2023 and 2025 respectively.

The company with its pipeline of molecules that it is developing in the central nervous system arena for cognitive disorders is eyeing an estimated USD 30 billion potential global market.

Back in May, the company had received a patent for new neuro molecules, from Canada and Eurasia. The contract reserach and manufacturing services provider received the Canadian and Eurasian patents for new chemical compounds with the potential to treat several neurodegenerative diseases including Alzheimer's.

In April, Suven Life’s investigative 5-HT compounds won patents from New Zealand and India, while in March, it secured another patent from the European Patent Office for a lead molecule with the potential to treat neurodegenerative diseases.

The company is looking to raise USD 20 million by the end of fiscal year 2011 to fund its research activities and could consider diluting stake. Speaking on the company's fund raising plans, Venkat Jasti, CEO of Suven Life Sciences had told on August 27, "We have brought 13 molecules to the table. But when it comes to development and clinical trials, and this is for SUVN-502, we need to spend about USD 20 million, for which we don’t have cash on hand. We will be raising that at the end of the year."

Also read: Will raise $20 million by year-end: Suven Life Sciences

The company had signed an agreement with Eli Lilly back in 2008, according to which the company would receive research funding as well as potential discovery and development milestone payments in the range of USD 19 million to USD 23 million per candidate and potential royalties on net sales of any products that may be successfully commercialized from the collaboration.

ArcelorMittal, Indiabulls in JV talks for steel project, mining

New Delhi: ArcelorMittal, the world's largest steel-maker, is in discussions with Indiabulls Group to form a joint venture company for scouting and mining iron ore in Rajasthan and setting up a steel plant.


"The discussions are on (between ArcelorMittal and Indiabulls to form a JV company). ArcelorMittal is pitching for a majority stake in the JV company," a person in-the-know of the development told PTI.

"There are indications of iron ore in Rajasthan. It is a mineral-rich state. The JV company would seek to locate and develop it. Then, a steel plant would be developed in the state," the source said.

According to the source, the JV would be between an ArcelorMittal subsidiary or an investment arm of the Mittal family and an Indiabulls Group firm.

ArcelorMittal chief financial officer Aditya Mittal is said to be the brains behind the proposed venture, which aims at tapping the market for steel in North India, where there is no integrated steel plant.

"Promoters of ArcelorMittal and Indiabulls share a good relationship and the new venture would further their partnership," the source added.

Through LNM India Internet Ventures, it is said that L N Mittal already holds an 8.79 per cent stake in Indiabulls Power, which is developing various power projects across the country.

State-owned SAIL has already discovered iron ore deposits in the desert state.

The proposed investment in the JV could not be immediately ascertained. An ArcelorMittal spokesperson did not revert to a PTI query on the cost of the proposed venture.

ArcelorMittal had in July said it expects to start work on one of its proposed Rs 1.3 lakh crore India projects in early 2011.

The world's largest steel-maker, accounting for 8 percent of global production, announced plans to set up projects in Jharkhand in 2005 and in Orissa a year later. In June this year, it signed an MoU with the Karnataka government for a Rs 30,000 crore steel project.

"We believe that in 2011, in one of the projects, we will break the ground, we don't know which one... It is our hope that it should be in the first quarter or the second quarter,"

ArcelorMittal chairman and CEO L N Mittal had said.

Gujarat Gas: Stock that surged 10% in a strong mkt

Ahmedabad based leading private gas distributor, Gujarat Gas Company Limited's stock rose over 10% on the back of an increase in compressed natural gas (CNG) prices by the company to Rs 32.45 per kg. The stock surged 10.21%, or Rs 36.05 to end at Rs 389. It touched a 52-week high and an intraday high of Rs 403.40 and an intraday low of Rs 352.95. There were pending sell orders of 26 shares, with no buyers available.

Why the run-up?

Following a supply crunch from its conventional sources, and an increase in input costs, the company hiked the price of CNG effective September 5, 2010 to Rs 32.45 per kg, an 8% increase over the existing price of Rs 29.96 per kg in Bharuch, Ankleshwar and Surat in Gujarat.

In 2009, the company had raised CNG prices following a weak rupee and revised electricity tariffs in the state. Over 100,000 vehicles in these towns run on CNG.

The company has been a part of the British Gas Group, a global leader in natural gas, since 1997. BG Group has a 65.12% controlling stake in GGCL. FIs, FIIs and public hold the remaining 34.88% of shares.

Since January of this year, gas prices for industrial units have gone up almost 10%. A growing demand for natural gas has put the company in a sweet spot.

It has a strong presence in Gujarat, which offers good potential for natural gas across industries. As gas supply in India increases, natural gas could become a cheaper and a superior alternative to industrial fuels like naphtha, used in power, steel and fertiliser industries.

Also, the number of vehicles using CNG is expected to rise significantly over the next five years, according to estimates of the Petroleum and Natural Gas Regulatory Board. Gujarat Gas is strategically well placed to take advantage of this growing demand, combined with its focus on the industrial market on the retail side. The company also has long-term contracts with domestic suppliers which provides it good revenue visibility.

Chances of double dip recession in US raised: Roubini

Economist Nouriel Roubini has come out with yet another chilling prediction. Roubini warns that the chances of a double dip recession in the US have increased as the second half of the year is expected to be even worse, reports ONE OF THE NATIONAL NEWS CHANNEL.

“Compared to six months ago when the probability of double dip was very low, right now, I expect it to be very high,” Roubini warned.

“Growth in Q2 has been revised downwards from 2.4% to 1.6%, given the construction numbers will be revised down to 1.2%,” he added.

He reasoned that based on the data the second half of the year is going to be worse than the first half 2 because all the tailwinds will become headwinds. He is concerned that if we finish Q2 with 1.2% then the second half will be worse.

“Once the growth rate is 1%, you are already in a growth recession, and then the risk is that the financial markets are going to have a downturn,” Roubini said.

Wall St week ahead: For stocks, Sept starts on upbeat note

US stocks could start next week with investors feeling a bit more optimistic about the economy, thanks to a stronger-than-expected jobs report, making further market gains more likely.

The government's nonfarm payrolls report on Friday was the latest of the week's data to suggest the economy may not be headed for another severe downturn, as many investors have feared.

All three major U.S. stock indexes rallied more than 1 percent on Friday. The Standard & Poor's 500 Index scored a gain of 3.8 percent for the week, marking its best week in eight, and starting September -- typically the weakest month for the market -- on a strong note. In contrast, for the month of August, the S&P 500 fell 4.7 percent.

"The data forces a re-evaluation of the underlying thesis of the economy, and how the stock market is priced," said Charles Lieberman, chief investment officer of Advisors Capital Management, LLC in Hasbrouck Heights, New Jersey.

"The employment report is really the keystone. If the economy is producing jobs, the thesis of a decline in the economy goes out the window," he said.

Next week, the economic calendar will be light, especially since it will be a holiday-shortened week with the U.S. stock market closed for Labor Day on Monday. But the agenda will include the international trade deficit data, which investors will scrutinize for clues on spending, as well as the latest weekly jobless claims numbers.

High unemployment and weak consumer spending have been among the toughest hurdles to sustaining the economy's recovery from the worst downturn since the 1930s.

Though the stock market ended this week with gains, the S&P 500 was unable to break out of a trading range of between 1,040 and 1,130, and some analysts see that range-bound trend continuing.

"I think we're in rally mode. In no way do I see us going through new highs or breaking through the trading range, but I see strength after the holiday," said Alan Lancz, president of Alan B. Lancz & Associates Inc. in Toledo, Ohio.

"We still see this as a two-steps-forward, one-step-back type market ... but we'll take what we can get."


September's baggage
For the week, the Dow Jones industrial average rose 2.9 percent, while the S&P 500 advanced 3.8 percent and the Nasdaq gained 3.7 percent.

That's a promising start, but history shows that this month isn't one that Wall Street's denizens will "Try to Remember," a la the iconic song from "The Fantasticks" of Off-Broadway fame.

September is typically the weakest month for stock market performance, according to the Stock Trader's Almanac. The S&P 500 has declined 0.7 percent on average during September in the years since 1950, the Almanac says.

However, on the day after Labor Day, the Dow has risen in 12 of the last 15 times, the Almanac notes.

Friday's jobs report was the catalyst for a bullish end to the week for stocks because it showed that although overall payrolls shed jobs for the month of August, the decline was much less than expected. And providing a bright spot, private payrolls rose more than expected.

Analysts said the news gave a ray of hope for the recovery. Other data this week showed an unexpected rise in the Institute for Supply Management index on U.S. manufacturing, stronger-than-expected pending homes sales in July, and a second consecutive week of lower claims for initial jobless benefits.

The data means "we are probably not looking at a double dip," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco.

Next week's data includes reports on international trade on Thursday and wholesale inventories on Friday.

A surge in imports dampened growth in the second quarter.
U.S. government data next week is expected to show the international trade deficit narrowed somewhat to $47.2 billion in July, according to economists polled by Reuters, after rising to $49.9 billion in June, the highest since October 2008.

Analysts believe sluggish domestic demand should cause a moderation in the growth of imports in coming months, while they expect U.S. exports to strengthen. As a result, the trade gap should be less of a drag on the economy.

Initial jobless claims, also expected on Thursday, are seen dipping to a seasonally adjusted 470,000 for the week from 472,000 previously.

Wholesale inventories for July, due on Friday, are forecast to rise 0.4 percent, the Reuters poll showed, following June's gain of just 0.1 percent. That report also will shed light on wholesale sales, seen up 0.3 percent in July, following June's decline of 0.7 percent.