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On Wednesday, the S&P 500 climbed 1.4% to its best level since mid-June following a barrage of economic reports, which didn’t really offer much inspiration to market participants. The Dow closed 57.06 points higher (+0.68%) to end the day at 8,504.06. The index gained sharply before closing modestly. The NASDAQ closed 10.68 points higher (+0.58%) to finish at 1,845.72.
Most of the Indian ADRs ended positively on Wednesday. ICICI Bank (IBN) was the biggest gainer, up 1.23%, closing at $30.73. Wipro (WIT) was the sole loser, down 0.10%, closing at $11.70.
Upbeat economic data, along with higher oil and mining stocks brought some cheer at the European markets. The UK’s FTSE closed 91.50 points up (+2.15%), ending at 4,341. Germany’s DAX closed 96.80 points up (+2.01%), ending trading at 4,905.
As of 9:45 am IST, the Asian markets were witnessing mixed results. While Japan’s Nikkei is currently trading flat, just 0.83 points lower, down 0.01%, the Hang Seng is currently trading 144.89 points higher, up 0.79%.
WTI Brent crude oil closed at $69.05 per barrel, down $0.26 (-0.38%). Nymex light crude August futures closed at $69.12, down $0.19 (-0.27%). August COMEX gold futures closed at $938.80 per ounce, down $2.50 (-0.27%).
As of 9:50 am IST, the Yen (¥) remained unchanged against the USD at ¥96.57. The Euro (€) fell €0.0018 to €0.7084 against the dollar. The Pound (￡) fell ￡0.0008 to ￡0.6074 against the dollar.
The rupee rose by Rs. 0.01 to Rs. 47.89/90 on Wednesday, against the greenback.
In the previous article of this series we had discussed the Price Earning Ratio and how to use it to filter stocks. I got a few very searching questions in the comments section. So I would request readers to go through those too.
We now take the second step forward and one which could be a major stumbling stock for many an aspiring portfolio picks. If a stock fails this test, I would need towering logic to overrule it. All business is margin and it is the bottom line - the profit margin. The last word in the financial statement analysis and hence a major filter for us. Profit margins are of three types.
Why do I say this? Markets “Calls” are least important things in Stock markets (i believe) , and you only get that least important information from TV experts . What you don’t get is vital things like psychology to trade , Money management rules, Discipline to follow every time you take the trade . Those calls are in isolation , They are not generated by a consistent rule , you can get calls from here and there and all of them will be kind of random to you . Other problem can be that you don’t know the time frame of the call . If you don’t understand all this what I just told , the easy way to understand is to answer this
“If listening to TV experts was really worth , Why am I not making money”
“How many people do you know who make living or earn exceptional returns by trading what experts tell them”
At last , the point is not that there calls and advice works or not ? They may work , but not for you. There is lot more than getting calls and acting on them . Another important thing why you should stay way or listen less to them is because most of their calls are for “forcing you to trade more” , which will eventually generate more brokerage and commissions for trading companies , Read this article from ShyamPattabi to understand more on this.
Question : Why do experts give more of BUY calls and very less of “SELL” callsMy Answer : When some one “SELLS” , he is out of trap , he is out of stock market , he pays commission once . But when Someone “BUYS” , he is trapped in markets , He already paid once and has to pay one more time to get out , so SELL = Commission 1 time and BUY = Commission twice for sure , Ohh.. Did I discover something here
On Tuesday, participants sent all 10 major sectors in the S&P 500 into the red following the release of the June Consumer Confidence Index, which came in at 49.3 to miss expectations and mark a decline from the previous reading. Meanwhile, the Expectations Index also missed the consensus estimate and declined from the previous reading. The Dow closed 82.38 points lower (-0.97%) to end the day at 8,447. The index fell rapidly as it opened and then continued to lie low through the day. The NASDAQ closed 9.02 points lower (-0.49%) to finish at 1,835.04.
Most of the Indian ADRs ended in the red on Tuesday. Dr. Reddy’s (RDY) was the biggest gainer, up 0.19%, closing at $16.95. HDFC Bank (HDB) was the biggest loser, down 2.24%, closing at $103.13.
Disappointing US consumer confidence data affected the European markets as well. The UK’s FTSE closed 44.82 points down (-1.04%), ending at 4,249. Germany’s DAX closed 76.45 points down (-1.56%), ending trading at 4,809.
As of 9:45 am IST, the Asian markets were witnessing mixed results. While Japan’s Nikkei is currently trading 95.14 points higher, up 0.96%, the Hang Seng is currently trading 149.78 points lower, down 0.81%.
WTI Brent crude oil closed at $70.61 per barrel, up $0.72 (+1.03%). Nymex light crude August futures closed at $70.47, up $0.48 (+0.83%). August COMEX gold futures closed at $929.50 per ounce, up $2.10 (+0.23%).
As of 9:50 am IST, the Yen (¥) fell against the USD, by ¥0.43 to ¥96.75. The Euro (€) rose €0.0003 to €0.7123 against the dollar. The Pound (￡) fell ￡0.0001 to ￡0.6077 against the dollar.
The rupee rose by Rs. 0.20 to Rs. 47.90/91 on Tuesday, against the greenback.
NIIT recently announced the Q4 09 results and published the transcript of their investor call. Some thoughts on the call
- Topline grew by 10% (excluding hedging losses), and operating margins increased to 22.3% from 19% (excluding hedging losses) for the quarter.
- The topline growth was around 5% for the year and the operating margins held steady. However the bottom line dropped by more than 10% due to the hedging losses.
- Hedging losses were around 22 Crs. This is the most ridicolous hedge I have ever seen. They had created a hedge for almost 2+ years of revenue at the rate of almost 41.6 Rs. I cannot understand why the management would have taken such a long hedge last year and assume that the currency would only strengthen.
- The company now has a hedge of around 1 year at the same rate and has mark to market loss of 199 Crs. The underlying earning power of the company is not impacted by this hedge, but some finance guys probably the CFO should be taken to task for such a hedge. The above losses have been booked against the reserves as per the new guidelines.
- The other key indicators such as new client additions (18 for the year), order intake (312 Mn usd), utilization etc have been healthy.
Overall, the results have been as expected and not really spectacular. However the current valuations continue to assume much worse and hence the stock continues to be undervalued. I have updated the valuation spreadsheet and uploaded it again(valuationtemplateNIIT2009).
I personally feel, that my net margin assumption of 7.5% may be too conservative and the company may be able to maintain net margins in the region of 10%. If that turns out to be the case, there could be a higher upside to the stock price.
Cheviot company
I have analysed cheviot company earlier. The main thesis behind this idea can be summarized as follows - the company net of cash and equivalents is selling at 1 or less times annual earnings.The company has an average earnings power of 14-15 Crs per year and can valued at around 200 crs (versus 80 Crs market cap).
I recently reviewed the annual report and did not like what I saw, mainly on how the company is using the excess cash. A few key points from my annual report analysis are
- The company recorded a topline growth of around 5% (inspite of a drop in volumes) and a bottom line which was flat or up a few percentage point (one needs to exclude the impact of other income which is mainly from equity investments and mutual funds). The same is visible in the cash flow from operations too.
- The operating and net margins from core operations has remained steady inspite of the turmoil in the export markets and other issues such as labor.
- The investments on books have dropped by 20 crs and there seems to be an unexplained loan/ advance of the same amount on the balance sheet. The company had invested the surplus cash in the equity markets and has seen a drop in the value of the holdings. The company also took some losses through the profit and loss statement due to the sale of some holdings.
- The outlook for the next year looks bad due to the high jute prices and recession in the global market. The bottom line and hence the stock price could remain depressed.
So why am I annoyed with the results ?
- For starters, the company has taken the surplus cash and invested in the equity markets. That does not seem to be their core skills. In addition, I don’t think they have done a great job of it anyway. The market value has dropped by 50%, which seems to be roughly in line with the market level. So the treasury department is barely keeping up with the market or earning a few points above it.
- The dividend payout has been reduced this year due to the drop in profits (from other income). I am fairly irritated by this reduction as the company is drowing in cash, does not have too much use for it in the core business and is investing it in the stock market (not too well )
- There is an unexplained 20 Cr advance to someone. There are no other details provided on this transaction. This is not a related party transaction, but at the same time I would prefer more disclosure.
- A donation of 3 Crs (LY 2.5 Crs) !!
I am annoyed mainly by the capital allocation skills being displayed by the management. They are holding excess cash and are neither able to deploy in the core business and at the same time not ready to return it to the shareholders.
This article was written by Rohit Chauhan. He also writes at his own blog Value investor india.
The week ending 26 June 2009 witnessed the stock markets making some major swings but eventually settled essentially unchanged as early losses were offset by gains later in the week. Trading was highlighted by corporate news from some widely-held names, economic data and the FOMC policy announcement. On Friday, the Dow closed 34.01 points lower (-0.40%) to end the day at 8,438. The index wobbled through the day, before ending lower. The NASDAQ closed 8.68 points higher (+0.47%) to finish at 1,838.22.
Most of the Indian ADRs ended positively on Friday. HDFC Bank (HDB) was the biggest gainer, up 3.03%, closing at $100.00. Tata Comm. (TCL) was the biggest loser, down 0.21%, closing at $18.55.
Weak sentiments saw the European markets ending lower once again. The UK’s FTSE closed 11.56 points down (-0.27%), ending at 4,241. Germany’s DAX closed 24.09 points down (-0.50%), ending trading at 4,776.
As of 9:27 am IST, the Asian markets were witnessing mixed results. While Japan’s Nikkei is currently trading 36.47 points higher, up 0.37%, the Hang Seng is currently trading 10.07 points lower, down 0.05%.
WTI Brent crude oil closed at $68.70 per barrel, down $0.46 (-0.67%). Nymex light crude August futures closed at $68.80, down $0.36 (-0.52%). August COMEX gold futures closed at $936.50 per ounce, down $4.50 (-0.48%).
As of 9:32 am IST, the Yen (¥) fell against the USD, by ¥0.31 to ¥95.48. The Euro (€) fell €0.0019 to €0.7123 against the dollar. The Pound (￡) fell ￡0.0016 to ￡0.6065 against the dollar.
The rupee rose by Rs. 0.50 to Rs. 48.10/11 on Friday, against the greenback.
For the second week running the markets closed the week strongly with a rally in Friday trading which has improved short term sentiment considerably. Unlike last week, Fridays rally was enough to pushthe headline indices, which had traded into the red in the first four days of the week, back into positive territory. The rally was led by the Banking, IT, Capital Goods and Realty stocks.
At the close on Friday, the Sensex stood at 14,765 up 243 points for the week or 1.7%. This was crucially above the 14,700 mark which had previously been identified by many analysts (including guest blogger Nooresh) as an important resistance point. The Nifty ended the week on4,376 up 1.4% or 62 points.
The first four sessions of the week had seen a continuation of the outflows of funds as FIIs were again net sellers of Indian stocks, this time to the tune of 2,500 Cr. However the bounceback seen on Friday has left many speculating that the run in to the upcoming full year budget may now turn out to be positive for the markets, depsite the correction of last week.
The details of the upcoming budget will remain the major determining factor for the markets, along with the health of the monsoon. However, some evidence was given today that in the absense of bad news, the market is still willing to resist the temptation to correct.
At the US markets, stocks managed to reverse modest losses in the first few minutes of trading to spend the rest of the day trading with impressive gains. There was some fleeting selling pressure heading into the close, but the effort was resisted and stocks finished near session highs. The Dow closed 172.54 points higher (+2.08%) to end the day at 8,472.40. The index rose modestly initially, and then continued to move up, through the day. The NASDAQ closed 37.20 points higher (+2.08%) to finish at 1,829.54.
Most of the Indian ADRs ended positively on Thursday. HDFC Bank (HDB) was the biggest gainer, up 3.05%, closing at $96.97. Sterlite Industries (SLT) was the biggest loser, down 0.20%, closing at $11.66.
Weak fundamentals continued to mar the European markets though. The UK’s FTSE closed 27.41 points down (-0.64%), ending at 4,253. Germany’s DAX closed 35.45 points down (-0.73%), ending trading at 4,801.
As of 9:15 am IST, the Asian markets were witnessing marginal gains. While Japan’s Nikkei is currently trading 23.21 points higher, up 0.24%, the Hang Seng is currently trading 139.41 points higher, up 0.76%.
WTI Brent crude oil closed at $70.46 per barrel, up $0.23 (+0.33%). Nymex light crude August futures closed at $70.60, up $0.37 (+0.53%). August COMEX gold futures closed at $942.50 per ounce, up $3.00 (+0.32%).
As of 9:20 am IST, the Yen (¥) rose against the USD, by ¥0.05 to ¥95.87. The Euro (€) rose €0.0023 to €0.7119 against the dollar. The Pound (￡) rose ￡0.0023 to ￡0.6083 against the dollar.
The rupee fell by Rs. 0.05 to Rs. 48.60/61 on Thursday, against the greenback.
- > As was mentioned in the webinar as well as in previous updates at 15.5k that index may test the momentum line. The sensex has tested the line couple of times in last few sessions.
- > The range for now is 14000-14700. In the next couple of weeks one can expect a breakout of the same which can lead to a conclusive move on either side. So wait and watch for a move. Deploy some cash but with a strict stop of 13900 or be very stock specific with strict stops.
- > On the medium term front the gap support of 13500 is an important support. On the upside 14900/15100 which is Circuit day top as well as 15100 which is 61% of current downmove. So a move beyond this range would change the trend significantly.
Simply put continue to be stock specific and stay strict with stops and discipline. There would be many opportunities on trading as well as investment side.
In the last updates at 15.5k to shift to defensives like Cipla, ITC , Dabur , Cadilla which have been in positive territory since then.
Stocks to watchout for :
Cadilla has moved up from 340s to 370s hold for 390/420. tata motors,gdl stopped out. IDBI stop 108.
Patni Computers
Stock is looking good on daily charts Buy on dips with a stop of 240 . Momentum above 270 may tgt 300 +.
Strides Arcolab
Nice volumes traded in the last few weeks. The stock has been ranged 154-135 in the near term. Buy around 142 stop of 135 or above 154 for a tgt of 170-190 in short term. Highly volatile stock so take small exposure and keep the risk in mind.
The last update was around 54 giving a target of 68 in short term. The move has almost achieved the cup and handle target ( 34-54 =20 dollars ) ( 54+ 20 = 74 )
It would be difficult for crude to cross 75-78. A move beyond 78 would be very surprising and could actually lead to a further pull up though i dont expect it in the near future.
After moving up in a steady up channel the upmove seems to have stalled and now may find a range between 8200-8600.
A move on either side could decide the next trend.
Gold Technical view :
Gold seems may stay ranged in 905-965 for the near term. Above 945 may see aa 20-30 $ move in short term.
Its been quite a long time since i updated on Crude, Gold and Dow.I dont update much on the above indices or commodities as these instruments are not what i advise on neither do have many readers trading the same.
The next update would be when i see a major change on the above charts.
WEBINAR RECORDING AVAILABLE
Quite a few people could’nt attend the Webinar on Technical Analysis on last Sunday - 21st June. We also received requests from the attendees, that they would be glad to brush up the session once again.
The direct link for for the recording is given below: So take ur headphones and check it.
Go through it and send in a detailed feedback to analyseindia@gmail.com. This was a trial run so later we can come up with more and better interactive webinars.
After starting the day strong, the US markets sold off sharply midday. The major averages climbed higher toward the end of the session, but the Dow still ended modestly lower and the S&P 500 only managed a slight gain. The Dow closed 23.05 points lower (-0.28%) to end the day at 8,299.86. The index rose modestly initially, but fell through as the day progressed. The NASDAQ closed 27.42 points higher (+1.55%) to finish at 1,792.34.
Most of the Indian ADRs ended positively on Wednesday. HDFC Bank (HDB) was the biggest gainer, up 3.05%, closing at $96.97. Sterlite Industries (SLT) was the biggest loser, down 0.20%, closing at $11.66.
News of the European Central Bank (ECB) pumping in €442 billion into the Eurozone’s weakened banking system brought some cheer to the markets there. The UK’s FTSE closed 49.96 points up (+1.18%), ending at 4,280. Germany’s DAX closed 128.86 points up (+2.74%), ending trading at 4,836.
As of 11:40 am IST, the Asian markets were witnessing significant gains. While Japan’s Nikkei is currently trading 201.34 points higher, up 2.10%, the Hang Seng is currently trading 388.56 points higher, up 2.17%.
WTI Brent crude oil closed at $68.85 per barrel, up $0.18 (+0.26%). Nymex light crude August futures closed at $68.86, up $0.19 (+0.28%). August COMEX gold futures closed at $935.70 per ounce, up $1.30 (+0.14%).
As of 11:45 am IST, the Yen (¥) fell against the USD, by ¥0.46 to ¥96.19. The Euro (€) rose €0.0019 to €0.7157 against the dollar. The Pound (￡) rose ￡0.0008 to ￡0.6082 against the dollar.
The rupee remained virtually unchanged at Rs. 48.55/56 on Wednesday, against the greenback.
I presented a long term view about expected return for SENSEX. I mentioned that the compounded expected return was 12.1%, while the arithmetic average was 16% per year.
Today, I am discussing the short term perspective using a NIFTY index. Similar calculations can also be done using SENSEX, but I believe NIFTY is a better representation. I calculated daily returns, weekly returns, and monthly returns for NIFTY from August 2002 to May 2009. In all three cases I have used average closing value on a given day, given week, and given month. The table below shows the summary for these results.
On Tuesday, stocks spent the session chopping along in a relatively narrow trading range. The lack of direction left the major indices to finish the session in mixed fashion. The Dow closed 16.10 points lower (-0.19%) to end the day at 8,322.91. The index fell as it opened and lay low thereafter. The NASDAQ closed 1.27 points lower (-0.07%) to finish at 1,764.92.
Most of the Indian ADRs ended in the red on Tuesday. Patni Computers (PTI) was the biggest gainer, up 0.29%, closing at $10.42. HDFC Bank (HDB) was the biggest loser, down 6.75%, closing at $97.06.
The bourses at the European markets saw modest movements on Tuesday. The UK’s FTSE closed 4.03 points down (-0.10%), ending at 4,230. Germany’s DAX closed 13.75 points up (+0.29%), ending trading at 4,707.
As of 9:35 am IST, the Asian markets were witnessing marginal gains. While Japan’s Nikkei is currently trading 28.06 points higher, up 0.29%, the Hang Seng is currently trading 174.40 points higher, up 0.99%.
WTI Brent crude oil closed at $68.60 per barrel, down $0.64 (-0.92%). Nymex light crude August futures closed at $68.65, down $0.59 (-0.85%). August COMEX gold futures closed at $924.70 per ounce, up $0.40 (+0.04%).
As of 9:40 am IST, the Yen (¥) fell against the USD, by ¥0.29 to ¥95.49. The Euro (€) rose €0.0003 to €0.7095 against the dollar. The Pound (￡) remained unchanged at ￡0.6072 against the dollar.
The rupee rose by Rs. 0.04 to close at Rs. 48.58/59 on Tuesday, against the greenback.
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On Monday, the S&P 500 moved lower sharply in broad-based fashion, which took it below the key 900 level for the first time this month. With sellers in control, the session culminated in the stock market’s worst single-session percentage loss in two months. The Dow closed 200.72 points lower (-2.35%) to end the day at 8,339.01. The index simply nosedived as it opened and lay low thereafter. The NASDAQ closed 61.28 points lower (-3.35%) to finish at 1,766.19.
The Indian ADRs had a mixed bag day on Monday, with the gainers and losers more or less equally divided amongst them. Infosys Technologies (INFY) was the biggest gainer, up 0.89%, closing at $36.15. HDFC Bank (HDB) was the biggest loser, down 2.75%, closing at $104.41.
The European markets suffered hefty losses on Monday as risk averse investors shifted to the perceived safety of the dollar, the yen and government bonds. The UK’s FTSE closed 111.88 points down (-2.57%), ending at 4,234. Germany’s DAX closed 146.06.98 points down (-3.02%), ending trading at 4,693.
As of 9:35 am IST, the Asian markets were witnessing significant losses. While Japan’s Nikkei is currently trading 299.63 points lower, down 3.05%, the Hang Seng is currently trading 582.94 points lower, down 3.23%.
WTI Brent crude oil closed at $66.77 per barrel, down $0.16 (-0.24%). Nymex light crude July futures closed at $66.93, down $2.62 (-3.91%). August COMEX gold futures closed at $917.60 per ounce, down $3.40 (-0.37%).
As of 9:40 am IST, the Yen (¥) rose against the USD, by ¥0.68 to ¥95.21. The Euro (€) rose €0.0003 to €0.7209 against the dollar. The Pound (￡) fell by ￡0.0003 to ￡0.612 against the dollar.
The rupee fell by Rs. 0.54 to close at Rs. 48.62/63 on Monday, against the greenback.
The volatility in the index has definitely left a lot of us confused and that would continue in weeks to come with lot many external triggers namely expiry this week followed by Budget in July 1st week.
Technically some things are more clear now.
Index if stays above the momentum line which is roughly around 14k on closing basis there could be a bounce back in the short term which can also be termed a pre-budget rally.
Index if stays below 14k on closing basis opens up to the gap area of 13500 -12900 which can also be a post-budget correction or global meltdown.
So investors can accordingly position themselves and do keep a decent amount of cash in portfolio as suggested at 15.5k.
Traders need to keep trading volumes low as there could be more stop hits with high volatility so good risk management may help.
Stocks to watchout for :
NTPC
The stock has its 200 dema around 185 levels and the stock has heavily from 230 levels. Investors/traders can buy with a stop of 185 on closing basis and a target of 202/212.
Reliance Inds
The chart was earlier posted about how a move below 2145-2160 would turn the tide for the index. Reliance is now arnd 1950. The next important support is around 1850. The 38 % retracement of the entire upmove comes to 1900. So one can expect the stock to manage a pullback from the ones of 1850-1900. Any move below 1850 would take the stock to 1680-1750.
HDFC Bank
The stock has seen no meaning ful correction since October and the trend still remains strong. Currently in the range of 1500-1580. Move below 1490 or 1600 could give a quick 40-80 bucks move to traders on either side.
As anticipated, equities retraced some of their gains last week. However, Nifty and S&P 500 started showing some signs of renewed strength in Friday’s trading session. Let’s look at the possibilities going into this week.
First - let’s take a look at S&P 500 (spot) 60 Minutes chart:
S&P500 June 21, 2009
In case a continuation of Friday’s move occurs this week - the best resistances for S&P 500 (spot) should be in areas of 936 and 944 - based purely on standard Fibonacci retracements. However, looking at the price patterns made by the index on its way down and subsequent movement - I would consider 944 as having higher possibility of working as a good resistance based on the fact that 916-917 (23.6 retracement) worked as a good resistance initially - indicating that 76.4 retracement could be significant as well. Read the rest of this entry »
TV Channels blaring that India’s inflation rate slipped into the negative for the first time in 30 odd years. What does it really mean? It really means nothing to the common man!
Prices are still soaring or at least stable at their peak - and why is this not reflected in the Inflation numbers?
This is because India calculates Inflation differently than other countries
India uses something called the Wholesale Price Index (WPI) to calculate and then decide the inflation rate in the economy.
Most other developed and developing countries use the Consumer Price Index (CPI) to calculate inflation.
The week ending 19 June 2009 was privy to some broad-based selling as investors looked to book profits. On Friday, the Dow closed 15.87 points lower (-0.19%) to end the day at 8,539.73. The index gained as it opened but skid soon after. The NASDAQ closed 19.75 points higher (+1.09%) to finish at 1,827.47.
The Indian ADRs had a mixed bag day on Friday, with the gainers and losers more or less equally divided amongst them. Infosys Technologies (INFY) was the biggest gainer, up 0.89%, closing at $36.15. HDFC Bank (HDB) was the biggest loser, down 2.75%, closing at $104.41.
Some modest gains on Friday notwithstanding, the European markets ended the week ending 19 June 2009 in the red as investors turned to the safety of defensive stocks. The UK’s FTSE closed 65.07 points up (+1.52%), ending at 4,346. Germany’s DAX closed 1.98 points up (+0.04%), ending trading at 4,839.
As of 9:55 am IST, the Asian markets were witnessing reasonable gains. While Japan’s Nikkei is currently trading 32.90 points higher, up 0.34%, the Hang Seng is currently trading 393.22 points higher, up 2.19%.
WTI Brent crude oil closed at $69.29 per barrel, down $0.26 (-0.37%). Nymex light crude July futures closed at $69.29, down $0.26 (-0.37%). August COMEX gold futures closed at $933.70 per ounce, down $2.50 (-0.27%).
As of 10:00 am IST, the Yen (¥) fell rose against the USD, by ¥0.30 to ¥95.92. The Euro (€) fell €0.0022 to €0.7188 against the dollar. The Pound (￡) fell by ￡0.0007 to ￡0.6063 against the dollar.
The rupee gained by Rs. 0.11 to close at Rs. 48.08/09 on Friday, against the greenback.
About
Patni is an IT services company similar to Infosys, WIPRO and other companies in the same industry. The company derieves a major portion of its revenue from the US. The main industry segments in which the company operates are Financial services, insurance, manufacturing and media.
The key feature of the business model is offshoring. Indian IT services company provide a cost advantage to the customer by executing the work in low cost locations such as India.
Financials
The company has been doing fairly well financially for the last couple of years. It has been able to maintain its ROE in excess of 15% over the past 5 years. The calculated ROE is depressed due to high cash on books (running almost 1400 Crs now). The company had a good topline growth till 2005, which slowed down in 2007 and 2008. However it has still been able to pull off a double digit growth for 2008.
The net margins has dropped from around 20% to around 13% levels due to forex losses. The net margins are not as high as the Tier I companies such as infosys, but still at healthy levels.
The net profit growth has been fairly erratic in the last few years due to the forex changes. However the profit has doubled in the last 5 years inspite of the major changes in the market such as recession, flucutations in the Rupee-dollar rates and increases in the salary etc.
The markets showed signs that fear was on the rise this week as heavy selling and volatile trading saw an end to the spectacular run of recent advances. Fridays trading was especially volatile and a late rebound, driven by the heavy industry stocks which had been sold aggresively throughout the week, coincided with positive cues from European and Asia bourses. This will to some extent put an overly positive spin on a week which saw the first real correction since the rally began some 15 weeks and 7,000 Sensex points ago.
Despite the gains on Friday, the Sensex closed the week down 716 points or 4.7% at 14,522. The Nifty meanwhile shed 270 points to end the week on 4,314, representing a loss of 5.9%.
The reversal in benchmark index performance mirrored a reversal in recent FII flows with 1,369 Cr of net sales representing the worst week on this front for a long time. Volumes were slightly lower than have been seen in recent weeks.
Typically the weeks preceeding the full year budget are associated with a strong move in the markets, with history suggesting an equal chance of either an advance or a decline. With the steam apearing to have already run out of the rally, crude on the rise and the monsoon disappointing, the liklihood of a significant advance now seems low.
Many institutions (both foreign and domestic) may adopt a wait and see strategy regarding the upcoming budget which could result in a drying up of demand. However, the volume of excess liquidity that exists at the monment should be enough to offset the threat of a really dramatic downmove.
All eyes remain fixed on budget day and the markets are likely to remain volatile between now and then, with some downward bias becoming increasingly likely.
The US markets slipped in the first few minutes of trading, but were able to recover and log their best single-session advance by percent in two weeks. The advance was broad-based as six of the 10 major sectors in the S&P 500 posted a gain. The Dow closed 58.42 points higher (+0.69%) to end the day at 8,555.60. The index fell as it opened but managed to recover its gains through the day. The NASDAQ closed 0.34 points lower (-0.02%) to finish at 1,807.72.
Majority of the Indian ADRs ended in the red on Thursday. HDFC Bank (HDB) was the biggest gainer, up 2.68%, closing at $102.70. ICICI Bank (IBN) was the biggest loser, down 0.90%, closing at $28.92.
At the European markets, stocks rebounded in late trading on Thursday after a volatile session for European equities, which finished in positive territory for the first time this week. The UK’s FTSE closed 2.40 points up (+0.60%), ending at 4,281. Germany’s DAX closed 37.50 points up (+0.78%), ending trading at 4,837.
As of 10:45 am IST, the Asian markets were witnessing reasonable gains. While Japan’s Nikkei is currently trading 24.21 points higher, up 0.25%, the Hang Seng is currently trading 104.13 points higher, up 0.59%.
WTI Brent crude oil closed at $71.51 per barrel, up $0.14 (+0.20%). Nymex light crude July futures closed at $71.63, up $0.26 (+0.36%). August COMEX gold futures closed at $934.30 per ounce, down $0.30 (-0.03%).
As of 10:50 am IST, the Yen (¥) fell against the USD, by ¥0.01 to ¥96.57. The Euro (€) rose €0.0015 to €0.7178 against the dollar. The Pound (￡) rose by ￡0.0012 to ￡0.611 against the dollar.
The rupee fell by Rs. 0.06 to close at Rs. 48.19/20 on Thursday, against the greenback.
On Wednesday, the S&P 500 climbed 1.4% to its best level since mid-June following a barrage of economic reports, which didn’t really offer much inspiration to market participants. The Dow closed 57.06 points higher (+0.68%) to end the day at 8,504.06. The index gained sharply before closing modestly. The NASDAQ closed 10.68 points higher (+0.58%) to finish at 1,845.72.
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For the second week running the markets closed the week strongly with a rally in Friday trading which has improved short term sentiment considerably. Unlike last week, Fridays rally was enough to push
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