STOCK MARKET DESK

Amid global uncertainties, the US Inc is bullish on India as an investment destination compared to other emerging economies, but wants the country to improve its intellectual property rights regime and infrastructure, a survey said.

The survey, which polled members and company executives of the US-India Business Council (USIBC), showed that a large number of respondents rated future economic growth in India as highly sustainable despite uncertainties in other global markets.

Further, a large section of respondents answered in the affirmative regarding their plans to invest in India in order to establish or expand their operations over the next five years, according to the survey conducted by Ernst and Young.

"India is, and will continue to be, a premier destination for investment," is the assessment of most of these respondents, it said.

India has said it will take measures to bring down steel prices, but would first wait to see if producers do it on their own.

"Let's see. If the steel companies do not do what they should be doing (reducing prices) then the government will do what it should be doing," Commerce and Industry Minister Kamal Nath told PTI in Dubai on Thursday evening.

Already, five major steel producers including SAIL, Tata Steel and Essar have decided to hold the price line for up to three months after an appeal by Prime Minister Manmohan Singh not to manipulate prices for short-term gains.

High steel prices are partly to blame for soaring inflation, which rose to 7.33 per cent for the week ended April 12. Steel has seven per cent weightage in the wholesale price index-based inflation and has contributed significantly to rising prices in the last few months.

The government had earlier withdrawn export incentives on primary steel items. Nath said the government has taken some decision and steel companies have said they would voluntarily bring down prices.

Earlier, Finance Minister P Chidambaram had accused steel and cement companies of behaving like a cartel. "Steel industry should be responsible to ensure that they are playing their part in containing inflation," he said.

Zee News Recommendation: Buy Price target: Rs79 Current market price: Rs55.6

Result highlights

• Zee News Ltd (ZNL) has delivered a blow-out performance for Q4FY2008. Beating our and the consensus estimates, the revenues from its operations grew by a robust 59.1% year on year (yoy) to Rs113.1 crore in the quarter. The net profit after minority interest zoomed multifold to Rs15.3 crore during the same period.
• The advertising revenues soared by 84% yoy to Rs86 crore, while the subscription revenues that had grown by a meagre 7.6% in M9FY2008 grew by 49.7% yoy and 36.3% quarter on quarter (qoq) to Rs22 crore. A break-up of its channels into existing and new businesses shows that the revenues from the existing businesses grew by a handsome 53% yoy, whereas the new businesses recorded a 153% growth in their revenues.
• The operating profit margin (OPM) for the quarter stood at 23.7% against –1.3% for Q4FY2007. Hence the operating profit grew to Rs26.8 crore against an operating loss of Rs0.9 crore in Q4FY2007. The improvement in the margins of the existing businesses continued and stood at 37.2% for the quarter. The operating loss for the new businesses declined from Rs15.3 crore in Q4FY2007 to Rs10.1 crore.
• Zee Marathi and Zee Bangla, which are number one channels in their respective genres, increased their gross rating points (GRPs) by 35.7% and 18.5% respectively over Q4FY2007, whereas Zee Telugu and Zee Kannada, which form a part of the new businesses, increased their GRPs by 74.3% and 123.4% respectively and have thus increased their market share to ~10.5% against 6% and 4.5% earlier. We believe that with the continuous gain in viewership the new businesses (excluding Zee Tamil) would break even by the end of FY2009.
• The company will launch Zee Tamil by the end of July 2008 against which it has charged Rs1.39 crore as expenses in the quarter. The south Indian regional entertainment diaspora is highly competitive. However, considering the Zee group’s established track record in entertainment and the size of this market, we remain positive on Zee News’ prospects in these markets. We believe that its entertainment channels in the southern regional languages remain the key drivers of its growth in the longer term.
• At the current market price of Rs55.6, ZNL discounts its FY2009E and FY2010E earnings per share (EPS) by 23.7x and 18.1x respectively. We maintain a Buy recommendation on the stock with a price target of Rs79.

The Indian Steel Industry, is today acknowledged for its product quality. This is reflected by trends of rising exports and Indian companies mark in the global Mergers & Acquisitions market. From the fledgling one-million tonne capacity status at the time of Independence, India has now risen to be the 7th largest crude steel producer in the world and the largest producer of sponge iron. The steel industry now accounts for a capital base of Rs. 90,000 crore and contributes around 6 per cent of the Gross National Product, commanding a weight of 5.13 in the Index of Industrial Production and provides direct employment to more than 4 lakh people from being a negligible global presence.

The first major change came during the first three Five Year Plans (1952-1970), when in line with the economic order of the day, the iron and steel industry was earmarked for state control. From the mid 50s to the early 70s, Government thus set up large integrated steel plants in the public sector at Bhilai, Durgapur, Rourkela and Bokaro.

Indian stock market has emerged as one of the worst performers globally in the first three months this year, with concerns of a possible slowdown in the US economy and surge in commodity prices impacting sentiments of emerging and developed equity markets, a report says.

According to a monthly review by global index provider Standard & Poor's, the world's emerging and developed equity markets were hit hard during the first quarter of 2008, losing 10.56 per cent and 8.95 per cent respectively, during the period.

Among the emerging world equity markets, 15 of the 26 countries lost ground during the January-to-March quarter this year with India, China and Turkey emerging as the worst performers.

During the first three months in 2008, Indian equity market lost 28.55 per cent, while China and Turkey witnessed a fall of 24.65 per cent and 36.62 per cent respectively.

However, emerging markets which managed to give positive returns despite the global concerns, include Pakistan, Morocco and Chile, which emerged as some of the best performers during the first quarter of this calendar year.

Pakistan stock market has provided a return of 10.25 per cent in the reviewed period, Morocco performed robustly giving gains of 23.81 per cent and Chile gave 8.5 per cent positive returns, the S&P monthly global stock market review said.

As the market is very volatile these days borrowing and investing in the stockmarkets now is not a good strategy to follow. In this case, your stock market profits will first be used to service the debt taken and after that the left over will be your profits. In fact, it is quite possible, in order to increase the returns, since a major chunk goes towards interest payments, the investor might be forced to take higher risk (for higher returns), which could be well over his/her risk appetite. Moreover, it would serve as double whammy if the stockmarkets were to go into a correction mode again.

Power equipment supplier Bharat Heavy Electricals (BHEL) has recorded a 17 per cent rise in net profit to Rs 2,815 crore in FY08 on the back of a 15 per cent jump in turnover at Rs 216.08 billion.

Its annual turnover has jumped two-and-a-half times from Rs 86.62 billion in FY04. “We aim to be a Rs 500 billion company by 2012,” said Chairman and Managing Director K Ravi Kumar.

During FY08, the company got orders worth Rs 502.65 billion, taking its order book to Rs 850 billion.

It has also formed an equal joint venture with power producer NTPC for setting up power plants and taking up engineering works. BHEL will also enter with an agreement with Nuclear Power Corporation of India (NPCIL) on Friday to set up nuclear power plants in India and overseas.

"There has also been a 1 per cent increase in cost of raw materials such as steel during the fourth quarter,” Kumar said.

According to analysts, higher wages and raw material prices were likely to result in lower profits in the fourth quarter of FY08 compared with the comparative previous quarter.

The joint venture would also take up engineering, procurement and construction activities for nuclear power projects in India and abroad, BHEL Chairman and Managing Director K Ravi Kumar told journalists.

Mukesh Ambani-led Reliance Industries has submitted an over Rs 300 billion proposal for setting up two manufacturing facilities under the government's scheme to promote semiconductor technology.

Till now, the government has received seven investment proposals totalling Rs 65,000 crore from six companies. Besides Reliance Industries, Videocon Industries, Moser Baer PV Technologies, Titan Energy System, KSK Energy Ventures Pvt Ltd and Signet Solar Inc have submitted their plans with the Department of Information and Technology (DIT), an official statement said.

Proposals received are for manufacture of wide variety of items like Polysilicon, single/multi-crystalline ingots, wafers, solar cells, solar photovoltaic modules (SPV) liquid crystal display (LCD), integrated circuits-advanced logic/memory/embedded system on chip including assembly, test, mar and packaging facility for semiconductor devices.

"The investments are envisaged over a period of ten years," the statement said. Under the special incentive package scheme, the central government has to provide incentive of 20 per cent capital expenditure during the first 10 years for the units in SEZs and 25 per cent of the capital expenditure in non-SEZ units.

Domestic steel producers, including Tata Steel and Rashtriya Ispat Nigam Ltd, have told the government they will cut prices by Rs 2,000 a tonne on long products like TMT bars used in construction while most producers agreed to roll back prices of roofing materials like galvanised corrugated sheets by Rs 500 to Rs 1,000 a tonne. This is the second price cut by steel companies at the government’s behest in the calendar year. In February, companies agreed to a cut of Rs 1,500 to Rs 2,000 a tonne but raised prices by Rs 2,000 to Rs 2,500 a tonne in March. “This is a voluntary measure but there is no assurance to increase, decrease or hold prices beyond this,” said R S Pandey, steel secretary, after a meeting with major steel companies. Companies that export high-end steel products after processing HRC have agreed to buy the entire requirement internationally under the advance licence scheme that allows duty-free imports against exports. This may boost domestic availability by 2 million tonnes annually, he added.

This is an important investment practice one should abide by strictly. Keep strict targets for yourself and do not hesitate to sell a stock when its price target is achieved, beyond which, it is just over-expectations and market momentum that takes over the stock. Similarly, to look at the other side of this, do not get emotionally attached to a stock. If fundamentals of a company change due to any unforeseen and unpredictable development (like a government policy), get rid of the stock. There is no dearth of investment opportunities in the market.