Equity Research Technical Analysis Report BY Mansukh February 2011

ALBK's NII for Q3FY11 has grown-up by 55.7%yoy to Rs10.5bn driven by more than 30% yoy (+4% qoq) growth in advances and 14bps expansion in NIMs to 3.4%. The advances expansion was muscular at 32% yoy and 6% qoq principally driven by SME and corporate advances, which grew by sturdy 9%qoq and +7%qoq respectively. However, we consider that the advances growth on yoy basis is likely to cool off by 6-7% for FY11 due to hostile base effect. The CASA mix declined by 144bps to 33.3% in Q3FY11 as the bank raised term deposits aggressively during the quarter, a growth of 8.8%qoq. ALBK's CAR remained comfortable at 12.8% with tier I CAR of 8.1%. We believe that ALBK's current valuations of 1.6x FY11E ABV and 1.2x FY12E ABV are extremely attractive looking at average 22% RoAs for FY11- 12E.

On technical perspective, stock currently shows some correction from the highs of Rs 272 however we believe it's a temporary one. And we may see some counter actions in the near term. Nevertheless its technical indicators i.e. RSI and MACD also revealed some buying opportunities in near term.

Sterlite Industries (Sterlite) reported slightly better Q3FY11 numbers. Disenchantment on copper and power segment's performance got remunerated by above expectation results in Zinc business. On the back of higher than expected mined metal volumes, Zinc business reported an EBITDA of Rs15.0bn above our expectation of Rs14 bn. Contrary to performance in Zinc business, Copper reported an EBITDA of Rs2.3bn due to lower mined metal production at and below expected refined metal production at domestic operations. Power business reported numbers well below our expectation coupled by Commissioning of Sterlite Energy's (SEL) further got delayed by a quarter to revised schedule of Q4FY11 with an overall delay of a year.

On technical viewpoint, stock has shown some consolidation around Rs 160 (200 dma). In close proximity we believe stock is well poised to move in upward direction. Moreover it's RSI and other technical indicators also suggest some buying opportunities due to its over sold territory. Hence investors are advised to BUY this stock for a price target of Rs 175-190 in one month.

Sluggish Revitalization Ups Risk For Obama By Mansukh

The economy is bouncing back two years into Obama's presidency. But the president is confronting unemployment of more than 9%, record home foreclosures and in all likelihood, the third straight federal budget shortfall of over $1 trillion. About 1.1 million nonfarm jobs were created last year, and economists are forecasting growth of 3.5% in the final three months of 2010. That said, many Americans remain out of work, even as markets have improved. There are 2.8 million fewer jobs now than in January 2009. With planning for his second White House run already underway and with Republicans gunning for his signature health-care plan and seeking aggressive federal spending cuts, Obama must convince voters he can deliver the scaled-back version of Washington they're demanding as well as targeted investments.

The latest Wall Street Journal/NBC News poll, taken Jan. 13-17, showed 53% approved of the job Obama is doing as president, up eight percentage points from December. The poll was conducted after Obama signed a package of tax-cut and jobless-benefits extensions he agreed on with congressional Republicans during the December lame-duck session of Congress. Obama has been road-testing the themes for his sophomore State of the Union in recent days, including in remarks last week at a General Electric Co. plant in New York that will soon be making advanced batteries. He used the occasion to name GE CEO Jeffrey Immelt to head a new White House council on jobs and competitiveness, and underscored how investment will help the U.S. stay competitive.
Obama's address comes as the government is operating on a short-term budget that expires March 4, and a fight over raising the U.S. debt ceiling looms. Treasury Secretary Timothy Geithner has warned Congress that the country could hit its $14.3 trillion debt limit by the end of March if Congress doesn't act, but Republicans are demanding spending cuts in return for their votes. Industries are also eager to hear from the president, who has pivoted in recent weeks to a decidedly more business-friendly posture.

The recently passed tax-cut deal between President Barack Obama and Congressional Republicans has removed some of the pressure on the Fed from being alone on the front line battling the economic crisis. The eighteen members of the Open Market Committee are widely expected at their two-day meeting that kicks off Tuesday to keep interest rates steady at record low levels and make no changes to the controversial $600 billion bond-buying program. The Fed has kept since December 2008, and is expected to keep, its key interest rate in a range of 0% to 0.25% as it seeks to bolster the economy.

The market responce to state of uniom speeches

2G SPECTRUM SCAM- DEPRIVED GOVT BY ALMOST $39 BILLION

The Comptroller and Auditor General (CAG) has meticulously documented how former telecom minister circumvented norms at every level and obdurately avoided scrutiny in awarding 2G licences in January 2008 at 2001 rates, which resulted in a loss of Rs 1.76 lakh crore to the exchequer. n 2008, India issued 122 new telecoms licences and the second-generation radio spectrum bundled with it to several Indian companies that had little or no experience in the telecoms sector, and at a price set in 2001. The state auditor said the allocation process did not reflect the correct value of radio spectrum as there was no auction and the entire process was flawed, benefiting selected companies. The auditor said the telecoms ministry did not do the requisite due diligence, granting 85 out of the 122 licences to ineligible applicants.

To recapitulate the spectrum swindle, the all India license and the spectrum for additional cellular operators (2G operators) was given away on a first-comefirst- served basis at 2001 prices. TRAI, experts within and outside the government, had all stated then that there was no justification for using 2001 prices when there were barely 4 million mobile subscribers as against 300 million subscribers in 2007. Soon after this sale, the parties who had secured the licenses sold it at about 6-7 times the price they had paid without doing any development at all. The difference between what the companies paid a total of Rs 9,000 crore and what the market price of these licenses were anything between Rs 60,000 to 100,000 crore is the scam, making it by far the biggest scam ever in this country. 

Who were the companies that benefited from this award of licenses? There were nine corporate entities who secured 120 licenses, which benefited from this under-valuation of the license fees Unitech Builders, Venugopal Dhoot's Videocon, Swan Telecom, Loop Telecom (reportedly owned by Ruias), S Tel, an unknown company owned by a shadowy entity Telecom Investments (Mauritius) Ltd and older players such as Shyam Telelink,, Idea Cellular, Spice and Tatas. Only a few of these were telecom companies or had any real interest in telecom. The deals struck soon after between UAE's telecom operator Etisalat and Swan Telecom, and that between Unitech and Talenor (of Norway), brought out the magnitude of the under-valuation. Swan Telecom sold 45 per cent of its stake to Etisalat for $900 million, taking its book value to $ 2 billion (Rs 10,000 crore). This is without putting up any infrastructure, let alone actually starting operations. The Unitech-Talenor (of Norway) deal was no different: it sold 60 per cent of its stake to Talenor for Rs 6,120 crores while paying only Rs 1,651 crore as license fee. Thus, the new entrants secured licenses for Rs 1,651 that were being valued in excess of Rs 10,000 crore by the market within a few months of their securing the licenses!

IMPACT ON TELECOM: India's mobile phone market is the world's fastest-growing and its nearly 700 million users trail only China, making it a must-invest market for any major global operator. But regulatory uncertainties have been a concern for some and could make foreign companies start to look more carefully where to invest. If the government imposes heavy fines on new licensees singled out in the auditor's report, it would weaken them further. The newer operators are yet to make profit as they offer heavy discounts to grab subscribers, and any financial penalty would be a blow for them, forcing some to leave the market. Some operators may also freeze network expansion until clarity emerges on the regulatory front, meaning slower growth for network equipment vendors and other service providers. In case licences are cancelled, it would lead to natural consolidation in the crowded 15-player market.

 

MARKETS MAY REMAIN RANGE BOUND- GLOBAL DATA EYED

The domestic equity markets settled the futures & options' (F&O) expiry week on a negative note.The Street witnessed high volatility and record volume during the passing week on account of F&O October series expiry.The key indices finished higher on two out of five trading sessions of the week. The cuts on the broader indices were even severe compared to their larger peers. Though Q2 earnings' season has so far remained good for India Inc., the markets that have already witnessed sharp up-move in past two months are looking a bit exhausted for further rally at this point. During the week, only consumer durables and auto gauges managed to show respectable gains while realty,power and public sector undertaking witnessed maximum unwinding of positions from traders.

The markets witnessed a gargantuan turnover of over Rs 2.82 lakh crore in the day's trade which is highest ever in the history of Indian markets while the previous high of over Rs 2.36 lakh crore of turnover was registered on the day of September expiry. The markets also witnessed vast rollovers today in stocks.  
like ABG Shipyard (89%), Orchid Chemicals (87%) and Andhra Bank (76%). Total open interest (OI) for the October series expiry remained around 10% lower than September expiry. On the global front, markets in Asia ended mostly in the positive terrain while sentiments in Europe remained strong as they traded with sturdy gains of over half a percent points. Back home,buying interests in Heavyweights like Reliance, Bharti Airtel and Hero Honda gave some support to the frontline indices while the broader markets proved to be the laggards today. Huge profit bookings marred all the sectoral indices on the NSE, with the Realty index being the biggest loser with 1.99% losses. The India VIX, a gauge for market's short term expectation of volatility, decreased 2.37% and reached 20.52 at close.

Nifty November futures saw an addition of 5.93% or 1.44 million (mn) units, taking the total outstanding open interest (OI) to 25.85 mn units. For Nifty calls, 6100 strike price (SP) from the November series was the most active call with an addition of 1.25 mn or 43.25%. Among Nifty puts, 6000 SP from the November month expiry was the most active put with an addition of 0.81 mn or 19.02%. The maximum Call OI outstanding was at 6100 SP (4.16 mn) and that for Puts at 6000 SP (5.09 mn. The Nifty Put Call Ratio (PCR) OI wise stood at 1.13 for November-month contracts. The top five scrips with highest PCR on OI were Dr Reddy's 2, ACC 1.98, Godrej Industries 1.63, Jindal Steel 0.95 and Aban Offshore 0.76. Among most active underlyings ICICI Bank witnessed an addition of 16.56% in the November month futures contract,followed by Reliance which saw an addition of 1.59% of OI in the near month contract. Tata Steel witnessed an addition of 3.65% in the near-month futures. Tata Motors saw an addition of 2.77% in the OI while Uco Bank witnessed an addition of 3.53% in the near month futures contract.

The coming week will be the eventful one as there are few important macro as well as micro economic events lined up. There will be only four trading sessions next week. The Reserve Bank of India's (RBI) second quarter monetary policy review for FY11 is scheduled on November 02 (Tuesday). The apex bank of the country is expected to go for one more round of rate hike in its policy review to tame spiraling inflation. Besides this, all eyes will also be on the outcome of the Federal Open Market Committee (FOMC) meeting in the US which will be held over November 02-03. The US Federal Reserve is likely to take more monetary easing steps this time to boost the slowing economy. Technically too domestic indices seem to be on the back foot as we expect 5830-5850 could be the crucial support zone. Any drift below this may open the flood gates however next support could be around 5600. On the flip side if support remains Affermative , we might see some more bullishness in the upcoming sessions however 6295 will be very crucial to watch. HAPPY TRADING…..