Banks had a party this week and Nifty closed at highest level ever. UB was went high on scotch !

The world markets were on a roll this week and that encouraged investors taking a positive call on the Indian equities. Markets carried on the momentum from last week. Sensex jumped over 500 points around 4% this week. It was the Banking sector which ballooned up helped by higher than expected valuation of ICICI holdings and another potential value unlocking in SBI through the approval of SBI Subsidiary Bill. SBI started the week off with a Bang. Good results and more than that changes in the Bill which will help its subsidiaries raise money. Refining companies saw big moves, HPCL, BPCL , Gail saw upmove on change in the subsidy sharing while Reliance got a kick from the Gross Refining margins which is hitting highs. Bajaj Auto however was an accident. Bajaj Auto's disclosure about the Insurance agreement with Allianz hit the stock badly. The results were not that bad.. But the markets got a shock. The stock closed down 17% for the week.

The big gainers for the Index components included. ICICI bank +12 %, Reliance +7%, SBI +16%, BPCL +5%, Bharti +4%, BHEL +7% Gail +5% HCL T +7%, HLL +4%, HPCL +4%, Oriental Bank + 19%, Punjab National Bank + 8%, The big losers were Bajaj Auto -17%, Suzlon -8%. The mid caps saw lot of action as many Mid cap companies were included in the FNO section. Among the story was the success of UB group with its , acquisition of the world’s fourth largest scotch manufacturer, Whyte & Mackay (W&M) for GBP 595mn ($1 18bn). The stock gained over 22%.Suzlon in a hot breeze, Bajaj had an accident, Tera on Terra firma but Titan had a good time !

Suzlons numbers were lower than market expectations. The margins were hit given an appreciating rupee. There was a major block of goods in transit and profit on that was not accounted which the company explained will come in the next quarter. The company sold about 1,400+ mw of windmills during the year, of which over 500 MW was through exports. As of now, Suzlon has unexecuted orders of around 2000 mw with export orders accounting for 85% of them. The key remains the bid for REpower and the uncertainty will end on 24th May that is next week. The company has said that it will fund the acquisition through debt. Suzlon's bid is now at €150 (vs Areva @ €140)
valuing REpower @ €1.2bn. REpower is the world's seventh-largest wind turbine producer. Areva (which owns over 30 per cent) and Suzlon with its Portugal partner Martifer, (which owns 25.4 per cent of REpower.. Now 33% including its own holding) are in the race. REpower's product range of 1.5-5 MW onshore & offshore turbines compliments Suzlon's portfolio of 0.35 - 2MW turbines and that's the cited synergy. The price to pay is high and benefits of the acquisition are unlikely to be much but not acquiring REpower would mean negatives. The stock continues to be weak.

Bajaj Auto dropped a bomb on the analysts. It disclosed the terms with The Munich-headquartered Allianz for the insurance business. Allianz has an option to raise its equity in general insurance to 50 per cent from 26 per cent and life insurance to 74 per cent from the current 26 per cent at throw away rates. The bigger chunk of course is the life insurance. We had valued the Insurance business to about Rs 7800 crore of its Rs 26000 cr market cap. Now this would add only one third that..which indicates that Rs 500 crore of Market cap is wiped out as per the formula. Thus on a like to like basis
just with this disclosure the stock should be Rs 500 per share less at Rs 2100. Interesting to note that the disclosure was made saying that the Management felt the need to disclose given the high valuations which were being attributed to the insurance business. The big question is corporate Governance. The stock will see more pressure.. Given that the 2 wheeler industry has come under question. The Financial services business intends to get into broking. Well! Well ! Well !.. This one is an accident. We were positive on this. We turned cautious on the slower industry growth guiance..
And now we think its going to be a long wait and watch here. May be the pure Two wheeler business is what one could look at beyond the demerger.

We met a small software company this week. Terasoft India.. A small software company based out of Hyderabad. The story is purely domestic and related to E-governance. Competitors here are TCS and CMC and to some extent 3i Infotech. The company's model is different as in a BOOT model where it develops, runs the project for 5 years and then gives it to the Government. Valuations are not expensive at Rs 100 cr and expected profits next year in the region of Rs 15-16 cr. The company also has land worth Rs 40 which it expects to realise soon. We had a research note on this one.

Titan is having a good time. We have been positive on the business model of the company. The company has been posting a good performance as the Jewellery business is seeing good momentum. The entry into prescription eyewear is an attempt to leverage the brand and thats a strong story. The stock closed up 12%. Thats good gains really. Do read our research on that Enjoy as the party is on.. But it always pays to be a bit careful;
Performance sparkling

Technically speaking: Sensex is upward biased clearly but at crucial resistance level. An upward break out would see resistance at 14500 and then 14700. On the support side 13800 is the first support area and if that goes then we would open for 13560.

Fundamentally speaking: Inflation remains benign and thats the good part. However, the risks have not receded and thats the worry. Inflation for the week ended May 5th came in at 5.44%.. a trifle higher than market expectation. This we believe will be subdued and thats the reason for the party to continue. However, the party popper could be China which has increased interest rates. Thats some reason for Asian markets to feel the heat of slowdown. There are no negatives except in terms of high valuations.
The risks are of a slowing US economy and impact globally. So it pays to be cautious but enjoy as long as the party is on !

Great week of Performance... Wowcals on Asian Electronics was closed with Over 20% gains in less than a months timeframe. Followed by a call on ZEE News which provided splendid gains and partly booked. And Wowcals also had some fresh calls. Sterlite optical was on way to delivery but it had taken stoploss. However, we were disciplined here. Quickies too saw great week with wonderful call on Yes Bank, Tata Tea, Bajaj Auto were closed with handsome gains. Adonis Managed Delivery Deligths had a call on EKC which delivered over 15% gains and the company also started in FNO segment expect some more surprises here. Day Traders are having a good time and BTST are also delivering