JJ Irani of Tata Sons said that Steel industry is robust. The cost of raw materials are shooting up. It mainly consists of iron ore and coking coke. But he don't think that any sub prices rise is on the cards and there may be a marginal rise. Present prices are likley to continue till the end of the year.

He further said that Iron ore prices in India will follow the Chinese negotiations. Indian demand will outstrip the steel production and India may have to import steel. The steel capacities are seeing delay in commissioning due to this India may see increase in imports, causing prices to remain firm.

Andrew Goodwin of Steel Business Briefing said that China exports are declinging in long products and flat product prices are robust. He expects negotiations to take longer and expects a 30% increase in iron ore prices. He believes that steel prices will remain stable and likley to pick up later in the year. Flat products will remain strong on US markets picking up. Chinese exports are not drying up and the prices are robust. He is forecasting the prices in 12 months to be stable. He further said that Financial problems in US are not likely to affect the steel prices. China is seeing a dip in growth in production, but overall production is still strong, he said finally.

Narayan Ramchandran of Morgan Stanley said that 50 bps Fed rate cut in early 2008 is very likely. Although, he is surprised by 50 bps cut by the Fed. Fed believes that housing situation is still very serious and they might cut the rates again. He don't think that global slowdown would be too serious. Real bail out was from UK Central Bank.

He further said that valuations are no where next to peak and are not too stretched currently but sees some economic slowdown. There are no problems on earnings or GDP growth in India. He believes that India is one of the best assets in the context of global slowdown. But growth could slow to 7 -7.5% in India. He said that there may see 'Garden Variety' slowdown instead of serious one. He would remain invested in the Indian markets as fundamentals are still strong.

He believes that the US Subprime Issue has been eased and that he will remain invested in the markets. Money will flow from developed markets to emerging markets.

He further said that RBI is expected to pause rather than cut the rates and Asian Central Banks may also turn neutral from hawkish. He believes that rupee effects on stock markets and IT stocks is overdone. The rupee impact may not be as bad as market makes it to be. About Yen, he said that Yen carry trade may not be as 'Alive' as it was 4 months ago.

He is bullish on Telecom and IT sectors and believes that technology companies will continue to show very good RoEs. Most of the long-only investors will gain in the near-term. There is more probability of upside in 1 year and may not see 20% fall in the market. There are higher probability of markets going upside than downside.

Shares of frontline pharmaceutical companies are likely to remain subdued next week, as a strong rupee threatens to impede growth of export-driven drug ompanies, analysts said today. India's pharmaceutical industry has stood out with its indifference to the recent spurts in the broader market. BSE's healthcare index fell 0.3% this week, a period that saw benchmark indices Sensex and Nifty scale new heights.

The decline was led by heavyweights Ranbaxy Laboratories, Sun Pharmaceutical Industries and Cipla. The sector may continue to remain an underperformer. Expectations that large companies will have no significant earnings growth for the current fiscal have dampened sentiments," Shahina Mukudam, an analyst with IDBI
Capital, said.

Earnings of these companies are seen subdued this financial year on account of the high base of 2006-07, and their dependence on dollar revenues in the face of a relentlessly shooting rupee. The rupee today ended at 39.89 to a U.S. dollar, after touching nearly a 10-year high of 39.88 Thursday. The Indian unit has risen over 9% during the current financial year.

"Shares of those companies that are not dependent on exports are likely to see some action in times to come. I expect Orchid Chemicals & Pharmaceuticals and Indoco Remedies to gain some momentum," Surya N. Patra, an analyst with domestic brokerage Sharekhan said. "There seems to be no trigger for pharmaceutical shares, but news on mergers and acquisitions can certainly fire them up," Mukudam of IDBI Capital said.

Thursday's closing share prices, in rupees, of leading pharmaceutical companies on the National Stock Exchange, compared with a week earlier:

Company	Sep 21	Sep 14	Change%
Cadila Healthcare	307.2	303.25	1.3
Cipla	167.45	172.1	(-) 2.7
Dr Reddy's Labs	639.75	640.55	(-) 0.1
GlaxoSmithKline Pharma	1,140.05	1,135.15	0.4
Pfizer	663.05	685.45	(-) 3.3
Ranbaxy Labs	405.1	413.95	(-) 2.1
Sun Pharma	972.8	996.7	(-) 2.4
BSE Healthcare Index	3654.24	3665.56	(-) 0.3
Nifty	4837.55	4518	7.1
Sensex	16564.23	15603.8	6.1

The government will announce monetary support for beleaguered domestic sugar mills in the next 8-10 days to help them clear cane arrears to farmers, Agriculture Minister Sharad Pawar said today. "We are planning to provide monetary support to sugar mills on the condition that it is passed on to the farmers," Pawar said on the sidelines of a conference. He said the group of ministers on sugar has forwarded to the Union Cabinet
its recommendations on the incentives to be given to the industry, which is likely to take its final decision in 8-10 days.

Mills in the major sugarcane growing state of Uttar Pradesh have pending cane arrears of over 19 bln rupees. They have been seeking soft loans from the government to help them clear these dues.

ETHANOL BOOST
Pawar said the government also plans to allow mills to produce ethanol directly from sugarcane to tide over the glut in the sugar industry. Ethanol is currently produced from molasses, a by-product of sugar. Diverting cane towards direct production of the green fuel will ensure lower sugar output in the next season.

The industry is currently battling a glut, which is likely to worsen in the next crushing season that begins Oct 1, as output is pegged over 33 mln tn. The country's sugar output in the current season is estimated 48% higher year-on-year at about 28.5 mln tn. Pawar said the ministerial panel has recommended increasing ethanol
blending in petrol to 10% by Oct 2008 to ensure higher consumption.

The government currently allows 5% ethanol blend in petrol. Mills are allowed to sell ethanol to oil companies at 21.50 rupees a L. Pawar said the government will hold discussions with the oil ministry as well as oil companies to push forward the proposal.

N Murukumbi of Shree Renuka Sugars says that the move will reduce sugar surplus, and it is a positive for the industry. The government move will benefit integrated players most and the bigger market for ethanol will also improve sugar market.

Rana Sugar, KCP Sugar, Kothari Sugar, Ponni Sugar, Mawana Sugar, Uttam Sugar, Sakthi Sugar, KM Sugar, Dharani Sugar, Dhampur Sugar, Upper Ganges Sugar, Simbhaoli Sugar, Oudh Sugar, Thiru Arooran and Bannari Sugar have all hit the upper circuit of 20% on the above news. Shree Renuka Sugar, Balrampur Chini and Triveni Engineering are up more than 23%.

Sanjeev Prasad, Head Research of Kotak Securities says that there is not much upside seen from the current level for the markets and it can be seen in a band of 14250-16750 over the next 12 months. He believes that the US subprime problems are not over yet. In India he says that the political instability is likely to keep the markets under pressure. It may also impact the telecom, oil and gas policies.

Speaking on the sectors, Prasad says that we may not have seen the end of problems in real estate. They have a positive view on the infrastructure space, but says that the FMCG space may not report good numbers. The Indian IT sector is also likely to continue underperforming.

On media, Prasad says that they are not excited by it and the CAS rollout has been ineffective. Zee EPS is seen at Rs 11.50 for FY 09 and the stock looks expensive at these levels. On cement, he mentioned that the cement capacity utilisation will decline in FY09-10 and prices may come off. They are looking at 32 mt of new cement capacities in FY09 & FY10 each.

Commerce and Industry Minister Kamal Nath today said the slowdown in industrial growth is 'not a matter of concern' and hoped that the manufacturing growth target set for the current financial year to March would
be achieved. India's industrial production slumped to a nine-month low in July 2007 to 7.1% compared to 13.2% a year ago and 9.0% in June.

"The slowdown is not that much a matter of concern as it is mainly due to contraction of credit that resulted in steep decline in demand of consumer durables," Nath told reporters at an industry function. He said the slowdown in industrial production is not due to any structural deficiency. "The country is likely to achieve 12% manufacturing growth target set for the current financial year," Nath said.

Nath said the monetary policy should essentially aim at contraction of credit to contain inflation but at the same time it should not lead to decline in the demand for consumer durables. He said the government is hopeful of meeting the export target of $ 160 bln set for the current fiscal despite high crude oil prices. "I'm not amending the export target as July and August are difficult months due to the monsoon," he said.

"The improved efficiency and competitive production by Indian exporters has helped offset the high input costs," the trade minister added. On the government's plan to impose cess on organised retail, Nath said, "I
am not aware of any such move on the part of the government.

The markets posted gains last week as the signals from the US on the mortgage crisis were reassuring. The Sensex gained 271.82 points, nearly 1.8 per cent to 15,590.42 points, while the Nifty rose 45.5 points or 1.01 per cent to 4518.60 points during the week.

Foreign institutional investors remained net buyers to the tune of Rs 2191.6 crore, while mutual funds shopped for Rs 353.8 crore.

What to expect this week

Markets are expected to remain directionless with bouts of volatility, rising crude oil prices and a lack of clarity on the political front in India. With speculations over US Fed rate cuts and the Indo-US nuke deal, the situation does not appear to be improving until the end of the week. However, mutual funds and domestic financial institutions are likely to continue buying shares.


Stock to watch

CENTURY ENKA
Last week's close (Rs) 139.85
Prev. week's close (Rs) 118.75
Week's high (Rs) 142.85
Week's low (Rs) 118.33
Last week's ave. daily turnover (Rs cr) 1.58
Prev. week's ave. daily turnover (Rs cr) 0.27
Number of up/down move 4/1

After being an underperformer in the past year, the beleagured synthetic textile company, Century Enka, has been gaining attention in recent times. The stock is up by 18 per cent in last week and 15 per cent over the last month.

The company’s market capitalisation of roughly Rs 270 crore is just about 27 per cent of its annual revenues of about Rs 1,000 crore mainly due to poor profitability at the net levels.

However, market players expect the company's profitability to improve as they believe that it will follow Reliance Industries, which has raised prices of different grades and varieties of polyester items by Re 1 to Rs 10 per kg due to rising global prices.

Today Sugar stocks had a dream run in the market on the news that the UP government might ask the centre to give out interest free loan and ethanol blending to become mandatory from October 2008.

SP Tulsian of Sptulsian.com said that there are two news driving the sugar companies stock. One is definitely the ethanol blending which says that 5% would be made mandatory immediately because right now about 15 states are only following the 5% blending norm which is optional which is proposed to be made mandatory from immediate effect. Second suggestion is that from October 2007 it will be increase to 10% but again optional and from October 2008 it will be made 10% mandatory. This is on the ethanol-blending front.

The second point which he see as a sweetener for the announcement which is likely to come from the group of ministers meeting is that price of Rs 21.50 has been fixed for ethanol for the next three years because if you give a clear cut pricing policy to the industry, one could take up the capex plan and one could plan out the whole of manufacturing plans, how it will pan out. These are two very strong features. Let me just give you the resultant effect of this.

If you take 5% as the blending, your requirement would be about 80 crore litre of ethanol per year. But since he said only 15 states are following this policy of blending, probably the demand from this blending is about 50-60 crore litre. Suppose if you make it 10% which is mandatory from October 2008 that would be having a demand of about 160 crore litre. So what we are effectively having is an additional demand of about 90-100 crore litre. Since the price is about Rs 21.50 per litre, here the processing cost is very low. You can effectively use your entire molasses. That will give you an incremental profit of Rs 20 per litre.

So what sugar sector will ultimately be getting is additional 2000 crore as profit before tax to their financials which is quite a good amount for giving a boost to the sector.

He further said that the news that the UP government might ask the centre to give out interest free loan is more a political move now. New government has come in UP and now you need some excuses, if you want to withdraw your support at the later date that you have not given me the support or assistance, interest free loan or grant on this account. Definitely, there are cane arrears, which are developed to the extent of about 2,000 crore plus of which about 1,500 crore plus is of private sugar mills. So what the UP government has asked for is an interest free loan from the central government of 2,000 crore which will ultimately be utilise by those beneficiaries or the recipients, for clearing the cane arrears dues to the farmers which otherwise will have a snowballing effect making the problems on the political front also.
He do not think that’s anyway improving the profitability or increasing the bottomline, giving any rationale move on part of the government, ultimately for the larger interest of the sector or for the industry, except for saving the skin or definitely clearing the sugarcane arrears dues, which is a very critical issue.

When asked about who stands to benefit the most from ethanol blending he said that the UP mills - those who have set up the distillery, they otherwise are also having the advantage of supplying. But what is happening now is they are not getting the full allocation because the surplus, now you have a production of about 300 crore litre which is about 100 crore litre for quotable and about 80 crore for industrial use. So still you are surplus with about 100-120 crore litre against the doping demand of 50-60 crore litre.

What is happening is the surplus molasses is not getting processed and that’s getting sold at Rs 250-500 per tonne which otherwise can have an effective realisation of Rs 4,000-4,500 per tonne. The sugar mills, which are not having their own distillery, definitely will stand to gain with this announcement or with this policy changes. But those who are already having their distillery are not going to affect so much, will not be benefited so much, except right now they may be having a cash outgo of about Rs 1 per litre or Rs 1.50 per litre in grabbing the contract for supply of ethanol to the oil marketing companies.

With reference to the current news on sugar companies he suggested that this is the time to book profits because you do not have any trigger or any announcements, which are expected on account of fertiliser front. May be the policy announcement will come but probably that will take a little longer time.