The Psychology of Investing in Financial Markets

I have published an article in IndianMBA website which is top site for MBA students and faculty. It deals with the biases of traders in taking risk. The link is http://www.indianmba.com/Faculty_Column/FC598/fc598.html

BFSIFORUMS.COM

I have come across an interesting forum on BFSI aptly named WWW.BFSIFORUMS.COM. It is a good container of knowledge on BFSI area. All students and practitioners in this domain should interact in the forum and contribute

Indian Stock Market Daily Report June 6,2007

TWENTYFIRST CENTURY SHARES AND SECURITIES LTD.
DAILY REPORT June 06, 2007
Anticipating the future
GLOBAL CUES
• Asian stocks rose to a record, led by Japanese trading companies after Daiwa Institute of Research Ltd. recommended investors buy shares in Marubeni Corp.
• The European Central Bank will probably raise its benchmark interest rate to a six-year high today and leave the door open for another increase to keep economic growth from fueling inflation, surveys of economists show.
June5 Stock Market Summary

• Market opened on a positive note, but it lost ground and slipped into the red immediately after opening. After a recovery in the early afternoon, it remained firm through out the trading session. S&P CNX Nifty closed at 4284.65 up by 17.60 points.
• Index Movement :
Index Previous Close Open High Low Close Gain/Loss
S&P CNX Nifty 4267.05 4268.90 4292.50 4249.10 4284.65 17.60
CNX IT 5209.20 5220.40 5265.90 5184.70 5251.55 42.35
CNX Nifty Junior 8069.75 8072.00 8216.55 8042.40 8207.95 138.20
S&P CNX Defty 3649.60 3647.30 3671.65 3628.85 3663.75 14.15
BANK Nifty 6448.85 6441.50 6554.90 6411.25 6533.35 84.50
CNX Midcap 5677.30 5673.60 5700.65 5653.00 5696.65 19.35
S&P CNX 500 3557.20 3558.15 3575.70 3543.00 3571.45 14.25
CNX 100 4160.00 4159.30 4190.75 4144.20 4184.80 24.80

Advances 537 Declines 531 Unchanged 44

• 79 securities have hit their price bands today.
• Top 25 Securities Today :
Securities Prev. Close Close Price % Var. Value (Rs.crs.) Securities Prev. Close Close Price % Var. Value (Rs.crs.)
NITINFIRE 190.00 484.85 - 769.73 SATYAMCOMP 465.95 463.60 -0.50 118.03
INFOSYSTCH 1916.30 1943.20 1.40 345.36 IBREALEST 400.45 391.35 -2.27 114.70
RELIANCE 1741.95 1745.40 0.20 315.06 TATAMOTORS 710.85 710.50 -0.05 106.06
RCOM 508.95 511.60 0.52 273.88 RNRL 34.55 35.95
4.05 105.16
SBIN 1406.40 1436.50 2.14 256.71 UNITECH 562.75 560.05 -0.48 102.49
RELCAPITAL 983.60 1009.85 2.67 205.73 TATASTEEL 638.10 641.70 0.56 97.28
SUZLON 1289.85 1353.70 4.95 175.06 SREINTFIN 94.95 95.75
0.84 93.55
IFCI 46.30 47.45 2.48 158.54 MTNL 162.65 165.90 2.00 89.88
LT 1971.85 1944.75 -1.37 156.33 MIC 373.20 369.90 -0.88 85.26
PUNJLLOYD 216.85 235.15 8.44 152.22 CINEMAX 154.30 168.10 8.94 84.79
ICICIBANK 933.35 939.05 0.61 150.67 NIITLTD 912.15 990.85 8.63 84.14
RPL 97.35 101.60 4.37 145.73 SAIL 138.80 138.95 0.11 82.01
IDBI 98.70 104.15 5.52 141.74

• Top Five S&P CNX Nifty Gainers / Losers :
Gainers Close Price Prev. Close % Change Losers Close Price Prev. Close % Change
SUZLON 1353.70 1289.85 4.95 HINDPETRO 277.25 285.05 -2.74
RPL 101.60 97.35 4.37 ITC 161.85 164.90 -1.85
VSNL 479.25 464.00 3.29 BPCL 349.90 355.60 -1.60
SBIN 1436.50 1406.40 2.14 LT 1944.75 1971.85 -1.37
MTNL 165.90 162.65 2.00 GUJAMBCEM 112.35 113.85 -1.32




Politics & Economy:
• India has informed the WTO that it making efforts to resolve the disputes with US over high rates of duties on wines and spirits. (BS)
• In a move to check short-term inflow of foreign funds, RBI has suggested to the government to impose a 3-year lock in for FII allotments. (ET)
• The BOA has given nod to 26 SEZ proposals. (BS)
• According to a FICCI report rising rupee has reduced exports by 12%. (BS)



Industry& Company:

• UK-based private equity major Apax Partners is learnt to be interested in picking a controlling stake in Patni Computers Systems for over $800 million. (ET)
• Aurobindo Pharmaceuticals on Tuesday said it has got USFDA approval for its Ciprofloxacin tablets in 250mg, 500mg and 750mg strengths. (ET)
• DLF has ermarket around Rest. 4000 crores for projects in Bangalore. (ET)
• Rain commodities has declared a 35% dividend for the Fiscal FY07. (BL)
• Tata motors is planning to cut production at its Pune plant in anticipation that higher interest rates may force transport companies to postpone or drop purchase plans. (ET)
• GMR Energy has announced that it plans to set up a 1000-MW coal based power pant in Chhattisgarh. (BS)
• Amtek Auto has acquired UK-based auto ancillary company for an undisclosed sum. (BS)
________________________________________________________________________
"The worst decisions, in life and markets, come from extremes: overconfidence and a lack of confidence." ~ Dr. Brett Steenbarger
___________________________________________________________________________
Analyst: Gangineni Dhananjhay

Twentyfirst Century Shares and Securities Limited
Ground Floor, Kamadhenu Complex, Rockdale Compound, Somajiguda
Hyderabad – 500082
DISCLAIMER: This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person. Opinion expressed is our current opinion as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true and are for general guidance only. While every effort is made to ensure the accuracy and completeness of information contained, the company takes no guarantee and assumes no liability for any errors or omissions of the information. No one can use the information as the basis for any claim, demand or cause of action. Recipients of this material should rely on their own investigations and take their own professional advice. Reports based on technical analysis centers on studying charts of a stock’s price movement and trading volume, as opposed to focusing on a company’s fundamentals and as such, may not match with a report on a company’s fundamentals. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Twentyfirst Shares and Securities and affiliates, including the analyst who has issued this report, may, on the date of this report, and from time to time, have long or short positions in, and buy or sell the securities of the companies mentioned herein or engage in any other transaction involving such securities and earn brokerage or compensation or act as advisor or have other potential conflict of interest with respect to company/ies mentioned herein or inconsistent with any recommendation and related information and opinions. Twentyfirst Shares and Securities and affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past.

Report on Mangalam Cements

Mangalam Cement (BUY) May 17, 2007
C.M.P: 140 (4.45X08E) Target Price (12 months): Rs. 200
Investment Argument:
• We initiate coverage on Mangalam Cements Limited (MCL) with a BUY, due to its very attractive valuations.
• MCL is a major Rajasthan based cement player with an aggregated capacity of 1.5 million tonnes. The company is set to become a significant player with its current capacity expansion going up by 0.5 mn tons which is to be commissioned by September'07.
• We expect the company to post a robust topline on the back of fresh capacities coming on board for FY08 inspite of the likelihood of a price decline of Rs. 4-5 per 50 kg bag.
• MCL has repaid its entire long-term debt as on Oct'06. It is also setting up 17.5 MW thermal based captive power plant (to be commissioned by Jun'07) which would result in savings in power cost to the tune of Rs 133 per tonne.
• Cement offtake was boosted due to 14.8% growth in consumption level in North India during this quarter. In Rajasthan, consumption grew by 20% YoY, which accounts for 35-37% of the MCL’s dispatches.
• On a conservative basis, our 12 month target is Rs. 200 (6.45X08E).
Investment Positives:
Well Positioned in In North India: MCL has 2 cement plants in the state of Rajasthan with capacities aggregating to 1.50 million tonnes (capacity utilisation levels of more than 100%) catering to the northern cement markets of Rajasthan, UP, Haryana & Delhi. We expect the cement demand in the North to grow by 12% YoY in FY07E & FY08E driven by strong housing demand and infrastructure development in the region. Fresh capacities are expected to come up only by end FY08E and early FY09E, hence we expect the cement prices to remain stable during FY08E respectively. However, the deadlock between the government and the cement industry may trigger a possible price decline of Rs 4-5 per 50 kg bag.
Expansion of cement capacity: MCL has undertaken an expansion plan for increasing its cement capacity from 1.5 mn tonnes currently to 2.0 mn tonnes by September'07 at a capex of Rs 750 million, which is to be entirely financed from internal accruals. This would help the company to service the increasing demand in its existing markets resulting in increased EBITDA margins.
Captive Power Plant - Key Positive: MCL is setting up a 17.5 MW thermal based captive power plant, which would take care of 100% of its power requirement for the 2.0 million tonnes cement capacity. The captive power plant, which will be commissioned in September'07, would save about Rs 2 per unit of power. Further, the captive plant would also ensure uninterrupted power resulting in increased operational efficiencies.
Healthy Financial Restructuring: MCL came under the Board for Industrial and Financial Restructuring (BIFR) umbrella after being declared a sick unit in May 2002. As on September 30, 2003, MCL’s total debt stood at Rs 2.4bn, of which Rs 2.1bn were long-term secured loans including interest dues of around Rs.1,025mn. A restructuring plan was made by the company’s operating agency IDBI, wherein MCL offered a one-time settlement to financial institutions to whom it owed money. The entire interest component of the loans was waived off. As per the scheme, the promoter companies brought in Rs.1.2bn, Rs.382mn was generated from internal accruals and loan of Rs.550mn was availed off to set up a captive power plant.

Financial Highlights:
Details (Rs. Cr) FY06 FY07 FY08E
Net Sales 429 228 500
Operating Profit 102.85 70 140
Net Profit 69 42 90
EPS 24.45 14.85 31.55
The Company has changed its accounting year from October-September ending to 31st March ending. Consequently, the current year's accounts have been prepared for six months, from 1st October, 06 to 31st March. 07. Hence, previous year's figures are therefore, not strictly comparable with the figures of current period.
Quaterly Highlights:
Details (Rs. Cr) Q407 Q406
Net Sales 116 110.6
Operating Profit 35.75 29
PBT 32.35 23.13
Net Profit 21.5 22.75
EPS 7.55 8
The company’s sales volume posted a flat growth for the quarter, with a mere 5.0% growth YoY to Rs. 1160 mn. However, net realization has improved by 22.7% YoY to Rs.151/50 kg bag, The EBITDA margins improved by 474 bps to 29.3%, but with the company now falling into the full tax bracket, the PAT came down (5.4) % to Rs. 215 mn.
Risks & Concerns:
• Any slowdown in infrastructure spending and sharp drop in cement prices can affect the profitability of the company.

Outlook:
Our outlook for the company and the cement sector as a whole remains positive. Going forward, continued demand and higher utilization levels are expected to boost earnings for cement companies despite rise in freight and raw material costs. The housing sector, IT/ITES and higher infrastructure sector spend remain to be the key growth drivers for the cement industry.



Valuation:
At the current price of Rs 140, MCL trades at an EV/EBIDTA of 3.5 x FY08E and at a P/E of 4.5 x FY08E. EV/Tonne for FY08 at an enhanced capacity of 2 million tonnes stands at USD 65 (including 17.5 MW power plant) which is far lesser than the cost of setting up a 2 mn ton cement plant. With a debt free status, increased capacity by Q2 FY08 and expected improvement in operational efficiencies post installation of captive power plant, we believe that MCL is a good long term investment. We recommend a BUY on the stock with a target price of Rs 200. At our target price the stock will be valued at EV/EBITDA of 5.0 x FY08E and PE of 6.45 x FY08 E of Rs 31.5. At our target price the company is valued at an EV/Tonne of USD 86.5.
Analyst: Akhil Reddy.



Twentyfirst Century Shares and Securities Limited
Ground Floor, Kamadhenu Complex, Rockdale Compound, Somajiguda
Hyderabad - 500082

Report On ERA Constructions

TWENTYFIRST CENTURY SHARES AND SECURITIES LTD.
Era Constructions (BUY) June 05, 2007
C.M.P: 365 (5.8X08E) Target Price (12 months): Rs. 500
Investment Argument:
Era Constructions is engaged in diverse areas such as power projects, infrastructure, institutional & industrial complexes and turnkey projects and is set to benefit in a major way from the expected growth in the infrastructure sector. Its order book is Rs.1800 crores – 1.5 times its consolidated FY07 revenues – to be executed over the next 15 months. ECIL expected to significantly increase its order book in the near future, which provides a clear visibility in revenue growth for the next few years. The company is also foraying into real estate which is expected to unlock significant value for the company going forward. We expect the company’s revenue growth to be robust. We recommend a BUY with a one year target price of Rs.500 implying an upside of 35% from the current levels.

Key investment positives:
Good revenue visibility: Increased focus of government on infrastructure and robust order book of Rs.1800 crores is likely to drive revenue growth for the company for the next few years. The management has indicated that it plans to add orders worth more than Rs. 3000 crores to its order book during the current fiscal.
Robust Financial Performance: The company has shown a consistent revenue growth in the past two years.
Consolidated Numbers (Rs. Cr) FY05 FY06 FY07 FY08E
Net Sales 310.84 376.21 1200 1440
Other Income 2.07 2.11 13.95 0
Total Income 312.91 378.32 1213.95 1440
Total Expenditure 262.75 326.45 928.6 1100
EBIDTA 50.16 51.87 285.35 340
Interest 9.94 9.95 46.17 55.5
Depreciation 3.47 3.47 8.17 16
PBT 36.75 38.45 231 268.5
PAT before minority interest 27.15 27.8 160.7 188
PAT after minority interest 27.15 27.75 120 145
DEPS 14.31 21.5 57.15 63

Improving margins: Operating margins of the company are continuously improving due to a diverse mix of projects in different segments such as power, railways, roads and industrials. Power and industrial projects enjoy higher operating margins. Going forward, infrastructure and power projects are expected to contribute to 50% of the company’s revenues.

Scaling up the value chain: The company has recently set up a 50,000 metric ton facility to manufacture pre-engineered building (PEBs) materials plant at Pant Nagar (Uttaranchal) through a separate entity Era Metals. Era Constructions will have a 48% stake in Era Metals and the remaining will be held by promoters and associates. Rapid growth in the end user industry of ‘pre-engineered’ building is likely to lead to the industry growing from INR 4.5 billion in 2005 to about INR 25 billion by 2011. With more than a third of its order book coming from building structures, ECIL’s foray into the PEB segment is likely to help it move up the value chain. We expect accretion of significant business opportunity from this business foray on third party front as well as captive construction business.

Real estate Foray: ECIL’s increased focus in the real estate space through its 51% subsidiary Era Infrastructure (India) Ltd (EIIL) is likely to lead to significant value unlocking. With primary focus on tier II and III cities through 16 projects on the anvil, EIIL has a land bank of over 300 acres.

Saved from impact of Section 80IA (Source: BSE announcements): In the Union Budget 2007-08, it has been clarified that tax benefits under Section 80IA will not be applicable for construction companies that are carrying out only civil construction projects. Their effective tax rate would also go up in future estimates. However, the negative impact of Section 80IA will not be seen in case of Era Constructions since it had been paying full tax in past years.


Risks & Concerns:

Slowdown in debtor realizations: Any kind of delay in clearances of payments might impact the company's performance.

Small size might become a constraint: The small size of the company might become a constraint in bidding for bigger projects. But with increased net worth, it will be in a right position to individually bid for projects.

Outlook:
Strong growth in construction business supported by ramp-up in pre-fabricated construction businesses and value unlocking in the company’s real estate business are likely to act as multiple value creation triggers over the next few years.

Valuation:
At the current price of Rs 365, ECL currently trades at 5.8 x FY08E. We believe that ECL is a good long term investment, hence we recommend a “BUY” with a 1-year price target of Rs. 500. Our target provides an upside of 35% from current levels.
Analyst: Akhil Reddy.



Twentyfirst Century Shares and Securities Limited
Ground Floor, Kamadhenu Complex, Rockdale Compound, Somajiguda
Hyderabad - 500082

F&O contracts on NIFTY JUNIOR & CNX-100

NSE introduced derivative contracts on Nifty junior & CNX 100. Ajay shah has very insightful article at his blog ajayshahblog.blogspot.com