18th April, 2011

The markets opened on a soft note and moved lower in the morning session post which they traded sideways till the late morning session. The markets further dropped in the noon session and again traded  in a narrow range ending the day on weak note. Most of the Sectoral indices ended in the red with IT & Realty being the major losers while Auto & Capital Goods saw minimal gains. Among the Sensex stocks Hero Honda (5.52%), Bharti Airtel (1.35%) were amongst the gainers while Infosys (9.59%) and Wipro (5.04%) were the major losers. The Sensex lost 310 points or 1.57% to close at 19,397 while Nifty lost 87 points or 1.47% to close at 5,825.

Total traded turnover stood at Rs 1,46,496 cr. In equities both FIIs & DIIs were net sellers to the extent of (Rs 253 cr) and (Rs 361 cr) respectively. On the derivatives side, FIIs were net sellers in Index Futures (Rs 970 cr), Stock Futures (Rs 574 cr) while they were net buyers in Index Options (Rs 688 cr) and Stock Options (Rs 14 cr).

The US markets ended positive as stocks gained on positive economic data as investors chose to ignore some disappointing quarterly results. The Dow Jones gained 57 points or 0.46% to close at 12,342 while NASDAQ gained 4 points or 0.16% to close at 2,765.

The Asian markets are trading mixed. Nikkei is trading lower by 0.19% while Hang Seng is currently trading higher by 0.40%.

On Friday the markets closed on a weak note following lower than expected results from Infosys coupled with concern on high crude prices. The market may open on a soft note amidst mixed global cues. Adopt a cautious stock specific approach.

The trend deciding level for the day is 5845, If NIFTY trades above this level then we may witness a further rally up to 5870-5905-5930 levels. However, if NIFTY spot trades below 5845 levels then we may see some profit booking to initiate in market, it may correct up to 5800-5774-5750.

Stock to focus for intraday Long: JP Associates; TCS; Havells

IPO Update

Muthoot Finance Ltd

        Price band: Rs 160-175 per share

        Issue opens: April 18, 2011

        Issue closes: April 21, 2011

        Bid Lot: 40 shares

Company and Promoters

Incorporated in 1997; Muthoot Finance Ltd. (MFL) is the flagship company of The Muthoot Group based in Southern India. MFL is registered as a Non-Banking Financial Company - Non Deposit taking - Systemically Important (NBFC-ND-SI); and is engaged in the loan against gold ornament segment with a managed advance base of Rs 11,550 cr as on Sept 2010. Although the company is a non-deposit accepting NBFC, it does accept retail debentures (not considered as public deposits), which accounted for close to 33% of the company’s total funding as on Sept 2010.

M.G. George Muthoot; current Chairman of MFL; is a graduate in engineering from Manipal University. He is the National Executive Committee Member of the FICCI and the current Chairman of FICCI-Kerala State Council. He was conferred the Mahatma Gandhi National Award for social service for the year 2001 by the Mahatma Gandhi National Foundation.

Issue Highlights

ü  Muthoot Finance Ltd. (MFL) is the LARGEST gold financing company in India in terms of loan portfolio. Gold Loan portfolio as of Feb 2011 comprised approx. 4.1 mn loan accounts in India that were serviced through 2,611 branches across 25 states in India. Approx. 67,953 customers per day were catered to by MFL in Feb 2011.

ü  Equipped with collateral for the loans provided to clientele; MFL currently has minimal NPA (0.5%) which speaks volume of the quality of its investments. Moreover, as on 8M FY 2011; RONW stands at 29.6%; NIM stood at 9.2% and capital adequacy ratio stands healthy at 15.1%.

ü  Till date; MFL has been primarily South region focused player with approx. 70% of its branch network positioned there. MFL is rapidly scaling up branches in Northern and Eastern regions and company is expected to achieve formidable presence in this region thereby reducing its high dependence on single region in the medium term. The next trigger will be to replicate the success achieved down South when it reaches newer geographies.

ü  MFL has achieved stellar financial performance in previous fiscals. The NBFC has registered a CAGR of 65% in total income, 68% in operating income and 71% in net profit over the period 2006-2010.

ü  CRISIL and ICRA have graded 4/5 for the MFL IPO indicating that the fundamentals are above average relative to other listed equity securities in India.

Positives

·    Geographic diversification will aid in business scalability: MFL is rapidly scaling up branches in Northern and Eastern regions. Over the next 2 years company can achieve formidable presence in this region thereby reducing its high dependence on single region, opening up newer growth avenues for MFL. The next trigger for MFL will be to replicate the success achieved down South when it reaches newer geographies.

·    Lowering cost of funds will propel profits: Company’s measures in reducing its cost of debt will augment its profitability going forward.

·    Being customer friendly; MFL enjoys several advantage over peers like banks and private lenders: MFL offers accessibility, quick response time and minimal documentation. These are prime reasons for its business scalability as it can cater to a wider audience which might be burdened by private lenders loans or who do not get easy access to bank loans. Thus, loan book growth is expected to remain robust going forward.

·    Low average loan tenure and stringent risk measurement techniques will shield against gold price volatility: Over the last 3 years, not more than 3% of gold against loans outstanding has been auctioned; which speaks volume of the strength of the business model. Thus, MFL’s business model is pretty healthy in light of stringent risk practices, low loan tenures and ticket size.

Risk factors

·    MFL extends loans secured by gold jewellery provided as collateral by the customer. An economic downturn or sharp downward movement in the price of gold could result in a fall in collateral values. In the event of any decrease in the price of gold, customers may not repay their loans and the collateral gold jewellery securing the loans may have decreased significantly in value, resulting in losses which company may not be able to support. A failure to recover the expected value of collateral security could expose MFL to potential losses. Any such losses could adversely affect their financial condition and results of operations.

·    As of March 31, 2010, the Southern Indian states of Tamil Nadu, Kerala, Andhra Pradesh and Karnataka constituted 75.38% of MFL’s total Gold Loan portfolio. Company’s concentration in the Southern states exposes them to adverse economic or political circumstances that may arise in that region as compared to other NBFCs and commercial banks that have diversified national presence. If there is a sustained downturn in the economy of South India, MFL’s financial position may be adversely affected.

For additional information & risk factors please refer to the Red Herring Prospectus

15th April, 2011

The markets opened gap down tracking weak cues from global peers but buying across sectors led the markets into the positive zone in the morning session. Trading in the positive zone markets continued to move higher throughout the day ending the session with stellar gains. All the Sectoral indices ended in the green with Capital Goods Auto & Bankex being the major gainers. Among the Sensex stocks Jaiprakash Asso. (7.09%), Hero Honda (5.86%) and HDFC (3.92%) were amongst the gainers while Tata Power (0.51%), Sterlite Inds.

(0.40%) were the losers. The Sensex gained 434 points or 2.25% to close at 19,697 while Nifty gained 125 points or 2.17% to close at 5,912.

Total traded turnover stood at Rs 1,48,971 cr. In equities FIIs were net buyers (Rs 26 cr) while DIIs were net sellers (Rs 5 cr).On the derivatives side, FIIs were net sellers in Index Futures (Rs 77 cr) , Stock Futures (Rs 1,056 cr) and Stock Options (Rs 19 cr).while they were net buyers in Index Options (Rs 208 cr)

The US markets ended mixed amidst volatile session and thin volumes as investors remained cautious after an unexpected rise in new unemployment benefit claims. The Dow Jones gained 14 points or 0.12% to close at 12,285 while NASDAQ closed flat at 2,760.

The Asian markets are trading mixed. Nikkei is trading lower by 0.43% while Hang Seng is currently trading higher by 0.74%.

The markets ended on a firm note; buying was seen across sectors. The markets may open on a flat note. Infosys results and monthly inflation data due for March to be released today may set direction for the market.

The trend deciding level for the day is 5855, If NIFTY trades above this level then we may witness a further rally up to 5940‐5980‐6015 levels. However, if NIFTY spot trades below 5855 levels then we may see some profit booking to initiate in market, it may correct up to 5820‐5790‐5765.

Stocks to focus for intraday long: HCLTECH, Herohonda.

Indian Economy

India's Index of Industrial Production, in February slowed drastically to 3.6% from a 15.1% for the corresponding month last year, dragged down by poor performance of manufacturing, mining and capital goods sectors.

The growth was also slower than the revised growth rate witnessed in the preceding month. The cumulative index of industrial production for the first eleven months of this fiscal was 7.8%, down from last year's 10%. The data for January revised upwards to 3.95% from the earlier provisional figure of 3.7%.

Manufacturing sector, fell drastically by 3.5% from the 16.1% in the February of the preceding year.

The power sector's growth fell by 6.7% from the 7.3 % for the corresponding month last year.

The mining sector's figure sharply declined by 0.6% from a 11% in February last year. 15 of the 17 industry groups showed a positive growth in February, compared to the corresponding month of the preceding year.

Capital goods sector showed a negative growth of 18.4%, compared to a positive growth of 46.7% last February. Basic goods declined by 5.9% from 8.5% of February last year, while intermediate goods fell sharply by 8.4% from the 15.9% for the corresponding month last year.

Growth of the consumer durables sector dropped by 23.4 % from the 29.1% as on last February, whereas non-durables showed a positive growth of 6.1%, compared to a negative growth of 0.8% for the same month last year.

13th April, 2011

The markets opened on a negative note amidst mixed cues from Asian peers and tried to recover some ground in the morning trade but failed to cross]over into the positive zone. The markets slipped further during the day on profit taking and amid weak IIP data ending the day on a negative note. Most of the Sectoral indices ended in the red with Auto & Realty Being the major losers while Healthcare & FMCG ended flat. Among the Sensex stocks Reliance Infra (0.84%) and Cipla (0.63%) were the gainers while DLF (3.51%), Jindal Steel (3.01%) and Jaiprakash Asso. (2.96%) were amongst the losers. The Sensex lost 189 points or 0.97% to close at 19,263 while Nifty lost 56 points or 0.96% to close at 5,786.

Total traded turnover stood at Rs 91,785 cr. In equities FIIs were net sellers (Rs 691 cr) while DIIs were net buyers (Rs 264 cr).On the derivatives side, FIIs were net sellers in Index Futures (Rs 1951 cr) and Stock Futures (Rs 436 cr) while they were net buyers in Index Options (Rs 1392 cr) and Stock Options (Rs 10 cr).

The US markets ended lower on concerns that rising US stockpiles and subsequent lower demand may adversely affect the energy sector coupled with lower than expected Alcoa numbers . The Dow Jones lost 118 points or 0.95% to close at 12,264 while NASDAQ lost 27 points or 0.96% to close at 2,745.

The Asian markets are trading marginally lower. Nikkei is trading lower by 0.11% while Hang Seng is currently trading lower by 0.26%. The market breadth was negative throughout. FIIs turned net sellers in the cash segment while DIIs bought. The markets may open on a flat to negative note amidst weak global cues.

The trend deciding level for the day is 5800, If NIFTY trades above this level then we may witness a further rally up to 5820‐5850‐5875 levels. However, if NIFTY spot trades below 5865 levels then we may see some profit booking to initiate in market, it may correct up to 5770‐5745‐5720.