Elliot Wave Anlysis (Dated 22/09/2008)

Drop from ‘e’ (at 15107) appeared like a 3^rd extension Impulse on intra-day charts. Impulses do not get retraced by more than 61.8%. Also the 3^rd extension impulse should find it difficult to retrace beyond 2^nd wave of this Impulse (which is at 14046-14433).At the same time the impulses in the 5^th wave or c-wave positions do get fully retraced. A move sustaining beyond 61.8% correction level, i.e. above 14133-225 area, would, therefore, indicate that we are dealing with such a situation.

From this perspective, it would be pertinent to note that the current drop (from 15107 to 12558) achieved 161.8% ratio to the previous one (from 15580 to 14002). Such an event suggests some alternatives.They show that a-b-c formation from 15580 to 12558 could either be a-b-c of a Running Expanding Triangle, or “b” of Flat from 12514 (with its “a” at 15580).

If it is Expanding Triangle, then the current rally can go beyond 61.8% up to 15107 as “d” of ET, but may not cross 15107. Note that current “d” (if true) has become larger than “b”, and has overlapped with “b” as required within an Expanding Triangle.If it is “b” leg of Flat from 12514, then the current rally would be “c” of such a Flat, and could go beyond 15107, perhaps forming as a Terminal hereafter. The “a” of such Flat (if true) is from 12514 to 15580, and “b” was from 15580 to 12558.

The neckline joining 13727 and 14002, with the structure post-12514 appearing like a Head and Shoulders formation. A strong break below 14K breaks the neckline of this traditional H&S formation. This Neckline is now getting tested at around 14225. Sustaining above the Neckline cancels the assumption of H&S formation.

The current bear market rally would be the “b” leg of the second corrective, which I said, can occur despite the fact that the market remains open for a protracted bear phase as per the 8-year cycle.

As per the Wave logic, corrective phases should consume more time than the wave getting corrected. Corrective phase consuming lesser time is allowed only in Triangle / Terminal / Diametric, which are exceptions to virtually all rules. In our case, it would indicate 2^nd corrective (post-17054) developing as an Extracting Triangle or Diametric.

Check List For New Fund Offer

1. Date of issue

Initially Check Out that you have received an up-to-date edition of the OD. An OD must be updated at least annually.

2. Minimum investments

Mutual funds differ both in the minimum initial investment required, and the minimum for subsequent investments.

3. Investment objectives

As the investors need to be sure the fund's objective matches their objective as well so it's necessary to check the goal of each fund — from income, to long -term capital appreciation.

4. Investment policies

The prospectus also include information on minimum bond ratings and types of companies considered appropriate for a fund. Be sure to consider whether the fund offers adequate diversification.An OD will outline the general strategies the fund managers will implement.You'll learn what types of investments will be included, such as government bonds or common stock .

5. Risk factors

Every investment involves some level of risk. In an OD, investors will find descriptions of the risks associated with investments in the fund. These help investors to refer to their own objectives and decide if the risk associated with the fund's investments matches their own risk appetite and tolerance. Since investors have varying degrees of risk tolerance, understanding the various types of risks in this section( eg credit risk, market risk, interest-rate risk etc.) is crucial.

6. Past Performance data

ODs contain selected per-share data, including net asset value and total return for different time periods since the fund's inception. Performance data listed in an OD are based on standard formulas established by Sebi and enable investors to make comparisons with other funds. Investors should keep in mind the common disclaimer, "past performance is not an indication of future performance". They must read the historical performance of the fund critically, looking at both the long and short-term performance. When evaluating performance, investors must look at the track record of a fund over a time period that matches their own investment goals.

7. Fees and expenses

Entry loads, exit loads, switching charges, annual recurring expenses, management fees, investor servicing costs…these all add up over time. The OD lists the limits on these fees and also shows the impact these have had on the fund investment historically.

8. Key Personnel esp Fund Managers

This section details the education and work experience of the key management of the fund company, including the CEO and the Fund Managers. Investors get an idea of the pedigree and vintage of the management team. For example, investors need to watch out for the fund that has been in operation significantly longer than the fund manager has been managing it. The performance of such a fund can be credited not to the present manager, but to the previous ones. If the current manager has been managing the fund for only a short period of time, investors need to look into his or her past performance with other funds with similar investment goals and strategies. Only then can they get a better gauge of his or her talent and investment style.

9. Tax benefits information

Mutual funds enjoy significant tax benefits under Sec 23 D and Sec 115 .

10. Investor services

Shareholders may have access to certain services, such as automatic reinvestment of dividends and systematic investment/withdrawal plans. This section of the OD, usually near the back of the publication, will describe these services and how one can take advantage of them.

VIEW ON CHAMBAL FERTILISERS & CHEMICALS.

Fundamental Aspects of the company

In the private sector Chambal Fertilisers and Chemicals is India’s largest producer of Urea .It's on the northern and western part of the country and supplies urea to nine states. Uttam Veer is the company's brand name.It has three divisions - agri-inputs, shipping and textiles. It has two subsidiaries - one in the software business and the other in the infrastructure sector. Its two joint ventures are in the fields of financial services and manufacture of phosphoric acid.

The shipping division, operating under the name of India Steamship has three Aframax tankers with a fleet capacity of about dwt 3,00,000 MT. And the textile unit, known as Birla Textile Mills, has a state-of-the-art spinning unit with a capacity of 80,208 spindles located at Baddi, Himachal Pradesh.

Financial Aspects of the company

YoY, the net sales of the company rose 35.31% at Rs.805.27 crore. 62% of its sales came from the fertilizer division. Trading earned it Rs.185.59 crore, shipping Rs.56.58 crore and textile sales was at Rs.66.40 crore. Operating expenses rose 47%. This pulled down the margins.

The shipping venture showed an operating loss of Rs.48.34 crore, while the textiles division had an operating loss of Rs.1. 22 crore, small loss but loss nevertheless. And this affected the overall operating profit of the company. OPM was down from 26.03% to 16.28%. EBIDTA was down 15% at Rs.131.10 crore.

PBT was down 25.51 crore and the tax outgo of Rs.33.51 crore as against Rs.15.31 crore in Q1FY08 pulled down the PAT, it was down by a whopping 61.43% at Rs.23.80 crore. NPM was down at 2.96% as against 10.37%, YoY.

Our result

Rs.96 was the stock high in the month June, though it has not drowned in the correction phase.Currently good but existing holder may continue there interest but any additional buying in this stock is not recommended.

Shall I Repay Loan At Lumsum Receipt ?

Sometimes we get unforeseen funds from different sources which was either unexpected or not calculated at the time of taking loan.The one shot thought we had in mind while getting a lump sum fund when we had a loan going on is to repay the but we should consider the following events before taking decision.

1 For our unforeseen contingencies we can keep it invested in reliable source where it could be liquidated immediately . Once you prepay a loan, this money cannot be easily borrowed, later.

2 If you have any unsecured debt (credit card or personal loan), pay it off at once! No risk-free investment can ever give you a higher post tax return than the post tax cost of such a loan.The difference is usually so high that even stiff prepayment penalties of around 3% to 5% will not change the decision.

3.As a thumb rule it makes sense to prepay home loans as long as the prepayment charges do not exceed 2% but we have two exceptions here:

• Where interest rates on the home loan are lower than the current ruling rate
  
  
• If principal repayment of the home loan, increases, the amount of deducted under Section 80C will also increase. This happens if you don't use the limit of deduction fully through other modes of investment such as life insurance premiums, contribution to provident funds, etc.
  

Stocks Affected By Lehman Brothers Case

Lehman brothers hold stake in several Indian listed Stocks. Most of these Indian companies were asking Lehman Brothers to have stake in there company at sometimes but now these stocks are now to be worst hit and they wouldn't be able to recover for long period.

The stocks to be affected are

1. Moser Baer

2. Dhampur Sugar

3. Triveni Engineering

4. DCBL

5. Edelwies

6. IVRCL

"LEHMAN BROTHER" NEWS WAS FLASHED BY ME LONG BEFORE

Check out the 12th posting from below with a head : "MARKET MOOD AHEAD" in green color where I had clearly declared the bad market mood with the statement that a bad news is ahead with a disclosure of bankruptcy from an American Bank.

It was flashed long back and our followers have been benefited with the opportunity to stay away from the market and hold on with cash.

INDIA GROWTH STORY

India GDP growth for the month of July ‘08 reduced from 8.3% to 7.1%

Firstly, the IIP growth figure was expected to be lower than the June growth rate and the average estimate was around 6.25% to 6.5% but when it surged above 7%, naturally. Sequentially, the growth has also gone up from 5.4% in June ‘08.

A significant rise in consumer durables growth, which YoY, grew from a retraction of 2.7% to a positive 11.2%. But industry experts warn that there is no need to be jubilant over this growth as 41% of these consumer durable goods comprised of 10 articles which are completely irrelevant, questioning the very veracity of the IIP compilation.

Capital goods sector has been listless, showed a growth at 21.9% as against 12.3% in July ‘07. Growth in the capital good sector is very good news as this means that investment activity continues to remain strong.

Manufacturing which accounts for about 80% of India’s production, on a MoM gained 7.5% from 6.1% but YoY, it fell from 8.8%.Electricity output fell 4.5% from 7.5% in July ‘07. Mining grew 5% from 3.2% YoY. Consumer-goods production increased marginally from 7.1% to 7.3%.

With inflation seemed to have been reigned in, crude prices falling and given these IIP figures, all point to the fact that India Inc is now on the revival path. There is no doubt that first quarter of the current fiscal was the most challenging in recent times, with high crude prices, higher interest rates and lower demand. Corporate profitability is expected to increase from the second half of the current fiscal and this is based on the big assumption that retail demand would pick up.Govt Of India has recently given an average 21% pay hike to about 5 million government employees, which is the highest hike in the entire Asia-Pacific region. This means that there would be more disposable income with these many people and with this money coming in exactly during the festival time, demand is sure to pick up. Once demand picks up, industrial production would rise, that is the simple economic co-relation.

As the growth symptoms are foreseen so no recent action of tightening money flow and further hike in rate of interest is not at all expected.. And later, if crude once again starts rising, it is expected that, at the most, there could be a 25 bps rate hike, but this again is based on the assumption of crude shooting up. If things remain as they are right now, it is unlikely that interest rates could be tightened any more.

CHEMCEL BIOTECH A DANGEROUS IPO

Chemcel Biotech is debuting the capital market on 9^th September 08, with a public issue of 1.54 crore equity shares of Rs.10 each at a premium of Rs.6 per share, with total issue price of Rs.16 per share, accumulating a sum of Rs.24.64 crores.The company is a pesticide formulator manufacturing pesticides for crops and had a total income of Rs.25 crores for FY 08 with PAT of Rs.1.20 crores, resulting in an EPS of less than 50 paise.

The company has managed to get its IPO subscribed from closed sources and the said source or operator is from a nearby hill station of Mumbai. The stock is likely to witness huge momentum post listing, and it will help the said operator to jack up the price of the stock after listing, if it does not receive any public response. So, interested to have negative analysis and rating on the stock.

Rightly so, the stock has no fundamentals at all. The company is entering into bio-diesel field but nothing seems to be attractive. The huge equity base of Rs.26 crores would be a big dampner.

Nothing attractive in the stock while having necessary momentum and speculative ingredients in it. Those who have inclination to ride the momentum may get attracted towards the issue.

MY VIEW :ONE SHOULD NEVER OPT FOR SUCH DANGEROUS STOCK.

RESTRUCTURING OF STERLITE INDUSTRIES

Sterlite Industries is presently under the Vedanta Group ,which has following listed entities in India.

1) Sterlite Industries (India) Ltd.

2) Hindustan Zinc Ltd.

3) Sterlite Technologies Ltd,

4) Madras Aluminium Company Ltd.

The group is engaged in production of Aluminium, Zinc, Copper, lead and Power through these companies. Since all these companies were acquired by the Vedanta Group in the last few years

Sterlite Industries, is predominantly a holding company.Madras Aluminium, is a very tiny company with capacity to produce 40,000 TPA of aluminium and this has been keeping the operations of the company stagnant. So the group has rightfully thought of merging its aluminium and energy business under this company. As the Vedanta Group has limited listed companies available, this is probably the best option to make use of a tiny company and make it a giant.

Hindustan Zinc is already growing, having created capacity to manufacture 7.20 lakhs TPA of zinc from 1.80 lakh TPA, when it was acquired by the group in 2003 – 04. Lead capacity was also raised four fold.

It is tough to analyze the valuation and prospects of Sterlite Industries, which has been holding 64.90% in Hindustan Zinc, 51% in BALCO, 100% in Sterlite Energy and 100% in Mt. Lyell Mine and Thalanga Mine referred as CMT assets. On standalone basis, the working of Sterlite Industries has been showing working of copper smelter only while consolidated working is required to be seen and analyzed to arrive at the correct valuation of Sterlite Industries.

As per restructuring plan, Sterlite Industries India Ltd. (SIIL) has decided to transfer following project to MALCO:--

1) Aluminium Foil plant at Sanaswadi.

2) 100% stake of Sterlite Energy Ltd.

3) 51% stake of BALCO.

4) 29.5% stake of Vedanta Aluminium Ltd.

MALCO will now be renamed as Sterlite Aluminium Ltd. (SAL) and the scheme shall be effective from 1^st April, 2009.

For acquiring these projects, MALCO will issue 7 equity shares of Rs.2 each of MALCO, to the shareholders of SIIL, for every 4 shares held by them in SIIL.

MALCO presently holding 246.10 lakh shares of SIIL, which will be transferred back to SIIL and lieu of this transfer, SIIL will issue 1 share of SIIL for 51 shares held in MALCO. Effectively 246.10 lakh shares of SIIL, now held by the MALCO are being distributed amongst the shareholders of MALCO and this would not result in any increase in the equity of SIIL.

Present equity of MALCO, which is now at 11.25 crore, shares would rise by another 119.68 crores shares and the capital structure and shareholding pattern of MALCO on pre and post restructuring would be as under :--

Before Restructuring

Promotor stake was 80% with 9 crore shares while Public holding of 20% with 2.25 crore shares

* shares of Rs.2 each with paid-up equity at Rs.22.50 crores.

After Restructuring

Promotrs holding reduced to 60.92% with 79.77 crore shares, Aloong with others (promoters) being 1.78% with 2.33Crore shares. Though the public hoilding will come to 1.72 % with 2.25 crore shares in the market.And Public (SIIL) with be finally the rest 35.58% with 46.58 crore shares

* shares of Rs.2 each with paid-up equity at Rs.261.86 crores.

MALCO will thus be having an aluminium capacity of 25.75 lakh tonnes by 2012 at three locations with Alumina capacity of 53.20 lakh TPA and captive power plant of 5,370 MW. In addition to this, the company will be owning 100% of Sterlite Energy.

On restructuring SIIL, it will get MALCO investment, being 246.10 lakh shares of SIIL back in itself for which 1 share of SIIL will be issued for every 51 shares held of MALCO. SIIL will also get 79.4% stake of Konkola Copper Mines Ltd. from Vedanta by merging THL KCM Ltd., Mauritius, for which, SIIL will issue 1 share of Rs.2 each of SIIL for every one share of US $ 0.01 held in THL KCM Ltd. by Vedanta.

So, on post restructuring, SIIL will hold 100% of Asarco, 64.90% of Hindustan Zinc, 100% of CMT and 79% of KCM.

The present equity of SIIL comprises of 70.85 crore shares of Rs.2 each of Rs.141.70 crores. However, due to acquisition of 79% of KCM and 100% of Asarco, equity of SIIL would rise from 70.85 crores shares of Rs.2 to 102 crore shares of Rs.2, from Rs.141.70 crores to Rs.204 crores.

Hence, hereon ownership pattern of the Vedanta group companies in India would be clear with –

1) Vedanta holding 51% of SESA Goa.

2) Vedanta holding 73% of SIIL.

3) MALCO will be holding 51% of BALCO. 100% of SEL and 15% of VAL. On group acquiring remaining stake of 49% of BALCO from the government, for which Arbitration proceedings are pending, BALCO shall be owned 100% by MALCO.

4) SIIL will be holding 65% of Hindustan Zinc, 79% of KCM and 100% of CMT, thus making it an end to end copper, lead and zinc player.

5) VAL will be holding 61% of MALCO while 85% of VAL shall be held by Vedanta while 15% shall be held by MALCO. MALCO name shall be changed to SAL.

This would make four independent companies of the group as under:--

1) Hindustan Zinc – producer of zinc and lead.

2) Sesa Goa – producer of iron-ore.

Both these companies won’t be having any investment or subsidiaries in other companies.

3) MALCO or SAL, will have aluminium and energy with 15% investment in its holding company VAL.

4) SIIL will be a direct end to end copper player with 65% stake in Hindustan Zinc. Also, if Vedanta group succeeds in acquiring remaining 29.54% stake of the government in Hindustan Zinc, it will go to SIIL. Hence SIIL is a focused end to end copper, zinc and lead player.

Though the share price of SIIL has corrected by 7.50% to Rs.575, it is a good buy at Rs.575 for a long term view. MALCO with equity base of Rs.262 crores on post restructuring basis and at the current market price of Rs.214 translates into a market cap of Rs.28,000 crores, which needs to get discovered by the market over a period of time.

The Plan for restructuring the companies is a good idea to make a justified arrangement of the company helping to analyze the stock at its best.

STOCKS TO GET BENEFITED FROM NUCLEAR DEAL.

The following companies are going to get the maximum benefit from nuclear deal.

1. Reliance Power

2. NPICL

3. JlNDAL SOUTH WEST

4. BHEL

5. L&T

6. NTPC

7. Tata Power

8. Walchandnagar Industries

9. HCC