SEBI's note to MFs on mergers
Kolkata: SEBI has received proposals from a number of mutual funds for merger and consolidation of schemes, which has prompted the regulator to issue an explanatory note on the matter. Consolidation will be seen as change in fundamental attributes of the schemes concerned, SEBI has stated, adding that funds will be required to comply with stipulations laid down in the SEBI (Mutual Funds) Regulations, 1996. The regulator, which has not identified the funds that have mooted fresh proposals on merger of their schemes, has underlined the significance of disclosures and approvals by the boards of their asset management and trustee companies. The AMC and Trustee boards must ensure that the interest of unit holders is upheld before merger proposals are vetted. In case a new scheme is expected to emerge after merger, the draft offer document will have to be lodged with SEBI.
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Monsoon hopes lift Tata Chem
Kolkata: The Tata Chemicals stock on Monday attracted significantly higher volumes on major bourses. The stock, after touching a day's high at Rs 76, closed at Rs 72.90 (Rs 72.60) on the BSE. The total traded quantity of the counter on the BSE was 7.63 lakh shares (4.73 lakh shares). On the NSE, the stock recorded a volume of 13.73 lakh shares (8.34 lakh shares). According to market sources, the stock is attracting investment buying on expectation of a normal monsoon and better fundamentals. Tata Chem has recommended a dividend of Rs 5.50 per share against Rs 5 for 2001-02. At the current market price, the stock is trading at Rs 6.7 times its 2002-03 earnings per share of Rs 10.90. The dividend yield works out to 7.5 per cent. Following the merger of Hindustan Lever Chemicals (HLCL) with it, Tata Chem's predominance in the fertiliser market has increased and is now better placed to take advantage of increase in fertiliser demand.
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Indian Rayon gains on funds' support
Mumbai: After increased interest in Arvind Mills, institutional investors have turned towards Aditya Birla group company Indian Rayon's stock. Dealers said the main factor for institutional interest is due to the revived interest of the market for textile stocks. Textiles contribute around 25 per cent of the company's revenue. Talks in the market are that after the removal of the quota system in 2005, the outlook for the company will be bright. Another factor for the institutional interest is the company's viscose filament yarn business. Dealers said the company would also benefit from the backward integration into the VFY yarn business, a raw material for making textiles. On Monday, the stock gained 3.50 per cent at Rs 115.40 with volumes of 6.97 lakh shares on the BSE and on the NSE, it closed at Rs 115.30, up 3.50 per cent with volumes of 13.17 lakh shares.
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Select PSU banks back on buy-list
Mumbai: After being neglected for weeks due to controversy over the return of equity to the government, select public sector banks are again on the buy-list of select institutional investors. There was some buying on Monday in some of the banks that have announced plans to return equity to the government. The main factor for the interest of the institutions to buy these stocks is on hopes that these banks would still return their equity. Dealers said the banks might not return the original equity announced, but they would go ahead to return some portion to the government at a pre-determined price, if not at par. In addition, the institutions are also relying on the expected growth of 25-30 per cent announced by these banks. Some of the stocks that were bought on Monday included Andhra Bank (up 2.11 per cent at Rs 31.50), Bank of Baroda (up 3.97 per cent at Rs 113.80), Canara Bank (up 0.43 per cent at Rs 94.45). There was also buying in Punjab National Bank and Oriental Bank of Commerce.
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Automotive Axles up on order talk
Mumbai: Auto-ancillary company Automotive Axles stock has been witnessing increased interest over the last few days. Even on Monday, some institutional buying was seen in the counter. This led the stock price of the company rising by 4.5 per cent at Rs 127.80 with volumes of 1.11 lakh shares. Dealers said the buying in the counter is on talks of company bagging an export order.
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Sustained buying props up Vesuvius
Mumbai: Sustained buying support by operators saw the share price of Vesuvius India Ltd jump by almost 10 per cent on the bourses with good volumes. The stock ended the day at Rs 99.95, up 10.56 per cent with around 3.13 lakh shares traded on the BSE. On the NSE the stock ended the day at Rs 99.75, up 11.58 per cent with around 6.39 lakh shares traded. Brokers said that the counter has been witnessing buying interest following reports of good export prospects for the steel sector. According to company officials the current positive sentiment might be related to the prevailing sentiment in the steel industry. Commenting on the company's growth prospects, the official said that the company was looking to make other acquisitions along the lines of the acquisition made in Gujarat in March 2003, to diversify its business prospects thereby acquiring more stability in the business.
Vesuvius India manufactures continuous cast refractories (CCR) used in modern steel plants.
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HPCL: Outlook positive, buy July 330 calls
Mumbai: The outlook on BHEL stock is positive. The upside price target is Rs 285. The downside risk level is Rs 245. Note that these price levels are near symmetrical from the current level. Consider buying the July futures on the stock. At the current level, you will be exposed to an 18-point downside. This downside cannot be protected with a cost-effective hedge. You can, therefore, consider protecting the excess downside with the July 245 puts. The farther month contracts are not currently traded. Based on the current implied put volatility, the July 245 puts will cost less than Rs 7 per option. If the stock trades at Rs 285 at the horizon, the long futures long put combination will generate Rs 18,000 per contract. If the stock declines to Rs 245, the position will lose Rs 25,000. The payoffs are not very attractive for two reasons: One, the cost of the put will lower the gains, but the option does not contribute much to the payoffs unless the stock goes below Rs 245. Two, the forecast put volatility is lower than the current implied volatility. The trading horizon is 19 days. The market lot is 1,200.

The outlook on HPCL stock is positive. The upside price target is Rs 365. The risk is that the stock may decline to Rs 300 on profit-taking. Consider buying the July 330 calls, as they are cheaper in terms of implied volatility. The directional risk is high, as the calls are in-the-money. The position is subject to high risk in the event of fall in volatility. Note that the fall in volatility is highly likely should the stock trend upwards. The position will lose heavily if the stock does not reach the upside price target at the horizon. If the stock rises to Rs 365 at the horizon, the July 330 calls will generate 125 per cent returns. If the stock declines to Rs 300, the position will tend towards zero. The trading horizon is 23 days. The market lot is 1,300.
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Rupee loses 13 paise; securities lacklustre
Mumbai: The domestic currency was driven down to close at 46.67/68 per dollar on Monday, largely on account of the usual month-end scramble by banks to cover short dollar positions. The rupee closed at 46.54/5450 against the dollar last Friday.
Dealers said that the rupee touched an intra-day low of 46.71 and then recovered back to end at its closing levels.
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