International aluminium prices on the London Metal Exchange (LME) have been ruling near their 20-month high. And that is undoubtedly a good news for the primary aluminium producer which is also one of the lowest cost producers in the world.

The impact of the uptrend in aluminium prices is clearly reflected in the first quarter's performance. The company has clocked a sale of Rs 478 crore -- the highest in the last five quarters. During the fourth quarter of 1998-99, the company had achieved a sales of Rs 472 crore. The same figure was at Rs 433 crore during the third quarter in 1998-99. While improved aluminium prices are certainly responsible for this jump, higher value addition also had its role to play.

The impact of higher value addition coupled with higher exports can be reflected in the improved operating profit margins. Exports were at Rs 65 crore duringthe first quarter, up by 93 per cent from Rs 34 crore in the corresponding period in the previous year. OPM during the first quarter stood at 44.64 per cent compared to 43.99 per cent in the corresponding period in the previous year. Lower interest burden also had its impact. Interest burden were down from Rs 22.6 crore to Rs 17.2 crore in the first quarter.

Besides improved performance, the other factor which has given a push to the stock price is the management's decision not to go ahead with the proposed Aditya Aluminium project in Orissa. Earlier, uncertainty over equity dilutions for this project had its negative impact on the stock price for almost a year.

As the hitch no longer remains, several fund managers would like to increase their exposure on this counter especially when the company is doing exceedingly well, and the aluminium prices have been rising.

For the future, the outlook for aluminium prices is positive as demand has been showing a significant jump. Even if aluminium prices remainat the same level, higher offtake coupled with the company's attempt to increase its value chain besides cutting down costs would go a long way in helping Hindalco. And, it should not face any problems in producing good results during the rest of the year.

Overall, the current year is going to be very good for Hindalco. And in that circumstances, expecting a bonus issue, or a buy back may not be unfair on shareholder's part. A strong book value also makes it a strong bonus candidate. The company has a book value of Rs 436, and the last bonus was given in 1996.

As far as the technical position is concerned, the short-term support for the stock exits at Rs 870. After this level, Rs 850 should be considered as a base. The medium term support level for this stock is at Rs 810, and a dip below this level would make Hindalco a technically weak stock, at least, in the medium term.

Bajaj Auto: Signs of consolidations?

For the past five weeks, the Bajaj Auto stock has been taking support in the range ofRs 470-Rs 475. At the same time, the trading volume on the counter has jumped significantly. Volumes have risen from 2 lakh shares to as high as 11 lakh shares. It is not clear if this is a sign of distribution or accumulation. Unless it breaks the Rs 470-level, it would favour the bulls. The last support for the stock is at Rs 464. Below this, it would be a three-year low and that would be good news for the bears. Keep an eye on the stock movement.