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Friday, May 04, 2007

STRATEGY INPUTS FOR THE DAY


FM, global markets in focus

The strongest principle of growth lies in human choice.

The bulls may choose to be upbeat at least for the day as there is more good news in the air than bad developments. Given the sheer momentum, good quarterly earnings, firm global markets and renewed buoyancy in portfolio investments we expect the bulls to end the truncated trading week on a strong note. Yesterday was a perfect example of the strong undercurrent in the market, with the key indices shooting up on higher volume and turnover. Market breadth was also quite positive, with even the mid-cap and small-cap shares participated in the rally.

What's more, after the market had downed the shutters, Finance Minister P. Chidambaram made some positive announcements in parliament which should cheer up the bulls today. To add to the feel-good vibes, stocks in the US, Europe, Latin America and Asia are all up while crude oil is steady at around $63.20 per barrel mark. Cues from the F&O segment are also looking good with the premium between Nifty May futures and the underlying index widening and open interest picking up.

A few more key companies are scheduled to announce their results today. If they manage to deliver the goods it would only add to the good tidings. But, one should watch out for the weekly inflation numbers. The WPI-based inflation is expected to fall below 6%. Any negative surprise in the data could dampen the sentiment just a little bit.

Stainless steel makers could gain after the Government slashed the import duty on nickel from 5% to 2%. Sesa Goa could advance following the steep cut in export duty on low-grade iron ore. Cement companies will definitely be in focus after the FM altered the dual excise duty structure. Gems & Jewellery firms might gain from the scrapping of customs duty on cut and polished diamonds. Ready-to-eat food manufacturers and biscuit makers may also rise after the FM lowered the import duties.

Global Vectra could attract some attention as Chidambaram has exempted the import of aircraft for non-scheduled charter operators from customs duty. Moreover, RIL and RNRL will hog the limelight after the latter secured an interim stay from the Bombay High Court, preventing the former from selling the gas from KG basin to a third party. RIL says it will appeal the decision. Watch out for Videocon as well as creditors of Daewoo Electronics are likely to approve a bid by a consortium led by the Indian company.

On Wall Street, US stocks rallied, with the S&P 500 index closing above 1,500 for the first time in more than six years and the Dow Jones Industrial Average ending at a record high for the sixth time in seven sessions.

Sentiment received a major boost following the release of better-than-expected reports on productivity gains and the US services industry.

The Dow added 29.50, or 0.2 percent, to 13,241.38. The S&P 500 increased 6.47, or 0.4 percent, to 1502.39. The Nasdaq Composite Index advanced 7.62, or 0.3 percent, to 2565.46.

Treasury prices slipped, lifting the yield on the 10-year note to about 4.67% from 4.64% late on Wednesday as investors bet that the strong economic news means that the Federal Reserve is unlikely to cut interest rates anytime soon.

In currency trading, the dollar gained against the euro and the yen. COMEX gold for June delivery rose $9.30 to settle at $684.40 an ounce.

US light crude oil for June delivery fell 49 cents to $63.19 a barrel on the New York Mercantile Exchange. The front-month contract was quoting 2 cents down at $63.21 a barrel in extended trading in Asia.

European shares ended higher in a volatile trading session. The pan-European Dow Jones Stoxx 600 index closed with a 0.3% rise at 389.73. All other indexes touched highs not seen for at least six and a half years in the session, with the French CAC-40 breaking though 6,000 level for the first time since December 2000 ahead of the weekend's elections. The CAC closed up 0.2% at 6,004.28, the German DAX Xetra 30 increased 0.3% at 7,479.40 and the U.K. FTSE 100 rose 0.8% at 6,537.80.

In Latin America, Brazilian blue-chip shares closed at a fresh record high. Mexican stocks were boosted by positive US economic reports. In Brazil, the benchmark Ibovespa stocks index closed up 747 points, or 1.5%, at 50,21.22. Mexico's IPC index rose 493 points, or 1.7%, to 29,752.95.

Most Asian markets are up this morning. Australian markets rose to a new high. South Korea's Kospi was flat at 1561 after earlier setting a fresh high of 1,566.03. In Singapore, the benchmark Straits Times Index rose 20 points to 3,471, after earlier marking an intra-day high of 3,484.97. The Hang Seng in Hong Kong gained 40 points at 20,721.

HOW MARKET FARED

Modified Finance Bill may cheer up bulls

The bulls made a solid come back and ended the day with firm gains. Strong regional markets, lower crude oil prices and impressive corporate performance lifted the benchmark Sensex above the 14k mark. The bulls were victorious as set of impressive monthly sales numbers from Auto Majors and steady gains for biggies like RIL aided the markets. Upward trend of market continued on Thursday as the Bulls looked refreshed after two holidays. Thankfully nothing untoward happened in the international markets in the interim. Others like Bajaj Auto, Gujarat Ambuja Cement, L&T and SBI were the major gainers among the 30 Sensex stocks. Finally the benchmark Sensex closed at 14078, up by 206 points and NSE Nifty closed at 63 points at 4151.

Earlier, indices opened with a huge upward gap taking cues from strong US market overnight. The Dow Jones Industrial Average hit another record high on Wednesday, clocking its longest winning streak in almost 52 years as investors welcomed strong earnings, lower oil prices, media deals and a strong reading on manufacturing.

The Dow gained 75.74 points, or 0.6%, to a record 13,211.88 as a stronger-than-expected factory orders report lifted Honeywell International Inc. shares. The average recorded its 18th record close this year. The Nasdaq Composite climbed 26.31 points, or 1%, to 2557.84, the highest since February 2001.

US light crude oil for June delivery fell 72 cents to settle at $63.68 a barrel on the New York Mercantile Exchange, after the government said that supplies of gasoline fell and crude oil inventories climbed. The front-month contract was quoting 6 cents higher at $63.74 a barrel in extended trading in Asia.

Auto stocks were among the major gainers on back of strong monthly sales figures. Maruti surged by over 1% to Rs815, Bajaj Auto surged by over 4% to Rs2562. However, Bajaj Auto's sales last month declined by 10%.

Fresh buying was seen in sugar stocks. Renuka Sugar was up by 5% to Rs461, Sakhti Sugars has gained by 1.5% to Rs92.25, Triveni Engineering was up by over 8% to Rs52.2 and and Uttam Sugar was up by 2% to Rs107.

Market Volumes:
The turnover on NSE was up by 23% to Rs93.27bn. BSE Oil & Gas index was the major gainer and gained 2.84%. BSE Auto index (up 1.45%), BSE Mid Cap index (up 1.22%) and BSE Capital Good index (up 1.85%) were among the other major gainers.

Volume Toppers:
IFCI, TTML, Nagarjuna Fertilizers, IDBI, Arvind Mills, Dish TV, RNRL, SAIL, HLL, IDFC, Tata Steel, IDEA, Bank of India, RIL, Ashok Leyland, Bajaj Hind, Satyam and Cipla.

Upper Circuit:
Deccan Aviation, Mid-Day Multimedia, Silverline Tech, Mercator Lines, Ador Welding and Sanwaria Agro.

Results Today:
Ashok Leyland, EID Parry, GE Shipping, GSFC, Gujarat Alkalies, Hindalco and HT Media.

Delivery Delight:
Andhra Bank, Ashok Leyland, ACC, Bajaj Auto, BILT, Bank of India, BEML, Bharat Forge, BPCL, Corporation Bank, Crompton Greaves, HCL Technologies, M&M, Ranbaxy and Reliance Industries.

Abnormal Delivery:
J&K Bank, Rolta India, Tata Elxsi, UTI Bank, CEAT, Kesoram Industries, Gujarat State Fertilizers & Chemicals Ltd, EID Parry and Dabur India.

Stock Futures with Largest Increases in OI:
Chennai Petro, GE Ship, Federal Bank, Wockhardt, Triveni Eng, Shree Renuka Sugar, Tata Motors, Amtek Auto, Tata Steel and R Com.

Stock Futures with Largest Decreases in OI:
Crompton Greaves, Cummins, BILT, Vijaya Bank, VSNL, Bank of India, Sobha Developers, Ranbaxy and Balrampur Chini.

Results Corner:
Sterlite Q4 net income (down 13%) to Rs2.09bn and revenue (up 20%) to Rs30.73bn

Colgate Q4 net income (up 36.7%) to Rs505.9mn, revenue (up 14.9%) to Rs3.61bn and to pay Rs2 as special dividend

HDFC full year profit at Rs15.7bn (up 24.9%), revenue at Rs53.14bn (up 40%) and to pay Rs22 per share as dividend.

Brokers Recommendations:
HLL – Buy from CLSA with target of Rs240

ICICI Bank – Outperform from Macquarie with target of Rs1085.

Long Term investment:
JSW Steel

Major News Headlines:

FM alters dual excise duty on cement

Ad valorem excise of 12% on cement sold above Rs190 per bag

Govt will keep tax rates 'stable and moderate': FM

Wockhardt buys Negma Labs for $265mn in cash

PSL-led JV secures 156 Acres from Mississippi

Honda plans to make small car in India from 2009

JSW Steel output rises 18% in April after the company raised capacity

Jet Airways raises fuel surcharge by Rs150

Tata Sons raises stake in Tata Tea to 22.78% from 19.1%.