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Tuesday, July 31, 2007

Bulls expect credit from policy


It is only the poor who pay cash, and that not from virtue, but because they are refused credit.

It wasn't just another Manic Monday as most people had expected. The bulls survived a volatile start to the week, thanks largely to the rebound in Asian markets as nagging fears related to the US credit market ebbed. A few index bellwethers such as HUL and SBI helped prop up the main indices.

Banking stocks had a field day amid growing expectations that the RBI won't hike its key short-term lending rates in its first quarter review today. However, some steps are in the offing to contain the relentless inflow of foreign money.

This morning, global indicators are much more encouraging, though oil prices are still a cause for concern. We expect a higher opening given the improvement in the sentiment across global markets. But, the volatility will continue and some more pain may be left in the near-term. As a result, aggressive buying should be avoided at this stage, especially if it is for the short term. Long-term investors should buy fundamentally strong scrips at dips regardless of the market cap. A stock specific approach is the right way to deal with the current uncertainty.

Whatever the outcome of the policy, it's not worth borrowing much to buy in these markets. So stay less leveraged and ride the tide if any in the short term.

Tata Steel may be in action as the company has decided to raise its contribution (including that of Tata Steel Asia) from US$6.7bn to US$7.4bn. Reliance Industries will remain in the thick of action amid lots of news on the company in the newspapers.

Speciality steel maker Mukand may attract some attention as a financial daily reports that the Bajaj Group firm may offer equity stake to auto component manufacturer, Bosch India. Tata Tea could gain amid reports of a price hike in the mid to premium segment.

Hindalco's Board will consider a Scheme of Arrangement with Indian Aluminium Company. Lots of result-oriented action will also be seen as the earnings season approaches its end.

US stocks rebounded from the worst two-day fall since 2003 after Wall Street's biggest securities firms, led by Citigroup, Goldman Sachs and Bank of America asked investors to buy banks, homebuilders and retailers.

The Standard & Poor's 500 Index added 14.96 points, or 1%, to 1473.91. The Dow Jones Industrial Average rallied 92.84 points, or 0.7%, to 13,358.31. The Nasdaq Composite Index rose 21.04 points, or 0.8%, to 2583.28.

US stocks struggled at the start of the session, but moved higher after recent fears about the housing and credit markets subsided. Market breadth was positive.

The Chicago Board Options Exchange's Volatility Index (VIX), an indicator of market volatility that traders follow, fell nearly 13% after closing at its highest level in more than four years on Friday. The VIX and the market tend to move in opposite directions.

Treasury prices fell, lifting the yield on the 10-year note to 4.80% from the 4.77% level reached after bonds rallied Friday in reaction to the selloff in equities.

Oil prices fell with US light crude for September easing 22 cents to $76.80 a barrel on the New York Mercantile Exchange. The front-month contract was quoting 15 cents lower at $76.58 a barrel.

The dollar was lower against the euro and gained versus the yen. COMEX gold for December gained $4.30 to $676.60 an ounce.

European shares traded in a tight range in a volatile session. The pan-European Dow Jones Stoxx 600 index inched 0.1% lower at 372.48. The German DAX 30 closed up 0.1% at 7,456.31, while the French CAC-40 hovered close to the unchanged line at 5,646.36 and the UK's FTSE 100 slipped 0.2% late in the session to 6,206.10.

In Brazil, the benchmark Ibovespa stock index closed 3.1% higher at 54,572.61, up from Friday's close at 52,922, as local blue-chip shares gained. In Mexico City, the IPC index of the 35 most-traded shares rose 2.2%, or 666 points, to close at 30,900.68, after falling 5.3% last week. The RTS index in Russia fell 0.3% to 1961.

Barring Japan, most Asian markets were trading mostly higher this morning. The Nikkei in Tokyo was down 38 points at 17,251 while the Hang Seng in Hong Kong surged 244 points to 22,984. The Straits Times in Singapore rose 28 points to 3555 and the Kospi in Seoul climbed 15 points to 1921.

A volatile trading session ended on a flat note as bulls were unable to sustain their gains. Benchmark Sensex index gyrated over 200points and NSE Nifty over 50points. After opening with a negative bias, markets bounced back as Asian markets recovered to close in positive terrain lifting the benchmark Sensex to hit an intra-day high of 15451. However, selling pressure in the heavyweights like RIL, ITC, Infosys and TCS dragged the key indices lower from their days high.

Finally, BSE 30-share Sensex gained 26 points to close at 15260. NSE-50 Nifty closed flat at 4440.

Bajaj Auto ended lower by 1% to Rs2294. The company announced that they were in talks to build vehicles in India with Renault SA. The scrip touched an intra-day high of Rs2345 and a low of Rs2250 and recorded volumes of over 20,00,000 shares on NSE.

HUL surged by over 6.5% to Rs208 after the company posted a 29% gain in Q2 profit. Net income rose to Rs4.93bn from Rs3.8bn, a year earlier. Sales rose 13% to Rs34.8bn. The board also has approved the company's first share-buyback program; it would offer Rs230 a share to buy back its stock. The scrip touched an intra-day high of Rs212 and a low of Rs202 and recorded volumes of over 62,00,000 shares on NSE.

Reliance Industries was down by 1% to Rs1848. The company posted a 28% growth in Q1 profit, beating estimates. Net income rose to Rs32.6bn. According to reports the company may scrap its $5.2bn project to extract natural gas from the nation's east coast because of a government delay in approving the price at which the company can sell the product. The scrip touched an intra-day high of Rs1898 and a low of Rs1840 and recorded volumes of 27,00,000 over shares on NSE.

SBI spurred by over 5.5% to Rs1578 as the nation's biggest lender profits beat estimates. The company’s Q1 net profit surged more- than-expected. Net income surged to Rs14.3bn gaining 78%. Revenue rose by 27.7% to Rs122.3bn. The scrip touched an intra-day high of Rs1614 and a low of Rs1509 and recorded volumes of over 25,00,000 shares on NSE.

Grasim advanced by 3% to Rs2945 after India's third-biggest cement maker, posted a better-than-expected Q1 profit which gained 54%. Net income rose to Rs6.7bn beating analyst estimates. Sales rose 26% to Rs40.63bn. The scrip touched an intra-day high of Rs2979 and a low of Rs2812 and recorded volumes of over 1,00,000 shares on NSE.

Tata Steel pared its gains as the scrip lost 1.3% to Rs643. The company declared its Q1 result with net profit at Rs12.22bn (up 28%) and net sales at Rs41.97bn (up 7.6%). The scrip touched an intra-day high of Rs675 and a low of Rs635 and recorded volumes of over 32,00,000 shares on NSE.

Banking stocks gained momentum ahead of the RBI meet on Credit Policy. ICICI Bank advanced by 1% to Rs923. Andhra Bank, Bank of India and Syndicate Bank were the major gainers among the Mid-Cap stocks.

NTPC gained by 1%t o Rs163 after India's biggest power producer, signed an agreement with Nigeria to source about 3mn metric tons of liquefied natural gas a year. The scrip touched an intra-day high of Rs163 and a low of Rs160 and recorded volumes of over 33,00,000 shares on NSE.

Cement stocks were in momentum led by gains in the frontline stock Ambuja Cement as the scrip surged by over 3.5% to Rs129; JP Associates was up by over 3% to Rs808 and Shree Cement advanced by 2.1% to Rs1243.

Metal stocks lost their shine. Nalco plunged by over 10% to Rs255 after the company’s Q1 profit at Rs4.47bn (down 28%) and net sales at Rs11.65bn (down 21.6%), Hindalco was down by 4.2% to Rs165 and SAIL slipped 1.3% to Rs146.

Power stocks were in action led by gains in frontline stock, REL advanced by 2.2% to Rs779 after the company won the bid for Sasan project, Tata Power spurred by over 2.5% to Rs721 and NTPC added 1.2% to Rs163. However, Suzlon lost by over 4% to Rs1251.

Results Today:

Aurobindo Pharma, Bajaj Hindusthan, BEL, Bombay Rayon Fashions, Cadila, Cinemax, FT, Fortis Healthcare, Gammon India, Godrej Consumer, Hindalco, HT Media, Indian Hotels, IVRCL Infrastructures, Kesoram, MICO, Nestle India, RCOM, SCI and Videocon Industries.

Fund Activity:

FIIs were net sellers of Rs11.17bn (provisional) in the cash segment on Monday. On the other hand, local institutions were net buyers at Rs8.54bn. In the F&O segment, FIIs were net sellers at Rs630.5mn.

On Friday, FIIs pulled out Rs12.22bn from the cash segment. Mutual Funds were net buyers of Rs2.52bn.

Major bulk Deals:

Barclays Capital has bought Alok Industries; Merrill Lynch has purchased Fact Enterprises while selling Goldstone Technologies.

Lower Circuit:

Anant Raj Industries and BF Utilities.

Upper Circuit:

United Breweries, Bartronics, Ganesh Forgings, Jai Corp, Jaybharat Textiles, Raj Tele, Genus Overseas and Kalindi Rail.

Delivery Delight (Rising Price & Rising Delivery):

BILT, Cipla, Colgate, Dabur India, GAIL, HCC, Kesoram and SREI Infrastructure.

Abnormal Delivery:

Orchid, Gammon, McDowell, Amtek Auto, CEAT and United Phosphorous.

Major News & Announcements:

Punj Lloyd ventures into integrated drilling services

Jet Airways Q1 profit at Rs308.8mn against loss of Rs449.8mn and revenue at Rs18.07bn (up 11%)

Ranbaxy to sell Authorized Version of Generic Isoptin in US

Tata Steel Q1 profit at Rs12.22bn (up 28%); net sales at Rs41.97bn (up 7.6%)

BHEL Q1 net profit at Rs2.89bn (up 22%), revenue at Rs34.4bn (up 23.7%)

BEML Q1 profit at Rs235.9mn (up 57%) and net sales at Rs3.93bn (up 17.3%)

Swaraj Mazda Board to consider right issue on August 27th

GE Shipping Q1 profit at Rs4.21bn (up 74%) and net sales at Rs8.7bn (up 59%)

REL wins bid for Sasan power project

Vijaya Bank Q1 profit at Rs1.11bn (up 54%), revenue at Rs9.67bn (up 38.9%)

IOC Q1 profit at Rs14.68bn (down 17.5%) and net sales at Rs528.62bn (up 8.5%)

Elecon Engineering secures Rs3.78bn order

I-flex Q1 group profit at Rs367mn (up 4.5%), revenue at Rs5.13bn (up 27%)

JSW Steel to buy steel plate mill in its first US acquisition

M&M Q1 profit at Rs1.91bn (down 6%), net sales at Rs26.13bn (up 16.8%).