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Wednesday, September 05, 2007

All's well that starts well


Good teachers are costly, but bad teachers cost more.

Spare a thought for your teachers on Teacher's Day. But for the markets more than Warren Buffet, Peter Lynch et al, it is experience which has been the best teacher and the price investors pay for it is each one's guarded secret. The bulls may not have had much to cheer about yesterday, but today is a better day. After enjoying a long weekend, US stocks ended higher amid continued hope that the Federal Reserve will slash its benchmark interest rate on Sept. 18 to prevent the US economy from slipping into a recession. Most experts are betting that not only this month, but the US central bank is also likely to cut rates in the coming months to avoid a major downturn in economic activity. If this scenario plays out as anticipated, the bulls will regain their control over world equity markets, including in India. Still, there are worries that the Fed action may not be sufficient to help the US economy ward off the threat of a recession. So, one has to keep a close watch on the global developments.

On the domestic front, there are no big concerns on the economic front. But, on the political side, we seem to be heading into mid-term polls sometime early next year, unless senior Congress party leaders find a surprise solution. As far as liquidity is concerned, the outlook is getting positive again with both FIIs and Mutual Funds persisting with their buying spree. Today, we expect a higher opening, and perhaps an equally bullish close. Hopefully all will end well today.

Reliance could be in action following the acquisition of GAPCO in East Africa. Jet Airways is another stock to watch out for as it has deferred its proposed $400mn Rights Issue. Akruti Nirman will be in action as it is reportedly planning to bid for the Dharavi project with a Dubai firm. Puravankara Projects may also attract some attention as it plans to tie up with French hospitality major Accor for its foray into this sector. Pyramid Saimira is expected to be in the spotlight as a financial daily reports that it is likely to bid for Australian theatre chain Hoyts, owned by media tycoon Kerry Packer.

IDBI and IFCI will remain in the thick of things ahead of the latter's stake sale announcement. Mastek could rise as it will today announce plans for raising additional funds. Murli Industries may advance amid reports of its entry into the cement sector. Abbott India will also be in action as it will declare its plans for the proposed share buyback. Eveready Industries is likely to gain as it is expected to consider a private placement tomorrow.

US stocks rallied after investors returning from an extended weekend snapped up technology, energy and financial shares. Stocks climbed after economic reports stoked optimism that the Federal Reserve might consider cutting interest rates at its meeting on September 18.

Apple advanced to a one-month high on speculation that sales will exceed estimates. Exxon Mobil climbed after the price of crude rose to a one-month peak. Goldman Sachs and Lehman Brothers helped spark a second straight gain in banks and brokerages.

The Standard & Poor's 500 Index added 15.43, or 1.1%, to 1,489.42. The Nasdaq Composite Index rose 33.88, or 1.3%, to 2,630.24 for its steepest four-day rally in four years. The Dow Jones Industrial Average climbed 91.12, or 0.7%, to 13,448.86, held back by a 5.1% decline in shares of Home Depot.

The Institute of Supply Management's manufacturing index slipped to 52.9 in the latest survey, down from the 53.8 reading for July. Any reading above 50 indicates growth in the sector. Economists had forecast the index would slip to 53 in the latest survey.

Meanwhile, July construction activity sank by the biggest amount in six months as spending on homes fell for a record 17th straight month.

Light, sweet crude rose $1.08 to $75.12 a barrel on the New York Mercantile Exchange. The front-month contract was up 12 cents at $75.20 a barrel in extended trading in Asia.

Treasury prices fell slightly, raising the yield on the 10-year note to 4.55% from 4.53% late on Friday. The dollar was up against the euro but lower versus the yen. COMEX gold for December delivery rose $9.60 to $691.50 an ounce.

European shares recovered from earlier losses to close broadly higher. The pan-European Dow Jones Stoxx 600 index added 0.7% to 379.47, with gains in the banking sector leading the way. The German DAX 30 closed up 1% at 7,721.77, while the UK's FTSE 100 gained 1% to 6,376.80 and the French CAC-40 added 0.4% to 5,672.72.

Latin American ended mixed. Brazil's Bovespa closed up 0.8% at 55,250.47 and Mexican stocks, as measured by the IPC index, rose 0.4% to 30,932.17. Chile's IPSA shed 2 points to close at 3,324.58. Argentina's Merval index also closed lower, by 0.2% at 2.068.19.

In other emerging markets, the RTS index in Russia dropped 1.1% to 1904 and the ISE-National 30 index in Turkey added 0.2% to 62,963.

Asian markets were trading mixed. The Nikkei in Tokyo was down 45 points at 16,375 while the Hang Seng in Hong Kong jumped 259 points to 24,145. The Straits Times in Singapore rose 19 points to 3395 and the Kospi in Seoul was flat at 1875.

Markets continued its upward run as key indices managed to end in a positive territory for seventh consecutive day. With lack of triggers from the International markets bulls were unable to find any specific direction and moved in a narrow range throughout the trading session. However, volumes rose. Turnover in NSE cash segment rose 4.1% and in F&O segment rose 13%. Finally, the BSE 30-share Sensex closed at 15,465 adding 43 points. NSE Nifty added 4 points to close at 4479.

TCS gained by 0.7% to Rs1066 after the company won a deal from Roche. The scrip touched an intra-day high of Rs1087 and a low of Rs1061 and recorded volumes of over 5,00,000 shares on NSE.

Centurion Bank of Punjab gained 1.1% to Rs40 amid market grapevine of another small acquisition. The scrip touched an intra-day high of Rs41 and a low of Rs39 and recorded volumes of over 2,00,000 shares on NSE.

Tata Motors slipped by 1.6% to Rs691 after the company’s August sales fell 0.4%, its fourth monthly decline as demand remained sluggish due to high interest rates. The company sold 45,144 commercial and passenger vehicles in India and overseas last month. The scrip touched an intra-day high of Rs707 and a low of Rs682 and recorded volumes of over 14,00,000 shares on NSE.

Dollex Industries slipped 2.3% to Rs102. The company announced that they have acquired Sugar making Facility for Rs140mn. The scrip touched an intra-day high of Rs105 and a low of Rs103 and recorded volumes of over 48,000 shares on NSE.

ICICI Bank edged higher by 0.3% to Rs908 after the company announced that it borrowed $1.5bn in overseas loan. The scrip touched an intra-day high of Rs926 and a low of Rs901 and recorded volumes of over 18,00,000 shares on NSE.

L&T advanced by 1.5%to Rs2624 after the company secured Rs2.67bn orders from Indian Oil and Liaoning Huajin Chemical. The scrip touched an intra-day high of Rs2640 and a low of Rs2590 and recorded volumes of over 8,00,000 shares on NSE.

Fertilizer stocks were in momentum led by gains in Nagarjuna Fertilizer surged by over 5.5% to Rs42, Chambal Fertilizer was up by 1.4% to Rs50, Deepak Fertilizer spurred by over 7% to Rs114.

Realty stocks ended higher. Unitech surged by over 3.5% to Rs253, DLF advanced by 2.1% to Rs623 and Ansal Infrastructure gained by 3% to Rs258.

Select FMCG stocks were on the receiving end on back of profit booking. Colgate slipped by 2% to Rs393, ITC was down by 0.7% to Rs172; Tata Tea edged lower by 0.8% to Rs762. However, Goderej Consumer, Marico and Hindustan Unilever were among the major gainers.

IT stocks witnessed fresh buying interest. Infosys advanced by 1.8%to Rs1889, TCS gained by 0.5% to Rs1066, Satyam Computer added 0.5% to Rs449. However, Wipro was on the receiving end, the scrip was down by 1.8% to Rs465.

The market is expected to move in a range after closing flat today unless RIL turns the magic on Dalal Street. Bulls will be placing their hope on heavyweight Reliance Industries on Wednesday after the company acquired a majority stake and management control of Gulf Africa Petroleum Corporation (GAPCO), a company which has a significant presence in East Africa in the petroleum downstream sector. And traders will certainly anticipate that global cues can provide some direction to the bulls with the resumption of US markets after being closed yesterday. The downside appears to be limited though risks from unforeseen global as well as domestic events could pose some threat to the current upswing.

Fund Activity:

FIIs were net buyers of Rs3.48bn (provisional) in the cash segment on Tuesday and the local institutions pumped in Rs679.8mn. In the F&O segment, foreign funds were net buyers of Rs1.06bn.

On Monday, FIIs were net buyers to the tune of Rs5.28bn in the cash segment. Mutual Funds were net buyers of Rs1.43bn on the same day.

Major Bulk Deals:

Sundaram MF has bought IMP Powers while UBS Securities has picked up Mascon Global.

Insider Trades:

Simplex Projects Limited: JM Financial Mutual Fund through its various schemes has purchased from open market 35070 equity shares of the company on 30th August, 2007.

Raymond Ltd: SBI One India Fund has purchased from open market 750000 equity shares of the company on 27th August, 2007.

Upper Circuit:

Prism Cement, Noida Toll, Raj Tele, Amara Raja Batteries, Bag Film, Morepen Labs, Bank of Rajasthan, RPG Cables, Shaw Wallace, Tripex Overseas, Shree Precoated, Kei Industries, Prakash Industries and Taneja Aerospace.

Delivery Delight (Rising Price & Rising Delivery):

Crompton Greaves, Cummins India, GTL, Maruti and Tata Chemicals.

Abnormal Delivery:

Alfa-Laval, Asian Hotels, BEML, ENIL and Triveni Engineering.

Major News & Announcements:

Jet Airways to start cargo airline

TCS wins deal from Roche

L&T secures Rs2.67bn orders

Sujana Towers to raise $60mn selling bonds overseas

Dollex Industries acquire Sugar making Facility for Rs140mn

ICICI Bank borrows $1.5bn in overseas loan