Thursday, August 09, 2007
The rupee surrendered gains on Thursday, 9 August, as stocks dropped on worries about fallout from the US subprime mortgage sector, and traders said the central bank may sell while it was weak to push it away from nine-year highs.
European stocks led other market lower after BNP Paribas froze $2.2 billion worth of funds, citing the subprime woes.
Worries over problems in credit markets saw investors pare risk by selling high-yielding currencies, and an unwinding of carry trades sparked a surge in the yen.
The rupee ended at 40.53/54 per dollar, off an intraday high of 40.39 but just softer than Wednesday’s close of 40.5250/5350. It hit a nine-year high of 40.20 in late July.
“Dollar/yen has moved up by one big figure in the day and local stocks have fallen by more than 400 points from its early peaks,” said a local trader.
“This is not a good sign and we will see a gradual move towards 41 per dollar, which will be the next key support level for the rupee,” she said.
Indian shares fell as much as 3.1% from an early high, before closing down 1.4%.
The rupee had risen in early deals despite an increase in the central bank’s intervention firepower.
The ceiling on market stabilisation bonds (MSS), which are used to absorb rupee funds generated by currency intervention, was raised to Rs1.5 trillion ($37 billion) from Rs1.1 trillion late on Wednesday.
It followed Tuesday’s curbs on foreign borrowings by local firms in a bid to try to check some of the huge capital inflows that have driven the rupee higher this year.
The central bank bought more than $23 billion trying to cap the rupee in the first five months of 2007, latest data shows, and the higher MSS ceiling meant further intervention was likely — including into a weakening market, traders said.
“They will take advantage of any sharp rupee fall to sell into it and push it further lower,” a trader from a European bank said.
The state gradually stepped back from economic activity over the past two decades and more of liberal reforms. Now, the global commodities boom and the growing trade surpluses in Asia are helping a few governments reclaim some of the economic power that they have lost. Other governments are reacting to this by claiming the right to vet foreign investments.
Are we headed for a new era of interventionist state capitalism? Venezuela’s President Hugo Chavez has decided to nationalize his country’s oil industry. There is speculation that he may target the power and telecom industries next. Russia’s Vladimir Putin has forced investors to give up some of their rights to the Sakhalin oilfields to his government at ridiculously low prices.
Both Chavez and Putin are using their oil revenues to play power games. Chavez is helping other Latin American countries stand up to the Washington consensus, the set of market-friendly policies that have gained acceptance in most parts of the world. Putin is using his natural gas resources to bully Russia’s neighbours.
Meanwhile, some oil-rich countries in West Asia as well as China are setting up sovereign wealth funds—investment companies that will use part of the burgeoning foreign exchange piles of these countries to buy companies and assets elsewhere. Investment bank Morgan Stanley estimates that these sovereign funds already have $2.5 trillion to play around with; this corpus will swell to $5 trillion in 2010 and $12 trillion in 2015.
In other words, sovereign wealth funds will get an additional $9.5 trillion to play around with over the next eight or nine years. That’s more than a trillion extra dollars a year. The United Nations’ world investment report says that total new FDI flows between 2001 and 2005 were $3.7 trillion, or $748 million a year. What this means is that government investment companies are likely to fund more FDI in the coming years than all the world’s private companies put together.
This could lead to a political firestorm—and a further round of intervention in countries that are likely to be recipients of the trillions that will come in from China and the Arab countries.
In Britain, there has been a raging debate ever since the China Development Bank took a stake in Barclays Plc. last month. Qatar’s investment fund is trying to buy British retailer J. Sainsbury Plc. German chancellor Angela Merkel says that her government is thinking of introducing legislation to make it more difficult for sovereign wealth funds to buy into German industry. She is also trying to cobble together a pan-European alliance to address the challenge. The new French President, Nicolas Sarkozy, too, has made protectionist noises.
Nobody is talking about blanket bans as yet—and thankfully so. Europe’s leaders seem to want to protect —though not own—“strategic industries” such as energy, banks and ports. Though they may not realize it, this is the resurrection of an old approach where the state would control key sectors that it believed to be too important to be left to the private sector. It’s the commanding heights doctrine all over again.
We already hear echoes of these debates in India. There are reports that the draft National Security Exemption Bill, which will pinpoint sectors where intelligence clearance will be needed before an FDI proposal gets the final green light, mentions a large array of sectors where foreign money cannot sail in unhindered. While money from terror networks is the bigger worry right now, it is quite possible that such rules can be used to limit investment by various sovereign wealth funds.
There is little doubt that countries such as China could use their investment funds to buy companies for reasons beyond pure commercial profit. But does that mean that the governments of countries that are likely to attract money from state-owned investment funds should go into a protectionist hurdle? It’s a difficult question to answer. However, it would be worth looking at other options as well.
Most of the areas that are being defined as “sensitive” by governments (including India’s) are dominated by monopolies and oligopolies—oil, power, mining, telecom and ports, for example. The fear that a China or a Qatar could derive unfair economic power by buying companies in these sectors is based on the fact that there is limited competition in them. One sensible policy would be to aggressively break down monopolistic and oligopolistic power in these areas, perhaps through a combination of market reforms and strong anti-trust action.
But the power of government investment funds could be overrated. As the Wall Street Journal wrote in an editorial earlier this week, China’s famed $3 billion investment in the IPO of private equity firm Blackstone is already in the red. Blackstone’s share price is way below its IPO price. It’s early days yet, but the old rule applies—governments are usually terrible investors.
The Bombay Stock Exchange’s Sensex plunged over 207 points on 9 August on emergence of heavy selling by funds and investors, following reports that a leading European bank has freezed accounts of three mutual funds.
The Sensex, which commenced the day with a 234 point gain, tumbled 207.83 points at 15,100.15 on aggressive selling by funds on reports that French bank BNP Paribas was the latest to face the subprime credit crunch.
The benchmark index experienced a wide swing of nearly 500 points during the day by touching a high of 15,542.40 and a low of 15,062.10 points.
The wide-based National Stock Exchange index, Nifty, shed 58.90 points at 4,403.20 as many consumer durable and refinery stocks led by Reliance Industries quoted lower.
Marketmen said the downslide on domestic bourses began near the noon session after European markets opened on a weak note with BNP Paribas and Commerzbank seeing a sharp fall in their share prices.
They said concerns of a serious political development in neighbouring Pakistan and its stock market crashing nearly four per cent also had a negative impact on the bourses here.
“Major market participants like foreign funds adopted a cautious approach in investing on concerns over reports of emergency in Pakistan,” said Rajiv Malik of RNM Financial Services.
Firm global cues fueled the Indian indices to continue yesterdays euphoria, but profit booking oflate kept the indices down and closed in deep red. Asian markets closed mixed. Indian indices started the day on a strong note and traded ranged till mid session. But the news on BNP Paribas, France's biggest bank freezing 3 Asset Backed Funds on US Subprime losses saw some volatility there after. As result of this European markets opened in red and weighed on Indian indices too. Sensex lost more than 500 points from days high. All the sectors closed in red, Consumer Durables, Oil & Gas, FMCG and IT were the worst hit. Mid and Small caps were also not spared from the selling pressure and ended in line with frontline indices.
Globally Speaking: Some reports suggest that the Chinese government has begun a concerted campaign of economic threats against the United States and has hinted that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation. For now it is just warning. Lets see how this pans out and how market will react to this.
Sensex closed down by 208 points at 15100.15. Weighing on the Sensex are losses in Hindalco (156,-4 percent), SBI (1649.6,-3 percent), Rel Energy (757.9,-3 percent), Ranbaxy (371.6,-3 percent) and Satyam (467.1,-3 percent). Losses are restricted by gains in Dr Reddys (638,+1 percent), BHEL (1733.05,+1 percent), Cipla (188,+1 percent), ICICI Bk (890.25,+1 percent) and Wipro (478,+0 percent)
Orbit Corp. sold the land to JSW for a super Rs 300 crore profits. OCL is a niche real estate company with a business of redevelopment of dilapidated buildings. OCL has 15 projects in hand with a saleable area of 1,1 lac square feet. and no land bank. OCL is the only company to offer warranties against defects in construction. The story about the sale was doing rounds and the speculators were expecting Rs 900 crores as well. So in a sense the sale price news is a let down. However all in all its a good deal for orbit but these kinds of profits do not entail a P/E multiple as its a one time gain. One needs to see the sustainable business value and that most likely has been surpassed in the recent rally. As result of this the stock rallied up by 14%, closed at Rs 450.
Last week in South India cement prices increased by Rs 3-5 per bag. The major players in south like ACC, India Cement, Kesoram and Madras Cement are the major beneficiaries. Due to huge demand even in the monsoon season one can again expect the price to be hiked in coming months. ACC reported almost 15% yoy growth in July month's despatches. The company's production has grown by 11% in July to 1.63 mn tonne from 1.47 mn tonne a year ago. During January - July, the company's production was at 11.84 mn tonne against 11.15 mn tonne in the same period a year ago and despatches rose to 11.84 mn tonne from 11.10 mn tonne as compared to same period a year ago. Due to strong demand even in mansoon season we expect the companyes to deliver good resutl in coming quarters. We are positive on this sector, one can look for down side for investment opportunities. All the cement stocks ended in red. ACC closed down by 2.41%, India Cement down by 3.23%.
Technically Speaking: Sensex started the day on a strong note but late panic selling session saw it end in deep red. Sensex touched an intraday high of 15542 and low of 15062. Market turnover was good at Rs 5036 cr. Overall breadth was in favor of Declines, where the Advances to Declines ratio stood at 1:1.6. Sensex looking to retest supports near 14850-14900. Medium term trend will turn negative if the supports of 14700-14735 is broken
The US economy will grow less than previously forecast as a rout in sub-prime borrowing hampers consumer spending, according to a survey of economists.
Growth will slow to an average 2.6 percent annual pace in the second half of the year, 0.2 percentage point less than economists forecast in July, according to estimates in a survey.
Rising delinquencies in the sub-prime mortgage market are prompting lenders to limit the availability of credit, which may mean Americans buy fewer cars and spend less on vacations.
The slackening expansion won't force the Federal Reserve to lower interest rates for the rest of the year as officials stay focused on taming inflation, economists said.
"The longer the housing downturn goes on, the more spillover there will be," said Nigel Gault, Chief US Economist at Global Insight in Lexington, Massachusetts. "The fed doesn't have a lot of room to manoeuvre because inflation is still at the high end of what they want to see."
Global Insight reduced its growth forecast for the last six months of 2007 by a quarter percentage point.
Much of the projected slowdown in spending stems from the tumult in the sub-prime mortgage market, which is weighing on home values and delaying a recovery from the 18-month-long housing slowdown.
Lenders such as Wells Fargo and Wachovia Corp are raising rates and restricting access to loans even for some of their most credit-worthy borrowers.
Consumer spending, which accounts for more than two-thirds of the economy, will probably grow at an average 2.5 percent pace in the second half of the year, a 10th of a percentage point less than forecast in July, according to the survey. Spending expanded at an average 3.7 percent pace per quarter over the last decade.
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.
Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.
China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.
"China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily.
The threats play into the presidential electoral campaign of Hillary Clinton, who has called for restrictive legislation to prevent America being "held hostage to economic decicions being made in Beijing, Shanghai, or Tokyo".
A bill drafted by a group of US senators, and backed by the Senate Finance Committee, calls for trade tariffs against Chinese goods as retaliation for alleged currency manipulation.
The yuan has appreciated 9pc against the dollar over the last two years under a crawling peg but it has failed to halt the rise of China's trade surplus, which reached $26.9bn in June.
Henry Paulson, the US Tresury Secretary, said any such sanctions would undermine American authority and "could trigger a global cycle of protectionist legislation".
Mr Paulson is a China expert from his days as head of Goldman Sachs. He has opted for a softer form of diplomacy, but appeared to win few concession from Beijing on a unscheduled trip to China last week aimed at calming the waters
The market witnessed a complete trend reversal today. It started declining sharply since mid-afternoon trade on intense selling pressure at higher levels, after European indices opened weak and Asian indices also started coming off their highs. Earlier, trading on domestic bourses had resumed on an optimistic note today, 9 August 2007, on strong buying demand for index pivotals, tracking firm US markets overnight. All the sectoral indices on BSE ended in the red.
The BSE 30-share Sensex was down 207.83 points or 1.36% at 15100.15. It opened with a 144.46-point upward gap at 15,452.44 and cruised ahead to hit a high of 15,542.40, at 10:31 IST. It slipped to a low of 15,062.10 at 15:06 IST.
It oscillated 480.10 points for the day
The S&P CNX Nifty declined 58.90 points or 1.32% at 4,403.20. The Nifty August 2007 futures settled at 4355, a sharp discount of 48.20 points as compared to spot closing
All the European markets were trading lower today, 9 August 2007 as BNP Paribas suspended redemptions from three funds citing problems in US subprime mortgages. The news came just at a time when worries about global credit problems arising from US subprime mortgatge woes appeared to be easing.
The market breadth which was strong till mid-afternoon trade on BSE turned negative, as small-cap and mid-cap stocks succumbed to selling pressure: 1,660 shares declined as compared to 1,065 that advanced, while 51 remained unchanged
The BSE Mid-Cap index lost 1.59% to 6,559.58 while the BSE Small-Cap index lost 1.08% to 7,964.12
The total turnover on BSE amounted to Rs 5036 crore as compared to Rs 4732 crore on Wednesday, 8 August 2007.
The NSE F&O turnover was Rs 55,930.24 crore as compared to Rs 42084.83 crore on Wednesday, 8 August 2007.
Among the 30-member Sensex pack, 23 declined while the rest advanced.
India’s leading power equipment maker Bharat Heavy Electricals was up 1.26% to Rs 1734, off its days high of Rs 1786. The stock surged after it bagged a contract worth Rs 2900 crore for building three 500-megawatt units in north India. It was the top gainer from the Sensex pack.
Larsen & Toubro (L&T), declined 1.47% to Rs 2456. The stock hit a high of Rs 2600 on reports that it is set to invest Rs 100 crore in Mysore-based Rangsons Electronics for a 40% stake. Rangsons Electronics is a Rs 70-crore electronic manufacturing solutions provider and one of the preferred suppliers for L&T’s electrical & electronics division. L&T had risen 4.35% over the last one month to 8 August 2007.
The BSE Capital Goods Index was down 1.14% at 12,883.72
Reliance Communications (RCom) lost 1.33% to Rs 536.90. It struck a high of Rs 554.20 buoyed by the completion of the private placement of 5% equity shareholding in its telecom infrastructure arm, Reliance Telecom Infrastructure (RTIL), at a valuation of Rs 27000 crore ($ 6.75 billion). The placement has been made with seven leading international financial investors. The company made this announcement after market hours on Wednesday, 8 August 2007.
Pharma shares Cipla (up 0.67% to Rs 187.55), and Dr Reddy’s Laboratories (up 1.23% to Rs 638) gained, as they are considered as defensive shares in falling market.
India’s biggest aluminium company Hindalco Industries slipped 3.77% to Rs 155.75 on 8.72 lakh shares. It was the top loser from Sensex pack
ICICI Bank, the country’s largest private sector bank in terms of net profit, rose 0.37% to Rs 887.10, on reports that the Foreign Investment Promotion Board (FIPB) is expected to reconsider the much-discussed proposal of infusion of foreign funds into its holding company at its next meeting on 17 August 2007. The stock came off session's high of Rs 919.80
India’s largest bank, State Bank of India (SBI) slumped 3.57% to Rs 1645. The stock came off from a high of Rs 1736. Other banking shares also attracted selling. The BSE Bankex slipped 1.25% at 7,975.48.
Kotak Mahindra Bank (down 3.16% to Rs 768.50), HDFC Bank (down 1% to Rs 1160), Oriental Bank of Commerce (down 2.30% to Rs 231.50), Punjab National Bank (down 2.17% to Rs 510.10), Bank of India (down 3.20% to Rs 245), Bank of Baroda (down 5.07% to Rs 298), Axis Bank (down 2.56% to Rs 609.90) and Allahabad Bank (down 3% to Rs 92) edged lower.
Ambuja Cements was down 1.27% to Rs 128 after it said it had stopped operations at its plants in Gujarat state due to heavy rains and floods. The company said it was in the process of estimating losses from the flood and had full insurance cover.
India’s largest private sector enterprise Reliance Industries (RIL) lost 1.91% to Rs 1839.80 on 10.55 lakh shares. RIL is understood to be keen on picking up a stake in the proposed 4,00,000-barrel-a-day Jizan refinery project in Saudi Arabia.
IT shares declined today, after a sharp rally yesterday, 8 August 2007 when the government on Tuesday, 7 August 2007, tightened external commercial borrowing (ECB) norms. The BSE IT index lost 1.55% to 4,733.85. It had surged 4.11% to 4,808.43, yesterday.
Infosys Technologies (down 1.83% to Rs 1931.50), Satyam Computers (down 2.77% to Rs 466) and TCS (down 1.10% to Rs 1141), slipped. The Indian rupee was trading at 40.51 against the US dollar.
Auto stocks ended on a weak note. The BSE Auto Index slipped 0.86% to 4,769.15. Maruti Udyog (down 1.72% to Rs 823), Mahindra & Mahindra (down 0.43% to Rs 687), and Bajaj Auto (down 0.85% to Rs 2291), slipped.
Hero Honda Motors (up 0.36% to Rs 680) and Tata Motors (up 0.45% to Rs 664) gained.
At present, all passenger vehicles are charged 24% excise duty but small cars are charged only 16%. Two- and three-wheelers also fall under the 16% bracket. The auto industry has been asking for 16% to be the highest excise slab for all automobiles.
Housing Development Finance Corporation (HDFC) declined 2.22% to Rs 2020, off its day’s high of Rs 2099
National Thermal Power Corporation (NTPC), slipped 1.46% to Rs 168.55. The stock came off a high of Rs 176. As per reports it is targeting 50,000 megawatt (MW) by 2012. As on date, the installed capacity of NTPC is 27,904 MW.
Omaxe settled at Rs 349.95 on BSE, a premium of 12.90% over IPO price of Rs 310. The stock debuted at Rs 400 on BSE. The stock had hit a low of Rs 341.50 and high of Rs 410 during the day. On BSE, 1.20 crore shares changed hands in the counter. The IPO of Omxe had received strong investor response. It was subscribed 68 times. The company had priced the IPO at the top end of the Rs 265 to Rs 310 price band. The National Stock Exchange (NSE) has included Omaxe in futures & options (F&O) segment. The lot size of Omaxe in F&O is set at 650.
Assam Company (up 9.90% to Rs 21.10), Shringar Cinemas (up 8.16% to Rs 61.65), Atlanta (up 10% to Rs 254.95), HOV Services (up 10% to Rs 176.30) and DCB (up 6.83% to Rs 12.20) were the key gainers from the small-cap and mid-cap basket.
Shree Precoated Steels (down 10% to Rs 303), Selan Exploration (down 7% to Rs 120), Shakti Pumps (down 6.70% to Rs 146.20), Zee News (down 6.50% to Rs 66.95), Kale Consultants (down 5.72% to Rs 94) and HTMT Global (down 5.64% to Rs 373) were the key losers from the small-cap and mid-cap basket.
ICSA (India) galloped 13.60% to Rs 1819.70, riding on the back of splendid Q1 results. Its net profit rose 95.42% to Rs 23.92 crore in Q1 June 2007 over Q1 June 2006. Net sales vaulted 107.04% to Rs 122.63 crore in Q1 June 2007 over Q1 June 2006. The results were announced on 30 July 2007.
Mercator Lines jumped 8.25% to Rs 53.15 after it said it acquired a 2006 built vessel ‘Dredger’ having a capacity to dredge 4500-5000 cubic meters of material with an aim of diversifying into the lucrative area of dredging sector.
IFCI dropped 5.10% to Rs 61.50 after the National Stock Exchange banned taking fresh positions in the derivatives contracts.
Modern Dairies jumped 5% to Rs 71.80 on reports Reliance Retail, a unit of Reliance Industries, is in talks to buy a stake in north-India based firm.
Motherson Sumi Systems advanced 1.86% to Rs 131.15 on forming a joint venture with UK-based Calsonic Kansei based in England to meet the growing needs of the automotive manufacturers in India including the new car makers who have announced their plans to set up manufacturing base in India.
Aegis Logistics rose 1.43% to Rs 145.10 following its announcement yesterday, 8 August 2007, of a board meet on 10 August 2007 to consider an acquisition.
Lanco Infratech rose 4.05% to Rs 282.60, extending its recent rally triggered by strong Q1 results. Lanco's consolidated net profit rose 1103.9% to Rs 51.29 crore on 135.42% rise in sales to Rs 591.44 crore in Q1 June 2007 over Q1 June 2006.
Tayo Rolls was up 1.46% to Rs 268 after its board approved setting up engineering forging and forged roll project with investment of Rs 142.50 crore. The project envisages setting up integrated facilities for manufacturing forging quality ingots, forged bars, engineering forgings and forged rolls. The board also approved to tie-up with UK-based Sheffield Forgemasters for technical know-how.
Sangam (India) rose marginally by 0.27% to Rs 56.15 after it said its order book stood at Rs 135 crore as on 31 July 2007 that includes export orders worth Rs 65 crore. Further, the company said it would be entering technical textile fabric segment to cater to the institutional needs of various industries.
Tata Tea slipped 0.66% to Rs 710.10, after hitting high of Rs 744.90 on reports that it is eyeing a stake in US-based AriZona Beverages in which the Tatas have been interested for almost three years now. AriZona Beverages operates a portfolio of tea, coffee, water and juice brands, besides beer and snacks. Reportedly, if a bid goes through, the Tatas will keep both the bottled and powder beverage operations and may divest the beer and snack businesses of AriZona Beverages. The company however termed such report as speculative.
Public sector Hindustan Copper (HCL) jumped 5% to Rs 120.25 on recent reports that it may be revived without any cash support from the government. A financial restructuring package worth Rs 637 crore is proposed by the ministry of mines that includes waiver of loan, interest, preference share capital, guarantee fee and reduction of capital. The stock surged 5% in each of the previous three trading sessions.
Jai Corp hit 5% upper circuit at Rs 5314.75 on BSE on company’s plans to consider issue of bonus shares in a meeting scheduled on 09, August 2007. Jai Corp surged 62.8% over the last the past 10 trading sessions to Rs 5061.70 on 8 August 2007 from Rs 3107.60 on 25 July 2007.
Tata Power declined 2.70% to Rs 684 on reports that it is in talks with French nuclear group Areva for sourcing nuclear power equipment.
Ratnamani Metals & Tubes surged 1.75% to Rs 1040 after the company’s board approved the issue and allotment of 4,50,000 convertible warrants (5% of the present equity capital) at a price of Rs 950 per warrant aggregating to Rs 42.75 cores on preferential basis to promoters. The stock had surged 6% on Wednesday 8 August 2007 after the company made the announcement after trading hours on Tuesday, 7 August 2007.
Birla Kennametal was locked at the upper limit of 5% to Rs 225.15 after the company said it signed an agreement with its erstwhile joint venture partner US-based Kennametal to supply products for five years.
Asian markets eased from higher levels today, 9 August 2007. Nikkei (up 0.83% to 17,170.60), Taiwan Weighted (up 0.91% at 9,182.60) and South Korea's Seoul Composite (up 0.28% at 1,908.68) gained.
Hong Kong's Hang Seng lost 0.43% at 22,439.39. It came sharply off higher level.
Shanghai Composite advanced 1.95% to 4,754.09, after hitting an all time high of 4,768.88.
US stocks surged yesterday, 8 August 2007, as solid results in the technology arena and renewed demand for risky debt soothed investors a day after the Federal Reserve said the economy should keep expanding. The Dow Jones Industrial Average rose 153.56 points, or 1.14%, to 13,657.86. The Standard & Poor's 500 index rose 20.78 points, or 1.41%, to 1,497.49. The S&P has had its biggest three-day point gain since October 2002. The technology-dominated Nasdaq Composite index advanced 51.38 points, or 2.01%, to 2,612.98.
Crude prices continued to hover around the $72 mark on signs that US gasoline demand may have peaked as the summer driving season neared close. It was trading at $72.33, up $0.18, on the Nymex in early morning trade.
BNP Paribas SA, France's biggest bank, closed its three funds on concerns over US subprime mortgage losses and markets in Europe fell sharply, dampening sentiment back home. London's FTSE 100 index declined nearly 1% while Germany's DAX index shed over 1% and France's CAC 40 index was down 1.55%. The market crashed nearly 480 points from its day's high to touch the intra-day low of 15,062. The fall in European indices and a sharp fall in the global commodities markets played on investors’ sentiment. After adding over 375 points in yesterday's trades, the Sensex resumed 144 points higher at 15,452 and gained around 90 points to touch the day's high of 15,542 on sustained buying in banking and metal stocks. But, the index slipped on across-the-board selling to close at 15,100, down 1.36% or 208 points. The Nifty shed 1.32% or 59 points to close at 4,403.
The market breadth was negative, with the losers outnumbering the gainers. Of the 2,670 stocks traded on the BSE, 2,611 stocks declined, 1,012 stocks advanced and 47 stocks ended unchanged. All the sectoral indices were battered. Among the major losers the BSE CD index lost 2.47%, the BSE Oil & Gas index dropped 1.96%, the BSE FMCG shed 1.73%, the BSE PSU index declined by 1.64%, the BSE IT index and the BSE Teck index fell by 1.55% each.
Excluding the few, most of the Sensex stocks ended in the red. Among the major losers Hindalco plummeted by 3.61% at Rs156, SBI tanked by 3.30% at Rs1,650, Reliance Energy dropped 3.22% at Rs758, Ranbaxy slumped 2.66% at Rs372, Satyam computers crumbled by 2.55% at Rs467 and HDFC shed 2.44% at Rs2,016. ONGC at Rs867, ACC at Rs1,001, Grasim at Rs2,919 and ITC at Rs164 shed over 2% each.
Over 1.54 crore IKF Technologies shares changed hands on the BSE followed by IFCI (1.31 crore shares), RNRL (1.24 crore shares), Omaxe (1.21 crore shares) and Nagarjuna Fertilizers (1.07 crore shares).
Omaxe was the most actively traded counter on the BSE and registered a turnover of Rs443 crore followed by Orbit Corporation (Rs341 crore), Reliance Industries (Rs198 crore), SBI (Rs98 crore) and ICICI Bank (Rs93 crore).
Cisco Systems pushes Technology stocks higher and reinforces global economic strength
Upbeat earnings report from Cisco Systems last night and an unexpected rally in the home building sector took US stocks higher today, Wednesday, 8 August, 2007. But market almost gave up all of its gains during mid day when rumors about Goldman Sachs hit the market. Once it was clarified that they were just rumors, the indices once again clawed back much of their day’s gains while going into close.
The Dow Jones Industrial Average gave up its 190 point gain at one point and was up by just 11 points the very next moment. But financial stocks once again showed their resilience today. The Dow Jones Industrials Average today rose by 153.56 points at the end to close at 13657. Tech-heavy Nasdaq gained 51.38 points to close at 2612. S&P 500 added 21.78 points to close at 1497.49.
Twenty-three out of thirty Dow stocks closed in the green today. General Motors and Mc Donalds were the notable Dow leaders.
General Motors shares today advanced 4%. At an analyst meeting in Michigan, GM’s CFO reiterated the automaker's 2007 target for 3 million in retail unit sales, and said GM remains on track to shave costs by $9 billion by the end of the year.
The Technology sector today was the biggest beneficiary of Cisco's solid quarterly report. Its upbeat outlook painted a comforting picture of global economic strength and helped restore confidence across all sectors.
Investment Banks and Thrifts & Mortgages were among today's biggest winners
When market opened in the morning, all the three indices opened in the green. Nasdaq was up more than 1% after Cisco, which is now the Nasdaq's second most influential component, reported a 25% jump in Q4 profits and raised its long-term revenue forecasts last night.
But it was the Financial sector which led the charge. Investment Banks and Thrifts & Mortgages were among today's biggest winner. Materials and Energy sectors turned in the next best performances.
Also, President George Bush’s overall comments about economy and reassurance offers led some additional validation to the recent shift toward a more positive underlying tone.
But a speculation late in the day that Goldman Sachs will make a potentially troubling announcement after the close took the wind out of the market's sails. But soon, the news was declared as a rumour and bargain hunters were back.
Dow component McDonald's was up 1.1% today after the fast-food giant reported a 6.5% rise in same-store sales for last month.
Energy sector shows its resilience to falling oil prices
The Energy sector's resilience to falling oil prices was noteworthy. Crude oil futures went through some volatile trading today but ultimately closed lower for the day.
Higher than expected fall in crude supplies and decrease in gasoline consumption as reported in the weekly inventory report were the main causes for this drop in price today. Crude-oil futures for light sweet crude for September delivery closed at $72.15/barrel (lower by $0.27/barrel or 0.37%) on the New York Mercantile Exchange. Prices rose as high as $73.20 a barrel earlier in the session.
Volume at the New York Stock Exchange showed nearly 2.6 billion shares exchanged, while more than 3.5 billion shares were traded at the Nasdaq. Advancing issues topped decliners 8 to 3 on the NYSE, while advancing issues topped decliners 7 to 3 on the Nasdaq.
Since Initial Claims is the only economic report scheduled tomorrow, July same-store sales figures and earnings reports will be the focal point for tomorrow.
The market to is expected to continue its upward journey tracking firm US and Asian markets. The Sensex advanced 375.21 points or 2.51% at 15,307.98, on Wednesday, 8 August 2007. The S&P CNX Nifty advanced 105.75 points or 2.43% at 4,462.10, on the same day.
Asian stocks climbed early today, 9 august 2007 with technology counters such as Advantest Corp. and Sony Corp. pacing gains in Japan while Samsung Electronics led the advance in South Korea in the wake of US tech stocks' gains. Nikkei rose 1.24% at 17,240.99
Hang Seng surged (up 0.93% at 22,746.97), Singapore's Straits Times (up 3.37% at 3,413.17), Taiwan Weighted (up 0.86% at 9,177.87) and South Korea's Seoul Composite (up 0.40% at 1,911.09) gained.
Stocks surged yesterday, 8 August 2007 as solid results in the technology arena and renewed demand for risky debt soothed investors a day after the Federal Reserve said the economy should keep expanding. The Dow rose 153.56 points, or 1.14%, to 13,657.86. The Standard & Poor's 500 index rose 20.78 points, or 1.41%, to 1,497.49. The S&P has had its biggest three-day point gain since October 2002. The technology-dominated Nasdaq Composite index advanced 51.38 points, or 2.01%, to 2,612.98.
As per provisional data, foreign institutional investors (FIIs) bought shares worth a net Rs 86.96 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 216.43 crore on Wednesday, 8 August 2007.
Crudeprices, continued to hover around the $72 mark on signs that US gasoline demand may have peaked as the summer driving season neared to a close there. It was trading at $72.33, up $0.18, on the Nymex in early morning trade.
Market Grape Wine :
In House :
Nifty at a supp of 4430 and 4391 levels with resistance at 4530 and 4570 levels .
Positive Opening with Tech to open higher .
Buy : Intraday : JSW above 655 target 677 a/l of 647
Buy : intraday : Siemens above 1262 target 1298 s/l of 1240
Buy : in F&O Intraday : BRFL target 232 s/l 218
Buy : in F&O Intraday : Indiacement above 227 taregt 234 s/l of 225
Buy : in F&O : RelCap intraday looks good
Out House :
Markets at a support of 15234 & 15151 levels with resistance at 15432 & 15551 levels .
Buy : SBIN & IciciBank
Buy : RIL & Rel
Buy : IDBI & IFCI
Buy : HDFC and Bhel
Buy : LT & NTPC
Buy : HanunToys & Apar
Buy : JP , Jphydro , GMR , LITL & PunjLLoyd
Buy : IBullReal & IBulls
Dark Horse : RIL , LT , SBIN , GMR , Apar , IciciBank , Hanun , Aban & RNRL
Buller for the Day : REL & IDBI with strict stop loss .
Nifty (4462) Supp 4424 Res 4500
Buy NDTV (373) SL 369 Tgt 381, 383
Buy Kesoram Inds (484) SL 479 Tgt 492, 495
Buy Grasim (2988) SL 2974 Tgt 3025, 3030
Buy PNB (521) SL 516 Tgt 530, 533
Sell Aurobindo Pharma (632) SL 639 Tgt 620, 617
By persisting in your path, though you forfeit the little, you gain the great.
The bulls appear to be on the rampage thanks to the soothing remarks from the American central bank which has lifted the s entiment across the globe. The Dow posted a triple-digit gain while the Nasdaq was up 2%, on the back of Cisco's strong earnings. Stocks also rose in Europe and other emerging markets. Asian markets have opened higher as well.
We are looking at yet another good day for the bulls. However, some degree of caution is warranted following the steep appreciation from the lows of February-March. Lack of breadth in evident in the current rally as only a handful of shares are pushing the main indices. Switch to a stock specific approach and don't get too carried away by the headlines (including ours) about the daily movement in the indices.
Investors may also be debating on the impact of the revised ECB norms. Though its good for export-centric sectors like IT in the near term, some are worried about its fallout on the capex plans of Indian companies.
Shares of realty major Omaxe will be listed on the bourses. The Omaxe issue was heavily subscribed. So, the stock is likely to do well. Premium heard on the street is Rs90-100 and may be a little above that.
Tata Tea should be in the limelight as a business newspaper reports that it is now eyeing US-based beverage firm Arizona. According to the paper, the Tata Group company is likely to mount a $2bn bid for Arizona. Telecom companies will be in action amid reports that the regulator TRAI is toying with the idea of scrapping the 10% cap on cross holdings in two operators in a single circle.
Phoenix Mills has reportedly sold a 25% stake to a clutch of investors for Rs13bn. India Glycols could be under pressure as a financial daily says that European authorities have found high level of dioxin in the shipment of guar gum from the Indian company. Steel and Cement shares could gain from a report that the Railways will not impose the 15% peak season surcharge on freight cost.
Public sector banks will attract attention as a newspaper report says that the government could allow them to go for stock split. Shoppers' Stop is another stock that might gain amid a report that the K Raheja Group has lined up a war chest of Rs15bn on hypermarkets and convenience stores. Jai Corp, which has been hitting upper circuits off late, may continue its good run as its Board is to consider a bonus today.
Supreme Petro is likely to rise ahead of its results. Its Board will also consider the merger of subsidiary viz. SPL Polymers with the company. Greaves Cotton has inaugurated its Light Engines Manufacturing Unit at Aurangabad. This unit will manufacture twin cylinder engines and transmission packs. Aegis Logistics' Board will meet on August 10, to consider the scheme of arrangement for acquisition of an undertaking.
Modern Dairies is likely to be in the limelight amid a report that Reliance Industries is likely to acquire an equity stake in the Haryana based company. The stock has more than doubled in the last month. It was up 5% yesterday.
US shares rallied on Wednesday, with the Dow Jones Industrial Average registering a triple-digit gain after Cisco raised its sales forecast and concerns eased on the crisis in the subprime mortgage and credit markets.
Merrill Lynch and Morgan Stanley helped lead the Standard & Poor's 500 Index higher for a third day after a Citi analyst recommended buying the shares. Cisco, the world's largest maker of computer-networking equipment, climbed to a six-year high after saying demand for Internet gear increased.
The S&P 500 rose 20.78 points, or 1.4%, to 1497.49. The Dow Jones gained 153.56 points, or 1.1%, to 13,657.86. The Nasdaq Composite Index added 51.38 points, or 2%, to 2612.98, its biggest advance since October.
Stocks were up for most of the session, but retreated a little in the last half hour of trading amid market rumors that investment banking titan Goldman Sachs may make an announcement related to one of its hedge funds.
Also helping drive stocks higher were signs that recent troubles in the credit markets were subsiding. President George W. Bush and Treasury Secretary Henry Paulson both sought to sooth worries over the subprime mortgage turmoil, stating that the US economy was on a sound footing.
Treasury prices slumped as investors poured into the stock market, lifting the yield on the benchmark 10-year note to 4.86%, up from 4.77% late on Tuesday.
Oil prices retreated on a surprise decline in gasoline inventories in the weekly US inventory report. US light crude for September delivery fell 22 cents to $72.20 a barrel on the New York Mercantile Exchange. The front-month contract was quoting 18 cents higher at $72.33 a barrel in extended trading in Asia.
The dollar edged lower against the euro and climbed versus the yen. COMEX gold for December climbed $4 to $686.30 an ounce.
European shares advanced for a second straight session. The pan-European Dow Jones Stoxx 600 index advanced 2% to 381.18. The UK's FTSE 100 closed up 1.4% at 6,393.90, the German DAX rose 1.3% to 7,605.94 and the French CAC-40 advanced 2.3% to 5,749.29.
Major Latin American markets also rose. Brazil's Bovespa climbed 2.7% to 55,241.37 and Mexico's IPC rose 1.2% to 30,595.07. Chile's benchmark IPSA index closed up 1% at 3,287.87 and Argentina's Merval rose 1.7% to 2,158.44.
Most Asian markets were trading sharply higher this morning. The Nikkei in Tokyo jumped by 212 points to 17,240 while the Hang Seng in Hong Kong climbed by 153 points to 22,689. The Kospi in Seoul was up 9 points at 1913 and the Straits Times in Singapore gained 111 points at 3413.
The Morgan Stanley Capital International Asia-Pacific Index added 0.8% to 153.67 at 10:42 a.m. in Tokyo, with more than two stocks advancing for each that fell. All 10 industry groups included in the benchmark advanced. All Asian markets open for trading advanced.
Momentum likely to continue
Benchmark Sensex once again managed to settle above the 15300mark led by gains in the IT, Banking stocks following the tightening of ECB norms, which will result in lesser dollar inflows. Bulls kept their flag high right from the opening bell following overnight gains in the US Markets and firm Asian and European Markets. The rally was also backed by a sharp jump in volume and improvement in market breadth. Fed’s decision to keep interest rates steady at 5.25% also boosted the sentiments on D-Street aiding Sensex to hit a high of 15340 finally closing at 15307 and NSE-50 added 105 points to close at 4462.
Bharti Airtel gained by 1.2% to Rs886 after unit of India's biggest mobile-phone service provider Bharti Telemedia, plans to start a DTH satellite television service by March 2008. The scrip touched an intra-day high of Rs890 and a low of Rs878 and recorded volumes of over 4,00,000 shares on NSE.
IFCI was down by 1.8% to Rs64 after RBI said overseas investment in shares of the company has reached 22% trigger limit, two percent below the buying limit. The scrip touched an intra-day high of Rs67 and a low of Rs64 and recorded volumes of over 5,00,00,000 shares on NSE.
Opto Circuit gained by 1.5% to Rs450 after reports stated that the company would set up SEZ near Mysore. The scrip touched an intra-day high of Rs456 and a low of Rs438 and recorded volumes of over 4,00,000 shares on NSE.
Axis Bank (formerly know UTI Bank) was up by 2% to Rs625 after the company formed Venture with Shinsei Bank for Asset Management The scrip touched an intra-day high of Rs631 and a low of Rs613 and recorded volumes of over 7,00,000 shares on NSE.
PVR gained by 2.6% to Rs214 after the company announced that it would open multiplexes in Ludhiana and New Delhi on August 10. The scrip touched an intra-day high of Rs219 and a low of Rs205 and recorded volumes of over 31,000 shares on NSE.
PSL advanced by 2% to Rs329 after the company announced yesterday won order of Rs1.65bn from IOC. The scrip touched an intra-day high of Rs338 and a low of Rs327 and recorded volumes of over 67,000 shares on NSE.
IT were in limelight as rupee declined the most in two months on concern, capital inflows from abroad will slow after the government imposed curbs on overseas borrowings by Indian companies. Index heavyweight Infosys led from front as the scrip was up nearly by 5% to Rs1967, Satyam Computer surged by 3.5% to Rs479 and TCS advanced by 4% to Rs1152. Polaris, Mastek, HCL Tech were the major gainers among the Mid-Cap stocks.
Textile stocks also were in momentum on back of tightening in ECB norms. Among the Textile stocks, BRFL rallied by over 7% to Rs217, Arvind Mills advanced 3% to Rs45 and Century Textile added 1.5% to Rs721
Fertilizers stocks recorded smart gains after Prime Minister Dr. Manmohan Singh said that he existing subsidy system may have to be reviewed in the future, the government is committed to the present system and will ensure that adequate funds are available to meet the requirements this year. Nagarjuna Fertilizers surged nearly by 6% to Rs25, Chambal Fertilizers was up by 2%to Rs34 and Deepak Fertilizer has added 3% to Rs105.
Auto stocks were in top gear led by gains in the index heavyweights like Hero Honda gained by 4% to Rs679, M&M was up by 1.7%to Rs689, Tata Motors edged higher 0.3% to Rs658 and TVS Motors added 1.8% to Rs57.
Capital Good stocks were also trading higher. ABB surged by 1.8% to Rs1135, Gammon India gained by 2.5% to Rs451, BHEL was up by 2.4% to Rs1712 and L&T added 1.5% to Rs2492.
Realty stocks continued its northward journey as the index added 1.77%. DLF gained by 2%to Rs600, Parsvnath was up by 3.7% to Rs342; Unitech advanced by 1.7% to Rs527 and Sobha added 2% to Rs851.
FIIs were net buyers of Rs869.6mn (provisional) in the cash segment yesterday. While the local institutions pumped in Rs2.16bn. In the F&O segment, FIIs were net buyers at Rs25.27bn. On Tuesday, foreign funds offloaded stocks worth Rs1.24bn from the cash segment. Mutual Funds were net sellers at Rs52mn on the same day.
Major Bulk Deals:
Merril Lynch has bought Arihant Foundation while Bear Steans has sold the stock;
Merrill Lynch has picked up Cinemax while Bear Stearns has sold it; UBS Securities has
purchased Genus Overseas from Bear Stearns; UBS has bought Hexaware from Bear
Stearns, Reliance Capital has purchased Hinduja TMT; Goldman Sachs has sold Sujana
Metal and Merrill Lynch has sold Suryachakra Power.
Vimta Labs Limited: SBI One India Fund has purchased from open market 459633 equity shares of the company on 6th August, 2007.
Murli Industries and Marathon Nextgen.
Tanla, Hindustan Organics, ETC Networks, Ganesh Forgings, Shree Ashtavinyak,
Atlanta, Jai Corp, Hindustan Oil Exploration, Radha Madhav, Balasore Alloys, Swan
Mills, Flawless Diamond, Tanla, Global Broadcast, Bank of Rajasthan, ERA Construction,
Taneja Aerospace, ION Exchange, IID Forgings and BF Utilities.
Delivery Delight (Rising Price & Rising Delivery):
Sun Pharma, Sintex, M&M, Gujarat NRE Coke, Maruti, Ranbaxy, TCS, Cummins, BILT,
Andhra Bank and ABB.
Reliance, Ultratech, Sintex, NDTV, Yes Bank, Chennai Petroleum and Jindal Steel.
Major News & Announcements:
PM Singh says Fertilizer Subsidy system may be reviewed in Future
Finance Minister says, India has no plans to further regulate 'participatory notes'
Tata Power to invest Rs26bn this year for expansion
Reliance Communication completes 5% private placement in Reliance Telecom Infrastructure
RIL's Mumbai economic Area to be reduced – Reports
PVR to open multiplexes in Ludhiana and New Delhi on August 10
JSW Steel to buy Land in Mumbai for Rs7.5bn – Reports
ESS DEE Aluminum to sell 1.41mn shares to Morgan Stanley at Rs575 per share
UTI and Shinsei Bank forms Venture for Asset Management
Opto Circuit to set up SEZ near Mysore
Market may extend its bullish trend following strong gains in the US markets and over 1-2% gains in the ongoing Asian markets. However, FIIs remaining net sellers in domestic equities for last couple of session likely to exert some pressure on the market sentiment. Investors should maintain caution as higher bouts of volatility is likely to persists on the back of market's sharp run-up in last couple of sessions. Key local indices, the Nifty could test higher levels around 4500 in the short term and has a key support at 4400. The Sensex is likely to test 15200 on the downside while it may face resistance at 15400.
US indices gained immense strength in the last minute of the session on Wednesday, with the Dow Jones soaring by 1.14% or 153 points to close at 13658. The Nasdaq also ended firm with gains of 51 points at 2613.
All the Indian ADRs witnessed decent to firm buying support. Infosys was the major gainer amongst the ADRs and vaulted over 5.65%, while Satyam and ICICI Bank vaulted 5%, while Wipro, Dr Reddy's, Tata Motors, VSNL, MTNL, Rediff and HDFC Bank were up over 1-4% each.
Crude oil prices eased a little. While the Nymex light crude oil for September series slipped by 27 cents at $72.15 a barrel. In the commodity segment, the Comex gold for December series shot up by $4 to settle at $686.30 an ounce.
On the financial front, the company has been a consistent performer with respectable sales and profitability right since 1992. Notably, even during the adverse times, it has never made losses and has always paid dividends.
The company has declared a dividend of 50% for the year ended March 2007 as against 40% in FY 2007. The company has increased dividend rate consecutively for the past four years. Going by the trend one can expect dividend of 60% for FY 2008, giving a dividend yield of 6.25% at the current price.
One can expect the company to report sales and net profit of Rs 92.31 crore and Rs 6.57 crore for FY 08. On a small equity of Rs 3.50 crore and face value of Rs 10 per share, EPS works out to a solid Rs 18.8.
Current price of Rs 96 discounts the FY 2007 actual EPS of Rs 14.6 just 6.6 times. P/E on FY 2008 EPS of Rs 18.8 falls to even more attractive 5.1 times. This means the company is available at a market cap of Rs 33.60 crore, which is only one-third of its expected FY 2008 revenues.