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Thursday, October 25, 2007
Trading Calls
Buy Reliance Petroleum with stop loss of Rs 171 for a target of Rs 234.
Buy JSW Steel with a stop loss of Rs 940 for a target of Rs 1300.
What if the capital inflows stop?
Here are some premature, and somewhat strange, cautionary observations. In the entire hullabaloo about capital inflows and the impact they are having on the domestic economy, is there any thought being given to what will happen when these inflows stop?
Simon Johnson, economic counsellor and director of the IMF’s research department, while releasing the analytical chapters of the Fund’s latest World Economic Outlook recently, said: "...What important lessons can be drawn from past episodes of surges in capital inflows (this is over the past twenty years), and particularly what kinds of macro policies could help ensure that growth remains robust after the capital flows stop (And the capital flows do, in our experience, always stop at some point)."
The crucial point is in the parentheses. What happens once the music stops? What kind of shape is the Indian economy in? Is it too dependent on capital inflows for its growth? These, and many other questions, must surely be exercising the minds of India’s central bank governors, who will be presenting their mid-term review of the annual monetary policy on October 30.
But these are long-term issues. The immediate concern is somewhat different. Like many other emerging economies in the region, and elsewhere in the world, India has been grappling with ways in which to tackle the wall of money that is washing up on Indian shores every day. Large sums of portfolio investments are finding their way into the equity markets, especially after the US Fed cut rates recently. This has put direct pressure on the rupee, which has been appreciating against the dollar.
A large section of exporters has been forced to shutter up. This has political ramifications, especially if the exporting units are labour-intensive, such as textiles. The central bank, to stem the appreciation of the rupee, has therefore been intervening in the forex market to buy dollars. This results in a surge of liquidity in the domestic system, which — acting through aggregate demand — could have implications for inflation management in the future. Thus, the central bank sells securities to soak up this excess liquidity, which also has a fiscal cost.
The Reserve Bank, in conjunction with the finance ministry, has tried repurposing policy contours to blunt the impact of capital inflows. First, the RBI imposed restrictions on inflows through the external commercial borrowings route.
It simultaneously also eased controls on fund outflows from the domestic economy. In addition, banks’ unremunerated reserve requirements were also raised to suck out liquidity. On the fiscal front, the government announced two packages of incentives for exporters, which even included lowering of interest rate for export credit. It might even be appropriate to view the recent controls on participatory notes, announced by the Securities and Exchange Board of India, as part of the same policy framework.
All this also brings into sharp focus what is known as the “impossible trinity” problem — the inability of central banks to simultaneously pursue an independent monetary policy, exchange rate stability and full capital mobility. Economists believe that it might be possible to achieve two of the three issues, but never all the three objectives.
The monetary policy regime in India follows a multiple-indicators approach, compared to some of the other countries, which either have an inflation target or currency value target. The RBI’s indicators focus on overall economic growth and the price stability, from which flow targets for credit growth and money supply growth. But, the central bank keeps a hawk-eye on one special variable — the price line.
Therefore, when the central bank governor’s meet on October 30, the policy language is likely to be influenced by what liquidity flows are doing to the current price line and their effect on future inflationary expectations.
There are two issues that allow the RBI and government to meet both the short-term as well medium-sterm objectives.
One is the larger and broader issue of the economy and its absorptive capacities. This has a direct bearing not only in tackling the current logjam but also for powering economic growth in the future. Governor Y V Reddy said as much in a recent speech: “...the absence of modern infrastructure and shortage of skilled manpower are the most critical barriers to growth. It is imperative to augment the existing infrastructure facilities, particularly roads, ports and power, to provide an enabling environment for industry to prosper.”
Secondly, the time might be just appropriate to introduce some more reforms in the money and foreign exchange markets, by allowing greater hedging flexibility. Specifically, the time might be right to allow a broader, exchange-traded, derivatives market in currency and interest rates, which offers the full suite of products (such as futures, options and swaps), while retaining an OTC market as well. This might give the central bank some breathing space.
India tightens rules on P-notes
India's stock market regulator on Thursday tightened rules regarding the use of participatory notes, which unregistered foreigners could use to gain exposure to Indian shares.
The curbs were in line with the proposals that the Securities and Exchange Board of India (SEBI) first floated last week and sought comment on. SEBI said the decision was about improving the transparency of inflows into India's financial markets by getting participants to register.
Chandan Desai, Director of Mauritius-based Silverstreak Management Services: "The biggest entities will take the front door to invest in India, but smaller entities which don't meet the criteria will probably stay out. For the short-term, money flow may get hampered for a while, but the country is on such a strong wicket, that investors will continue to come in. For the long term, these are definitely good measures."
Suraj Saraogi, Managing Director, Key Note Capitals: "All the decision were on expected lines and there are no surprises in the market. In a broker's language, I can say that all the poison is out of the market now and it will give a thumbs-up sign tomorrow."
Viral Doshi, an independent strategist, Mumbai : "Any measure which is more about transparency and less about capital flows control is always welcome ... the regulator always has a concern about the quality of the money coming into the system. There are many foreign funds with genuine money and genuine interest in India, and they will continue with their investments into the country."
Gurudatta Dhanokar, Derivatives Strategist, Almondz Global Securities: "Though this decision will create short-term panic in the market, overall it is a good one. The whole process will be now much more transparent once the unknown entities withdraw from it, and this will increase the comfort levels of existing players or the registered FIIs."
Nipun Mehta, Chief Executive, Unitis Tower Wealth Advisory, Mumbai: "I look at the measures in a very positive manner. This is something which should have happened much earlier, but better late than never. This is just about cleaning up the system, getting rid of the unregulated money in the market. Very clearly, there was some discomfort about foreign fund inflows which was excessive and one couldn't control it ... there should be transparency about who is investing in the system."
A Prasanna, Economist at ICICI Securities, Mumbai: "The broad measures are along expected lines and they seem to be keen on phasing out participatory notes on a gradual basis. This will have a moderating effect on the inflow of capital in the near term and in terms of the central bank's policy next week, they should maintain status quo on rates. There is no need to raise banks' reserve requirements immediately as they can monitor the impact of these moves on the inflows of money in the near term and also the festival season spending is due. There is no need to rush into a cash reserve ratio hike."
P-Notes regulations to stay
Sticking to the draft participatory notes (P-Note) regulations, Securities and Exchange Board of India (SEBI) on Thursday, announced that sub-accounts cannot issue participatory notes (PNs) and that FIIs have to unwind offshore derivative instruments (ODI) positions in 18 months. The regulator has also fixed September 30 as the date for calculating asset under custody for P-Notes. The rules approved by the board come into effect from October 25.
According to the new ruling, sub-accounts -- vehicles set up by registered FIIs to issue P-notes -- to wind up their positions altogether, although FIIs may apply to register proprietary sub-accounts. The Board has also approved the move wherein pension funds can register as FIIs, SEBI Chairman M. Damodaran told a news conference on Thursday.
Further issuance of P-notes by sub-accounts had been stopped with immediate effect, but proprietary, corporate sub-accounts could continue to do so till registration, he said. Those already registered as FIIs have been cleared, he added.
Indices ended on a firm note on Thursday ahead of the outcome of the crucial SEBI meet on the participatory note issue. Second rung stocks also participated in the rally. Metal shares were the biggest gainers among sectors.
According to SEBI, P-notes affect the transparency of inflows. It wants foreign portfolio investors to register so it knows the source of funds coming into the country. The finance minister has said India is also trying to moderate inflows to avoid a stock market bubble. India, the world's fastest-growing major economy after China, has battled a surge of foreign capital this year, which has pushed the rupee to its strongest against the dollar since 1998 and helped power the stock market to a series of record highs. SEBI wants FIIs to wind up existing P-notes on underlying derivatives over 18 months and restrict the issuance of new P-notes on cash positions.
Market Close: Peaceful FNO expiry..
FNO expiry had nothing much to worry but a bit of volatility with all eyes on SEBI's meet. Flat start but gained momentum to trade in green till the end. Buying was seen in index heavy weights like Tata Steel, Hindalco, REL, ICICI Bank and SBI which kept the indices upwards. Tisco and Sail seem to be drawing strength everyday on the back of expectations of large mine allocations. Metal sector trade up accompanied by Banking and Auto. FMCG stocks trade bit weak. European indices are trading in green.
Sensex ended up by 257 points at 18,770 levels. Supporting the indices were gains in Tata Steel (+7.60%), ICICI Bank (+3.40%), Bharti Airtel (+2.7%), HDFC Bank (+2.20%) and Grasim (+2.04%). Restricting the gains were the losses in Cipla (-5.11%), Dr. Reddy (-2.33%), ITC (-1.06%), ACC (-0.93%) and Rel Energy (-0.46%).
Avaya Global reported its good First Quarter Results Top line grew by 26% to Rs 152 Cr on y-o-y basis. Bottom line was Rs 9.8 Cr against loss made last year. Avaya Global's Australian subsidiary started contributing Revenue. This will further add to bottom line. Avaya a market leader in Communication is well placed to capture this segment as it is a clear leader by far. With expertise in IP Telephony, Unified Communication and lots more, Avaya Global is well placed to take the advantage. The risk appears to be from slower growth in the call centre's who are facing tougher times because of the appreciating Rupee. However, the growth may slow but more than that the companies would rely on technology even more to have higher productivity and that would be beneficial for Avaya. At current price of Rs.280 the stock trades 11 times its annualized EPS. We remain positive on this with a long term perspective.
Navneet Publications reported 77 % jump in its net profit at Rs 8.4 Crs for the second quarter ended September 2007 from Rs 4.74 Crs for the same quarter, last year. The company's Net sales rose by 35% to Rs 82 Crs from Rs 60 Cr a year ago. The company also mentioed that the wind power generating units have been operational since September 2007. Navneet Publications has two major divisions, book publishing division and paper stationery division. The book publishing division publishes educational books for Maharashtra & Gujarat viz children and general books. The paper stationery division caters to the domestic as well as international markets. International market contributed 6 Cr out of the 20 Crs made in the stationery segment. The company recently ventured into e-learning, animated online books & software as it sees good growth in this segment. The e-learning has already been launched in Gujarat schools and as of now has 40 schools in its kitty and expects same service in Maharashtra's schools by March next year. Retail e-learning products would be also made available by March next year. Keep looking at this space as we will update you..
Technically speaking : Sensex is faces a resistance at 18850 above which we could see good rally and new high's and down side could see 18300 levels.
Sensex extends gains for fourth straight session
The market settled on a firm note on buying in index pivotals. However, trade was choppy towards the fag end of the day ahead of today's expiry of October 2007 derivatives contracts. European markets and Asian markets were trading with gains today, 25 October 2007. Total cash market turnover on BSE was just under Rs 8000 crore mark.
The Securities Exchange Board of India (Sebi)’s board meets today, 25 October 2007, to take a decision on recently announced proposals. It may be recalled that on 16 October 2007, Sebi had proposed curbs on issuance of offshore derivative instruments (ODIs), also known as participatory (P) notes, based on assets under management of FIIs and prohibited sub-accounts of FIIs from issuing P notes.
The Sensex gained 257.98 points or 1.39% at 18,770.89. It had opened marginally higher at 18,519.23 and rose to strike an intra-day high of 18,900.10 in late afternoon trade. At the day’s high of 18,900.10, Sensex had risen 387.19 points.
Sensex hit a low of 18,459.51 in early trade. At day’s low of 18,459.51, Sensex had lost 53.40 points. It oscillated 440.59 points in the day.
The Sensex had struck an all-time high of 19,198.66 struck on 18 October 2007.
The broader based S&P CNX Nifty was up 72.80 points or 1.32% at 5,568.95. The Nifty November 2007 futures settled 5531, a discount of 37.95 points as compared to spot closing. Nifty October 2007 futures expired today.
The BSE Mid-Cap index rose 1.31% to 7,750.93 while the BSE Small-Cap index gained 1.35% to 9,367.08. Both these indices underperformed the Sensex.
The market breadth was strong on BSE: 1,552 scrips had advanced as compared to 1,147 that declined while 71 remained unchanged. 21 of the 30 members of the Sensex pack were trading with gains.
The total turnover on BSE amounted to Rs 7976 crore as compared to Rs 7997 crore yesterday, 24 October 2007
The NSE F&O turnover was at Rs 103930.17 crore as compared to Rs 107495.25 crore yesterday, 24 October 2007
Most of the sectoral indices on BSE settled with gains. Bankex (up 2.67% to 9,924.11), BSE Capital Goods Index (up 1.18% at 17,314.13), BSE PSU index (up 1.16% to 8,878.54), BSE TecK index (up 0.82% to 3,962.59), BSE Realty (up 0.40% to 9,807.30), BSE Metal Index (up 4.13% at 16,424.52), BSE Consumer Durables Index (up 1.51% to 5,202.18), BSE Oil and Gas Index (up 0.60% at 10,800.82), and BSE Auto Index (up 1.84% at 5,503.58), outperformed the Sensex.
BSE FMCG Index (down 0.03% at 2,134.75), BSE Health Care Index (down 0.53% at 3,832.95), BSE IT Index (up 0.05% at 4,582.54), were underperformers.
World’s sixth largest steel maker, Tata Steel retraced from its 52-week high of Rs 1003 struck earlier today. It settled 7.93% higher to Rs 988 on 26.80 lakh shares. It was the top gainer from Sensex pack. The stocks surged on reports that Tata Steel is looking at investment opportunities in CSN's heartland Brazil. Tata Steel will reportedly in the next few months send a delegation to the Northern Brazilian state of Maranhao in order to evaluate investment opportunities there. Tata Steel will declare Q2 September 2007 results on 26 October 2007.
Hindalco Industries (up 1.45% to Rs 191.85), Sterlite Industries (up 2.79% to Rs 924), Sesa Goa (up 1.67% to Rs 3319.80), and Steel Authority of India (up 2.79% to Rs 250.20), were the other gainers from metal and mining pack.
Auto stocks gained on fresh buying. Maruti Suzuki India (up 1.90% to Rs 1140), Bajaj Auto (up 0.76% to Rs 2499), Mahindra & Mahindra (up 1.59% to Rs 772), and Tata Motors (up 1.08% to Rs 783) rose
Shares of top banks surged. ICICI Bank advanced 3.40% to Rs 1135 and State Bank of India gained 0.91% to Rs 1925.30. After market hours on 23 October 2007, SBI Life Insurance Company posted net profit of Rs 14.09 crore for the first half year ended 30 September 2007 on the back of 80% increase in its total premium collection. A 74:26 joint venture between the State Bank of India and Cardif, a BNP Paribas company, it manages assets over Rs 6000 crore.
India’s largest engineering and construction company by net sales, Larsen & Toubro gained 1.39% to Rs 3450. The stock hit an all time high of Rs 3510 on BSE today.
India's largest private sector entity by market capitalisation and oil refiner Reliance Industries (RIL) rebounded sharply from day’s low of Rs 2594 to hit a high of Rs 2667.10. It settled 0.58% higher at Rs 2624.70 on 11.15 lakh shares.
India’s largest oil exploration company by market capitalisation Oil and Natural Gas Corporation rose 0.55% to Rs 1114. The stock made a strong recovery from day’s low of Rs 1064. As per recent reports, its joint venture firm ONGC-Mittal Energy had acquired a 30% participating interest in an exploration block in the Caspian Sea, Turkmenistan.
India’s third largest pharma company by sales, Cipla slumped 5.10% to Rs 186.60 on 11.08 lakh shares after it reported 5.73% rise in net profit to Rs 190.62 crore 25.01% rise in total income to Rs 1140.21 crore in Q2 September 2007 over Q2 September 2006. The results were announced after the trading hours on Wednesday, 24 October 2007. It was the top loser from Sensex pack.
Dr. Reddy's Laboratories, the nations third largest pharma company by market capitalisation, slipped 1.80% to Rs 618.60 after it reported a 4.5% fall in consolidated net profit to Rs 267 crore in Q2 September 2007 over Q2 September 2006. Dr. Reddy's total revenue at Rs 1267 crore was 37% below last year's Rs 2004 crore that included Rs 781 crore of one-time gains from exclusive marketing rights for two drugs. The results were announced after market hours yesterday, 24 October 2007.
ACC (down 1.39% to Rs 1063.10), and ITC (down 0.65% to Rs 183.50), were the other losers from Sensex pack.
IT pivotals were mixed today. Satyam Computers (up 0.07% to Rs 461.20) and Wipro (up 1.79% to Rs 495), gained. TCS (down 0.20% to Rs 1046) and Infosys Technologies (down 0.46% to Rs 1836) edged lower.
Reliance Energy, the country’s second largest power utility company by sales declined sharply from day’s high of Rs 1714.95 to settle 0.05% lower at Rs 1653.
Maytas Infra settled at Rs 614.30 on BSE, a premium of 66% over IPO price of Rs 370. The stock debuted at Rs 480, a premium of 29.7% over the IPO price. The scrip hit a low of Rs 480 and high of Rs 637.70. On BSE, 72.9 lakh shares changed hands in the counter. The company had priced the IPO at the top end of the Rs 320-370 price band.
Sugar shares advanced on fresh buying. Dwarikesh Sugar (up 1.13% to Rs 58), Uttam Sugar (up 1.61% to Rs 81.85), Balrampur Chini Mills (up 4.69% to Rs 82.65), Shree Renuka Sugars (up 2.25% to Rs 790.50), and Bajaj Hindustan (up 2.51% to Rs 189.70) surged.
Transformer shares gained on renewed buying. Emco (up 2.52% to Rs 1210), Voltamp Transformers (up 7.93% to Rs 1318), and Indo Tech Transformers (up 2% to Rs 519), advanced.
Areva T&D India surged 12% to Rs 2110 on posting 39.5% rise in net profit to Rs 48 crore on 20.5% growth in net sales to Rs 432.60 crore in Q3 September 2007 over Q3 September 2006. The company announced the results after market hours on 24 October 2007.
Gillette India slipped 1.10% to Rs 841. It posted 44.91% decline in net profit in Q1 September 2007 to Rs 27.82 crore on 35.28% rise in total income to Rs 142.05 crore in Q1 September 2007 over Q1 September 2006. The company announced the results during the market hours today, 25 October 2007.
Triveni Engineering & Industries soared 7.83% to Rs 135 after its board approved raising up to Rs 250 crore for capital expenditure and repayment of debt.
Finolex Cables spurted 7.93% to Rs 74.20. Earlier on 23 October 2007, the company said its board approved an expansion of capacity to 30 million compact fluorescent lamp (CFLs) per year at an additional expenditure of Rs 30 crore.
Engineers India rose 6.18% to Rs 605.30. It will declare Q2 September 2007 results on 30 October 2007.
TVS Motor Company declined 4.77% to Rs 53.95 on posting 52% decline in net profit to Rs 11.92 crore on 23.6% decline in sales to Rs 823.42 crore in Q2 September 2007 over Q2 September 2006. The company announced the results after market hours on 24 October 2007.
Bharat Earth Movers gained 0.69% to Rs 1500, after it secured a Rs 648 crore contract from Northern Coalfields (NCL) for supplying and servicing electric rope shovels. The announcement was made after the trading hours on Wednesday, 24 October 2007.
Indiabulls Financial Services (IBFSL) rose 0.08% to Rs 596.75 while Metals and Minerals Trading Corporation (MMTC) jumped 5% to Rs 31,701.85. IBFSL will set up a special purpose vehicle (SPV) with Metals and Minerals Trading Corporation (MMTC) for a commodity exchange. In the special purpose vehicle (SPV), IBFSL would hold 74% equity while MMTC will hold the reaming 26% stake.
Adani Enterprises gained 5.29% to Rs 794 on reports the company has sold 10% stake in its subsidiary - Adani Power to the British private equity firm 3i Group Plc for Rs 900 crore.
Reliance Capital eased from day’s high of Rs 1869.50. It settled lower by 0.48% to Rs 1777.10. It posted 20.41% rise in net profit to Rs 201.28 crore on 75.58% rise in total income to Rs 391.27 crore in Q2 September 2007 over Q2 September 2006. The company announced the results during the market hours today, 25 October 2007.
The market regulator Sebi, after trading hours on Monday, 22 October 2007, provided partial breather to foreign institutional investors (FIIs) with respect to proposed restrictions on use of participatory notes and said it would speed up regulatory clearance for foreigners keen to invest transparently.
Meanwhile, on the eve of a crucial board meeting to decide on Securities & Exchange Board of India (Sebi)’s proposed restriction on use of participatory notes (PN), Sebi chairman, M. Damodaran, on Wednesday, 24 October 2007, said that all the 20 PN issuing FII sub-accounts have expressed intent to convert into foreign institutional investor (FII) status.
All these 20 sub-accounts have sent their letter of intent within the 24-hour deadline that was mentioned by the Sebi on Monday, 22 October 2007. There are 34 P-Note issuing entities in the country, of which some are already FIIs. This number was 14 in March 2004.
The Reserve Bank of India's (RBI) mid-term review of annual policy due on 30 October 2007 and US Federal Reserve’s meeting on 31 October 2007 on interest rates, will be key events that will drive the market in the near term.
European markets opened on a firm note. Key benchmark indices in United Kingdom (up 1.01% to 6,547.60), Germany (up 1.06% to 7,911.38), and France (up 1.02% to 5,732.66), gained.
Asian markets were trading with gains today, 25 October 2007. Hong Kong's Hang Seng (up 1.78% at 29,854.49), Taiwan's Taiwan Weighted (up 1.33% at 9,568.25), Singapore's Straits Times (up 1.59% at 3,707.14) and South Korea's Seoul Composite (up 2.24% or at 1,976.15) edged higher.
However Japan's Nikkei (down 0.45% at 16,284.17) and Shanghai Composite (down 4.80% to 5,562.39) slipped
The Dow Jones industrial Average recovered from sharp early losses of over 200 points yesterday, 24 October 2007, as Merrill Lynch posted dreadful result hinting that sub-prime mortgage crisis may get bigger. Dow settled almost unchanged at 13,675.25, marginally lower by 0.98 points. The Nasdaq Composite Index, finished lower by 24.5 points at 2,774.76. S&P 500 slipped 3.71 points at 1,515.88.
As per provisional data, FIIs purchased shares worth a net Rs 1301.87 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 383.23 crore on Wednesday, 24 October 2007.
Crude oil traded higher in Asia today, 25 October 2007 on news US energy stockpiles fell sharply last week and tensions rose in the Middle East after Turkish warplanes bombed Kurdish rebel camps in Northern Iraq. New York's main futures contract, light sweet crude for delivery in December, advanced 85 cents to $87.95 a barrel. Brent North Sea crude for December climbed 73 cents to $85.10.
No change in proposals on P-notes: Sebi
M Damodaran, chairman, Securities and Exchange Board of India (Sebi), today said there was no change in the draft regulations announced by the regulator last week on participatory notes (P-notes).
The draft, which said the current P-notes would have to be wound up in 18 months, was also cleared by the board of the regulator which met today.
Damodaran, while addressing the media a short while ago, said Sebi would review the position on the issue from time to time.
The reference date for the calculation of assets under custody (AUC) of foreign institutional investors (FIIs) for the issuance of P-notes has been set as September 30, 2007. The regulation on P-notes is effective October 25, Damodaran added.
P-notes can now be issued only to regulated entities in accordance with the FII regulation of 2004.
Pension funds, foundations, endowments, university funds, charitable societies, which may not strictly fit into the category currently, can now register as FIIs.
The board also cleared a proposal to have a separate exchange for the small and medium enterprise (SME) segment.
Sensex rallies on metal stocks
The market resumed on a quiet note in line with its global peers as investors were playing with caution ahead of the Securities and Exchange Board of India's decision on participatory notes and expiry of October series of derivative contracts. As trading progressed, the market gradually moved northwards and touched the day's high of 18,900 during late trades. The Sensex received major support from Tata steel, ICICI Bank, and Maruti Udyog. The market remained above the crucial 18,700 level for a major portion of the day, but profit-taking towards the fag end saw the Sensex pare some profits and end the session at 18,771, up 258 points. The Nifty moved up 73 points to close at 5,569.
The market breadth was positive. Of the 2,800 stocks traded on the Bombay Stock Exchange (BSE), 1,586 stocks advanced, 1,144 stocks declined and 70 stocks ended unchanged. The BSE Metal index led the surge in the sectoral indices and rose 4.13% at 16,425. The BSE Bankex index, the BSE Auto index, the BSE CD index, the BSE CG index, and the BSE PSU index were the other notable gainers, while the BSE FMCG index ended weak.
Buying was led by Tata Steel, which notched up gains of 8.03% at Rs989. Among the other gainers ICICI Bank advanced 4.44% at Rs1,146, Maruti Udyog added 3.61% at Rs1,159, Bharti Airtel moved up 3.41% at Rs1,020, HLL jumped by 2.42% at Rs221, Tata Motors gained 2.41% at Rs793 and HDFC Bank was up 2.28% at Rs1,541. However, Cipla tumbled 5.01% at Rs187, Dr Reddy’s slipped 2.44% at Rs615, ACC fell 1.57% at Rs1,061 and ITC was down 1%, while HDFC, Reliance Energy, Infosys and Satyam Computer were down marginally.
A sharp rally was witnessed in metal stocks today. Jindal Steel soared 5.92% at Rs7,929, Sterlite Industries scaled up 4.96% at Rs923, Nalco surged 4.95% at Rs297 and Bhushan Steel moved up 3.12% at Rs1,048.
Over 2.33 crore IFCI shares changed hands on the BSE followed by Reliance Petroleum (1.39 crore shares), Reliance Natural Resources (1.38 crore shares), GTL Infrastructure (1.34 crore shares) and Tata Teleservices (1.05 crore shares).
Value-wise, Maytas Infra registered a turnover of Rs426 crore on the BSE followed by Reliance Energy (Rs406 crore), Reliance Industries (Rs295 crore), Reliance Capital (Rs292 crore), and Reliance Petroleum (Rs270 crore).
Market to stay cautious ahead of Sebi meet and October 2007 derivatives expiry
The market is expected to stay cautious ahead of October 2007 series derivatives expiry and Securities Exchange Board of India (Sebi) meet. Global cues were mixed. US markets edged lower on Wednesday, 24 October 2007. Asian markets posted gains today, 25 October 2007.
Volatility is expected to remain high as October 2007 derivatives contracts expire today, 25 October 2007. As per market data, marketwide rollover of derivative positions from October 2007 series to November 2007 series was 61% while Nifty rollover was 60%.
The Securities Exchange Board of India (Sebi)’s board meets today, 25 October 2007, to take a decision on recently announced proposals. It may be recalled that on 16 October 2007, Sebi had proposed curbs on issuance of offshore derivative instruments (ODIs), also known as participatory (P) notes, based on assets under management of FIIs and prohibited sub-accounts of FIIs from issuing P notes.
The market regulator Sebi, after trading hours on Monday, 22 October 2007, provided partial breather to foreign institutional investors (FIIs) with respect to proposed restrictions on use of participatory notes and said it would speed up regulatory clearance for foreigners keen to invest transparently.
The Reserve Bank of India's (RBI) mid-term review of annual policy due on 30 October 2007 and US Federal Reserve’s meeting on 31 October 2007 on interest rates, will be key events that will drive the market in the near term.
Asian markets were trading with gains today, 25 October 2007. Hong Kong's Hang Seng (up 1.39% at 29,740.01), Japan's Nikkei (up 0.21% at 16,393.14), Taiwan's Taiwan Weighted (up 1.11% at 9,547.09), Singapore's Straits Times (up 0.69% at 3,674.40) and South Korea's Seoul Composite (up 1.13% or at 1,955.28) edged higher.
The Dow Jones industrial Average recovered from sharp early losses of over 200 points yesterday, 24 October 2007, as Merrill Lynch posted dreadful result hinting that sub-prime mortgage crisis may get bigger. Dow settled almost unchanged at 13,675.25, marginally lower by 0.98 points. The Nasdaq Composite Index, finished lower by 24.5 points at 2,774.76. S&P 500 slipped 3.71 points at 1,515.88.
As per provisional data, FIIs purchased shares worth a net Rs 1301.87 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 383.23 crore on Wednesday, 24 October 2007.
Crude oil traded higher in Asia today, 25 October 2007 on news US energy stockpiles fell sharply last week and tensions rose in the Middle East after Turkish warplanes bombed Kurdish rebel camps in Northern Iraq. New York's main futures contract, light sweet crude for delivery in December, advanced 85 cents to $87.95 a barrel. Brent North Sea crude for December climbed 73 cents to $85.10.
The BSE 30-share Sensex rose 20.07 points, or 0.11% to 18,512.91 on Wednesday, 24 October 2007. The Sensex is now 685.75 points away from its all-time high of 19,198.66 struck on 18 October 2007.
The broader based S&P CNX Nifty rose 22.45 points or 0.41% at 5,496.15, on Wednesday, 24 October 2007
Grey Market - Mundra, Reliance Power, Religare
Reliance Power 47 to 48
Mundra Port & Sez 400 to 440 260 to 270
MAYTAS Infra 370 135 to 145
Circuit Systems (India) Ltd. 35 3 to 3.50
Rathi Bars 35 4 to 5
Allied Computers 12 15 to 16
Varun Ind. 60 30 to 32
SVPCL 40 to 45 7 to 8
Religare Enterprises 170 to 190 230 to 240
Barak Valley Cement 37 to 42 5 to 6
Choppy trades to continue
The Sensex swung over 500 points during intra-day trades and gained 0.11% at the close on Wednesday across-the-board selling pressure. The bouts of strong intra-day volatile moves, dwindling FII inflows and expiry pressures in the derivate segment may weigh on the sentiment. A strong positive opening in most of the Asian indices in ongoing trades may help the local market advance further. However, overnight losses in European and US markets may hurt the market sentiment. Among the key indices, the Nifty may resist at 5600 and has a key support at 5400 levels in the near-term. The Sensex has a likely support at 18000 and may face resistance at 19000. ABB, Ballarampur Chini, Cairn India, Century Textiles, Chambal Ferilisers, Cummins India, Federal Bank, Glaxo, JSW Steel, NIIT Tech, Reliance Capital, SRF, Sun Pharmaceuticals and Voltas are expected to announce their quarterly numbers.
US Stocks remained in negative territory for better part of the session on Wednesday on new housing and subprime woes, before paring some losses on speculation that the Federal Reserve may take additional action. While the Dow Jones slipped marginally to close at 13675, the Nasdaq slipped about 0.88% or by 25 points at 2775.
Indian floats trading on the US bourses had a mixed outing. Among the gainers HDFC Bank, VSNL and MTNL rose over 1-2% each. Infosys, Satyam, Wipro, Dr Reddy's, Tata Motors, Rediff, Patni Computer and ICICI Bank slipped around 1-4% each.
Crude oil prices jumped over $85, with the Nymex light crude oil for December delivery rising by $1.83 to close at $85.27 a barrel. In the commodity segment, the Comex gold for December series flared up $2.50 to settle at $765.60 an ounce.
Trading Calls
Nifty (5496) Supp 5425 Res 5567
Buy MTNL (180) SL 176 Target 188, 190
Buy Sterlite Ind (880) SL 873 Target 894, 898
Buy Cipla (197) SL 193
Target 205, 207
Sell Wipro (486) SL 491
Target 477, 475
Sell Tata Tea (787) SL 794 Target 776, 772
Decision day…Grin and bear it
If we are to learn to improve the quality of the decisions we make, we need to accept the mysterious nature of our snap judgments.
It's a big day for the bulls, especially the FIIs. Market regulator SEBI will unveil its final regulations on offshore derivative instruments (ODIs), including Participatory Notes (P-Notes). The draft released on Oct. 16 rattled the market before clarifications from SEBI pulled the market up. Still, a host of issues with regard to P-Notes remain unanswered. FIIs will be hoping that the gray areas are sorted out by SEBI today. The move is good for the long-term health of the market, though there could be some short-term hiccups. Besides the SEBI Board meeting on P-Note guidelines, we also have the F&O settlement today. Market players will know about SEBI's final call on P-Notes only after the market is closed for the day. So, the anxiety and uncertainty will keep players on tenterhooks and trading choppy.
As far as global markets are concerned, the trend is not so bad. After a sharp fall initially on renewed credit market jitters, the Dow Jones Industrial Average ended flat, though the Nasdaq lost nearly 0.9%. Markets in Europe closed lower while in Latin America stock benchmarks ended mixed. Other emerging markets in Russia and Turkey were marginally down. In Asian markets this morning, the Hang Seng was a big mover as were markets in South Korea and Singapore. The Nikkei in Tokyo was up marginally. We expect a positive opening but things will turn volatile as the day wears on. In the past couple of years we have seen that the bulls have bounced back smartly every time there has been a big crash. This year only, they have done so on three occasions - in February-March, in July-August and now in October. We expect the market to remain resilient with a positive bias in the days and months to come.
Shares of Maytas Infra Ltd. will be listed today. The company, promoted by Satyam promoters, has set an issue price of Rs370 per share. The stock is expected to shoot past the Rs500 mark.
US stocks dropped for the first time in three days after Merrill Lynch reported the biggest quarterly loss in its 93-year history and home sales tumbled. Merrill fell the most since 2002 on $8.4bn in write-downs from credit-market losses.
The selloff accelerated after the National Association of Realtors said existing home sales sank more than expected last month, to its slowest pace on record. The industry group also revealed that the median home price fell 4.2% from a year ago in September.
Stocks pared most of their decline late in the day and the Dow average recovered from a 206-point drop on speculation that the Federal Reserve will cut interest rates before its Oct. 31 meeting.
The S&P 500 Index lost 4 points, or 0.2%, to 1,515.88 after retreating as much as 2%. The Dow ended flat at 13,675.25. The Nasdaq sank 25 points, or 0.9%, to 2,774.76.
Market breadth was negative as decliners topped advancers on the New York Stock Exchange by nearly 2 to 1 on volume of 1.58 billion shares. Losers beat winners by more than 2 to 1 in Nasdaq trade as 2.78 billion shares traded hands.
Bond prices staged a modest rally, lowering the yield on the benchmark 10-year note to 4.33%, down from 4.4% late on Tuesday. The dollar moved modestly lower against the euro and eased versus the yen.
Light, sweet crude for December gained $1.83 to settle at $87.10 a barrel on the New York Mercantile Exchange, after US oil inventories took a surprise dip in the latest week. COMEX gold for December gained $2.50 to $765.60 an ounce.
European stocks ended a choppy session down. The pan-European Dow Jones Stoxx 600 index fell 0.6% to 377.45 with the mining sector down 2%. The UK's FTSE 100 closed down 0.5% at 6,482.00, the German DAX 30 shed 0.2% to 7,828.96 and the French CAC-40 fell 0.5% to 5,674.67.
Latin American stocks closed mixed. Brazil's Bovespa ended down 0.12% at 62,624.81 after dropping 2% during afternoon trade. Mexico's IPC lost 0.6% to end at 32,048.18, but recovered from a 1.6% tumble shortly after the session started. The Merval gained 0.2% to 2.256.61 in Buenos Aires. In Santiago, the IPSA gained 0.3% to 3,464.87.
In Russia, the RTS index dropped 0.2% to 2123 and the ISE National-30 index in Turkey slipped 0.2% to 70,453.
In Asia, most markets are trading higher. Commodity-related stocks gained after crude oil prices rose and global investors increased the bets that the Fed will cut borrowing costs after US existing home sales plunged.
Posco and Hyundai Heavy Industries climbed after South Korea's economy grew in the third quarter. Japanese exporters slid after the yen strengthened against the dollar, reducing the value of sales made abroad.
The Morgan Stanley Capital International Asia-Pacific Index advanced 0.4% to 165.06 at 10:30 a.m. in Tokyo. Japan's Topix index slid 0.1% to 1,561.89. South Korea's Kospi Index gained 2%, and Taiwan's Taiex index climbed 1.4%. All Asian markets in the region open for trading rose except New Zealand.
The yen rose against all 16 of the world's most-actively traded currencies as global investors cut their holding of high-yielding assets amid persistent worries over the health of the US economy, especially its weak housing sector.
All eye on SEBI meet, F&O expiry
After posting over 5% gains in previous trading session, key indices added on to their gains in early trades. However, bulls were unable to hold on to their gains as markets turned choppy. Traders and investors preferred to book some profits which were witnessed in the index heavyweights like Infosys, ONGC, Bharti Airtel and HDFC.
Finally, the 30-share Sensex ended flat at 18,512. NSE Nifty closed 22 points higher at 5,496.
Sun TV slipped 2.5% to Rs325. The company announced that their Q2 results with net profit at Rs801.6mn (up 67.2%) and net sales rose 106% to Rs1.94bn. The scrip touched an intra-day high of Rs349 and a low of Rs321 and recorded volumes of over 2,00,000 shares on NSE.
Federal Bank gained 0.6% to Rs386 the company announced that they would set right issue price on October 26. The scrip touched an intra-day high of Rs398 and a low of Rs377 and recorded volumes of over 1,00,000 shares on NSE.
Today’s Writing was locked at 5% upper circuit to Rs95.3 after the company’s unit has entered in venture with Naftogaz unit. The scrip touched an intra-day high of Rs95.3 and a low of Rs92 and recorded volumes of over 28,000 shares on NSE.
Union Bank of India surged by over 3% to Rs160 after the company announced its Q2 result with net profit at Rs2.76bn (up 42.2%). The scrip touched an intra-day high of Rs174 and a low of Rs158 and recorded volumes of over 30,00,000 shares on NSE.
Reliance Communications gained by 0.8% to Rs749 as reports stated that the company is likely to sell additional 10% in its tower arm RTIL through an IPO. The scrip touched an intra-day high of Rs775 and a low of Rs744 and recorded volumes of over 99,00,000 shares on NSE.
Dhanus Technologies declined by 4% to Rs327. According to reports the company has planned to acquire two US-based communications companies and a Chinese telecom services provider by raising Rs8bn. The scrip touched an intra-day high of Rs355 and a low of Rs325 and recorded volumes of over 13,00,000 shares on NSE.
Britannia Industries rallied by over 6.5% to Rs1480 after the cookie maker announced that its second-quarter profit more than doubled to Rs485mn in the quarter ended September. 30, rising 128% from a year earlier. The scrip touched an intra-day high of Rs1559 and a low of Rs1455 and recorded volumes of over 11,000 shares on NSE.
Stocks in News:
Dr. Reddy’s performance in July-September quarter was affected due to a sharp decline in revenues from its German subsidiary Betapharm.TCS says the available indicators suggest no intended reduction in IT budgets.
Infotech Enterprises is scouting for acquisitions to ramp up its capabilities in areas of hi-tech, telecom and automotive.
Patni signs MOU with BITS Pilani for a two-year masters level degree in embedded systems for its employees.
Bank of Maharashtra to enter non-life insurance business in JV with Shriram group and South Africa based Sanlam.
Future Generali, a JV between the Future group and the Italian Assicurazioni Generali Spa, has launched its life and non-life operations in India.
ONGC plans Rs310bn capex in the 11th plan to increase gas production from its KG basin.
ONGC has decided to sell up to 50% stake in a KG basin offshore block to Norwegian energy major Statoil Hydro and Petrobras of Brazil.
ONGC has chalked out an investment plan of Rs63bn for phase II of the redevelopment of Mumbai High South.
Future group might pick up 15% in Percept Holdings.
The cabinet committee on economic affairs (CCEA) will discuss Sterlite Industries’ call option to acquire 49% stake in Bharat Aluminium today.
Gail India is likely to partner with China Gas in developing coal bed methane in Mongolia.
Ranbaxy launches anti-allergic nasal spray in India.
Dabur Pharma has signed an agreement with Spanish generic company Combino Pharm to supply and distribute generic oncology products
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