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Tuesday, October 30, 2007
FII: + Rs 1047 ; MF + Rs 419 Cr
Mkt Sources:
FII Gross purchases Rs 4783 Cr, Gross sales Rs 3735 Cr,Net Buyers Rs 1047 Cr.
MF Gross Purchases Rs 1460 Cr, Gross Sales Rs 1040 Cr, Net Buyers Rs 419 Cr.
Our View:
With the clearance on the P notes issues the FII inflows seem to have resumed. The Fed meet is scheduled tomorrow and the rate cut hopes are high. The further inflow of funds would depend largely on that. Any fresh positions at this point must be taken with caution as the indices have just sneaked in the 20,000 levels and are near the all time highs. Value added services by experts is recommended at this stage.
Market Close: Volatile on Credit policy..
Great rally yesterday, Indices finally crossed the 20k mark in the early sessions. Indices touched all time high in early trades After the RBI meet indices witnessed profit bookings. Sensex lost its ground in the mid sessions and fell in the red zone after RBI raised the Cash Reserve Ratio (CRR) by 50 basis points to 7.5% but left the other rates unchanged. Indices some how managed a solid recovery after the initial fall as buying intensified in the heavy weights. But, the recovery was short lived as the market plunged down in negative zone during the final hour. Auto, Banking and IT stocks heavy profit taking while selective Capital goods and Metal stocks gained investors interest. Mid cap and Small cap both end marginally down. Asian markets ended in mix, while Europe followed the same mixed trend.
The central bank raised the CRR by 50 basis points to 7.5 % in its move to suck out the excess liquidity in the system, but kept its key lending rates unchanged. RBI also left the reverse repo and repo rate unchanged. Now everybody has its eyes on the Fed to see whether it cuts the interest rates or not. Market is expecting a cut of 25 bps but Crude at over $ 93 is a looming risk. So all eyes on FED meet?
Sensex ended at 19,779 lower by 199 points. Supporting the sensex were the gains in REL Energy (+4.20%), BHEL (+1.72%), L&T (+0.64%), NTPC (+0.45%) and Bharti Airtel.(+0.15%). Restricting the gains were the losses in Maruti (-8.12%). M&M (-6.36%), TATA Motors (-4.23%) and SBI (-2.26%).
Reliance Energy reported that it would transfer its infrastructure projects to a separate, wholly-owned subsidiary for which it has already obtained the approval of the board. The board has approved a proposal to further unlock overall shareholder value by transferring its infrastructure projects to a separate 100% subsidiary, subject to compliance with applicable laws. The infrastructure projects include roads, bridges, metro rail and real estate. The announcement comes on the heels of REL's plans to list another subsidiary Reliance Power to raise an estimated Rs 12,000 crore. REL has already transferred its power projects to Reliance Power. The stock was top gainer for the day and ended up by 4.20% at close.
ABG Shipyard reported good results for Q2 FY07. The revenues grew by 26% to Rs 212 cr and the bottom line grew by 26% to Rs 34 on yoy basis. The Ebidta profit enhanced by 33% to Rs 64 cr and Ebidta margins stood at 30% higher by 100 bps on yoy basis points. Decrease in Raw Material helped Ebidta margins to improve by 100 bps. Valuation appears rich at the current market price of Rs 740 the stock trades at 29 times trailing earnings. The worry to the business is subsidy issue; still the Govt has not taken any decision which got over in the month of August 2007. We expect the subsidy to continue if not Indian ship builders are not cost competitive in global scenario. As of now ABG order book is at Rs 7200 cr, of which 70% is for export. Expect a detailed note on this. The stock performed well on healthy result and ended up by 5%.
Technically Speaking: Market trades volatile for the whole day after the credit policy issue. Sensex traded between an intraday high of 20238 and low of 19694. The breadth was in favor of decline as there were 1760 declines against 1217 advances. The volume for the day stood at Rs.10949 Cr.
Jindal Steel Power,BHEL, HDFC, Maruti Suzuki, PNB, Pantaloon, HPCL, Jet Airways, Sobha Developers, OBC, JK Bank, Jagran Prakashan, Jyoti Structures,
Labels:
Banking Sector,
BHEL,
Economy,
HDFC,
HPCL,
IOB,
Jagran Prakashan,
Jet Airways,
Jindal Power Steel,
JK Bank,
Jyothi Structures,
Maruti Udyog,
OBC,
Pantaloon,
PNB,
RPL,
Sobha Developers
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DLF Q2 net profit up 32% at Rs 2018 cr
DLF Ltd, the country's largest real estate firm on Tuesday reported a 32 per cent increase in its consolidated net profit at Rs 2,018 crore for quarter ended September 30 against Rs 1,524 crore in the first quarter of the current fiscal fuelled by robust growth in volume.
The consolidated revenue grew by 7.3 per cent at Rs 3,349 crore during July-September quarter against Rs 3,121 crore in the previous quarter.
"Execution of projects and enhanced volume have led to the growth," DLF Vice Chairman Rajiv Singh told reporters.
It has also declared an interim dividend of 100 per cent, that is, Rs 2 on shares of face value Rs 2 each.
The net profit for the second quarter in current fiscal is more than the total profit for the entire 2006-07 financial year, which stood at Rs 1,933.65 crore.
DLF, which got listed on stock market in July by raising over Rs 9,000 crore through IPO, announced its entry into the mid-income segment in residential with first launch planned in the third quarter. It would launch projects in south India.
"We will launch 4-5 projects in next six months," Singh said, adding that mid-income segment for DLF would be Rs 35-50 lakh for a 3-bedroom apartment covering 1500 sq ft of area.
During the quarter, DLF has increased the developable area to 738 milion sq ft from 615 million sq ft. The area under construction at the end of second quarter stood at 54 million sq ft.
On the proposed investment in Bangalore township spread over 9,000 acre that it has recently bagged, Singh said it would be about Rs 10,000-12,000 crore in next 2-3 years, which would be shared between DLF and Dubai-based Limitless in form of equity and debt.
Industry reaction to CRR hike
Industry bodies Ficci, CII, Assocham, PHDCCI and FIEO today gave a mixed reaction to the 50 basis point increase in cash reserve ratio (CRR) announced by the Reserve Bank of India in its mid-term monetary policy review.
Ficci, Assocham and FIEO were of the view that the CRR hike may further hurt credit growth.
"While RBI has maintained the Bank Rate and Repo Rate at the earlier levels, the increase in CRR by 50 basis points will impound liquidity thus reducing lendable resources of the banks," Ficci said in a release.
Ficci president Habil Khorakiwala expressed hope that the CRR increase will not have an adverse impact on the lending rates, which are already at a high level.
Federation of Indian Export Organisations (FIEO) said the 50 basis points increase in the cash reserve ratio will adversely impact small and medium enterprises.
FIEO president Ganesh Kumar Gupta expressed disappointment that no significant measures had been taken to reduce the cost of credit to the SME export sector in view of the appreciating rupee impacting export growth.
"An increase in CRR by 50 bps will restrict credit for the SME sector, and could create a liquidity crunch adversely affecting trade and industry," he said.
Gupta also appealed for a package to bail out the SME export sector.
CII said RBI’s review of monetary policy was on expected lines. However, keeping in mind the international trends in interest rates, and particularly the indications coming in from the United States, RBI could have considered an interest rate (Repo Rate) cut to go along with the CRR hike of 50 bps, CII said.
Associated Chambers of Commerce and Industry of India (Assocham) said interest rates should have been reduced to help the industry. Assocham president Venugopal N. Dhoot said banks would now find it difficult to reduce the interest rates. CRR hike may also further hurt the credit offtake, he added.
Sanjay Bhatia, president, PHDCCI, said the increase in CRR should have been avoided. He, however, welcomed no change in Bank Rate, Repo Rate and the Reverse Repo Rate.
FICCI, CII and PHDCCI also welcomed measures announced by the RBI to permit importers and exporters having foreign currency exposures to write covered call and put options and permitting oil companies to hedge their foreign exchange exposures. These measures would help the relevant players deal with rupee appreciation more effectively, they said.
CRR hiked
| Reserve Bank of India (RBI) today dashed hopes of interest rates easing in the near future as it hiked the cash reserve ratio (CRR) by 0.5% to 7.5% to suck out liquidity with effect from the fortnight beginning November 10, 2007. The central bank, however, left all key rates (Bank Rate - 6%, Repo - 7.75% and Reverse Repo - 6%) unchanged in the mid-term review of the monetary policy. CRR is the amount of cash banks need to park with RBI, which does not pay any interest on such deposits. Between December 2006 and July 2007, RBI has raised CRR by 2% to 7%, and has sucked out about Rs 56,000 crore from the financial system. Unveiling the busy season monetary policy, RBI Governor Y V Reddy sent strong signals that the apex bank's hawkish stance would continue in order to ensure price stability, credit quality and orderly conditions in the financial market. Flush with funds, commercial banks have been reducing deposit rates to bring down their cost of funds and slashing rates on new retail loans to improve credit offtake. This had raised hopes of interest rates falling further although bankers maintained there would be no change in the rate regime. ICICI Bank joint managing director Chanda Kochhar said the CRR hike will stabilise liquidity, and "further hike in interest rates is unlikely." The central bank left the economic growth projection for 2007-08 unchanged at 8.5% and continued to focus on keeping inflation low. Though inflation has come down to 3.07%, RBI expects it to be in the vicinity of 5% by the end of 2007-08. Going forward, it resolved to contain inflation expectations in the range of 4-4.5% so that an inflation rate of around 3% becomes a medium-term objective. Highlighting several challenges facing the conduct of monetary policy, RBI said management of capital flows, related liquidity implications and overall stability were the biggest challenges. Yet another challenge was rapid escalation in asset prices, particularly equity and real estate, driven by capital flows which are often opaque, highly leveraged and largely unregulated, the RBI observed. "Monetary policy will have to contend with the risks to overall macroeconomic stability and threats to inflation expectations emanating from fluctuations in asset prices, the re-pricing of risks and their diffusion across the financial system," it said. It observed that the momentum in investment has been affected by changes in the interest rate cycle and spending on capital expenditure and infrastructure has weathered the transient slack in industrial activity in the second quarter. Key monetary aggregates like the reserve money and money supply have been running well above initial projections, it said. Asset prices remain at elevated levels although there is some anecdotal evidence of stabilising real estate prices, the RBI said. The apex bank said equity prices were at record highs and although inflation, in terms of wholesale prices appears to have eased, remains high in terms of consumer prices. To curb the menace of recovery agents, RBI has asked banks to prescribe specific considerations while engaging recovery agents. |
| The third quarter review of the annual policy statement will be undertaken on Tuesday, January 29, 2008, the central bank said. Following is the press release issued by the central bank today: Dr. Y. Venugopal Reddy, Governor, presented the mid-term review of annual policy for the year 2007-08 today in a meeting with chief executives of major commercial banks. The Mid-term Review consists of two parts: Part I Mid-term Review of the Annual Statemenat on Monetary Policy for the Year 2007-08; and Part II Mid-term Review of the Annual Statement on Developmental and Regulatory Policies for the Year 2007-08. Highlights Bank Rate, Repo Rate and Reverse Repo Rate kept unchanged. The flexibility to conduct overnight repo or longer term repo including the right to accept or reject tender(s) under the LAF, wholly or partially, is retained. CRR increased by 50 basis points to 7.5 per cent effective fortnight beginning November 10, 2007. GDP growth forecast retained at 8.5 per cent during 2007-08, assuming no further escalation in international crude prices and barring domestic or external shocks Inflation to be contained close to 5.0 per cent during 2007-08 while resolving to condition expectations in the range of 4.0-4.5 per cent, with a medium-term objective of inflation at around 3.0 per cent. Moderating net capital flows so that money supply is not persistently out of alignment with indicative projection of 17.0-17.5 per cent. Covering of ‘Short-sale’ and ‘When Issued’ transactions to be permitted outside the Negotiated Dealing System – Order Matching (NDS-OM) system. Systemically important non-deposit taking NBFCs (NBFC-ND-SI) to be considered as ‘qualified entities’ for accessing the NDS-OM using the Constituents’ Subsidiary General Ledger (CSGL) route. Reinstatement of the eligible limits under the past performance route for hedging facility to be permitted. Oil companies to be permitted to hedge foreign exchange exposures by using overseas over-the-counter (OTC)/ exchange traded derivatives up to a maximum of one year forward. Importers and exporters having foreign currency exposures to be allowed to write covered call and put options in both foreign currency/ rupee and cross currency and receive premia. Authorised Dealers (ADs) to be permitted to run cross currency options books subject to the Reserve Bank’s approval. ADs to be permitted to offer American options as well. Working Group to be constituted for preparing a road-map for migration to core banking solutions (CBS) by Regional Rural Banks (RRBs). RRBs and State/ Central Cooperative Banks to disclose their capital-to-risk weighted assets ratio (CRAR) as on March 31, 2008 in their balance sheets. A road-map to be evolved for achieving the desired level of CRAR by these banks. High Level Committee to be constituted to review the Lead Bank Scheme. Financial assistance to RRBs for implementing information and communication technology (ICT) based solutions. Working group to be constituted to lay down the road-map for cross-border supervision and supervisory cooperation with overseas regulators, consistent with the framework envisaged in the Basel Committee on Banking Supervision (BCBS). Besides general market risk, specific risk, especially the credit risk arising out of deficient documentation or settlement risk to be covered under the supervisory process. Action plan to be drawn up for implementation of National Electronic Clearing Service (NECS) with centralised clearing and settlement at Mumbai. Domestic Developments Real GDP growth during the first quarter of 2007-08 is placed at 9.3 per cent as against 9.6 per cent in the corresponding quarter a year ago. The year-on-year (Y-o-Y) wholesale price index (WPI) inflation eased from its peak of 6.4 per cent on April 7, 2006 to 3.1 per cent by October 13, 2007. The average price of the Indian ‘basket’ of international crude has increased to US $ 80.0 per barrel as on October 23, 2007 from US $ 72.1 per barrel in July-September, 2007. The Y-o-Y CPI inflation for industrial workers showed a sharp increase to 7.3 per cent in August 2007 as against 6.3 per cent a year ago. The Y-o-Y growth in money supply (M3) was higher at 21.8 per cent on October 12, 2007 than 18.9 per cent a year ago. The Y-o-Y growth in aggregate deposits at Rs.5,69,061 crore (24.9 per cent) was higher than that of Rs.3,88,528 crore (20.4 per cent) a year ago. Total credit exhibited a Y-o-Y growth of Rs.3,81,333 crore (23.3 per cent) as on October 12, 2007 on top of an increase of Rs.3,66,463 crore (28.8 per cent) a year ago. The Y-o-Y growth in total resource flow from scheduled commercial banks (SCBs) to the commercial sector was 22.1 per cent, over and above the growth of 28.0 per cent a year ago. Banks’ holdings of Government and other approved securities increased to 30.0 per cent of their net demand and time liabilities (NDTL) as on October 12, 2007 from 28.0 per cent at end-March 2007. The overhang of liquidity under the LAF, MSS and the Central Governments’ cash balances taken together increased to Rs.2,22,582 crore by October 24, 2007 from Rs.85,770 crore at end-March 2007. The Government of India, in consultation with the Reserve Bank, revised the ceiling under MSS for the year 2007-08 from Rs.1,10,000 crore to Rs.1,50,000 crore on August 8, 2007 and further to Rs.2,00,000 crore on October 4, 2007. During the second quarter of 2007-08, financial markets remained generally stable with conditions of abundant liquidity and interest rates moderated in almost all segments of the financial system. During April-October 2007, public sector banks (PSBs) decreased their deposit rates, particularly at the upper end of the range for various maturities, by 25-60 basis points. During April-October 2007, the benchmark prime lending rates (BPLRs) of private sector banks moved from a range of 12.50-17.25 per cent to 13.00-16.50 per cent. The range of BPLRs for PSBs and foreign banks, however, remained unchanged at 12.50-13.50 per cent and 10.00-15.50 per cent, respectively, during this period. The BSE Sensex increased from 13,072 at end-March 2007 to 19,243 on October 26, 2007. The gross market borrowings of the Central Government through dated securities at Rs.1,27,060 crore (Rs.1,17,548 crore a year ago) during 2007-08 so far (up to October 26) constituted 67.3 per cent of the budget estimates (BE) while net market borrowings at Rs.75,387 crore (Rs.65,951 crore a year ago) constituted 68.7 per cent of the BE. External Sector Merchandise exports rose by 18.2 per cent in US dollar terms during April-August 2007 as compared with 27.1 per cent in the corresponding period of the previous year while import growth was higher at 31.0 per cent as compared with 20.6 per cent in the previous year. Non-oil imports rose by 44.3 per cent (10.9 per cent a year ago); oil imports, however, slowed down to 6.0 per cent (44.5 per cent), mainly on account of moderation in the price of the Indian basket of crude oil by 0.5 per cent during April-August 2007. India’s foreign exchange reserves increased by US $ 62.0 billion during 2007-08 and stood at US $ 261.1 billion on October 19, 2007. The rupee appreciated by 10.3 per cent against the US dollar, by 2.4 per cent against the euro, by 5.4 per cent against the pound sterling and 7.1 per cent against the Japanese yen during the current financial year up to October 26, 2007. Global Developments The downside risks to the global economic outlook have increased from a few months ago, accentuated by the recent financial market turmoil, firm inflationary pressures and high and volatile crude prices. According to the IMF’s World Economic Outlook (WEO) released in October 2007, the forecast for global real GDP growth on a purchasing power parity basis has been retained at 5.2 per cent for 2007 as in the July 2007 update, down from 5.4 per cent in 2006, but forecast for 2008 has been revised down to 4.8 per cent in October from 5.2 per cent in the July 2007 update. In the US, real GDP growth had risen to 3.8 per cent in the second quarter of 2007 as compared with 2.4 per cent a year ago - The IMF’s October 2007 WEO expects the US economy to grow at 1.9 per cent in 2007 and 2008 as against 2.9 per cent in 2006. There was a sudden fall in credit market confidence in late July brought on by the spread of risks from exposure to the US sub-prime mortgages with credit crunch spreading into corporate bond markets and equity markets. The European Central Bank and the US Federal Reserve, which have intervened since August 9 by providing liquidity to the inter-bank market, were joined by central banks in Canada, Japan, Australia, Norway and Switzerland. Bank of England has provided liquidity support to a mortgage lending bank, while giving a blanket guarantee to depositors on the safety of their deposits. Several central banks have cut policy rates during the third quarter of 2007 after financial markets were significantly affected by turbulence, such as the US Federal Reserve, the Banco Central do Brasil, Bank Indonesia (BI) and the Bank of Thailand. The central banks that have tightened their policy rates include the European Central Bank; the Bank of England; the Bank of Japan; the Bank of Canada; the Reserve Bank of Australia; the Reserve Bank of New Zealand; the People’s Bank of China; the Bank of Korea; the Banco de Mexico; and the Banco Central de Chile. A few central banks in Asia have used supplementary measures for tightening, besides increasing key policy rates. The only central bank that has kept policy rates steady is the Bank Negara Malaysia. Overall Assessment Some positive elements in the global economy are (i) the global economy is strong and resilient; (ii) EMEs, by and large, have a better macro-environment than before; (iii) globally, corporate balance sheets are strong and less leveraged than in the past; (iv) large financial intermediaries are perhaps adequately capitalised to absorb the shocks of credit infirmities; and (v) the inflation environment has been, on the whole, benign. The global environment is fraught with uncertainties with international crude prices at new highs, having breached the level of US $ 90 per barrel while elevated food and metal prices would, in current circumstances, pass through to domestic inflation. The US Federal Reserve has been the most aggressive in terms of easing monetary policy, with a higher than expected rate cut, reflecting the concerns over impact of housing issues on consumption and, hence, growth. The most important issue for India is the possible impact of global financial market developments and policy responses by central banks in major economies. The immediate task for public policy in India, therefore, is to manage the possible financial contagion which is in an incipient stage with highly uncertain prospects of being resolved soon. On the domestic front, aggregate demand conditions have remained firm and on the uptrend. Key monetary aggregates, i.e., reserve money and money supply have been running well above initial projections, reflecting the impact of higher than expected deposit growth and the exogenous expansionary effects of capital inflows as well as the drawdown of fiscal cash balances. The incomplete pass-through of international prices of crude, metals, food and commodities in general to consumer prices is indicative of suppressed inflation which carries destabilising potential into the future. The policy responses in the form of active liquidity management operations to modulate expansionary monetary and financial conditions were reflected in a generally orderly evolution of market liquidity. Since late July, global financial markets have experienced unusual volatility, strained liquidity and heightened risk aversion. While the trigger was the rising default rates on sub-prime mortgages in the US, the source of the problem was significant mis-pricing of risks in the financial system. Easy monetary policy, globalisation of liquidity flows, wide-spread use of highly complex structured debt instruments and inadequacy of banking supervision in coping with financial innovations also contributed to the severity of the crisis. At the current juncture and looking ahead, on the domestic front, the biggest challenge for monetary policy is the management of capital flows and the attendant implications for liquidity and overall stability. Yet another challenge is the rapid escalation in asset prices, particularly equity and real estate, which are significantly driven by capital flows. Over the next twelve to eighteen months, risks to inflation and inflation expectations would also continue to demand priority in policy monitoring. Stance of Monetary Policy Real GDP growth in 2007-08 is placed at 8.5 per cent for policy purposes, as set out in the Annual Policy Statement of April 2007 and reiterated in the First Quarter Review. Policy endeavour would be to contain inflation close to 5.0 per cent in 2007-08 and the resolve, going forward, would be to condition expectations in the range of 4.0-4.5 per cent so that an inflation rate of 3.0 per cent becomes a medium-term objective. Moderating the expansionary effects of net capital flows is warranted so that money supply is not persistently out of alignment with the indicative projections. The Reserve Bank will continue with its policy of active demand management of liquidity through appropriate use of the CRR stipulations and open market operations (OMO) including the MSS and the LAF, using all the policy instruments at its disposal flexibly, as and when the situation warrants. Barring the emergence of any adverse and unexpected developments in various sectors of the economy and keeping in view the current assessment of the economy including the outlook for inflation, the overall stance of monetary policy in the period ahead will broadly continue to be: * To reinforce the emphasis on price stability and well-anchored inflation expectations while ensuring a monetary and interest rate environment that supports export and investment demand in the economy so as to enable continuation of the growth momentum. * To re-emphasise credit quality and orderly conditions in financial markets for securing macroeconomic and, in particular, financial stability while simultaneously pursuing greater credit penetration and financial inclusion. * To respond swiftly with all possible measures as appropriate to the evolving global and domestic situation impinging on inflation expectations, financial stability and the growth momentum. * To be in readiness to take recourse to all possible options for maintaining stability and the growth momentum in the economy in view of the unusual heightened global uncertainties, and the unconventional policy responses to the developments in financial markets. Monetary Measures The Bank Rate has been kept unchanged at 6.0 per cent. The repo rate under the LAF is kept unchanged at 7.75 per cent. The reverse repo rate under the LAF is kept unchanged at 6.0 per cent. The Reserve Bank has the flexibility to conduct repo/reverse repo auctions at a fixed rate or at variable rates as circumstances warrant. The Reserve Bank retains the option to conduct overnight or longer term repo/reverse repo under the LAF depending on market conditions and other relevant factors. The Reserve Bank will continue to use this flexibility including the right to accept or reject tender(s) under the LAF, wholly or partially, if deemed fit, so as to make efficient use of the LAF in daily liquidity management. CRR increased by 50 basis points to 7.5 per cent effective fortnight beginning November 10, 2007. Developmental and Regulatory Policies Financial Markets Non-Competitive Bidding Scheme in the Auctions of State Development Loans (SDLs) to be operationalised by March 31, 2008. Re-issuance of SDLs in the second half of 2007-08. The facility of new issuance structure for floating rate bonds (FRBs) is being built into the new Negotiated Dealing System (NDS) auction system being developed by the Clearing Corporation of India Limited (CCIL). The Reserve Bank is committed for permitting market repos in corporate bonds, once the corporate debt markets develop and the Reserve Bank is assured of availability of fair prices, and an efficient and safe settlement system based on delivery versus payment (DvP) III and Straight Through Processing (STP) is in place. Covering of ‘Short-sale’ and ‘When Issued’ transactions to be permitted outside the Negotiated Dealing System – Order Matching (NDS-OM) system. Systemically important non-deposit taking NBFCs (NBFC-ND-SI) to be considered as ‘qualified entities’ for accessing the NDS-OM using the Constituents’ Subsidiary General Ledger (CSGL) route. The facility of permitting all exporters to earn interest on their Exchange Earners’ Foreign Currency (EEFC) accounts to the extent of outstanding balances of US $ 1 million per exporter is extended up to October 31, 2008 and banks are free to determine the rate of interest. Reinstatement of the eligible limits under the past performance route for hedging facility provided that supporting underlying documents are produced during the term of the hedge undertaken. Oil companies to be permitted to hedge their foreign exchange exposures to the extent of 50 per cent of their inventory volume as at the end of the previous quarter by using overseas over-the-counter (OTC)/ exchange traded derivatives up to a maximum of one year forward. Importers and exporters having foreign currency exposures to be allowed to write covered call and put options in both foreign currency/ rupee and cross currency and receive premia. Authorised Dealers (ADs) to be permitted to run cross currency options books, subject to the Reserve Bank’s approval. ADs to be permitted to offer American options as well. Credit Delivery Internal Working Group to be constituted to examine the recommendations of the Committee on Agricultural Indebtedness (Chairman: Dr. R. Radhakrishna) relevant to the banking system in general and the Reserve Bank, in particular. Working Group to be constituted with representatives from the Reserve Bank, the NABARD, sponsor banks and RRBs for preparing a road-map for migration to core banking solutions (CBS) by RRBs. RRBs and State/ Central Cooperative Banks should disclose the level of CRAR as on March 31, 2008 in their balance sheets. A road-map may be evolved for achieving the desired level of CRAR by these banks. Working Group to be constituted to study the recommendations of Sengupta Committee report on ‘Conditions of Work and Promotion of Livelihood in the Unorganised Sector’ relevant to the financial system and suggest an appropriate action plan for implementation of acceptable recommendations. High Level Committee to be constituted to review the Lead Bank Scheme. Proposed to prepare a concept paper on financial literacy-cum-counseling centres detailing the future course of action. Financial assistance to RRBs for implementing information and communication technology (ICT) based solutions, including installation of solar power generating devices for powering ICT equipment in remote and under-served areas. Prudential Measures Final guidelines on Credit Default Swaps would be issued by end-November 2007. Banks are urged to follow prescribed specific considerations while engaging recovery agents. Abusive practices followed by banks’ recovery agents would invite serious supervisory disapproval. Constitution of a working group to lay down the road-map for adoption of a suitable framework for cross-border supervision and supervisory cooperation with overseas regulators, consistent with the framework envisaged in the Basel Committee on Banking Supervision (BCBS). In order to enhance the effectiveness of the banking supervisory system, the process of consolidated supervision to be integrated with the financial conglomerate monitoring mechanism for bank-led conglomerates. It is proposed to cover, besides general market risk, specific risk, especially the credit risk arising out of deficient documentation or settlement risk, under the supervisory process. Institutional Developments Banks are urged to ensure that adequate disaster recovery systems are put in place to fully comply with the requirements. Banks are urged to draw up time-bound action plans for implementation of CBS across all their branches. An action plan to be drawn up for implementation of National Electronic Clearing Service (NECS) using the existing infrastructure of National Electronic Funds Transfer (NEFT) system with centralised clearing and settlement at Mumbai. Working group to be constituted comprising representatives of the Reserve Bank, State Governments and the Urban Cooperative Banks (UCBs) to examine the various areas where IT support could be provided by the Reserve Bank to UCBs. The Committee on Financial Sector Assessment (CFSA) (Chairman: Dr.Rakesh Mohan; Co-Chairman: Dr.D.Subbarao) submitted an interim report delineating its approach and reviewing the progress of work to the Finance Minister and Governor, Reserve Bank of India in July 2007. The CFSA is expected to complete the assessment by March 2008 and lay out a road-map for further reforms in a medium-term perspective. |
Post Market Commentary
The market started the day on a strong note but within a span of time, it gave up it gains and started trading with little volatility & cautious approach ahead of the RBI''s review policy. Further in the noon session, the RBI came out with its policy, which stated that the CRR is hiked by 50 bps to 7.5% from 7.0% and the other key rates including the repo and reverse repo rates are remained unchanged. The market continued trading flat with a bit of volatility but no turbulence. It remained unaffected by the new credit policy, as the credit policy is largely inline with street expectations. Finally in the last few minutes, the market ran under heavy selling & the benchmark index Sensex ended up with a loss of 194.16 points to close at 19,783.51, whereas Nifty also closed with a loss of 37.15 points to close at 5,868.75. All the indices ended in red territory except Capital Goods, Metal & Realty. Further, BSE Midcap and BSE Smallcap also closed lower with a loss of 34.47 points and 60.76 points at 8,048.07 & 9,644.44 respectively. The market breadth stood as negative with over 1087 stocks on the advancing side and over 1666 stocks on the decline side.
BSE Capital goods closed with the marginal gain of 158.91 points at 20,006.57. Fueled it up are ABB Ltd with the gain of (5.70%), Jyoti Structures (3.09%), Seimens (2.59%), AIA Engineering (2.51%), and BHEL (1.63%).
BSE Metal also managed to close in green with a gain of 112.48 points to close at 17,302.22. Scrips supported are, Sterlite (6.63%), Jindal Steel (6.47%), & Sesa Goa (2.06%).
BSE Realty stood at the third position as a gainer surged 241.98 points to close at 10,516.99. Scrips gained are DLF Ltd (5.78%), Anant Raj (5.21%), Ansal Infra (2.57%), & Unitech Ltd (1.50%).
BSE Auto stood as the top loser for the day closed lower by 176.54 points at 5,479.89. Scrips dragged the index down are Maruti Suzuki down by (8.46%), Mah & Mah (7.00%), Tata Motors (4.93%), and Punjab Tractors (3.65%).
Market falls below 20K on profit bookings
Unabated selling towards the end of the session saw the Sensex lose 454 points from the day's high of 20,238. The market continued to witness volatility till the mid-morning trades. But, dipped by more than 200 points after the Reserve Bank of India announced the CRR hike by 50 basis points while keeping bank rate, repo rate and reverse repo rate unchanged. However, the clarity over the monetary policy led a recovery from the low levels and the Sensex entered into the green. Thereafter the market moved with in a range with a positive bias. However sustained selling towards the close saw the Sensex slump below 20,000 and end the session down 194 points at 19,784. The broad based Nifty slipped 37 points at 5,869.
The market breadth was weak as the losers outpaced the gainers. Of the 2,822 stocks traded on the BSE, 1,666 stocks declined, 1,087 stocks advanced and 69 stocks ended unchanged. Except a few, most of the sectoral indices closed in the red. The BSE Auto index dropped 3.12% followed by the BSE Oil & Gas index (down 1.14%), the BSE Bankex index (down 0.94%), the BSE FMCG index (down 0.68%). However, the BSE Realty index gained 2.36%, the BSE CG index added 0.80% and the BSE Metal index moved up by 0.65%.
Most of the index heavyweights witnessed heavy correction. Among auto majors Maruti Suzuki tumbled by 8.46% at Rs1,088, M&M dropped 7% at Rs741 and Tata motors lost 4.93% at Rs767. Among the other major losers SBI slumped by 2.63% at Rs2,062, HDFC slipped by 2.02% at Rs2,756, Reliance Industries shed 2.02% at Rs2,771, Grasim lost 1.98% at Rs3,730, Ranbaxy dipped 1.92% at Rs415. Select counters, however, bucked the downtrend and ended with gains. Reliance Energy advanced by 3.91% at Rs1,789, BHEL advanced 1.63% at Rs2,655 and L&T moved up by 1.06% at Rs4,323 while Bharti Airtel, NTPC, Ambuja Cement, Dr Reddy's Lab and Wipro ended with modest gains.
Over 3.98 crore Reliance Natural Resources shares changed hands on the BSE followed by Reliance Petroleum (3.26 crore shares), Tata Tele Services (3.25 crore shares), Power Grid Corporation (1.94 crore shares) and Manglore Refinery (1.67 crore shares).
Reliance Capital was the most actively traded counter on the BSE and registered a turnover of Rs828 crore followed by Reliance Petroleum (Rs755 crore), Reliance Natural Resources (Rs459 crore), Reliance Energy (Rs419 crore) and Reliance Industries (Rs331 crore).
Sensex sheds 194 points on hike in CRR; auto shares skid
The market plunged deep in red in late trade in what was a choppy trade today. Earlier, the market had staged a solid recovery after an initial fall in early afternoon trade that was triggered by the Reserve Bank of India’s raising cash reserve ratio (CRR) by a steep 50 basis points to 7.5%, at its mid-term review of the annual monetary policy announced at 12:00 IST today. RBI kept interest rates unchanged. Contrary to some expectations, interest rates may not soften in the near term.
Auto, banking and IT stocks were weak. Capital goods, metal stocks gained. Reliance Industries lost ground. Market breadth was negative. Most of the Asian markets were trading lower. European markets were subdued.
BSE Sensex ended down 194.16 points or 0.97% to 19,783.51. It opened on a strong note with an upward gap of 125.77 points at 20,103.44 and soon rose to strike an all-time high of 20,238.16 in early trade. At day's high of 20,238.16, Sensex had gained 260.49 points.
Sensex hit a low of 19,694.85 in late trade. At day’s low of 19,694.85, Sensex had declined 282.82 points. Sensex oscillated 543.31 points between a low of 19,694.85 and high of 20,238.16.
The broader based S&P CNX Nifty ended down 37.15 points or 0.63% to 5,868.75. It hit an all time high of 5,976 in early trade.
ONGC, Bharat Heavy Electricals, Larsen & Toubro and HDFC hit all time highs today.
The central bank raised the proportion of cash banks have to keep with it on deposit by 50 basis points to 7.5 % today to mop up excess funds, but kept its key lending rates unchanged. The central bank left the reverse repo rate, the rate at which it absorbs excess cash from banks, unchanged at 6%. The bank rate, too, was unchanged at 6%.
The market breadth was negative BSE: 1,051 scrips advanced as compared to 1,657 that declined while 345 remained unchanged. 8 of the 30 members of the Sensex pack were trading with gains.
The BSE Mid Cap index was down 0.43% to 8,048.07 and BSE Small Cap index was down 0.63% to Rs 9,644.44. Both these indices outperformed Sensex.
BSE Auto index (down 3.12% to 5,479.89),BSE Oil & Gas index (down 1.14% to 11,526.30) underperformed Sensex.
BSE Bankex (down 0.94% to 10,550.09), BSE Capital Goods index (up 0.8% to 20,006.57), BSE Metal (up 0.65% to 17,302.22), BSE Realty index (up 2.36% to 10,516.99), BSE IT index(down 0.58% to 4,647.53) outperformed Sensex.
The NSE F&O turnover was Rs 89,601.31 crore today as compared to Rs 69,537.38 crore Monday, 29 October 2007.
Nifty November 2007 futures contract was trading at 5,892, at a premium of 23.25 points or 0.39% over spot price of 5,868.75.
Auto stocks declined sharply. Mahindra & Mahindra (down 7% to Rs 740.60), Maruti Suzuki India (down 8.46% to Rs 1,087.95), Hero Honda Motors (down 2.61% to Rs 724.95), Tata Motors (down 4.93% to Rs 767.30) and Bajaj Auto (down 0.6% to Rs 2,487.05) edged lower.
Banking majors declined as the Reserve Bank of India raised CRR by a steep 50 basis points to 7.5%, in a bid to suck out excess liquidity in the banking system. ICICI Bank (down 0.73% to Rs 1,240.25) and HDFC Bank (down 1.25% to Rs 1,618.25) and State Bank of India (down 2.63% to Rs 2,062.20) edged lower. CRR deposits with the RBI earn zero interest for banks.
IT majors edged lower. Infosys (down 0.5% to Rs 1,851.30), Tata Consultancy Services (down 1.86% to Rs 1,048.50) , Satyam Computer Services (down 0.64% to Rs 479.45) edged lower. Wipro (up 0.01% to Rs 509.70) edged higher.
India’s largest telecom services provider Bharti Airtel (up 0.51% to Rs 999.75) edged higher. Dr.Reddy’s Laboratories rose 0.61% to Rs 615.45.
India's second biggest power utility in terms of revenue Reliance Energy (REL) was up nearly 3.91% to Rs 1,789.20 and was the top gainer from Sensex pack. REL said today that it will transfer its road, rail, real estate and other infrastructure projects to a separate unit.
India's largest private sector entity by market capitalisation and oil refiner Reliance Industries (RIL) declined 2.02% to Rs 2,770.50. It hit a low of Rs 2,746.
Capital goods stocks extended gains. Bharat Heavy Electricals (Bhel) rose 1.63% to Rs 2,654.55. It hit an all time high of Rs 2,750 today. Net profit of Bharat Heavy Electricals (Bhel) rose 91.01% to Rs 687.66 crore on 18.68% rise in total income to Rs 3965.36 crore in Q2 September 2007 over Q2 September 2006. The company announced the results after the market hours on 29 October 2007.
India's biggest engineering & construction firm by revenue Larsen & Toubro rose 1.06% to Rs 4,323. It hit an all time high of Rs 4,470 today. Suzlon Energy however declined 0.87% to Rs 1,980.45.
Housing Development Finance Corporation, India's biggest dedicated housing finance firm, declined 2.02% to Rs 2,756.25. It hit an all time high of Rs 2,965 today. Net profit of Housing Development Finance Corporation rose 75.64% to Rs 646.39 crore on 30.54% rise in total income to Rs 1888.60 crore in Q2 September 2007 over Q2 September 2006. The company announced the results after the market hours on 29 October 2007.
Reliance Natural Resources topped volume charts on BSE, clocking volumes of 3.98 crore shares. The stock gained 4.78% to Rs 115.15. Reliance Petroleum gained 5.34% to Rs 233.75 on volumes of 3.26 crore shares and stood second in terms of volumes. Tata Teleservices (Maharashtra) slipped 3.47% to Rs 45.85 on 3.25 crore shares. It was the third most traded counter on BSE. Power Grid Corporation of India advanced 2.05% to Rs 146.60. It notched volumes of 1.92 crore shares and secured fourth position. Mangalore Refineries and Petrochemicals surged 26.22% to Rs 80.40 and finished as fifth most traded counter with volumes of 1.67 crore shares on BSE.
Reliance Capital clocked the highest turnover of Rs 828.13 crore on BSE. The stock rose 14.75% to Rs 2,127.70. Reliance Petroleum clocked the second highest turnover of Rs 755.66 crore on BSE. Reliance Natural Resources clocked third highest turnover of Rs 459.82 crore. Reliance Energy (Rs 419.77 crore) and Reliance Industries (Rs 331.20 crore) were other turnover toppers.
Among side counters, Parle Software (up 20% to Rs 695.50), Siemens Medical (up 20% to Rs 1,110.60), Mangalore Refinery and Petrochemicals (up 26.77% to Rs 80.75), Celestial Labroratories (up 17.55% to Rs 59.95) edged higher.
ITD Cementation (down 23.07% to Rs 647.95) edged lower.
European markets were subdued today. France's CAC 40 (down 0.53% to 5,805.20) and UK's FTSE 100 (down 0.63% to 6,663.70) edged lower. Germany's DAX declined 0.44% to 7,973.61.
Asian markets were trading slightly lower today, 30 October 2007. Japan's Nikkei (down 0.28% at 16,651) Taiwan Weighted (down 0.53% at 9,757), Singapore's Straits Times (down 0.56% at 3,798.45), South Korea's Seoul Composite (down 0.51% at 2,052.37) edged lower. However, Hong Kong's Hang Seng rose 0.16% at 31,638.22.
Crude oil prices fell nearly 1% below $93 a barrel on Tuesday, 30 October 2007, fading from their latest record high as investors took profits from a rally fuelled by a Mexican supply outage and the spiraling dollar. US crude fell by 85 cents to $92.68 a barrel after hitting a record high of $93.80 yesterday, 29 October 2007. London Brent slipped 77 cents to $89.65.
Q2 September 2007 results announced so far have been decent to strong.
Watch out for banking stocks
Banking shares will be buzzing ahead of Reserve Bank’s review of the monetary policy. Most players expect the RBI to keep the policy rates unchanged during its credit policy review but a hike in cash reserve ratio is likely.
According to reports, engineering and construction major Larsen & Toubro has bagged the master contract for the redevelopment of the Mumbai airport. This could boost the company’s shares.
Telecom shares are likely to witness some action as TRAI has approved the reference interconnect offer of the three undersea cable owners — Reliance, Bharti and VSNL— paving the way for long distance operators and internet service providers to access the trios’ cable landing systems at competitive rates.
Reports suggest that billionaire Mukesh Ambani has become the richest person in the world, surpassing American software magnate Bill Gates and Mexican business tycoon Carlos Slim Helu and investment guru Warren Buffett. Reliance group shares could see a sentimental rise on the news.
The market will eye an array of corporate results to be declared today. Hindalco Industries, Ramco Systems, HMT, MTNL, Ispat Industries, Central Bank of India, Bombay Dyeing, Power Grid Corporation, Sterling Biotech, Birla Corporation, Hindustan Unilever, CESC, Puravankara Projects will announce earnings for the July-September quarter.
Eyes on credit policy
The market may rally further on expectations that the Reserve Bank of India won't surprise investors in today's credit policy meeting. Despite registering smart gains in yesterday's trades, the mixed Asian markets in current trades and rising oil prices could make the investors jittery from taking any fresh position. Among the local indices, the Nifty could test 6000 on the upside and has a strong support around 5700 level. The Sensex has a likely support at 19000 and may face resistance at 20500. On the earnings front Balaji Tele, Ceat, Crompton Greaves, DLF, Dolphin Offshore, Indotech Transformers, ONGC, Sesa Goa, SAIL, Tata Chemical, Tata Elxsi, Tata power, TTML and Unitech are expected to announce their quarterly numbers.
Major US indices registered significant gains on Monday, on expectations that the Federal Reserve will cut interest rates later this week despite record oil prices above $93 a barrel and another decline for the dollar versus the euro. While the Dow Jones flared up by 64 points at 13870, the Nasdaq moved up by 13 points to close at 2817.
Except Satyam all the Indian ADRs traded firm on the US bourses. ICICI Bank led the pack with gains of over 6.5% while Infosys, Tata Motors and HDFC Bank, MTNL, Wipro, VSNL, Patni Computer and Dr Reddy's added over 1-5% each.
Crude oil prices advanced further, with the Nymex light crude oil for December delivery gaining by $1.67 to close at $93.53 a barrel. In the commodity space, the Comex gold for December delivery gained $5.10 to settle at $792.60 an ounce.
Morning Call - Oct 30 2007
Market Grape Wine :
In House :
Nifty at a supp of 5867 and 5828 with resis at 5941 and 5997
Intra day: Sell IDBI below 146 with a TGT of 140 and a SL of 148.50
Buy Petronet LNG above 86 with a TGT of 90 and a SL of 84.20
F&O: Buy Relcap above 1880 with a TGT of 1935 and a SL of 1858
Out House :
Markets at a support of 19595 & 19339 levels with resistance at 19987 & 20120 levels .
Buy : RIL & RCap
Buy : REL & RPL
Buy : JSW & Sail
Buy : RComm & RNRL
Buy : IBull & Ibullreal
Buy : HCC & IVRCL
Buy : GTL & GTLInfra
Buy : Bhel & Grasim
Buy : LT & Aban
Dark Horse : ABAN , LT , REL , HCC , RIL , Jp , TVtoday & SBIN
Bullet for the Day : IBulls , HCC & GTL with stop loss .
Grey Market - Religare, Varun, Mundra Port
Reliance Power 53 to 54
Mundra Port & Sez 400 to 440 360 to 365
Varun Ind. 60 40 to 42
Religare Enterprises 160 to 185 300 to 310
Barak Valley Cement 37 to 42 22 to 24
Empee Distilleries 350 to 400 130 to 140
Circuit Systems (India) Ltd. 35 3 to 5
Rathi Bars 35 4 to 6
Allied Computers 12 18 to 20
SVPCL 40 to 45 5 to 7
Pre Market Watch
Indian market is likely to have a flat opening for the day with marginal gains, as the investors will be in a wait and watch mood for the RBI''s policy review. On Monday, the benchmark index Sensex ended with a gain of 734.50 points at 19,977.67 after touching the all time high of 20,024.87, whereas Nifty also closed with a good gain of 203.6 points to close at 5905.90. We expect that the market may trade a little cautious ahead of the RBI''s policy review. Further profit booking can be seen in the later stages on yesterday''s purchase.
On Monday, the US markets ended marginally up as the Dow Jones Industrial Average (DJIA) ended with a gain of 63.56 points to close at 13,870.26. Further the NASDAQ Composite & S&P 500 (SPX) index also ended up by 13.25 points & 5.70 points at 2,817.44 & 1,540.98 respectively.
Indian ADRs also ended in green. In telecommunication sector, VSNL & MTNL surged (5.02%) & (2.96%) respectively. In Metal sector, Sterlite Industries is up by (4.26%). In Banking sector ICICI bank & HDFC bank grew (6.53%) & (5.20%). Further in Technology sector, Patni Computers increased by (0.09%), along with Wipro (1.39%) & Infosys (3.51%).
The major stock markets in Asia are trading mixed. Hang Seng is trading with a gain of 114.36 points at 31,701.26. On the other hand, Japan''s Nikkei is trading lower by 117.44 points to trade at 16,580.64. Singapore''s Straits Times index is also trading down by 13.78 points at 3,806 and Seoul Composite lost 9.47 points to trade at 2,053.45.
On Monday, the FIIs stood as the net sellers as the gross equity purchased was Rs.4077.90 (in crores), and the gross debt purchased was Rs.25.30 (in crores) as against the gross equity sold was Rs.4334.70 (in crores) and the gross debt sold was Rs.153.10 (in crores). The net investment of equity was Rs.-256.80 (in crores) and the net debt investment was Rs.-127.80 (in crores).
Today, Nifty has support at 5,810 and resistance at 5,990 and BSE Sensex has support at 19,799 and resistance at 20,185.
Market to stay cautious ahead of RBI meet
The market is expected to stay cautious ahead of the Reserve Bank of India's (RBI) mid-term review of annual policy today, 30 October 2007. Also US Federal Reserve’s meeting on Wednesday, 31 October 2007 on interest rates, will be another key event to watch out. High volatility cannot be ruled out in these two days. Cues from global markets were positive.
As per reports, some bankers and economists expect a marginal cut in key short-term rates, while others feel that RBI might not do so in the face of inflationary expectations looming large due to surging global oil prices. Analysts speculate that Fed would cut rates by 25 basis points.
Asian markets were trading slightly lower today, 30 October 2007. Japan's Nikkei (down 0.70% at 16,580.64), Taiwan Weighted (down 0.06% at 9,803.76), Singapore's Straits Times (down 0.36% at 3,806), South Korea's Seoul Composite (down 0.46% at 2,053.45) edged lower. However, Hong Kong's Hang Seng rose 0.36% at 31,701.26.
US Markets advanced yesterday, 29 October 2007, on positive earnings reports and the anticipation of an interest rate cut. The Dow Jones industrial average gained 64 points to 13870.26, the S&P 500 index rose 6 points to 1540.98 and the Nasdaq Composite index firmed 13 points to 2817.
As per provisional data, FIIs purchased shares worth a net Rs 688.93 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 634.44 crore on Monday, 29 October 2007.
Crude oil prices fell nearly 1% below $93 a barrel on Tuesday, 30 October 2007, fading from their latest record high as investors took profits from a rally fuelled by a Mexican supply outage and the spiraling dollar. US crude fell by 85 cents to $92.68 a barrel after hitting a record high of $93.80 yesterday, 29 October 2007. London Brent slipped 77 cents to $89.65.
The BSE Sensex ended with a 734.50-point or 3.82% spurt to 19,977.67, on Monday, 29 October 2007. It hit an all time high of 20,024.87 in late trade. The broader based S&P CNX Nifty ended up 203.6 points, or 3.57%, to 5,905.90. It hit an all-time high of 5,922.50 in late trade on Monday, 29 October 2007. FII buying was primary driver of the rally. Q2 September 2007 results announced so far have been decent to strong.
US Market hopeful of another rate cut
Indices register modest gains though crude prices close above $93/barrel for the first time ever
US stocks ended higher today, Monday, 29 October 2007 on anticipation that Federal Reserve is going to give another treat to the investors by cutting the interest rate by another half percentage point on coming Wednesday, 31 October. Nine of the ten economic sectors posted gains today led by the energy sector. Crude prices closed above $93/barrel for the first time ever.
The Dow Jones industrial Average closed higher by 63 points at 13,870. The Nasdaq Composite Index, finished higher by 13 points at 2,817. S&P 500 finished higher by 5.71 points at 1,541.
Twenty-three out of thirty Dow components ended in green today. Alcoa, IBM and Exxon Mobil led the team of Dow winners. Caterpillar, 3M and JP Morgan remained the main laggards.
The materials sector was today’s best-performing area as the decline in the dollar index continued to propel stocks of companies that benefit from increased commodity prices/demand.
In the currency market today, the dollar index, which tracks the U.S. unit against a basket of major currencies, was down 0.1%, with the euro earlier touching record highs at $1.4437. As usual, dollar also dropped on speculation that Federal Reserve might be going for another interest rate cut day after tomorrow.
On the earnings front, Dow component Verizon beat market expectations. On the other hand, cereal maker Kellogs reported earnings beating estimates but issued FY 2008 guidance that was below expectations.
Existing home sales fall by 8% in September
All Indian ADRs closed in green today. ICICI Bank, MTNL and HDFC Bank were the main gainers today closing up by 5%-6%. On the tech front, Infosys and Wipro Technologies closed up by 3.1% and 1.02% respectively.
Crude oil prices closed above $93/barrel for the first time ever today. Price rose today after dollar hit a new all-time low against the euro and Gulf of Mexico announced that it has to cut production due to poor weather conditions. Crude-oil futures for light sweet crude for December delivery closed at $93.53/barrel (higher by $0.87/barrel or 0.9%) on the New York Mercantile Exchange. Prices rose to $93.8/barrel today earlier in the day during intraday trading. Prices are up 52% on a yearly basis.
Mexico's state-owned Petroleos Mexicanos, one of the largest crude suppliers to the U.S, said that it halted production of 600,000 barrels a day due to bad weather. The company plans to resume production in a couple of days. Tensions between Turkey and Iraq over Kurdish militants as well as over Iran's nuclear program also helped drive oil prices higher.
Volume on the New York Stock Exchange topped 1.2 billion, and advancing stocks outpaced declining issues more than 9 to 7. On the Nasdaq, more than 2 billion shares were exchanged, and advancing stocks edged just ahead of those declining.
Stock Recommendations
Stock Recommendation for the week October 29, 2007 to November 2, 2007
Scrip Name
Price
Recommendation
Engineers India
726.35
Buy
HCC
200.75
Buy
Honda Siel Power
262.85
Buy
Micro Technologies
236.85
Buy
Voltas
191.45
Buy
Nifty futures at premium
Turnover falls
Nifty November 2007 futures were at 5918, at a premium of 12.10 points as compared to spot closing of 5905.90.
NSE's futures & options (F&O) segment clocked turnover of Rs 69,537.38 crore, lower than Rs 73,836.74 crore on Friday, 26 October 2007.
Reliance Petroleum November 2007 futures were at premium, at 224.40, compared to the spot closing of Rs 221.80.
Larsen & Toubro November 2007 futures were at premium, at 4285, compared to the spot closing of Rs 4267.75.
State Bank of India November 2007 futures were at premium, at 2125, compared to the spot closing of Rs 2116.70.
In the cash market, the S&P CNX Nifty gained 203.6 points or 3.57% at 5905.90.
Crude prices not far from $100
Prices close above $93 for the first time ever as production curtailed at Mexico
Crude oil prices closed above $93/barrel for the first time ever today, Monday, 29 October 2007. Price rose today after dollar hit a new all-time low against the euro and Gulf of Mexico announced that it has to cut production due to poor weather conditions.
For the day ending Monday, 29 October, 2007, crude-oil futures for light sweet crude for December delivery closed at $93.53/barrel (higher by $0.87/barrel or 0.9%) on the New York Mercantile Exchange. Prices rose to $93.8/barrel today earlier in the day during intraday trading. Prices are up 52% on a yearly basis.
Mexico's state-owned Petroleos Mexicanos, one of the largest crude suppliers to the U.S, said that it halted production of 600,000 barrels a day due to bad weather. The company plans to resume production in a couple of days.
Tensions between Turkey and Iraq over Kurdish militants as well as over Iran's nuclear program also helped drive oil prices higher.
In the currency market today, the dollar index, which tracks the U.S. unit against a basket of major currencies, was down 0.1%, with the euro earlier touching record highs at $1.4437. As usual, dollar also dropped on speculation that Federal Reserve might be going for another interest rate cut day after tomorrow.
Petroleum products at strongest levels
Natural gas advanced in New York, following crude oil, after Mexico shut a fifth of its production. Gas for November delivery rose 5.1 cents (0.7%) to settle at $7.269 per million British thermal units.
Against this backdrop, November heating oil reached $2.472 a gallon before ended the session at $2.4646, and November reformulated gasoline rose to $2.3335 a gallon before closed at $2.3274.
At the MCX, crude oil for October delivery closed at Rs 3637/barrel, higher by Rs 42 (1.1%) against previous day’s close. Natural gas closed at Rs 312.9/mmtbu as against previous close of Rs 306.6/mmtbu, higher by Rs 6.3/ mmtbu.
OPEC has planned to boost daily oil production by 500,000 barrels. OPEC's production target is 27.2 million barrels a day, beginning 1 Nov. OPEC, has decided to raise their daily output by 500,000 barrels per day, starting 1 November.
Attacks on oil facilities in Middle East and tight supplies from OPEC have bolstered crude prices this year. As per the U.S. Energy Information Administration, tight global energy supplies are expected to keep energy prices high through 2008.
Trading Calls
Nifty (5906) Supp 5736 Res 5991
Buy MTNL (193) SL 189
Target 199, 201
Buy SAIL (276) SL 271
Target 283, 285
Buy Satyam (485) SL 479
Target 495, 498
Sell Mastek (331) SL 334
Target 326, 323
Sell Bata (219) SL 223
Target 215, 213
Dilemma for Dr YV Reddy
It's always a dilemma whether to follow or lead.
The Fed meet tomorrow is not the major dilemma. This is one of those times Dalal Street is looking closely at Mint Street on what Dr YV Reddy prescribes. Going by the lower inflation figure (WPI - 3.07%) and moderation in credit growth (23-24% YoY), there is a case for the central bank to maintain status quo on all fronts.
But given the Government's and the RBI's worries over robust foreign capital inflows and the disconcerting rise in the rupee, there may be a hike in the CRR yet again of around 50bps to suck out excess liquidity of around US$3.6bn from the system.
The RBI’s dilemma is to sterlise excess liquidity in the system, while guiding interest rates lower. These two objectives are contradictory as the first requires monetary tightening, which would necessarily push interest rates higher. The RBI could also opt for paying some interest to banks on the incremental CRR. A cut in the repo rate may allow the RBI to strike a balance.
Tomorrow, the Fed will review its monetary policy, and bets are that it will cut rates again to prevent further slowdown in the US economy. Only the size of the cut is what everyone is debating on. We see a flat opening but things could well cool down a bit till the RBI policy is announced.
A fortnight ago, the Sensex was speeding towards 20K when the P-Note bombshell set it back by a few thousand points. Bears found themselves corned again as the bulls accelerated to conquer Mount 20K. In early morning trade yesterday, the Hang Seng galloped by over 1,000 points to cross 31k. We had an intuition that it was just a day's work and the bulls could boost the Sensex past the 20k milestone. Luckily our forecast proved right.
Having said that we would like to add that it is really tough to predict daily movement in key indices. One should not get carried away by these numbers and the euphoria. Focus on your portfolio. Stay put in quality stocks and invest more in them at every fall. Use the rally to get rid of the laggards. The market these days is more like the F1 race. The movement, on either side, is quite rapid. We expect the choppiness to continue with a positive bias.
Prominent Results Today:
Adhunik Metaliks, Alstom Projects, Ashapura Minechem, Asian Electronics, Balaji Tele, Balkrishna Industries, Balmer Lawrie, Bharati Shipyard, Bilcare, BL Kashyap, Bombay Rayon, Bongaigaon Refinery, CEAT, Centurion Bank of Punjab, Chennai Petro, Crompton Greaves, DLF, Dolphin Offshore, EIH, Elder Pharma, Engineers India, Era Construction, Everest Kanto, Everon Systems, Gammon India, GHCL, Havells India, Indian Oil, Indotech Transformers, Indraprastha Gas, Jai Corp, Jindal Drilling, Karnataka Bank, Kesoram, Logix Micro, Man Industries, Maharashtra Seamless, Matrix Labs, Mirc Electronics, Nestle, Nitin Fire, ONGC, Prasvnath, Patni Computer, Purvankara, Pyramid Saimira, RPG Transmission, Sesa Goa, SpiceJet, SAIL, Strides Arcolab, Swaraj Mazda, Tata Chemicals, Tata Elxsi, Tata Power, Tata Tele, Torrent Pharma, Unitech and Varun Shipping.
US stocks rose for a second day after higher prices for oil and metals boosted producers of energy and raw materials.
The S&P 500 Index added 6 points, or 0.4%, to 1,540.98. The Dow Jones Industrial Average rose 64 points, or 0.5%, to 13,870.26. The Nasdaq Composite Index gained 13 points, or 0.5%, to 2,817.44. Benchmark indexes also rallied in Asia and Europe, while two-year Treasury note yields increased.
Exxon Mobil gained the most in three weeks after crude climbed to a record. A rally in gold to the highest since 1980 sent shares of Freeport-McMoRan Copper & Gold to an all-time high. Verizon Communications climbed to the highest since 2002 on earnings that beat analysts' estimates.
Wall Street is betting that the Fed policy makers will cut the target rate for overnight loans by at least 25 basis points, to 4.5%. The Fed cut rates last month for the first time in four years, lowering the fed funds rate by 50 basis points to 4.75%, amid worries that the financial market turmoil could hurt the US economy badly.
Recent economic reports suggest that not much has changed since then, and the risk of a recession still looms large. Accordingly, the market has raised the odds that the Fed will cut rates again, despite the recent spike in oil prices.
US light crude oil for December delivery rose $1.67 to settle at $93.53 a barrel on the New York Mercantile Exchange, a record close. Crude reached a record $93.80 during the session.
Market breadth was positive on Wall Street. On the New York Stock Exchange, winners beat losers nine to seven on volume of almost 1.22 billion shares. On the Nasdaq, advancers barely edged decliners on volume of 2.05 billion shares.
COMEX gold for December delivery rose $5.10 to settle at $792.60 an ounce. Treasury prices inched higher, with the yield on the benchmark 10-year note at 4.38%, little changed from late Friday. In currency trading, the dollar fell to another all-time low versus the euro and gained against the yen.
European shares also rose. The pan-European Dow Jones Stoxx 600 index climbed 0.7% to 386.60. The French CAC-40 was up 0.7% at 5,836.19, while the German DAX 30 gained 0.8% to 8,009.67 and the UK's FTSE 100 rose 0.7% to 6,706.00.
Brazilian and Argentine stocks finished at record highs. Brazil's Bovespa rose 1.2% to 65,044.31, surpassing a record high of 64,275.88 set on Friday. Mexico's IPC slipped 0.1% to 32,100.76. Chile's IPSA lost 0.3% to 3,487.26.
Argentina's Merval index rose 0.4% to 2,337.11, adding to its record close on Friday. On Sunday, voters elected Cristina Fernandez de Kirchner as president. The first woman to be elected president in Argentina, she will succeed her husband, Nestor Kirchner.
Asian markets were trading mixed this morning. The Nikkei in Tokyo was down 117 points at 16,580 while the Hang Seng in Hong Kong rallied 274 points to 31,861. The Straits Times in Singapore was down 16 points at 3803 and the Kospi in Seoul was down 9 points at 2054.
The Morgan Stanley Capital International Asia-Pacific Index slid 0.4% to 171.03 as of 10:33 a.m. in Tokyo, with eight of 10 industry groups declining. Benchmarks in South Korea, Australia, Taiwan, Singapore and New Zealand dropped, while China, Malaysia and the Philippines rose.
After opening with a positive gap up, markets constantly gained momentum as the session progressed. Buying across the board lifted the benchmark Sensex to hit the 20k milestone. After a record 1,000 points rally Sensex again covered the 19k-20k journey in just 11 trading sessions also recording its third biggest single day absolute points gain ever.
Today's rally was also backed by strong cues from the International markets especially the Hang Seng in
Finally, the 30-share Sensex rallied 734 points to close at 19,977. Nifty index rose 203 points to close at 5,905.
Mr. Mehraboon Irani, Sr. VP, Centrum Broking says that “even as we look set to go much higher, there could be corrections, of and on. At the moment, it’s a liquidity-driven market. If and when there is a slowdown in flow of funds to the market, there could be a fall though I don’t see that happening in the near future”.
Major contributors during the journey to 20k:
L&T was the top contributor, it contributed 322 points, ICICI Bank followed by contributing 246 points and Reliance Industries added 157 points.
L&T surged by over 10% to Rs4267 after reports stated that they would build two new ports at a total cost of Rs30bn on the west and east coast and a third shipyard; to float US$1bn infrastructure fund. The scrip touched an intra-day high of Rs4300 and a low of Rs3950 and recorded volumes of over 27,00,000 shares on NSE.
ONGC gained by over 7% to Rs1235 following reports that the company has planned an IPO of ONGC Petro-additions, the SPV formed for its Rs135bn petrochemical complex at Dahej in
BHEL jumped by over 7% to Rs2615 after reports stated that the company and the Tamil Nadu Electricity Board would set up Joint Venture for two 800MW supercritical power projects in the state at a cost of Rs85bn. The scrip touched an intra-day high of Rs2700 and a low of Rs2500 and recorded volumes of over 17,00,000 shares on NSE.
Power Grid Corp surged by over 2% to Rs143 after reports stated that the company in concert with Citadel Holdings, may acquire 10% in the government owned Philippines National Transmission Corporation The scrip touched an intra-day high of Rs147 and a low of Rs142 and recorded volumes of over 2,00,00,000 shares on NSE.
NTPC advanced 2% to Rs233 after reports stated that they have planned to diversify into hydroelectric generation and coal mining is likely to be delayed due to environment and land acquisition issues. The scrip has touched an intra-day high of Rs240 and a low of Rs231 and has recorded volumes of over 92,00,000 shares on NSE.
IVRCL Infrastructure gained by 3% to Rs504 after the company announced that they have secured order worth Rs346.8cr. The scrip touched an intra-day high of Rs520 and a low of Rs496 and recorded volumes of over 15,00,000 shares on NSE.
Maruti advanced by 0.6% to Rs1189 after the company’s Q2 net income rose 27.2% to Rs4.67bn and revenue rose 33.7% to Rs47.36bn. The scrip touched an intra-day high of Rs1248 and a low of Rs1175 and recorded volumes of over 10,00,000 shares on NSE.
Ashok Leyland gained by 1% to Rs40 after Nissan along with the company signed agreement for LCV Partnership. The scrip touched an intra-day high of Rs41 and a low of Rs40 and recorded volumes of over 65,00,000 shares on NSE.
Stocks in News:
Maruti plans to invest US$1.8bn to achieve its target of producing 1mn cars by 2010-11.
Reliance Industries has signed a production-sharing contract for two exploration blocks in northern Iraq.
Bajaj Auto is raising production of its XCD 125cc bike to 75,000 units a month from November.
Infosys has identified 3-5 potential acquisition targets, including a consulting company.
Hotel Leela plans to add 1,625 rooms through five new properties.
Bajaj Auto, Renault and Nissan plans to develop ultra-low-cost small car by 2010.
Duncan MacNeill group of the UK is likely to purchase the tea business of Balmer Lawrie in the UK.
Jet Airways is planning to launch a cargo airliner and to setup a MRO facility.
Wipro Technologies is broadening the segment focus of its technology vertical division to minimize exposure to telecom.
Coal India has expressed inability to supply requisite coal for Farakka and Kahalgaon Stage I and II super thermal power projects of NTPC.
L&T is likely to bag Rs50bn master contract for redevelopment of the Mumbai Airport.
Tatas have reportedly participated in second round of bidding for Land Rover and Jaguar.
Tata Chemicals plant to build a US$250mn soda ash plant along with the Tanzanian Government has hit a road block.
Arcellor–Mittal has been allotted one coal block each in Jharkhand and Orissa.
Hinduja Group is keen on picking up a majority stake in ONGC’s Kakinada refinery.
GAIL is planning to buy petrochemical plants in Qatar and Russia.
Tata Tea has decided to issue non-convertible debentures totaling Rs3.25bn through the book-building process.
Gujarat Fluorochemicals is diversifying into the power sector by investing over Rs60bn in the next five years.
Qatar is considering India’s proposal for supply of additional LNG to meet rising energy demand.
The Government is planning to relax ECB norms, remove restriction on deployment of pension and insurance funds and liberalizing the bond and the debt market for the infrastructure sector.
The RBI has allowed banks to raise Tier I and upper Tier II capital through preference shares.
The DoT plans to double the share of revenues paid as fees to the Government by wireless firms for the initial allocation of spectrum.
Hot rolled steel prices are expected to increase to US$700-800 per ton through 2008 against an earlier estimate of US$550 per ton this July.
Speciality and value added coffee exports from India have increased by 12.9% yoy during Oct-Sep’ 07.
Fund Activity:
FIIs were net sellers of Rs6.89bn (provisional) in the cash segment on Monday and the local institutions bought shares worth Rs6.34bn.
In the F&O segment, foreign funds were net buyers at Rs17.11bn.
On Friday, FIIs pulled out Rs2.57bn in the cash segment.
NTPC, SBI, LT, Tata Steel, ITC, Grasim, JSW Steel, Bharat Electronics, HDFC, I-Flex, Lanco, Corp Bank, Colgate, HT Media, Andhra Bank, Jindal SAW
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Andhra Bank,
Bharat Electronics,
Colgate,
Corporation Bank,
Grasim,
GSPL,
HDFC,
HT Media,
I-Flex,
Idea Cellular,
ITC,
Jindal Saw,
JSW Steel,
Lanco Infratech,
NTPC,
SBI,
Tata Steel
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