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Thursday, November 01, 2007
Sensex trips from the highs
Sensex failed to hold on to the record peak it reached earlier in the day and closed with a loss of over 114 points on emergence of profit selling by funds at the higher levels.
The Sensex, which commenced the day with a gain of over 366 points, fell back sharply by losing 113.64 points at 19,724.35 as heavy-weights like Reliance Industries, Bharti Televenture, ACC and Maruti ended lower.
The wide-based National Stock Exchange index Nifty, which recorded an all-time high of 6,000 points at open, experienced profit booking by funds and closed 34.23 points lower at 5,866.45. It touched the day’s high of 6,011.95 and low of 5,837.20 points.
However, capital goods and banking index rose.
While all other sectoral indices closed lower, capital goods index gained 345.87 points at 20,141.19 and banking index by 196.36 points at 10,851.69.
Sensex and Nifty recorded new peaks early in the day after the US Federal Reserve cut the key interest rate by 25 basic points to 4.5%. PTI
Afternoon
Mumbai: Sensex rose 6.27, or less than 0.1%, to 19,844.26 at 12:30 pm local time. It earlier fell as much as 0.7%.
The S&P/CNX Nifty Index on the National Stock Exchange climbed 14.30, or 0.2%, to 5,914.95. Nifty futures for November delivery slid 0.1% to 5,901.
Morning
The National Stock Exchange index Nifty briefly crossed the milestone of 6,000 points in early trade on heavy buying by foreign funds after the US Federal Reserve slashed interest rates by 25 basis points yesterday.
The Bombay Stock Exchange was equally buoyant. Its 30-share Sensex spurted by 366.22 points to hit 20,204.21 points in the first five minutes of trade.
The 50-share Nifty went up by 111.30 point at 6,011.95 with most of the index linked stocks trading in green.
It later pared some of the gains, and was at 5993 at 10:45am, showing a gain of 92 points.
The market also received a booster from the Hong Kong share prices which opened higher today, up 1.27%, tracking Wall Street’s gains after the US Federal Reserve cut its key interest rate by 25 basis points.
The US Fed cut its target for the federal funds rate to 4.5% from 4.75%, meeting the expectations of most analysts.
Market Close: Fed cut gave opportunity for profit taking!
Indian indices got some boost from Fed rate cut as it opened strong to see new high. However, indices could not sustain the highs and displayed a volatile session for the day. Indices lost the strength from beginning as profits taking at high level kept indices down in red. Reacting to the rate cut Nifty crossed 6000 mark and hit all time high in the early sessions. At mid session indices fell in to red and traded on both the sides, some value buying at lows helped the indices to recover from negative region. The final hours of trading selling pressure on the indices pushed it to red and ended with modest losses. Broadly speaking it was a roller coaster ride for Indian indices. Crude made new high of $96 + a barrel as a result the ATF was increased which saw Airline stocks to slip. Also Paint, Tyres to feel the pinch of higher crude prices but MRF traded strong for the day. UP high court has ordered Sugar mills to pay 25% of the cane arrears with 6 months while lucknow court ordered the mills to pay arrears with 5-6 weeks also saw some weakness in the sugar stocks. Global markets traded mixed with Asian markets closing mixed while Europe is trading in red.
Sensex closed lower by 160 points at 19,678. Supporting were the gains in ONGC (+6.68%), L&T (+3.31), ICICI Bank (+3.15%), HDFC Bank (+1.99%) and Reliance Communication (+1.98%). Restricting the gains were he losses in (-6.55%), Bharti Airtel (-6.32%), Hindalco (-6.27%), Maruti (-5.80%) and Reliance Energy (-5.35%).
Monthly sales number of many auto companies were reported with some being on the better half while some being subdued. Maruti reported its sales for the month of October at 69,415 units vs 60,163 units, up by 16% on yoy basis. Sales were higher by 3% on monthly comparison also with sales in the previous month stood at 67,448 units. Sales have picked up in this month due to the reason of Dasherra and also would see some good numbers next month due to Diwali. Mahindra & Mahindra reported 44% increase in vehicle sales at 24,679 units in October from 17,109 units sold in October 2006. Domestic auto sales including utility vehicles, light commercial vehicles and three-wheelers rose 46% to 23,578 units from 16,173 units on yoy basis. Exports rose to 1,101 units from 936 units. M&M sold 2,214 units of Logan in October. The company has shown decent growth even with the credit crunch and some slow down in the industry but on the tractors side it showed some slow down. The company sold 11,186 tractors in October, down from 13,384 units in the year ago same period. In two wheelers TVS Motor reported its October sales up 13% to 129,614 units compared on mom basis and 9% down by yoy basis. Motorcycle sales stood at 67,752 units from 92,328 units, while scooterettes rose 23% to 28,119 units. Exports increased by 53 % to 11,046 units on mom basis.
McNally Bharat Engineering Company Ltd (McNally) reported flat results for Q2 FY2007. The top line grew by 2% to Rs 115 cr while the bottom line grew by 28% to Rs 6 cr on yoy basis. The Ebidta profit grew by 26% to Rs 8.3 cr while the Ebidta margins were higher by 140 bps to 7.2% on yoy basis. Despite the flat growth the net profit has been improved, due to less tax payment as the company will be under the payment of MAT for this year. However, top line in this quarter has been flat due to low supply billing in Project division. The delay in receipt of steel orders from RINL and IISCO also postponed the billing to next quarter. Future looks bright, the major investments in steel and power sector going to boost the company?s revenues. McNally has order book of Rs 1414 cr comprising of Rs 1354 cr in project and Rs 60 cr in product business. Valuation seems to be high at the current market price of Rs 230, the stock trades at 27 times of trailing earnings. We are positive on company and its business; one can accumulate at dips for long term investment prospects.
Technically Speaking: It was a volatile session for the whole day before closing in red. Sensex touched intraday high of 20,204 and low of 19,634. Overall breadth was in favor of Declines, where the Advances stood at 908, while Declines at 1820. The turnover was pretty good at Rs 11,432 cr. Sensex Resistance lies at 20,040 and 20,400 levels and A stong support lies at 19600 if slips below we could see 19200 levels. IF sensex trading near 19700 above levels then sensex could see new high shortly.
Post Market Commentary
The market started the day on a cheerful note as the market participants got the positive result from the Fed Meeting yesterday. In the meeting, the US Federal reserve decided to reduce federal funds rate by 25bps to 4.5% & the discount rate by a quarter-point to 5%. However, the market could not sustain its gain and started falling on the back of profit booking by the investors in the later stages. The market even went to negative territory and exhibited volatility in the mid session. Later it recovered a bit and gained 100-130 points buy finally ended in red territory amid an extremely volatile session. All the indices ended in red except Bankex, Capital goods, & PSU. After a long interval, BSE Metal entered in red territory and closed with losses. The benchmark index Sensex ended up with the loss of 113.64 points at 19,724.35, whereas Nifty also closed with a loss of 34.20 points to close at 5,866.45. Further, BSE Midcap and BSE Smallcap also closed lower by 168.67 points and 150.25 points at 7,966.54 & 9,646.61 respectively. The market breadth stood negative with 944 stocks on the advancing side and 1817 stocks on the decline side & 54 unchanged.
BSE Capital goods closed in green with the highest gain of 345.87 points at 20,141.19. Pulled it up are Alfa Laval up by (4.41%), Larsen & Toubro (4.29%), Crompton Greaves (1.95%), BHEL (1.83%) and Jyoti Structure (1.20%).
BSE Bankex also managed to gain 196.36 points to close at 10,851.69. Scrips gained are Bank Of India (5.54%), ICICI Bank (3.33%), Oriental Bank (2.54%), & Bank of Baroda (2.22%).
BSE Realty stood as the top loser of the day with a loss of 311.26 points at 10,191.51. Scrips declined mainly are Indiabulls Realty by (6.29%), Akruti Nirman (3.80%), Omaxe Ltd (3.78%), and Unitech Ltd (3.53%).
BSE Metal also stood as the loser with a loss of 302.39 points to close at 17,582.54. Scrips plunged are, Hindalco down by (4.28%), Sh. Precoated (4.14%), NALCO (4.08%) & Hindustan Zinc (3.34%).
Market takes a beating; Sensex down 114 points
Sensex could not hold on to its gains despite positive global cues. The market saw a knee-jerk reaction in the opening trades to the interest rate cut of 25 basis points by the US Federal Reserve last night. The Nifty crossed the 6,000 mark for the first time, while the Sensex zoomed up by 366 points expecting higher capital inflows. The market moved within a range of 19,800-20,000 for the major portion of the day, but witnessed a major slump towards the close and touched an intra-day low of 19,634. The Sensex finally closed with a loss of 114 points at 19,724, while the Nifty was down 34 points at 5,866.
The breadth of the market was weak. Of the 2,815 stocks traded on the Bombay Stock Exchange (BSE), 1,817 stocks declined, 944 stocks advanced and 54 stocks ended unchanged. On the sectoral front, the BSE Bankex index was up 1.84% at 10,851, the BSE CG index gained 1.75% at 20,141 and the BSE PSU index moved up by 0.77% at 9,702. However BSE FMCG index, BSE Reality index, BSE Auto index and BSE CD index were down 2-4% each.
Among the major losers, Maruti Suzuki shed 6.51% at Rs1,004, HLL declined 6.43% at Rs194, Bharti Airtel fell 6.32% at Rs943, Reliance Energy slipped 5.30% at Rs1,768, Hindalco dipped 4.28% at Rs188, ITC lost 4.07% at Rs172 and Reliance Industries slumped 3.99% at Rs2,672. HDFC, ACC, Tata Steel, and Bajaj Auto were down over 2% each. ONGC, however, gained 6.60% at Rs1,330, followed by L&T up 4.29% at Rs4,227, ICICI Bank added 3.33% at Rs1,299, Reliance Communication jumped 2.42% at Rs791 and Ranbaxy was up by 2.06% at Rs436.
Over 7.23 crore Reliance Natural Resources shares changed hands on the BSE followed by Reliance Petroleum (5.72 crore shares), Tata Teleservices (2.09 crore shares), Power Grid Corporation (1.41 crore shares) and IFCI (1.31 crore shares).
Value-wise, Reliance Petroleum registered a turnover of Rs1,565 crore on the BSE followed by Reliance Natural Resources (Rs967 crore), Reliance Communication (Rs522 crore), RIL (Rs408 crore), and L&T (Rs378 crore).
Mindtree eyes acquistion
Mindtree may acquire a European company
IPO funds may be used for acquistion
Market declines in volatile trade
Market declined sharply in late trade in what was a choppy trading session. The market had surged in early trade following US Federal Reserve's interest rates cut by a quarter percentage point to 4.5% yesterday, 31 October 2007. It had slipped later into the red and moved between positive and negative territory for a better part of the trading session. Nifty had surpassed 6,000 mark and hit fresh all time high in early trade. The market breadth was weak.
Hindustan Unilever declined for the second day in a row. Reliance Industries declined sharply in late trade. Bharti Airtel plunged. ONGC surged. Realty, auto and FMCG stocks witnessed selling pressure. Capital goods and banking pivotals moved higher. Asian markets were mixed. European markets were weak.
The Sensex provisionally ended down 164.55 points, or 0.83%, to 19,673.44. It had opened strong with a upward gap of 292.24 points at 20,130.23. It soon hit a high of 20,204.21 in early trade. At day’s high of 20,204.21, Sensex had risen 366.22 points. It hit a low of 19,634.47 in late trade. At day’s low of 19,634.47 Sensex had lost 203.52 points.
The broader based S&P CNX Nifty was down 34 points, or 0.45%, to 5,866.65. It hit an all-time high of 6,011.95 in early trade. It took 24 trading sessions for Nifty to reach 6,000 after it had first hit 5,000 on 27 September 2007.
BSE clocked a turnover of Rs 11432 crore compared to Wednesday (31 October 2007)'s Rs 10,060.07 crore.
The market breadth was negative on BSE: 902 scrips advanced as compared to 1,818 that declined while 343 remained unchanged. 10 of the 30 Sensex stocks, gained.
India's largest private sector entity by market capitalisation and oil refiner Reliance Industries (RIL) declined 4.06% to Rs 2,669.50.
FMCG stocks were major losers. Hindustan Unilever plunged 6.7% to Rs 193.70. The stock had declined 5.21% to Rs 207.60 yesterday, 31 October 2007 after the company said its net profit declined 21.63% to Rs 408.06 crore on 9.72% rise in total income to Rs 3,470.49 crore in Q3 September 2007 over Q3 September 2006. HUL announced the results during trading hours yesterday. India's biggest cigarettes maker by sales, ITC, lost 4.21% to Rs 171.65.
Realty stocks plunged. Indiabulls Real Estate (down 6% to Rs 610.50), Unitech (down 3.75% to Rs 369.25) and DLF (down 2.19% to Rs 928) edged lower.
Auto stocks declined. Maruti Suzuki, India's biggest small-car maker by sales, declined 6.66% to Rs 1,002 after it reported 14.96% rise in sales in the domestic market to 64,258 vehicles in October 2007 over October 2006. Hero Honda Motors (down 6.45% to Rs 680), Bajaj Auto (down 2.55% to Rs 2,411), Tata Motors (down 2.07% to Rs 742) edged lower. Mahindra & Mahindra (up 1.16% to Rs 765.30) edged higher.
India's biggest cellular services provider in terms of market share, Bharti Airtel declined 5.82% to Rs 938 and was the top loser from Sensex pack on reports that Department of Telecommunications is planning to recommend an increase in the spectrum usage charges for operators that seek additional spectrum.
India's second largest cement maker by sales, ACC, lost 2.85% to Rs 1,046.80.
Ranbaxy Laboratories (up 1.99% to Rs 435.55) and Reliance Communications (up 2.08% to Rs 788) edged higher.
India's largest oil exploration firm by sales ONGC rose 6.45% to Rs 1,328.45.
India’s largest aluminium maker by sales Hindalco Industries lost 5.76% to Rs 185. India's second biggest power utility in terms of revenue Reliance Energy shed 5.13% to Rs 1,771.
Capital Goods stocks were the major gainers. India's largest engineering and construction company in terms of revenue Larsen & Toubro surged 3.24% to Rs 4,382. It hit an all-time high of Rs 4,670 today after it got engineering, procurement and construction order for the modernisation of Chatrapati Shivaji International Airport (CSIA). Bharat Heavy Electricals (up 0.64% to Rs 2,630) edged higher. Suzlon Energy (down 1.45% to Rs 1,945) edged lower.
Bank stocks rose after Fed rate cut. HDFC Bank rose 2.23% to Rs 1,690. It hit an all-time high of Rs 1,748 today. State Bank of India (up 2.65% to Rs 2,118) and ICICI Bank (up 3.42% to Rs 1,300) edged higher.
Among side counters, Parle Software (up 20% to Rs 1,001.50) Wheels India (up 20% to Rs 312), Dynamatic Technologies (up 20% to Rs 1,985.90), Damodar Threads (up 19.97% to Rs 41.75) edged higher.
NIIT Technologies (down 11.61% to Rs 295) and Visaka Industries (down 10.67% to Rs 67) edged lower.
The US Federal Reserve cut interest rates by a quarter percentage point to 4.5% yesterday, 31 October 2007 as widely expected. US markets advanced yesterday, 31 October 2007, after the Federal Reserve moderated some of investors fears about a sinking economy, stating that risks to the financial markets from the subprime crises have eased. The Dow Jones industrial average gained 137.54 points, or 1%, to 13,930.01. The S&P 500 index surged 18.36 points, or 1.20%, to 1,549.38, and the Nasdaq Composite index rose 42.41 points, or 1.51%, to 2,859.12.
European markets opened weak. France’s CAC 40 (down 0.62 % to 5,811.44), UK’s FTSE 100 (down 0.75% to 6,671.60) and Germany’s DAX (down 0.28% to 7,996.85) edged lower.
Asian markets were trading mixed today, 1 November 2007. Hong Kong's Hang Seng (up 0.45% at 31,492), Japan's Nikkei (up 0.79% at 16,870) edged higher. Singapore's Straits Times (down 0.06% at 3,803.56). South Korea's Seoul Composite (down 0.08% at 2,063.14) and Taiwan's Taiwan Weighted (down 1.17% at 9,598.23) slipped.
US crude oil prices surged over $1.60 to hit new record high of $96.21 on Thursday, 1 November 2007. The gains followed an unexpected sharp fall in US crude stocks, strong US economic data and further losses for the dollar after the Federal Reserve cut interest rates by a quarter percentage point.
As per provisional data, FIIs purchased shares worth a net Rs 198.74 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 444.25 crore on Wednesday, 31 October 2007.
The 30-share BSE Sensex rose 54.48 points, or 0.28%, to 19,837.99, on Wednesday, 31 October 2007. The broader based S&P CNX Nifty was up 31.9 points, or 0.54%, to 5,900.65 on that day.
Good Q2 September 2007 results and FII buying aided a solid surge on the bourses in October 2007. The BSE 30-shares Sensex gained 14.73% to 19,837.99 in one month to 31 October 2007.
Grey Market premiums rise
If the prophets of doom were to be believed, the SEBI clampdown on participatory notes was expected to impact demand for initial public offers (IPOs). But the prevailing rates of upcoming IPOs in the grey market give no such indication.
According to brokers active in the grey market, most issues that are open for subscription or are scheduled for listing in the coming weeks, are trading at a premium as high as 100% to the issue price. IPO premiums have been steadily rising even when the regulator was in the process of finalising PN guidelines.
Merchant banking circles say that a significant portion of FII subscription in IPOs have been coming in through the PN route. “The trend shows around 25% of FII demand for IPOs is met through P-notes, which is expected to come down after the Sebi move. While this will largely impact small issues, companies with good business model and bright prospects would not see much of an impact,” said a merchant banker.
Tighter PN regulations could affect short-term fund flows into both the primary and secondary markets, feel market observers. However, there is near unanimity in market circles that the flows will pick up over the next few months if the growth in the economy as well as corporate earnings sustain.
Issues like Mudra Port and SEZ, Religare Enterprises, Allied Computers and Varun Industries are trading at a huge premium to their offer price, including the much talked about Reliance Power IPO, according to grey market sources. The coming months may witness a slew of IPOs by infrastructure, energy and power companies.
Grey market participants are expected to take cue from the outcome of the Fed meeting and it would have significant impact on the premium of these IPOs. Sources say there has been some decrease in the premium of Barak Valley Cement and Religare Enterprise in the last session.
For example, in the case of Barak Valley Cement, premium has gone down from Rs 24 to Rs 18-20 in just one day. Also in the case of Religare Enterprise, it has gone down from over Rs 300 to Rs 260-280 range. Though they maintain that the positive news from the US could further fuel positive sentiments in the primary market and premiums may rise substantially.
In a volatile or a weak market, grey-market premium shrinks and many a time the issue becomes unattractive for subscription. In such a situation, the pricing is usually conservative so that there is some scope for investors to make gains on listing. The issuers and lead managers of the forthcoming IPOs are expected to have adopted this strategy as P-note issues could have dented their prospects severely, say bankers.
Investors are understood to have been offered higher rates for lending their applications in many of the latest issues. A retail investor can apply for a maximum of Rs 1 lakh worth of shares. So, he is usually paid Rs 2,500 to Rs 3,000 in cash for his application.
This amount has gone up to Rs 5,000 to 6,000 per application in some cases due to high grey-market premiums. Often, the application money of Rs 1 lakh is provided by financiers who are part of the grey market network. The applicant investors are only bothered with the cash they get per application, in fact, they have no control once the shares enter their demat accounts.
If there are three or four eligible applicants in a household, it means an income of Rs 15,000 to 20,000 for the family just renting out the demat and bank accounts. Such income can rise further when the primary market is quite bullish. As part of grey market operations, an IPO applicant hands over the delivery instruction slip book of the demat account signed by him/her to the agent broker. Once the allotment is made, the broker gets the shares transferred to his account, say market sources.
Suzlon Energy to expand
“We have presence in 14 countries which would be raised to 40 in the next five years. We are setting up four manufacturing facilities which will specifically cater to exports,” Suzlon Energy chairman and manging director Tulsi Tanti told reporters here.
The company is setting up manufacturing facilities at Bandra, Coimbatore, Kandla and Mangaluru. These would add 3,000MW by March 2009 to the company’s existing capacity of 2,700 MW, Tanti said.
The company would make an investment of Rs2,600 crore over next two years for raising its global manufacturing capacities to 5,700 MW.
Grey Market - Edelweiss, Religare, Mundra, Barak, Varun
Reliance Power -- 50 to 51
Mundra Port & Sez 400 to 440 380 to 390
Varun Ind. 60 40 to 42
Religare Enterprises 160 to 185 280 to 285
Barak Valley Cement 37 to 42 19 to 20
Empee Distilleries 350 to 400 150 to 155
Edelweiss 725 to 825 200 to 210
Circuit Systems (India) Ltd. 35 6 to 8
Rathi Bars 35 3 to 3.50
Allied Computers 12 16 to 17
SVPCL 40 to 45 2 to 3
Labels:
Edelweiss,
Grey Market,
Mundra Port Sez,
Reliance Power,
Religare
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Morning Call
Market Grape Wine :
In House :
Nifty at a supp of 5895 and 5830 with resis at 5978 and 6040
Long position can be held on till Nifty stays above 5900 with expected TGT of 6100
Intra Day: Buy Satyamcomp above 477 with a TGT of 490 and a SL of 469
Buy federal bank above 392.50 with a TGT of 405 with a SL of 386
F&O: Buy Indian bank above 155.50 with a TGT of 165 and a SL of 151
Buy Centurytext with a TGT of 1110 and a SL of 1052
Out House :
Markets at a support of 19696 & 19595 levels with resistance at 19987 & 20142 levels .
Buy : RIL
Buy : REL & RPL
Buy : JindalPower
Buy : RComm & RNRL
Buy : JpAsso
Buy : IBUlls & IBullReal
Buy : Centextile
Buy : Aban
Dark Horse : ABAN , REL , REL , RIL , Centextile , Powergrid & SBIN
Bullet for the Day : REL & JpAsso with stop loss .
Market to head higher following Fed rate cut
The market is expected to head higher on positive cues from US markets. Profit booking cannot be ruled out in the second half of the day’s trading session.
The US Federal Reserve cut interest rates by a quarter percentage point to 4.5% yesterday, 31 October 2007 as widely expected. US markets advanced yesterday, 31 October 2007, after the Federal Reserve moderated some of investors fears about a sinking economy, stating that risks to the financial markets from the subprime crises have eased. The Dow Jones industrial average gained 137.54 points, or 1%, to 13,930.01. The S&P 500 index surged 18.36 points, or 1.20%, to 1,549.38, and the Nasdaq Composite index rose 42.41 points, or 1.51%, to 2,859.12.
Asian markets were trading mixed today, 1 November 2007. Hong Kong's Hang Seng (up 0.78% at 31,598.43), Japan's Nikkei (up 0.75% at 16,863.83), Singapore's Straits Times (up 0.47% at 3,823.66) rose. However, Taiwan's Taiwan Weighted (down 0.51% at 9,661.43) and South Korea's Seoul Composite (down 0.35% at 2,057.69) slipped.
US crude oil prices surged over $1.60 to hit new record high of $96.21 on Thursday, 1 November 2007. The gains followed an unexpected sharp fall in US crude stocks, strong US economic data and further losses for the dollar after the Federal Reserve cut interest rates by a quarter percentage point.
As per provisional data, FIIs purchased shares worth a net Rs 198.74 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 444.25 crore on Wednesday, 31 October 2007.
The 30-share BSE Sensex rose 54.48 points, or 0.28%, to 19,837.99, on Wednesday, 31 October 2007. The broader based S&P CNX Nifty was up 31.9 points, or 0.54%, to 5,900.65 on that day.
Good Q2 September 2007 results and FII buying aided a solid surge on the bourses in October 2007. The BSE 30-shares Sensex gained 14.73% to 19,837.99 in one month to 31 October 2007.
US Market applauds another rate cut
Indices react late to Federal Reserve’s decision on cutting fed fund rate and discount rate
US stocks rallied today, Wednesday, 31 October 2007, after the Federal Reserve cut interest rates (fed fund rate and discount rate) by 25 bps and 50 bps respectively. The cut in interest rate came for the second time in six weeks and as per the Federal Reserve Chairman, it was aimed to help the economy weather stress from the housing slump and a weakening financial system. Better than expected read on third quarter growth also added fuel to today’s rally.
Though market was acting in a bullish tone since the morning hours today, stocks slipped initially once Federal Reserve’s decision was out at 2.15 pm E.T. After some time, they made a U-turn and picked up momentum. The Dow Jones industrial Average closed higher by 137 points at 13,792. The Nasdaq Composite Index, finished higher by 42 points at 2,859. S&P 500 finished higher by 18 points at 1,549.
Twenty-eight out of thirty Dow components ended in green today. Microsoft led the team of Dow winners and the stock reached a six-year high today. Verizon was another top winner. Wal-Mart was one of the two laggards. All ten economic sectors posted gains today, led by the energy sector.
The Federal Open Market Committee gave the market what it wanted when it decided to cut the fed funds rate and discount rates by 25 and 50 basis points each to 4.5% and 5% respectively.
The financial sector played an influential role in driving the late-afternoon rally today but it was mainly the Technology sector that was in the forefront. Apart from Microsoft, there was Apple and Google. Google shares crossed the $700 mark for the first time.
Wal-Mart shares were down today after the world's largest retailer said that it would start its holiday discounting early. But Verizon shares were up on reports that the company was in talks with Google to come out with a product against Apple’s iPhone.
Third quarter real GDP figure surprises investors
On the economic news front, third quarter real GDP rose at a 3.9% annual rate. Further good news comes from the fact that GDP deflator (inflation measure) was up at just a 0.8% annual rate in the quarter. The figures were quite surprising in nature given the nature of housing slump and sub prime mess market has witnessed this quarter.
On the other hand, the October Chicago Personal Manufacturing Index, a regional manufacturer survey, slipped to 49.7 as against an expected figure of 53.0. A number below 50 indicates a decline in manufacturing.
The earnings reports that poured in today was good. Among others, Kraft and MasterCard topped expectations.
Indian ADRs closed mixed today. HDFC Bank and ICICI Bank were the main winners gaining 6.5% and 4.6% respectively. VSNL and Patni Computers were the main losers shedding 7.8% and 5.8% respectively.
Unexpected drop in crude inventories taking fuel inventories to two-year low level sent crude prices to a new all time high today. Prices crossed and closed above the $94/barrel mark for the first time ever. A falling dollar just aggravated the situation further. Till yesterday, traders had speculated that this week’s energy inventory report is expected to show rise in US crude inventories.
Crude-oil futures for light sweet crude for December delivery closed at $94.53/barrel (higher by $4.15/barrel or 4.6%) on the New York Mercantile Exchange. Prices rose to $94.74/barrel today earlier in the day during intraday trading. Prices are up 61% on a yearly basis. Futures prices for petroleum products and natural gas also rose today. Oil rose 16% in October, the biggest one-month gain since September 2004.
Volume on the New York Stock Exchange neared 1.6 billion, and advancing stocks ran ahead of those declining nearly 3 to 1. On the Nasdaq, more than 2.5 billion stocks exchanged hands, with advancers edging ahead of declining stocks almost 2 to 1.
Pre Market Watch
Indian market is likely to have a positive opening for the day, as the market participants have got a positive response from the US Fed meeting in which federal funds rate are lowered by 25bps to 4.5% & the discount rate by a quarter-point to 5%. On Wednesday, the benchmark index Sensex ended up with marginal gain of 54.48 points at 19,837.99, whereas Nifty also closed with a gain of 31.90 points to close at 5,900.65. We expect that the market may trade with little volatility with buying across the key indices.
On Wednesday, the US markets ended in green territory as the Dow Jones Industrial Average (DJIA) ended with a gain of 137.54 points to close at 13,930.01. Further the NASDAQ Composite & S&P 500 (SPX) index also ended up by 42.41 points & 18.36 points at 2,859.12 & 1,549.38 respectively.
Indian ADRs traded mixed. In telecommunication sector, VSNL & MTNL plunged by (7.81%) & (2.65%) respectively. In Pharma sector, Dr. Redddy''s Lab is down by (0.56%). However, in Banking sector ICICI bank & HDFC bank surged (4.56%) & (6.55%). Further in Technology sector, Patni Computers decreased by (5.84%), whereas Wipro & Satyam are up by (3.52%) & (2.85%).
The major stock markets in Asia are also trading mixed. Hang Seng is trading up by 245.85 points at 31,598.43. Along with this, Japan''s Nikkei is trading with a gain of 126.20 points to trade at 16,863.83. Singapore''s Straits Times index is also trading higher by 17.96 points at 3,823.66, whereas Seoul Composite lost 7.16 points to trade at 2,057.69.
Yesterday, the FIIs stood as the net sellers as the gross equity purchased was Rs.4534.00 (in crores), and the gross debt purchased was Rs.0.00 (in crores) as against the gross equity sold was Rs.4837.30 (in crores) and the gross debt sold was Rs.0.00 (in crores). The net investment of equity was Rs.-303.30 (in crores) and the net debt investment was Rs.0.00 (in crores).
Today, Nifty has support at 5,805 and resistance at 6020 and BSE Sensex has support at 19,690 and resistance at 20,250.
Market may advance on Fed rate cut
A strong overnight gains in US markets after Fed rate cut and positive opening in most of the Asian indices in ongoing trades may help the local indices advance further. Uncertainty is likely to prevail on rising oil prices and higher intra-day volatility. Among the key indices, the Nifty has a resistance around 5975 levels and has a key support at 5860-5830 levels in the near-term. The Sensex has a likely support at 19000 and may face resistance at 20500.
US indices rallied on Wednesday after the Federal Reserve cut a key short-term interest rate by a quarter point. While the Dow Jones soared by 138 points at 13930, the Nasdaq advanced by 42 points at 2859.
However, the Indian ADR pack had a mixed outing on the US bourses. HDFC Bank led the upmove and zoomed nearly 6.55% while Satyam, Wipro, ICICI Bank and MTNL flared up over 1-4% each. But, Dr Reddy's, Tata Motors, VSNL, MTNL, Patni Computer and Rediff slipped over 1-7% each.
Crude oil rose to a record high in New York after U.S. inventories unexpectedly fell to a two-year low and the economy expanded at the fastest pace in more than a year. While the Nymex light crude oil for December series rose by $4.15 at $94.53 a barrel. In the commodity space, the Comex gold for December delivery surged by $8.20 to settle at $787.80 an ounce.
Daily Trading Calls
Nifty (5901) Sup 5842 Res 5988
Buy RCom (772) SL 765
Target 784, 787
Buy Aptech (374) SL 769
Target 384, 386
Buy Tata Steel (906) SL 899 Target 920, 924
Sell Balram Chini (80) SL 84 Target 74, 72
Sell GDL (130) SL 134 Target 123, 121
As expected, Fed cuts bears
Whatever we expect with confidence becomes our own self-fulfilling prophecy.
Mr. Ben S. Bernanke & Co. has done what was expected of them. The Federal Reserve has cut its key short-term rate by a quarter percentage point to protect the US economy from the housing slowdown and a tight credit market. Global markets are naturally happy, but not as much as they were the last time around. The reason is there may not be any more Fed rate cuts in the near term, as the US central bank is also worried about inflation. That perhaps explains the tempered optimism in the US as well other markets. The rally in Asian markets this morning is not that spectacular.
We expect a spike in our market when the opening bell rings, but do not rule out some cooling later on, as most of the big events are now out of the way. FII buying too seems to have slowed in the past couple of days. The market will remain choppy with lower volumes in the near term due to lack of fresh catalysts and a possible slowdown in overseas capital inflows. Gains this month may not be as phenomenal as the outperforming October, which was not just the best this year but the best October in a decade.
Sugar stocks could fall after the UP Government announced a state advised price (SAP) of Rs125 per quintal for cane. This is likely to hit sugar mills in the state, as they will have to pay Rs12.5/kg to farmers as against the retail sugar price of Rs14/kg. However, in another news, the Allahabad High Court has granted a major reprieve to UP sugar mills, permitting them to discharge 25% of their outstanding cane arrears within 5-6 weeks time. Watch out for auto stocks as they will announce their monthly sales volume. Oil and airline companies will also be in the limelight as crude oil nears the $100 per barrel mark.
US stocks rallied and bonds slumped on Wednesday after the Fed cut a key short-term interest rate by a quarter percentage point and indicated that it doesn't need to cut rates again as it could start fueling inflation.
Microsoft and Intel led gains on prospects that consumers will keep spending. Exxon Mobil advanced as oil rose to a record $94.74 a barrel. Newmont Mining, the second-largest gold producer, jumped the most in six years after profit doubled.
The S&P 500 added 18.36 points, or 1.2%, to 1,549.38. The Dow Jones Industrial Average increased 137.54 points, or 1%, to 13,930.01. The Nasdaq advanced 42.41 points, or 1.5%, to 2,859.12. Almost four stocks rose for every one that fell on the New York Stock Exchange.
FOMC, the US central bank's policy setting arm cut the fed funds rate by 25 basis points to 4.5%. But, the decision was not unanimous, with Kansas City Fed President Thomas M. Hoenig preferring no change.
The cut in October follows a half-point cut made on Sept. 18. That cut was aimed at easing the strain in credit markets and to try and prevent the financial market crisis and housing sector collapse from sending the US economy into a recession.
Treasury prices slumped on bets that the Fed is not going to cut rates again anytime soon. The selloff boosted the yield on the benchmark 10-year note to 4.47% from 4.38% late on Tuesday.
US light crude oil for December delivery briefly hit an intra-day record high of $94.74 a barrel on the New York Mercantile Exchange, before pulling back a bit to settle at a new record of $94.53. Crude was quoting above US$96 per barrel in Asian trading.
Oil prices had already risen after the government's weekly report showed a surprise drop in crude inventories, but the gains accelerated after the Fed announcement.
COMEX gold for December delivery settled at $795.30 an ounce in New York and hit a high of $800.80 in electronic trading, a close to 27-year high. In currency trading, the dollar fell to another record low against the euro and inched higher versus the yen.
The US economy grew at a 3.9% annual rate in the third quarter, the government said, after having grown at a 3.8% annual rate last quarter. Economists had predicted a reading of 3.1%.
The GDP price deflator, the report's inflation component, rose at a pace of 0.8%, much slower than what economists were forecasting. The more closely-watched "core" PCE deflator rose at an annual rate of 1.8%, faster than the previous quarter but still within the Fed's comfort zone.
European shares closed higher. The pan-European Dow Jones Stoxx 600 index rose 0.9% to 388.43. The French CAC-40 rose 0.8% to 5,847.95, while the UK's FTSE 100 added 0.9% to 6,721.60 and the German DAX 30 climbed 0.5% to 8,019.22.
Brazilian stocks hit a record high while Mexican stocks finished lower. Brazil's Bovespa rose 1.5% to 65,317.70, its third record close this week. Mexico's IPC fell 1% to 31,458.67. Argentina's Merval index rose 0.5% to 2,351.44 while Chile's IPSA lost 0.8% to end at 3,451.18.
Asian stocks rose after the Fed rate cut and on a government report that the US economic growth accelerated in the third quarter of 2007, bolstering confidence in the region's biggest export market. Canon was set for its biggest advance in two months. BHP Billiton climbed after crude jumped the most since March.
The Morgan Stanley Capital International Asia-Pacific Index added 0.8% to 172.73 as of 11:01 a.m. in Tokyo, set for a record. The Nikkei 225 Stock Average advanced 0.8% to 16,863.83. Stock benchmarks rose across the region, except in China. The Philippines' market is closed for a holiday.
After opening with strong gains market ended on a flat note before the Fed meet. A strong first half was followed by a range bound and later in the session also profit booking dragged the key indices from their days high to end the day with modest gains. However, major support for the market was provided by the Metal, Banking and the PSU stocks. Broader indices i.e. Mid-Cap and the Small-Cap index also gained over 1% each.
Finally, the 30-share Sensex gained 54 points to close at 19,837. Nifty index added 31 points to close at 5,900.
TCS slipped 1.1% to Rs1037. Tata Sons sold 1% stake in the company via block deal. The scrip touched an intra-day high of Rs1063 and a low of Rs1017 and recorded volumes of over 1,00,00,000 shares on NSE.
Tata Steel advanced 0.8% to Rs908 after the company announced that they signed MoU with Vietnam Steel Corporation. The scrip touched an intra-day high of Rs922 and a low of Rs896 and recorded volumes of over 11,00,000 shares on NSE.
VSNL gained 1.5% to Rs575. The company declared its Q2 result with net profit at Rs614mn (down 42.9%) and revenue at Rs9.88bn (down 1.4%). The scrip has touched an intra-day high of Rs587 and a low of Rs567 and has recorded volumes of over 3,00,000 shares on NSE.
Reliance Energy advanced by 4.5% to Rs1869 after reports stated that the company approved a proposal to transfer its infrastructure projects to a wholly owned subsidiary. The scrip touched an intra-day high of Rs1899 and a low of Rs1800 and has recorded volumes of over 43,00,000 shares on NSE.
ONGC advanced by 2.2% to Rs1245 after the company announced that they would invest Rs4,000cr to upgrade Mumbai high North. The scrip touched an intra-day high of Rs1264 and a low of Rs1220 and recorded volumes of over 18,00,000 shares on NSE.
Glemark Pharmaceuticals advanced by 3.8% to Rs492 after the company licensed out experimental drug developed to Eli Lilly in a deal potentially worth US$350mn. The scrip touched an intra-day high of Rs538 and a low of Rs490 and recorded volumes of over 16,00,000 shares on NSE.
Videocon Industries gained 2.5% to Rs378 after the Group announced that they would bid for
CESC advanced by 1% to Rs580 after the company announced their Q2 net profit rose 47.6% to Rs930mn and net sales were at Rs7.3bn (up 8.1%). The scrip touched an intra-day high of Rs595 and a low of Rs574 and recorded volumes of over 3,00,000 shares on NSE.
Stocks in News:
L&T set to win Rs10bn contract for railway factory at Chhapra district in Bihar.
Tata Steel signs a MoU with Vietnam Steel Corporation for a cold rolling mill complex.
IOC plans to retail CNG via its chain of petrol pumps.
CISCO and Wipro form a JV to develop IT solutions across the globe.
UB holdings to raise Rs13.2bn by November end.
The Videocon Group plans to bid for the new Greenfield airport coming up at Navi Mumbai.
ONGC may partner Hinduja for a refinery to be constructed in AP.
Marico buys South African consumer arm of Enaleni Pharmaceuticals for Rs520mn.
SBI plans to hire 3,000 officers for soft recovery.
Patni stake sale was called off over differences over management control.
Ashok Leyland plans Rs40bn capex for building capacity, developing products and upgrading technology.
Indonesian state-run Krakatau Steel is considering a strategic alliance with four steel companies including Essar and Ispat.
Gujrat State Petroleum Corp (GSPC) may sell 30% equity in KG block.
Exide Industries acquires lead smelting firm in Pune.
Pyramid Saimira acquires Texasbased FunAsia.
The RBI and the finance ministry working on a concept paper to introduce sterilisation tax and auctioning of limited foreign loans to stem the Dollar flows.
Maharashtra Government to remove octroi across the state except Mumbai.
The Central Board of Trustees is likely to revive discussion on investing up to 5% of corpus in stock market.
Oil companies to hike aviation turbine fuel prices between 4% and 6% from Wednesday night.
Telecom Engineering Centre (TEC) to recommend a steep increase in spectrum usage charges for GSM mobile service providers for seeking additional spectrum.
The central government’s fiscal deficit for the first six months fell to 53.8% of the budget target from last year’s 58.2%.
NCAER raises GDP growth target to 8.9% from 8.5% estimated previously.
UP sugar mills have been granted a major reprieve by the HC, permitting them to discharge 25% of their outstanding cane arrears within 5-6 weeks time.
US Fed cuts rate by 25 bps
The Federal Open Market Committee (FOMC) decided today to cut the federal funds rate by 25 basis points to 4.5 per cent.
"Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time," FOMC said in a release.
"Readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully," the it added.
Crude shoots back above $94
Prices increase on unexpected drop in crude and fuel inventories
Unexpected drop in crude inventories taking fuel inventories to two-year low level sent crude prices to a new all time high today. Prices crossed and closed above the $94/barrel mark for the first time ever. A falling dollar just aggravated the situation further. Till yesterday, traders had speculated that this week’s energy inventory report is expected to show rise in US crude inventories.
For the day ending Wednesday, 31 October, 2007, crude-oil futures for light sweet crude for December delivery closed at $94.53/barrel (higher by $4.15/barrel or 4.6%) on the New York Mercantile Exchange. Prices rose to $94.74/barrel today earlier in the day during intraday trading. Prices are up 61% on a yearly basis. Futures prices for petroleum products and natural gas also rose today. Oil rose 16% in October, the biggest one-month gain since September 2004.
As per the weekly inventory report by the Energy Department, U.S. commercial crude oil inventories, fell by 3.9 million barrels to 312.7 million barrels in the week ending 26 October, the lowest since October 2005. Market was expecting a build up of 1.25 million barrel in crude inventories. Refinery capacity utilization fell sharply by 0.9% to 86.2%.
Also, the EIA reported that gasoline supplies rose by 1.3 million barrels to 195.1 million barrels in the latest week, down from last year's 206.4 million, while distillate stocks, which include heading oil, diesel and jet fuel, grew by 800,000 barrels to 135.3 million barrels, down from 144.1 million of the same period in last year.
Brent crude oil for December settlement rose $3.19 (3.7%) to $90.63 on the London-based ICE Futures Europe exchange.
In the currency market today, the dollar hit a record low of $1.4503 per euro after the Federal Open Market Committee, the Fed's rate-setting arm, cut the fed funds rate by 0.25% to 4.5% today afternoon.
All crude product prices shoot up
Natural gas rose in New York as traders shifted their focus to the arrival of cold weather and crude oil rose to a record. Gas for December delivery rose 30.9 cents (3.9%) to settle at $8.33 per million British thermal units
Against this backdrop, November reformulated gasoline jumped 3.7% to $2.3400 a gallon and November heating oil rose 3.4% to $2.5078 a gallon.
At the MCX, crude oil for November delivery closed at Rs 3687/barrel, higher by Rs 88 (2.4%) against previous day’s close. Natural gas closed at Rs 324.7/mmtbu as against previous close of Rs 316.9/mmtbu, higher by Rs 7.8/ 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.
The Energy Department will come out with the weekly inventory report on natural gas for week ended Friday, 26 October, tomorrow morning at Washington at 10.30 E.T.
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