Monday, December 10, 2007
The market closed marginally lower on the back of selling across the sectoral indices scrips. The market opened on a positive note but all of a sudden lost the grip as the profit booking prevails. The global cues are not in favor, which led the market to trade lower. The investors are talking calculated steps in booking their positions. The Realty and Bankex indices scrips remained in the limelight as most buying is seen from these baskets. Both the BSE Mid cap and Small cap outperformed the benchmark indices as they closed higher by 95.48 points and 188.65 points at 9,117.44 and 11,530.92 respectively. The BSE Sensex closed lower by 35.32 points at 19,930.68 and NSE Nifty fell 13.3 points to closed at 5,960.60. Overall, the market breadth was strong as 2,061 stocks are closed higher while 805 stocks are closed lower.
BSE Realty index surged 246.25 points to close at 11,822.88. Scrips that gained are Ansal Infra (7.05%), Omaxe (5.99%), Indiabull real (3.83%), Unitech (3.11%)
BSE Bankex index closed higher by 108.59 points to close at 11,486.55. Pushed up by Union bank (5.61%), Yes bank (5.47%), PNB (3.37%), and ICICI bank (2.10%).
BSE Capital goods closed lower by 87.96 points to close at 20,130.92. Scrips that fell are Areva (3.85%), Elcon engineering (2.97%), BHEL (2.40%), Alstom projects (1.51%) .
BSE Auto index grew by 26.09 points to close at 5,677.39. Scrips that gained are Ashok Leyland (5.38%), Bharat Forge (2.83%), Apollo tyres (2.27%), MRF (1.61%) and TVS motors (1.40%).
BSE Oil & Gas index closed with marginal gains of 4.67 points at 12,740. Pulled up by Gail India (5.92%), Indian Oil (4.47%), HPCL (3.24%), BPCL (1.14%) and RPL (0.93%).
BSE Metal index slipped by 36.24 points to close at 18,701.84. Scrips that dropped are Sterlite Industries (1.94%), Jindal Steel (1.91%), SAIL (1.11%) .
BSE IT index closed up by 8.35 points at 4,432.92. Pushed up by Aptech Ltd. (4.42%), Financial Technologies (3.24%), NIIT Techno (2.37%) and Infosys (1.76%).
The market ended slightly lower today, 10 December 2007, in a choppy trading session. 20 out of 30 Sensex stocks ended in the red. Concerns on the political front resurfaced after communist allies warned the government against going ahead with a civilian US nuclear deal.
European markets, which opened after Indian market, were mixed. Asian markets, which opened before Indian market, were subdued. Concerns arising from US sub-prime mortgage crisis resurfaced after Swiss bank UBS unveiled $10 billion in subprime writedowns on Monday, 10 December 2007, while simultaneously announcing that it had obtained an emergency capital injection from a Singapore government entity and an unnamed Middle East investor.
Hindalco Industries and ICICI Bank were top gainers from the Sensex pack. Tata Consultancy Services and Bharat Heavy Electricals were top losers from Sensex pack. Reliance Industries declined. Consumer goods and realty stocks gained. FMCG stocks declined. BSE Mid-Cap and Small-Cap indices outperformed Sensex.
Communist parties, a key ally of the ruling Congress party-led coalition, fired a fresh salvo on Sunday, 9 December 2007, asking the government to stop talks on a controversial nuclear deal with a UN nuclear watchdog.
The 30-share BSE Sensex shed 35.32 points or 0.18% to 19,930.68.
The market was volatile. Sensex had hit a high of 20,095.69 in early trade. At day's high, Sensex had gained 129.96 points. Sensex hit a low of 19,834.01 in mid-afternoon trade. At day's low, Sensex had lost 131.99 points for the day.
The broader S&P CNX Nifty lost 13.7 points or 0.23% at 5,960.60.
US November 2007 non-farm payrolls increased and unemployment rates remained steady, data on Friday, 7 December 2007 showed. While the numbers helped to ease recession concerns, they also reduced probability of the US Federal Reserve cutting the Fed funds rate by a steep 50 basis points at its 11 December 2007 meeting.
Market breadth was strong. On BSE, 2,032 stocks advanced, 801 stocks declined and 29 stocks remained unchanged.
BSE clocked a turnover of Rs 7,359 crore, compared to Friday (7 December 2007)'s Rs 8,677.98 crore.
Nifty December 2007 futures were at 5979, at a premium of 18.40 points as compared to the spot closing of 5960.60.
The NSE's futures & options (F&O) segment turnover was Rs 47,277.77 crore, which was lower than Rs 61,359.41 crore on Friday, 7 December 2007.
The BSE Mid-Cap index rose 1.06% to 9,117.44 and BSE Small-Cap index gained 1.66% to 11,530.16. Both these indices outperformed Sensex.
BSE Auto index (up 0.46% to 5,677.39), BSE Bankex (up 0.95% to 11,486.55), BSE Consumer Durables index (up 2.18% to 6,059.12), BSE IT index (up 0.19% to 4,432.92), BSE Oil & Gas index (up 0.04% to 12,740), BSE Realty index (up 2.13% to 11,822.88) outperformed Sensex.
BSE Capital Goods index (down 0.44% to 20,130.92), BSE FMCG (down 0.78% to 2,160.27), BSE Power index (down 0.58% to 4,501.33) underperformd Sensex.
India’s largest private sector firm by market capitalization & oil refiner Reliance Industries declined 0.67% to Rs 2,822.30. As per reports, it has intensified restructuring of its retail venture Reliance Retail to create up to 30 independent business activities, each targeted to be a profit centre. Speculation is rife of a mega initial public offer in 2008 of Reliance Retail.
Consumer durables stocks rose. Videocon Industries (up 10% to Rs 609.70), Blue Star (up 1.71% to Rs 475.75) and Rajesh Exports (up 1.39% to Rs 919.40) edged higher.
Realty majors edged higher. India’s largest real estate developer in terms of market capitalisaion DLF rose 1.44% to Rs 1,025.90.
Unitech rose 3.11% to Rs 442.30. As per reports, India’s second-largest real estate developer, Unitech has major plans, which look beyond real estate. After announcing its plans of entering the telecom business, Unitech now wants to concentrate on positioning itself as a full fledged infrastructure development company with interests in power, roads, airports and also in other areas wherever it sees an opportunity. Besides, it also plans to enter the international market.
Indiabulls Real Estate rose 3.83% to Rs 713.85. The company said before trading hours today, 10 December 2007, its wholly owned subsidiary, Indiabulls Wholesale Services (IWSL), is proposing to make an open offer for Piramyd Retail, a retail company.
Banking stocks were mixed. ICICI Bank (up 2.1% to Rs 1,273.75) edged higher. HDFC Bank (down 1.65% to Rs 1,693.20), State Bank of India (down 0.5% to Rs 2,424.50) edged lower.
FMCG stocks lost ground. ITC (down 0.95% to Rs 187.10) and Hindustan Unilever (down 1.37% to Rs 205.50) edged lower.
Bharti Airtel rose 1.13% to Rs 970.45. Bharti Airtel announced before the market hours today 10 December 2007 that, Bharti Infratel, Idea Cellular and Vodafone Essar have agreed to form an independent tower company, Indus Towers to provide passive infrastructure services in India to all operators on a non-discriminatory basis. Idea Cellular rose 3.64% to Rs 137.90.
Hindalco Industries (up 2.63% to Rs 193.10), Infosys (up 1.76% to Rs 1,748.45), Reliance energy (up 0.98% to Rs 1,951) edged higher.
Tata Consultancy Services (down 2.41% to Rs 1,035.70), HDFC (down 1.67% to Rs 2,872.15), Cipla (down 2.08% to Rs 192.0), and Bharat Heavy Electricals (down 2.4% to Rs 2,677.35) edged lower.
Tata Teleservices (Maharashtra_ clocked the highest volume of 4.06 crore shares on BSE. The stock rose 7.86% to Rs 59. GV Films rose 18.2% to Rs 7.99 and clocked the second highest volume of 2.92 crore shares. Ispat Industries rose 2.35% to Rs 71.90 and clocked the third highest volume of 2.71 crore shares. Centurion Bank of Punjab rose 2.87% to Rs 57.30 and clocked the fourth highest volume of 1.54 crore shares. IFCI rose 5% to Rs 106 and clocked the fifth highest volume of 1.42 crore shares.
Tata Teleservices Maharashtra clocked the highest turnover of Rs 232.44 crore on BSE. Reliance Petroleum (Rs 212.68 crore), Ispat Industries (Rs 193.56 crore), Essar Oil (Rs 183.41 crore) and IFCI (Rs 150.74 crore) were other turnover toppers on BSE in that order.
European markets were mixed today. France’s CAC 40 (up 0.08% to 5,732.73), Germany’s DAX (up 0.31% to 8,018.79) edged higher. UK’s FTSE 100 (down 0.02% to 6,553.50) edged lower.
Most of the Asian markets were trading in the red today, 10 December 2007. Taiwan Weighted index (down 1.43% to 8,598.03), Nikkei (down 0.2% to 15,924.39), Straits Times index (down 0.14% to 3,553.08), Hang Seng (down 1.18% to 28,511.07) and Seoul Composite index (down 1.44% to 1,906.42) edged lower. Shanghai Composite index (up 1.38% to 5,161.92) edged higher.
US stocks ended on a mixed note on Friday, 7 December 2007 in spite of better than expected employment data. The Dow Jones industrial average rose 5.69 points, or 0.04%, to 13,625.58. The Standard & Poor's 500 index declined 2.68 points, or 0.18%, to 1,504.66. The Nasdaq Composite index slipped 2.87 points, or 0.11%, to 2,706.16.
Buy KPIT Cummins Infosystems with a stop loss of Rs 120 for a target of Rs 180
Buy Adani Enterprises only on declines with a stop loss of Rs 761 for a short-term target of Rs 854.
Buy Sterlite Optical with a stop loss of Rs 320 for a target of Rs 410
The upward momentum in the stock markets is likely to continue till the US Federal Reserve meeting scheduled on Tuesday, 11 November 2007. Fed is expected to cut Fed funds rate by at least 25 basis points. Recent data showing strong job creation by the US private sector in November 2007 has eased US recession worries.
Signs that the US economy is not ailing as much as has been thought caused investors to scale back expectations of the extent of an interest rate cut when the Federal Reserve meets. Yet, market men hope that a further cut in interest rates by the Fed will boost FII inflow in India.
Asian markets were mixed today, 10 December 2007. Hang Seng (up 0.85% to 29,081.68), Shanghai Composite index (up 1.16% to 5,151.04) and Straits Times index (up 0.27% to 3,567.44) edged higher. Taiwan Weighted index (down 0.51% to 8,678), Nikkei (down 0.23% to 15,919.90), and Seoul Composite index (down 0.44% to 1,925.72) edged lower.
US stocks ended on a mixed note on Friday, 7 December 2007 in spite of better than expected employment data. November non-farm payrolls increased and unemployment rates remained steady.While the numbers helped to ease recession concerns. They also reduced probability of the FOMC cutting the Fed funds rate by 50 bps at its 11 December 2007 meeting.
The Dow Jones industrial average rose 5.69 points, or 0.04%, to 13,625.58. The Standard & Poor's 500 index declined 2.68 points, or 0.18%, to 1,504.66. The Nasdaq Composite index slipped 2.87 points, or 0.11%, to 2,706.16.
The Bank of England lowered its key interest rate on Thursday, 6 December 2007 citing signs of slowing growth. The Monetary Policy Committee, or MPC, voted to reduce the official bank rate paid on commercial bank reserves by 0.25 basis points to 5.5%. However the European Central Bank Monetary Policy Committee decided to keep interest rates on hold at 4% after their monthly policy meeting yesterday, 6 December 2007.
Back home, The 30-share BSE Sensex rose 170.13 points or 0.86% to 19,966 on Friday, 7 December 2007.
The 30-share BSE Sensex surged 602.81 points or 3.11% to 19,966 in the week ended 7 December 2007. The S&P CNX Nifty gained 211.55 points or 3.67% to 5,974.30 in the week.
As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 253.84 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 339.64 crore on Friday,7 December 2007.
Crude oil fell for a second day today, 10 November 2007, in New York on speculation slowing U.S. economic growth may limit demand as fuel stockpiles rise. Crude oil for January delivery declined as much as 53 cents to $87.75 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for January settlement declined 24 cents, or 0.3%, to $88.40 a barrel
The current market sentiment is mainly influenced by the movement in global indices. The mood of the market is expected to remain positive after Friday's surge and the gains in the US markets will also help the local indices advance further. However, subdued Asian indices in current trades may drag the market in early trades. Among the indices, the Nifty could test higher levels around 6010 and 6030 while on the downside the index has a strong support at 5895 and if broken then around 5775 level. The Sensex has a likely support at 19300 and may face resistance at 21000.
US indices had a flat end on Friday ahead of expected interest rate cut from the Federal Reserve. While the Dow Jones gained by six points at 13626, the Nasdaq slipped three points to close at 2706.
Crude oil prices in the global market extended their downward trend, with the Nymex light crude oil for January series slipping by $1.95 at $88.28 a barrel. In the commodity space, the Comex gold for February delivery moved down by $6.90 to settle at $807.10 a troy ounce.
eClerx Services 270 to 315 50 to 60 (Seller)
BGR Energy 425 to 480 380 to 390 (Buyer)
Transformers & Rectifiers 425 to 465 390 to 400
Brigade Enterprises 351 to 390 75 to 80
Jyothy Lab. 690 230 to 240
Burnpur Cement Ltd. 12 6.5 to 7
Edelweiss 825 730 to 750
Renaissance Jewellery 150 47 to 48
Kolte Patil 145 85 to 90
Kaushalya Infra 60 13 to 14
SVPCL 42 - 5 to -7
Out House :
Markets at a support of 19786 & 19681 levels with resistance at 20102 & 20221 levels .
Buy : RIL & REL
Buy : RelCap & RNRL
Buy : JpAsso & Jphydro
Buy : EssarOil bullet
Buy : SKumar & ABAN
Buy : IBUllsreal , UNITECH , GMR & DLF
Buy : Sail & JSW
Buy : Kotak & SBIN
Buy : IOlBroad bullet
Dark Horse : IOL Broad , JpAsso , IBullReal , JSW , Balrampur , Essaroil , RIL , SBIN & JpHydro
Bullet for the Day : Primesecurities & Gitanjali with strict stop loss .
The Market is likely to have positive opening as the Asian market is trading mixed. The market closed higher on Friday after tumbling at the mid session. The market opened with hand some gains but pared pared most of its gains at higher levels after the mid session but buying at the lower levels towards the end of the session led the market to closed higher. On Friday, the BSE Sensex closed higher by 170.13 points at 19,966 and NSE Nifty closed up by 19.6 points at 5,974.30. We expect that the market to see remain range bound during the trading session.
On Friday, the US market closed in mixed territory. The DJIA closed with marginal gains of 5.69 points at 13,625.58. The S&P 500 index fell 2.68 points to close at 1,504.66 and NASDAQ slipped by 2.87 points to close at 2,706.16.
Indian ADRs ended in mixed territory. In technology sector, Infosys grew by (3.23%) along with Satyam by (1.15%), Patni computers by (0.85%) and Wipro by (0.46%). In banking sector, ICICI bank advanced by (1.16%) while HDFC bank slipped by (2.17%). In telecommunication sector, MTNL and VSNL fell (7.50%) and (1.93%) respectively.
The major stock markets in Asia are trading mixed. Hang Seng is trading lower by 716.45 points at 28,842.47 while Japan''s Nikkei is trading higher by 82.29 points at 15,956.37. Taiwan Weighted is trading up by 27.97 points at 8,722.38. Seoul Composite is trading at 1,934.32 down by 18.85 points. Singapore Strait Times advanced by 5.40 points to trade at 3,557.95.
The FIIs stood as the net buyer on Friday both in equity and Debt. The gross equity purchased was Rs4, 943.20 Crore and the gross debt purchased was Rs1,187.60 Crore while the gross equity sold stood at Rs4,120.80 Crore and gross debt sold stood at Rs59.60 Crore. Therefore, the net investment of equity reported was Rs822.40 Crore and net debt was Rs1,128 Crore.
Today, Nifty has support at 5,887 and resistance at 6,039 and BSE Sensex has support at 19,627 and resistance at 20,193.
Nifty (5974) Sup 5912 Res 6036
Buy IVRCL Infra (493) SL 488 Target 501, 505
Buy PSTL (335) SL 331
Target 347, 349
Buy CESC (630) SL 624
Target 642, 6455
Sell Sterling Bio (159) SL 163 Target 152, 150
Sell Ultratech (979) SL 987 Target 966, 962
We recommend buying the Aftek stock. From the weekly chart of Aftek it is clear that it has been on an uptrend from its June 2006 low of Rs 40. However, the stock met with a resistance at Rs 97 in February 2007 and has been in a sideways consolidation mode since then. The stock’s price action since February has formed a symmetric triangle pattern. On December 7, the stock broke out of this pattern by surging 11 per cent, accompanied by heavy volumes. The stock is currently trading well above the 50-day and 200-day moving average lines. The daily momentum indicator is featuring in the bullish zone and the weekly momentum indicator is on the verge of entering this region. The immediate support for the stock is at Rs 70 and the next is at Rs 57. Short-term investors can buy the stock at current market price while keeping their stop-loss at Rs 74. We expect the stock to move up to Rs 95 in the short-term.
Equities are expected to remain subdued on Monday as reduced hopes of a rate cut by US Federal Reserve turned global markets weak.
Also, a sharp fall in oil prices and signs of resilience in the labour market offset concerns that tighter credit is hurting consumer spending saw US markets end on a flat note on Friday.
Dow Jones industrial average finished 5.69 points or 0.04 per cent higher at 13,625.58. But Standard & Poor's 500 Index closed down 2.68 points or 0.18 per cent at 1,504.66. Nasdaq Composite Index slipped 2.87 points or 0.11 per cent to 2,706.16.
Ahead of Friday's jobs report, investors had been hopeful that the Federal Reserve would cut short-term rates by a half percentage point to rescue a sinking economy after recent comments by Fed officials.
But the Labor Department report showed US employers added 94,000 jobs last month, slightly above forecasts by Wall Street analysts and a moderately positive sign for the economy.
Benchmarks across Asia were trading flat following Wall Street cues with Japan's Nikkei down 0.5 per cent. Hong Kong's Hang Seng lost 0.93 per cent and South Korea's KOSPI fell 0.59 per cent.
"Nifty has support at 5940, 5880 and 5820 levels and will face resistance at 6040, 6065 and 6115. Closing above 6065 and also sustaining above the same may result in fireworks and change the picture in total favour of the bulls. On the downside, 5680 will be the critical level to watch out for," said Bharat Dalal, vice president-stck broking at Dawnay Day AV Securities.
Small and mid cap IT stocks could be the dark horse for investment with a medium term to long term time horizon period, Dalal advises.
Friday, Bombay Stock Exchange's Sensex closed at 19,966, up 170.13 points or 0.86 per cent. It was 11 points short of all time closing high of 19,977.67 recorded on October 29. Intra-day, the index swung between a high of 20,094.56 and low of 19,706.43.
National Stock Exchange's Nifty closed at 5,976.15, up 0.36 per cent or 22 points after touching an all-time high of 6,042.10 earlier in the day. The low was 5894.80.
Foreign institutional investors' net sold equity worth Rs 253.84 crore on Friday while mutual funds were net buyers of equity worth Rs 339.64 crore, according to provisional data on NSE.
It was quite a turbulent week in the US Market for the week that ended on Friday, 7 December, 2007. But market continued to be troubled by ongoing problems in the housing and credit markets and mounting concerns about the overall health of the economy. Economic reports dominated the week. Nevertheless, at the end of the week, the indices registered good gains.
The Dow Jones Industrial Average gained 254 points for the week. Tech - heavy Nasdaq gained 45 points. S&P 500 gained 23 points.
Market suffered losses during the first two days of the week, Monday, 3 December and Tuesday, 4 December. Dow lost almost 120 points in those two days. Disappointing guidance from Merck and JPMorgan trimming its earnings estimate on a number of brokerage firms weighed on investor sentiments. A positive report from the manufacturing front was ignored.
The Institute for Supply Management's index showed stable manufacturing conditions with a level of 50.8 for November, compared to 50.9 in October. A reading above 50 is intended to reflect growth.
On Wednesday, 5 December, market gained back momentum. Dow Jones industrial Average ended the day with a gain of 196.23 points. The main focus of the day was the ADP employment estimate. The reading showed that November private payrolls increased by a very strong 189,000, more than triple the consensus expectation.
Also, a report that showed non-farm productivity rose 6.3% in the third quarter, up from a preliminary estimate of 4.9%.
Market once again rallied on Thursday, 6 December. The stock market rallied as President Bush announced a plan to help certain subprime borrowers at risk of losing their homes. Also, new data showed new claims for unemployment for the week ended 1 December fell to 338,000 from 353,000 the week before, reflecting continued strong employment conditions.
Market ended almost flat on Friday, 7 December, 2007. Market failed to extend gains from good employment report that had hit the wires earlier during the week. On Friday, Labor Department's latest report showed that 94,000 jobs were added to payrolls in November, while unemployment held steady at a 4.7% rate. That was a 0.8% annual rate of increase in payrolls. The October increase was also revised to show an increase of 170,000 from a previously reported 166,000 gain.
For the week, indices registered good gains. DJIx and S&P 500 closed up by 1.9% and 1.6% respectively. Nasdaq too gained 1.7%. President Bush’s plans to save certain subprime borrowers at risk of losing their homes cheered investors. Other than that, there were some upbeat reports on the employment front.
Market will now focus on the upcoming Federal Reserve Open Committee meeting on 11 December, 2007. Investors are quite hopeful about another interest rate cut. For the year, Dow is up by 9.3%, Nasdaq is up by 12% and S&P 500 is up by 6.1%.
It is easy to be wise after the event!
Though the bulls managed to lift the Sensex and the Nifty above 20k and 6k, respectively, they could not hold those levels owing to some profit booking. The same scenario may play out this week as well. The undertone is largely positive, but the trend will remain choppy and the key indices are likely to consolidate after reaching new lifetime highs.
All eyes are on Tuesday's Fed meeting, where the US central bankers are expected to cut rates by 25 basis points, to stem the slide in the housing sector and prevent a further slowdown. Although worldwide, the markets have already discounted another easing by the Fed tomorrow, investors are keen on what hints the Fed policy makers will drop on future outlook on the US economy and interest rates.
With not-so-bad economic reports and a relief package already in place for some sub-prime borrowers, the Fed may signal that there won't be any further rate cuts unless the current mess in the housing sector worsens in the new year. The global equity markets may not like that outcome all that much, and there may be some softening post the FOMC meeting.
Today, we expect the key indices to be cautious to slightly higher at the opening bell, though the rally in small- and mid-cap shares may continue. But one has to be weary of the spurt in small- and mid-cap stocks, as a steep fall may leave one high and dry.
US stocks ended nearly flat on Friday despite a slightly better than expected November jobs report, as investors preferred to stay on the sidelines ahead of the Dec. 11 Fed meeting.
The Dow Jones Industrial Average was up 6 points at 13,626 and by 1.9% for the week. The S&P 500 index ended the week up 1.6% and the Nasdaq Composite index recorded a weekly rise of 1.7%.
Despite a seemingly upbeat jobs report, stocks showed little momentum throughout the session. Market breadth was mixed.
US employers added 94,000 jobs to their payrolls in November, following an upwardly revised 170,000 gain in October. The unemployment rate held steady at 4.7%, instead of rising to 4.8% as expected.
The report indicated that the world's largest economy is holding in the face of the subprime mortgage meltdown and tighter credit conditions. The jump in average hourly earnings could be seen as inflationary but could also be seen as a good sign for consumer spending.
The Fed policy makers are widely expected to cut the fed funds rate, a key short-term lending rate, by a quarter-percentage point to 4.25%, after cutting rates at the last two meetings. Some Wall Street observers have been hoping for a larger cut of 50 basis points.
However the November jobs report suggests that the Fed may not need to cut rates by the larger amount.
A separate report, the University of Michigan's consumer sentiment index, fell to 74.5 in early December from 76.1 in late November. Economists thought it would fall to 75.0.
Treasury prices slumped, boosting the yield on the 10-year to 4.1% from 4% late on Thursday. In currency trading, the dollar fell versus the euro and rose versus the yen.
US light crude oil for January delivery fell $1.95 to settle at $88.28 a barrel on the New York Mercantile Exchange. COMEX gold for February delivery fell $6.90 to settle at $800.20 an ounce.
The strength of any further gains this week will hinge on the Fed's outlook for the US economy and possible more bad news on the credit-market correction. Wall Street will receive a string economic reports this week, beginning with Monday's report on pending home sales and November wholesale and consumer inflation figures and retail sales later in the week. Lehman Brothers will kick off an early earnings season for the securities industry.
European stocks ended higher on Friday. The pan-European Dow Jones Stoxx 600 rose 0.8% to a one-month-high of 372.87. The UK's FTSE 100 closed up 1.1% at 6,554.90, while the French CAC 40 gained 0.8% to 5,718.75 and the German DAX 30 advanced 0.7% to 7,994.07.
In the emerging markets, the Bovespa in Brazil was down 0.2% to 65,638 while the IPC index in Mexico was flat at 31,268. The RTS index in Russia climbed 1.2% to 2285 and the ISE National-30 index in Turkey was up 0.5% at 71,958.
Asian markets were trading mixed this morning. The Nikkei in Tokyo was down 85 points at 15,871 while the Hang Seng in Hong Kong gained 218 points at 29,060. The Kospi in Seoul was almost flat at 1931 and the Straits Times in Singapore added 12 points to 3570.
Waiting for the Fed
It was a see-saw trading session as after opening with positive gap and touching new all time highs sharp selling in the Auto, Power and Oil & Gas stocks dragged the key indices from their respective highs. Even better than expected inflation figures had a minimal impact on the sentiments; India’s Inflation was at 3.01% for the week ended Nov. 24 against expectation of 3.22%.
However, markets recouped on back of late buying in the heavyweights like ICICI Bank, Infosys, HDFC and Bharti Airtel lifted the markets to close with smart gains. Finally, 30-share Sensex ended 170 points higher to close at 19,966 and Nifty closed at 5,974 adding 19 points.
Hindustan Unilever edged higher by 0.5% to Rs208 following reports that Middle East-based Switz Group, owned by Mumbai-based Khorakiwala family, is set to buy Modern Foods from Hindustan Unilever for Rs1bn. The scrip touched an intra-day high of Rs212 and a low of Rs207 and recorded volumes of over 13,00,000 shares on NSE.
Tata Motors was down 1% to Rs767. According to reports the company would invest US$43mn in a Thai factory to produce pick-up trucks. The scrip touched an intra-day high of Rs781 and a low of Rs760 and recorded volumes of over 11,00,000 shares on NSE.
Vikas WSP was locked at 5% upper circuit to Rs59.5 after the company announced that they have planned preferential share sale at Rs82.5 each. The scrip touched an intra-day high of Rs59.55 and a low of Rs58 and recorded volumes of over 20,00,000 shares on NSE.
Maharashtra Seamless was down 1.2% to Rs574. The company yesterday announced that they would acquire a Romania-based seamless pipes plant having a capacity of 20,000 ton per year. The scrip touched an intra-day high of Rs599 and a low of Rs560 and recorded volumes of over 1,00,000 shares on NSE.
Jubilant Organosys ended flat at Rs300. The company yesterday announced that it entered into an agreement with US-based Forest Laboratories for discovery of drug candidates for a metabolic disorder. The scrip touched an intra-day high of Rs310 and a low of Rs298 and recorded volumes of over 36,000 shares on NSE.
Reliance Communications gained 2.1% to Rs734 after the company secured all-India GSM license from DoT. The scrip touched an intra-day high of Rs754 and a low of Rs721 and recorded volumes of over 72,00,000 shares on NSE.
Bombay Dyeing dropped 4% to Rs727 after the company declared that the repeal of land act has no impact on Projects. The scrip touched an intra-day high of Rs774 and a low of Rs714 and recorded volumes of over 4,00,000 shares on NSE.
IT stocks were back in the limelight as rupee headed for a weekly gain on speculation overseas funds would increase holdings of equities. Index heavyweight Infosys was up 5.3% to Rs1722, TCS was up 2.6% to Rs1062, Polaris surged by over 9% to Rs124.
Eicher Motors rallied by over 7% to Rs542 after company declared that the Board of Directoprs of the company would meet on December 12 to mull strategic partnership for CV biz. The scrip touched an intra-day high of Rs588 and a low of Rs515 and recorded volumes of over 3,00,000 shares on NSE.
Alok Textile was up by over 3.5% to Rs82 after the company announced that they would set up Economic zone for Textile. The scrip touched an intra-day high of Rs84 and a low of Rs79 and recorded volumes of over 26,00,000 shares on NSE.
What the FIIs are doing
FIIs were net sellers of Rs2.54bn (provisional) in the cash segment on Friday while the local institutions pumped in Rs3.4bn. In the F&O segment, foreign funds were net sellers of Rs1.52bn on the same day.
On Thursday, FIIs pumped in Rs8.2bn in the cash segment. Mutual Funds were net buyers of Rs977mn on the same day.
Stocks in News:DLF, GMR and L&T, amongst a dozen private players, are likely to have bid for modernization of Udaipur airport. (FE)
Vodafone Essar, Idea and Bharti group to form Indus Towers to provide passive infrastructure to other mobile operators. (BL)
Godrej Consumer on lookout for acquisitions in hair colour business in developing markets. (BS)
Reliance Industries to supply KG basin gas to Mahagenco, the Maharashtra state owned utility, at US$4.34 per mmbtu. (BS)
Sesa Goa to invest Rs10bn to increase its pig iron capacity to 1mn tons in the next two years. (BL)
M&M may partner BAE Systems for a manufacturing JV in India (FE)
Suzlon plans to raise US$500mn from QIP route; its Belgium subsidiary Hansen raises Rs23bn from a London IPO. (BS)
RPG Enterprises to invest Rs140bn over the next three years in group businesses; power to account for Rs90bn. (FE)
Reliance Energy forms JV with five companies, including Arcelor Mittal and GMR, for coal mining in Orissa. (BS)
Indiabulls Real Estate's retail arm to buy Piramyd Retail, a Ashok Piramal group company; to pay Rs1.7bn for 84% stake. (BS)
Wockhardt to consolidate its global operations; its hospital chain arm to raise Rs10bn from an IPO in first quarter of 2008. (BL)
IOC has tied up with Egyptian General Petroleum Corporation to build refinery in Egypt. (ET)
UK based Stemcor and Ispat Industries form JV to set up a coke oven plant at latter’s unit. (DNA)
Bharti Airtel may list its hived-off tower arm Bharti Infratel. (ET)
GAIL has signed an agreement with Reliance Gas Transportation Infrastructure for transmission of natural gas from the Krishna Godavari basin. (ET)
Essar Shipping & Logistics to buy six ships from a Chinese manufacturer for US$390mn. (Mint)
Tata Motors to set up a unit at Dharwad to make buses. (BS)
Sun Pharma's attempts to acquire Israeli drug maker Taro Pharma delayed as latter postpones shareholders' meet. (BS)
NALCO plans to sign a MoU with Indonesian to build a smelter on Sumatra island. (TOI)
NTPC and BHEL may invite a private equity partner for their JV for engineering and construction work for power plants. (DNA)
Leading car makers to increase prices later this month or early next month. (FE)
Inflation rate slowed to 3.01% for the week ended November 24th on account of cheaper food items. (BL)
Innovative policy response needed to control capital flows without hurting growth and prices, says Mid-Term Review 2007-08. (BS)
22 fertilizer companies to get bonds worth Rs39bn. (ET)
RBI permits banks to invest in unrated bonds of infrastructure companies within the ceiling of 10% for unlisted non-SLR securities. (BL)
The Government asks Delhi International Airport Ltd. to freeze land development plans. (Mint)
GSM lobby group COAI walks out of the DoT spectrum review panel. (FE)
The Government to ask all states to reduce sales tax on ATF. (ET)
The market ended the week with fair gains, with the Sensex finishing 3.11% or 603 points higher, and the Nifty 3.67% up. However, the week belonged to the mid caps, with the CNX Midcap surging 6.02%. Reliance Energy was the biggest winner among the Sensex stocks with an 11.2% gain. The other gainers were Wipro, Reliance Communications, Cipla, DLF, Infosys and Mahindra & Mahindra, with gains between 6% and 10%.
Grasim was the biggest loser among the Sensex stocks with a 4% loss. ACC followed, with a 2.3% loss. Reliance Industries and Bajaj Auto were the only other Sensex stocks to decline, but with losses of less than half a percent. Chambal Fertilisers was the biggest winner among the more heavily traded non-Sensex stocks with a 36.6% gain. It was closely followed by Ispat Industries, Videocon Industries, Core Project, Wire & Wireless and Centurion Bank of Punjab — all of which gained 30% or more. GMR Infra was the biggest loser with a 5% loss. Electrosteel Castings, United Spirits and Voltas followed with losses between 2% and 4%.
Intermediate trend: The Sensex and Nifty are in intermediate uptrends since their November 22 lows. The CNX Midcap remained in an uptrend all that while. The intermediate uptrend will end if the Sensex falls below 18883, the Nifty below 5596 and the CNX Midcap below 7700.
The Sensex and Nifty have been moving sideways for the past seven weeks. The Sensex has swung between 18182 and 20238, which means it has stayed within 5.4% from the mean of that range. Hence, a more meaningful trend will develop once these indices emerge from their bands. However, the CNX Midcap has remained in a persistent uptrend, and has now gained almost 15% since the Sensex first crossed 20000 at the end of October.
Long-term trend: The market is in a bull phase even though the Sensex and Nifty have failed to reach fresh new highs with the regularity we saw until October. The bull market will end if the indices close below their previous intermediate bottoms. These stand at 18183 for the Sensex, 5394 for the Nifty, and 6463 for the CNX Midcap.
There is a possibility that we could be in a bubble. There are several instances of the market caps of purely speculative stocks exceeding those of well-established businesses. Also, there is a tendency for stocks to shoot up much too spectacularly on the slightest whiff of good news. Even so, the bubble can continue to grow for a while before it finally bursts.
Short-term outlook: Global markets are rising and we should be in for further gains this week — and the 20000 level could be finally left behind. A global reversal before that will change the picture. At the same time, we are tending to see sharp two-way moves, even though the rallies have delivered better returns.
Strategy: Fresh long and medium-term purchases should now be made only after the next intermediate downtrend ends, and provided the bull market continues. Stocks which are under-performing during this uptrend can be vulnerable when the uptrend ends.
These include Reliance Infrastructure, ACC, Zee Entertainment, Axis Bank, Grasim Industries, Hindalco, Ranbaxy Laboratories, ITC, Tata Steel, Hindustan Unilever, Religare Enterprises, Reliance Industries, ONGC, Century Textiles, Siemens, Suzlon Energy, Satyam Computer Services, ABB, Sesa Goa and Larsen & Toubro.
The intra-day range for the indices had been small early last week, but has now started increasing. This should provide intra-day traders with some trading opportunities, but with closer than usual trailing stops, as the market is tending to fluctuate both ways inside a session.
Swing traders should favour the long side as the intermediate trend is up and overnight risk is not particularly bad. Please note that all forms of short-term trading will succeed only with a proper risk and money management strategy.
Global perspective: Most global indices are now in intermediate uptrends. The Dow will end its uptrend if it breaches 13140. The Nikkei had reached a 14-month low during the last downtrend, and is clearly in a bear market. Most European indices made lower intermediate tops during the last downtrend, and their bull phases are threatened. A closing below its last intermediate bottom of 12700 will signal a bear market for the Dow, and such an event could well trigger a global bear market too.
The Sensex’s gain for ’07 (until Thursday) stands at 43.6%, making it the sixth best performer among 40 well-known global indices considered for the study. Shanghai continues to head the list with an 88.2% gain. Indonesia, Hong Kong, Brazil and Turkey follow, with gains between 43% and 55%. (These rankings do not take exchange rate effects into consideration). The Dow Jones Industrial Average has gained 9.3% and the Nasdaq Composite 12.2% during the same interval.
Via Economic Times
Reliance Power may be forced to push its initial public offering (IPO) to early next year, as the Securities and Exchange Board of India (Sebi) is still grappling with the fine print of the red herring prospectus.
Billed to become one of the biggest IPOs in recent times, the Reliance Power issue has evinced interest among investors in the power sector, even as it triggered apprehensions in some quarters on the pricing.
Sources in the group were emphatic that the Rs 8,000 crore issue will hit the primary markets, but it’s the timing they are not sure of, as Sebi is going through the details with a fine-tooth comb.
“Even if we obtain all the approvals now, we’ll avoid doing road shows in the fag end of December. It’s a wrong time to approach foreign institutional investors, as their fund managers normally go on Christmas holidays during that time,” a source said.
For the Reliance Power IPO to be a success, the response from foreign investors will be critical.
Reliance Power is owned a little over 50% by Reliance Energy, with the balance by R- ADA group’s investment firms.
A clue to the postponement of the issue came when Reliance Energy promoters decided to infuse about Rs 8,000 crore in the company, through a preferential issue to the promoters and major institutional shareholders.
The infusion, to be done through warrants within a span of two years, will see the balance sheet of Reliance Energy “increase substantially,” a recent report by broking firm Tower Capital & Securities said.
As REL’s net worth reaches Rs 20,000 crore, post the 2009 dilution, Tower Capital said the company can give Reliance Energy “appropriate cushion” to manage an order book of Rs 1,00,000 crore.
However, analysts say that the Rs 8,000 crore infusion will only facilitate its infrastructure businesses that include metro rail, road projects, townships etc.
All the power-generating businesses have been shuffled into Reliance Power.
CMP: Rs 256
Citigroup values HCL Infosystems (HCLI) at Rs 305, which includes hardware business Rs 184 (12x EV/EBIT), the Nokia business Rs 107 (probability weighted 5.5x EV/EBIT) and cash Rs 14. HCLI is a play on government and domestic industry tech spending. With a focus on systems integration, its hardware revenues — backed by stable margins — will witness an estimated CAGR of 25%.
The Nokia business has been a drag on HCLI’s growth over the past few quarters. With re-distribution of the addressable market having been completed, the business is likely to recover in Q308 and witness a CAGR of 14% during FY08-11. On a like-for-like basis (ex-Nokia renegotiation), HCLI’s FY08E sales growth should be much higher.
Adjusting for the value of the hardware business and net cash, the market values the Nokia business at an estimated Rs 27 per share — lower than Citigroup’s worst-case assumption of the contract value terminating in FY11. Nokia is unlikely to end its contract with HCLI, given the latter’s wide and hard-to-replicate distribution network. The company has ventured into digital lifestyle stores as a new distribution channel, as well as training.
Research: Morgan Stanley
CMP: Rs 421
Morgan Stanley has downgraded BPCL to ‘underweight’ due to three reasons. Firstly, BPCL has outperformed the market by 19% in the past month. Secondly, Morgan Stanley’s global team has revised upward its long-term estimate of crude oil to $85/barrel (bbl); the Indian basket is at $63/bbl.
Thirdly, Morgan Stanley does not expect any major price rise in the next 12-15 months due to a possible election in the country. This has made the predictability of earnings very low and dependent on how much bonds the government wants to provide as part of its subsidy share.
BPCL has one of the lowest operating costs per barrel in the refining business across Asia, at under $2/bbl, and it has one of the strongest marketing franchises in the retail petroleum segment in India. However, the more it sells, the more it loses in the current high crude oil environment.
The global team expects crude oil prices to move to higher levels of $95/bbl by ’12, and has revised its long-term estimate to $85/bbl from $65/bbl. Thus, the cash losses of $22-23/bbl will continue in the system. Uncertainty on earnings for the downstream sector will continue at least for the next two years.
Research: Merrill Lynch
CMP: Rs 1,442
Merrill Lynch expects Nestle to be the fastest-growing company in the consumer staples space in ’08. Relative to the Sensex, it is at a P/E premium of 20%, which is low for a domestic high-growth consumer business.
Nestle’s sharp underperformance in the past few years makes it a good buying opportunity. Nestle is growing faster than the earlier expectations, led by stronger topline and higher operating efficiencies.
Hence, Merrill Lynch has upgraded its ’07E EPS by 6%. Over the next two years, Nestle’s EPS is expected to grow at an average of 26.5%. There is a strong upward risk to the estimates led by Nestle’s robust topline growth.
Over the next two years, Nestle’s sales will grow by an average of 21% with two-thirds of the growth coming from volumes. The company’s key growth drivers are: 1. Growing urban incomes — Nestle is a key beneficiary of this trend; 2. Stronger new product activity offering higher margins; and 3.
Benign competition: Nestle is a virtual monopoly in the structurally higher growth processed foods categories. Agri input costs will continue to rise, but the rate of growth is likely to be lower than in the past. More importantly, Nestle has been able to pass on the cost increases; higher sales volumes are delivering operating leverage and its new products are likely to offer higher margins.
CMP: Rs 1,936
Suzlon Energy has underperformed the domestic market by 6% on a 12-month basis, versus the rest of the wind energy stocks, which have outperformed their respective local markets by an average of 50%.
However, in absolute terms, the stock has gone up by 32% due to the strength of the domestic market. This relative underperformance has been due to concerns over the bidding war that developed over REpower, as well as concerns regarding the leverage of Suzlon Energy (gearing stands at 102%).
There were also concerns regarding its ongoing ability to finance its aggressive expansion plans at the same time as completion of the acquisition of REpower. In addition, margins have been falling as the business internationalises, in line with expectations.
However, with some clarity emerging now on Suzlon’s funding position with the recent issuance of a convertible bond, and the prospective spin-off of a stake in Hansen Transmission, HSBC believes that this period of uncertainty has ended.
HSBC retains some concerns regarding Suzlon’s balance sheet — especially given the aggressive nature of its acquisition strategy and expansion plans — and over the full integration of REpower and the evolution of margins. However, the balance of risks is more today than it has been throughout ’07.
Research: Lehman Brothers
CMP: Rs 415
Crompton Greaves (CGL) is one of the largest domestic transmission and distribution (T&D) equipment manufacturers in India. It has a presence across various products, and will reap the benefits from the spate of investments in the T&D segment. The company is also a major player in the industrial motors segment. It manufactures both high tension (HT) and low tension (LT) motors.
Lehman Brothers expects this segment to grow robustly, since there will be large industrial capex in India over the next three years. CGL’s consumer products division, which manufactures products such as household fans and pumps, should also reap the benefits of high GDP growth. Lehman Brothers’ research estimates that India’s GDP growth could be as high as 10% over the next 10 years. On a consolidated basis, CGL’s core EBITDA margins for FY07 were 8.5%, while standalone margins stood at 10.2%.
Consolidated margins were depressed because of the impact of acquisitions of loss-making Ganz and lower operating margins of Pauwels. Crompton Greaves recently entered into a franchise agreement with Maharashtra State Electricity Distribution Corporation (MSEDCL) for electricity distribution in three divisions of Nagpur circle in Maharashtra.
This is a new business initiative for the company and the targets set in the agreement are fairly aggressive. The foray, if successful, may help the company to bag more orders for its T&D division and reduce its receivables cycle in the long run. If CGL is able to beat the loss reduction targets set by MSEDCL, that will be its main upside in this deal.