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Thursday, December 27, 2007
Sensex gains amid choppy trading
The market was poised for a negative close, but late bout of buying pulled the Sensex above 20,200 and halted its downturn. Frontline stocks traded within a narrow range on the back of expiry of December derivative contracts, but mid- and small-cap shares remained buoyant for entire trading session. Shrugging off the mixed trend in Asian markets, Sensex resumed 108 points above its last close at 20,193.It extended its upmove for a brief period and touched the day's high of 20,324, however profit bookings at higher levels saw it shed over 130 points and enter into negative territory by afternoon. Lack of buying interest kept the market lacklustre thereafter and Sensex touched the day's low of 20,160. But, consumer durables, metal, PSU and FMCG shares received some buying support towards the close and the market turned positive. Sensex finally closed the session at 20,217, up 24 points, while the Nifty ended the session with a gain of 11 points at 6,082.
The breadth of the market was positive. Of the 2,953 stocks traded on the BSE, 2,069 stocks advanced, 841 stocks declined and 43 stocks ended unchanged. On sectoral front,BSE CD index was up 1.79% at 6,339 and BSE FMCG index gained 0.92% at 2,253. However BSE Auto index, BSE CG index, BSE HC index, BSE IT index, BSE Teck index and BSE Realty index closed marginally down.
Among the major losers, Tata Motors shed 2.05% at Rs737, Satyam Computer declined 1.72% at Rs451, Reliance Communications fell 1.66% at Rs731, Bharti Airtel slipped 1.65% at Rs966, while Ranbaxy, L&T, Grasim, SBI, M&M and Infosys were marginally down. HDFC Bank, however, gained 2.77% at Rs1,750, followed by Wipro up 2.54% at Rs549, ICICI Bank added 1.85% at Rs1,242, ITC jumped 1.85% at Rs203 and Tata Steel was up by 1.52% at Rs906.
Over 2.62 crore IKF Technology shares changed hands on the BSE followed by GV Films (1.95 crore shares), Himachal Futuristic Communication (1.86 crore shares), Maars Software (1.71 crore shares) and Arvin Remedies (1.50 crore shares).
Valuewise, Essar Oil registered a turnover of Rs272 crore on the BSE followed by Reliance Energy (Rs225 crore), Reliance Industries (Rs179 crore), Reliance Petroleum (Rs173 crore) and Orchid Chemical (Rs120 crore).
Market Close: Choppy sessions post the santa rally?
It was a choppy day for the markets on last F&O expiry session for the year 2007. Indian markets had a good start with gapup points but sooner gave up most of its morning gains made and traded absolutely flat till mid session. Trading session continued to be choppy through out the day with occasional dips in negative territory. Alternate bouts of buying and selling activities restricted the movement of the indices within a narrow range but However 20K level was maintained till the final hour. For the December F&O series Nifty was up 8%, BSE smallcap up 21%, Nifty rollover position was seen at 75% Vs 60% last month and market wide turnover at 80% which shows market outlook looks positive. Small cap (up 2.2%) counter continued to witness buying interest and out performed the mid caps and index heavy weights. FMCG, Metal, Oil and Power stocks traded with buying support while Auto, Reality and Pharma counter were under selling pressure. Asian markets ended in mixed cue while European indices continued to trade marginally higher in green.
Sensex closed higher by 24 points at 20216.721. It was helped up by gains in Wipro (549.3,+3 percent), HDFC Bk (1744.95,+2 percent), ICICI Bk (1242,+2 percent), ITC (203.35,+2 percent) and TISCO (906.35,+2 percent). Restricting the gains were Tata Motors (736.7,-2 percent), Satyam (451.4,-2 percent), RCVL (730.8,-2 percent), Bharti Tele (966.3,-2 percent) and Ranbaxy (411.5,-1 percent).
Capex plans announced by Videocon Ind were the primary reasons for Videocon ind to be in lime light. Company intends to invest $ 5 bn in power projects in Gujarat and has announced bids for the project. Videocon is a well known player in the consumer durables industry. Margins from the consumer durable business of the country can come under pressure with increase in the organised retail by players with deep pockets. The other business of the company includes oil extraction, where company has 25% partnership. Unconfirmed reports state that the company intends to re structure its business and separate the oil exploration business and the consumer durables business. That would be done with an intention to unlock the share holders. Any fresh position in Videocon at this point is not recommended from the long term point of view till more information is revealed by the company. However, trading up sides are worth considering as the volumes have increased considerably on this counter. Videocon Ind closed higher by 9% for the day.
Karuturi bloomed amid choppy sessions on the back of strong fundamentals and closed higher by 10%. Company is the largest Rose cultivator in the country. The proposed acquisition in Kenya would make company the largest cultivator in the world. Karuturi has 10 hectares in India where it produces 15 mn stems. The company has 50 hectares operational in Ethiopia with a capacity of over 80 mn stems. An additional 50 hectares is planned and expected to go live next year. Karuturi Networks has been allotted additional 450 hectares of land by the Government of Ethiopia for its expansion and diversification projects. Cost of air freight out of Ethiopia is $1 per kg of rose as against $2.5 per kg out of India, a 60% cost saving. Setting up operations in Ethiopia, it could avoid a customs duty of 28% levied on goods entering the US. We are positive on the company and have a wow call running on the company as well. Do read our note on the company to know more.
Technically Speaking: Markets traded in narrow range with positive market breadth . Intra day high for the day was 20,324 while sensex touched an intra day low of 20,160. Advances out numbered declines in the ratio of 3:1. Resistance is at 20,600 levels while support lies at 20,020-19,710 levels. Volume of Rs 8,232 cr was churned out through out the day.
Post Market Commentary
The market after struggling a lot through out the trading session finally managed to close on an upbeat note. A lot of volatility was seen in today''s trading session. The cues from the global markets, led the domestic market to open with good gains but the investors took calculated steps in booking their positions after the last two days of strong rally by the market. However, both the Mid Caps and Small Caps indices outperformed the benchmark indices as most buying is seen from these baskets. The BSE Mid Cap and Small Cap closed higher by 28 points and 286.25 points at 9,428.86 and 12,628.74 respectively. The Metal and Consumer durables indices remained in the limelight as the investor''s showed more interest in buying from these counters. The BSE Sensex closed with marginal gains of 24.20 points at 20,216.72 and NSE Nifty closed up by 10.75 points at 6,081.50. Overall, the market breadth was strong as 2,069 stocks are closed in green while 841 stocks are closed in red.
BSE Metal index surged 175.77 points to close at 19,467.11. Scrips that grew are NALCO (9.76%), Gujarat NRE (5.59%), JSW Steel (4.01%), Tata Steel (1.52%)
BSE Oil & Gas index grew by 7.04 points to close at 13,123.03. Pushed up by IOCL (2.92%), Essar Oil (2.52%), Cairn (0.68%) and ONGC (0.37%).
BSE Capital goods index declined by 12.05 points to close at 19,642.26. Slipped by Jyoti Structure (3.28%), Havell India (2.70%), Praj Industries (2.68%), Alstrom Project (1.24%).
BSE Realty index closed lower by 29.83 points at 12,080.16 as Phoenix mill (5.96%), Penland (3.43%), Omaxe (2.67%), Sobha developers (2.07%) and DLF (0.38%) closed in red.
BSE Bankex index closed higher by 80.25 points to close at 11,370.33. Scrips that grew are Yes bank (4.96%), HDFC bank (2.77%), BOB (2.44%) and ICICI bank (1.85%).
BSE IT index fell 22.73 points to close at 4,569.14. Scrips that fell are I-Flex (2.83%), Finance Tech (2.72%), GTL Ltd (2.52%), Satyam (1.72%) and Tech Mahindra (1.65%)
Market slips into the red
The market slipped into the red in afternoon trade. Auto and healthcare stocks declined. Metal stocks remained firm. FMCG stocks gained momentum. Market breadth was strong. 15 out of 30 stocks from the Sensex pack were in green. Asian markets, which opened before Indian markets, were mixed.
As per reports, Nifty rollover from December 2007 series to January 2008 series stood at 66% while total market wide rollover stood at 66%, by Wednesday, 26 December 2007.
At 13:20 IST, the 30-share BSE Sensex was down 24.67 points or 0.12% to 20,167.85. Sensex hit a low of 20,164.16 in afternoon trade. At day’s low, the Sensex shed 28.36 points. Sensex had hit a high of 20,323.76 in early trade. At day’s high, the Sensex gained 131.24 points.
The broader CNX S&P Nifty was down 5 points or 0.08% to 6065.75.
The BSE Mid-Cap index was up 0.32% to 9,430.72. The BSE Small-Cap index was up 1.93% to 12,580.69.
The market breadth was strong. On BSE, 2140 shares advanced as compared to 735 that declined. 37 shares were unchanged.
India’s largest private sector firm by market capitalization & oil refiner Reliance Industries fell 0.20% to Rs 2890.95.
India’s largest private sector bank by assets ICICI Bank rose 1.20% to Rs 1234.
India’s second largest software exporter by sales Infosys Technologies rose 0.08% to Rs 1813.40.
Hindalco Industries moved up 2.53% to Rs 214.70, ITC rose 2.55% to Rs 204.75, Reliance Energy gained 1.95% to Rs 2153.10, ONGC climbed 1.63% to Rs 1256.30 and HDFC Bank flared up 1.36% to Rs 1726.10.
Bajaj Auto declined 2.77% to Rs 2607.70, Bharti Airtel fell 2.47% to Rs 958.25, Reliance Communications gave away 1.45% to Rs 732.25, Grasim Industries shed 1.13% to Rs 3576 and Tata Motors fell 0.94% to Rs 745.
Among the mid-caps, ISMT surged 20% to Rs 134.05, Raymond soared 8.15% to Rs 434, CMC spurted 7.94% to Rs 1,396.55, Castrol India jumped 7.47% to Rs 312.10 and SpiceJet rose 7.43% to Rs 74.50.
Among the small-caps, Sagar Cement surged 20% to Rs 435.90, Kalindee Rail Nirman (Engineers) soared 20% to Rs 517.35, KRBL spurted 20% to Rs 146.80, Hindustan Organic Chemicals jumped 16.67% to Rs 94.50 and Era Infra Engineering climbed 15.07% to Rs 333.20.
Some of the key Asian indices turned negative after a firm opening today, 27 December 2007. Key indices in China, Singapore, South Korea and Taiwan were up between 0.04% to 1.93%. However, key indices in Japan and Hong Kong were down between 0.57% to 0.67%.
US markets closed almost unchanged on Wednesday, 26 December 2007. Dow Jones industrial average rose 2.36 points at 13,552. Nasdaq Composite index gained 11 points at 2,724 and the S&P 500 index advanced 1.21 points at 1,498.
Back home, the 30-share BSE Sensex jumped 338.40 points or 1.70% to 20,192.52 on Wednesday, 26 December 2007. The broader CNX S&P Nifty rose 85.65 points or 1.43% to 6070.75 on that day.
As per provisional data, foreign institutional investors (FIIs) bought shares worth a net Rs 538.29 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 448.73 crore on Wednesday, 26 December 2007.
FIIs were net buyers to the tune of Rs 844.89 crore in the futures & options segment on Wednesday, 26 December 2007. They were net buyers of index futures to the tune of Rs 262.22 crore and bought index options worth Rs 698.49 crore. They were net sellers of stock futures to the tune of Rs 119.16 crore and bought stock options worth Rs 3.34 crore.
US Market fights for a late recovery
Nasdaq outpaces other indices with help of Apple which crosses $200 for first time
US Market ended little higher today, Wednesday, 26 December, 2007 with the Nasdaq clearly outpacing the other two indices. Trading volume was quite light as expected due to the ongoing holiday season. Traders became concerned with disappointing holiday sales figure and also some weak housing report.
Apple shares crossed the $200/mark for the first time ever. Crude oil prices shot up and crossed the $96/barrel once again as traders expected a drawdown in crude inventories in tomorrow’s report.
The Dow Jones industrial Average ended the day with a mere gain of 2.36 points at 13,551.7. The Nasdaq Composite Index, finished higher by 10.9 points at 2,724.41. S&P 500 finished edged higher by 1.2 points at 1,497.7.
Twelve out of thirty Dow stocks ended higher for the day. Citigroup and Walt Disney were a couple of the major Dow laggards. Exxon Mobil, Caterpillar and IBM were a few Dow winners. Alcoa and GE were a couple of main Dow winners for the day.
Target was today’s worst performing retail stock after the company warned its December same-store sales will come up short of expectations. The company said it now expects sales to be down 1% to up 1%, well below the previous forecast that called for sales to rise 3% to 5%.
Also, the S&P/Case-Shiller Home Price Index indicated October home prices dropped a more than expected 6.1% on a y-o-y basis. Market expected a drop of 5.7%.
Apple shares cross $200 mark for first time ever
Dow remained in the red for most part of the day. It inched up in the green territory in the final hour of trading after much dillydallying. Five out of ten economic sectors posted loss today.
Apple shares were mainly responsible for taking Nasdaq higher. Shares of Apple crossed $200 mark for the first time due to higher iPod, iPhone and Macintosh sales.
Indian ADRs ended in green today. ICICI Bank was the topmost winner gaining 3.4%. It was followed by Wipro Technologies which gained 2.3%.
Expectations of lower crude inventory and Turkish air strikes sent crude prices almost $2/barrel higher today. Prices have been on a roll since last Friday, 21 December and have gained more than $5/barrel since then. Prices once again crossed the $96/barrel mark today. Price also rose as the greenback slipped against its rival currencies.
Crude-oil futures for light sweet crude for February delivery closed at $95.97/barrel (higher by $1.84/barrel or 2%) on the New York Mercantile Exchange. Futures rose as high as $96.6 earlier in the day. Prices are 57% higher than the year before.
On the New York Stock Exchange, more than 838 million shares were traded, with declining stocks roughly equaling advancing stocks. More than 1.2 billion shares exchanged hands on the Nasdaq, with advancers outpacing decliners by 16 to 13.
Tomorrow, investors will focus on economic reports to set the tone of trading. The Commerce Dept.'s Durable Orders report is scheduled to hit the wires at 8:30 ET, along with unemployment claims for the week ended 15 December. Those reports will be followed by the Energy Dept.'s weekly inventories report at 10:30 ET.
Mid market report
The market has now slipped from the opening highs and is trading with marginal gain. The heavy buying is seen in the Metal and Capital Goods stocks. However the Health Care stocks today are facing the selling pressure. The BSE Mid Cap and BSE Small Cap however outperformed the benchmark index today. The overall market breadth remains positive, as 2069 stocks are advancing while 777 stocks are declining and the 42 stocks remained unchanged on BSE.
The BSE Mid cap is higher by 46.84 points at 9,447.70 and the BSE small Cap advanced by 242.94 points to trade at 12,585.43.
At 12.31 pm, BSE Sensex was at 20,224.98 up by 32.46 points whereas Nifty was at 6,076.85 up by 6.10 points.
BSE Metal index surged 186.40 points to trade at 19,477.74. The major gainers are Nalco (7.95%), Hindalco Industries (2.38%), SAIL (1.85%) and Tata Steel (1.01%).
Nalco has planned to invest Rs11,000 Crore in a mega Greenfield smelter and thermal power project in Indonesia.
BSE Capital goods index increased 52.26 points to 19,706.57. The main gainers are BEML (3.31%), Areva (3.23%), Bharat Electrical (2.14%) and L&T (0.35%).
BSE Banks index advanced by 61.70 points to trade at 11,351.78. The major gainers are Yes Bank (2.68%), HDFC Bank (1.96%), ICICI Bank (1.20%) and Union Bank (0.22%).
BSE Power index inclined by 16.29 points to trade at 4,460.05 as Power Grid (1.81%), Suzlon Energy (1.57%), Reliance Energy (1.10%) and Crompton Greaves (0.68%) are trading higher.
BSE IT index inclined by 21.75 points to trade at 4,613.62 as NIIT Techno. (1.47%), HCL Tech. (0.47%), Wipro (0.43%) and I-flex (0.29%) are trading in positive territory.
BSE Auto index increased by 4.69 points to trade at 5,647.59. Leading to its gain are MRF (1.93%), Cummins India (1.65%), Maruti Suzuki (0.54%) and TVS Motor (0.35%).
BSE Oil & Gas index was trading 4.13 points higher at 13,120.12 as Essar Oil (5.54%), ONGC (0.87%), Indian Oil (0.84%) and RPL (0.18%) are trading in green.
Daily Trading Calls
Buy Essar Oil with a stop loss of Rs 262 for a target of Rs 400.
Buy Shree Renuka Sugar with stop loss of Rs 930, for target of Rs 1300.
Buy Great Eastern Shipping with a stop loss of Rs 511 for a short-term targets of Rs 560-Rs 570.
Trading Calls
Market Grape Wine :
In House :
Nifty at a supp of 6034 and 5986 with resis at 6111 and 6185
F&O: Buy Ansalinfra above 415 with a TGT of 434 and a SL of 408
Buy DLF above 1024 with a TGT of 1048 and a SL of 1016
Intra Day: Buy Hindalco above 210 with a TGT of 220 and a SL of 205
Buy BEL above 1929 with a TGT of 1989 and a SL of 1900
Out House :
Markets at a support of 19786 & 20021 levels with resistance at 20442 & 20314 levels .
Buy : RIL & REL
Buy : JSW & sail
Buy : JpAsso & Jphydro
Buy : EssarOil bullet
Buy : ABAN
Buy : IBUllsreal & IBullsFin
Buy : NTPC & Bhel
Buy : IciciBank & SBIN
Buy : IndiaGlycol & Balrampur Bullet
Dark Horse : Aban , REL , Renuka , JpAsso , IBullReal , Bharti , IciciBank , RIL & SBIN
Trading Call
Buy Shipping Corporation of India above Rs 282. Stop Loss of Rs 244, target at Rs 355 and Rs 473
Govt approves FDI proposals
The government today gave its approval for 19 foreign direct investment proposals amounting to Rs 726.88 crore, which include Global Broadcast News Ltd's proposal to sell 26 per cent stake for Rs 500 crore. GBN is a part of media group Network 18.
The proposal of Cyprus-based Dunbay to acquire additional 5 per cent stake in Delhi Stock Exchange for Rs 10.61 crore has also been approved.
"The Finance Minister approved 19 FDI proposals recommended by the Foreign Investment Promotion Board (FIPB) in its meeting held on December 14," said a Finance Ministry statement here.
GBN has proposed to induct up to 26 per cent FDI worth Rs 500 crore, including investment by foreign institutional investors (FIIs).
The broadcaster, which runs English news channel CNN-IBN, had raised around Rs 105 crore from the capital market with an initial public offer (IPO) early this year.
The company has also announced to set up a joint venture with Jagran Group to bring out a business newspaper in Hindi language.
The government also gave its approval to the UK based- Middlebrough Oils to invest Rs 200 crore to set up a subsidiary to undertake extraction of crude Jatropha oil from Jatropha seeds.
Daimler Chrysler of Germany has also been allowed to set up a joint venture company to undertake body building of buses.
Year end gains
If you are looking for reasons pointing to the surge in equity markets and can’t find any, well then try an unconventional explanation.
Go back to history, if the last ten years data is to go by, the markets have posted positive returns, or in other words rallied in the last week of every year. Further, FII inflows have also been positive during the same period, contrary to popular belief that they usually stay away from the markets due to holiday season.
The gains in the last week of every year can be called a ‘Santa Claus rally’, though in Wall Street terminology. A Santa Claus rally refers to a jump in the prices of shares in the week between Christmas and New Year. In the US, there are several explanations for this phenomenon. Some of them relate to tax considerations, plain happiness around the street or also the fact that a lot of people are on vacation that week.
There are no definite explanations for such a situation in India but there has been a rise in the markets between Christmas and New Year every year since 1997. Data to study this phenomenon in India was available since 1997 only as prior to that the markets remain closed the week after Christmas.
The highest gains during the same period were posted by Sensex in 2003, which is 3.5%. Similarly, the highest net FII inflow also has been during the same year. However, data suggests that this not due to FII inflow alone as even though in 2006, the net FII position was negative, the markets gave a return of 2.3% during the same period. For the past four years, markets have gained handsomely during the same period, followed by strong FII inflows (expect 2006).
Even if we go by today's market movement, Sensex surged 3.6% to close at 19,854 points, which could be a precursor to the rally over the next few days. The provisional FII data stood at Rs 176 crores, according to NSE provisional figures. It is to be seen whether in percentage terms, Indian equity markets are able to see its best rally this time. In the same period last year, the Santa Claus rally raised the market by 2.3%.
Many analysts believe that the rise during such a period is more in anticipation of a strong performance in the early months of the new year as it is believed that there is always a lot of action in the period surrounding the budget. They also attribute this rise to beginning of the pre-budget rally.
Wanbury
We recommend a buy in Wanbury at current market price. From the weekly chart of Wanbury it is clear that it has been on a steady long-term uptrend since the March 2007 low of Rs 99.
However, the stock met with a significant long-term resistance at Rs 155 level in early November and began to move sideways. Following a month’s sideways consolidation, the stock is once again testing this resistance level. The stock is currentl y trading well above the 21-day and 50-day moving average line.
The daily and weekly momentum indicators are featuring in the bullish zone. Steady rally in the moving average convergence divergence indicator is a bullish sign. The immediate support for the stock is at Rs 140 level and the next support is at Rs 125 level.
Moreover, the long-term uptrend is intact. We expect the stock to break through the current resistance and move up to Rs 175 in the short-term. Short-term investors can buy the stock with stop-loss at Rs 138.
via BLFIIs in buying mode
Inflow of Rs 167.40 crore on 24 December 2007
Foreign institutional investors (FIIs) bought shares worth net Rs 167.40 crore on Monday, 24 December 2007, compared to their selling of Rs 515.80 crore on Thursday, 20 December 2007.
FIIs inflow of Rs 167.40 crore on 24 December 2007 was a result of gross purchases of Rs 3498.50 crore and gross sales Rs 3331.10 crore. The 30-share BSE Sensex rose 691.55 points or 3.61% to 19,854.12 on that day.
FII inflow in December 2007 totaled Rs 1073.70 crore (till 24 December 2007). FII inflow in calendar year 2007 totaled Rs 66,981.10 crore (till 24 December 2007).
There are a total of 1,214 FIIs registered with the Securities & Exchange Board of India (Sebi).
Nifty December futures at premium
Turnover in F&O segment rises
Nifty December 2007 futures were at 6076.50, at a premium of 5.75 points as compared to the spot closing of 6070.75. December 2007 derivative contracts tomorrow, 27 December 2007.
The NSE's futures & options (F&O) segment turnover was Rs 96,144.43 crore, which was higher than Rs 80,577.10 crore on Monday, 24 December 2007.
Reliance Industries (RIL) December 2007 futures were at premium, at 2901.50, compared to the spot closing of 2896.50.
GMR Infrastructure December 2007 futures were at premium, at 249.60, compared to the spot closing of 247.60.
Jindal Steel & Power December 2007 futures were at premium, at 14,799, compared to the spot closing of 14,667.25.
In the cash market, the S&P CNX Nifty gained 85.65 points or 1.43% at 6070.75.
Gold heads for seventh straight annual gains
Boosted by dollar weakness and rising crude, gold crosses $830 mark once again
Precious metals ended higher today, Wednesday, 26 December, 2007 after the dollar slipped against almost all its rival currencies. Gold crossed the $830/ounce mark once again and marked the highest price in almost a month. Gold generally moves in the opposite direction of the U.S. currency. Gold, as a dollar-denominated commodity, suffers from dollar strength.
Comex Gold for February delivery rose $13 (1.6%) to close at $829.5 an ounce on the New York Mercantile Exchange today. Prices touched $830.2/ounce during intra day trading. Last week, the yellow metal gained $17.4/ounce (2.2%). On, 7 November, prices had touched $848/ounce. It was the highest price after a record $873 on 21 January, 1980.
Comex Silver futures for March delivery rose 17.5 cents (1.2%) to $14.835 an ounce. Prices touched 26 year high on 7 November, after reaching $16.275. The metal has climbed 15% this year.
Gold is headed for a seventh straight annual gain. In 2006, silver had jumped 46% while gold gained 23%.
Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. Rising crude increases inflationary pressures and vice versa. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.
In the currency market today, the dollar index, which tracks the value of the greenback against a basket of other currencies, fell for a third day, down 0.6% to 77.14.
In the energy market, oil prices ended substantially higher after crossing the $96/barrel mark on supply concerns and Turkish airstrikes.
Gold had climbed 30% this year till date as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Dollar is still 9% down against the euro this year.
The Fed has reduced overnight lending rates by 1% in FY 2007. On 11 December, Federal Reserve lowered the federal funds rate by a quarter-point to 4.25%. The Fed also lowered its discount rate, the interest it charges on direct loans it makes to banks, by a quarter-point to 4.75%.
Before 11 December, Federal Reserve had cut the fed funds rate by a quarter-point to 4.50% on 31 October, 2007. Prior to that, Federal Reserve had cut interest rates by half percentage point on 19 September, 2007. With these interest rate cuts, dollar has been tumbling down. Market anticipates that there will be more rate cut in the coming year.
Crude oil rallies
Prices rise more than $2/barrel on anticipation that crude inventories will show a drop
Expectations of lower crude inventory and Turkish air strikes sent crude prices almost $2/barrel higher today. Prices have been on a roll since last Friday, 21 December and have gained more than $5/barrel since then. Prices once again crossed the $96/barrel mark today. Price also rose as the greenback slipped against its rival currencies.
For the day ending Monday, 26 December, 2007, crude-oil futures for light sweet crude for February delivery closed at $95.97/barrel (higher by $1.84/barrel or 2%) on the New York Mercantile Exchange. Futures rose as high as $96.6 earlier in the day. Prices are 57% higher than the year before.
The Turkish military announced today that its warplanes hit eight suspected Kurdish rebel hideouts in northern Iraq. Today's bombing raid was at least the third air operation in Iraq this month. Iraq has the world's third-largest crude-oil reserves.
Also, traders anticipated today that in tomorrow’s weekly inventory report, EIA will report a drop of 1.2 million barrels in crude inventory. This also led to crude price shooting up.
In the currency market today, the dollar index, which tracks the value of the greenback against a basket of other currencies, fell for a third day, down 0.6% to 77.14.
Brent crude oil for February settlement today rose $1.24 (1.3%) to $93.94 on the London-based ICE Futures Europe exchange.
Today, January natural gas rose as crude oil and related products rose. Gas for January delivery rose 2.1 cents (0.3%) to settle at $7.046 per million British thermal units
Against this backdrop, January reformulated gasoline gained 6.86 cents to $2.4526 a gallon and January heating oil rose 4.65 cents to $2.6412 a gallon.
As per EIA, global oil markets will likely remain tight through 2008 and monthly average oil prices are expected to near $85 per barrel over the next year. The IEA, an adviser to 27 nations, said global demand in 2008 will rise 2.5% to 87.8 million barrels a day.
The Energy Department is scheduled to release its weekly report on inventories tomorrow at 10:30 a.m. in Washington, a day later than usual because of Christmas.
Daily Technical Analysis
Nifty — The index opened on a positive note and witnessed a steady rise throughout the day’s trading session. It ended the day with gains of 86 points.
Sustains above 10 dma — The index is sustaining above the 10 dma on a closing basis, suggesting the upswing is likely to continue. On the upside, we expect the index can test higher levels around 6185 (high of 13 December 2007). On the downside, we believe that it has support around the 6025 levels with lower support around the 10 dma at the 5945 levels.
Conclusion — Expect the upswing to continue.
JK Cement, Pharmaceuticals
JK Cement
Cluster: Cannonball
Recommendation: Buy
Price target: Rs330
Current market price: Rs218
Capacity expansion to drive growth
Key Points
- The capital expenditure (capex) plans of JK Cement are on track. The company completed its expansion at Nimbahera plant by raising the capacity from 3.5MTPA to 4MTPA. It is in the process of setting up a 3.5MTPA plant in Karnataka by December 2008 along with a 50MW captive power plant (CPP).
- It has acquired Nihon Nirman with a capacity of 0.4MTPA at an acquisition and refurbishing cost of Rs100 crore, taking JK Cement's total capacity to 4.4MTPA.
- Acquisition of Nihon Nirman will lead to savings of Rs200 per tonne in freight cost, as claimed by the management.
- The company has also lined up a capex plan to set up CPPs. It plans to set up a 43MW CPP which will include a 20MW pet coke fired generation unit, a 13MW waste heat recovery power plant and 10MW turbines.
- The company is investing in capacity addition along with investments in power generation. Going forward, the production cost per tonne will reduce because of initiatives taken by the company to invest in CPPs. At the current market price of Rs218 the stock is trading at a price-to-earnings multiple of 6.2x discounting our FY2008 earnings estimate and at 7.8x times discounting our FY2009 earnings estimate. On increased capacities JK Cement trades at an enterprise value (EV)/tonne of USD80.
SECTOR UPDATE
Pharmaceuticals
Teva launches generic Protonix
Teva, the world's largest generic company, has launched the generic version of Wyeth/Altana's Protonix tablets in the USA on December 24, 2007 triggering off 180 days of exclusivity period for the product. Protonix is Altana's blockbuster drug for acidity and oesophageal reflux and is marketed in the USA by Wyeth. The product generated sales of close to $2.5 billion in 2006.
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