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Friday, June 06, 2008
Multibagger picks for the bear market
We are in a short term bear market (atleast we would like to assume so)
Let us know what your picks in this type of markets are and which could become multibaggers once the market recovers
Leave a comment on your winners and let others know
These were the Stock Picks of 2008 - If you had listed few picks there - let people know how they have been performing :)
NSE Bulk Deals to Watch - June 6 2008
Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,ASTUTE COMMODITIES & DERIVATIVES Pvt Ltd,BUY,129908,204.92,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,DINESH MUNJAL,BUY,175564,202.70,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,FIN BRAINS SECURITIES (INDIA) LTD.,BUY,132981,202.84,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,MANISH VRAJLAL SARVAIYA,BUY,166433,204.91,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,MANSUKH SECURITIES & FINANCE LTD,BUY,166912,202.20,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,PRASHANT JAYANTILAL PATEL,BUY,229879,204.59,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,R.M. SHARE TRADING PVT LTD,BUY,236197,203.22,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,SANJAY BHANWARLAL JAIN,BUY,194769,202.95,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,TRANSGLOBAL SECURITIES LTD.,BUY,156203,203.15,-
06-JUN-2008,PVR,PVR Limited,CITIGROUP GLOBAL MARKETS MAURITIUS PRIVATE LIMITED,BUY,139400,182.30,-
06-JUN-2008,ASIANELEC,Asian Electronics Ltd,DNBNOR CARLSON FUND,SELL,409780,117.28,-
06-JUN-2008,BRITANNIA,Britannia Ind Ltd.,FID FUNDS MAURITIUS LIMITED ,SELL,450000,1479.98,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,ASTUTE COMMODITIES & DERIVATIVES Pvt Ltd,SELL,133357,205.36,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,DINESH MUNJAL,SELL,175564,203.03,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,FIN BRAINS SECURITIES (INDIA) LTD.,SELL,132981,202.75,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,MANISH VRAJLAL SARVAIYA,SELL,166433,206.14,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,MANSUKH SECURITIES & FINANCE LTD,SELL,166912,202.51,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,PRASHANT JAYANTILAL PATEL,SELL,229879,204.71,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,R.M. SHARE TRADING PVT LTD,SELL,236197,203.37,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,SANJAY BHANWARLAL JAIN,SELL,194769,203.31,-
06-JUN-2008,GOKUL,Gokul Refoils and Solvent,TRANSGLOBAL SECURITIES LTD.,SELL,157203,203.31,-
06-JUN-2008,GUJNRECOKE,GUJARAT N R E COKE LTD,MORGAN STANLEY MAURITIUS COMPANY LTD,SELL,1775000,133.97,-
BSE Bulk Deals to Watch - June 6 2008
Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
6/6/2008 532981 ANU LABS TIRUPATI ONLINE B 268462 264.99
6/6/2008 532981 ANU LABS H K STOCK SERVICES PVT LTD B 120169 264.98
6/6/2008 532981 ANU LABS LABH INVESTMENT B 95500 264.54
6/6/2008 532981 ANU LABS PRABHUDAS LILLADHER PVT. LTD. B 68827 269.28
6/6/2008 532981 ANU LABS N D NISSAR B 72098 274.60
6/6/2008 532981 ANU LABS PINKEY POPATLAL JAIN B 135402 266.92
6/6/2008 532981 ANU LABS TIRUPATI ONLINE S 262598 278.85
6/6/2008 532981 ANU LABS GOPAL TRADERS S 69000 265.16
6/6/2008 532981 ANU LABS KASHISH FINSTOCK S 95000 270.32
6/6/2008 532981 ANU LABS PRABHUDAS LILLADHER PVT. LTD. S 68827 269.55
6/6/2008 532981 ANU LABS N D NISSAR S 72098 274.93
6/6/2008 532981 ANU LABS PINKEY POPATLAL JAIN S 135402 269.98
6/6/2008 532946 BANG MARUTI SECURITIES LTD S 91926 242.93
6/6/2008 590059 BIHAR TUBES MAVI INVESTMENT FUND LTD S 100000 170.00
6/6/2008 590061 BRUSHMAN IND JRK CONSULTANTS PVT LTD B 70000 122.00
6/6/2008 590061 BRUSHMAN IND ASHOK FINSTOCK LTD B 76230 120.70
6/6/2008 590061 BRUSHMAN IND ASHOK FINSTOCK LTD S 76230 121.87
6/6/2008 505923 CEEKAY DIAKI PRADEEP PASARI B 28275 66.44
6/6/2008 531358 CHOIC INTERN SUNITA DEVI S 35000 12.70
6/6/2008 532271 CYBERMAT INF BASMATI SECURITIES PVT LTD B 1167255 5.52
6/6/2008 517973 DMC INTER KRISHNA INFOMEDIA LTD B 22500 11.60
6/6/2008 532980 GOKUL REFOIL MANSUKH STOCK BROKERS LTD B 188751 202.85
6/6/2008 532980 GOKUL REFOIL SAM GLOBAL SECURITIES LTD B 146130 203.65
6/6/2008 532980 GOKUL REFOIL MANSUKH STOCK BROKERS LTD S 188751 202.75
6/6/2008 532980 GOKUL REFOIL SAM GLOBAL SECURITIES LTD S 146130 203.56
6/6/2008 516078 JUMBO BAG LT NILESH JOSEPH GONSALVES B 49973 44.70
6/6/2008 526409 KALPANA INDU JACQUA INDUSTRIES AND SALES CO LTD B 100203 111.70
6/6/2008 530771 KLG CAPI SER HEMANT R PATEL HUF S 20000 113.40
6/6/2008 505523 MAH IND LEAS VHM IMPEX PRIVATE LTD B 20000 21.00
6/6/2008 505523 MAH IND LEAS AYODHYAPATI INVESTMENT PVT. LTD. S 20000 0.56
6/6/2008 531996 ODYSSEY CORP SMITA MANOJ TURKHIA S 35000 29.91
6/6/2008 532626 PONDY OXIDES PRADEEP PASARI B 135500 20.46
6/6/2008 531273 RADHE DEVELO RAVI VASANTBHAI PAWAR S 100000 89.93
6/6/2008 532886 SEL MANUF MAVI INVESTMENT FUND LTD B 119000 519.42
6/6/2008 519228 TEMPT.FOODS ELARA INDIA OPP FUND B 159990 233.00
6/6/2008 519228 TEMPT.FOODS MORGAN STANLEY MAURITIUS COMPANY LTD S 160000 233.01
6/6/2008 531088 TULIP STAR H ANAAN MERCANTILES PVT LTD B 74846 290.37
6/6/2008 531088 TULIP STAR H JAROLI VINCOM PVT LTD S 75000 288.02
6/6/2008 532765 USHER AGRO MAVI INVESTMENT FUND LTD S 550000 150.01
Nifty futures at a discount
Turnover in F&O segment declines
Nifty June 2008 futures were at 4613.80, at a discount of 14 points as compared to spot closing of 4627.80.
The NSE's futures & options (F&O) segment turnover was Rs 42,888.38 crore, which was lower than Rs 51,017.90 crore on Thursday, 5 June 2008.
DLF June 2008 futures were at discount at 517 compared to the spot closing of 518.40.
Reliance Communication (RCom) June 2008 futures were at discount at 545 compared to the spot closing of 547.20.
Shree Renuka Sugars June 2008 futures were near spot price at 96.55 compared to the spot closing of 96.05.
In the cash market, the S&P CNX Nifty lost 49.15 points or 1.05% at 4627.80.
Asian markets post gains
Major Indices In The Region Record Healthy Gains While Europe Opens Steady
Most of the Asian Indices end their week with a broader advance taking a clue from after an overnight progress on Wall Street. On Wall Street, the Dow Jones Industrial Average climbed 213.97 points to end at 12,604.45 and the S&P 500 index surged 26.85 points to 1,404.05. The Nasdaq Composite rallied 46.80 points to 2,549.94.
Japanese markets jumped today, heading toward their second straight weekly advance, as exporters gained on a weakened yen. In Tokyo, the Nikkei 225 Average jumped 1.03% to 14,489.44 and the Topix index added 0.3% to 1,428.11.
On the economic front Japan's reserves of convertible foreign currencies, gold and International Monetary Fund special drawing rights in May were down $6.861 billion from April at $996.98. The country's foreign exchange reserves have shown only minor changes since Tokyo stopped its yen-selling intervention campaign in March 2004.
The rest of the region was mostly higher, after energy stocks bouncing back on a strong recovery in crude-oil prices to lift shares of energy companies in Sydney and in Hong Kong.
In Hong Kong, the Hang Seng Index gained 0.6% to 24,402.18 and the Hang Seng China Enterprises Index rose 1.2% to 13,513.21.
China's Shanghai Composite slipped 0.7% to 3,329.67, taking losses into the fourth straight session on persistent worries about large fund-raising plans of local companies.
Some investors expect Hong Kong and Shanghai stocks to be helped by speculation that data could show China's consumer price inflation falling in May.
Australia's S&P/ASX 200 advanced 1.1% to 5,592.10 and New Zealand's NZX 50 index slipped 0.2% to 3,548.08. Taiwan's weighted index advanced 0.1% to 8,745.35. South Korean markets were closed for a holiday.
Singapore's Straits Times Index rose 0.2% to 3,150.98. In the afternoon trading India's Sensitive Index, or Sensex, was down by 0.6% to 15,672.88 and the broader S&P/CNX Nifty fell 0.4% to 4,659.10.
In currency trading, the U.S. dollar bought 105.87 yen, compared with 105.90 yen late in New York.
July crude-oil futures rose as much as 44 cents to $128.23 a barrel in electronic trading, after soaring $5.49 to finish at $127.79 a barrel yesterday on the New York Mercantile Exchange. The rally came in the wake of a sharp fall in the dollar against most rivals, after European Central Bank President Jean-Claude Trichet hinted at a future interest-rate increase.
In Euro zone, European shares rose, as energy firms and miners got a boost from higher crude and gold prices before key U.S. jobs data scheduled to release in the evening.
Of the National indexes the German DAX 30 rose 0.8% to 6,995.30, the French CAC 40 soared 1% to 4,955.25 and the U.K. FTSE 100 climbed 1.2% to 6,059.10.
On the economic release side we had France's foreign trade deficit, which shrunk to EUR3.72 billion in April from EUR4.27, billion in March, as exports rose and imports fell.
Exports rose to EUR34.97 billion in April from EUR34.48 billion the previous month, the office said. Imports fell to EUR38.68 billion in April from EUR38.75 billion in March.
Last year, France posted a record trade deficit of EUR39.17 billion, compared with a deficit of EUR28.24 billion in 2006.
The French trade minister blamed last year's record deficit on the strength of the euro and the slowdown of the U.S. economy. However, France's trade balance has been deteriorating with countries that belong to the euro zone, as well as those outside the currency bloc.
Looking ahead for the day is scheduled to release industrial production data for the Germany, which will be followed by unemployment rate for the Canada. In the evening we have a series of economic data from the U.S. It will start with average hourly earning which will be followed by consumer credit and wholesale inventories. However the focus of the evening will be on unemployment rate that will be accompanied by the non-farm payrolls for the month of May.
Sejal Architectural Glass IPO Analysis
Promoted by the Gada family, Sejal Architectural Glass was incorporated in 1998 and started commercial operations in 2000-01 by setting up a processing facility for insulating glass. It started another process for toughened glass in 2001. An automated lamination line was installed in January 2007. Processing value-added glass for exterior and interior applications including decorative glass was also undertaken.
The installed capacity for insulating glass is 49,500 square meters (sq mt), tempering glass 2,40,000 sq mt and laminated glass 4,500 sq mt. The plant is located in the Union Territory of Dadra and Nagar Haveli in the Silvassa district of Gujarat.
Sejal Encasa, the trading division located in Mumbai, trades in various in-house brands as well as other manufacturers’ products including tiles, sanitary ware, mirrors and glass home and commercial interiors.
A new manufacturing facility for float glass, with a capacity of 2,00,750 tonnes per annum, is proposed to be set up at Jhagadia in Gujarat. Commercial production is expected to start from March 2009. The strategic location of this project will help in controlling costs and enhance the quality of glass used for value-added products. Land of 6,08,540 sq mt has been acquired for this backward integration project. Contracts have been awarded for executing the construction and civil works.
The cost of setting up this new manufacturing facility for float glass is Rs 434.86 crore. A term loan of Rs 318 crore has been raised from a consortium led by State Bank of Patiala, Rs 39.83 crore through issue of equity shares including the pre-IPO placement of 5,09,425 shares, and Rs 15 crore by means of an unsecured loan. Around Rs 96.53 crore to Rs 105.73 crore are to be raised by issuing 91,94,155 equity shares at the price band of Rs 105 to Rs 115 per share through IPO to part finance the funds required for capacity expansion and general corporate purposes.
Strengths
The proposed plant would be eligible for 100% income tax deduction for the first five years after the commencement of the commercial production and thereafter at 30% for the next five years.
The growth in real estate sector, especially in commercial offices, residential housing and retail industry will give boost to the glass and glass products industry.
Weaknesses
Operating in a highly competitive industry.
Had a negative cash flow (from operating activities) of Rs 46.34 crore in the nine months ended December 2007 and Rs 10.02 crore in the year ended March 2007 (FY 2007).
Depends on few customers for its business. Top three customers accounted for 54% and top 10 74% of the total turnover in the nine-month period. The loss of any one or more customers would adversely affect business.
Float glass plant is to be set up by taking huge debt. The float glass industry, apart from being capital-intensive, is dominated by a few large global players and is categorised by profit cyclicality. Ability to stabilise and upgrade a float-glass plant and also sell about six times current volume of glass remains to be seen.
Valuation
Sejal Architectural Glass has set a price band of Rs 105 to Rs 115 per equity share of face value Rs 10. At the lower band, the P/E would be 47.7 times the annualised EPS in the for nine months ended December 2007 and 105 times the annualised EPS in FY 2007 on post-issue equity of Rs 28 crore.
At the upper price band, the P/E would be 52.3 times the annualised EPS in the nine months ended December 2007 and 115 times the annualised EPS in FY 2007 on post-issue equity of Rs 28 crore. Considering the sector TTM P/E of around 18 and the risks involved, the issue price is very high
First Winner Industries IPO Analysis
Promoted by Rinku Patodia and Anita Patodia, First Winner Industries was incorporated on 22 January 2003 as a garment trading firm supplying textile fabrics to wholesalers and apparel and garment manufacturers. It mainly trades in various textile fabrics such as cotton fabric, blended fabric, nylon fabric, polyester fabric, furnishing fabric, woolen fabric, and non-cotton fabric to the wholesale customers to facilitate the manufacturing of garments. The company set up its own weaving unit in MIDC, Tarapur, District Thane, in Maharashtra by installing 100 looms in 2006-07.
To backward integrate, First Winner Industries started manufacturing grey fabric in 2006-2007. The manufacturing unit was set up with a capacity of 108 lakh meters per annum. The unit consists of 100 looms with the latest Rapier machine technology that facilitates fast mode of weaving. Each loom can manufacture grey fabric of 300 meters per day. Besides trading and manufacturing of fabrics, the company executes job works for manufacturing grey fabric for specific customers who supply the raw material. Thus, income from job work has started contributing significantly to the total income of the company.
First Winner Industries’ two operating subsidiaries, Ramshyam Textile Industries Ltd and Realgold Exports Pvt Ltd, are in the same business.
Ramshyam Textile Industries commenced its operations of weaving from 1 February 2006 and became the company’s subsidiary on 1 April 2007. It has 48 looms with an installed capacity of 42.24 lakh meter fabrics per annum.
Realgold Exports was incorporated on 12 December 2002 and became a subsidiary on 1 April 2007. It has a weaving unit with 48 looms and an installed capacity of 62 lakh meters per annum.
First Winner Industries plans to expand its grey fabric manufacturing capacity to around 170 lakh meters per annum from the current capacity of 108 lakh meters of grey fabric per annum. For this purpose, the company intends to buy 48 more looms with a production capacity of 62 lakh meters per annum.
To forward integrate operation, First Winner Industries is setting up a garment-manufacturing unit with production capacity of 5,000 pieces of men’s shirts per day. The company also plans to manufacture the entire men’s-wear range from this facility. It will explore the export market after setting up the garment manufacturing facility. To offer apparel products in the men’s-wear category, First Winner Industries will launch its own brands through its own retail outlets.
Strengths
- Integrating backward to manufacture grey fabrics will help the trading division to source fabric at a reasonable prices. The proposed apparel manufacturing facility could also source the fabrics from the manufacturing facility, thus, giving an integrated structure to the operation.
- Has design capability through in-house designing team as well as established relationship with various wholesale customers, which can be efficiently leveraged for apparel manufacturing and retail venture in the future.
- Foray into apparel retailing through own brands and outlets is a related diversification, which could serve well going forward.
Weaknesses
- Despite weaving capabilities, manufacturing has not started in a big way and income still continues to be mainly from trading, which is plagued by margin pressure.
- The textile industry is highly competitive with competition from both the organized and the unorganized sectors. Is in direct competition with leading Indian and international fabric manufacturers. The limited scale as well as reach will act as a major obstacle to fight competition.
- No long-term agreement with both suppliers of raw material as well as customers. Thus, vulnerable to price risk. Also, no firm commitment from customers.
Valuation
First Winner Industries has set a price band of Rs. 120 to Rs 130 per equity share of Rs 10 each, translating into a P/E of 34.6x at the lower price band and 37.5x at the higher price band, based on the unconsolidated annualised earning per share of Rs 3.5 for the 10-month period ended January 2008 on post-IPO equity.
However, consolidated annualised earning per share works out to Rs 8.6 for the 10-month period. Thus, P/E on the consolidated earning per share works out to 14.0x at the lower band and 15.2x at the lower band. Considering the nature of business, the asking price is high.
Weekly Tumble - 843 pts
India`s benchmark index, Sensex extended its losses for the third consecutive week, due to heavy selling by overseas investors and discouraging global markets. The 30-share index fell on soaring inflation concern and rising oil prices weighing down auto makers. ONGC, Wipro, ITC led the advances, while BHEL, Ambuja Cement and L&T led the declines.
The 30-share index lost 843.39 points, or 5.13% to 15,572.18 in the week ended June 6, 2008 whereas the broad based NSE Nifty closed down 242.30 points, or 4.97% to 4,627.80 in the same period.
The Sensex on Friday lost 197.54 points, or 1.25% to settle at 15,572.18, while the broad-based Nifty down 49.15 points, or 1.05% to end at 4627.80.
BSE mid-caps and small-caps declined 6.07% and 5.37% respectively over the week.
The wholesale price index witnessed a radical upsurge in inflation figures which stood at 8.24% for the week ended May 24, despite fall in prices of some essential commodities like fruits, vegetables, spices.
ONGC soared 10.29% over the week after the government announced hike in petrol, diesel, and LPG cylinder by Rs 5, Rs 3 and Rs 50 respectively.
The construction and engineering company Larsen & Toubro (L&T) fell 8.73% during the week on news that the company has outbid BHEL for supply of main power equipment for a proposed 1,600 mw power project in Andhra Pradesh.
New listing
Hyderabad-based drugmaker Anu`s Laboratories, which made its debut at the bourses on Wednesday, closed at Rs 268.05, representing a premium of 27.64% over its issue price of Rs 210. Shares of the company got listed at Rs 260, up Rs 50, or 23.81%.
Ahemedabad-based Gokul Refoils and Solvent settled at a discount of 7.15% at the Bombay Stock Exchange (BSE). Shares of the company closed at Rs 181.05, down Rs 13.95, or 7.15%. A total of about 21.15 million shares changed hands at the BSE.
Weekly Newsletter - June 6 2008
April exports jump 31.5% yoy
India's merchandise exports grew by 31.5% in April to US$14.4bn while imports surged 36.6% in the same month to US$24.3bn, resulting in a trade gap of US$9.87bn as against US$6.81bn in the same month last year. In rupee terms, India's exports grew by 24.8% in April while imports were up 29.7% over the same period of last year. Oil imports in April soared 46.2% to US$8.03bn, while non-oil imports jumped 32.3% to US$16.2bn. The Government has set a target of more than tripling India's share of world trade to 5% by the year 2020 from the current 1.5%.
Manufacturing still on strong wicket: PMI
India's manufacturing sector remained in a healthy state last month despite a key gauge falling to the weakest in the past 10 months, according to ABN AMRO Bank's Purchasing Managers' Index (PMI). The PMI stood at 57.4 in May compared with 57.5 in April. A reading above 50 indicates factory output gained. May data for the Indian manufacturing industry remained, on the whole, very positive. Output, total new orders, quantity of purchases and stocks of purchases all increased at marked rates, the ABN AMRO report said.
RBI bans Sahara from raising deposits
The Reserve Bank of India (RBI) banned Sahara India Financial Corporation - one of the country's biggest deposit-taking NBFCs - from raising fresh money from the public with immediate effect. The central bank said the decision was taken in public interest and to protect the interest of the depositors. In its response, Sahara India Financial obtained a stay on the RBI's order from the Lucknow bench of the Allahabad High Court. The case is scheduled to come up for hearing in the last week of July. The court also issued a notice to the Central Government in the matter. But, the central bank went one step ahead, and approached the Supreme Court, challenging the Allahabad High Court's stay on its order. The two sides now look to be heading towards a protracted legal battle.
Govt clears 23 SEZ proposals
The Board of Approval for Special Economic Zones (SEZs) considered 27 proposals for setting up of SEZs, including 4 for conversion of In-Principle approval to Formal Approval. The Board recommended grant of 21 formal approvals and 2 conversion of In-Principle Approval to Formal Approval. The SEZs that got formal clearance included L&T's IT SEZ in Gujarat and Bangalore International Airport's airport-based SEZ. Meanwhile, the Government said it will take a final decision on the Goa's four formally approved SEZs in July after getting the state government's comments on submissions made by the developers. Commerce Secretary GK Pillai, who is Chairman of the Board of Approval (BoA) for SEZs, heard views of developers of the four zones in the wake of the state government's recommendations to cancel the tax-free enclaves. The BoA could not take a final view on the fate of four SEZs as there was no representation from the state government at the meeting of the board.
TRAI unveils revised norms for satellite radio
Telecom and media regulator TRAI revised its recommendations on satellite radio, capping the ceiling for FDI in the segment at 74% and directing 4% revenue sharing with the Government. According to a financial newspaper, the Information & Broadcasting Ministry accepted TRAI's revised recommendations on satellite radio. World Space is the only player offering satellite radio services in the country right now. On implementation of the new TRAI policy, World Space will have to offload a 26% stake to a local partner. TRAI stated that there be no cap on the number of players in the satellite radio service, depending on the availability of satellites and spectrum for this platform. However, the regulator added that the Government may consult the Department of Telecommunications (DoT) and ISRO on this issue.
Jet, Kingfisher raise fuel surcharge
Jet Airways along with the Kingfisher-Deccan combine, raised fuel surcharge by Rs300 to Rs550 to recover higher fuel costs. Jet and its low-cost unit JetLite raised the levy by Rs300 on flights of up to 750 kilometers and Rs550 beyond that. The move followed Air India's decision to hike fuel surcharge last weekend after the state-run oil marketing companies hiked ATF prices by a whopping 18.5%. However, the same was cut by over 4% after the Government trimmed customs duty on ATF by 5%. Singapore Airlines, Cathay Pacific and other Asian carriers increased fuel surcharge as the price of jet fuel has almost doubled in the past year. Civil Aviation Minister Praful Patel was reportedly planning to meet Prime Minister Dr. Manmohan Singh over the issue of surging aviation fuel prices. Airlines in the country suffered a loss of Rs40bn last fiscal and the figure may double this year depending on the oil price movement. Domestic airlines told the Civil Aviation Ministry that they might go for a 20% reduction in the overall capacity. Airlines were also likely to take a decision on cutting down operations on some unviable sectors. Meanwhile, the Government set up a 10-member group to look into the complaints made by airlines after new private airports levied certain charges.
Tata Motors completes JLR deal
Tata Motors completed the acquisition of the Jaguar Land Rover (JLR) businesses from Ford Motor Co. for a net consideration of US$2.3bn, as announced on March 26, in all-cash transaction. Ford contributed about US$600mn to the Jaguar Land Rover pension plans. Tata Motors confirmed that David Smith, the acting CEO of JLR, would be the new CEO of the business. Smith has 25 years of experience with JLR and Ford. Before recently returning to JLR as CFO, he was Director Finance and Business Strategy for Premier Auto Group (PAG) and Ford Europe.
Indiabulls extends Singapore IPO
Shares of Indiabulls Real Estate rose the most in seven weeks after investors bid for all the shares offered in a delayed sale by its property trust in Singapore. The sale received bids for 1.8 times the number of shares offered to institutional investors, allaying concern that a decline in land prices and sell-off in property stocks would deter buyers. Earlier, Indiabulls Real Estate extended closing of the issue by one day. The public issue of Indiabulls Properties Investment Trust opened on June 2 and was originally scheduled to close on Thursday. Indiabulls Properties Investment Trust is seeking to raise up to S$389mn through the initial public offer (IPO) in Singapore. It plans to sell 353mn units at S$1 (US$0.73) to S$1.10 apiece in the Real Estate Investment Trust (REIT). An investment arm of NRI billionaire Lakshmi Mittal family has already agreed to purchase 91mn shares in the trust at the IPO price, amounting to a 3.9% stake. The company had filed an IPO prospectus for listing its property trust in Singapore last month.
Panna and Mukta fields shut after explosion
Oil & Natural Gas Corp. (ONGC) said it shut the Panna and Mukta fields off the west coast after an explosion. A third of the gas production has been affected, Sudhir Vasudeva, executive director at ONGC said. "There was minor damage in the equipment at Panna and that has forced us to shut gas and oil production," Vasudeva said. Gas production at the fields has been cut to 13.6mn cubic meters a day from the daily average of 17.3mn cubic meters. Output of 40,000 barrels a day of oil has also been hit. The fields are jointly operated by BG Group, Reliance Industries and ONGC. BG and Reliance each own 30% in the fields and ONGC holds the rest. The companies have declared force majeure. It is a legal clause that allows a company to miss contracted deliveries because of circumstances beyond its control. One person working for a contractor on Panna's process platform died in the accident, which took place late in the evening on June 3. The fields produce 20% of India's gas supply of 85mn cubic meters a day, including imported LNG. The blast also cut down 6% of India's total crude oil output or 40,000 barrels per day. If normal production is not restored, the country may have to import to make to for the shortfall.
India Inc steps up buying binge...
Anil Ambani, chairman of the Reliance-Anil Dhirubhai Ambani Group (ADAG), is planning to enter into the troubled world of aviation. According to reports, the younger of the two Ambani scions has initiated talks with Gurgaon-based low-cost carrier SpiceJet. Shares of SpiceJet rose as much as 23.4% after a business daily reported that Anil Ambani was in the race to buy a majority stake in the no-frills airline. According to the newspaper, Anil Ambani is competing with Jet Airways and Kingfisher Airlines. SpiceJet has hired NM Rothschild & Sons as an adviser to raise funds, according to the paper.
Sterlite Industries agreed to buy assets of bankrupt Asarco LLC for US$2.6bn in its first acquisition in North America. The company will use debt and cash to buy three open-pit mines and a smelter in Arizona, a copper-refiner, rod and cake unit and a precious metals plant in Texas. Asarco, the third-largest copper producer in the US, owns mines that hold about 5mn metric tons of copper resources. The 100-year-old company produced 235,000 tons of refined metal last year and had revenue of US$1.9bn. But, the deal may be challenged by Grupo Mexico SA, which controlled Asarco before it filed for bankruptcy protection in 2005.
Suzlon Energy has acquired Areva's 30% stake in German wind turbine maker REpower Systems. This acquisition will consolidate the company's total holding in REpower to about 66%, Suzlon said. With this acquisition and through voting pooling agreement with Martifer of Portugal - another major shareholder of REpower - Suzlon enjoys voting rights of about 89% in REpower, subject to certain minority protection and other rights. Areva said the sale of its stake in RE power has generated a capital gain of more than 350 million euros.
Telekom Malaysia is reportedly increasing its stake in Spice Communications. According to reports, Telekom Malaysia is likely to hike its stake in Spice to 51%, from the current 39%. At the same time, reports say that Idea Cellular may pick up a stake in Spice and will eventually merge the BK Modi company with itself. Promoters may either exit completely from Spice or retain marginal stake, the reports add. BK Modi had said in the AGM on Monday that Telekom Malaysia was considering raising its stake in Spice up to 74%.
Mahindra & Mahindra (M&M) signed an agreement with Engines Engineering SpA., agreeing to acquire 100% stake in Engines Engineering S.r.l, the new legal entity which will be formed by transferring the business of Engines Engineering SpA. The transaction is subject to receipt of necessary approvals. Engines Engineering’s revenues are about US$12mn. It is in the business of two wheels design and developing of motorcycle prototype.
Punj Lloyd acquired a strategic 74% stake in Technodyne International, UK for an undisclosed amount. Technodyne is a specialist engineering, design and consultancy company specializing in large scale cryogenic and high pressure tanks. Technodyne also has track record in designing of test rigs. Punj Lloyd said the acquisition is a strategic fit and further strengthens it's existing tankage & terminal business.
PVR said that JP Morgan Mauritius Holding IV Ltd. and ICICI Venture Funds Management Co. Ltd. have agreed, in-principle to invest Rs600mn each in the company's wholly owned subsidiary i.e. PVR Pictures Ltd. PVR Pictures is engaged in film production and distribution. It is planning to undertake significant expansion plans.
Long Term Recommendations - June 6 2008
Buy NTPC
Buy Tata Power
Buy Sterlite
Buy HCL Tech
Buy Nicolas Piramal
Weekly Snippets - June 6 2008
It’s been raining more pain than gain for the markets in recent times. The ray of hope remains a good monsoon. But with enough worries flowing in, it will take some fund flows especially from FIIs to get the bulls moving confidently. For the time being, the FIIs are in no mood to relent.
That leaves us with local worries, global fluctuations and some political drama. The outlook for the coming week will again hinge on global cues at start. We know its been the same old story in recent times. But then, the market just isn’t moving ahead. And so we remain with less sunshine and more dark clouds for the main indices.
Courage under fire or bungling again ?
The UPA Government finally bit the bullet on the fuel price hike issue and announced a package comprising a mix of price increases and duty changes to enable the public sector oil marketing companies to combat high crude oil prices. The price of petrol was hiked by Rs5 per litre while diesel turned costlier by Rs3 a litre. The Government also increased domestic LPG price by Rs50 per cylinder. Not surprisingly, there was no hike in kerosene price as it is too sensitive an item to be touched in an election-heavy year. The Government had last increased fuel prices in February, the first time since June 2006. Cooking gas prices had been capped since April 2005. Deora said India's petrol price should ideally have risen by 50%, and diesel and cooking gas prices should have doubled, to bring domestic prices in line with international rates.
Separately, the Finance Ministry announced revision in customs duty and excise duty on crude oil and petroleum products to help cushion the common man from the impact of higher fuel prices. Customs duty on crude oil was removed as against the current rate of 5%. Customs duty on diesel and petrol was cut to 2.5% from 7.5% while on other petroleum products (like ATF and Naphtha) the same was down at 5% versus 10%. Excise duty on petrol and diesel was trimmed by Re1 per litre each. Currently, excise duty on petrol is Rs14.35 per litre while the same on diesel is Rs4.60 a litre.
The fuel price hike will cut under recoveries by Rs211.2bn while Rs226.6bn will come from the duty cuts. OMCs themselves will bear net revenue loss of Rs200bn. The subsidy burden of the upstream oil companies will be Rs450bn. The Government will issue oil bonds worth Rs946bn. Despite the bailout package announced by the Government, there still will be a shortfall of around Rs419-420bn.
The price hike may add between 0.5% and 0.6% to wholesale price inflation, Petroleum Secretary M.S. Srinivasan said. Inflation for the week ended May 24 increased to 8.24%. Inflation for the current week ending June 07 will be released on June 20. Most economists expect inflation to cross 9% then, while the cascading effect of the fuel price hike may even take inflation above 10%. And, with inflation forecast to balloon to a double-digit mark, the RBI is also expected to announce fresh round of monetary tightening, including perhaps a small increase in policy rates.
Mindful of this fact, the Government urged ministries and bureaucrats to cut down on wasteful spending, especially on travel. In a rare move, the Prime Minister addressed the nation, explaining to them the rationale behind the fuel price hike, which he termed as "modest". He also urged the nation to conserve as much energy as possible. "We need to be efficient and economical in our use of energy," Dr. Manmohan Singh said. A substantial burden of high crude oil prices is still being borne by the Government and the public sector oil companies, he said.
Emphasising the precarious condition of the state oil companies, Dr. Singh said they are making a large sacrifice and are under severe stress. Issuing bonds and loading deficits on oil companies is not a permanent solution, he added. "We are only passing on our burden to our children who will have to repay this debt," the Prime Minister said, adding that more corrective measures are needed in future to help the oil companies.
The Prime Minister also called on states to do their bit by cutting sales tax on petroleum products. Several states like West Bengal, Bihar and Maharashtra obliged while others like Kerala were likely to follow suit. Even the BJP urged its chief ministers to trim sales tax on petro products.
But, the transporters and truck operators were in no mood to relent, as they hiked rates by up to 15%. At the same time, the Railways said it will absorb the entire burden of the increase in diesel prices. The reduction in sales tax also prompted oil companies to slash ATF prices by over 4%, but the airlines - already bleeding badly due to record high jet fuel prices - refused to pass on the benefits to consumers. Delhi announced that it will hike domestic LPG prices by only Rs10 per cylinder, while Andhra Pradesh decided to bear the entire burden of the hike in cooking gas prices.
Spice communications may opt for a stake sale
Promoters of Spice Communications Ltd, India’s seventh largest mobile phone company by subscribers, are considering three options for a stake sale in the business, and are in three-way discussions with Japan’s biggest mobile phone company NTT DoCoMo Inc., partner Telekom Malaysia Bhd and local firm Idea Cellular Ltd, a person close to the talks said.
Spice Communications is interested in scaling up its operations to compete more effectively with bigger rivals such as Bharti Airtel Ltd, Reliance Communications Ltd and Vodafone Essar Ltd. The New Delhi firm is owned 40% by industrialist B.K. Modi and family, with 39.3% held by Telekom Malaysia. The rest is held by public shareholders and institutions.
A deal announcement may be made as early as Monday, the person said.
Detailing the discussions, the person said the first option is that a foreign player will buy out Telekom Malaysia’s stake as also a portion of the Modi family’s equity taking control of up to 74% in Spice Communications. The talks for this option are mainly with NTT DoCoMo, this person said.
Taro Ito, a spokesman for the Japanese firm’s international operations, declined comment specifically on which stage the talks were. “We’re thinking of every possibility on the merger but there is no final decision,” Ito said in a phone interview.
“The second option,” the person quoted earlier said, “is for Telekom Malaysia to increase its stake to 74%” by buying out a portion of the Modi stake.
Both these options will require the buyer—NTT DoCoMo or Telekom Malaysia—to make an open offer for at least 20% equity in Spice Communications under Indian laws that say such an offer should be made by anyone buying at least 15% in a listed firm.
The third option, the person said, involved Spice being acquired by Idea Cellular, India’s sixth largest mobile phone services firm by customers.
This option will entail the promoters of Idea buying out the Modi family and public shareholders. If this transaction goes through, promoters of Idea Cellular will likely hold 80% stake in the merged entity with Telekom Malaysia owning 20%.
The Modi family is asking for at least Rs70 per share as the exit price in a potential transaction, the person said. At close of trading on Thursday on the Bombay Stock Exchange, shares of Spice Communications gained Re1 to close at Rs53.50, valuing the company at Rs3,691 crore. By that valuation, the Modi family’s stake is valued at around Rs1,477 crore.
A Mumbai-based telecom analyst, who did not want either himself or his employer to be identified, said the Modi family has been on the lookout for an exit for some months now but that their asking price was very high.
“It is overvalued. Even if a deal happens, the stock will not move further up. Even in the last merger announcement with Idea, Spice was asking for a valuation that Idea was not willing to give,” he said.
“Foreign companies buying into Spice will only buy for a footprint in India.”
Spice Communications runs phone networks in Punjab and Karnataka and has licences for four more states. Any stake acquisition in the company by a foreign acquirer without a presence in India currently will make the acquirer eligible to bid for licences for so-called third generation or 3G phone services. The department of telecommunications is yet to take a final decision on whether or not to allow new entrants to bid for 3G licences or restrict it to existing players.
Sanjeev Aga, managing director of Idea Cellular said he cannot comment on the issue. Shares of Idea Cellular gained Re0.30 and closed at Rs106.95, giving the company a market capitalization of Rs28,185 crore. Spice Communications has more than 4.7 million customers.
RBI may jump into action
Inflation rose further above 8 percent in late May, data showed on Friday, and with higher fuel prices seen sending it to a 13-year peak early next month, analysts expect RBI action soon to ease price pressures.
Reserve Bank of India Governor Y V Reddy said on Thursday the central bank was ready to employ the full range of instruments at its disposal to turn round inflation.
India's widely watched wholesale price inflation rate rose 8.24 percent in the 12 months to May 24, above the previous week's level of 8.10 percent but slightly below a median forecast in a Reuters poll of 8.29 percent.
"Inflation remains high and needs to be tackled. We believe the Reserve Bank of India may hike the reverse repo and the repo rate by 25 basis points by July," Shuchita Mehta, economist at Standard Chartered Bank in Mumbai, said.
Revisions to earlier data have been sharp in the past few weeks, but Friday's figures showed this trend slowed in the week ended March 29, with inflation now at a revised 7.75 percent, up from 7.41 percent. That is way above the 5-5.5 percent the central bank had set as its comfort level for the 2007/08 financial year ending in March.
After 10 days of debate, the communist-backed ruling coalition on Wednesday agreed to raise state-set petrol and diesel prices by about 10 percent, more than expected, to help curb losses at its state-owned refiners. Energy costs account for 14.2 percent of the inflation index, and the price increases will have a cascading impact on overall prices as diesel and petrol are key inputs through the economy.
A poll of analysts found the immediate impact of the fuel price rises would be to push wholesale price inflation to a 13-year high of 9.2 percent on June 7. Finance Minister Palaniappan Chidambaram, while admitting that inflation was a problem due to higher global crude prices, said the government was willing to take more measures to calm prices.
Some analysts said the central bank may only use the reserve requirement route to tame inflation, fearing any hike in rates would further hurt growth already seen moderating to a still strong 8-8.5 percent this fiscal year from 9 percent in 2007/08.
"Our view remains that the RBI will tighten monetary policy using cash reserve ratio hikes, (and) we expect another 100 basis points worth of CRR hikes this year," said Sonal Verma, an economist at Lehman Brothers in Mumbai.
Inflation climbs to 8.24%, RBI may intervene
Refusing to be tamed, inflation soared to yet another high at 8.24% on Friday for the week ending May 24. Announcing the figures Finance Minister P Chidambaram said, “The food prices under pressure. But the government is confident of overcoming difficulties.
The unrelenting upward trajectory of inflation is expected to worsen in the days to come when the steepest-ever hike in petroleum prices, that were announced earlier this week, starts to take effect.
It was 8.1% for the week ending May 17. Wholesale prices-based inflation stood at 5.15 percent a year ago. The rate of price rise is expected to advance further after two weeks, when the June 5 increase in prices of petrol, diesel and cooking gas would be taken into account.
During the week ending May 24, non-food articles, raw rubber, raw cotton and groundnut seeds became expensive by 1-2 percent.
Finance Minister P Chidambaram admitted that inflation was a problem, but with people`s support price stability could be ensured.
Cereal prices went up by 0.5 percent, while fruit and vegetable prices declined by about one percent.
Despite fiscal measures taken by the government, prices of imported edible oil surged by 6 percent.
The Finance Minister added that authorities may take more steps to control inflation if needed.
The inflation was 7.82 percent for the week ended May 10 as compared to 7.83 percent for the previous week, said the official figures released today. During the corresponding week a year ago, the inflation stood at 5.62 percent.
RBI to chip-in
Earlier on Thursday, RBI Governor Dr YV Reddy had made it clear that the RBI, in an effort to stem inflation, is ready to take recourse to a full range of instruments that will include both conventional and unconventional ones.
Referring to the impact of the fuel price hike on inflation, Dr Reddy said the global hike in oil prices and subsequent increase in Indian domestic prices were more than anticipated by the central bank.
“However, we did factor in the hike in oil prices in our policy. The RBI is also ready to use forex reserves which are meant to meet any shocks, such as the oil shock”, Dr Reddy said.
The current fuel prices can be referred to as an ‘extraordinary situation’, and in this context the RBI will focus on careful management of the liquidity conditions in the country, the Governor said. “It has assumed some urgency now”, he commented.
With regards to GDP growth Dr Reddy said the he anticipates it to be in the range of 8 to 8.5 percent, subject to a ‘normal’ monsoon. He felt that the Centre’s decision to hike domestic fuel prices was very appropriate. The Governor was responding to a range of questions from newspersons.
Analysts sceptical
"It (inflation) could cross 9 per cent in the near term owing to the hike in petrol and diesel prices," HDFC bank chief economist Abheek Barua told a news agency.
ICICI bank CEO and MD K V Kamath said, "A 10 percent sustained rise, if passed through, can add as much as 1.3 percent to inflation."
Inflation was over 9 percent nearly 13 years back in September 1995.
Petroleum Secretary M S Srinivasan said the hike could lead to an about 0.5-0.6 per cent rise in inflation rate.
Petrol and diesel prices, which have gone up by 11 percent and 8.5 percent respectively, will increase the inflation rate by about 0.3 percent, while LPG cylinder would add 0.2-0.3 percent to the rate.
Besides, there would be cascading effect of diesel price rise on commodities in due course of time by way of higher transportation cost, adding to the inflation.
A study by CRISIL said the petroleum price hike would push up inflation by 95 basis points through both direct and indirect impacts.
The hike in prices would be reflected in official inflation data slated to be released on June 20.
Anti-inflationary measures are unlikely to turn India into a slow growing economy, while other Asian nations could face the situation of rising prices and economic stagnation, a latest report says.
"We do not believe that India would be affected significantly in a stagflation scenario and growth would remain strong in relative terms...," global research firm Lehman Brothers said in a recent research report.
Post Market Commentary - June 6 2008
Indian market slipped sharply towards the final hours of the session to close on the back foot due to investor’s cautious behavior, which led them to compel the selling pressure. On the back of strong cues from global market, the domestic market opened on the firm note but was not able to sustain the momentum due to the concern of the rising inflation that stood at 8.24% for the week ended 24th May 2008, as against 8.10% in the earlier week which is according to the market expectation of 8.25%. The investors did not showed their active participation during the trading session, due to concerns of inflation figures. The market moved back once in early afternoon neglecting the growth in inflation figures. From the sectoral front, only Auto index ended in positive territory while metal, reality stocks were the main laggards. The market breadth was negative as 1,524 stocks closed in red while 1,125 stocks closed in green.
The BSE Sensex closed lower by 197.54 points at 15,572.18 and NSE Nifty fell by 49.15 points to close at 4,627.80. The BSE Mid Caps and Small Cap closed lower by 50.14 points and 39.54 points at 6,350.15 and 7,696.05 respectively. The BSE Sensex touched intraday high 15,970.70 and intraday low of 15,526.50.
Losers from the BSE are Wipro Ltd (4.43%), ITC Ltd (4.14%), Ranbaxy Lab (3.47%), Hindalco (3.46%), DLF Ltd (3.44%), Rel Infra (2.67%), TCS Ltd (2.36%), Bharti Airtel (2.34%) and J P Assoc (2.21%).
The Metal Index closed lower by 199.20 points at 15,515.29 Losers are Hindalco (3.46%) along with JSWSL (3.15%), Jindal Steel (2.94%), Welspan Gujarat Sr (2.89%), Ispat Industries (2.88%), Bhushan Steel (2.40%) and Tata Steel (2.10%).
The Realty index closed down by 115.75 points at 6,210.30 Losers are Mahindra Life (4.77%), Penland Ltd (4.60%), Housing Development (3.74%), DLF Ltd (3.44%), Anant Raj Indus (3.39%), and Ansal Infra (5.36%).
The Banking index fell by 82.30 points to close at 7,266.28 as Indian Overseas Bank (4.24%), Bank of Baroda (3.09%), Allahabad Bank (2.72%), OBC (2.26%), Union Bank (2.24%), and Kotak Bank (1.53%) closed in negative territory.
The Capital Goods index declined by 78.99 points to close at 12,032.64. Major losers are Thermax Ltd (3.31%), Praj Industries (3.26%), Elecon Eng (3.10%), Jyoti Struc (2.76%), Punj Lloyd (2.12%) and Aiaengineer (2.04%).
The Oil & Gas index closed lower by 55.75 points at 10,006.08. Losers are HPCL (5.92%), IOC (3.55%), Reliance Nat Resources (2.89%), ONGC (1.54%), Reliance Petroleum (1.25%) and Aban offshore (0.88%).
Auto index closed higher by 5.31 points at 4,227.32. Gainers are Mahindra & Mahindra (3.46%), Tata Motors (1.40%), Exide Indus (0.14%) and Bosch Ltd (0.09%).
Market slips amid sharp volatility
Positive international indices failed to lift the sentiment in the domestic market, as the Sensex drifted into negative territory after gaining 201 points in early trades. The sentiment turned extremely bearish in the afternoon as sustained selling in heavyweight, FMCG, realty and fast-moving Bankex stocks dragged the index below the 15,550 mark to an intra-day low of 15,527. The Sensex witnessed a swing of 444 points during the day and ended the session with losses of 198 points at 15,572. Nifty shed 49 points to close at 4,627.
The market breadth was negative. Of the 2,717 stocks traded on the BSE, 1,521 stocks declined, 1,131 stocks advanced and 65 stocks ended unchanged. All the sectoral indices ended in the red except the BSE Auto index. The BSE FMCG index dropped 2.65% at 2,361.88 followed by the BSE Reality (down 1.83% at 6,210.30), the BSE Metal index (down 1.27% at 15,515.39), the BSE HC index (down 1.15% at 4,296.01) and the BSE Bankex index (down 1.12% at 7,266.28).
Out of the 30 Sensex stocks, only four stocks managed to close in positive. Among the losers, Wipro slumped 4.43% at Rs500, ITC tumbled 4.14% at Rs211.40, Ranbaxy Laboratories plunged 3.47% at Rs503.25, Hindalco declined 3.46% at Rs174.65, DLF dipped 3.44% at Rs517, Reliance Energy shed 2.67% at Rs1,084, Tata Consultancy Services lost 2.36% at Rs798, Bharti Airtel was down 2.34% at Rs798, JP Associates fell 2.21% at Rs199.50 and Tata Steel was down 2.10% at Rs751.95. Mahindra & Mahindra however bucked the downtrend and advanced 3.46% at Rs582.20. Tata Motors gained 1.40% at Rs540.05, Grasim Industries gained 0.73% at Rs2,262.80 and Infosys advanced 0.66% at Rs1,992.85.
FMCG stocks were under sustained selling pressure today. United Spirits plummeted 2.34% at Rs1,518.80, Tata Tea tumbled 1.69% at Rs802.50, REI Agro dropped 1.32% at Rs1,520 and Marico shed 1.19% at Rs62.25. United Breweries, Hindustan Unilever and Nestle shed around 1% each.
Over 1.62 crore IFCI shares changed hands on the BSE followed by SpiceJet (1.16 crore shares), Chambal Fertilisers (1 crore shares), Gokul Refoil (96 lakh shares) and Ispat industries (89 lakh shares).
Valuewise, Reliance Industries registered a turnover of Rs385 crore on the BSE followed by Reliance Capital (Rs214 crore), Cairn India (Rs208 crore), Gokul Refoils (Rs197 crore) and Anu Lab (Rs174 crore)
Weakness may persist
The market is likely to remain subdued in the coming week, as global equity market sentiments remain weak due to high crude oil prices. Back home, high inflation and a possible continuation of the high-interest rate environment may continue to weigh on the market sentiment.
The government on Wednesday, 4 June 2008, raised petrol by Rs 5 a litre and diesel price by Rs 3 a litre in an attempt to curb mounting losses of state-owned refiners thereby stoking inflation.
Inflation, already running at nearly 4-year high of 8.24%, is likely to rise further following the fuel price hike. The immediate impact of fuel price hike on wholesale price inflation could be as high as 65 basis points in near term. If inflation cannot be controlled, interest rates may go up as a result of the cascading impact of the fuel price hike.
The wholesale price index rose 8.24% in the 12 months to 24 May 2008, above the previous week's annual rise of 8.1%, government data released today, 6 June 2008, afternoon showed. The reading was the highest since 28 August 2004, when it stood at 8.74%. Inflation for the week ended 29 March 2008 was revised upwards to 7.75% from 7.41%.
Hinting at a possible increase in cash reserve ratio (CRR) or short-term interest rates, Reserve Bank of India (RBI) governor YV Reddy on Thursday, 5 June 2008 said that the central bank would take all measures to curb inflationary expectations. The RBI governor said the situation was extraordinary in respect of oil prices and that the basic approach of RBI was to carefully manage liquidity conditions. The next monetary policy review of RBI is on 29 July 2008.
Foreign institutional investors (FIIs) sold shares worth Rs 1,872.20 crore so far in the month of June 2008. They sold shares worth Rs 17,241.70 crore in calendar year 2008, till 4 June 2008. Domestic funds sold shares worth Rs 144.20 crore in the month of June 2008, till 4 June 2008.
The BSE Sensex declined 843.39 points or 5.14% to 15,572.18 in the week ended 6 June 2008. The S&P CNX Nifty fell 242.3 points or 4.97% to 4627.80.
The BSE Mid-Cap index fell 410.39 points or 6.07% to 6,350.15. The BSE Small-Cap index slumped 436.99 points or 5.37% to 7,696.05.
Sensex sheds 843 points on rise in fuel prices
The market declined sharply as a hike in fuel prices by about 10% announced by the Union government on Wednesday, 4 June 2008, triggered possibility of a surge in inflation to double digit level.
The BSE Sensex declined 843.39 points or 5.14% to 15,572.18 in the week ended 6 June 2008. The S&P CNX Nifty fell 242.3 points or 4.97% to 4627.80 in the week.
The BSE Mid-Cap index fell 410.39 points or 6.07% to 6,350.15. The BSE Small-Cap index slumped 436.99 points or 5.37% to 7,696.05.
The government on Wednesday, 4 June 2008, raised petrol by Rs 5 a litre and diesel price by Rs 3 a litre in an attempt to curb mounting losses of state-owned refiners thereby stoking inflation.
The wholesale price index rose 8.24% in the 12 months to 24 May 2008, above the previous week's annual rise of 8.1%, government data released on 6 June 2008 showed. The reading was the highest since 28 August 2004, when it stood at 8.74%. Inflation for the week ended 29 March 2008 was revised upwards to 7.75% from 7.41%.
The 30-share BSE Sensex plunged 352.39 points or 2.15% to 16,063.18 on Monday, 2 June 2008. The broader based S&P CNX Nifty declined 130.5 points or 2.68% to shut shop at 4,739.60.
On 3 June 2008, the market staged a smart intra-day rebound in second half of the day’s trading session led by recovery in Reliance Industries (RIL). The 30-share BSE Sensex settled 100.62 points or 0.63% lower at 15,962.56. The broader based S&P CNX Nifty fell 23.70 points or 0.5% at 4,715.90.
The market witnessed a sell-off on 4 June 2008 after the government announced hike in fuel prices during trading hours. The 30-share BSE Sensex tumbled 447.77 points or 2.81% at 15,514.79. The broader based S&P CNX Nifty was down 130.3 points or 2.76% at 4,585.60.
On 5 June 2008, frenzied buying coupled with short covering after three straight days of fall triggered a solid rally in late trade. The 30-share BSE Sensex gained 254.93 points or 1.64% at 15,769.72. The broader based S&P CNX Nifty was up 91.35 points or 1.99% to 4,676.95.
On 6 June 2008, local benchmark indices underperformed their global peers, hit by rumours that the Reserve Bank of India (RBI) may hike cash reserve ratio (CRR) or interest rate later in the day to tame runaway inflation. The 30-share BSE Sensex declined 197.54 points or 1.25% to settle at 15,572.18. The broader based S&P CNX Nifty was down 49.15 points or 1.05% to 4,627.80.
India's largest state-run oil exploration firm in terms of revenue Oil and Natural Gas Corporation (ONGC) jumped 8.58% to Rs 938.50 in the week. The stock spiraled higher after Union government on Wednesday, 4 June 2008, halved the state-owned upstream company’s subsidy burden in fiscal 2009.
India's largest private sector firm by market capitalization and oil refiner Reliance Industries slipped 6.76% to Rs 2239.35.
India's largest private sector bank by assets ICICI Bank fell 2.21% to 770.85.
India's largest wind turbine maker by sales Suzlon Energy rose 1.06% to Rs 280.20. The firm said it signed a share purchase agreement with Areva for acquisition of latter's total stake of approximately 30% in REpower Systems AG, Germany. This acquisition will consolidate Suzlon's total holding in REpower to around 66%, the company said in a statement to the Bombay Stock Exchange on Friday, 6 June 2008. 2007.
Mumbai-based large-cap natural gas and oil exploration firm Cairn India rose 0.21% to Rs 286.25. The firm was awarded a licence by Sri Lanka to explore for oil & gas in the Mannar basin.
Spicejet surged 10.62% to Rs 35.95. Anil Dhirubhai Ambani Group is reportedly in talks to acquire the Gurgaon-based small-cap low-fare carrier.
Back-office firm HOV Services soared 18.05% to Rs 100.40. The firm received an offer of $202 million for sale of its HOV Services LLC subsidiary and its Honk Kong unit. The payment will be made in a mix of cash and stock.
Foreign institutional investors (FIIs) sold shares worth Rs 3291.20 crore so far in the month of June 2008. They sold shares worth Rs 18660.60 crore in calendar year 2008, till 5 June 2008. Domestic funds sold shares worth Rs 144.20 crore in the month of June 2008, till 4 June 2008.
Indian market underperforms global peers on speculation RBI may hike CRR
The key benchmark indices underperformed their global peers today amid rumours the Reserve Bank of India (RBI) may announce a hike in cash reserve ratio (CRR) or interest rate later in the day to tame runaway rise in inflation. Volatility was high throughout the day.
Inflation based on the wholesale price index (WPI) rose 8.24% in the year through 24 May 2008, compared to previous week's rise of 8.10%. The government also revised the annual inflation rate for the year through 29 March 2008 to 7.75% as compared to 7.41% reported earlier. This is the 15th consecutive week when inflation rate has been above 5.5%, the RBI's target for the fiscal year ending March 2009.
Crude oil climbed close to $6 on Thursday, 5 June 2008, to more than $127 per barrel as funds shifted back into oil when the dollar fell against the euro following a signal from the European Central Bank that it may raise interest rates. The crude contract climbed another 0.3% in Asian trading today.
The 30-share BSE Sensex declined 197.54 points or 1.25% to settle at 15,572.18. The Sensex lost 243.22 points at day’s low of 15,526.50 touched in late trade. After opening 144.69 points higher at 15,914.41, the Sensex advanced further to strike an intra-day high of 15,970.70 in early trade. At the day’s high, Sensex gained 200.98 points.
The broader based S&P CNX Nifty was down 49.15 points or 1.05% to 4,627.80. Nifty June 2008 futures were at 4613.80, a discount of 14 points as compared to spot closing.
Reserve Bank of India governor YV Reddy yesterday, 5 June 2008 hinted at a possible increase in CRR in an attempt to curb inflationary expectations
The Sensex has slumped 5634.59 points or 26.57% from its all time high of 21,206.77, struck on 10 January 2008. However, it is still 762.69 points or 5.15% above its recent low of 14,809.49 touched on 17 March 2008.
The market breadth was negative on BSE with 1516 shares declining as compared to 1142 that advanced. 64 remained unchanged. On the contrary, the market breadth was strong in early trade.
The BSE Mid-cap index was down 0.78% to 6,350.15 and the BSE Small-Cap index slipped 0.51% to 7,696.05. Both these indices outperformed the Sensex.
The total turnover on BSE amounted to Rs 5229 crore as compared to Rs 6,172.82 crore yesterday, 5 June 2008.
Turnover in NSE’s futures & options segment amounted to Rs 42888.38 crore as compared to Rs 51017.9 crore yesterday, 5 June 2008.
All the sectoral indices on BSE ended with losses except the BSE Auto index. The BSE Auto (up 0.14% at 4,227.32), BSE Health Care index (down 1.15% at 4,296.01), BSE Consumer Durables index (down 0.75% to 4,001.66), BSE Power (down 0.31% to 2,700.02), BSE Bankex (down 1.12% at 7,266.28), BSE PSU index (down 0.79% to 6,666.59), BSE Oil & Gas index (down 0.55% to 10,006.08), BSE Capital Goods (down 0.65% at 12,032.64), BSE TecK index (down 0.80% to 3,497.88), outperformed the Sensex.
The BSE Realty index (down 1.83% at 6,210.30), BSE Metal (down 1.27% to 15,515.39), BSE FMCG index (down 2.65% to 2,361.88), underperformed the Sensex.
Among the 30-member Sensex pack, 25 declined while the rest advanced.
Mahindra & Mahindra (M&M), the country’s largest tractor company in terms of sales, advanced 3.07% to Rs 580 on 60,044 shares. On 5 June 2008, the company agreed to buy Italian auto designer Engines Engineering for an undisclosed sum. The stock was the top gainer from Sensex pack.
Tata Motors (up 1.37% to Rs 539.90), Infosys Technologies (up 0.73% to Rs 1994.10), and Grasim (up 1.06% to Rs 2270) edged higher from the Sensex pack
India’s largest private sector company in terms of market capitalisation and oil refiner Reliance Industries (RIL) was down 0.74% to Rs 2231.10 on high volumes of 17.10 lakh shares. The stock had surged to an intra-day high of Rs 2299 in opening trade. Reliance Industries today said only one unit at its Nagothane petrochemicals plant had been shut by a fire and others were running normally. The plant has an annual capacity of 4,00,000 tonnes of ethylene. The shut unit has annual capacity of 1,20,000 tonnes
India’s third largest software services exporter Wipro lost 4.05% to Rs 507 on 2.86 lakh shares. It was the top loser from Sensex pack.
Hindalco Industries (down 3.99% to Rs 174.65), ITC (down 3.98% to Rs 213.50) and DLF (down 3.98% to Rs 517.50), edged lower from the Sensex pack.
India’s largest state run engineering company in terms of outstanding order book Bharat Heavy Electricals declined 1.80% to Rs 1419, after striking an intra-day high of Rs 1499.95. On 26 May 2008, the company had bagged Rs 1,150-crore turnkey contract from a joint venture of HPCL and Mittal Energy for setting up an energy efficient 153 megawatt captive power plant at Bhatinda in Punjab.
India's second largest power generation company in terms of sales, Reliance Infrastructure (formerly Reliance Energy), slipped 2.29% to Rs 1105, after hitting day’s high of Rs 1163. The stock was boosted by reports that it has won regulatory approval to raise power tariff by as much as 10.22% for its 2.6 million users in Mumbai. Shares of rival power generation company Tata Power Company rose 1.86% to Rs 128.05 on reports it has also hiked tariff marginally. The new tariff will be applicable from 1 June 2008 31 March 2009.
Interest rate sensitive banking shares declined. ICICI Bank (down 1.66% to Rs 768.25) and HDFC Bank (down 1.05% to Rs 1230) declined.
India’s largest stare-run bank in terms of net profit State Bank of India fell 1.80% to Rs 1330. The bank signed an agreement with Societe Generale Securities Services, a division of Societe Generale Group, to form a joint venture company for providing custody services.
India’s top small car company in terms of sales Maruti Suzuki India dropped 0.84% to Rs 756 despite reports the company has launched a new LPG variant Maruti 800 Duo of its once flagship model Maruti 800, in the price range between Rs 2.05 lakh and Rs 2.26 lakh.
Reliance Industries was the top traded counter on BSE with turnover of Rs 386.07 crore followed by Reliance Capital (Rs 214.18 crore), Cairn India (Rs 208.51 crore), Gokul Refoils (Rs 196.95 crore), and Anu’s Labs (Rs 173.44 crore), in that order.
IFCI topped the volumes chart clocking volumes of 1.63 crore shares followed by SpiceJet (1.16 crore shares), Chambal Fertilisers & Chemicals (1 crore shares), Gokul Refoils (96.70 lakh shares) and Ispat Industries (89.45 lakh shares), in that order.
Indiabulls Real Estate jumped 4.70% to Rs 424.50 ahead of the sale of shares in Indiabulls Properties Investment Trust in Singapore, which ends today. The stock struck in intra-day high of Rs 475.80. The real estate investment trust aims to raise S$388.3 million ($284 million) from selling 353 million units in the trust in range of Singapore $1 to Singapore $1.10 a piece. So far, the issue has been reportedly subscribed 1.8 times.
Karur Vysya Bank rose 2.17% to Rs 362 on reporting 33.39% rise in net profit to Rs 70.54 crore on 39.33% rise in total income to Rs 354.21 crore in Q4 March 2008 over Q4 March 2007. The bank announced the result during the market hours today 6 June 2008.
GMR Infrastructure slipped 2.44% to Rs 120. Its 100% subsidiary GMR Energy entered into a power purchase agreement with Karnataka Power Transmission Corporation for sale of power for a period of 7 years.
HOV Services jumped 20% at Rs 100.40 after it received an offer of approximately $202 million to purchase 100% of its wholly owned subsidiary HOV Services, LLC and its Hong Kong unit .
Sun Pharmaceutical Industries declined 3.35% to Rs 1405 after the company strongly opposed Taro Pharmaceutical Industries' decision to sell its Irish subsidiary, Taro Ireland, to protect its merger plans with Taro Pharmaceutical.
Suzlon Energy gained 4.24% to Rs 280 after the company said it has signed an agreement with Areva for the acquisition of Areva's total stake of approximately 30% in REpower Systems AG, Germany. The acquisition will consolidate Suzlon Energy’s total holding in REpower to approximately 66%.
SpiceJet surged 14.33% to Rs 35.90 on reports the Anil Dhirubhai Ambani Group has begun talks to buy the low-cost carrier. Vijay Mallya-promoted Kingfisher Airlines and the country`s largest private sector carrier Jet Airways are also said to be in fray for picking up a stake in SpiceJet.
Cairn India surged 7.75% to Rs 284.40 after the company said it has received an exploration license from the Sri Lankan government to explore oil and natural gas in the Mannar Basin. The company made this announcement after trading hours on Thursday, 5 June 2008.
GHCL plunged 10.94% to Rs 50.90 even as the company said it has increased soda ash prices.
Motilal Oswal Financial Services rose 4% to Rs 757 on reports it has chalked out plans to raise over Rs 800 crore to fund its expansion plans and meet other working capital requirements.
Punj Lloyd fell 2.33% to Rs 272.25 after the company said it has secured an order worth Rs 649 crore for motor spirit quality upgradation project from Indian Oil Corporation for its Barauni Refinery, Bihar.
European markets, which opened after Indian markets pared early gains. Key benchmark indices in United Kingdom (up 0.47% to 6,023.40), France (up 0.01% to 4,907.23), and Germany (up 0.02% to 6,943.43), advanced.
Most Asian markets, which opened before Indian markets, were trading higher today, 6 June 2008. Japan's Nikkei (up 1.03% at 14,489.44), Hang Seng (up 0.61% at 24,402.18), Taiwan's Taiwan Weighted (up 0.08% at 8,745.35), Singapore's Straits Times (up 0.26% at 3,151.94), advanced. However, China's Shanghai Composite declined 0.56% at 3,332.77.
US markets rallied yesterday, 5 June 2008 on stronger-than-expected May 2008 sales by Wal-Mart and other retailers and a surprising fall in weekly jobless claims, spurring optimism about the economy's health. The Dow Jones industrial average gained 213.97 points, or 1.73%, to 12,604.45. The S&P 500 index advanced 26.85 points, or 1.95%, to 1,404.05, and the Nasdaq Composite index surged 46.80 points, or 1.87%, to 2,549.94
The European Central Bank said yesterday, 5 June 2008, it would keep key lending rates unchanged at 4%. The bank, however, anticipates inflation to be more persistent than previously anticipated. Also the Bank of England kept its benchmark interest rate unchanged at 5% yesterday, 5 June 2008.
Back home, frenzied buying coupled with short covering after three straight days of fall triggered a solid rally yesterday, 5 June 2008. The 30-share BSE Sensex jumped 254.93 points or 1.64% at 15,769.72 and the broader based S&P CNX Nifty was up 91.35 points or 1.99% to 4,676.95, on that day.
Meanwhile, market regulator Securities and Exchange Board of India (Sebi) yesterday, 5 June 2008, ruled out relaxing curbs imposed last year on participatory notes (PNs), a derivative tool that enables unregistered foreign investors to invest in Indian stock markets. In October 2007, Sebi had imposed restrictions on Foreign Institutional Investors (FIIs) to issue PNs and asked FIIs and their sub-accounts not to issue fresh PNs against underlying derivatives and wind up their existing position in 18 months.
Global cues firm, inflation data eyed
Local equities may open firm today, extending yesterday’s gains tracking positive global cues. However caution may prevail at higher levels ahead of the release of inflation figures for the week ended 24 May 2008, by noon today. Inflation had surged to a 4 year high at 8.10% in the previous week. Also the revisions of provisional data for earlier week will be watch closely.
Analysts opine that higher inflationary expectations immediately gave rise to fears of a cash reserve ratio (CRR) or interest rate hike, which is a negative for markets. Reserve Bank of India governor YV Reddy yesterday, 5 June 2008 hinted at a possible increase in CRR in an attempt to curb inflationary expectations, which is likely to weigh on sentiment.
Worries of double-digit inflation, at 13-year high, after the fuel price hike announced on 4 June 2008, is still haunting minds of investors.
In coming weeks, markemen would be eyeing two things. One would be progress of monsoon and second would be the advance tax figures.
Most Asian markets were trading higher today, 6 June 2008. Japan's Nikkei gained 1.55% at 14,563.14, Hang Seng rose 1.06% at 24,511.24, Taiwan's Taiwan Weighted rose 0.63% at 8,793.60, Singapore's Straits Times advanced 0.88% at 3,171.41. However, China's Shanghai Composite declined 0.59% at 3,331.71.
US markets rallied yesterday, 5 June 2008 on stronger-than-expected May 2008 sales by Wal-Mart and other retailers and a surprising fall in weekly jobless claims, spurring optimism about the economy's health. The Dow Jones industrial average gained 213.97 points, or 1.73%, to 12,604.45. The S&P 500 index advanced 26.85 points, or 1.95%, to 1,404.05, and the Nasdaq Composite index surged 46.80 points, or 1.87%, to 2,549.94
Back home, frenzied buying coupled with short covering after three straight day's of fall triggered a solid rally yesterday, 5 June 2008. The 30-share BSE Sensex jumped 254.93 points or 1.64% at 15,769.72 and the broader based S&P CNX Nifty was up 91.35 points or 1.99% to 4,676.95, on that day.
As per provisional data, foreign funds sold shares worth a net Rs 1418.34 crore yesterday, 5 June 2008. Domestic funds bought shares worth a net Rs 570.03 crore on that day.
Foreign institutional investors (FIIs) were net buyers of Rs 1054.43 crore in the futures & options segment yesterday, 5 June 2008. They were net buyers of index futures to the tune of Rs 1035.25 crore and bought index options worth Rs 405.81 crore. They were net sellers of stock futures to the tune of Rs 402.85 crore and bought stock options worth Rs 16.22 crore.
Meanwhile, market regulator Securities and Exchange Board of India (Sebi) yesterday, 5 June 2008, ruled out relaxing curbs imposed last year on participatory notes (PNs), a derivative tool that enables unregistered foreign investors to invest in Indian stock markets. In October 2007, Sebi had imposed restrictions on Foreign Institutional Investors (FIIs) to issue PNs and asked FIIs and their sub-accounts not to issue fresh PNs against underlying derivatives and wind up their existing position in 18 months.
The European Central Bank said yesteday, 5 June 2008, it would keep key lending rates unchanged at 4%. The bank, however, anticipates inflation to be more persistent than previously anticipated. Also the Bank of England kept its benchmark interest rate unchanged at 5% yesterday, 5 June 2008.
Post Session Commentary - June 6 2008
The Indian Market is expected to open higher on the back of strong global cues as the US market closed in green and the Asian markets are trading with gain. On Thursday, the Indian market closed with handsome gains after recovering from earlier losses. The market opened with the negative attitude and remains volatile throughout the trading session due to the inflation worries. But it started recovering smartly after the mid session to close on a confident note due to favorable global cues and oil prices hitting a three-week low. From the sectoral front, the IT, Banking and Metal stocks were in limelight as most buying was witnessed from these baskets. The BSE Sensex closed higher by 254.93 points at 15,769.72 and NSE Nifty closed up by 91.35 points at 4,676.95. We expect that the market may gain some grounds in the first half and the declaration of the inflation figure by the government will set the further direction to the market in the second half during the trading session.
Oil prices witnessed fall in Asian trading on Thursday along with fresh concerns of weakening global growth which would reduce energy demand.
On Thursday Indian rupee declined almost to Rs43 against the dollar despite central bank’s intervention to check sharp falls. RBI may increase interest rates if the rupee falls further, as imported inflation would rise much above the its comfort level.
On Thursday, the US market closed with strong gains on the back of profits reported by retail stores and expectation of telecommunications giant Verizon about adding to its holdings. The Dow Jones Industrial Average (DJIA) closed higher by 213.97 points at 12,604.45 along with NASDAQ went up by 46.80 points to close at 2,549.94 and S&P 500 advanced by 26.85 points to close at 1,404.85.
Indian ADRS ended high. In technology sector, Wipro went up by (5.75%) along with Infosys by (5.74%), Satyam by (5.31%) and Patni Computers by (1.55%). In banking sector, ICICI bank and HDFC bank increased by (5.51%) and (4.97%) respectively. In telecommunication sector, Tata Communication and MTNL grew by (9.83%) and (5.95%). Sterlite industries increased by (4.28%).
Today the major stock markets in Asia are trading higher on the back of US market overnight gains. Hang Seng index is trading up by 255.95 points at 24,511.24 along with Japan’s Nikkei trading advanced by 222.02 points at 14,563.14 and Taiwan Weighted trading at 55.14 down by 8,793.60 points.
The FIIs on Thursday stood as net seller in equity and debt. The gross equity purchased was Rs3,245.70 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs4,070.90Crore and gross debt sold stood at Rs15.00 Crore. Therefore, the net investment of equity reported was (Rs825.20) Crore and net debt was Rs15.00 Crore.
Today, Nifty has support at 4,585 and resistance at 4,792 and BSE Sensex has support at 15,442 and resistance at 16,092
Market may start buoyant
The benchmark indices, Sensex and Nifty, are expected to commence on a firm note and witness significant rally during intra-day trades, as international markets backed by firm US and Asian indices may help the sentiment remain buoyant. Among the Asian majors, Nikkei has surged 1.55% at 14563 while Hang Seng has scaled up nearly 1.06% at 24513. However, intra-day volatility cannot be ruled out and caution should be maintained as crude oil rises sharply and could trigger further slump. On the technical front, the Nifty could test in the 4720-4760 range on the upside and has supports in the 4640-4600 range, while the Sensex has a likely support at 15649 and may face resistance at 15900.
US indices posted significant gains on Thursday as investors' cheered the strong consumer confidence report. As a result, the Dow Jones to close at 12604, up 214 points, while the Nasdaq added 47 points to close at 2550.
Except Tata Motors, rest of the Indian floats had a decent outing on the US bourses. VSNL was the biggest gainer and rose 9.83% while MTNL, Infosys, Satyam, Wipro, ICICI Bank and HDFC Bank scaled up above 5% each. Other gainers like Dr Reddy, Rediff and Patni Computer gained over 1-3% each.
Crude oil prices in the US market gained sharply, with the Nymex light crude oil for July delivery raising by $5.49 to close at $127.79 a barrel and in the commodity segment, the Comex gold for August series lost $8.30 to settle at $875.50 a troy ounce.
Huge rally - only in US Markets
Better than expected economic reports boost market sentiment ahead of crucial job report
After three consecutive days of drop, US Market rallied today, Thursday, 05 June 2008 riding on the effects of a couple of better than expected economic reports. Stocks rallied even though crude prices marked the highest one day gain in a long time after crude prices soared by almost $5.5/barrel. Leadership from the influential financial sector was a sustaining factor for the broader market. All the ten economic sectors ended in the green.
The major indices opened little higher but market soon zoomed up as the economic reports boosted market sentiments. At the end, the Dow Jones industrial Average ended the day with a gain of 214 points at 12,604. The Nasdaq Composite Index, finished higher by 46.8 points at 2,649. S&P 500 finished higher by 26.85 points at 1,404.05.
Twenty-seven out of thirty Dow stocks ended in the green today. Verizon together with Wal-Mart were the pacesetters for the Dow. Boeing, Pfizer and Caterpillar were the Dow laggards.
There were quite a few economic reports on the dock today. All were better than expected. First, retailers, led by Wal-Mart reported better-than-expected same-store sales for May. Wal-Mart was the headline leader in that respect, posting a 3.9% increase, excluding fuel. The company had forecast same-store sales to be flat to up 2%. For June Wal-Mart is expecting same-store sales to be up 2% to 4% due in part to an expected benefit from the spending of stimulus checks.
Secondly, the weekly initial claims data was better than expected and certainly not recession-like, as claims fell 18,000 to 357,000.
In the M&A arena, Verizon is reportedly going to buy privately-held Alltel for $28.1 billion. In the process, it will supplant AT&T as the biggest mobile phone operator in the country.
Financials got badly hammered today after headlines crossed the wires that Standard & Poor's was cutting its ratings on Ambac Financial and MBIA. Those stocks, and the market, suffered a knee-jerk dip, but regrouped in quick fashion.
Crude oil prices gained more than what they had lost in the previous two days as prices rallied and marked their largest one day gain in a long time today. A lower dollar prompted this sharp rise in crude price today. Crude has dropped $5.46 in the past two days and rose today by $5.49. Crude-oil futures for light sweet crude for July delivery today closed at $127.79/barrel (higher by $5.49/barrel or 4.5%) on the New York Mercantile Exchange. Prices haven't scored a gain anywhere near that large in a single day since at least 5 March of this year, when they climbed $5.
At the currency markets on Thursday, the dollar came under severe pressure, especially against the euro, after European Central Bank President Jean-Claude Trichet said a small increase in interest rates next month is possible. The dollar index, which tracks the greenback against a basket of six major currencies, was at 73.054, down from 73.469.
Volume topped 1.3 billion on the New York Stock Exchange, with advancing stocks topping decliners nearly 4 to 1. On the Nasdaq, 902 million shares changed hands, with advancers outrunning decliners nearly 3 to 1.
For tomorrow, the economic calendar focuses on the May employment report.
Trading Calls - June 6 2008
Nifty (4677) Sup 4580 Res 4740
Buy Tata Steel (841)
SL 835 Target 845, 850
Buy RIL (2246)
SL 2220 Target 2291, 2301
Buy Chennai Petro (330)
SL 325 Target 340, 345
Buy Divi’s Lab (1524)
SL 1502 Target 1549, 1559
Sell Amtek Auto (277)
SL 282 Target 267, 265
Bears talk, bulls walk!
Democracy means government by discussion, but it is only effective if you can stop people talking.
While we did expect a bounce back among extreme pessimism, the temporary upsurge in sentiment and the key indices on Thursday was much more than expected. Loud voices of inflation are set to climb and the negative impact of fuel price hike seemed to fall on bulls’ deaf ears for the moment. The rally was restricted to only the large caps while the broader market remained subdued.
Looks like the upbeat mood may continue for one more day at least given the strong show by the US stocks overnight. Asian markets this morning are also up sharply. The bad news is that crude oil has gained over $5 to cross $128 per barrel. Also, the weekly inflation number will continue to cast its spell on the market. In a related development, RBI Governor YV Reddy has hinted that the central bank may go for another round of monetary tightening to contain inflation. And, there's speculation that the RBI may even tinker with policy rates to anchor inflationary expectations.
IT, Power, FMCG, Banking, Pharma and Metals were the top gainers. Real Estate was the biggest loser while Oil & Gas, Capital Goods and Auto shares were mixed. The market breadth was negative though traded volume and turnover were pretty good. Some amount of short-covering coupled with healthy global markets helped the bulls recoup some of the losses of the previous day.
Meanwhile, to mitigate the fallout from the fuel price hike, the Government has asked all the ministries and the bureaucrats to curtail wasteful expenditure. It expects to save $1.4bn from the austerity drive. States have also chipped in by announcing cut in sales tax, while the Railways says it will absorb the entire increase in diesel. Oil marketing companies have lowered the ATF price by over 4%, though the airlines are unlikely to pass this on to the consumers. It remains to be seen how effective the Government will be in cutting spending.
Berger Paints, Dhanlakshmi Bank, Hindustan Oil Exploration, Kalyani Steels, Karur Vysya Bank, Peninsula Land and Sundram Fasteners will declare their results today.
FIIs were net sellers to the tune of Rs14.18bn (provisional) in the cash segment yesterday while the local institutions poured in Rs5.7bn. In the F&O segment, foreign funds were net buyers at Rs10.54bn. On Wednesday, FIIs were net sellers of Rs8.25bn in the cash segment. Mutual Funds were net buyers of Rs1.85bn.
Zandu Pharma's Board will meet today for considering the proposal for issue of equity shares / warrants / other convertible instruments to promoters, their relatives, associates, other investors on preferential basis.
The Government of Sri Lanka has awarded an exploration license to Cairn India to search for oil and natural gas in the Mannar basin. The block is offshore northwest Sri Lanka and covers about 3,400 Km in water depths of 200 metres to 1800 metres.
HEG's Board has approved expansion of capacity from 60,000 TPA to 80,000 TPA at a cost of Rs1.9bn at its graphite plant at Mandideep. With this expansion the company will become as the world's largest graphite electrode producer at a single location.
Asian stocks advanced, led by oil producers and Japanese companies reliant on US sales, after crude prices surged the most in two months and the yen weakened to a three-month low against the dollar.
BHP Billiton and Inpex Holdings gained. JFE Holdings led steelmakers higher after Nucor Corp., the largest US steel maker, boosted its second-quarter profit on rising global demand. Toyota rose on expectation that a weaker yen will boost the value of US sales.
The MSCI Asia Pacific Index added 0.8% to 150.14 as of 10:42 a.m. in Tokyo, with about three stocks climbing for each that declined. All 10 industry groups advanced on the regional benchmark, which gained 0.1% this week after ending May little changed.
Japan's Nikkei 225 Stock Average rose 1.4% to 14,534.36, set for its highest close since Jan. 9. Benchmarks climbed in other Asian markets open for trading apart from China. South Korea is closed for a holiday today.
US stocks rallied on Thursday, with the Dow Jones Industrial Average jumping by over 200 points, as investors cheered a surprise dip in weekly jobless claims, stronger-than-expected retail sales and a mega merger in the telecom sector.
The Labor Department reported that first-time claims for unemployment benefits fell by 18,000 last week to their lowest level in more than a month. The government will report monthly figures on non-farm payrolls Friday morning.
After a three-day decline, the Dow Jones climbed 213.97 points, or 1.7%, to 12,604.45, with 27 of its 30 components ending higher. The S&P 500 index climbed 26.85 points, or 2%, to 1,404.05, with the energy sector up 4%. The Nasdaq advanced 46.8 points, or 1.9%, to 2,549.94.
US stocks rose modestly in the morning, but picked up the pace as the session wore on, thanks to the mix of economic and company news, and a technical bounce following several down sessions.
According to some market watchers, the better-than-expected retail sales results from discounters such as Wal-Mart and Costco fueled the rally. However, the improved sales were largely on account of the economic stimulus package, instead of any improvement in consumer sentiment.
Still some analysts suggest the worst for the US market could be over, but until there's some positive news on inflation and economic growth, the main indices are likely to remain range bound and volatile.
Wal-Mart shares added 3.7% after the world's largest retailer reported same-store sales increased 3.9% for May. American Express rallied for a second day, up 3.9%, after the company reiterated expectations that earnings would grow 4% to 6% this year.
Verizon Wireless' plan to buy privately held Alltel Corp. for US$28bn boosted telecom shares. The deal will create the largest US wireless carrier. Verizon Communications gained 5.4%.
Continental Airlines, the fifth-largest American airline announced plans to cut about 3,000 jobs and reduce its fleet size. Shares of Continental closed 4.8% higher.
The monthly non-farm payrolls report will be out before the start of trade on Friday. Employers are expected to have cut 60,000 from their payrolls in May, after cutting 20,000 in April. The unemployment rate, generated by a separate survey, is expected to have risen to 5.1% from 5% in April.
US light crude oil for July delivery rose US$5.49 - the biggest single-day price gain ever - to settle at US$127.79 a barrel in New York, after having slid for the past few sessions. Because oil is near record levels, the gain is not close to being the biggest advance on a percentage basis.
The national average price for a gallon of regular unleaded gas rose to US$3.989 from US$3.983 the previous day, AAA reported. It was the 28th record in 29 days.
The dollar slipped versus the euro, after rising for the past few sessions. The dollar gained versus the yen. Treasury prices fell, lifting the yield on the 10-year note to 4.05% from 3.97%. COMEX gold for August delivery fell US$8.30 to US$875.50 an ounce.
European shares ended marginally lower. Miners lost ground and exporters were hit after European Central Bank (ECB) President Jean-Claude Trichet hinted that euro-zone interest rates could rise.
The Stoxx 600 index fell 0.1% to 316.61. Germany's DAX 30 fell 0.3% to 6,941.83, while the French CAC-40 lost 0.2% to 4,907.06. The UK's FTSE 100 closed up 0.4% at 5,995.30.
A pickup in inflationary pressures meant that policymakers at both, the Bank of England (BOE) and the ECB voted to leave rates on hold, at 5% and 4%, respectively.
In his monthly news conference following the ECB's decision, Trichet said a small increase in interest rates is possible next month, but not certain. The central bank remained on heightened alert over inflationary pressures, he added.
The emerging markets were pretty mixed. The Bovespa in Brazil was nearly flat at 71,247 while the IPC index in Mexico rose 0.9% to 31,726. The RTS index in Russia dropped 0.1% to 2351 while the ISE National 30 index in Turkey climbed 1.6% to 49,050.
The momentum may continue
Market snapped a three days losing streak as bulls staged a strong come back in the last hour of the trading session. It was a steady start to the day, after which key indices turned highly volatile and witnessed wild gyrations during the session. The benchmark Sensex fell sharply to hit a low of 15,314 in the mid-afternoon trades. However, a sudden bout of buying was followed which saw the benchmark index to surge to an intra-day high of 15,479.
The IT stocks were in the limelight with heavyweights like Infosys, Satyam and Wipro leading from front. Also Power, FMCG and select telecom stocks were in demand. The Nifty gained over 130 points from its days low and Sensex advanced over 450 points from its days low. Finally, the BSE benchmark Sensex ended 254 points higher to close at 15,769 and the Nifty index gained 91 points to close at 4,676.
Mercator Lines rallied by over 10% to Rs116 after the company announced that it took delivery of double hull crude carrier. The scrip touched an intra-day high of Rs118 and a low of Rs105 and recorded volumes of over 36,00,000 shares on NSE.
Ashok Leyland slipped by 2.5% to Rs32 after the company’s May sales declined for second straight month. The company announced that its May vehicle sales were at 5,576 units (down 4%). The scrip touched an intra-day high of Rs33 and a low of Rs31 and recorded volumes of over 9,00,000 shares on NSE.
Sahara Housing Finance was frozen at 5% lower circuit to Rs178 after the central bank banned Sahara India Financial Corp. Ltd. from accepting deposits for violating rules including failing to pay minimum interest rates. The scrip touched an intra-day high of Rs180 and a low of Rs178 and recorded volumes of over 3,000 shares on BSE.
PVR rallied by over 9% to Rs184 after the company announced that JP Morgan Mauritius Holding IV Ltd and ICICI Venture Funds Management Company Ltd acting as the investment manager for M/s. India Advantage Fund have agreed to invest Rs600mn each aggregating to Rs1.20bn in company's wholly owned subsidiary i.e. PVR Pictures Ltd.
PVR Pictures is engaged in film production and distribution. Both the investors and PVR Ltd. have therefore executed Share Subscription Agreement and Shareholder Agreement on June 04, 2008. The scrip touched an intra-day high of Rs184 and a low of Rs166 and recorded volumes of over 1,00,000 shares on NSE.
NTPC gained momentum and ended higher by 5% at Rs166 after media reports stated that 23 lakh NTPC shares changed hands at Rs160 per share on BSE. The scrip touched an intra-day high of Rs167 and a low of Rs157 and recorded volumes of over 50,00,000 shares on NSE.
NIIT Ltd advanced by over 5% to Rs109 after the company announced that it secured new orders to impart computer education to 1.9 million school students in Bihar and Maharashtra".
"NIIT Ltd, the leading Global Talent Development Corporation has received the mandate for providing computer and computer aided education to 1.9mn students in 900 State Government Schools in Maharashtra and Bihar. As per two back to back orders bagged by its School Learning Solutions Business, NIIT will train nearly 1.3mn students in 500 State Government Schools in Maharashtra, and 600,000 children in 400 Schools in Bihar, in the next five years. The scrip touched an intra-day high of Rs110 and a low of Rs102 and recorded volumes of over 1,00,000 shares on NSE.
Karnataka Bank advanced by 1% to Rs187 after the company announced that the board of directors would meet on June 12th 2008 to consider right issue. The scrip touched an intra-day high of Rs200 and a low of Rs184 and recorded volumes of over 50,000 shares on NSE.
M&M ended lower by a percent to Rs562. The company announced that it signed an agreement with Engines Engineering S.p.A., agreeing to acquire 100% stake in Engines Engineering S.r.l, the new legal entity which will be formed by transferring the business of Engines Engineering S.p.A. The scrip touched an intra-day high of Rs571 and a low of Rs557 and recorded volumes of over 58,000 shares on NSE.
Jaihind Projects was locked at 5% upper circuit to Rs112.75 after the company announced that it secured an order worth Rs7.60cr from Karnataka Urban Water Supply & Drainage Board for Construction of manholes, providing and laying of stone ware and RCC Pipe lines (Zone 4). The scrip touched an intra-day high of Rs112.75 and a low of Rs102 and recorded volumes of over 16,000 shares on NSE.
Tanla Solutions gained by 3.5% to Rs267 after the Board of Directors of the Company at its Meeting approved acquisition of Openbit Oy, Finland by its subsidiary Tanla Mobile Asia Pacific Pte. This transaction is valued at $US18.60mn.
Openbit Oy would be acquired by Tanla Mobile Asia Pacific Pte Ltd., Singapore a subsidiary of Tanla Solutions Ltd. Tanla Mobile Asia Pacific Pte Ltd would initially acquire 85% of the total shareholding of Openbit Oy. The scrip touched an intra-day high of Rs279 and a low of Rs250 and recorded volumes of over 68,000 shares on NSE.
Punj Lloyd edged higher by half a percent to Rs278 after the engineering, procurement, construction specialist, signed a collaboration agreement with Singapore Technologies Kinetics Ltd, for the manufacture of defence equipment.
Punj Lloyd has been issued a license by the Government of India for the manufacture of guns, rockets and missile artillery systems and related equipment in addition to other defence equipment. Under this agreement, both ST Kinetics and Punj Lloyd will be pooling their resources in the execution of supply contracts for the Ministry of Defence, Government of India. The scrip touched an intra-day high of Rs286 and a low of Rs275 and recorded volumes of over 10,00,000 shares on NSE.
Corporate News
ADAG plans entry into aviation and has initiated talks to buy SpiceJet. (Mint)
Piramal Life looks to sell 9-10% to private equity players. (Mint)
Sun Pharma to challenge Taro Pharmaceuticals’ intention to sell its Irish operations. (Mint)
Punj Lloyd has signed an agreement with Singapore Technologies Kinetics for the manufacture of defence equipment. (Mint)
Petronet LNG has resumed imports of LNG from the spot market after a nine-month halt. (Mint)
ONGC shuts operations of Panna and Mukta fields after an explosion in one of the processing platforms. (Mint)
BSNL pulls out of Singapore cable project. (Mint)
Tata Chemicals opens unit in Netherlands. (BS)
Sun Pharma buys Able Labs unit for Rs1040mn. (BS)
M&M is developing a small engine for a smaller version of its UVs. (BS)
Reliance Infrastructure has received regulatory approval to raise power tariff in Mumbai by 10.22%. (BS)
Lebanon based M1 CEO Azmi Mikati gives approval for a possible merger of RCom and MTN. (BS)
Allahabad High Court stays RBI order against Sahara taking deposits. (BS)
Apollo Hospitals intends to foray into pharmaceuticals. (BL)
Essar Oil may go cautious on Vadinar expansion. (BL)
Sail may increase prices after July. (BL)
JV of Tata Steel and Sail is asking Coal India to transfer three coal blocks to them. (BL)
ONGC to supply gas to NEEPCO’s power plant. (BL)
GMR group has chosen China’s Shangdong Electric Power Corporation as EPC contractor for 1,050MW power project in Orissa. (BL)
BSNL may get relief from rural phone burden. (BL)
HCL Tech along with Germany based SAP has developed solutions for the SMEs in the metal industry. (FE)
Archidply Industries announced a price band of Rs70 to Rs80 for its forthcoming IPO. (FE)
Rolta to foray into high-end security system, EPC and ERP implementation for engineering companies. (FE)
BSNL pulls out of Rs15bn Singapore undersea project. (FE)
SBI in JV with SocGenerale arm for custodial services. (FE)
ICICI Bank increases interest rates on one year NRE deposit to 3.16%. (FE)
Videocon Industries to cut workforce by 50%. (FE)
ACC enters into separate business of alternative fuels and raw materials to cut cost. (FE)
ACC to extend waste management services to multinational companies in India. (FE)
The Union Law Ministry gives approval on the proposed merger of Bhavnagar-based State Bank of Saurashtra with SBI. (FE)
Hindustan Aeronautics to design and manufacture 1,873.5 tonnage class helicopters. (FE)
Jindal Stainless files petition challenging the DGEP circular. (FE)
Reliance Industries goes ahead with gas sale purchase agreement term sheet notwithstanding court orders. (FE)
Tatas and Mahindras been approached by merchant bankers for takeover of General Motor’s Hummer. (ET)
Pantaloon Retail signs 50-50 JV with French apparel firm Celio. (ET)
Kitply Industries secures title sponsorship right for Bangladesh ODI series. (ET)
MTNL wants government to allow access to BSNL’s network to compete with private operators. (ET)
Suzlon buys out Areva’s 30% stake in REpower for a capital gain of over US$540mn. (ET)
Economic News
States start reducing sales tax on fuel. (BS)
RBI will use forex reserves to manage oil shock. (BS)
Iron Ore offtake may fall 10-15% due to China’s import curbs. (BL)
Railways examining further cut in freight rates. (BL)
DoT to allow non-licensees to bid for 3G -spectrum. (FE)
DGEP issue circular saying service tax exemption cannot be availed if services were not rendered from within the SEZs. (FE)
Agricultural minister Sharad pawar to meet PM on commodity trading tax. (ET)
Government to ask SEBI to relax listing norms for SMEs. (ET)
Committee of state finance ministry to meet on June 16 to consider lowering sales tax floor rate for petrol, diesel and LPG. (ET)
Oil companies reduced jet fuel prices by over 4% across the country. (ET)
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