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Tuesday, July 29, 2008
Post Session Commentary - July 29 2008
Market failed to recover from sharp losses and closed in deep red on account of monetary tightening by RBI. To curb the inflation, Central bank announced the hike in Repo rate by 50 basis points to 9% and CRR by 25 basis points to 9%, which will be effective from 30th August 2008. Repo rate will be at 9% for the first time since October 2000 and CRR at 9% for the first time since November 1999. Indian market opened on the back foot tracking the weak global cues and tumbled down further after the RBI’s quarterly review, in which it hikes the key rates and this adds to the investors’ negative sentiment. The market kept on hovering in extremely territory without showing any sign of recovery till the end the session. Both NSE Nifty and BSE Sensex closed with losses of more than 3%. The BSE Sensex ended below 13,800 level and NSE Nifty closed below 4,200 mark. All indices closed in red. Out of which, the interest sensitive indices like Bank and Reality lost more than 8% and 5% respectively. Along with this, the Capital Goods index also lost more than 5%. Heavy selling was also witnessed from the Oil & Gas, Metal, Power and Auto stocks baskets. The market breadth was weak as 963 stocks closed in green while 1672 stocks closed in red and 72 stocks remained unchanged.
The BSE Sensex closed lower by 557.57 points at 13,794.31 and NSE Nifty ended down by 142.25 points at 4,189.85. The BSE Mid Caps closed with losses of 142.20 points at 5,488.58 and Small Cap ended down by 81.97 points 6831.01. The BSE Sensex touched intraday high of 14,153.12 and intraday low of 13,727.14.
The Reserve Bank of India has released its Macro Economic review, as it always does a day before the credit policy. According to this review broad money growth YoY was at 20.5 % as on 4th July 2008 as against 21.8% a year ago. The bank deposits YoY grew by 20.7 % as against 23.1 %. Along with this GDP growth according to the revised estimate of CSO (Central Statistical Organization) is 9 % for the year ended 2007-08 in comparison to 9.6 % in 2006-07. The review also pointed out that India''s budget deficit may come under pressure in 2008-09 as the government’ spending is increasing. According to this report inflation is global phenomenon and is high in major economies due to the impact of high food and fuel prices and strong demand conditions.
Lossers from the BSE are HDFC Bank Ltd (8.71%), ICICI Bank Ltd (8.45%), Reliance Industrial Infra (7.99%), Maruti Suzuki (7.03%), SBI (6.84%), Tata Motors (6.84%), L&T Ltd (6.52%), M&M Ltd (5.54%), DLF Ltd (5.52%), HDFC (5.21%) and JP Associates (5.10%).
The BSE Capital Goods index lost 586.21 points to close at 11,320.60. Major lossers are Bharat Elect (16.28%), Praj Indus (7.46%), L&T Ltd (6.52%), Siemens Ltd (6.32%), Punj Lloyd (5.33%), Walchand In (4.57%) and Reliance Industrial Infra (3.95%).
The BSE Bank index closed lower by 562.22 points at 6,199.60. Major lossers are Bank of India (12.57%), Axis Bank (11.06%), Bank of Baroda (9.53%), Indian Overseas Bank (9.52%), HDFC Bank Ltd (8.71%), ICICI Bank Ltd (8.45%), Oriental Bank of Commerce (8.22%), and Punjab National Bank (8.05%).
The BSE Oil & Gas index ended down by 349.33 points at 9,303.57. As Aban Offshore (5.99%), Reliance Nat Res (5.73%), HPCL (5.26%), BPCL (4.81%), Reliance (4.31%), ONGC (3.02%) and Essar Oil Ltd (2.97%) closed in negative territory.
The BSE Reality index ended lower by 281.41 points at 4,979.71. As Indiabull Real (7.98%), Unitech Ltd (6.50%), Mahindra Life (6.17%), DLF Ltd (5.52%), Akruti City (5.36%), Sobha Dev (4.98%), and Parsvnath (4.33%) closed in negative territory.
The BSE Metal index closed down by 236.36 points at 12,130.36. Lossers are Gujarat Nre C (8.07%), HIndalc (4.72%), Welspan Gujarat Sr (4.69%), Steel Authority (4.33%), Ispat Industries (4.03%), and Tata Steel (3.25%).
The BSE Auto index closed lower by 150.59 points at 3,573.21. Major lossers are Maruti Suzuki (7.03%), Tata Motors (6.84%), M&M Ltd (5.54%), Hero Honda Motors (4.23%), Exide Industries (3.56%), Bajaj Auto (2.63%) and MRF Ltd (2.55%).
Bank stocks lead 558-point Sensex fall as RBI hikes rates
The key benchmark indices which had posted marginal gains yesterday, 28 June 2008, ahead of monetary policy slumped sharply after the Reserve Bank of India (RBI) today, 29 July 2008, raised cash reserve ratio (CRR) by 25 basis points and repo rate by 50 basis points at quarterly review of the monetary policy. Sensex lost more than 620 points at the lowest level of the day hit in mid-afternoon trade. Weak global markets also weighed on the Indian bourses.
Rate sensitive banking, realty and auto stocks tumbled. ICICI Bank and HDFC Bank fell more than 8.5% each. Reliance Infrastructure and Maruti Suzuki India slipped more than 7% each. Reliance Industries dropped. The market breadth was weak as selling was witnessed across the board. Except BSE FMCG index all the sectoral indices on BSE declined.
Reserve Bank of India (RBI) today, 29 July 2008, raised repo rate by 50 basis points to a seven-year high of 9% to curb inflation, now running close to 12%, and dampen inflationary expectations. RBI also raised the cash reserve ratio (CRR), the proportion of funds that banks must keep on deposit with it, by 25 basis points to 9%. The central bank left its reverse repo and bank rates unchanged. The tone of the monetary policy was extremely hawkish
The 30 share BSE Sensex plunged 557.57 points or 3.89% at 13,791.54. The index lost 621.97 points at the day's low of 13,727.14, hit in mid-afternoon trade. At the day's high of 14,152.29, Sensex lost 196.82 points in mid-morning trade.
The broader based S&P CNX Nifty was down 142.25 points or 3.28% at 4,189.85. Nifty July 2008 futures were at 4194, at a premium of 4.15 points as compared to spot closing of 4189.85.
The barometer index BSE Sensex is down 6,495.45 points or 32.01% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 7,415.23 points or 34.96% away from its all-time high of 21,206.77 struck on 10 January 2008.
The BSE clocked a turnover of Rs 5,085 crore today, 29 July 2008, higher than Rs 4,632.42 crore on Monday, 28 July 2008. NSE's futures & options (F&O) segment turnover was Rs 64,804.21 crore, which was higher than Rs 45,000.90 crore on Monday, 28 July 2008. July 2008 derivatives contracts will expire on Thursday, 31 July 2008.
The BSE Mid-Cap index was down 2.53% to 5,488.58 and the BSE Small-Cap index was down 1.19% to 6,831.01.
The market breadth was weak on BSE with 963 shares advancing as compared to 1,672 that declined. 72 remained unchanged.
As per the provisioanl figures on BSE, Foreign institutional investors (FII)s sold shares worth Rs 538.27 crore and domestic funds sold shares worth Rs 254.59 crore today, 29 July 2008.
BSE Bankex (down 8.31% to 6,199.60), BSE Realty index (down 5.54% to 4,797.71), BSE Capital Goods index (down 4.92% to 11,320.60), BSE Power index (down 4.11% to 2,473.81), Auto index (down 4.04% to 3,573.21) underperformed Sensex.
BSE FMCG index (up 0.05% to 2,136.28), BSE IT index (down 0.51% to 3,588.87), BSE Consumer Durables index (down 1.07% to 3,621.63), BSE Teck index (down 1.59% to 2,934.35), BSE HealthCare (down 1.65% to 4,133.34), BSE Metal index (down 1.91% to 12,130.36),BSE PSU index (down 3.12% to 6,514.79), BSE Oil & Gas (down 3.62% to 9,303.57) outperformed Sensex.
India’s largest private sector firm by market capitalization and oil refiner Reliance Industries fell 4.31% to Rs 2,085.20 .
Capital goods stocks declined. Larsen & Toubro (down 6.52% to Rs 2,546.10), Bharat Heavy Electricals (down 3.43% to Rs 1,592.10) and Suzlon Energy (down 0.77% to Rs 212.10) edged lower.
Power stocks fell. NTPC (down 3.44% to Rs 178.45), PowerGrid Corporation of India (down 3.72% to Rs 94.45), Reliance Infrastructure (down 7.99% to Rs 908.15), Reliance Power (down 8.89% to Rs 154.15) and Tata Power Company (down 0.79% to Rs 1,043.30) edged lower.
Rate sensitive auto stocks fell. Tata Motors (down 6.84% to Rs 396.80), Maruti Suzuki India (down 7.03% to Rs 567.65), Mahindra & Mahindra (down 5.54% to Rs 500.20), Hero Honda Motors (down 4.23% to Rs 728.15) edged lower.
Rate sensitive realty stocks slipped. Indiabulls Real Estate (down 7.98% to Rs 264.05), DLF (down 5.82% to Rs 471.90) and Unitech (down 6.5% to Rs 156.80) edged lower.
Banking stocks fell. ICICI Bank (down 8.45% to Rs 607.40), State Bank of India (down 6.84% to Rs 1,321) and HDFC Bank (down 8.71% to Rs 1,028.90) edged lower. India’s largest dedicated mortgage firm by operating income HDFC fell 5.21% to Rs 2,105.65.
Jaiprakash Associates (down 5.1% to Rs 153.45), Hindalco Industries (down 4.72% to Rs 139.25), Reliance Communications (down 4.27% to Rs 490.40) edged lower from Sensex pack.
Infosys (up 0.06% to Rs 1,539.90) and Tata Consultancy Services (up 0.27% to Rs 808.35) edged higher.
India’s largest state run oil exploration firm by sales ONGC declined 3.02% to Rs 981.90. ONGC on Monday, 28 July 2008, reported 44% surge in net profit to Rs 6636 crore on 47% growth in turnover to Rs 20,123 crore in Q1 June 2008 over Q1 June 2007. The company attributed the strong performance to higher price realization on crude oil and cost management.
India’s largest drug maker by sales Ranbaxy Laboratories fell 3.84% to Rs 474.80 after the company reported 0.25% rise in consolidated net profit to Rs 160.80 crore on 13% rise in consolidated sales to Rs 1829.60 crore in Q2 June 2008 over Q2 June 2008.
Reliance Natural Resources clocked the highest volume of 1.97 crore shares on BSE. Himachal Futuristic Communications (1.51 crore shares), IFCI (1.27 crore shares), Ispat Industries (97.05 lakh shares), Polaris Lab (83.34 lakh shares) were other volume toppers in that order.
Reliance Capital clocked the highest turnover of Rs 313.40 crore on BSE. Larsen & Toubro (Rs 223.37 crore), Reliance Industries (Rs 222.27 crore), ICICI Bank (Rs 193.96 crore) and Reliance Natural Resources (Rs 178.23 crore) were other turnover toppers in that order.
In the near term, the market trend is likely to dictated by slew of events like expiry of futures & options contracts on Thursday, 31 July 2008. Besides, the progress of the monsoon and corporates quarterly numbers will also be keenly watched.
Volatility may remain high ahead of the expiry of futures & options contracts for July 2008 series on Thursday, 31 July 2008. As per reports, marketwide rollover of positions from July 2008 series to August 2008 series stood at 30%, while that of Nifty was 35%, as of Monday 28 July 2008.
US stocks tumbled on Monday, 28 July 2008, as news that federal regulators seized two more failed US banks late last week triggered a sharp sell-off in financial shares. The Dow Jones industrial average lost 239.61 points, or 2.11%, to 11,131.08. The Nasdaq composite index declined 46.31 points, or 2%, to 2,264.22. The S&P 500 index fell 23.39 points, or 1.86%, to 1,234.37.
Asian markets which opened before Indian market were weak. China's Shanghai Composite, Japan's Nikkei, Hong Kong's Hang Seng, Taiwan's Taiwan Weighted, Singapore's Straits Times and South Korea's Seoul Composite were down by between 1.19% to 3.03%.
European markets which opened after Indian markets were mixed after weak start. France’s CAC 40 and Germany’s DAX were down by between 0.76% to 1.14%. UK’s FTSE 100 rose 0.18%.
US crude gained $1.47 to settle at $124.73 a barrel yesterday, 28 July 2008 after militant attacks slashed Nigerian oil production and Iran stirred geopolitical tensions by suggesting it was rapidly expanding its nuclear program.
Global cues weak, RBI’s monetary policy eyed
Key benchmark indices are set to extend losses for third straight day today, 29 July 2008 tracking negative global cues. However the crucial Reserve Bank of India (RBI)’s monetary policy review scheduled at noon today, 29 July 2008, will provide the irection to the market in second half.
Marketmen opine that RBI may further hike short-term interest rates or the repo rate as well as statutory deposit requirements or the cash reserve ratio (CRR). RBI had increased short-term lending rates for banks and CRR by 0.5% each on 24 June 2008 to control surging inflation.
In the near term, the market trend is likely to dictated by slew of events like expiry of futures & options contracts on Thursday, 31 July 2008. Besides, the progress of the monsoon and corporates quarterly numbers will also be keenly watched.
Volatility may remain high ahead of the expiry of futures & options contracts for July 2008 series on Thursday, 31 July 2008. As per reports, marketwide rollover of positions from July 2008 series to August 2008 series stood at 30%, while that of Nifty was 35%, as of Monday 28 July 2008.
US crude gained $1.47 to settle at $124.73 a barrel yesterday, 28 July 2008 after militant attacks slashed Nigerian oil production and Iran stirred geopolitical tensions by suggesting it was rapidly expanding its nuclear program.
Foreign brokerage house Goldman Sachs reduced India's growth forecast for fiscal year 2010 to 7.2% from 8.2% earlier due to a weak investment outlook on account of rising interest rates. However, the growth forecast for FY09 remains unchanged at 7.8%.
Goldman Sachs also raised its inflation forecast for both FY09 and FY10. For FY09, the forecast has been raised to 11.5% from 10% earlier, while for FY10 it has been increased to 5.3% from 4.7% earlier.
Asian markets were trading lower today, 29 July 2008. China's Shanghai Composite fell 1.74% or 50.51 points at 2,852.50, Japan's Nikkei plunged 2.15% or 287.34 points at 13,066.44, Hong Kong's Hang Seng lost 2.57% or 582.88 points at 22,104.33, Taiwan's Taiwan Weighted declined 3.76% or 271.79 points at 6,961.83, Singapore's Straits Times was down 1.50% or 43.66 points at 2,866.70, South Korea's Seoul Composite slipped 3.19% or 50.94 points at 1,547.35.
US markets tumbled yesterday, 28 July 2008 led by financials after investment bank Merill Lynch said it will take a 5.7 billion dollar write-down in Q3. The International Monetary Fund's warned that worsening credit conditions may prolong the economic slowdown added to the bearish sentiment. The IMF stood by its April forecast for about $1 trillion in losses stemming from the US mortgage crisis.
The Dow Jones industrial average lost 239.61 points, or 2.11%, to 11,131.08. The Nasdaq composite index declined 46.31 points, or 2%, to 2,264.22. The S&P 500 index fell 23.39 points, or 1.86%, to 1,234.37.
Back home, the 30-share BSE Sensex gained 74.17 points or 0.52% higher at 14,349.11and the broader based S&P CNX Nifty rose 20.25 points or 0.47% at 4,332.10, yesterday, 28 July 2008. The barometer index BSE Sensex is down 5,937.88 points or 29.26% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 6,857.66 points or 32.33% away from its all-time high of 21,206.77 struck on 10 January 2008.
As per the provisional figures foreign institutional investors (FII)'s sold shares worth Rs 721.90 crore while domestic funds bought shares worth Rs 456.67 crore yesterday 28 July 2008.
Foreign institutional investors (FIIs) were net sellers of Rs 1939.47 crore in the futures & options segment on 28 July 2008. They were net sellers of index futures to the tune of Rs 1166.31 crore and bought index options worth Rs 81.46 crore. They were net sellers of stock futures to the tune of Rs 883.85 crore and purchased stock options worth Rs 29.22 crore.
Market may open negative
The market is likely to remain under pressure after a sharp fall in the US market and weakness among major Asian indices in the ongoing trades. FIIs remaining net sellers in equities for last couple of sessions may help the sentiment to remain negative. Among the domestic indices, the Nifty could test lower levels of 4250 and may rise to 4350 - 4400 levels on the upside. The Sensex has a likely support at 14100 and may face resistance at 14500.
US indices fell sharply on Monday, with the Dow Jones lost tumbled 240 points to close at 11,131, the Nasdaq also ended weak with a loss of 46 points at 2264.
All Indian ADRs also had a weak outing on Monday. Rediff was the major loser amongst the ADRs and declined 10.74% followed by VSNL which tumbled 9.34% , ICICI Bank down 8.44% and Tata Motors tumbled 6.63%, while Dr Reddy, HDFC Bank, Satyam, Infosys, Wipro, MTNL and Patni Computers shed around 1-4% each.
Crude oil prices gained marginally, with the Nymex light crude oil for September delivery moved up by $1.47 to close at $124.73 a barrel. In the commodity space, the Comex gold for August series gained 90 cents to settle at $937.80 a troy ounce.
Morning Call - July 29 2008
Market Grape Wine :
In House :
Nifty at a support at 4257 and 4220 with resistance at 4360 and 4430 levels.
Cash: Buy RELIANCE above 2285 target 2348 with S/L 2255.
Cash: Buy REL CAPITAL above 1351 target 1420 with S/L 1319.
Future: Sell ADLAB below 538 target 510 with S/L 548
Future: Sell LITL below 350 targets 330 with S/L 360.
Out House:
Markets at a support of 14014 & 13876 levels with resistance at 14532 & 14441 levels .
RBI credit policy today might see a REPO rate hike , and weak US markets to see markets open downward with a gap .
Buy : Adalbs at dips
Buy : Sail at dips
Buy : Relcap
Buy : LNT at dips
Buy : ITC
Buy : SBIN
Buy : HLL at dips
Buy : Core project at dips
Dark Horse :Adalbs , SBIN , LNT , Core & MRPL
Pre Session Commentary - July 29 2008
The Indian Market is expected to have negative opening due to weak global cues as US markets closed in deep red and Asian markets are trading lower. RBI’s quarterly review today also adds to the investors’ negative sentiment. Monday, the Indian market closed with gains after showing volatility during the trading session. The domestic market opened flat but soon turned volatile led by discomfort due to the serial blasts in Bangalore and Ahmedabad. Further it was not able to gain the momentum and was skipping up and down. At the end, market managed to close in green due to some buying in key indices. The BSE Sensex ended below 14,400 mark and NSE Nifty closed below 4,400 level. BSE Small Cap index gained around 2%. From the sectoral front, the Capital Goods, Oil & Gas, Reality, Consumer Durables and Pharma stocks were in favor as most of the buying was seen from these baskets. While the Metal, Power, IT and Auto stocks remained sufferer of negative sentiment. The BSE Sensex closed higher by 74.17 points at 14,349.11 and NSE Nifty ended up by 20.25 points at 4,332.10. We expect that market may trade lower during the trading session.
The Reserve Bank of India will release its quarterly review today and may take some measures to curb higher inflation. It has released its Macro Economic review, as it always does a day before the credit policy. According to this review broad money growth YoY was at 20.5 % as on 4th July 2008 as against 21.8% a year ago. The bank deposits YoY grew by 20.7 % as against 23.1 %. Along with this GDP growth according to the revised estimate of CSO (Central Statistical Organization) is 9 % for the year ended 2007-08 in comparison to 9.6 % in 2006-07. The review also pointed out that India''s budget deficit may come under pressure in 2008-09 as the government’ spending is increasing. According to this report inflation is global phenomenon and is high in major economies due to the impact of high food and fuel prices and strong demand conditions.
On Monday, the US market was closed in deep red due to shut down of two more banks by regulators. Federal regulators announced that First Heritage Bank of Newport Beach, California and First National Bank of Nevada, based in Reno would close, because both were undercapitalized. Crude oil also bounced back to put pressure after three straight weeks of decline. Crude for September delivery raised $1.47 to settle at $124.73 a barrel on the New York Mercantile Exchange.
The Dow Jones Industrial Average (DJIA) closed lower by 239.61 points at 11,131.08 along with NASDAQ ended down by 46.31 points at 2,264.22 and S&P 500 index closed lower by 23.39 points at 1,234.37.
Indian ADRs ended down. In technology sector, Satyam ended lower by (2.70%) along with Wipro by (2.19%), Infosys by (1.31%) and Patni Computers dropped by (1.10%). In banking sector, ICICI bank and HDFC bank lost (8.45%) and (3.12%) respectively. In telecommunication sector, Tata Communication and MTNL ended down by (9.34%) and (2.48%). However, Sterlite industries increased by (1.85%).
Today the major stock markets in Asia are trading lower US market losses overnight on fresh worries over fallout from the credit crisis. Hang Seng index is trading down by 582.88 points at 22,104.33 along with Japan’s Nikkei trading lower by 287.34 points at 13,066.44. Taiwan Weighted is trading at 6,961.83 down by 271.79 points.
The FIIs on Monday stood as net seller in equity and debt. The gross equity purchased was Rs2,954.60 Crore and the gross debt purchased was Rs207.00 Crore while the gross equity sold stood at Rs3,501.00 Crore and gross debt sold stood at Rs324.40 Crore. Therefore, the net investment of equity reported was (Rs546.30) Crore and net debt was (Rs117.40) Crore.
Today, Nifty has support at 4,153 and resistance at 4,400 and BSE Sensex has support at 13,809 and resistance at 14,626.
Trading Calls - July 29 2008
Nifty (4332) Sup 4250 Res 4390
Buy HUL (231) SL 227
Target 239, 242
Buy Mercator Lines (94) SL 91
Target 98, 100
Sell Hindustan Oil (129) SL 133 Target 120, 118
Sell NALCO (428) SL 433
Target 418, 415
Sell Jet Airways (449) SL 453 Target 439, 435
Be Reddy to scout!
A Scout is never taken by surprise; he knows exactly what to do when anything unexpected happens.”
Last week's terror strikes failed to have any major impact on market sentiment. The main indices managed to advance after a choppy session. The rally seemed to taper off towards the close amid anxiety over today's RBI policy meeting. Weakness in European markets also may have prompted the bulls to turn a little cautious. And, rightly so. Wall Street witnessed another big sell-off amid nagging worries over the US financial sector and its impact on the world's biggest economy. Asian markets this morning are down 2-3.5%. FIIs were net sellers of over Rs7bn (provisional) yesterday. Given this kind of a backdrop, we expect a soft opening in our market.
Trading may turn volatile ahead of the RBI's quarterly policy announcement around noon. A small hike in either Repo Rate or CRR is on the cards, and has already been discounted by the markets. Having said that, RBI Governor Y.V. Reddy has this habit of springing a surprise almost every time. It remains to be seen if he does it again today. Even if he does, hopefully the surprise will be on the positive side for banks and the markets. So be ready with your picks because Dr. Reddy seems more steady for now.
Results Today: Adhunik Metaliks, Akruti City, Areva T&D, Ashok Leyland, Balaji Tele, BOB, BEL, Bombay Dyeing, Cadila Healthcare, Cairn India, Corporation Bank, Deccan Chronicle, Deepak Fertilizers, D.S. Kulkarni, Elecon Engineering, Essar Shipping, Evinix, Finolex Industries, Gail India, GHCL, GSK Consumer, GMR Infra, Godawari Power, Godrej Industries, Gokaldas Exports, GVK Power, Harrison Malayalam, Hero Honda, Hexaware, HPCL, Hotel Leela, ICRA, India Infoline, IRB Infra, Jet Airways, Matrix Labs, Mercator Lines, Mukand, National Fertilizers, NDTV, NTPC, Omaxe, Orient Paper, Praj Industries, Punj Lloyd, Rajesh Exports, Ranbaxy, RCF, Shoppers' Stop, Sunil Hitech, Syndicate Bank, TV 18, Thomas Cook, UTV, Venus Remedies and Visa Steel.
FIIs were net sellers of Rs7.22bn (provisional) in the cash segment on Monday and the local funds pumped in Rs4.57bn. In the F&O segment, the foreign funds were net sellers of Rs6.37bn. On Friday, FIIs were net sellers of Rs5.46bn in the cash segment.
Asian stocks fell on Tuesday after the IMF said there is no end in sight to the correction in US housing sector even as energy costs are spiraling. The Nikkei in Tokyo was down 2.15% at 13,066 while the Hang Seng in Hong Kong fell 2.5% to 22,114.
The MSCI Asia Pacific Index fell 2% to 131.33 as of 10:54 a.m. in Tokyo. About 16 stocks retreated for each that rose. Financial stocks accounted for 34% of the index's decline.
US stocks tumbled on Monday as worries about the economy and the troubled financial sector overshadowed the announcement of a rescue plan for mortgage giants Fannie Mae and Freddie Mac.
Financial stocks were among the blue chips hit the hardest, with insurance giant AIG down 12%. Shares of Citigroup fell 7.5%, Bank of America sank 5.1%, and Wachovia tumbled 6%. Bond insurer Ambac was the biggest loser for the day, falling 19%.
Merrill Lynch, AIG and Fannie Mae led financial shares to a third straight drop after the IMF warned that worsening credit conditions may prolong the economic slowdown in the US. Verizon slid to an almost two-year low on a bigger-than-estimated decrease in home-phone lines.
Tyson Foods tumbled the most in six weeks after profit sank 92% on higher feed costs.
The S &P 500 Index slumped 23.39 points, or 1.9%, to 1,234.37, its lowest level since reaching an almost three-year low on July 15. The Dow slid 239.61 points, or 2.1%, to 11,131.08. The Nasdaq Composite Index dived 46.31 points, or 2%, to 2,264.22.
Market breadth was very negative. Four stocks fell for each that rose on the New York Stock Exchange.
US indices had finished slightly higher in the previous session on encouraging reports from the housing and manufacturing sectors.
Stocks opened lower as worries about the credit crisis were exacerbated by federal regulators shuttering two more regional banks on Friday. They came off their lows briefly after Treasury Secretary Henry Paulson laid out guidelines for banks seeking to issue covered bonds as a way to finance home mortgages.
Investors will see if the US market can rebound on Tuesday as a key measure of consumer confidence is due to be released shortly after the opening bell. Scores of earnings reports are also due before and after the market.
Government-sponsored mortgage finance giants Fannie Mae and Freddie Mac turned higher after the Senate approved a bill that could establish a rescue plan for the embattled firms. Shares of Fannie and Freddie both soared in morning, but turned sharply down by midday. Fannie fell 10.7% and Freddie sank 6.7%.
Oil prices rose $1.47 to $124.73 per barrel as traders weighed slumping demand with renewed concerns about Iran's nuclear capabilities. Nonetheless, crude is still about $24 below its high of $147.27 set on July 11.
The average price of gasoline in the US fell 1.2 cents to $3.958 per gallon.
In currency trading, the US dollar slipped against global currencies. The greenback fell against the euro, even as a measure of German consumer confidence fell to a more-than-five-year low.
COMEX gold for August delivery rose 90 cents to settle at $927.70 an ounce after fluctuating above and below the break even point for much of the day.
Treasury prices rose, sending the yield on the benchmark 10-year note down to 4.01% from 4.11% late on Friday.
Europe stocks ended lower, as German consumer confidence dropped to a five-year low, Citigroup downgraded the banking sector and Ryanair Holdings warned of the possibility of its first-ever annual loss. The pan-European Dow Jones Stoxx 600 closed 1.1% lower to 278.73.
In Germany, the benchmark DAX 30 fell 1.3% to 6,351.15. The French CAC 40 fell 1.2% to 4,324.45 and the UK's FTSE 100 slipped 0.8% to 5,312.60.
In the emerging markets, the Bovespa in Brazil dropped 0.6% to 56,869 while the IPC index in Mexico was down 1.3% at 26,732. The RTS index in Russia slipped 1.2% to 1928 and the ISE National-30 index in Turkey gained 1.9% to 46,990.
All eyes on RBI
After slipping for two consecutive trading sessions, Indian bourses ended with modest gains starting off the weak with a positive bias. Markets started off the day on a flat note and remained range bound for major part of the trading session. Finally, the benchmark Sensex gained 74 points to close at 14,349 and Nifty gained 20 points to close at 4,332.
Among the BSE Sectoral indices, BSE Oil & Gas index (up 1.5%), Capital Goods index (up 1.5%), BSE Realty index (up 1%). On the other hand, Metal index (down 1%) and BSE Power index (0.3%).
Sunil Hitech rallied by 3% to Rs196 after the company announced that it bagged fresh order worth Rs6.49bn in the first quarter of the financial year 2008-2009. The company said that at the end of first quarter of the present fiscal the Company is holding a strong consolidated order book position worth Rs13.74bn. The company bagged Engineering Procurement Contract (EPC) job for 30 MW works and 60 KLPD Distillery Plant with 6000 TCD sugar for Gangakhek Sugan & Energy Pvt Ltd, in District Parbhani. The work is worth Rs3.29bn. This is the biggest single order Sunil Hitech bagged since its inception which marked the entry of the company into EPC business.
Shares of L&T gained by over 3% to Rs2723 after the company announced its Q1 results with net profit at Rs5.02bn (up 33%) and revenues at Rs71bn (up 50%). The scrip touched an intra-day high of Rs2799 and a low of Rs2600 and recorded volumes of over 10,00,000 shares on BSE.
Dabur India gained by 1% to Rs92 after the company announced its Q1 results with net profit of Rs701.40mn (up 25%) as compared to Rs559.70mn for the quarter ended June 30, 2007. The total income increased 13.3% to Rs5,352.90mn from Rs4,720.50mn for the quarter ended June 30, 2008. The scrip has touched an intra-day high of Rs95 and a low of Rs91 and recorded volumes of over 6,00,000 shares on BSE.
Dish TV gained by a percent to Rs31.5. The company announced that it posted a net loss of Rs1.25bn for the quarter ended June 30, 2008 compared to a loss of Rs897.64mn in the same quarter last year. Total income for the quarter is Rs1.65bn as against Rs893.37mn in the quarter ended June 30, 2007. The scrip touched an intra-day high of Rs33 and a low of Rs31 and recorded volumes of over 18,00,000 shares on BSE.
Sterlite Industries declined by 3.5% to Rs582 after the company announced its Q1 results with net profit at Rs3,579.3mn (up 77.7%) for the quarter ended June 30, 2008 as compared to Rs2,014.6mn for the quarter ended June 30, 2007. However, total income declined 0.8% to Rs31,426mn for the quarter ended June 30, 2008 from Rs31,658.5mn.
The scrip touched an intra-day high of Rs627 and a low of Rs572 and recorded volumes of over 7,00,000 shares on BSE.
Adani Enterprises gained by 1.5% to Rs644. The company announced that it registered a net profit of Rs669.70mn for the quarter ended June 30, 2008 as compared to Rs454.30mn for the quarter ended June 30, 2007. The total revenue increased from Rs19,437mn for the quarter ended June 30, 2007 to Rs23,959.30mn for the quarter ended June 30, 2008.
The scrip touched an intra-day high of Rs657 and a low of Rs608 and recorded volumes of over 55,000 shares on BSE.
Standard & Poor’s, lowered its short-term issue credit rating on ICICI Bank’s US$300mn US commercial paper (USCP) program to ‘A-1’ from ‘A-1+’.
ONGC has decided to foray into nuclear power production beginning with mining for uranium in collaboration with Uranium Corporation of India. (FE)
Tata Power and IOC have decided to float a new company for jointly developing a 1,000MW coal-based mega power project at Paradip in Orissa. (FE)
Britannia Industries may close some more of its manufacturing facilities and raise prices of its products to offset the rise in input costs. (BS)
Nava Bharat Venture and Maytas Infra led consortium has won the Rs118.14bn Hyderabad Metro Rail project. (FE)
Hindustan Unilever has tied up with a third-party logistics service provider to manage the entire back end distribution chain on behalf of its distributors. (ET)
Dr Reddy`s to form JV for off-patent drugs. (BS)
Infosys plans to cut dependence on the United States to ~40% from more than current 60%. (FE)
Rolta is close to acquiring a Chicago based IT firm for ~US$40-50mn. (ET)
M&M and Renault are discussing the possibility of selling cars made in Renault-Nissan’s manufacturing facility in Chennai through Mahindra-Renault. (ET)
Exide Industries to increase exports from its Sri Lankan subsidiary to India by 15-20% in FY09.
Titagarh plans wagons line expansion by 44% yoy in FY09 to 5,000. (BS)
BSNL is likely to use a portion of the IPO proceeds toward pension funds and training. (ET)
The country’s first mega power project in the private sector built by the O.P. Jindal group to go fully commercial by August 15. (BL)
Electrotherm to compete with high-powered petrol scooters. (BL)
Ashok Leyland to develop new range of trucks by 2012. (BL)
Great Offshore bagged an engineering contract worth Rs2.3bn from ONGC. (BL)
Ranbaxy has entered into an agreement with AstraZeneca Pharmaceuticals to launch an authorised generic of Omeprazole 40 mg capsules in the US.
Bajaj Auto unveiled three variants of Discover bike. (BL)
Kinetic Motor may not sell stake to M&M but may enter into an alliance to cash in on the M&M's huge network and expertise. (ET)
Tatas’ plan to enter into Chinese hospitality sector through the group company Taj International Hong Kong. (FE)
Economic Front Page
Madhya Pradesh government to go slow on mining lease for new investors. (BS)
RBI says that global inflationary pressures likely to remain. (BL)
DoT plans separate 3G policy for CDMA players. (BL)
New EU tariff preferences to benefit Indian gem, jewellery industry. (BL)
The upcoming third generation (3G) policy is likely to hit CDMA players. (ET)
India’s share in global service exports is expected to increase from current 2.7% to 6% by 2012. (ET)
Polluting power companies may have to pay carbon tax. (ET)
Trade deficit on a balance of payments basis has widened from US$63.2bn in 2006-07 to US$90.1bn in 2007-08. (FE)
The Punjab Government plans to spend Rs250bn on over 75 infra projects. (FE)
Bullion metals register marginal gains
Prices manage to eke out little gains but close off at day’s highs
Bullion metal prices kept on fluctuating today, Monday, 28 July, 2008, as traders kept close watch on the currency market and crude market. At the end, gold prices ended marginally higher. Silver prices also rose for the day.
Comex Gold for August delivery rose $0.9 (0.09%) to close at $927.7 ounce on the New York Mercantile Exchange. It recovered from a low of $922.40, but finished below the day's high of $932. Last week, it ended lower by $30 (3.2%). On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped since then.
This year, gold prices have gained 10.8% till date against a 9% drop for the dollar against the euro. Gold prices ended June, 2008 with a gain of 4.1%. The yellow metal ended second quarter with a marginal gain of 0.7%. In May, it ended with a gain of higher by $22.5 (2.5%). Before May, for April, prices closed lower by 6.3%.
For first quarter prices gained 10.7%. In January, prices gained 11%, the highest monthly gain since April 2006. For February, it gained 6%. But in March, prices succumbed and fell by 5.5%.
On Monday, Comex silver futures for September delivery rose 9 cents (0.46%) to $17.465 an ounce. Silver has gained 18.7% in 2008 till date. For the second quarter, it had gained a paltry 1.4%.
Silver prices ended the month of May 2008 with a gain of 2.7%. For April, it closed lower by 5.5%. Silver had gained 16% in Q1. In January this year itself, prices climbed 14%. In February, it gained another 15%. For March, it ended lower by 13%. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years.
Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies. On the other hand, a lower dollar pushes up precious metal prices as their demand lessens as it becomes cheaper for traders holding other currencies.
At the currency markets on Monday, the dollar wavered between positive and negative territory against most major counterparts. The dollar index, which measures the dollar against a trade-weighted basket of currencies, was at 72.68, down from 72.811.
At the crude market on Monday, crude prices rose today at New York after Royal Dutch Shell reduced Nigerian production because of an attack on a pipeline by militants. Comments from Iranian president regarding global crude supplies also helped in lifting the prices higher. But the price gains were checked as investors continued to be worried about oil demand from US in the long run. Crude-oil futures for light sweet crude for September delivery closed at $124.73/barrel (higher by 1.47/barrel or 1.2%) on the New York Mercantile Exchange. The contract rose as high as $124.80 during the regular trading session, but traded as low as $122.70.
The weakening dollar and higher global demand for raw materials have led to records this year for commodities including gold. Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. Gold and oil has climbed 36% and 66% since the past one year.
During last week of June, Federal Reserve yesterday sharpened its focus on inflation, saying that the upside risks to inflation have increased. Fed held its target for short-term interest rates steady at 2%. Since last September, Fed has axed interest rates seven times and brought it down to 2%. On the other hand, after keeping interest rates unchanged at 4% since June, 2007, ECB hiked the same to 4.25% last month.
Gold had witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. In 2006, silver had jumped 46% while gold gained 23%.
Crude ekes out gains
Prices rise more than 1% as production is disrupted at Nigeria
Crude prices rose today at New York after Royal Dutch Shell reduced Nigerian production because of an attack on a pipeline by militants. Comments from Iranian president regarding global crude supplies also helped in lifting the prices higher and the weak dollar. But the price gains were checked as investors continued to be worried about oil demand from US in the long run.
Crude-oil futures for light sweet crude for September delivery closed at $124.73/barrel (higher by 1.47/barrel or 1.2%) on the New York Mercantile Exchange. The contract rose as high as $124.80 during the regular trading session, but traded as low as $122.70. Last week, prices coughed up $6.5 (4.8%). It's now 15% lower than the $147.27 record high hit last on Thursday, 10 July, 2008.
Last night, pipelines at Nigeria were attacked and the rebel group, the Movement for the Emancipation of the Niger Delta, or MEND, claimed responsibility for the assault. Shell said that the company shut some output, but didn't specify the amount.
Iran's President Mahmoud Ahmadinejad said today that his country has 6,000 uranium-enriching centrifuges, and the producer has threatened to blockade the Strait of Hormuz, the export channel for a quarter of the world's crude oil, if its nuclear facilities are targeted.
Crude prices gained 38% in the second quarter of this year. It was the biggest quarterly increase in nine years. It ended June 2008 higher by 9.9%. Prices are 62% higher than a year ago. For the year, crude is up by 32% till date.
At the currency markets on Monday, the dollar wavered between positive and negative territory against most major counterparts. The dollar index, which measures the dollar against a trade-weighted basket of currencies, was at 72.68, down from 72.811.
Last week, EIA’s weekly inventory report showed that an economic slowdown is taking toll on energy demand. Over the past four weeks, U.S. motor gasoline demand has averaged 9.3 million barrels per day, down by 2.4% from the same period last year.
Against this background, August-reformulated gasoline gained 3.8 cents to close at $3.07 a gallon and August heating oil gained 3.9 cents to finish at $3.562 a gallon.
Natural gas in New York advanced as the lowest prices for the fuel in four months attracted speculators. Natural gas for August delivery rose 7.9 cents (0.9%) to settle at $9.163 per million Btu. The August delivery contract expires tomorrow. Gas for September delivery rose 6.9 cents (0.8%) to settle at $9.195 per million Btu.
Nu Tek India IPO Review
Incorporated in 1993, Nu Tek India (Nu Tek) was promoted by a first-generation entrepreneur, Inder Sharma, a BE Electronics and Communication Engineer from North Carolina State University, US. Nu Tek is a telecom infrastructure services provider, offering Infrastructure rollout solutions for both mobile and fixed telecommunication networks. The company offers services to telecommunication equipment manufacturers, telecom operators as well as third party infrastructure leasing companies in installing and maintaining telecom network equipment and Infrastructure.
From end-to-end solutions ranging from telecom network installations to full turnkey infrastructure rollout services, Nu Tek also provides technical support services and operation and maintenance to its clients. The company has executed projects in all the 23 telecom circles in India through its workforce of over 1,000 employees across India. It is also registered with the Department of Telecommunications (DoT) as a telecom infrastructure provider (category – 1).
A subsidiary in Turkey will mark Nu Tek’s foray into the overseas markets. The Middle East operations of Ericssion AB, Dubai, will also be serviced by the company. It is in the process of acquiring companies / entities in the US that will compliments its requirements. Work orders of a Rs 4.82-crore Tata Projects relating to the power sector in Rajasthan and Orissa are under execution.
Nu Tek’s initial public offer (IPO) of Rs 76.50 – Rs 86.40 crore comprises 45 lakh shares in the price band of Rs 170 – Rs 192 per share. This includes fresh issue of 35 lakh shares and offer for sale of 10 lakh shares. The net proceeds of the issue (Rs 59.5 – 67.2 crore) and internal accruals are to be used for capital expenditures including various testing equipments, laptops and transport vehicles (Rs 23.58 crore) to fund overseas acquisitions (Rs 21 crore), to augment long-term working capital requirements (Rs 44 crore) and for general corporate purposes.
Strengths
* Had an order book of Rs 175 crore on 15 June 2008 to be executed in the year ending March 2009 (FY 2009). This is 1.8 times FY 2008 net revenue. Orders are from Aircel/Dishnet Wireless, Huawei Telecommunications, Ericssion, ATC Tower Company of India and Shyam Telelink.
* Has worked for all the major telecom operators like Bharti Airtel, Reliance Communications, Tata Teleservices, Aircel, and Shyam, and telecom equipment manufacturers like Nokia, Ericsson, Motorola, and Huwaei, and third party infrastructure leasing companies like Quipo, ATC Tower Company, and Xcel Telecom.
* Operating in high-growth telecom infrastructure services sector, seeing a massive expansion plans by all telecom services providers, especially in small towns and rural areas, offering good business opportunities in the coming years. With mobile number portability to be implemented soon, existing telecom operators will be forced to improve the on-road and in-building coverage by improving/sustaining their network infrastructure to retain existing subscribers. The imminent arrival of third generation (3G) technology would lead to an increased demand for towers/telecom sites.
* Changing its business mix towards operation and maintenance (O&M) services to ensure a sustainable business model to offset matured markets. Revenue from O&M activities increased to 13% in FY 2008 against nil in FY 2006. Seven per cent of the current order book comprises O&M service contracts. Also undertakes O&M for sites developed by other infrastructure providers (about 60% of business from such sites). Expects to win O&M contracts from MTNL for sites in Delhi and the National Capital Region (NCR).
Weaknesses
Most of the infrastructure rollout experience is concentrated in north India (about 70% of revenue), while exposure to other regions is limited to smaller projects. There is huge amount of capex lined up by all the telecom operators for the rollout of infrastructure across India, of which sizable spending is expected in the under-penetrated eastern part of the country. Is working on strengthening its presence in the eastern and southern regions to address opportunities arising out of regional growth. This can be seen from the current order book, which includes just 46% of the orders from the northern region as against about 70% of revenue earlier.
* There has been an increasing trend of passive infrastructure sharing among operators, resulting in lower capex on network infrastructure. Further active infrastructure sharing and intra-circle roaming arrangements have also been allowed by the Telecom Regularity Authority of India (Trai), which will cap the capex by operators on network infrastructure while launching services in new circles, leading to lower opportunities.
* The market for telecom infrastructure services providers is highly competitive. The relatively small size of operations may impact competitiveness and prove to be a deterrent in bidding for larger projects. Lack of pricing power against large telecom operators, telecom equipment producers and tower leasing companies may put pressure on margin.
* The working capital cycle is high due to longer projects. Had negative operating cash flows in each of the last three fiscal years. At 113 days, debtors’ days are also on the higher side (181days on closing debtors basis).
Valuation
Over the three-year period ended March 2008, revenue grew at a CAGR of 46% and net profit at CAGR of 57%. Operating profit margin has stabilised at 32% against 18.7% in FY 2005. Improvement in margin is on higher employee utilisation and drop in selling, general and administration (SG&A) expenses in absolute terms. This may not be sustainable going forward. The EPS on post-issue equity capital of Rs 17.26 crore has improved by more than four times to Rs 12.3 in FY 2008 from 2.9 in FY 2006.
On the FY 2008 EPS of Rs 12.3 on post-issue equity capital of Rs 17.26 crore, the P/E works out to 13.8 – 15.6 in the price band of Rs 170 – Rs 192. The trailing 12-month (TTM) P/E of GTL (a much bigger player providing broadly similar services) is 13.
Today's Pick - Praj Industries
We recommend a buy in Praj Industries from a short-term perspective. It is apparent from the charts that the stock has been on a medium-term uptrend from its March 2008 low of Rs 100, which is a significant support level. However, the stock encountered resistance at around Rs 220 in late May and declined to Rs 140 (retracing 61.8 per cent fibonacci retracement of its prior uptrend). Subsequently, the stock resumed its medium-term uptrend. We also notice an inverse head and shoulders pattern, (a continuation pattern in this scenario) spanning over the past two months. On July 23, the stock broke through the neckline of this pattern by gaining 4 per cent on above average volume. The stock is trading well above its 21 and 50-day moving averages. The daily relative strength index has entered into the bullish zone. The moving average convergence and divergence has entered the positive territory, reinforcing our bullish stance. Our short-term forecast of the stock is bullish. We anticipate the stock to move up until it hits our price target of Rs 225 in the upcoming trading sessions. Traders with short-term perspective can buy the stock, while maintaining stop-loss at Rs 190.
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