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Monday, December 08, 2008

RIL December 2008 futures at premium

Turnover rises

Nifty December 2008 futures were at 2788.90, at a premium of 4.90 points as compared to the spot closing of 2784. Turnover in NSE's futures & options (F&O) segment surged to Rs 39,051.16 crore from Rs 36,708.86 crore on Friday, 5 December 2008.

Reliance Industries (RIL) December 2008 futures were at premium at 1123 compared to the spot closing of 1118.55.

DLF December 2008 futures were at premium at 222.55 compared to the spot closing of 221.55.

NTPC December 2008 futures were near spot price at 166.45 compared to the spot closing of 166.25.

In the cash market, the S&P CNX Nifty gained 69.90 points or 2.56% at 2784.

Asian Stocks Jump On US Stimulus Plan

Hang Seng, Nikkei and Shanghai lead the regional gain

The stock markets across the Asian region closed to a 3 week high as investors takes a sigh of relief from a rescue plan for US automakers, falling oil prices and more government stimulus measures to limit the economic damages from the credit crisis. On Wall Street the Dow closed up 259.2 points or 3.1% at 8,635.4, the Nasdaq gained 63.8 points or 4.4% to 1,509.3 and the S&P 500 advanced 30.9 points or 3.7% to 876.1.

In the commodity market, crude oil prices rose for the first time in seven days after OPEC president said that the group would announce significant output cuts and U.S President-elect Barack Obama reiterated his pledge of big-bang public spending program in five decades. At 00:53 a.m. ET, oil was quoted at $43 a barrel, up $2.19, after the contract plunged to its lowest level in four years of $40.81 a barrel on Friday in New York trading.

In the currency market, the U.S. dollar strengthened to the upper 92-yen levels in late Tokyo deals. The dollar was quoted at 92.83-92.86 yen, up 0.60 yen from Friday's close of 92.23-92.25 yen in Tokyo.

China's Yuan strengthened to 6.8745 a U.S. dollar in over-the-counter trading, up from Friday's close of 6.88120.

The Australian dollar closed up at US$0.6532-0.6537, compared to Friday's close of US$0.6442-0.6445, on capital inflow into equity market.

The New Zealand dollar finished the domestic session at US$0.5324, down from US$0.5337 late Friday.

The South Korean won finished the domestic session at 1,448.3 to a dollar, down from Friday's close of 1,475.5 to a dollar.

Coming back in equities, Japan’s Nikkei surged 5.20% to its highest close in a week, with machinery shares surged on hopes for economic stimulus packages being enacted around the world. The benchmark Nikkei gained 411.54 points to 8,329.05 after earlier rising as high as 8,358.27. It lost 7% last week. The broader Topix index of all the Tokyo Stock Exchange First Section issues rose 26.06 points, or 3.32%, to 812.08.

On the economic front, the Ministry of Finance said that Japan's unadjusted current account surplus plummeted 56.6% on year in October to 960.5 billion yen compared to analysts' expectations for a 50% decline. The current account surplus has fallen for the eighth straight month in October. The October trade surplus was down 87.2% on year to 145.8 billion yen.

In Mainland China, the stock markets surged to a two month closing high as meeting of top economic planners scheduled this week is likely to produce more government actions to aid the overall economy. The benchmark Shanghai Composite Index jumped 72.12 points or 3.57% to close at 2,090.77. The Shenzhen Composite Index for China's smaller second exchange rose 3.69% or 22.18 points to 622.90.

In Hong Kong, stock prices closed sharply higher, driven mainly by hopes that a key annual Chinese government economic conference will produce more measures to boost the economy and markets. The Hang Seng index closed up 1,198.78 points or 8.66% at the day's high of 15,044.87, off a low of 14,303.25. The Hang Seng China Enterprises index was up 708.91 points or 9.54% at 8,137.45.

The Australian stock market closed sharply higher, reversing Friday's 1.2% losses, as oil producers surged on talk of a potential takeover bid for Santos and banks gained on bargain hunting. The benchmark S&P/ASX 200 index rose 141.70 points, or 4.06% to 3,631.60 and the broader All Ordinaries index gained 126.6 points, or 3.7%, to 3,553.8.

On the economic front, ANZ reported that total job advertisements in Australia fell 8.6% in November, following a 5.9% monthly decline in the previous month.

The New Zealand stock market closed in negative territory for the second straight trading session, despite Wall Street posting sharp gains on Friday. The benchmark NZX 50 Index closed down 6.91 points, or 0.26%, at 2,699.81 and the broader NZX All Capital Index lost 9.9 points, or 0.4%, to 2,722.5.

On the economic front, the average price of houses in New Zealand fell 6.8% in November from a year earlier, the second monthly slide of the same magnitude. The average sale price fell to NZ$375,408 last month, from NZ$379,290 in October, QV Valuations said in a statement. Meanwhile, the Statistics New Zealand reported that the seasonally adjusted volume of residential building work put in place in the September quarter fell 7.9%, the lowest since June 2002.

The South Korean stock market jumped to near 4-week closing high as hopes of further economic stimulus measures from governments around the world strengthened, pushing up construction and technology issues. The Korea Composite Stock Price Index finished up 7.48% at 1,105.05 points, its highest close since the finish of 1,123.86 on 12 November 2008.

On the economic front, major global investment banks lowered their 2009 growth projections for South Korea to near 1%, citing a faster-than-expected worldwide recession and its impact on the nation's export-driven economy. According to the data provided by the Ministry of Strategy and Finance and the Korea Center for International Finance, seven major investment banks including JP Morgan predicted Asia's fourth-largest economy will grow an average of 1.2% next year, far lower than a 3% expansion predicted a month earlier.

In Taiwan, Stock market closed higher in a technical rebound after four successive sessions of losses, boosted by a strong showing on Wall Street on Friday. Taiex, the benchmark index closed up 193.26 points or 4.57% at 4,225.07, off a high of 4,424.09 and a low of 4,225.07. The daily change is the highest since 24 October 2008 when the market jumped by 271.12 points.

In economic news, Taiwan imported 34.50 million barrels of crude oil in October, up 7.8% from the same month last year and more than double the previous month of 2008. According to the Bureau of Energy said October crude oil imports likely benefited from shipments that were delayed from the previous month, as September crude imports fell to nearly a five-year low.

In another release, Taiwan's exports in November fell 23.3% from a year earlier to US$16.78 billion, compared with an 8.3% fall to US$20.81 billion in October, the Ministry of Finance said. Imports in November declined 13.2% year-on-year to US$15.26 billion, after declining 7.0% to US$17.86 billion in the preceding month. Trade in November resulted in a surplus of US$1.52 billion, narrowing from a surplus of US$2.95 billion in October. In the first 11 months of the year, Taiwan had a trade surplus of US$12.94 billion, down 48.7% from a year earlier. Exports in the period rose 8.4% to US$242.02 billion and imports rose 15.7% to US$229.08 billion.

In Philippines, the benchmark index PSEi escalated 1.04% or 19.72 points to 1,908.68, while the All-share index rose 0.55% or 6.59 points to 1,197.35. On the economic front, the producer price index for the manufacturing industry recorded a 6.9 % growth in October 2008, compared with the year ago level. On a month-on-month basis, PPI slightly went down by 0.2 % in October.

In India, slew of measures announced by the RBI and the government over the weekend to minimize the impact of a global slowdown on the Indian economy acted as booster for the regional stock markets. According to the provisional closing the BSE Sensex gained 195.03 points or 2.18% to close the day at 9161.03.

In other regional markets, European shares rallied sharply today morning, with oil majors and banks among the strongest performers. On a national level, the U.K. FTSE 100 index soared 5.8% to 4,285.43, the German DAX 30 index jumped 6.3% to 4,657.39 and the French CAC-40 index advanced 6.8% to 3,191.57.

BSE Bulk Deals to Watch - Dec 8 2008

Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
8/12/2008 505216 ALFRED HERBE CHINTAN PRAKASH SHETH B 5210 94.27
8/12/2008 505216 ALFRED HERBE PRAKASH S SETH B 5200 83.97
8/12/2008 505216 ALFRED HERBE CHINTAN PRAKASH SHETH S 5210 83.98
8/12/2008 505216 ALFRED HERBE PRAKASH S SETH S 5200 94.27
8/12/2008 533029 ALKALI MANSUKH STOCK BROKERS LTD B 66888 144.87
8/12/2008 533029 ALKALI MANSUKH STOCK BROKERS LTD S 66888 145.32
8/12/2008 530355 ASIAN OILFIE BHARATJAYANTILALSHAH B 58000 38.58
8/12/2008 530355 ASIAN OILFIE TRUPTIBHARATSHAH S 60500 38.58
8/12/2008 522163 DIAMON CABLE DIAMOND PROJECTS LTD S 200000 106.10
8/12/2008 526285 DIVYAJYO IND DWARKA DAS RATHI S 92000 6.83
8/12/2008 532984 ENSO SECUT CORPORATE STRATEGIES PVT LTD S 100000 17.30
8/12/2008 512413 KHAITAN WVG COMFORT INTECH LIMITED B 45000 146.21
8/12/2008 526045 LUMINAI TECH RITA DEEPAK NEGANDHI S 200000 3.68
8/12/2008 514300 PIONER EMBRO MEENAL NITESH THAKUR B 99007 10.31
8/12/2008 514300 PIONER EMBRO MEENAL NITESH THAKUR S 99007 10.15
8/12/2008 526407 RIT PRO IND SUBHASH CHANDER KHANEJA B 325000 14.65
8/12/2008 526407 RIT PRO IND HARERAMA RESTURANT PVT LTD B 88000 14.65
8/12/2008 526407 RIT PRO IND KINSFOLK INDUSTRIES P LTD B 500000 14.65
8/12/2008 526407 RIT PRO IND NIKHIL SECURITIES LTD S 50000 14.65
8/12/2008 526407 RIT PRO IND SANJEEV ARORA S 163257 14.65

NSE Bulk Deal Watch - Dec 8 2008

Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
08-DEC-2008,MRO-TEK,MRO-TEK Limited,RAICHAND HANSRAJ,BUY,100000,23.05,-
08-DEC-2008,NITINFIRE,Nitin Fire Protection Ind,TIRUPATI SECURITIES,BUY,66127,130.00,-
08-DEC-2008,HINDOILEXP,Hind. Oil Exploration ,HEMANG RAICHAND DHARAMSHI,SELL,700000,60.25,-
08-DEC-2008,NITINFIRE,Nitin Fire Protection Ind,KMUK A/C KOTAK INVESTMENT OPP FUND LIMITED,SELL,66000,130.00,-
08-DEC-2008,NITINFIRE,Nitin Fire Protection Ind,TIRUPATI SECURITIES,SELL,1293,129.53,-

Sensex underperforms its global peers

Doubts as to how much stimulus the already stretched government budget will be able to finance, pulled the market sharply off the higher level in late trade. The BSE 30-share Sensex rose 197.42 points or 2.2%, shedding 269.49 points from the day's high. The Indian market underpeformed its global peers which put up a strong show.

As per the provisional data released by the stock exchanges after trading hours, foreign funds today, 8 December 2008, bought shares worth a net Rs 350.34 crore. Domestic funds dumped stocks worth a net Rs 617.05 crore.

Volatility was high with the Sensex swinging 336.41 points between the day's high and low. After an initial surge triggered by the fiscal stimulus package by the government and rate cut by the central bank, both, announced over the weekend, the market soon cut gains as the fiscal stimulus package fell short of market expectation. The market firmed up again later, with the Sensex surging 466.91 points or 5.20% in mid-afternoon trade, tracking higher US index futures and on a likely firm opening of European markets.

The market cooled off a bit after the solid surge on doubts how much stimulus the already stretched government budget will be able to finance. A sell-off gripped the market in the last one hour of trade.

European indices surged tracking gains in the US market on Friday, 5 December 2008 and in Asia today, 8 December 2008. Key benchmark indices in France, UK and Germany were up by between 4.41% and 6.32%. Asia stock markets rose on Monday, 8 December 2008, with investors taking heart from a rescue plan for US automakers and hopes that the sharp drop in oil prices will ease some of the pain for households facing mounting layoffs. Key benchmark indices in China, Hong Kong, Japan, South Korea, and Taiwan were up by between 3.57% and 8.66%.

White House and congressional negotiators sought on Sunday, 7 December 2008, to resolve remaining differences over an emergency rescue for the struggling US auto industry, a stark symbol of the deepening US economic crisis. Trading in US index futures indicated the Dow could rise 161 points at the opening bell.

Oil jumped $2.44 to $43.25 a barrel, but the plunge to a four-year low near $40 a barrel is providing some relief to the bleak landscape of tightening credit and job losses that are hitting consumers around world.

US stocks jumped on Friday, 5 December 2008 as investors bet that a steep drop in oil prices will boost consumer spending, lifting retail stocks and offsetting government data showing half a million jobs were lost in November 2008. The Dow Jones Industrial Average gained 259.18 points, or 3.09%, to 8,635.42, the Standard & Poor's 500 index climbed 30.85 points, or 3.65%, to 876.07 and the Nasdaq Composite index rose 63.75 points, or 4.41%, to 1,509.31.

Closer home, the Indian government on Sunday, 7 December 2008 unveiled a Rs 30,700-crore fiscal stimulus package mainly comprising additional spending and excise duty cuts aimed at boosting consumption. The stimulus package has Rs 20,000 crore in additional expenditure, an across-the-board 4% excise duty cut amounting to Rs 8,700 crore and benefits worth Rs 2,000 crore for exporters.

The government will also take steps to ensure that already budgeted expenditure of Rs 300000 crore will actually be spent over the next four months of the current fiscal to end-March 2009

However, analysts feel that to make an impact on the economy, a much higher public investment is required. Analysts, meanwhile, expect the fiscal deficit to top 3% of gross domestic product in 2008/09, compared to a budget estimate of 2.5% for 2008/09. State and central government deficit is set to exceed 7% of gross domestic product in 2008/2009.

The BSE 30-share Sensex rose up 197.42 points or 2.2% to 9,162.62. The Sensex opened 311.69 points higher at 9,276.89. At the day's high of 9,432.11, the Sensex gained 466.91 points in mid-afternoon trade. The Sensex rose 130.50 points at the day's low of 9,095.470 in late trade.

The S&P CNX Nifty gained 69.60 points or 2.56% at 2784. Nifty December 2008 futures were at 2788.90, at a premium of 4.90 points as compared to the spot closing. Turnover in NSE's futures & options (F&O) segment surged to Rs 39,051.16 crore from Rs 36,708.86 crore on Friday, 5 December 2008.

The barometer index BSE Sensex is down 11,124.37 points or 54.83% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 12,044.50 points or 56.79% below its all-time high of 21,206.77 struck on 10 January 2008.

The market breadth, indicating the overall health of the market, was positive on BSE with 1379 shares advancing as compared with 1037 that declined. 89 shares remained unchanged.

The BSE Mid-Cap index (down 0.27% to 2,885.03) and the BSE Small-Cap index (up 0.59% to 3,343.20), underperformed the Sensex.

The total turnover on the BSE amounted to Rs 3231 crore as compared to Rs 3,755.84 crore on Friday, 5 December 2008

All sectoral indices on BSE except the BSE Healthcare index, logged gains. The BSE Consumer Durables index (up 2.78% to 1,704.91), the BSE Realty index (up 5.27% to 1,781.37), the BSE Metal index (up 3.05% to 4,781.22), the BSE Teck index (up 2.66% to 1,968.38), outperformed the Sensex.

The BSE Oil & Gas index (up 0.48% to 5,521.59), the BSE IT index (up 1.21% to 2,385.98), the BSE Auto index (up 1.43% to 2,280.48), the BSE HealthCare index (down 0.07% to 2,821.44), the BSE Capital Goods index (up 1.88% to 6,529.39), the BSE Power index (up 2.78% to 1,694.41), the BSE FMCG index (up 0.83% to 1,935.16), the Bankex (up 1.71% to 4,787.85) and the BSE PSU index (up 1.64% to 4,636.03), underperformed the Sensex.

Among the 30-member Sensex pack, 28 advanced while only 2 of them slipped.

Real estate shares rallied after the Reserve Bank of India (RBI) on Saturday, 6 December 2008, announced several measures, including a refinance facility for the National Housing Bank and priority sector status for housing loans up to Rs 20 lakh, to facilitate credit flow into the cash-strapped real estate sector. India's top real estate developer by market capitalisation DLF galloped 9.77% to Rs 223 on high volumes of 76.09 lakh shares and was the top gainer from the Sensex pack.

Unitech (up 6.33% to Rs 32.75), Parsvnath Developers (up 1.26% to Rs 40.20), and Housing Development Infrastructure (up 1.53% to Rs 89.50), rose.

Banking shares vaulted on hopes rate cut will boost lending growth. India's largest private sector bank by net profit ICICI Bank gained 3.19% to Rs 369.90 after its American depository receipt (ADR) jumped 9.65% on Friday, 5 December 2008. The bank on Saturday, 6 December 2008, announced reduction in its home loan rate from 13% to 11.5% for loans of up to Rs 20 lakh. The new rate, however, is applicable for new customers only as there has been no change in the bank's prime lending rate (the interest rate which a bank charges its best borrowers).

India's second largest private sector bank by net profit HDFC Bank rose 1.22% to Rs 899.70 on reports it has applied to the Reserve Bank of India to buy 10% stake in the MMTC-Indiabulls promoted commodity exchange, which is expected to be operational by March 2009.

India's largest state-run bank by net profit State Bank of India advanced 2.15% to Rs 1160.

Housing finance companies advanced after the RBI while announcing reduction in key lending rates on 6 December 2008 also said that the National Housing Bank (NHB) will be being given liquidity support to the extent of Rs 4000 crore to provide liquidity support to housing finance companies (HFC). HDFC (up 5% to Rs 1508.10), LIC Housing Finance (up 4.58% to Rs 221.20), and Dewan Housing Finance (up 10% to Rs 84.50), gained.

The RBI, on 6 December 2008, announced a 100-basis point cut in the repo rate and the reverse repo rate each. Repo rate is the rate at which RBI lends to commercial banks and reverse repo rate is the rate at which RBI accepts deposits from banks. The RBI also announced steps to improve liquidity and shore up economic activity.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) came sharply off the higher level and ended flat on news of a small fire at Reliance Petroleum's new refinery. The stock settled at Rs 1119, off the day's high of Rs 1175. The fire at the unit was put out and the complex was operating normally, reports suggest. Reliance Petroleum rose 3.45% to Rs 75.

India's largest oil exploration firm by market capitalisation Oil and Natural Gas Corporation rose 0.63% to Rs 659 on reports the sharp fall in global crude prices has not impacted its capital expenditure plan of Rs 18,000 crore earmarked for this fiscal.

Steel shares advanced after government abolished export duty on iron ore. Tata Steel (up 6.26% to Rs 194.25), Steel Authority of India (up 2.94%), and JSW Steel (up 3.99%), jumped.

Steel makers surged as the government's abolishment of export duty on iron ore, a key raw material used in manufacturing steel, will reduce production cost.

India's second largest telecom services provider by sales Reliance Communications surged 4.82% to Rs 206.75 on recent reports the Communications and IT Ministry has decided to refund about Rs 112 crore to the company which it had paid as part of the entry fee at the time of taking the approval for offering dual technology in 2007.

Bharti Airtel (up 5.59% to Rs 702.50), Hindustan Unilever (up 3.07% to Rs 242), and Ranbaxy laboratories (up 2.51% to Rs 214), edged higher from the Sensex pack.

Power generation stocks gained as the government has decided to eliminate the import duty on naphtha used for power generation. Tata Power Company (up 2.72% to Rs 687.10), and NTPC (up 3.26% to Rs 166.50), rose.

Naphtha is used as a fuel in power sector generation. The elimination of import duty will bring down the price of naphtha which would in turn reduce the cost of power generated from naphtha. This will help the power producers to bring down the tariff of power that they sell to transmission companies. Currently, naphtha attracts a customs duty of 5%.

India's top small car maker by sales Maruti Suzuki India rose 1.37% to Rs 497. The stock swung in volatile trade between the day's high of Rs 523.40 and low of Rs 477 in the day. The company has reduced prices of all its models by 4% effective from midnight, 8 December 2008, following reduction in excise duties by the government.

However India's top tractor maker by sales Mahindra & Mahindra slipped 2.85% at Rs 245 after it on Saturday, 6 December 2008 said that it would shut down its five manufacturing plants that produce cars, utility and commercial vehicles for 3-6 days this month, due to easing demand. It was the top loser from the Sensex pack.

Infrastructure shares rallied after the government announced a stimulus plan to shore up the sector. Reliance Infrastructure (up 4.08% to Rs 554.20), Jaiprakash Associates (up 3.32% to Rs 68.55), and GMR Infrastructure (up 4.39% to Rs 60.70), jumped.

IT pivotals, though up, were off early highs on a firmer rupee. India's fourth largest IT exporter by sales Wipro rose 5.13% to Rs 238.80. The stock came off day's high of Rs 244.90.

India's second largest IT exporter by sales Infosys rose 2.23% to Rs 1161. The stock retraced from day's high of Rs 1197.

India's third largest IT exporter by sales Satyam Computer Services climbed up 0.27% to Rs 225. The stock slipped from day's high of Rs 235.

India's largest IT exporter by sales Tata Consultancy Services, too, eased from day's high of Rs 547.80 and settled 0.63% higher at Rs 525

The rupee was trading at 49.25/26 per dollar, higher than its previous close of 49.57/58 on selling of dollar by banks and fresh inflow of funds. A stronger rupee affects operating margins of IT firms negatively as they earn most of their revenues from exports.

Capital goods heavyweights rose on hopes the government's thrust on the infrastructure sector, will boost orders. India's largest power equipment maker by sales Bharat Heavy Electricals gained 1.27% to Rs 1356. India's largest engineering & construction company by sales Larsen & Toubro rose 1.55% to Rs 740.05

The government hopes to precipitate infrastructure projects worth Rs 100,000 crore through faster clearances of public-private partnership projects, and ensure their easier financing by way of a tax break on fund raising by the India Infrastructure Finance Company, a specialist lender to the infrastructure sector.

Cement shares gained after the government on Sunday, 7 December 2008 on cut in excise duty. Ambuja Cements (up 7.11% to Rs 58), Grasim Industries (up 1.61% to Rs 955), ACC (up 1.38% to Rs 434.25), and UltraTech Cement (up 2.81% to Rs 298.20), advanced. The government has cut the ad valorem component of the excise duty cement from 12 to 8%. As per reports, cement prices may come down by Rs 8 - Rs 10 per 50 kilogram bag after the cut in duty.

State-run oil marketing companies (OMCs) slipped as reduction in retail fuel prices will bring down sales realization. HPCL (down 0.25% to Rs 223.65), BPCL (down 4.52% to Rs 325), and IOC (down 0.65% to Rs 381.50), declined.

The price cut came into effect from midnight on Friday and would lead to a revenue loss of Rs 6,000 crore to the state-run oil marketing companies (OMCs) in the current fiscal.

Reliance Industries was the top traded counter on BSE with turnover of Rs 282.50 crore followed by DLF (Rs 167 crore), SBI (Rs 157 crore), Tata Steel (Rs 149.40 crore) and ICICI Bank (Rs 133.25 crore).

Unitech led the volumes chart on BSE clocking volumes of 2.40 crore shares followed by Suzlon (1.30 crore), GVK Power Infrastructure (1.11 crore), DLF (76.20 lakh) and Tata Steel (76 lakh).

Karuturi Global rose 4.57% to Rs 11.68 on bagging an export order for supply 50 million roses from Edeka, one of the largest super market network in Germany, for an undisclosed sum. The company announced the order win during trading hours today, 8 December 2008.

Khaitan Weaving Mills gained 4.42% to Rs 157 after the board approved a 10-for-1 stock split at a meeting held on 6 December 2008

Indo Tech Transformer rose 2.62% at Rs 284.05 after a Mexican firm made an open offer to acquire 21.24 lakh shares at Rs 406 a share, a 41.22% premium over the ruling market price. The open offer was triggered by Indo Tech's promoters inking an agreement to sell 54.35% stake to Mexican Prolec GE International. The offer will open on 29 January 2009 and close on 17 February 2009.

Deccan Chronicle Holdings soared 4.70% to Rs 45.65 after it said its board will meet on 16 December 2008 to consider buyback of shares. The company made the announcement after market hours today, 8 December 2008.

Around the world, policymakers kept up their efforts to try and revive their economies. US President-elect Barack Obama said over the weekend that he plans the biggest increase in infrastructure investment since the 1950s with the goal of creating at least 2.5 million jobs. Chinese economic leaders are reportedly meeting this week on measures to keep growth above 8%.

Indian stock market remains closed tomorrow, 9 December 2008 on account of Bakri-Id.

Titan Industries

The Titan Industries stock has remained fairly resilient to the recent meltdown thanks to the company’s improving financial performance and strong focus on domestic consumption.

However, at Rs 830.80, trading at 23 times its trailing 12-month earnings, the stock seems expensive in the current market scenario. Investors can look for substantial dips in the stock to consider an entry. Given its business potential, expansion strategies and established leadership position, holding on to the stock may prove beneficial in the long run

The company appears to have the potential to sustain a 20 per cent growth given its improving market share in watches and branded jewellery, presence across price points, and a diversified retail presence. Performance in the third quarter, expected to be a period of good sales due to the wedding and holiday seasons, may hold the key to gauging if the company is vulnerable to a consumption slowdown.

Titan Industries reigns supreme in the watches and jewellery segments. The company, which owns brands Titan, Fastrack, Sonata and Tanishq, has recently diversified into eyewear through Eye+, a segment which combines high revenue potential with strong margins.

Though offering relatively thin margins, Titan’s jewellery business has been its key growth engine in recent years. With branded jewellery making up only 5 per cent of the Rs 75,000-crore Indian jewellery market, the potential for expansion appears huge. Tanishq is one of the few nationally recognised brands in this space.

The revenue potential of Titan’s jewellery business is showcased by its 56 per cent CAGR (compounded annual growth rate) over the past three years. That Tanishq derives the bulk of its revenues from domestic jewellery sales (though it does have an international presence) is an advantage when other export-oriented companies in this space may face the impact of recessionary trends in the US and Europe. Titan’s expansion plans include a wider national presence.Jewellery purchasers in semi-urban and rural India tend to be value conscious; yet this segment lacks an organised, branded player. And, the company aims to tap this segment with its economy brand GoldPlus, currently available mainly in the southern states. .
Watches: Wide portfolio

In the watches business, Titan holds a 60 per cent share of the branded market with watches at all price points; the premium Titan and Xylys brands, Fastrack as a youth brand and Sonata as a budget brand. This enables Titan to capitalise on any trend of consumer down-trading as a result of a more difficult demand environment. The watches business, too, is set for significant expansion, with the company targeting 50 new stores by the end of this fiscal taking the count to 300.
Eyewear: High potential

The company plans to open 300 new Titan Eye+ retail outlets over three years, of which 20 will be during this fiscal. It has partnered with Chennai-based eye hospital Sankara Nethralaya to train its retail and clinic staff to ensure quality and reliability. Focus will be on designing and retailing eyewear, outsourcing actual manufacture to other brands and reputed labs.

This segment has potential to not only scale up Titan’s retail network, but also to mark up its overall margin profile. The eyewear segment is fragmented, without a nation-wide recognised brand and the company aims to build on this gap with Eye+.

This division has contributed Rs 40 crore to Titan’s revenues in FY08, up from Rs 25 crore in the previous year, when the line was launched. Aggressive store openings will allow Eye+ to service a wider customer base, but there may not be a substantial increase in contribution to revenues in the initial years.

Apart from the above initiatives, Titan plans to further diversify its revenues through tie-ups with international premium players, Hugo Boss and Tommy Hilfiger, to market their products.

Titan uses the franchisee model for store expansion. This model allows easy scalability, control on rental costs and relatively lower capex requirements. The company mainly uses standalone stores and does not have a presence in malls, which may make for a higher cost structure.

Titan is favourably placed to bankroll its expansion plans (expected at upwards of Rs 100 crore till FY10), given its low debt-equity ratio and healthy cash flows. This may stand it in good stead to keep its expansion plans on track, at a time when most other retailers are carrying a fairly high debt burden and finding it difficult to obtain credit.

Jewellery accounts for the lion’s share of the revenues, increasing from about 54 per cent in FY2006 to almost 68 per cent in FY2008, at the expense of the watches division. Revenues are expected to sustain a growth rate of 30 per cent. Eyewear and precision engineering currently contribute a little over 3 per cent to revenues. Margins have declined on a yearly basis for the past three years, as jewellery operates on lower margins than watches.

However, margins have improved in Q2FY08 over the first quarter due to control in interest and depreciation costs. Margins are likely to remain steady as there may not be significant changes in product portfolio. Returns on investments have also held out above 40 per cent. Leverage has been brought under control by retiring old debt and taking up fresh loans to a smaller extent. Debt-equity ratio stood at 0.66 for FY08, a low number in the context of the retail sector. The interest cover stands at a comfortable 10.5 times, having improved over the past three years.

The company has incurred forex losses on account of raw material imports for FY 2008. Another concern is the volatile nature of gold prices and high procurement costs. Hedging strategies will go a long way in addressing this fluctuation. Change in gold prices can also be managed by tagging retail price to gold prices. Additionally, demand for gold is price sensitive, and hikes in gold prices might drive down demand during off-season. Performance of Titan’s new outlets in the US also remains to be seen, as consumer sentiments there remain weak.

Post Session Commentary - Dec 8 2008

The domestic market ended the day in positive despite giving up some of its gains in final trade due to the profit booking at higher levels. Market exhibited a good show during the trading session on stimulus package by the government and rate cut by the central bank. Positive European markets along with higher US index futures also contributed to the rally. The Government of India has announced Rs 20,000-crore fiscal stimulus package on December 7. The government has cut 4% ad valorem cenvat rate on non-petroleum products and will provide additional Rs 1,400 crore for textile upgradation fund. Exporters will get 2% interest subvention up to March ''09. The Reserve Bank of India has cut repo rate by 100 bps to 6.5% and reverse repo rate by 100 bps to 5%, both rates got effective from today.

The Indian market belled the day in pleasant note along with other Asian markets. Further, market continued to trade in positive terrain on strong buying across the board. The markets today got a boost on the back of the economic stimulus package announced by the government yesterday and also by the RBI move of cutting rates. Though, concern over the capability of the government budget to finance the stimulus along with profit booking, cooled off the bullish trend during final trading and market ended off the days high. From the sectoral front Reality remained in limelight as ended with gain of more than 5%. Apart from that, most of the buying was seen in Teck, Metal, Power, Capital Goods, Consumer Durables, PSU and Bank stocks. Some buying was also observed in Smallcap stocks. However, Pharma stocks were not able to gain market favor. Midcap stocks were also unable to hold the initial gains and ended down.

Among the Sensex pack 27 stocks ended in green territory and 3 in red. The market breadth was positive as 1384 stocks closed in green while 1016 stocks closed in red and 91 stocks remained unchanged.

The BSE Sensex closed higher by 197.42 points at 9,162.62 and NSE Nifty ended up by 69.60 points at 2,784. The BSE Small Caps ended with gains of 19.66 points at 3,343.20 while BSE Mid Caps ended with losses 7.92 points at 2,885.03. The BSE Sensex touched intraday high of 9,432.11 and intraday low of 9,095.70.

Gainers from the BSE Sensex pack are DLF Ltd (8.71%), Tata Steel (7.22%), Bharti Airtel (5.34%), HDFC (5.21%), Reliance Communication Ltd (4.97%), Wipro Ltd (4.91%), Reliance Infra (4.02%), JP Associates (3.47%), NTPC Ltd (3.19%), ICICI Bank (3.17%) and SBI (2.88%).

Losers from the BSE Sensex pack are Mahindra & Mahindra Ltd (1.57%), Tata Motors (0.72%) and Satyam Computer (0.33%).

The BSE Reality index ended up by (5.27%) or 89.18 points at 1,781.37. Major gainers are DLF Ltd (8.71%), Unitech Ltd (6.66%), Anant Raj (3.51%), Mahindra Life (2.39%), Parsvnath (2.39%) and Ansal Infra (1.54%).

The BSE Metal index ended higher by (3.05%) or 141.49 points at 4,781.22 as Tata Steel (7.22%), Nalco (5.49%), NMDC Ltd (4.57%), JSW Steel (4.06%), Steel Authority (3.77%) and Gujarat NRE C (2.13%) ended in positive territory.

The BSE Consumer Durables index advanced by (2.78%) or 46.14 points to close at 1,704.91. Main gainers are Videocon Ind (3.77%), Blue Star L (3.65%), Titan Ind (2.58%), Gitanjali GE (1.61%) and Rajesh Export (0.41%).

The BSE Power index surged (2.78%) or 45.82 points to close at 1,694.41 as NEyveli LIG (7.45%), Lanco Infra (5.82%), Suzlon Energy (5.66%), ABB Ltd (4.77%) and Seimens Ltd (4.12%) ended in green.

The BSE Teck index went up by (2.66%) or 51.02 points to close at 1,968.38. Main gainers are Tata Communication Ltd (6.08%), Bharti Airtel (5.34%), Reliance Communication Ltd (4.97%), Wipro Ltd (4.91%), NDTV Ltd (4.72%) and Aptech Ltd (4.31%.

The BSE Pharma index ended marginally down (0.07%) or 1.99 points at 2,821.44. Losers are Glenmark Pharma (10.00%), Lupin Ltd (4.24%), Cipla Health (2.79%), Sunpha Adv (2.16%), Dishman Pharma (2.15%) and Wockhardt Ltd (2.03%).

Pre Session Commentary - Dec 8 2008

Today markets are likely to open positive on the back of fiscal stimulus announced by the government to help uplift the economy. RBI has also reduced the Repo and Reverse Repo rates by 100bps to 6.5% to 5% respectively. GOI has planned to pump in Rs 30,700 into the system to give the economy a boost in the current financial carnage happening around the world. Positive sentiments are likely to boost the morale of investors as a majority of measures have been taken to give a fillip to sectors worst affected. The Cenvat in Auto industry has been reduced by 4% which auto makers are planning to pass over the benefit to final consumers. One could anticipate some firm trend today amidst good feel factor.

On Friday, the markets opened positive, however during later trading session amidst extreme volatility it nose-dived into red. The markets moved 426.31 points showing extreme volatility in the southward and northward direction. The positive sentiments had pushed the markets in the green zone however the profit booking coupled with weak sentiments pulled the markets to low levels. Sensex and Nifty fell by 2.87% and 2.64%. CD, IT, Realty and Metal lost 4.37%, 4.36%, 3.50% and 3.42% respectively. During the trading session we expect the market to be trading firm with a positive trend.

The BSE Sensex closed with a loss of 264.55 points at 8,965.20 and NSE Nifty ended lower by 73.60 points at 2,714.40. The BSE Mid Caps and Small Caps ended with losses of 29.85 points and 8.26 points at 2,892.95 and 3,323.54. The BSE Sensex touched intraday high of 9,340.69 and intraday low of 8,914.38.

On Friday, the US markets closed positive despite the worst data of the job markets. The Federal Reserve has bought $5 billion of debt from Fannie Mae on the other hand General Motors and Chrysler is also asking congress for billion of dollars. The financial sector outperformed all other sectors throughout the session. On Saturday Crude oil on New York Mercantile Exchange for January rose by $1.67 to $42.48 a barrel. Crude oil rose for the first time in seven days in New York after the Organization of Petroleum Exporting Countries’ president said there was consensus for a “significant” production cut when the group meets next week.

The Dow Jones Industrial Average (DJIA) closed higher with 259.18 points at 8,635.42 NASDAQ index gained 63.75 points at 1,509.31 and the S&P 500 (SPX) also closed higher by 30.85 points to close at 876.07 points.

Indian ADRs ended mixed. In technology sector, Infosys gained by 3.80% and Wipro ended high by 4.71% followed by Satyam that gained 4.08% and Patni Computers closing high by 1.27%. In banking sector ICICI Bank gained 4.11%, while HDFC Bank rose by 9.65%. In telecommunication sector, Tata Communication declined by 1.58%, while MTNL declined by 4.45%.

Today the major stock markets in Asia opened positive. The Shanghai Composite is trading high by 53.18 at 2,071.83 Hang Seng is high by 991.41 points at 14,837.50. Further Japan''s Nikkei is high by 381.05 points at 8,298.56. South Korea’s Seoul Composite is high by 53.57 points at 1,081.7.

The FIIs on Friday stood as net buyers in equity and debt. Gross equity purchased stood at Rs 1779.50 Crore and gross debt purchased stood at Rs 897.50 Crore, while the gross equity sold stood at Rs 1,331.20 Crore and gross debt sold stood at Rs 255.70 Crore. Therefore, the net investment of equity and debt reported were Rs 448.30 Crore and Rs 641.70 Crore respectively.

On Friday, the partially convertible rupee ended at 49.57/58 per dollar, 0.6% stronger than Thursday’s close of 49.87/89. The rupee gained on expectations of rate cut.

On BSE, total number of shares traded was Rs 29.08 Crore and total turnover stood at Rs 3,755.84 Crore. On NSE, total volume of shares traded was Rs 67.30 Crore and total turnover was Rs 9,731.09 Crore.

Top traded volumes on NSE Nifty – Unitech with 101482509 shares, Suzlon Energy with total volume traded 45979606 shares, followed by ICICI Bank with 21857882 shares, DLF with 15536364 shares and SAIL with 15493951 shares.

On NSE Future and Options, total number of contracts traded in index futures was 975827 with a total turnover of Rs 12,348.65 crores. Along with this total number of contracts traded in stock futures were 988643 with a total turnover of Rs 9,410.58 Crore. Total numbers of contracts for index options were 1007387 with a total turnover of Rs 14,366.79 Crore and total numbers of contracts for stock options were 58779 and notional turnover was Rs 582.83 Crore.

Today, Nifty would have a support at 2,648 and resistance at 2,859 and BSE Sensex has support at 8,920 and resistance at 9,549.

Government's stimulus package, RBI's rate cut may propel bourses

Key benchmark indices are likely to see a gap-up opening boosted by the blend of government's fiscal spending proposals and the Reserve Bank of India's (RBI) interest rate cuts announced over the weekend to counter economic slowdown. The SGX November 2008 Nifty futures jumped 102 points. Global cues were strong.

The government on Sunday, 7 December 2008, unveiled a Rs 30,700-crore fiscal stimulus package mainly comprising additional spending and excise duty cuts aimed at boosting consumption. The stimulus package has Rs 20,000 crore in additional expenditure, an across-the-board 4% excise duty cut amounting to Rs 8,700 crore and benefits worth Rs 2,000 crore for exporters.

In addition, the government hopes to precipitate infrastructure projects worth Rs 100,000 crore through faster clearances of public-private partnership projects, and ensure their easier financing by way of a tax break on fund raising by the India Infrastructure Finance Company, a specialist lender to the infrastructure sector.

The government will also take steps to ensure that already budgeted expenditure of Rs 300,000 crore will actually be spent over the next four months of the current fiscal to end-March 2009, as it increasingly resorts to pump-priming to shore up the economy that continues to face headwinds from the global financial market turmoil.

The Reserve Bank of India on 6 December 2008, announced a 100 basis points cut each in the reverse repo rate and the repo rate. Repo rate is the rate at which RBI lends to commercial banks and reverse repo rate is the rate at which RBI accepts deposits from banks. Both reductions are effective from Monday, 8 December 2008.

The RBI said it was also taking other steps to improve liquidity and shore up economic activity.

Meanwhile, the election results from four states due today, 8 December 2008 could reveal the political mood of an India. The elections, mostly in central and west India, come before a national vote in early 2009 that will pit the ruling Congress-led coalition against the main opposition alliance led by Bharatiya Janata Party.

Asian markets rose today, 8 December 2008 with financials leading the charge on hopes of further support measures from global central banks. China's Shanghai Composite was up 1.27% or 25.61 points at 2,044.27, Hong Kong's Hang Seng gained 4.96% or 686.42 points at 14,532.51, Japan's Nikkei rose 2.57% or 203.20 points at 8,120.71, South Korea's Seoul Composite added 4.29% or 44.11 points at 1,072.24 and Taiwan's Taiwan Weighted advanced 3.67% or 154.87 points at 4,379.94.

US stocks jumped on Friday, 5 December 2008 as investors bet that a steep drop in oil prices will boost consumer spending, lifting retail stocks and offsetting government data showing half a million jobs were lost in November 2008. The Dow Jones Industrial Average gained 259.18 points, or 3.09%, to 8,635.42, the Standard & Poor's 500 index climbed 30.85 points, or 3.65%, to 876.07 and the Nasdaq Composite index rose 63.75 points, or 4.41%, to 1,509.31.

Back home, selling pressure in index heavyweight Reliance Industries (RIL), metal and IT stocks pulled the market lower on Friday, 5 December 2008 on concerns about the weakening global economy. The BSE 30-share Sensex was down 264.55 points, or 2.87%, to 8,965.20 and the S&P CNX Nifty was down 73.60 points, or 2.64%, to 2,714.40, on that day.

Foreign institutional investors (FIIs) were net sellers worth Rs 4.52 crore while mutual funds sold shares worth Rs 184.02 crore on Friday, 5 December 2008, according to provisional data on NSE.

With few signs of immediate economic improvement the US crude for January 2009 delivery rose $1.59 to $42.40 a barrel today, 8 December 2008 after Friday's close (5 December 2008) at $40.81, the lowest settlement since December 2004.

SGX Nifty Live Update - Dec 8 2008

SGX Nifty currently trading at 2,840.0 and is +124.0 points

Expect a huge gap up opening

US Market shrugs off weak job report

Dow closes substantially up though unemployment reaches fifteen year high

The US Market registered modest losses for the week that ended on Friday, 05 December, 2008. The indices would have registered fair gains if not for the huge losses that it registered at the very first day of the week, Monday, 1 December. But the best part was, despite some of the worst jobs data in decades, stocks managed to finish the session with impressive gains after reversing early losses on the last day of the week, Friday, 05 December, 2008. Economic reports, job cut news and earnings cautions dominated the week which was fully in search of direction. The indices behaved in a Hayward manner during the week, moving each way without any catalyst.

The Dow Jones Industrial Average lost 193.62 points (2.2%) for the week to end at 8,635.42. Tech - heavy Nasdaq lost 26.26 points (1.7%) to end at 1,509.31. S&P 500 shed 20.17 points (2.3%) to end at 876.

On Monday, the November Institute of Supply management (ISM) report showed that U.S. manufacturing activity decreased to 36.2% from 38.9% in the prior month. Readings above 50% indicate an expansion of the manufacturing economy, while readings below indicate a contraction. Just two of 18 industries were expanding in November - Apparel and paper. Dow registered a huge 680 point loss on that very day.

Also hammering stocks badly that day were the manufacturing gauges in three major world economies which showed sharp contractions in November. The purchasing managers' indexes for the euro zone and for the U.K. fell to record lows. In China, a gauge of the country's manufacturing activity in November showed the sharpest contraction in the survey's history, which began in 2004. US, too is already into recession which began in December, 2007.

Rest of the week did not get any piece of news to cheer much about. But still, the indices remained within manageable territory showing that market has perhaps discounted the worst already in itself.

Research In Motion, Merck and DuPont all issued earnings warnings. AT&T announced plans to cut 12,000 jobs and several other companies said they would also be trimming their payrolls.

Auto sales were dismal in November, highlighted by a 41% decline in GM's sales. November same-store sales declined 2.1%, which was the worst reading since it started collecting data in 2000. Continuing claims for jobless benefits reached a 26-year high. The percentage of loans in the foreclosure process (2.97%) hit a new record in the third quarter.

During the week, Fed Chairman Ben Bernanke spoke about the economy. In his prepared text, Bernanke said the U.S. economy remains under stress despite the efforts of the Fed and other policymakers.

Bernanke said that actions taken by policymakers have helped alleviate some problems in the financial markets, but are still far from normal. Bernanke said in his speech that the Fed could increase liquidity by purchasing longer-term Treasury or agency securities on the open market.

Bernanke then laid out the future policy options. He said it is "feasible" to cut the fed funds rate below its current level of 1%. He also said that although interest rates can't be cut below 0, the Fed has other policy tools, including increasing liquidity, backstopping liquidity directly in certain financial markets and working with other agencies to minimize systematic risk.

But the last day brought some unexpected surprise. On Wall Street, the Dow Jones industrial average closed up 259 points at 8,635, the Nasdaq closed up by 63.7 points at 1,509.31 and the S&P 500 moved up 30.8 points at 876. Dow had earlier dropped by almost 300 points.

Putting further worriers in the American economy, the Labor Department reported 533,000 drop in November nonfarm payrolls, which is far worse than the 335,000 drop that was expected. November manufacturing payrolls declined 85,000, which was actually less than the 100,000 decline that was widely expected. The unemployment rate, now at 6.7%, is the highest in roughly 15 years. The elevated unemployment rate comes as companies laid off workers as part of an attempt to shave expenses amid stiffening economic headwinds.

Volume on the New York Stock Exchange on that day topped 1.6 billion, and for every stock on the decline, more than two advanced. On the Nasdaq, more than 978 million shares traded, and advancers pulled ahead of decliners by a 2-to-1 ratio.

On Friday, crude-oil futures for light sweet crude for January delivery closed at $40.81/barrel (lower by $2.85 or 6.5%) on the New York Mercantile Exchange. Prices reached a high of $147 on 11 July but have dropped almost 77% since then. For the week, prices coughed up 25%. This was the largest weekly loss for crude in past twenty five years. For this year in 2008, crude prices have dropped 56.5%.

For the year, Dow, Nasdaq and S&P 500 are down by 34.9%, 43.1% and 40.3% respectively.

Investment Calls - Dec 8 2008

Buy Reliance Capital

Buy Punj Lloyd



Buy L&T

Precious metals turn paler

Gold registers first weekly drop in last five weeks

Rising dollar decreased the appeal of the bullion metals and the same fell for third straight day on Friday, 05 December, 2008. Gold and silver prices fell due to the rising dollar which strengthened as US market digested the worst job report in fifteen years. dollar. 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 and also vice versa. Gold also registered first weekly drop in last five weeks.

On Friday, Comex Gold for February delivery fell $13.3 (1.7%) to close at $752.2 an ounce on the New York Mercantile Exchange. It fell to a low of $741.2 earlier. On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (28%) since then. For the week, gold prices ended lower by 8.2%.

For the month of November, gold prices ended higher by 14%. Prior to this, for the month of October, gold had ended lower by 18%. It was the biggest percentage loss for gold since February, 1983.

This year, gold prices have lost 10.7% till date. Futures have averaged $878 in 2008. The dollar index has gained 14% this year. For the third quarter ended September, 2008, gold prices ended lower by 5.1%. It was the first quarterly loss for the yellow metal since the second quarter in FY 2007. Prior to that, the yellow metal ended second quarter with a marginal gain of 0.7%. For first quarter prices gained 10.7%.

On Friday, Comex silver futures for December delivery fell 9 cents (0.9%) to $9.43 an ounce. For the week, silver lost 7.7%. For the month of November, silver prices hadf gained 5%. Till date, silver has lost 36% this year.

For the month of October, silver had slipped by 20%. Silver had ended month and quarter of September 2008 with a loss of 10%. For the second quarter, it had gained a paltry 1.4%. Silver had gained 16% in Q1. The metal also had gained for seven straight years.

At the currency market on Friday, the dollar index, which tracks the value of the greenback against other major currencies, rose 1%. The dollar index briefly reduced its gains after the Labor Department reported U.S. nonfarm payrolls plunged by 533,000 in November, the worst job loss in 34 years. Market was expecting a loss of 350,000.

Earlier this year, the weakening dollar and higher global demand for raw materials had led to records this year for commodities including gold. Gold reached a record in March as a U.S. housing slump and credit crisis spurred the Federal Reserve to slash borrowing costs. In the latest move, the Federal Reserve has cuts its target bank lending rate to 1% from 5.25% in September, 2007. The Fed did it in eight steps.

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. Silver had climbed 16% in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.

At the MCX, gold prices for February delivery closed higher by Rs 32 (0.3%) at Rs 12,103 per 10 grams. Prices rose to a high of Rs 12,121 per 10 grams and fell to a low of Rs 12,074 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 52 (0.31%) higher at Rs 16,446/Kg. Prices opened at Rs 16,487/kg and rose to a high of Rs 16,500/Kg during the day's trading.

Crude plunges

Prices drop by 25% in the past week

Crude prices ended substantially lower on Friday, 05 December, 2008. Prices fell as traders anticipated that demand for energy in coming months as US market faced one of the worst job reports in last thirty four years once again proving that US is deep into a recession. The strong dollar also pressured crude prices.

On Friday, crude-oil futures for light sweet crude for January delivery closed at $40.81/barrel (lower by $2.85 or 6.5%) on the New York Mercantile Exchange. Prices reached a high of $147 on 11 July but have dropped almost 77% since then. For the week, prices coughed up 25%. This was the largest weekly loss for crude in past tenty five years. For this year in 2008, crude prices have dropped 56.5%.

For the month of November, crude prices ended lower by 19.7%. Before this, for the month of October, 2008, crude prices had ended lower by 32.6%, the biggest monthly drop since 1983.

At the currency market on Friday, the dollar index, which tracks the value of the greenback against other major currencies, rose 1%. The dollar index briefly reduced its gains after the Labor Department reported U.S. nonfarm payrolls plunged by 533,000 in November, the worst job loss in 34 years. Market was expecting a loss of 350,000. Labor Department also reported an unemployment rate of 6.7% in November, the highest in US since 1991.

EIA reported last Wednesday that total U.S. petroleum products supplied in the past four weeks dropped 6.6% from the same period a year ago. Motor gasoline demand in the world's biggest oil consuming country dropped 2.8%.

The Organization of Petroleum Exporting Countries ended meeting in Cairo last month without any decision on a production cut to restore crude prices. OPEC President and Algerian Oil Minister Chakib Khelil said he expects oil demand to decline from a month ago, and said the group would take necessary action on 17 December when it meets in Oran, Algeria.

For the third quarter of the year crude prices ended lower by 28%. This was the biggest quarterly drop since 1991. Before that, crude prices had gained 38% in the second quarter of this year. It was the biggest quarterly increase in nine years. For the month of September, prices registered drop of 13%.

Against this background, January reformulated gasoline fell 7% to 90.12 cents a gallon, and January heating oil fell 5.5% to $1.4265 a gallon.

January natural-gas futures tumbled 4.6% to $5.742 per million British thermal units.

At the MCX, crude oil for December delivery closed at Rs 2,079/barrel,higher by Rs 4 (0.19%) against previous day's close. Natural gas for November delivery closed at Rs 287.7/mmbtu, higher by Rs 0.1/mmbtu (0.03%).

Daily News Roundup - Dec 8 2008

Jet Airways, Kingfisher, IndiGo cut fuel surcharge by Rs400 per ticket.(ET)
M&M to shut down plants for 3 to 6 days.(BS)

General Motors India said it would increase prices by 3% in January.(DNA)

Steel Ministry says all expansion and future plans of SAIL would be at stake if high-grade iron ore from Chiria mines not given soon.(BL)

Eicher Motors' CV sales in November down 71% yoy.(BS)

British Airways not in talks to buy stake in Kingfisher Airlines.(ET)

Indian Oil Corp, Bongaigaon Refinery & Petrochemicals merger may be approved soon.(BL)

Vodafone says it would challenge the government decision to impose capital gains tax on it following its acquisition of Hutchison Essar.(DNA)

Reliance Industries’ petrochem prices decline by up to 60% as demand slows.(Mint)

Unitech to raise up to Rs25bn to retire debt.(BL)

RPG group company Spencer's Retail plans to scale up its hypermarts chain to 400.(DNA)

Apollo Tyres declared a lockout in its unit in Kerala which employs 1,100 people.(FE)

Tata Motors raises Rs10bn from LIC to part-refinance bridge loan.(Mint)

Infosys to freeze new hiring, but no job cuts.(FE)

Promoters of Great Offshore have pledged their ~13% stake with Bharati Shipyard.(ET)

Reliance Industries’ puts on hold plans to reopen petrol pumps.(Mint)

Petroleum Ministry and ONGC Videsh accept they had considered a re-negotiation of the US$2.6bn deal to acquire Imperial Energy in the wake of depressed global economic situation.(FE)

BHEL receives order from Oman for gas turbines.(BL)

Indian Oil Corp commissions its first cross country LPG pipeline between Panipat and Jalandhar.(BL)

Indo Tech Transformers promoters to sell their entire shareholding to Prolec-GE International based in Mexico.(BL)

Videocon has put its DTH rollout plans on hold.(ET)

Dr Reddy's Laboratories remains in litigation for two patents in the US, while one patent has been dismissed from the case.(ET)

Dr Reddy's Laboratories is considering settling Sanofi-Aventis dispute out of court.(ET)

Wockhardt stalls PE fund raising plans.(ET)

HDFC Bank has sought RBI permission to buy 10% in MMTC-Indiabulls promoted commodity exchange, which is expected to be operational by March 2009.(TOI)

Madras high court has set aside Roche’s patent on key drug, valganciclovir, on procedural grounds.(TOI)

Six infotech SEZ projects of the Unitech Group have been delayed by as much as three years owing to slowing demand and delays in government approvals.(BS)

Sivasankaran to sell part of 8% stake in TTSL to DoCoMo.(BS)

Aditya Birla Nuvo mulls delisting PSI Data Systems.(BS)

NMDC has submitted a proposal to the Karnataka government seeking permission to set up a five million tonne capacity steel plant in Bellary.(BS)

Economic Front Page

Government cut the retail prices of petrol by Rs5 a litre and diesel by Rs2 following the sharp drop in international crude oil prices over the past few months.(DNA)

Government cuts excise duty, offers sops for key export sectors; stimulus package includes additional Plan expenditure of up to Rs200bn .(BL)

Government effects an across-the-board cut of 4% pts in the ad-valorem cenvat rate for the remaining fiscal on all products except petroleum.(BL)

India and Russia sign nuclear pact.(BS)

Government will borrow an additional Rs450bn during the remaining part of this fiscal year over the budgeted amount of Rs1,450bn.(ET)

Forex reserves jump by US$1.9bn to US$248bn for week ended November 28.(BL)

RBI cuts repo rate by 100 basis points to 6.5% and the reverse repo rate at which it borrows overnight to 5% from 6%.(FE)

RBI proposes norms for takeover by asset reconstruction companies.(ET)

Public sector banks to unveil package for home loan borrowers.(FE)

Interest rates futures likely soon according to SEBI.(ET)

The proposed 4000 Mw Ultra Mega Power Plant (UMPP) being set up by the Centre in Sunderagarh district in Orissa is likely to be commissioned by 2013.(BS)

Reserve Bank of India has reduced the interest rate on post-shipment credit and directed banks not to charge penal interest for delayed payments up to six months.(FE)

Direct tax collections in November dropped 36% yoy.(ET)

Housing finance companies are contemplating a cut in their prime lending rates.(BS)

Quick estimates available with the commerce ministry show that exports dipped 12% in November, almost the same as that in October.(BS)

Reserve Bank of India allows companies to buy back FCCBs prematurely through rupee resources.(FE)
RBI data shows incremental credit from the banking sector to the economy has become negative, till November 21.(FE)

Stimulating start for the day!

The best stimulus for running ahead is to have something we must run from.

Running away from recession is high on the agenda and the much-hyped fiscal stimulus package is out in the open. If reactions from industry captains are any indication, it has fallen short of expectations. Commerce Minister Kamal Nath said last week that the weekend's fiscal stimulus will be only the first part of a larger package. Hopefully, there will be more such measures in the weeks and months leading up to the general elections, which according to the Chief Election Commissioner could take place in April or May. Meanwhile, the results of the recently concluded assembly elections could have some bearing on the sentiment today. The counting has already begun and the outcome could give some signs as to who could lead the race for the Hot Seat at the Centre in the next 5-6 months.

Coming back to the markets, the fresh round of monetary and fiscal steps taken by the Government might boost sentiment early on today. In addition, the Centre has also cut prices of petrol and diesel. The fact that the US stocks rallied on Friday despite grim jobs data and firm trend across Asian markets would also help the bulls' cause. What is not certain is whether the cheerful mood lasts longer given the strong headwinds confronting the bulls, both local as well as local.

For instance, though the RBI has slashed rates aggressively, only a couple of banks have so far announced reduction in borrowing costs, and that too marginally. Other banks appear to be reluctant to lower lending rates and will first cut deposit rates to trim cost of fund. The same goes for the fiscal stimulus. So far, only auto, steel and cement companies have committed to pass on the benefit from lower excise duty. Others are still on a "wait-and-watch" mode.

Expect a lot of select sector and stock specific action today, based on the benefits accruing to them from the monetary and fiscal stimulus. Overall, we expect the market to remain choppy and rangebound after an initial spurt. Trend in global markets will of course continue to have a say in the market's direction, as will the outcome of state polls. Even if there is a strong rally, one should not get carried away as the fiscal stimulus and rate cuts may not be enough to boost economic growth, especially if the pain in the global markets doesn't show any sign of easing.

The November jobs report confirmed the fears that the US is worse off than expected. The overall picture is that the labor market is deteriorating at the fastest pace in decades. The fourth quarter is likely to be the worst in the cycle, and the first quarter of next year will be pretty bad too. By around the second quarter of next year, the US economy could start to stabilise, still contracting but at a slower pace. Experts don't expect any real improvement until late 2009. The same prognosis holds true for other advanced economies like The UK, Europe and Japan.

FIIs were net sellers of Rs45.2mn (provisional) in the cash segment on Friday while the local institutions pumped in Rs1.84bn. In the F&O segment, foreign funds were net sellers at Rs5.27bn. On Thursday, FIIs were net buyers at Rs4.48bn in the cash segment.

US stocks erased losses and shot higher on Friday as insurer Hartford Financial Services led a rally in the financial space by hiking its earning forecast for the year. Hartford's reassurances helped pull focus from the 553,000 drop in payrolls last month.

The Dow Jones Industrial Average gained 260 points, or 3.1%, to end at 8,637.09, leaving the blue-chip index down 2.2% for the week. The S&P 500 rose 30.85 points, or 3.65%, to 876.07, off 2.3% on the week. The Nasdaq Composite index climbed 63.75 points, or 4.4%, to 1,509.31, down 1.7% for the week.

All three major indices tumbled through the early afternoon, with the Dow losing as much as 257 points after the government reported the worst monthly job losses in 34 years. But stocks erased losses and pushed higher in the afternoon.

In the week ended on Dec. 3, investors pulled roughly $12 billion out of equity mutual funds, after putting $10.4 billion into funds in the previous week. Investors have cashed out of equity mutual funds in 16 of the last 18 weeks.

US employers cut 533,000 jobs from their payrolls in November, the biggest monthly decline since 1974, and far more than the 325,000 cuts that Wall Street economists were expecting.

Meanwhile, September's and October's job losses were revised up, bringing the three-month decline to 1.3 million, the largest three-month job loss total since World War II. So far this year, 1.9 million jobs have been lost, topping the 1.6 million lost in the 2001 recession.

The unemployment rate, generated by a separate survey, rose to 6.7% in November from 6.5% in the previous month. It was short of the 6.8% economists were expecting, but still brought the unemployment rate to the highest level in 15 years.

In other news, a record 1.35 million US homes were in foreclosure in the third quarter, up 76% from a year ago, according to a Mortgage Bankers' Association report released on Friday.

Executives from Detroit's Big Three automakers were back on Capitol Hill on Friday, asking a House panel for a massive loan package to rescue their struggling businesses. Executives from GM, Ford and Chrysler testified before the Senate on Thursday. The Big Three are seeking $34 billion in aid to rescue their struggling industry, up from an initial request of $25 billion last month. Separately, GM said it will lay off about 2,000 workers in the first quarter of next year.

Shares of Hartford Financial surged more than 102% after the insurer boosted its 2008 profit forecast and said that it has enough capital to get through further declines in the stock market. The stock had plunged 92% this year, as of the previous session's close.

Merrill Lynch shares rallied after shareholders approved Bank of America's $21 billion purchase of the bank. The all-stock deal had initially been valued at $50 billion when announced in September, but had been revised lower after Bank of America's stock fell.

Treasury prices slumped, raising the yield on the benchmark 10-year note to 2.70% from 2.56% late on Thursday. The 10-year yield dipped below 3% last week for the first time since the note was first issued in 1962.

The yield on the 3-month Treasury bill fell to 0.01% from 0.015% on Thursday, near the 68-year low of zero hit last month. The bill is seen as the safest place to put cash in the short term. The low yield means investors would rather preserve cash despite little or no interest than risk it in the stock market.

Lending rates showed little improvement. The 3-month Libor rate held steady at 2.19%, unchanged from Thursday. The overnight Libor fell to 0.28% from 0.52% Thursday. Libor is a key bank lending rate.

The dollar gained versus the euro and the yen. COMEX gold for February delivery lost $13.30 to settle at $752.20 an ounce.

US light crude oil for January delivery fell $2.86 to settle at $40.81 a barrel on the New York Mercantile Exchange, ending at a four-year low. OPEC chief says that the cartel will cut production at its Dec. 17 meeting in response to plummeting oil prices.

Gasoline continued its fall to nearly four-year lows, with prices down 1.6 cents to a national average of $1.773 a gallon. Prices have been sliding for 2-1/2 months and have dropped more than $2 a gallon, or 54%.

The week ahead will show if the US market can continue to be resilient, as investors digest reports on housing, inventories, jobless claims, the trade gap, producer prices, retail sales and consumer sentiment. All are expected to show weakness. The week ahead also could bring a breakthrough for the automaker industry.

European shares extended losses on Friday. The pan-European Dow Jones Stoxx 600 index fell 3.8% to 189.84, falling for the third time in five sessions and bringing losses this week to nearly 8%. Overall, the Stoxx 600 index has fallen by around 49% in the last twelve months.

The UK's FTSE 100 closed down 2.7% to 4,049.37, while Germany's DAX 30 lost 4% to 4,381.47 and the French CAC-40 index declined 5.5% to 2,988.01.

Markets ended lower on Friday as traders and investors preferred to book some profits after a sharp rally in previous session. The fall was led by the IT and the metal stocks.

Interest rate sensitive stocks also corrected after rallying throughout the week on expectations of the stimulus package which is likely to be announced in the weekend.

The BSE benchmark Sensex slipped 264 points to close at 8,965 and the NSE Nifty index was down 73 points ending at 2,714.

Market breath was weak, 1,099 stocks advanced against 986 declines, while, 71 stocks remained unchanged.

Among the 30-components of Sensex, 25 stocks ended in the red and 5 stocks ended in the green, the big gainers were Tata Motors (1.4%), Grasim (1%), Maruti (0.5%) and RCom (0.2%).

Shares of Gammon India rallied by over 17% to Rs55 after more than 2.3% of its equity changed hands in two transactions.

~999,850 shares were sold on the NSE and 1mn shares were sold on the BSE at Rs49 per share. The scrip touched an intra-day high of Rs57 and a low of Rs47 and recorded volumes of over 26,00,000 shares on BSE.

Shares of RCom advanced after reports stated that the Communication and IT ministry would refund Rs1.1bn to the company, which it paid as an entry fee for offering dual technology in six circles. The stock was up by over 0.5% to Rs197 after touching an intra-day high of Rs207 and a low of Rs195 and recorded volumes of over 54,00,000 shares on BSE.

Shares of Cipla ended flat at Rs183. Reports stated that the company has received US FDA approval to market multiple strengths of Pamidronate disodium injection. The scrip touched an intra-day high of Rs188 and a low of Rs182 and recorded volumes of over 1,00,000 shares on BSE.

Shares of Wockhardt edged higher by 0.5% to Rs98 after the company announced that its unit received US FDA approval to market a pediatric drug. The scrip touched an intra-day high of Rs104 and a low of Rs98 and recorded volumes of over 33,000 shares on BSE.

Morning Note - Dec 8 2008

Morning Note - Dec 8 2008

India Media Sector Update

India Media Sector Update

Global Energy Outlook - 2009

Global Energy Outlook - 2009

For investors seeking a defensive option in choppy markets, the stock of Britannia Industries is an attractive buy. With a product basket comprising biscuits, bakery and dairy products and brands straddling several price points, Britannia’s portfolio is among the least vulnerable, even within FMCGs, to any consumption slowdown. A slew of product launches, efforts to position biscuits as snacking alternatives for adults and forays into new segments have helped the company register healthy sales growth and ward off threat to its market share. Low margins and spiralling input costs have been the only point of concern in the company’s financials in recent quarters. Here, signs of moderation in prices of key inputs promise a reprieve.

Despite a strong focus on the lucrative foods segment, Britannia Industries is among the cheapest FMCG stocks, with its current market price of Rs 1,165 discounting trailing 12-month earnings by just 14 times. This is a steep discount not only to Nestle India (32 times), but also to every other leading player in the FMCG space.

After ceding significant market share to ITC in biscuits until 2006, Britannia Industries has regained some market share over the past couple of years. A host of new product rollouts (iron fortified Tiger, Good Day Classic), expansion of the premium portfolio (Good Day and Treat), the positioning of NutriChoice as a snacking alternative and the launch of Nano packs at Rs 2 and Rs 5 price points have all helped revive Britannia’s sales. Britannia’s topline growth, at 18 per cent in FY08, has witnessed a steady improvement this fiscal and stood at 27 per cent for the September quarter. Going ahead, an expanding cakes and rusks portfolio (the business has doubled in two years), further expansion of the Daily Bread bakery business and new markets for Britannia’s brands in West Asia and Africa (through acquired subsidiaries), offer growth opportunities.

Though Britannia has managed to stabilise its market share and add new product lines, strong topline growth hasn’t translated into earnings growth over the past few quarters. A sharp spiral in prices of commodity inputs such as wheat flour, vegetable oils/fats and milk has resulted in earnings growth (12 per cent) lagging sales (25 per cent). However, a moderation in wheat prices and sharp decline in global prices of vegetable oils and milk have now significantly moderated cost pressures. The lag effect of these, as well as the price increases taken in September/October, may contribute to much better margins in the coming quarters.

UTV Software Communications

Investors can stay invested in UTV Software Communications, an integrated entertainment company that spans movie production, content, airtime sales and gaming, considering the stock’s reasonable valuation levels and bright business prospects in some of its verticals.

At Rs 233, the stock trades at nine times its estimated 2008-09 earnings. Healthy collections from recent movie releases and a good pipeline suggest strong revenues and margins in the key movie production business over the coming quarters.

Strong viewership ratings for UTV’s content in TV production/co-production and airtime sales also suggest bright prospects. Gaming, where the bulk of activity happens in the December quarter, is another high potential business.

The stock has fallen over 70 per cent in the past one year, dogged mainly by concerns about losses in its broadcasting business and the heavy investments that UTV has committed across its verticals. The stock’s status as a mid-cap stock in the media pack, also took its toll.

Broadcasting is one area where UTV and Disney (its partner) have invested considerably, about Rs 360 crore and another Rs 100 crore to be invested over the next 18 months.

This vertical, with recent launches, has five channels in operation and is generating losses and is expected to continue to do so over the next year or so. Its youth channel Bindaas and movie channels such as Bindaas Movies and World Movies and business channel UTVi may see substantial investment. Four of their five channels are ‘pay’ channels, while one is free to air(UTVi).

The total loss from the broadcasting business is estimated at Rs 25 crore for the current year and about Rs 20 crore for the next fiscal.

This is much lower than its earlier projections and lends confidence to a quicker break-even. The increasing penetration of DTH suggests expanding reach for pay channels.

Although the general slowdown in the economy and the possibility of cut in advertising spend by companies, is a cause of concern investors in UTV may draw comfort from its well-diversified revenue stream, with TV content sales and movie syndication (35 per cent), Box Office (18 per cent) and gaming and music content to telecom companies and at gaming outlets being key contributors. Advertising revenue forms only about 18 per cent and a slowdown may not significantly dent its prospects.

Synergies with the Disney group (which holds a near 60 percent stake in UTV) across verticals, especially in broadcasting, tie-up with ABC News for its business channel UTViand in areas of gaming, movie syndication and television content augur well for the company.
Movie production

This has been the best performing vertical for UTV and is well poised to extend it over the next few years. This segment contributes over 50 per cent of its revenues and enjoys a 21 per cent margin. In the past, it has produced/distributed films such as Rang De Basanti, Taare Zameen Par and Jodhaa Akbar that have been runaway hits. Also, its strategy over the last couple of years has been to back low-budget films with a strong storyline, such as Khosla Ka Ghosla.

UTV operates a full studio-model where production, post-production and distribution are done under a single banner.

Movie releases (in the second quarter of FY09) such as A Wednesday, Welcome to Sajjanpur, both low-cost, have done extremely well at the box-office. Its recent release Oye Lucky Lucky Oye has also received good reviews.

Its forthcoming release of Delhi 6, from the director of Rang De Basanti, featuring Abhishek Bachchan, Main Aur Mrs.Khanna featuring Salman Khan, and a slew of low- and high-budget films with the right talent, may set the cash registers ringing at the box-office. In the wake of the Mumbai terror attack, there may be a slowdown in terms of movie goers at multiplexes. This could be partly offset by a more intensive marketing at the international screens and movie syndication to Indian channels.
TV content :

UTV does production/co-production of programmes for TV channels and also sells airtime by buying advertising slots in channels. This segment contributes 23 per cent of the company’s revenues. UTV develops content for channels such as Colors, ZEE and other channels which have the highest viewership in the general entertainment category.

In the airtime sales segment, the company has tied up with key channels in the South. For instance, it handles Kolangal and Arasi, two top rated soaps, currently on Sun TV.

It also buys TV telecast rights and resells movies to channels such as Zee. Given that several channels may be facing the heat of lower ad spends, UTV has rights to sell to channels on a non-exclusive basis. This includes selling it at a lower price for a lower period of time and to multiple channels.

UTV’s own Bindaas Movies, which features several local-language-dubbed version of Hollywood hits, is said to have overtaken Star Movies and HBO in viewership ratings.
Gaming and New Media

With the acquisition of Indiagames, the reach of UTV in mobile and online gaming has widened. It has tied up with nearly 80 operators globally, including players such as Bharti Airtel, Verizon and Vodafone to offer gaming on cell phones. The global gaming industry is estimated to touch $11 billion by 2009 according to a Nasscom report.

However, as with broadcasting, new media is in investment phase and it may take over two years for the company to make any meaningful margins from these ventures.