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Wednesday, July 08, 2009

Cloudy global cues


Prosperity is something the businessmen created for politicians to take credit for.

US President Barack Obama says that India’s prosperity is good for America. His remarks come a day after the PM made a case for reforming the UN Security Council and asked the developed world to address systemic failures. These statements hold particular significance in light of the three-day G8 meeting starting today. Chinese President Hu Jintao won’t be going to Italy for the G8 meet as he battles ethnic tension in Xinjiang.

In short, the global market will in focus. The bad news is western equity markets sank overnight amid growing doubts over the so-called ‘green shoots’ theory. Asian stocks are down 1-1.5%. So, it’s a no-brainer that we will open down. Results and global cues will control the sentiment. Infosys unveils its results on Friday. IIP will also be announced on the same day. Among the good news is that monsoon appears to be progressing well.

FIIs were net sellers for a second day running while local funds were bullish. Even though the market recovered from Monday Mayhem, the breadth was negative and traded volume was down.

In other global news, the US government is considering curbs on speculative trading of crude oil. Finance Minister Pranab Mukherjee also expressed concern on this issue with his post-budget interaction with India Inc. in New Delhi on Tuesday. Speculators have been blamed for causing extremely wild swings in the price of crude and consumers have been the big losers.

US consumer loan delinquencies have risen to record high. Across the Atlantic, manufacturing output in the UK saw an unexpected drop. The yen strengthened to a six-week high against the euro as Asian stocks fell and Japanese machinery orders unexpectedly declined, adding to signs the global recession is far from over.

Results Today: IndusInd Bank and Moser Baer.

FIIs were net sellers in the cash segment on Tuesday at Rs9.21bn while the local institutions poured in Rs7.9bn. In the F&O segment, the foreign funds were net buyers at Rs7.07bn. On Monday, the foreign funds were net sellers at Rs3.5bn in the cash segment. Mutual Funds also pulled out Rs5.88bn on the same day.

US stocks continued the recent downward trend on Tuesday, as traders dumped shares ahead of the start of the quarterly reporting period. A selloff in commodity prices took its toll on the underlying stocks, adding to the market weakness and worries about the health of the economy.

The Dow Jones Industrial Average lost 161 points, or 1.9%, to 8,163.60, closing at its lowest point since April 28. The S&P 500 index shed 18 points or 2%, to 881.03, closing at its lowest point since May 1. The Nasdaq fell 41 points, or 2.3%, to 1,746.17, closing at its lowest point since May 27. Declines were broad-based, with 25 of 30 Dow components sliding.

US stocks have been sliding since mid-June as a three-month rally has lost steam amid apprehensions that the economic recovery, when it does materialise, may not be as strong as has been anticipated. The S&P 500 had spiked 40% from early March.

Economic news due later this week includes readings on retail sales, the job market, import and export prices and consumer sentiment.

This recession is not going to be short and shallow like in 2001. We are more than 18 months into it and there does not seem to be any concrete signs of a turnaround. Until the global economy shows incremental signs of improvement, stocks will find it tough to move much higher.

A report from the Mortgage Bankers Association showed that delinquencies on credit cards and other loans jumped to a record 3.23% in the first quarter. That was a modest rise from the previous quarter.

Wall Street is also gearing up for the start of the second-quarter reporting period, which unofficially kicks off after the close on Wednesday with Dow component Alcoa. Next week brings reports from some of Wall Street's biggest financial firms, including Goldman Sachs, JPMorgan Chase and Citigroup. However, most quarterly financial reports are due out later in the month. Market participants will be looking to see not only that companies beat forecasts, but also for some soothing comments on the outlook for future quarters.

The summit of the world's leading industrialized nations begins on Wednesday in L'Aquila, Italy. US President Barack Obama is expected to speak about the economic outlook. The leaders of Japan, Britain, France, Italy, Germany, Canada and Russia will also speak.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.46% from 3.51% late on Thursday.

Energy prices slipped, with U.S. light crude oil for August delivery falling $1.12 to settle at $62.93 a barrel on the New York Mercantile Exchange.

In currency trading, the dollar gained versus the euro and fell versus the yen.

COMEX gold for August delivery fell $4.80 to settle at $929.10 an ounce.

Shares in Europe ended lower for the fourth consecutive session, with losses for utilities offsetting gains for metal producers and banks. The pan-European Dow Jones Stoxx 600 index declined 0.7% to 200.20. Germany's DAX index shed 1.1% to 4,598.58 and the French CAC-40 index lost 1.1% to 3,048.57. The UK's FTSE 100 index inched 0.2% lower to 4,187.00.

After a big selloff on Monday, Indian markets seemed to have regained their composure as the key indices managed to end with smart gains. Stocks, which were badly battered, attracted buying at lower levels.

Market players still hoped that disinvestment, PSU IPOs and other reforms may be announced in the coming quarters. The Auto, FMCG, Capital Goods and Power stocks were among the major gainers, while, the PSU and the Oil & Gas stocks remained under pressure.

The Sensex advanced 126 points or 0.9% at 14,169 after touching a high of 14,252 and a low of 14,000. The index had opened at 14,103 against the previous close of 14,043.

The NSE Nifty surged 38 points or 0.9% to shut shop at 4,203.

Asian markets ended in the red; the Nikkei index in Japan slipped 0.4% at 9,647, Australia's S&P/ASX ended down 0.5% at 3,766. Hang Seng index fell 0.6% at 17,862.

Elsewhere in the Europe, stocks were trading in the green. The FTSE index was up 1% at 4,233. The DAX index was up 1% at 4,678. CAC 40 index was up 0.6% at 3,098.

Coming back to India, among the BSE Sectoral indices BSE Auto index was the top gainer gaining 3.8%, followed by the BSE FMCG index up 3.7%, BSE Capital Goods index gained 1.5% and BSE Power index gained 1%.

The BSE Mid-Cap index added 1% however on the other hand, BSE Small-Cap index fell 0.2%.

In the Sensex, the major losers were JP Associates, ITC, Hero Honda, M&M, Grasim, ACC, Maruti and Bharti Airtel.

On the other hand, ONGC, Tata Power, Reliance Industries, SBI, RCom, Tata Motors and Infosys.

Among the big gainers in the broader market were Marico, IRB Infra, Voltas, Exide Ind, Torrent Power, IVRCL Infra, Jubilant and India Cement.

Outside the frontline indices, the top losers included REI Agro, Chambal Fert, NMDC, RCF, Jai Corp and Bajaj Holdings.

Shares of RNRL advanced by over 2.5% to Rs81.6 after the Supreme Court refused to stay a verdict of the Bombay High Court in a gas dispute case between Reliance Industries Ltd. and RNRL

The SC asked both the companies to reply to the appeals filed by each other by July 20, when the matter will come up for hearing.

On the other hand, shares of Reliance Industries declined by over 2% to Rs1855.

Tata Steel June sales rose by 19% to 497,000 tons as compared to 419,000 tons in the same period last year. While, Q1 sales rose 22% to 1.42mn tons as compared to 1.16mn tons YoY.

The company’s hot-metal output for the month of June rose 16% to 578,000 tons as compared to 499,000 tons in the same period previous year. Crude steel output rose by 21% to 514,000 tons YoY. While, crude steel output rose 20% to 1.5mn tons as compared to 1.25mn tons.

The stock ended higher by 0.5% to Rs398 after hitting an intra-day high of Rs409 and a low of Rs385 and has recorded volumes of over 3.6mn shares on BSE.

Shares of Reliance Industries further lost ground on Tuesday after the Finance Minister in the Budget announced that it hiked the MAT rate from 10% to 15%. Further the credit period was also increased to 10 years from 7 years. The stock hit an intra-day high of Rs1910 and a low of Rs1825 and recorded volumes of over 1.4mn shares on BSE.

Shares of M&M advanced by over 5.5% to Rs750 after the Finance Minister in the Budget which was presented on Monday reduced the duties on large cars.

The FM reduced a "component" added to the 24% ad valorem duty on large cars and utility vehicles (SUV).

The government also reduced the excise duty on petrol driven trucks from 20% to 8% "to equate the duty with similar vehicles run on diesel".

Tea and coffee plantations stocks like Mcleod Russel and Tata Coffee ended with smart gains on Tuesday. The Finance Minister in the Budget announced concessional customs duty of 5% on specified machinery for tea and coffee plantations would be reintroduced for one year up to July 6, 2010.

Shares of McLeod Russel advanced by 4.6% to Rs115 after hitting an intra-day high of Rs116 and a low of Rs109 and recorded volumes of over 0.25mn shares on BSE.

While Tata Coffee ended flat at Rs201. The scrip touched an intra-day high of Rs203 and a low of Rs199 and recorded volumes of over 4,000 shares on BSE.

Shares of ITC surged to 52-week high, the stock surged by over 6.5% to end at Rs211. The Finance Minister in the Union Budget left excise duty on cigarettes unchanged, after five consecutive years of increases.

The scrip hit its new 52-week high of Rs214.85 and hit its intra-day low of Rs199 recording volumes of over 3.5mn shares on BSE. ITC had hit its 52-week low of Rs132 on October 27, 2008.

Shares of GSPL and GAIL are trading higher after the Finance Minister in the Budget proposed to develop a blueprint for long distance gas highway leading to a National Gas Grid. This would facilitate transportation of gas across the length and breadth of the country, he said.

Furthermore, he proposed in the Union Budget to fully allow all capital expenditure as deduction under the Income Tax Act in respect of businesses of setting up and operating cold chain, warehousing facilities for storing agricultural produce and operating cross-country natural gas or crude or petroleum pipeline network for distribution on common carrier principle.

Shares of GSPL surged by over 7.5% to Rs54.2 after hitting an intra-day high of Rs54.9 and a low of Rs49.5 and recorded volumes of over 4.7mn shares on BSE.

Meanwhile, GAIL gained by 3.5% to Rs323 after hitting an intra-day high of Rs344 and a low of Rs316 and recorded volumes of over 1.1mn shares on BSE.