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Monday, November 30, 2009
Sensex to open higher
Headlines for the day
Jay Shree Tea close to buying Uganda Firm - DNA Money
L&T, NPCIL to ink pact for Rs2k crore venture today - DNA Money
Spice Mobile to set up unit to make handsets - Business Line
ONGC close to big oil find - Business Standard
B K Birla firm close to buying tea estate in Africa - Business Standard
Events for the day
Major corporate action:
· Nil
Pre-market report
Global signals
· The European stocks that opened weak on Friday due to concerns over the Dubai debt closed with gains of over 1% as the banks leads the surge.
· The major US indices fell sharply by over 1.5% each on the back of Dubai’s debt default
· Today, the major Asian indices recovered part of its losses of Friday and opened green with the gains in the range of 0.70%-3.41% each. However Straits Times bucked the trend and fell by 1.87%. While at the time of writing this report, SGX Nifty was trading 47 points higher.
Indian markets
· The positive Asian cues will help the domestic indices to open with decent gains and trade higher, volatility to continue.
· Among the local indices, the Nifty could test the 5000-5050 range on the up side, while on the down side it could find support at 4920 and 4900. The Sensex is likely to get support at 16600 and may face resistance at 17000.
Indian ADR's
· Among the Indian ADRs trading on the US bourses, all the ADRs closed in the red with heavy losses in the range of 0.5%-7.53% each, except for VSNL that rose substantially by 2.47%.
Commodity cues
· In the commodity space, the Crude oil prices slipped sharply, with the Nymex light crude oil for January 2010 series falling by $3.06 to settle at $74.90 a barrel.
· In the metals space, the Comex Gold for February 2010 series declined by $12.60 to settle at $1176.00 a troy ounce, while Comex Silver for December series fell by $0.47 to settle at $18.34 to a troy ounce.
Daily trend of FII/MF investment in equities
· On November 27, 2009, FIIs were the net buyers of the Indian Stocks in the tune of Rs306.10 crore (with the gross purchase of Rs2935.20 crore and gross sales of Rs2629.10 crore).
· While the Domestic mutual funds mutual funds, on November 26, 2009, were the net sellers of the stocks in the tune of Rs257.50 crore (with gross purchase of Rs1015.40 crore and gross sales of Rs1272.90 crore).
Grey Market - MBL Infrastructures, Cox and Kings, JSW Energy
| Company Name | Offer Price (Rs.) | Premium (Rs.) |
| Cox & Kings | 330 | 4 to 5 |
| MBL Infra | 165 to 180 | 5 to 5.50 |
| JSW Energy Ltd. | -- | 2.50 to 3.00 |
Market seen advancing on recovery in Asian markets; GDP data eyed
The market is likely to end two day losses following recovery in Asian stocks and higher US index futures. Trading in US index futures showed the Dow could rise 58 points the opening bell today, 30 November 2009. The S&P CNX Nifty futures for December 2009 expiry were trading 47 points higher in Singapore. Gross domestic product (GDP) data for Q2 September 2009 to be announced by the government later in the day day will be closely watched. The economy grew at 6.1% annual rate in the June 2009 quarter
Most Asian stocks advanced today, 30 November 2009, ending a two-day slide, as concerns about Dubai debt default eased and the yen retreated from a 14-year high on the dollar. Key benchmark indices in China, Hong Kong, Japan, South Korea and Taiwan were up by between 1.50% to 3.45%. However Singapore's Straits Times index fell 1.90%
Meanwhile, the Dubai government announced a restructuring of Dubai World after the company shocked creditors by requesting a standstill on all financings to it and its subsidiary Nakheel, the "palm island" developer. Granting of the request would result in a technical default.
Dubai World, one of the emirate's main state holding companies, asked for a delay on maturities until at least 30 May 2010. The company has total debts of $59 billion, including $3.52 billion of Islamic bonds due 14 December 2009 from its property unit Nakheel.
The government's decision risks undermining investor confidence in Dubai, a Middle East financial hub. A decision is yet to be taken on how to deal with investors insisting on repayment in December.
Fears of a possible Dubai debt default rippled through markets for a second day on Friday but the exodus from stocks and rush to the safe-haven U.S. dollar slowed as investors discounted contagion. The Dow Jones Industrial Average fell 154.48 points, or 1.48%, to 10,309.92. The Standard & Poor`s 500 Index slid 1.72% to 1,091.49 and the Nasdaq Composite index declined 37.61 points, or 1.73%, to end at 2,138.44.
Back home, auto majors Maruti Suzuki India and Mahindra & Mahindra may see action as they reportedly plan to raise prices in two phase next year as input costs have increased. State Bank of India may also be in action on its plans to open 23 branches overseas in the next four months. The bank plans to have 160 overseas branches by March 2010.
There are concerns that a glut in share sales may suck liquidity from the secondary market. A foreign brokerage firm expects Indian firms to raise roughly $70 billion through share sales over the next three years. The brokerage expects stake sales in state-run firms will account for $10-$15 billion of the total funds to be raised. The upcoming auction of third-generation mobile spectrum will also spur potentially billions of dollars in equity raising, although not necessarily from the public markets.
Indian companies have raised about $18 billion in equity thus far this year to repay high cost debt or to fund expansion plans. Last year, Indian firms raised $7.2 billion in equity.
The Reserve Bank of India (RBI) governor Duvvri Subbarao on Friday 27 November 2009 said an assessment of the impact of Dubai's debt problems was needed before deciding on a response. India's financial integration with the global economy is deeper than its trade integration, the central bank governor said.
Subbarao said that there was no benign policy option and that inflationary pressures were building up. The government on Thursday said it was concerned about rising prices, especially of food articles, and would take appropriate fiscal and monetary measures to contain them. "We are deeply concerned when prices go high," Finance Minister Pranab Mukherjee said on Thursday. "It will have to be done by us: control of monetary policy, control of credit policy, control of fiscal policy."
The six core industries grew 3.5% in October 2009 from a year earlier, slower than upwardly revised annual growth of 4.1% in September 2009, government data showed on Friday. During April-October, the first half of the 2009/10 fiscal year, output rose 4.7% from 3.3% in the same period in 2008/09. The infrastructure sector accounts for 26.7 percent of India's industrial output.
Key benchmark indices ended lower on Friday, 27 November 2009 despite a sharp rebound in second half of the day's trading session. The BSE Sensex fell 222.92 points or 1.32% to 16,632.01 and the S&P CNX Nifty was down 63.80 points or 1.27% to 4941.75.
The BSE Sensex had lost 566.94 points or 3.41% in the past two trading sessions on worries about Dubai's debt problems. Debt worries in Dubai sparked fears that the global financial markets have not healed properly since last year's crisis and that the Dubai problem could expose these weaknesses.
As per provisional data on NSE, foreign funds sold shares worth Rs 1057.18 crore and domestic funds bought shares worth Rs 698.67 crore on Friday, 27 November 2009.
Wall Street joins world in reacting to Dubai crisis
Early gains in the week help indices register little weekly losses
It was a holiday shortened week at Wall Street that ended on Friday, 27 November, 2009 with US market being closed on Thursday, 26 November, 2009 on account of Thanksgiving Holiday and half day closed the following the day. But due to weakness in the later part of the week, indices suffered little losses for the week, though market had managed a strong start on Monday, 23 November, 2009. But news of Dubai's debt crisis rattled Wall Street once again.
For the week, Dow ended lower by 8.24 points (0.1%) at 10,309.92. Nasdaq ended lower by 7.6 points (0.4%) at 2138.44. S&P 500 ended almost unchanged at 1091.49. Sector wise, financial led the pack of losers while healthcare and telecom led the pack of gainers.
Market made off to a good start on Monday, 23 November, 2009, following a weak dollar and better thane expected housing report. Market managed to cling to its gains for the following two days – Tuesday and Wednesday. Among economic reports expected for the week, the housing data showed that home sales in October rose 10.1% to 6.1 million homes, greatly outpacing expectations of 5.7 million as the first-time home buyers tax credit provided much of the incentive for the increase.
The world stock markets revisited last year's stock market crisis partly on Wednesday, 25 November, 2009 after news hit the wires that the Dubai government asked creditors, which reportedly include many European banks, particularly in the United Kingdom, to defer payments on some $20 billion in debt coming due over the next 18 months. Reportedly, Dubai World, the largest corporate entity in the Persian Gulf emirate, asked creditors last Wednesday for a six-month stay on repayment of $60 billion in debts. Indices across the world just plunged soon after the news.
Wall Street reacted a little late to the news with market being closed on Thursday, 26 November, 2009. In the US market on Friday, 27 November, sellers moved concertedly to pressure stocks amid news of credit troubles in Dubai. Their actions gave the stock market its worst single-session percentage drop of the month and caused volatility to spike.
On that day, The Dow Jones Industrial Average ended lower by 154.48 points at 10309.92. Nasdaq ended lower by 37.61 points at 2138.44. S&P 500 ended lower by 19.13 points at 1091.51. Losses were broad based, too. In fact, all 30 Dow components logged a loss. Broader market pressure and weakness among commodities took their toll on the materials sector and the energy sector. The two led declines for most of the session.
Crude prices fell at Nymex on Friday, 27 November, 2009. Prices fell as the debt concerns in Dubai further troubled investors. The rising dollar also pressured the crude oil prices.
On Friday, crude-oil futures for light sweet crude for January delivery closed at $76.05/barrel (lower by $1.91 or 2.4%). Earlier during the day, the contract dropped to a low of $72.39. For the week, crude ended lower by 1.8%.
Yellow metal prices ended their nine day consecutive winning streak and ended lower on Friday, 27 November, 2009. Prices fell as the debt concerns in Dubai further troubled investors. The rising dollar also pressured the precious metal prices. Silver prices also ended substantially lower.
On Friday, gold for December delivery ended at $1,174.2, lower by $12.8 (1.1%) an ounce on the New York Mercantile Exchange. Earlier during the day, it rose to a high of $1,195 and also fell to a low of $1,130. In the previous nine sessions, gold gained more than 7%. For the week, gold gained 2.6%. On a year to date basis, gold price is higher by 33%.
In the currency market on Friday, the dollar headed up against most of the major currencies. The dollar index, which measures the strength of dollar against basket of six other currencies, rose by almost 0.2%.
For the year, Dow, Nasdaq and S&P 500 are higher by 17.5%, 35.6% and 20.8% respectively.
Earnings season has ended for this season at Wall Street and there are no notably Treasury auctions for the coming week. But the economic calendar is full, with the ADP Employment change on Wednesday, 2 December, 2009 preceding the key Nonfarm Payrolls figure and Unemployment Rate on Friday, 4 December, 2009.
Daily News Roundup - Nov 30 2009
Suzlon Energy's subsidiary REpower Systems receives an order from Saint-Laurent Énergies, Canada, for supply of 954MW of wind turbines ;deal size is estimated at about US$1bn. (BL)
L&T is all set to ink a JV agreement with Nuclear Power Corp for setting up an Rs20bn project to make forgings for nuclear power plants. (BL)
ONGC finds traces of a new oil reserve in Gujarat which could increase the company’s total onshore oil production by about 20%. (BS)
Mahindra Satyam, Siemens and Patni Computers, are in the race for selection as IT implementing agencies for the government’s automation programme worth Rs100bn. (ET)
Wockhardt and DBS Bank have agreed to an out-of-court settlement of a dispute over loans the drug manufacturer had taken from the Singapore-based lender. (BS)
GMR Group is in talks with private equity funds 3i Investments and Macquarie-SBI Infrastructure to raise US$450mn in GMR Airport Holdings. (ET)
Barclays Capital and Calyon have petitioned the High Court to liquidate the assets of Wockhardt and distribute its proceeds to lenders. (BS)
Tatas, L&T in race for the 35-km high-speed rail transport between Bangalore International Airport at Devanahalli and the city centre. (BS)
The US drug regulator has commenced inspection of Lupin’s upcoming plant at Indore last week. (ET)
Gammon plans to make an yearly investment of up to Rs50bn for roads development projects and is looking to bid for 10 projects by fiscal end. (ET)
Shriram EPC has signed a MoU with North West Electric Power Design Institute of China to form a consortium to undertake EPC contracts for thermal power projects in India. (BL)
Marico and Godrej Consumer Products are in the race to buy British skincare brand Simple, one of the largest beauty product brands in the UK. (FE)
TCS has said that it will recruit about 25,000 people in 2010-11. (BL)
Bajaj Auto to launch sub-150 cc Pulsar. (BL)
Reliance Capital plans to acquire a controlling stake in Quant Capital. (BS)
Reliance Communications cuts SMS charges, further heating up the ongoing tariff war in the Indian mobile telephony market. (BL)
Aditya Birla Retail is considering an IPO and will time it as soon as the company starts spinning profits. (DNA)
ABG Shipyard said its open offer for 32.1% stake in Great Offshore will now commence on December 3. (FE)
Jay Shree Tea is close to announcing its first overseas acquisition, in Uganda. (BS)
Spice Group plans to enter mutual funds, stock broking and distribution and micro-finance businesses by March 2010. (BS)
Spice Mobile plans to start a manufacturing unit for mobile devices in the country by next year, with an initial investment of Rs1bn. (BS)
Foreign exchange reserves fell by US$1bn to US$285bn, for the week ended November 20. (BL)
Sufficient room for banks to cut lending rates further, says RBI governor. (BL)
Six core infrastructure industries see 3.5% yoy growth in October, compared to 4.1% and 7.8% levels of the preceding two months and the 2% for Oct’ 08. (BL)
The 46 operational airports in the country handled 42mn domestic passengers during April-Sept’ 2009-10, which is about the same as the numbers handled in 2007. (BL)
FDI into India declined 11% yoy to US$15bn in the first six months of fiscal 2009-10. (DNA)
Exports dip 6.6% yoy in October. (TOI)
Finance Ministry says no to income tax holiday for first 7 NELP rounds. (FE)
The government is assessing the needs of major export-oriented sectors hit by the economic slowdown to provide support for their fast recovery. (BS)
India’s drug retail market grew by 29.24% in value terms in October this year over the year-ago period. (ET)
Government plans ultra mega steel projects, to identify five locations adjacent to mining sites for developing UMSPS. (ET)
The Perfect Storm!
There is bound to come some pain, surely as there are storms and falling rain; just believe that the one who holds the storms will bring the sun.
The bears seem to have found the perfect storm in the desert. For long they have been scouting for a reason to break the range-bound trade and the Dubai-debt issues seem to have done the trick. UAE authorities seem to be coming up with a solution; albeit temporary, and this could at least limit the collateral damage.
We expect a bounce back at start today. Some amount of domestic buying, especially in the large caps is likely after they were randomly beaten down last week. Investors too may have pondered enough over the weekend and decide that the situation is not that bad after all for the time being. The Asian markets are staging a comeback recording decent gains.
The GDP numbers expected later in the day could add to the sentiment if above expectations. Some surveys suggest the India’s economy grew at the fastest pace in a year thanks to record-low interest rates and government stimulus measures.
The primary fears include that a bailout in Dubai may feed further bubbles. Beijing says it plans to continue its stimulus measures. Back home, the RBI says it is watching the situation closely. The event could delay the central bank’s exit measures for some time.
Japanese benchmark moved higher on expectations that the Dubai issue would be limited; moreover the yen’s appreciation halted. For the sake of the world, Dubai World will hope to live up to its tagline of "The sun never sets on Dubai World."
Finance Minister Pranab Mukherjee had said attempt was being made to balance the need to create jobs against inflation concerns. Food inflation meanwhile has climbed to 15.58% and remains a major concern.
Meanwhile Federal Reserve Chairman Ben Bernanke, has written a strong article in a newspaper warning Congress that actions limiting the Fed’s independence could prove detrimental to the causes of financial reform and economic recovery. "The government's actions to avoid financial collapse last fall -- as distasteful and unfair as some undoubtedly were -- were unfortunately necessary to prevent a global economic catastrophe that could have rivaled the Great Depression in length and severity, with profound consequences for our economy and society," he wrote.
Among other news in the media:
Foreign exchange reserves fell by US$1bn to US$285bn, for the week ended November 20.
Six core infrastructure industries see 3.5% yoy growth in October, compared to 4.1% and 7.8% levels of the preceding two months and the 2% for Oct’ 08.
The 46 operational airports in the country handled 42mn domestic passengers during April-Sept’ 2009-10, which is about the same as the numbers handled in 2007.
FDI into India declined 11% yoy to US$15bn in the first six months of fiscal 2009-10.
Exports dip 6.6% yoy in October. The government is assessing the needs of major export-oriented sectors hit by the economic slowdown to provide support for their fast recovery.
Finance Ministry says no to income tax holiday for first 7 NELP rounds.
India’s drug retail market grew by 29.24% in value terms in October this year over the year-ago period.
Government plans ultra mega steel projects, to identify five locations adjacent to mining sites for developing UMSPS.
It seems like fatigue and F&O expiry took its toll on the bulls today. The key indices were attempting to break out of a range where the correction had set-in last month. Lack of any events in the near term, which could trigger a big push towards new highs brought the indices lower.
Also, weakness in European markets following a sharp decline in Chinese stocks triggered a sell-off on Dalal Street in the afternoon trades.
The BSE Sensex lost 344 points to end at 16,854 after touching a high of 17,202.51. The NSE Nifty lost 103 points to close at 5,006.
Among the BSE sectoral indices, banking (2.64%), oil&gas (2.3%), consumer goods (2.24%), realty (2.11%) and IT (1.97%) stocks were the major losers respectively.
The BSE Mid-Cap index ended lower by 1.45% while the BSE Small-Cap index was down by 0.98%. Among the 30-components of Sensex, Hindustan Unilever, Sun Pharma, ACC, Hero Honda were among the top gainers. Top losers in Sensex were Reliance Industries, ICICI Bank, Tata Steel, M&M and SBI.
Indian stock market breadth was extremely negative and pared early morning gains as traders squared off positions on the settlement day of November series.
Private banking stocks declined sharply despite of government planning to move a bill early next year to amend a banking law for allowing foreign investors in private banks to have voting rights in proportion to their shareholdings. ICICI Bank dropped by 4%. HDFC Bank slipped by 2% and Axis Bank slipped by 2% to Rs997.
Tata Steel lost over 3% after it reported a consolidated net loss of Rs2,707cr in Q2 September 2009. Net sales fell 42.8% to Rs2,5270cr in Q2 September 2009.
Auto stocks fell on account of profit booking. Maruti, Mahindra & Mahindra and Tata Motosr were among the top losers.
Profit booking was seen in shares of Uttar Pradesh-based sugar companies, which rose on Wednesday. State's sugar mill association signed an agreement with the sugarcane farmers on the price for the ongoing season (October-September 2009-10). Balrampur Chini, Bajaj Hind and Dhampur Sugar have lost in the range of 2-3%.
In Asia, Australia's S&P/ASX ended lower by 0.29 % at 4708.60, Shanghai Index in China lost 3.6% and Hang Seng index in Hong Kong was down 1.78%.
In Europe, DAX in Germany was down by 1.85% and the CAC 40 index of France dipped 1.97%.
Asian stocks open in positive
Asian stocks may extend their best annual rally in 16 years, with a regional index poised to gain 20% in 2010 as foreign fund flows into the region`s equities increase, BNP Paribas said.
Japanese benchmark index Nikkei 225 rose 225.49 points, or 2.48%, to trade at 9,307.01.
Hong Kong`s Hang Seng is rose 553.19 points, or 2.62%, at 21,687.69.
China`s Shanghai Composite increased 72.84 points, or 0.99% to trade at 7,432.88.
Taiwan`s Taiex index was rose 90.47 points, or 1.21%, to trade at 7,581.38.
South Korea`s Kospi index increased 38.26 points, or 2.51% to trade at 1,562.76.
Singapore`s Straits Times index declined 7.37 points, or to 0.27% trade at 2,754.85. (7.42 a.m., IST)
Tata Communications
We recommend a buy in the stock of Tata Communications from a short-term perspective. It is apparent from the charts that the stock has been on a medium-term downtrend from its May high of Rs 651 (a 52-week high). In late October, the stock broke through the significant support level at Rs 450 by experiencing high selling interest. Subsequently, the stock tumbled sharply and found support at around Rs 350 in early November, a long-term support. Since then the stock had been on sideways movement just above this support. On November 27, the stock gained almost 6 per cent accompanied with high volume, crossing over the 2-day moving average. With this gain the stock has formed a bullish engulfing candlestick pattern signalling short-term strength. The daily relative strength index (RSI) had entered the neutral region from the bearish zone and weekly RSI is recovering from the oversold territory. The daily moving average convergence and divergence indicator has signalled a buy. We are bullish on the stock from a short-term perspective. We anticipate it to move up until it hits our price target of Rs 420. Trader with a short-term horizon can buy the stock while maintaining a stop-loss at Rs 364.
via BL
End of gold's winning streak
Yellow metal price drops after nine consecutive sessions of rally
Yellow metal prices ended their nine day consecutive winning streak and ended lower on Friday, 27 November, 2009. Prices fell as the debt concerns in Dubai further troubled investors. The rising dollar also pressured the precious metal prices. Silver prices also ended substantially lower.
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.
On Friday, gold for December delivery ended at $1,174.2, lower by $12.8 (1.1%) an ounce on the New York Mercantile Exchange. Earlier during the day, it rose to a high of $1,195 and also fell to a low of $1,130. In the previous nine sessions, gold gained more than 7%. For the week, gold gained 2.6%. On a year to date basis, gold price is higher by 33%.
On Friday, December Comex silver futures ended lower by 46.6 cents (2.5%) at $18.302 an ounce. Silver posted a marginal weekly loss.
In the currency market on Friday, the dollar headed up against most of the major currencies. The dollar index, which measures the strength of dollar against basket of six other currencies, rose by almost 0.2%.
Dubai World, the largest corporate entity in the Persian Gulf emirate, asked creditors last Wednesday for a six-month stay on repayment of $60 billion in debts.
In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.
Crude registers sharp drop
Prices drop due to Dubai's debt concerns
Crude prices fell at Nymex on Friday, 27 November, 2009. Prices fell as the debt concerns in Dubai further troubled investors. The rising dollar also pressured the crude oil prices.
On Friday, crude-oil futures for light sweet crude for January delivery closed at $76.05/barrel (lower by $1.91 or 2.4%). Earlier during the day, the contract dropped to a low of $72.39. For the week, crude ended lower by 1.8%.
Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 55% since then.
In the currency market on Friday, the dollar headed up against most of the major currencies. The dollar index, which measures the strength of dollar against basket of six other currencies, rose by almost 0.2%.
Dubai World, the largest corporate entity in the Persian Gulf emirate, asked creditors last Wednesday for a six-month stay on repayment of $60 billion in debts.
Among other energy products, December gasoline lost 3.6% to $1.9262 a gallon, and December heating oil fell 1.4% to $1.9622 a gallon.
Also on Friday, natural gas for January delivery ended up 3 cents, or 0.6%, at $5.192 per million British thermal units. It ended the week 9% higher.
Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.
Sunday, November 29, 2009
Jyothy Labs
It is FMCG makers which can deliver strong volume growth that have been outperformers in the stock market in recent months. That's why Indian players such as Marico, Dabur India and Godrej Consumer have seen a sharp expansion in their PE multiple to 25-30 times over the past year.
It is in this context that mid-sized FMCG company Jyothy Labs appears to be a good investment proposition. A value-for-money positioning for all its brands, extensive rural market presence and largely volume-driven growth suggest that recent buoyancy in the company's sales could be sustained. At the current market price of Rs 158, the stock is among the cheapest FMCG plays trading at 16 times its trailing 12-month earnings.
From being heavily dependent on just one brand, Ujala fabric whitener five years ago, Jyothy Labs has managed to broad-base its portfolio, adding Maxo mosquito repellants (36 per cent of 2008-09 revenues), Exo dishwash products (17 per cent) and a few smaller brands such as Jeeva soap and Ujala washing powder (10 per cent contribution).
Improving growth
After delivering sluggish numbers in the maiden year after its listing, Jyothy Labs has managed to post superior growth over the past year and a half. It managed a 27 per cent growth in adjusted sales and profits in the curtailed financial year ended March 2009 (the company reported numbers for 9 months due to a change in accounting year). This has been followed by a 34 per cent expansion in revenues and 56 per cent net profits growth in the first half of this year.
Over the past three years, the company has more than doubled its gross block to Rs 228 crore, without taking recourse to equity raising (the IPO in 2007 was an offer for sale by PE investors) or adding debt to the balance-sheet.
Gaining share
Jyothy Labs' brands increased their market share, even in the hotly competed segments of the FMCG business. While the flagship brand, Ujala fabric whitener has seen its market share climb from 68.5 per cent to 73.5 per cent between 2006 and 2009, Maxo mosquito repellant has seen shares rise from 19 to 22.8 per cent. Both these categories feature deep-pocketed competitors such as Hindustan Unilever, Godrej and Reckitt Benckiser. The company's expanding distribution presence in the South has also helped its Exo dishwash products double their South India market share from 11.7 to 23.8 per cent over the same period.
While Jyothy Labs' overall margin profile is lower than that of larger FMCG peers such as Dabur India or Godrej Consumer, it has managed to keep its adspend to sales ratio in the moderate 8-9 per cent range over the past three years, even while most other players saw a steep escalation in these spends to 12-13 per cent of their sales.
The company expects to keep adspend within this range, expanding market share mainly through investments in bettering its distribution reach.
Shift to value
The accelerated growth for Jyothy Labs is in line with the growth momentum witnessed by several smaller and mid-sized FMCG companies in this period. Mass market FMCG brands — whether in laundry, soaps or smaller categories — have seen strong growth momentum over the past year, helped by two factors.
One, the combination of upbeat farm product prices, higher support prices and better rural credit have helped keep rural and semi-urban demand for products quite strong, despite an erratic monsoon.
Jyothy Labs, with 60 per cent of its revenues originating from rural areas and an expanding distribution presence outside of urban India, has been a beneficiary of this trend. Two, the inflationary spiral of 2007-08 has prompted a consumer shift towards value offerings, helping regional and mid-sized players which have kept product prices under check.
With Jyothy Labs making almost no changes to its priceline over the past year, it has witnessed healthy volume-driven growth. In fact, packaging materials and plastics make up a chunk of raw material costs for the company and prices for these remain well below 2008 peaks.
The lag between commodity price corrections and their actual impact on costs and the three-four month raw material inventory held by the company may shield its margins from the increases in crude oil prices for the next couple of quarters.
The fact that the company has refrained from selling price increases for much of the past two years also lends it the flexibility to increase prices, if absolutely necessary, over the next year or two. A recent foray into laundry services, at a minimal investment may also lift overall margins, if it clicks.
via BL
Dubai World scare, a trigger for correction?
Is Dubai World's debt repayment problem merely a delayed aftershock of last year's credit crisis or a fresh tremor likely to shake up the financial system? Opinion may be divided on this; but the event is certainly reason for stock market investors to turn more cautious. For this may be just the excuse the market is waiting for, to launch into a much-needed correction.
The initial stock market reaction to the Dubai World crisis has been to batter down companies which have their fortunes directly tied to Dubai or its troubled investment arm.
The stock of Spicejet, in which a subsidiary of Dubai World owns a 13.4 per cent stake, has been marked down and so have the stocks of Bank of Baroda and SBI, which have admitted to retail and corporate loan exposures in Dubai. History, however, suggests that investors need not worry too much about how these individual stocks may fare because of the crisis. The Dubai entities do not have a significant portfolio exposures to Indian stocks. Even if they hold indirect stakes, the past two years have seen numerous instances of troubled financial giants liquidating their stakes in Indian companies.
Despite recurring investor worries about `Bear Stearns' stocks, `Lehman' stocks, `Merrill Lynch' stocks and recently `Galleon' stocks, the impact of the holders' troubles on stock prices has been quite shortlived.
Stocks with good fundamentals have rebounded to pre-crisis levels, finding ready buyers at lower prices. Stocks with little claim to fundamentals have remained battered.
Given that Indian banks emerged relatively unscathed from the much larger credit crisis of last year, investors in banking stocks may have little to fear from the Dubai scare.
SYSTEMIC RISK
It is the broader market ramifications of this event that stock investors need to worry about. Some financial experts are betting on this crisis being quickly contained through a bail-out of Dubai World by other UAE nations. But if this scenario does not play out, it is feared that this may trigger a fresh bout of risk aversion on the part of lenders around the world. Going by what followed last year's credit crisis, this could lead to a sharp spike in the borrowing costs for businesses (and countries) with inferior credit ratings and a drying up of the now-ample liquidity.
This certainly cannot augur well for the many Indian companies which are now relying heavily on foreign funds to repair their debt-leavened balance sheets. This stock market rally has been led mainly by highly leveraged companies from the commodity and realty space, making such a scenario worrisome.
PROFIT-TAKING TIME?
A phase of risk aversion, once it starts, can also have a big impact on the overall liquidity flows into the emerging markets, India included. Remember that it was returning risk appetite on the part of global investors which laid the foundation for this entire stock market rally.
It is rising risk-taking which has prompted global investors to abandon the safer developed markets and money market funds, and to pour money into all manner of risky assets - commodities, emerging market bonds and emerging market stocks - over the past eight months. The returns from these assets have by now exceeded everybody's wildest expectations.
The temptation to take money off the table and lock into those sizeable profits, is, therefore, bound to be quite high. The Dubai scare has also cropped up at a time when the global markets are being assailed by fresh doubts about the sustainability of the ongoing economic recovery. Will governments be able to exit from their big-ticket stimulus spending?
Will the "recovery" sustain once the props of stimulus are removed? Is consumer confidence robust enough to carry the baton from here on? If the answer to any of these questions turns out to be a "No", then the current stock market rally, which is built on optimism, would certainly be due for a pause.
Indian investors also need to weigh a few additional factors on the scale. At over 21 times trailing earnings, the BSE Sensex is already quite close to the inflexion point at which previous bull markets (of 2007- 08 and 1999-00) halted. With topline growth proving elusive for many companies, even in the recent September quarter, doubts are beginning to emerge on whether Corporate India can deliver on these high expectations.
But, most important, irrespective of how its own corporate or economic fundamentals look, India has always proved to be a high Beta market in the global scheme of things. It races ahead of most other markets when the going is good, but takes a merciless battering when liquidity flows suffer the mildest blip. That may be reason enough for Indian stock market investors to take some money off the table now.
via BL
Tulip Telecom
Investors with a two-year perspective can buy the shares of Tulip Telecom, an enterprise data connectivity player, given the strong growth prospects and the company's expanding margins. At Rs 895, the share trades at 10 times its likely 2009-10 per share earnings. Between 2006 and 2009, Tulip's revenues rose at a compounded annual rate of 47 per cent while net profit grew by 72 per cent. The company has seen its revenues grow by 30 per cent in the first half of this fiscal over last year to Rs 933.9 crore, while net profit expanded by 32 per cent to Rs 126.8 crore.
The profit expansion would have been much higher but for increased depreciation on the back of completion of projects, and higher provisioning for taxes in the light of the new minimum alternative tax regime.
An increased focus on high-margin enterprise data connectivity business, a slew of new deal wins and revenues to be received from completed projects and increase in annuity based revenues are key earnings drivers. Tulip offers wireless last-mile (virtual private network) connectivity for corporates from its ‘point of presence' in that city. This is a key advantage not easily matched by competitors. The company also has a system integration division, which is a hardware intensive low-margin business. The company has over 1,500 clients across over 1,400 locations in India, both of which have increased substantially over the last one year.
The enterprise data connectivity business has grown from 69.5 per cent levels last year to over 85 per cent currently. This augurs well for the company as it ensures higher margins for the company. It has also witnessed growth in recurring revenues from clients, in addition to installation charges, which is indicative of revenue visibility of the company as well as its execution capabilities. The company has also been active in the Government State-wide area network (SWAN) deals, having won several such deals. SWAN in West Bengal has been completed and revenues are set to flow in from the next quarter. Assam and Madhya Pradesh networks are under implementation.
Tulip has also won a array of deals from new clients such as TCS, Etisalat, AT&T and from banks and insurance companies. As the company has a wide network across India, opportunities, in the form of new telecom players wanting to lease circuits could be a key revenue generator for the company.
Competition from integrated telecom players such as Bharti Airtel and Reliance Communications who are seeking to expand their non-mobile businesses could create pricing pressures in the data connectivity business.
via BL
eClerx Services
Investors with a two-year horizon may buy the shares of eClerx Services, considering the improving business prospects for the segments (financial services, manufacturing) that the company caters to and the ramp-ups in business that the company is witnessing.
At Rs 376, the stock trades at 11 times its estimated 2009-10 per share earnings. Though not strictly comparable, this is at a discount to most listed mid to small tier IT/BPO players. Strong deal wins and increase in the run-rate of key clients are positives.
We had given an ‘avoid' to eClerx's initial public offering in December 2007, because of concerns on the macro-environment, especially in the US, stiff valuations and scalability factors. The stock did take a knock from its offer price of Rs 315 to Rs 91 levels in October 2008.
Concerns heightenedover bad debt from the failed Lehman Brothers, as it was one of its clients. The company has recovered over half of the Rs 4.9 crore in dues and has written off the rest as bad debt. But eClerx has managed what has been a turbulent 12 months for most IT/BPO/KPO companies quite well.
In FY09, the company saw its revenues grow by 51 per cent over 2007-08 to Rs 193.2 crore, while net profits expanded by 39 per cent to Rs 61.7 crore. In the recent September quarter, eClerx has seen its revenues and operating profits (EDITDA) increase by 10 per cent over last year.
eCerx is a KPO (Knowledge Process Outsourcing) services provider. It provides data analytics — collection and analysis of data, document management and catalogue management services. These services may be deemed to be of higher value than plain data entry or transaction processing work, but lower than services such as business and investment research, financial analysis and the like.
Improving metrics
eClerx has a high client concentration, as is the case with most small sized BPO/KPOs. But the company has witnessed a ramp-up in the revenues from its top five clients, who account for nearly 80 per cent of its revenues, higher than the 75 per cent a few quarters ago.
This suggests that despite the shake-up in the financial services sector in the US and elsewhere, eClerx has not been very significantly affected. Also, the company works on deals that are spread over multiple years, which increases revenue visibility.
The company has also won two large deals in the quarter gone by, competing with BPO/KPO majors. This in an environment of vendor consolidation undertaken by large clients that favour BPO/KPO majors, lends confidence on eClerx's execution capabilities.
From an industry perspective, the fact that most captive KPOs are being sold off or are being scaled down in favour of third party vendors is also positive for a player such as eClerx. The company has increased its operations in SEZs (Special Economic Zones). From accounting for around 24 per cent of revenues a year ago, revenues from SEZs now contribute 38 per cent. This would neutralise the impact of MAT of 15 per cent on the company as current tax incidence is around 12 per cent.
The company derives nearly 61 per cent of its revenues from clients in the US and the rest from Europe.
Industry body Nasscom has observed that the US geography and the BFSI segment are stabilising and most industry research firms indicate a revival in IT/BPO spends by clients. This could benefit vendors such as eClerx.
The company had unfavourable hedges against the dollar pegged at Rs 41-42, which had resulted in forex losses of Rs 11 crore for hedges that matured this fiscal.
But the remaining $12.5 million hedged are at favourable rates of Rs 45-46 in the December quarter and Rs 50 for the March quarter, which should bring in better realisations for the company.
Billing pressure from top-clients and attrition, which has increased in the recent quarter are key risks to this recommendation.
Lakshmi Vilas Bank
Investors can subscribe to the Lakshmi Vilas Bank (LVB) rights offer which is at a 25 per cent discount to its current market price. LVB is a small-sized old private bank with two-thirds of its branches located in Tamil Nadu. Though the bank's loan book growth has lagged the industry in the past, it has managed superior growth over the last one-and-a-half years.
Comfortable capital adequacy, improving operating metrics and reasonable asset quality over the past one year, despite the slowdown in the economy, are the bank's key advantages. LVB may witness improved growth in advances as the corporate sector (it is exposed to industries such as textiles, gems and jewellery, infrastructure) has shown early signs of revival.
The company expects to raise Rs 265 crore from the rights offer at Rs 54 per share. At this price, the price-to-adjusted book value (post rights) for FY-10 would be 0.8, which is at a steep discount to peers such as Karur Vysya Bank, Dhanalakhsmi Bank and South Indian Bank. The book value is adjusted for NPA provision coverage and transition liability. The FY-10 price-earnings multiple works out to a reasonable 7.6 times on the expanded equity base.
Business and Finance
LVB's deposits and advances grew at an annualised 19 per cent and 21 per cent during the period 2006-09, lower than the industry average. Net profits grew by 33 per cent annually over this period. Priority sector and large corporates make up 34 per cent of LVB's total advances.
While the bank has short-tenors on deposits and advances, it has seen higher maturity loans increasing in the last few years, which gives stability to the topline. Capital constraints limited loan book growth till 2008 despite the bank making two rights issues since 2005.
The infusion of Rs 265 crore through this rights offer may improve capital adequacy to as much as 15 per cent from the current 9.72 per cent. However, for the bank to maintain comfortable levels of capital beyond next fiscal, capital infusion may be necessary in the form of Tier-II instruments. The bank has not yet tapped this option fully. An upgrade in the bank's credit ratings would help reduce the cost of funds.
Already, in FY-09 and this year, LVB has seen better-than-industry growth in advances. The bank has trebled its net profits on a low base in the first half of the year, with improving net interest margins and higher credit off-take. Last year's profits were depressed by higher provisioning required in the preceding year, owing to the depreciation of the treasury portfolio.
The above-average topline growth may continue to help profits. However, this may be partly offset by higher provisions. The bank's net interest margins (NIMs) which stood at 2.26 per cent, as of June 30, may improve as the liabilities get repriced. LVB continues to lose CASA share to other competitors, which is of concern.
NPA moderates
While the bank has had troubles in the past in terms of asset quality, it has managed to significantly curtail NPAs. Net NPA, as a proportion of advances, has come down from 4.59 per cent in 2004-05 to 1.24 per cent in 2008-09. In the September quarter, the bank's asset quality slipped up with net NPA rising from 1.24 per cent to 1.55 per cent in six months. The net NPAs were limited due to restructuring of 3.3 per cent of advances as of March 31; but the figure may have increased in the last six months. Treasury losses are likely to pose a lower risk in future as LVB has done well to reduce the proportion of bonds held under AFS category, thus shielding its portfolio from bond price fluctuations. Around 80 per cent of the SLR portfolio is now in the held-to-maturity category. Early signs of recovery in sectors such as infrastructure, gems and jewellery and textiles may also help limit asset quality slippages for the bank.
The bank's cost-income ratio fell from 65 per cent to 54 per cent in the first half of this fiscal and may improve as the bank expands business. LVB was previously viewed as an attractive takeover target with Federal Bank picking up a 4.99 per cent stake in the bank.
However, with LVB continuing to gain strength, a takeover has become less likely. There is a possibility that the banking industry may grapple with higher NPAs arising out of future slippages, especially the restructured assets and this poses a risk for LVB as well, given the shorter maturity of the loan book.
via BL
MBL Infrastructures IPO Review
Investors with a high risk appetite and a two-year perspective can subscribe to the initial public offer of MBL Infrastructures Ltd (MBL), a player in the road segment. A healthy order-book, sound clientele, backward integration and steady margins are key positives for this construction contractor. While MBL does not possess any unique selling proposition, a steady business model, sustained earnings growth combined with attractive valuations buttress this offer. The company small size, competition and concentrated business model remain risks attached to similar businesses.
In the price band of Rs 165-180, the stock is valued at about 5.8 to 6.3 times its expected earnings for FY-10 on an expanded equity base. This valuation places it at a slight discount to similar sized peers such as KNR Construction and Tantia Constructions.
Background
MBL's project portfolio comprises road construction and maintenance contracts. Clientele is primarily made up of the Public Works Department and municipal corporations of various cities and states such as Mumbai, Delhi, Haryana and West Bengal. Projects are also funded by the World Bank and the Asian Development Bank. MBL, thus, has the credibility to secure repeat orders, especially in road maintenance contracts. The client base is likely to ensure a steady stream of contracts as public works is seldom affected by economic slowdown. MBL has also not seen project cancellations or payment delays thus far.
Having used joint ventures in project execution before, MBL plans to use such alliances to boost eligibility to bid for larger-sized build-operate-transfer contracts. It has completed a one-road BOT project. However, it has neither bid for nor won contracts since then. While small companies have ramped up operations to jointly bid and win BOT projects, MBL's current status can be said to be that of a contractor.
Given the competition and presence of large players in the BOT space, it may be challenging for the company to successfully venture into this space. However, even if it does not, we believe that as a contractor, it is positioned to secure ample business opportunities. Apart from local municipal works, the company is likely to get its pie of business from large road developers, which may subcontract the projects bagged by them.
Geographically, the company's projects cover a majority of the north and mark a presence in the south. Unexecuted order book stands at Rs 815.3 crore, about 2.2 times revenues for FY 09. Slated to be completed over a period of 18 - 24 months the order book provides medium-term earnings visibility. MBL has plans to increase contribution from industrial and urban infrastructure, but does not have any definite orders in hand, resulting in a heavy dependence on the road sector posing concentration risk.
About a third of MBL's revenues is sourced from waste management of steel plants such as SAIL. But with an operating margin of merely 1 per cent, it hardly aids overall profitability. This revenue stream is set to cease by the end of the current financial year; such a move could be positive as this business is unlikely to integrate with the primary road business and may act as a drag on resources.
Issue objects
The company plans to raise about Rs 100 crore through this issue. About Rs 55 crore is marked for acquisition of equipment and machinery. Funds raised will also be used to finance working capital.
Equipment ownership, though requiring higher capex in the short term, will ensure timely availability of key equipment, mobility between projects besides helping to reduce costs. MBL also operates its own ready mix concrete and bitumen divisions that serve captive consumption. It takes stone quarries on lease, mines and produces stone aggregates to meet raw material requirement.
It is, perhaps, this backward integration that has resulted in operating profit margin (OPM) jump to 14.5 per cent in FY-09, compared with the 10 per cent levels in FY-06. The profits margin achieved in FY-09 is commendable, given the raw material pressures faced by most infrastructure players. At 15.6 per cent, OPMs have been maintained in the June 09 quarter as well. Price escalation clauses built into most contracts would further protect margins.
Sales growth
MBL clocked health revenue and net profit growth of 46 and 48 per cent respectively, compounded annually over the last three years. The growth, while superior to many other players, comes from a small base. A repeat performance in future years may be a tough task. Further, debt taken to fund working capital, and depreciation on equipment have dented net profit margins. Comfort, though, may be derived from the fact that interest as a percentage of sales has remained around 4 to 5 per cent.
Offer details
The offer is open from November 27 to December 1. Motilal Oswal Investment Advisors is the book running lead manager. Given its risk factors, investors may consider setting target returns and exit the stock on meeting the same.
via BL
Saturday, November 28, 2009
Weekly Stock Picks - Nov 28 2009
Buy BEL
Buy Bajaj Auto
Buy Aurobindo Pharma
Buy Bharti Airtel
Buy Sintex Inds
Weekly Newsletter - Nov 28 2009
Once considered the magnet for international investment, Dubai is now repelling bulls world over. The debt problems in Dubai are having a cascading effect as panic sets in amongst most markets. The markets were waiting for an excuse to move up or down; and the Dubai default fear gave the bears reason to step in. The coming week will see a lot of stock-specific action based on the perceived impact due to the Dubai-issue. A section of the market believes that one should not co-relate too much as the market was anyways feeling heavy at the top. Take each day as it comes and the coming week sure will offer a lot in terms of good bargains. Picking up the large caps at lower rates would be a relatively safer bet for the coming week
Telecom war now on SMS service
Reliance Communications, India’s largest and only nationwide operator offering both GSM and CDMA mobile services, today initiated a radical move in the Indian telecom industry by making SMS’s more affordable to all mobile customers in India. Reliance Mobile customers can avail of two revolutionary SMS tariff plans: paisa per SMS plan and Unlimited SMS for just Re 1 per day
The new SMS tariff plans are add-on plans and are applicable for all Reliance Mobile customers irrespective of CDMA or GSM network as well as prepaid and postpaid customers.
"SMS continues to grow every year with more and more innovative ways of utilizing its potential coming in the forefront. Indians are using SMS as a mode of communication to keep in touch with friends and family. With select subscriber groups, SMS is a preferred communication mode over voice calls. On account of significant tariff disparity in the recent months, it has lost its due share of attention. Considering this, Reliance Communications with its 1st in the industry initiative, aims to revitalize SMS usage in the country", said Mr. Mahesh Prasad, President – Reliance Communications.
Obama says Namaste India
US President Barack Obama greeted Indian Prime Minister Manmohan Singh with a Namaste at the first state dinner in Washington. Calling India a rising and responsible global power, Obama ran through an exhaustive and expansive agenda between the two countries. Lavishing praise on Singh, standing next to him at the White House press interview, the president said India would play a 'pivotal role' in meeting future challenges in the world, and US-India ties will be the defining partnership of the 21st century.
"The United States welcomes and encourages India’s leadership role in helping to shape the rise of a stable, peaceful, and prosperous Asia," Mr. Obama said.
"So, engagement is the right strategy for India as well as for United States. We ourselves have tried very hard to engage China in the last five years and today China is one of our major trading partners," he said.
Indian Prime Minister Manmohan Singh said, "There are other values which are important than the growth of gross domestic product. I think the respect for fundamental human rights, the respect for the rule of law, respect for multi-cultural, multi-ethnic, multi-religious rights, I think those have values. So, even the Indian perforce with regard to the GDP might not be as good as the Chinese, certainly I would not like to choose the Chinese path.
Dubai…than sinking feeling!
Dubai, till recently the magnet for international investment, is now repelling bulls world over. That sinking feeling came yet again as debt problems in Dubai took its toll on financial markets world over. Safe-haven bonds rose and the rupee fell against the dollar. The debate of whether we are out of the woods or not will only gain further momentum again.
In what appears to be the biggest sovereign default since Argentina in 2001, Dubai has sought debt standstill agreement at its Dubai World holding company or in other words, a six-month reprieve on debt payments.
Dubai Inc as it is nick-named, is deep in debt of $80 billion and needs a bailout from Abu Dhabi.
Meanwhile, RBI governor, Duvvri Subbarao, said the RBI will study the situation in Dubai and if necessary communicate about what the implications likely are.
Speaking to reporters in Hyderabad, the RBI governor said, "We should not react to instant news like this. One lesson of the crisis is that we must study the developments, and I think we must measure the extent of the problem there and how it impacts India."
Nifty December 2009 futures at premium
Turnover declines
Nifty December 2009 futures were at 4953, at a premium of 11.25 points compared with the spot closing of 4941.75. Turnover in NSE's futures & options (F&O) segment declined to Rs 96075.18 crore from Rs 137130.38 crore on Thursday, 26 November 2009.
Tata Steel December 2009 futures were at premium at 544.35 compared to the spot closing of 543.40.
ICICI Bank December 2009 futures were at premium at 851.55 compared to the spot closing of 850.05.
Ranbaxy Laboratories December 2009 futures were at premium at 445 compared to the spot closing of 442.10.
In the cash market, the S&P CNX Nifty fell 63.80 points or 1.27% at 4941.75.
Dubai Debt Crisis Derails Asian markets
Hang Seng sink more than 1000 points while Shanghai, Sensex, Sydney drove deeper
Stock market in Asian region slumped in the sea of red on Friday, 27 November 2009, with investor’s pressing heavy sales in financial stocks amid fears of a likely debt default in Dubai.
The U.S. market was closed overnight on Thanksgiving Day holiday. But investors are seen tracking cues from European markets, where stock prices had plunged sharply after Dubai World asked for more time to meet its debt obligations. The mood is so bearish that stocks cutting across several sectors are seeing a fairly massive sell-off.
In the commodity market, crude oil tumbled to a six-week low as Dubai’s attempt to reschedule its debt prompted investors to sell commodities.
On the New York Mercantile Exchange, where markets didn’t settle yesterday because of a public holiday, January U.S. crude futures were trading at $74.36 a barrel, down 4.6% from the closing price on 25 November 2009.
Brent crude oil for January settlement fell $1.47, or 1.9%, to $75.52 a barrel on the London-based ICE Futures Europe exchange at 9:28 a.m. London time. Earlier, the contract plunged as much as 4.3% to $73.7.
Gold dropped the most since January in London as gains in the dollar damped demand for the precious metal as an alternative asset. Gold for immediate delivery dropped as much as $50.28, or 4.2 percent, to $1,138.10 an ounce, the biggest intraday slide since Jan. 12. The metal traded at $1,152.33 by 9:09 a.m. in London.
In the currency market, Dubai debt fear continued to drive investors away from risks, sending Asian stocks sharply lower while Yen soars, taking dollar higher with it. Investors are clearly worried about the risk of contagion effect from Dubai which could trigger second wave in the credit crisis.
Yen accelerates further, making another 14 year high against dollar and rallies sharply against other major currencies. The Japanese yen was quoted at 85.7 per US dollar, compared to 86.59 hit late Thursday in New York and 128.47 per euro.
The Hong Kong dollar was trading at HK$ 7.7503 against the dollar. Actually the Hong Kong dollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85 to the U.S. dollar.
In Sydney trade, the Australian dollar slumped to an eight-week low on a strong yen on Friday after choppy markets and fears that Dubai may not repay its $US80 billion debt turned investors off riskier assets. Against the US dollar, the Aussie fell as far as $US0.8989, from Thursday's close of $US0.9220. At the local close on Friday, it had recovered slightly to $US0.9017, but still hovered at a three-week low.
In Wellington trade, the NZ dollar was ditched today by Japanese investors fearful of a financial meltdown in the Middle East but it found support at lower levels. The NZ dollar was US71.05c at 5pm from US71.62c at 8am and US72.49c at 5pm yesterday. The low of US70.45c has not been seen since September.
The South Korean won declined 1.72% against the U.S. dollar on Dubai debt fears prompted investors to flock into safe assets. The local currency closed at 1,175.5 won to the greenback, down 20.20 won from the previous session.
The Taiwan dollar weakened further against the greenback. The Taiwan dollar was trading lower against the US dollar at NT$ 32.3150, 0.0710 up from Thursday’s close of NT$32.2440.
In the equity market, Asian stock markets slumped with some suffering their worst losses in months amid concerns about the potential fallout from Dubai World's debt standstill, with bank and construction stocks leading decliners.
In Japan, fears that Dubai may default on its debt have sent Japan shares market lower, joining a global retreat, as investor’s dumped riskier asset on worries about the ripples from a new international debt crises in Dubai.
Investors’ sentiments remain fragile amid growing pessimism over a recovery in the world’s second-largest economy. Investors expect that the market might remain weak for perhaps a few months given ongoing worries over the prevailing toxic cloud of so-called “3Ds” i.e. deflation, dilution, and the ruling Democratic Party of Japan.
At the closing bell, the Nikkei 225 Stock Average index was at 9,081.5, lost 301.72 points or 3.22% from its previous close, while the broader Topix of all First Section issues on the Tokyo Stock Exchange dropped 18.55 points, or 2.34%, to 811.01.
The Nikkei 225 Stock Average index dropped 416.18 points or 4.38%, while the broader Topix index has lost 27.7 points or 3.3%, for the week ended Friday, 27 November 2009.
On the economic front, the statistic bureau of Japan said that country core consumer price index fell 2.2% in October from a year earlier, the eighth straight annual decline, as the economy wallows in deflation due to weak domestic consumer demand. An index stripping out both energy and food prices showed deflationary pressures were mounting. Month-on-month, overall consumer prices dropped 0.4%, and excluding fresh food, prices fell 0.1%.
Retail sales in Japan dropped 0.9% year-on-year to 10.83 trillion yen in October 2009, the Ministry of Economy, Trade & Industry reported on Friday. Sales in large-scale retail stores declined 7.2% annually to 1.56 trillion yen in October. Wholesale sales plummeted 24.4% to 30.17 trillion yen.
Meanwhile, the Ministry of Internal Affairs & Communications reported that Japan's unemployment rate stood at a seasonally adjusted 5.1% in October, down from 5.3% in the previous month.
In Mainland China, share market stumbled with all ten sectors tilted into red terrain, hit by concerns over Dubai’s financials health. The shock from Dubai’s move to suspend payments due on a slice of Government-backed debt spilled over the world market. Investors recoiled from risky asset like materials and energy and also dumped banks and financials and properties stocks on rekindled fear that Dubai debt default could reignite the financial turmoil of the credit crises.
The Shanghai Composite Index, measuring A shares and B shares on the Shanghai Stock Exchange, slumped 74.71 points, or 2.36%, to 3,096.26, meanwhile the CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, tumbled 2.96%, to 3,382.51. The Shenzhen Component Index on the smaller Shenzhen Stock Exchange retracted 3.09% or 411.23 points, to 12,876.15. The Shanghai Composite index stumbled 212.08 points, or 6.41%, while the CSI 300 Index retracted 248.5 points or 6.84%, for the week ended Friday, 27 November 2009.
In Hong Kong, the stock market plummeted as heavy selling triggered across the sector after a weaker performance in mainland bourses and European markets and lower US index futures on concern over losses stemming from Dubai’s attempt to reschedule its debt.
At the closing bell, the Hang Seng Index hammered 1,075.91 points, or 4.84%, to 21,134.50, meanwhile the Hang Seng China Enterprise, which tracks the overall performance of 43 mainland Chinese state-owned enterprises on the Hong Kong Stock Exchange, stumbled 674.15 points, or 5.13%, to 12,472.13. The Hong Kong benchmark Hang Seng Index surrendered 1,321.34 points or 5.88%, while Hang Seng China Enterprises retracted 857.53 points or 5.88%, in the week ended Friday, 27 November 2009.
In Australia, the share market plummeted with all round of selling across twelve sector, sparked by meltdown in European stocks and other Asian bourses after ‘Dubai World’, the Dubai government’s investment and development vehicle, said it would halt repayments for up to six months on its nearly $60 billion in debt.
At the closing bell, the benchmark S&P/ASX200 index sagged 136.5 points, or 2.9%, to 4,572.1, meanwhile the broader All Ordinaries plummeted 130.4 points, or 2.76%, to 4,597.2. The benchmark S&P/ASX200 index shrank 113.70 points, or 2.43% in the week ended Friday, 27 November 2009, meanwhile the Broader All Ordinaries lost 109.50 points or 2.33%, during same period.
In New Zealand, benchmark index declined by more than 1% to end the last trading day of the week in the negative terrain on Friday. The NZX50 declined 1.06% or 32.87 points to 3094.43. The NZX 15 lost 0.60% or 33.42 points to close at 5616.47.
In South Korea, stocks finished lower Friday as investors fretted over debt problems in Dubai. The market's decline followed reports that Dubai World, a Dubai government investment fund, has asked creditors for a debt payment deferment. The benchmark Korea Composite Stock Price Index (KOSPI) declined 75.02 points or 4.69% to end at 1,524.50, carrying its losing streak through a second consecutive session.
Stock markets in Singapore were closed for the holiday.
In Taiwan, stock markets dumped their recent gains, following the fear of Dubai debt crisis as Dubai World, developer of some of the glitziest properties on the planet comes up short on repaying debt. The fear of contagion in the financial sector was seen through the exposure of Cathay Financial, Taiwan's largest listed financial services provider by assets.
The benchmark Taiex share index slumped to three weeks low on Friday, ending lower by 248.35 points or 3.21% in a day, closing at 7490.91, the lowest closing since 6 November 2009 when market finished the day at 7463.05
In India, key benchmark indices cut steep intraday losses as European stocks recovered from an initial slide. News that China has pledged to stick with a pro-growth stance in 2010 also helped. The market recovered after a heavy sell-off in early afternoon trade triggered by worries about Dubai's debt problems. Investors were also spooked by broader fears that global financial markets have not healed properly since last year's crisis, and that the Dubai problem could expose these weaknesses.
The BSE 30-share Sensex was down 222.92 points or 1.32% to 16,632.01. The S&P CNX Nifty was down 63.80 points or 1.27% to 4941.75.
Elsewhere, Malaysia's Kula Lumpur Composite index finished lower at 1270.61 while stock markets in Indonesia’s Jakarta Composite index gave up 68.01 points ending the day lower at 2393.45.
In other regional market, European shares pulled back from early lows on Friday, as investors started to buy up shares in firms battered in the previous session by news that Dubai is seeking to postpone repaying the debt of its corporate entity Dubai World. Regional share markets were also off lows in Europe. The U.K. FTSE 100 index declined 0.3% or 13.72 points to 5,180, the German DAX index fell 0.2% or 12.76 points to 5,603 and the French CAC-40 index lost 0.1% or 4.10 points to 3,675.
Friday, November 27, 2009
Grey Market Premium - Cox and Kings India, MBL Infrastructures
| Company Name | Offer Price (Rs.) | Premium (Rs.) |
| Cox & Kings | 316 to 330 | 6 to 8 |
| MBL Infra | 165 to 180 | 7 to 7.50 |
Market ends weak on Dubai World debt concerns
The markets were shattered due to Dubai debt crisis fears today. Aggressive selling was seen in funds as well as sectors namely, realty, banking and metals stocks were hammered badly during the after noon trade.
The index tumbled over 500 points in the opening trade in reaction to Dubai`s debt rescheduling which hurt investor sentiment worldwide and witnessed a steep fall later touching a low of 16,210.44. However, the index shed most of its losses and recovered from day`s low to finally close on weak note.
Dubai had accumulated USD 80 billion of debt by expanding in banking, real estate and transportation. S&P had placed the ratings of four Dubai-based banks on negative outlook due to their exposure to Dubai World.
BSE Midcap and Smallcap index declined 1.35% and 2.14% respectively.
Asian stocks slumped, dragging the MSCI Asia Pacific Index down the most in eight months, on concern over losses stemming from Dubai`s attempt to reschedule its debt and as the yen strengthened against the dollar. HSBC Holdings and Standard Chartered sank more than 7% in Hong Kong as CLSA Asia-Pacific Markets said Dubai World`s potential default has `negative implications` for the banks.
Japanese benchmark index Nikkei 225 fell 301.72 points, or 3.22%, to end at 9,081.52. Hong Kong`s Hang Seng is declined 1,075.91 points, or 4.84%, to end at 21,134.50. China`s Shanghai Composite decreased 74.72 points, or 2.36 to end at 3,096.26.
The Sensex ended the day with a loss of 222.92 points, or 1.32% at 16,632.01 after touching a high of 16,718.80 and a low of 16,210.44. The broad-based NSE Nifty fell 63.80 points, or 1.27% at 4,941.75 after hitting a high of 5,005.05 and a low of 4,806.70.
Major gainers in the 30-share index were Bharti Airtel (0.94%), Reliance Capital (0.59%), Hero Honda Motors (0.53%), Reliance Infrastructure (0.43%), Grasim Industries (0.30%), and Tata Steel (0.27%).
On the other hand, Jaiprakash Associates 3.05%), Larsen & Toubro (2.71%), Infosys Technologies (2.45%), Tata Consultancy (Services (2.40%), Sterlite Industries (India) (2.13%), and ITC (1.88%) were the major losers in the Sensex.
Overall market breadth was sharply negative. Out of the total 2,802 stocks traded at BSE, 734 advanced, 2,023 declined while 45 remained unchanged.
Among the sectoral indices, BSE IT fell 2.2%, Capital Goods fell 1.82%, TECk went down 1.63%, Bankex dropped 1.41% and Metal lost 1.30%, while BSE HC which went up 0.08%, Consumer Durables rose 0.35%.
In an exclusive talk with Myiris.com, Ashok Jainani, vice president Head Research, Khandwala Securities commenting on the Dubai debacle said, ``The stock market reaction to debt rescheduling sought by Dubai World does not seem warranted. Global market capitalization loss is many times over the total debt that is being sought to be rescheduled. We do not believe there is any default cascading to other sectors of the Indian economy as is being made out by mainline media.``.
``Market was looking for a reason to pause and rest. This incidence has just provided that. We suggest adding long positions in growth stocks in this panic situation,`` he added.
Sensex slides for second session
Today's major news
Suzlon Energy’s arm bags order for up to 954MW; the stock ends 6.24% higher.
Sun Pharmaceutical Industries receives tentative approval from the US Food and Drug Administration; the stock slid 0.29%.
Bajaj Auto to launch sub-150cc Pulsar in December; the stock rises 1.43%.
For more news, click here
Post-market summary
Global signals
European markets that opened 0.5% lower are trading flat to marginally lower, erasing early losses, at the time of writing this report.
Major Asian indices remained in red all through the day and ended with heavy losses in the range of 1.10-4.84% each. SGX Nifty lost 50 points.
US stock futures signaled a sharp slide, losing close to 2%, owing to the Dubai debt jitters. Oil prices dropped to $74 as dollar rose.
Indian indices
The Sensex opened 136 points lower at 16718.80 and never saw this level in today's trade. The Dubai debt jitters dragged the Sensex to the low of 16210, 645 points lower than its yesterday’s closing. However, marginally negative European opening coupled with buying in healthcare scrips helped the market to recover to a great extent. The Sensex closed at 16632, losing 1.32% or 223 points. Nifty closed at 4941, down 64 points.
Sensex sentiment
The market breadth was heavily negative, as out of 2,802 stocks traded on the BSE, 735 stocks advanced, whereas 2023 stocks declined.Forty-four stocks closed unchanged.
Sectoral & stock screening
Of the 13 sector indices on the BSE, only BSE HC managed to stay in positive with marginal gains of 0.08%. The remaining 12 sector indices declined in the range of 0.35%-2.20%.
On stocks’ front, Suzlon Energy surged the most by 6.24% followed by Tata Communications that rose by 5.63%. Bharat Electronics, Ranbaxy Laboratories and Jain Irrigation were up by over 3% each. Among losers, Financial Technologies slid the most by 6.06%, followed by Aban Offshore that fell by 6.01%, while IVRCL Infra, Siemens and IRB Infra fell by over 5% each.
Viewing volumes
On stock turnover front, over 2.74 crore shares of Suzlon Energy changed hands on BSE followed by Unitech (1.53 crore shares), IFCI (1.08 crore shares), HDIL (0.69 crore shares) and Ispat Industries (0.63 crore shares).
Sensex slids by 2.29%
It was a choppy week for the Sensex that started on a positive note, however with the global cues getting weaker, Sensex ends 390 points lower over the last weeks close. The markets at the start of the week remained range-bound and volatile, however the bears grabbed the 30-stock index- BSE Sensex as the week ended in the red.
During the week, Sensex made the high of 17290, close to its yearly high of 17394, however today it hit the weekly low of 16210, swinging wildly by 1080 points.
Among the sectoral indices, BSE IT and Teck indices declined by over 3% each. While indices like BSE CG, Metals and Power losses over 2% each. Among the gainers, the BSE Auto, Bankex, HC and realty ends in the green with gains in the range of 0.30%-6.34%.
As dollar seems to be getting stronger, liquidity might be the cause of concern in the coming period for the domestic markets. Thus one should watch closely the FII movements in the coming period.
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