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Tuesday, February 03, 2009

Ways companies manipulate

The spotlight remains firmly on corporate governance issues two weeks after the founder of Satyam Computer Services Ltd, B. Ramalinga Raju, confessed to doctoring the company’s books to the tune of Rs7,136 crore in India’s biggest accounting scandal.

While investigating agencies try to unravel the fraud, Crisil Research, an arm of credit rating agency Crisil Ltd, the Indian associate of Standard and Poor’s, found there are at least a dozen ways a company can creatively cook the books.

Crisil Research came across these loopholes by studying the notes to account and footnotes in the annual reports of companies. While most of them would probably not amount to a violation of the law in letter, at least some are breaches of the law in spirit.

“To call them malpractices would be harsh. The companies are just exploiting the loopholes that exist in the law,” said a partner at a Mumbai-based firm of chartered accountants, who didn’t want to be identified.

Listed below are the ways companies exploit these loopholes, collated after discussions with Crisil Research and at least two company secretaries of Mumbai-based firms:

  • Write-off expenses from reserves: Expenses towards research and development or money paid to employees or provision for taxes as part of a voluntary retirement scheme must reflect in the profit and loss (P&L) statement. Companies can show it as a one-time expense or amortize it over several quarters. In practice, many Indian firms take the easy way out by writing these off or deducting this amount from the reserves. This means expenses are understated in the P&L account and consequently, current profits look rosier than they are.
  • Show previous year’s expenses as this year’s income: By writing off a one-time expense against reserves, a firm can inflate its profits. If for some reason, the company doesn’t have to incur the expense (in case of tax provisions), it writes this expense back into the books. But instead of adding it to the reserves from where this amount was originally deducted, the company can show it as income in the P&L account, thus increasing profit.
  • In good time, firms can suppress profits by setting aside money for unforseeable expenses such as doubtful debts and possible liabilities on pending legal claims (court orders expected against the company) all of which have a high probability of happening.

    Hence, the amount is shifted from the P&L account to the balance sheet. When the company faces turbulent times, the same provision is written back by reversing the entry and is recognized as income.

    Essentially, this amounts to transferring income from one year to another. This could also result in tax planning by deferring taxes as the rate of tax in subsequent years could be lower.

  • Revalue assets to write off losses/expenses: This works if a company has enough reserves in its balance sheet. If it doesn’t, it can “create” some reserves either through brand valuations (using professional valuers) or by “revaluing” their existing assets to inflate the reserves. So now, the company not only has an inflated profit and loss, it also has an inflated balance sheet without spending any money.

    Revalue assets to write off transfer value: Imagine a company called Veritas, which has an associate or subsidiary called Satirev. Now, Veritas has three machines (assets) and wants to transfer one to Satirev without accepting any payment. In other words, it wants to gift away an asset.

    How does it do it? After transferring one machine, Veritas will revalue the remaining two machines (increasing their value by 50% each) so that the balance sheet remains balanced. Alternatively, Veritas will revalue its holding in Satirev to make up for the value of the asset it transferred.

  • Show loan waiver as income: One should look for this, especially in the books of companies that have accumulated losses and have got their outstanding debt restructured.

    Very often, as part of this restructuring, debtors waive a part of the outstanding loans to help the company turn around sooner. Instead of showing this as part of the balance sheet, some companies book it as income for the year.

  • Transfer loans to associates: Sometimes, companies transfer outstanding loans to associate companies. This helps them lower the debt-equity ratio—a measure of how leveraged a firm is.

    A lower debt equity ratio helps firms borrow more. Still, since they have to repay the original loan, it is shown as a “contingent liability”, which is defined as an obligation that must be met, but where the probability of payment is minimal.

  • Transfer fixed assets to current assets: Yet another way of revaluing assets. A corporate balance sheet typically has fixed assets (such as land, machinery) and current assets (cash, bank balances, receivables). Under the pretext of selling a piece of machinery, a company might transfer a por tion of its fixed assets to current assets. Now, fixed assets are often valued at book value or the price at which they were bought. When they are transferred to current assets, they can be done at market price. If market prices are more than the book value, the difference could be shown as income, which again boosts profit.
  • Continue with dead projects: When a company starts a new project such as building a factory, it is allowed to capitalize expenses, which means whatever it spends on the project is shown as investment in the balance sheet.

    During times of slowdown, the project may become unviable, yet the company might continue to show it “under implementation” so as not to add to the expenses in its P&L account.

  • Inventory valuation: Often, the closing stock of goods for a manufacturing firm is valued at higher than the selling price.

    This is against the law, both in letter and spirit. Firms desperate to show profits resort to such a practice, say experts.

  • Inflate sales: Higher sales growth results in higher profits. This also eases working capital financing from banks.

    At the end of each accounting period, the inflated sales are reversed as sales returned and rebooked with a lapse in time as sales to a different client and at revised prices, thereby further inflating the value of sales in subsequent years.

  • Sale/lease back of assets: Firms sell utility assets such as diesel generator sets, boilers and office buildings to leasing and finance companies and get cash up front. The same asset is then leased back to the company which pays a monthly lease rental. The company benefits as such rental is a deductable expense for tax calculations.
  • Change depreciation policies: This is done to postpone or advance taxes/profits as depreciation is an expense which is non-cash in nature and does not impact cash balance available for business operations but saves tax outflow.

    The objectives behind all accounting adjustments range from boosting profits after tax to raising valuations, suppressing revenues for tax purposes and even getting higher bank financing.

Gemini Engi-Fab withdraws IPO

Due to poor response from qualified institutional buyers

Gemini Engi-Fab, engaged in manufacturing and salvaging of process equipments through fabrication for various process industries has withdrawn its initial public offering (IPO). The IPO was set to open today, 3 February 2009 and conclude on 6 February 2009.

The company had proposed to offer 5.5 million equity shares of Rs 10 each at Rs 75 to Rs 80 for every share through 100% book building process.

Gemini Engi-Fab is engaged in manufacturing and salvaging of process equipments through fabrication for various process industries, such as cement, dairy, refinery, pharmaceutical, petrochemical, power and chemical.

The company had plans to raise around Rs 45-crore through the issue, which was proposed to be utilized to part-finance the company's expansion plan of setting up a new manufacturing workshop at Umbergaon in Gujarat with a total investment of Rs 49.84-crore.

Rating agency, CARE had assigned "CARE IPO Grade 2" to the IPO indicating below average fundamentals. Rating agencies assign IPO grades on a scale of grade 5 to grade 1, with grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals.

Asian Market Support Stimulus With Surge

Sydney rebound on stimulus While Nikkei neglect stimulus

Stock markets in Asian region closed mostly higher on Tuesday 3 February 2009, despite of lackluster performance on Wall Street overnight and stimulus measures in Japan and Australia to stabilize markets and support their economies. The Bank of Japan announced to buy about 1 trillion yen ($11.2 billion) in corporate shares held by banks, while the Reserve Bank of Australia announced a $ 26 billion fresh spending to help the country's resources-based economy accompanied by 100 basis point rate cut from Reserve Bank of Australia taking the interest rate to 3.25%.

Stocks at Wall Street ended on a mixed note trimming some of its early losses after data showed a smaller-than-expected contraction in the manufacturing sector. The Dow Jones Industrial Average finished down 64.11 points, or 0.8%, to 7,936.75. The S&P 500 gained half of a point to stand at 825.43, and the Nasdaq Composite added 18.01 points, or 1.2%, to 1,494.43.

Among major economic reports for the day, January ISM manufacturing data came in a better-than-expected 35.6 after coming in at 32.9 in the prior month. In a separate report, personal spending data showed that consumer spending remained under severe constraint pressed by rising unemployment, tight credit and declining home prices, and swooning asset portfolios. Personal spending in December was down 1%. In another release construction spending in December fell 1.4%. Spending was down 1.2% in the prior month.

In the commodity market, crude oil rose in New York on speculation that OPEC, led by Saudi Arabia, cut its output in January to avoid a supply glut and bolster prices.

Crude oil for March delivery gained as much as 69 cents, or 1.72%, to $40.77 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $40.77 a barrel at 10:40 a.m. London time. Yesterday, futures fell $1.60, or 3.8%, to $40.08, the lowest settlement since 20 January 2009.

Brent crude oil for March settlement rose as much as 79 cents, or 1.80%, to $44.61 a barrel on London’s ICE Futures Europe exchange. The contract yesterday declined $2.06, or 4.5%, to settle at $43.82 a barrel.

Gold prices retreated 70 cents an ounce, or 0.08%, to $902.10 in Asian electronic trading on Tuesday after the most active February Comex gold contract erased $21.20 an ounce, or 2.3%, to $907.20 by the close of New York trading on Monday as investors took profits and lightened safe-haven trades.

In the currency market, the U.S. dollar strengthened against the Australian dollar, New Zealand dollar, South Korean won, Philippines peso, Indonesian Rupaih Singapore dollar, while it weakened against the, Hong Kong Dollar, Chinese Yuan, New Taiwan Dollar and Indian Rupee.

In late Tokyo trades, the Japanese yen strengthened against the dollar. The Japanese yen was quoted at 88.4750 against the US dollar, down from Friday’s quote of 89.4600 yen.

The Hong Kong dollar was trading at HK$ 7.7545 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 late Sydney trades, the Australian dollar was trading at US$0.6346 down from Monday's close of US$0.6315.

In late Wellington trades, the kiwi ended the day at US50.97c from US50.33c yesterday having risen just above US51c following the RBA decision. A large interest rate cut by the Reserve Bank of Australia late this afternoon helped push the New Zealand dollar above US51c, well above last night's six-year low.

In late Seoul trades, the South Korean won was trading at 1,389.70 won to the U.S. dollar in early trades, down 1.20 won from Monday's close of 1,390.40 won.

Coming back in Asian equities the stock markets in Japan, Hong Kong, Indonesia, Malaysia and Philippines closed the day on a lower note while China, Taiwan, South Korea, Australia, New Zealand, Thailand, India, Singapore, closed the day on a higher note.

In Japan, the equity markets experienced the volatile trading session as government’s efforts to stimulate economy failed to cheer the market. After opening lower, Nikkei finished the session lower in seesaw trade, with losses in banks and financials after a media reports that the Mitsubishi UFJ Financial Group will post a loss for the April-December period and slash its annual forecasts as well as dismal economic news.

The market recouped early losses as bargain hunters chased recently battered shares, and markets began the afternoon session upbeat after the Bank of Japan announced a plan to buy up to 1 trillion yen (11.17 billion dollars) of shares held by commercial banks through April 2010, but gains were erased in last hour of trading on worries over pessimistic earnings outlooks of Japanese firms.

The Nikkei 225 Stock Average index erased 48.47 points, or 0.62%, to 7,825.51, while the broader Topix rose 4.06 points, or 0.52%, to 774.

On the economic front, the Bank of Japan said Japan’s monetary base increased in January by 3.9% to 93.5049 trillion yen or $1.046 trillion over its level of one year earlier. Meanwhile, the current account deposits rose 41.8% in January following an increase of 14.7% in December.

The Ministry of Health, Labor and Welfare said the value of Japan’s total cash earnings was down 1.4% in December. Contractual cash earnings plummeted 1.0%, scheduled earnings by 0.2%, non-scheduled earnings by 11.2%, and special cash earnings by 1.7% on year in December.

In Mainland China, the regional indices extended gains for second consecutive day, on expectations of government stimulus packages for industrial sector to revive the slumping economy. Market gains are also buoyed on hopes of fresh measures to boost the Chinese economy after Premier Wen Jiabao said that Beijing is considering adding to its previously announced $585 billion fiscal package. The benchmark Shanghai Composite Index rose 49.12 points, or 2.44%, to 2,060.80.

In Hong Kong, the market erased morning gains to finish the session lower, with loses in exporters and property developers on concern a slowing global economy will dent demand and dismal home loan data overshadowed gains in financials and industrial sector on expectations of Beijing stimulus packages to revive the slumping economy. The Hang Seng Index tumbled 84.60 points, or 0.66%, to 12,776.89, while the Hang Seng China Enterprise Index rose 48.12 points, or 0.7% to 6,960.11.

In Australia, the stock market finished the session higher, after the Australian government’s announced A$42 billion fiscal stimulus measures and an upbeat profit forecast from Commonwealth Bank. After opening on a positive note, the market trimmed most of morning gains after the RBA cut the interest rate to 3.25% from 4.25% in an effort to lure more borrowers into the housing market. The benchmark S&P/ASX200 spurted 11.30 points, or 0.32%, to 3,508.7, while the broader All Ordinaries added 5.60 points, or 0.16%, to 3,449.10.

On the economic front, the government of Australia unveiled a second stimulus plan of A$42 billion (US$26.5 billion) into grants and infrastructure projects over the next three years to shield the economy from the global downturn. Treasurer Wayne Swan said A$28.8 billion would be targeted at infrastructure, schools and housing, while A$12.7 billion would be provided as cash payments for low and middle-income earners.

The Australian Bureau of Statistics said in a report that Australia seasonally adjusted goods and services trade surplus of A$589 million in December. Seasonally adjusted goods and services imports fell A$421 million or 2%, which included a decrease of 45% in the non-monetary gold import category.

In New Zealand, equity market inched up slightly on Tuesday. The benchmark index that had dipped yesterday after gaining for five consecutive sessions, on concerns after the treasury of New Zealand reported that the country’s economy will stay in recession at least until the end of March this year and a worsening global outlook is adding to the risk of a steeper slowdown

The benchmark NZX50 rose slightly by 0.32% or 8.791 points to close at 2780.287. However, the NZX 15 inched down 0.03% or 1.309 points to 5125.494.

Stock markets in South Korea followed the regional trend giving up yesterday’s losses ending the day on a positive note. The surge was lead by the gains in banking and technology sector stocks. Shipbuilding stocks also supported the gains. The regional market also bucked the mixed finish on Wall Street. The Korea Composite Stock Price Index gained 16.25 points or 1.42% closing the day at 1,163.20.

On the economic front, the Bank of Korea said that South Korea's foreign exchange reserves rose for the second straight month in January and totaled $201.74 billion, up $520 million from a month earlier.

Meanwhile, the International Monetary Fund lowered its forecast for the South Korean economy and said that the economy will shrink 4% in 2009 due to weak domestic demand and exports amid the global economic slump. However, the IMF said that Asia's fourth-largest economy will likely turnaround and is expected to grow 4.2% in 2010.

In Taiwan the stock markets grip up yesterday’s gains by closing the day at two week high following a rally in DRAM stocks such as ProMOS rallying on hopes the struggling firm was close to raising new loans to pay off debts. The main Taiex share index jumped 112.83 points or 2.65% at 4,372.81- the highest closing since 14 January 2009 when marked closed at 4.521.47.

In Philippines, the stock market gave away yesterday’s gain, closing the day lower, as uncertainty prevailed among the investors by more bleak economic news that pointed to a deepening slump in the economy. The benchmark index declined 0.40% or 7.44 points to 1,826.13, while the all share index fell 0.33% or 4.03 points to 1,193.11.

On the economic front, the socioeconomic Planning Secretary Ralph G. Recto sees the Philippines incurring a wider deficit of about P114 billion this year as the government will have to spend more for economic pump-priming. The government originally expected the deficit to hit P40 billion after which the deficit projection was raised to 102 billion pesos. However as the country requires additional expenditure due to increasing effects of global economic downturn, the government has increased it’s targets for the fiscal deficit.

In Singapore, the stock market finished the session higher, as the bargain hunter stepped in after a two-day losing streak, with gains in manufacturing and construction sector on expectations for Beijing aid for the industrial sector and stimulus measures in Japan and Australia to support the economy from downturn. The benchmark Straits Times Index added 6.63 points, or 0.39%, to 1,711.92.

In India, the key benchmark indices retreated from its fresh intra-day high attained in mid-afternoon trade led by gains in oil & gas, FMCG and banking shares. As per the provisional figures, the BSE 30-share Sensex was up 82.60 points, or 0.91%, to 9,149.30. The S&P CNX Nifty added 0.62%, to 2,783.90.

Elsewhere, Malaysia's Kula Lumpur Composite index was down 0.54% or 4.78 points to 879.67, while Indonesia’s Jakarta composite decreased by 6.31 points or 0.48% to 1304.33. In Thailand, the Thai Stock exchange gained 2.84 points or 0.66% to 430.69.

In the other regional market, European shares advanced, with telecom stocks among the top advancers after Vodafone Group reassured on revenue trends. On a national level the German DAX 30 index rose 0.8% to 4,307.03 while the French CAC-40 index advanced 0.7% to 2,950.04. The U.K. FTSE 100 index rose 0.2% to 4,084.97,

Profit taking trims gains

Even as major Asian indices like Nikkei, Hang Seng, Straits Times and Kospi ended lower for the day, Sensex ended positive despite failing to hold on to its early rally, closing way off its highs amid profit taking towards the closing hours. Riding on the back of yesterday's negative close and optimism in several international markets, Sensex resumed 124 points higher at 9129 and advanced sharply on sustained buying scaling past 9300 touching an intra-day high of 9303. After remaining above 9200 for the entire first half, Sensex witnessed profit taking and slipped below 9050 to touch the day's low of 9,041, down 26 points. Sensex finally ended the session with gains of 83 points at 9149, while Nifty gained 17 points to close at 2784.

Among front liners, Grasim Industries soared 7.43% at Rs1278.10, ACC rose 5.26% at Rs519, Maruti Suzuki India added 3.58% at Rs586.90, Bharat Heavy Electricals Ltd jumped 2.84% at Rs1,345, ITC advanced 2.59% at Rs180.50, Wipro gained 2.43% at Rs225.45, ONGC moved up 2.13% at Rs653 and Tata Consultancy Services soared 2.03% at Rs501.95. However, DLF dropped 13.25% at Rs132.90 while Tata Motors declined 6.41% at Rs133.50 and Hindalco Industries, National Thermal Power Corporation, Mahindra & Mahindra, Tata Steel, Larsen & Toubro and Ranbaxy Laboratories lost 0.5-2%.

The breadth of the market turned negative. Of the 2,514 stocks traded on the BSE, 1,339 stocks declined, 1,074 stocks advanced and 101 stocks ended unchanged. BSE Oil & Gas was the lead performer and rose 1.44% while BSE FMCG gained 1.01%.

Over 3.65 crore shares of Satyam Computer Services changed hands on the BSE followed by Spice Tele (3.52 crore shares), Unitech (1.31 crore shares), DLF (1.30 crore shares) and Reliance Natural Resources (1.04 crore shares).

Post Session Commentary - Feb 3 2009

The Indian market today bounced back and closed with gains led by sustained buying in key stocks backed by favorable global cues. The market ended off the day’s high as a weak economic outlook kept investors wary. Most of the Asian markets rose on account of bank and technology shares Japan and Australia widened efforts to revive economic growth. Firm opening of European markets also supported the sentiments initially, which further turned negative.

The domestic market opened higher after strong sell off yesterday tracking positive cues from the Asian markets. Though, market was not able to continue the same momentum and turned choppy on continuous bouts of buying and selling. Along with this, yesterday’s negative sentiments also put an impact on today’s performance. Further, benchmark indices managed to gather impetus since mid session and continued to gain ground as fresh buying was witnessed among the scrips. This was also supported from the fact of firm trading in major global indices. BSE Sensex ended above 9,100 mark and NSE Nifty closed around 2,800 level. From the sectoral front, most of the buying was witnessed in Oil & Gas, FMCG, IT, Tech and Bank stocks. However, Reality, Consumer Durables, Pharma Metal and Auto stocks remained under pressure. Midcap and Smallcap stocks also contributed to the selling pressure during the trading session.

Among the Sensex pack 20 stocks ended in green territory and 10 in red. The market breadth indicating the overall health of the market remained negative as 1339 stocks closed in red while 1074 stocks closed in green and 101 stocks remained unchanged in BSE.

The BSE Sensex closed higher by 82.60 points at 9,149.30 and NSE Nifty ended up by 17.25 points at 2,783.90. Broader market indices were in red as BSE Mid Caps and Small Caps ended with losses of 22.28 points and 13.92 points at 2,873.63 and 3,274.03 respectively. The BSE Sensex touched intraday high of 9,302.75 and intraday low of 9,040.56.

Gainers from the BSE Sensex pack are Grasim Industries (7.15%), ACC Ltd (5.10%), Maruti Suzuki (3.06%), BHEL (2.36%), Reliance (1.96%), Wipro Ltd (1.84%), ITC Ltd (1.83%) and ICICI Bank (1.77%).

Losers from the BSE Sensex pack are DLF Ltd (13.25%), Tata Motors (6.41%), Hindalco (2.82%), NTPC Ltd (2.35%), M&M Ltd (1.10%), Tata Steel (0.99%) and L&T Ltd (0.60%).

On Feb 2, India signed a key safeguards agreement with IAEA to allow inspection of additional civilian reactors, clearing the hits for supply of atomic fuel and technology by the international community after a 34-year-old nuke trade embargo that was lifted in 2008. The deal between the government of India and the UN atomic watchdog for the ''Application of Safeguards to Civilian Nuclear Facilities'' was inked in Vienna by IAEA Director General Mohamed ElBaradei and Indian Amabassador Saurabh Kumar.

On the global markets front, the Asian markets ended firm. Shanghai Composite index, closed higher by 49.12 points at 2,060.81. Further, the Hang Seng and Nikkei 225 ended lower by 84.6 and 48.47 points at 12,776.89 and 7,825.51 respectively. However, Straits Times and Seoul Composite index ended up 6.63 and 16.25 points at 1,711.92 and 1,163.20 respectively. Asian markets rose modestly but trimmed their early gains, as optimism over billions of dollars in new stimulus measures in Japan and Australia gave way to concerns about the sputtering global economy. Japanese shares got a jolt despite the Bank of Japan said it would buy 1 trillion yen ($11.2 billion) in corporate shares held by financial institutions to help shore up capital at commercial banks, who''ve taken a beating from volatile equities markets. But the rally soon fizzled. Australia’s central bank cut its benchmark interest rate by 100bps to the lowest 9in 45 years and the government announced it would spend another A$42bn.

European markets are trading in red as FTSE 100 is trading lower by 30.36 points at 4,047.42 and the DAX index is trading down by 33.46 points at 4,237.58.

The BSE Oil & Gas index ended higher by (1.44%) or 87.39 points at 6,145.59 on rise of crude oil prices. Gainers are Cairn Ind (2.05%), Reliance (1.95%), ONGC Ltd (1.65%), Reliance Pet (1.59%) and BPCL Ltd (1.52%).

The BSE FMCG index rose on defensive buying and ended higher by (1.01%) or 20.43 points at 2,040.32. Main gainers are Ruchi Soya (2.30%), ITC Ltd (1.83%), HUL (1.07%) and Dabur India (1.03%).

The BSE IT index also gained the market favour and closed with increase of (0.66%) or 14.32 points at 2,195.04. Scrips that gained are Oracle Fin (4.03%), Oracle Fin (3.84%), Aptech Ltd (2.25%), Wipro Ltd (1.84%), TCS Ltd (1.62%) and Patni Computer (0.59%).

The BSE Reality index slipped on recent reports that falling interest rates have failed to boost housing demand as ended down by (7.59%) or 113.48points at 1,382.49. Major losers are DLF Ltd (13.25%), Indiabull Real (8.94%), Housing Dev (6.39%), Mahindra Life (5.80%), Anant Raj (5.00%) and Orbit Co (4.33%).

The BSE Consumer Durables index ended lower by (2.85%) or 48.60 points to close at 1,655.34. Rajesh Export (4.95%), Titan Ind (4.50%), Gitanjali GE (2.84%), Blue Star L (0.57%) and Videocon Ind (0.17%) ended in negative territory.

The BSE Pharma index tumbled (0.72%) or 19.38 points to close at 2,661.79 as Glenmark Pharma (5.89%), Aurobindo Pharma (4.75%), BIL Care (4.18%), Stelite Biotec (3.62%) and Dr reddys Lab (2.31%) ended in red.

Ashok Leyland shares grew by 0.58%. India’s second biggest truck maker plans to cut capex by as much as 39% in the next three years as a slowing economy hurts demand for commercial vehicles. The company also added that it would spend Rs20bn against planned Rs33bn and would also reduce its intended capacity for new factory.

Educomp shares plunged 12.28%. The corporate affairs minister Prem Chand Gupta asked the registrars of companies (RoCs) to inspect the books of accounts of Educomp after media reports stated that the company’s profits were inflated.

Indiabulls Securities Ltd ended lower by 4.14%. The company has informed BSE that the Board of Directors of the Company at its meeting held on February 02, 2009, has approved the proposal for Buy- back of Equity Shares of the Company under sub-section (2) of Section 77A of the Companies Act, 1956. The proposed Buy-back will be from the open market through stock exchanges at a price not exceeding Rs 33/- per equity share with total aggregate consideration for the Buy-back limited to Rs 83.18 crores, being 25% of the total paid up capital and free reserves as per audited balance sheet of the Company for the year ended March 31, 2008.

BSE Bulk Deals to Watch - Feb 3 2009

Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
3/2/2009 532845 BHAGWATI BAN RAJSHAH ENTERPRISE P. LTD B 275000 23.50
3/2/2009 511092 JMD TELEFILM NEETA NANALAL GALA B 39988 22.15
3/2/2009 511092 JMD TELEFILM CHHAYA MANSUKHLAL GALA B 40000 22.15
3/2/2009 511092 JMD TELEFILM SAROJ KOTHARI S 37349 22.15
3/2/2009 532819 MINDTREE LTD NALANDA INDIA FUND LIMITED B 740469 211.96
3/2/2009 531215 RTS POWER CO GANDHI MANISHA NAVNEETLAL B 42959 284.09
3/2/2009 531215 RTS POWER CO GANDHI MANISHA NAVNEETLAL S 42959 286.75
3/2/2009 532863 SPICE TELE OPG SECURITIES P LTD B 3615426 79.46
3/2/2009 532863 SPICE TELE OPG SECURITIES P LTD S 3615426 79.64

NSE Bulk Deals to Watch - Feb 3 2009

Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
03-FEB-2009,AKSHOPTFBR,Aksh Optifibre Limited,D K JAIN,BUY,300000,8.95,-
03-FEB-2009,APOLLOSIND,Apollo Sindhoori Capital,RAJASTHAN GLOBAL SECURITIES LTD,BUY,294600,50.40,-
03-FEB-2009,BHAGWATIHO,Bhagwati Banquets and Hot,RAJSHAH ENTERPRISES (P)LTD,BUY,275000,23.50,-
03-FEB-2009,CYBERMEDIA,Cyber Media (India) Limit,FULLFORD VINIMAY PVT LTD,BUY,125000,27.41,-
03-FEB-2009,EDUCOMP,Educomp Solutions Limited,C D INTEGRATED SERVICES LTD,BUY,114959,1513.93,-
03-FEB-2009,SATYAMCOMP,Satyam Computers Ltd,OM INVESTMENTS,BUY,3430683,56.16,-
03-FEB-2009,VARUNSHIP,Varun Shipping Co. Ltd.,KHATAU INTERNATIONAL LTD.,BUY,16000,46.37,-
03-FEB-2009,VARUNSHIP,Varun Shipping Co. Ltd.,SUNBEAM TALC PVT LTD,BUY,19500000,48.05,-
03-FEB-2009,AKSHOPTFBR,Aksh Optifibre Limited,RELIANCE CAPITAL ASSET MGT LT.,SELL,298707,8.95,-
03-FEB-2009,APOLLOSIND,Apollo Sindhoori Capital,SURENDER REDDY GADDAM,SELL,312000,50.40,-
03-FEB-2009,BHAGWATIHO,Bhagwati Banquets and Hot,LOTUS GLOBAL INVESTMENTS LIMITED,SELL,275000,23.50,-
03-FEB-2009,CYBERMEDIA,Cyber Media (India) Limit,ARCHANA SALUJA,SELL,90000,27.93,-
03-FEB-2009,EDUCOMP,Educomp Solutions Limited,C D INTEGRATED SERVICES LTD,SELL,114959,1515.26,-
03-FEB-2009,SATYAMCOMP,Satyam Computers Ltd,OM INVESTMENTS,SELL,3430683,56.21,-
03-FEB-2009,VARUNSHIP,Varun Shipping Co. Ltd.,KHATAU INTERNATIONAL LTD.,SELL,19500000,48.05,-

Sensex ends volatile session with modest gains

The market ended the volatile session marginally higher Tuesday (3 February 2009) amid intraday fluctuations. Market, which was firm in afternoon, trimmed gains by mid-afternoon trade after European indices turned red. Dull signals from the US index futures, which suggested Dow could fall 16 points at the opening bell, also hit sentiments.

Volatility in indices can be attributed to similar ups and downs in index pivotals Reliance Industries and ICICI Bank. The BSE 30-share Sensex rose 82.60 points or 0.91%, shedding close to 154 points from the day's high. The Sensex recovered close to 108 points from the intraday low of 9,040.56.

The market had opened firm picking cues from global indices. Asian stocks rose led by bank and technology shares. The key benchmark indices in China, Singapore, South Korea, Taiwan and Singapore rose by between 0.39% to 2.65%. Japan's Nikkei fell 0.62% and Hong Kong's Hang Seng fell 0.66%.

Also the European markets had opened positive, but turned negative as the session proceeded. The key benchmark indices in France, Germany and UK were down by between 0.74% to 0.92%.

US markets had ended on a mixed note on Monday, 2 February 2009. A rally in technology stocks lifted the Nasdaq Composite Index by 18.01 points, or 1.22%, to 1,494.43 on bets Obama administration's economic stimulus will boost spending on telecommunications and tech infrastructure.

However, the Dow and S&P 500 fell as uncertainty about a plan to stem bank losses dragged. The Dow Jones industrial average ended down 64.11 points, or 0.80%, at 7,936.75 and the Standard & Poor's 500 Index dipped 0.45 point, or 0.05%, to 825.43.

The BSE 30-share Sensex was up 82.60 points, or 0.91%, to 9,149.30. The Sensex rose 236.05 points at the day's high of 9,302.75 in late trade. At the day's low of of 9,040.56 in mid-morning trade, the Sensex fell 26.14 points.

The S&P CNX Nifty up 17.25 points, or 0.62%, to 2,783.90.

A wide-based sell-off in stocks and sectors across the board took their toll on bourses, sending key benchmark indices lower yesterday, 2 February 2009. The BSE 30-share Sensex lost 357.54 points, or 3.79%, to 9,066.70 and the S&P CNX Nifty fell 108.15 points, or 3.76%, to 2,766.65.

The market breadth, indicating the overall health of the market, was negative on BSE with 1,081 shares advancing as compared with 1,363 that declined. 67 shares remained unchanged. Breadth was strong in opening trade.

The BSE Oil & Gas index (up 1.44%), the BSE FMCG index (up 1.01%), outperformed the Sensex.

The BSE Realty index (down 7.59%), the BSE Consumer Durables index (down 2.85%), the BSE Healthcare index (down 0.72%), the BSE Metal index (down 0.56%), the BSE Auto index (down 0.13%), the BSE Power index (down 0.1%), the BSE PSU index (down 0.04%), the BSE Capital Goods index (up 0.21%), the BSE Bankex (up 0.53%), the BSE Teck index (up 0.64%), the BSE IT index (up 0.66%) underperformed the Sensex.

Nifty February 2009 futures were at 2765, at a discount of 18.90 points as compared to the spot closing of 2783.90. Turnover in NSE's futures & options (F&O) segment increased to Rs 40,066.85 crore from Rs 34,205.27 crore on Monday, 2 February 2009.

Among the 30-share Sensex pack, 20 rose while the rest fell.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 1.96% to Rs 1,302.55. The stock moved in a range of Rs 1,271.50 – Rs 1,330. The stock was boosted by recent reports the Bombay High Court has in its interim order lifted stay on sale of RIL gas till the final order. Further the High Court added the gas has be sold at $4.2 mmbtu as per government utilisation.

Other oil stocks, Cairn India, Reliance Petroleum and ONGC rose by between 1.59% to 2.05%.

Rate sensitive realty stocks fell on reports falling interest rates have failed to revive housing demand. Indiabulls Real Estate, HDIL, Phoenix Mills, Unitech, Anant Raj Industries fell by between 0.39% to 8.94%.

DLF slumped 13.25% on high volumes of 1.3 crore shares on reports it plans to cut home prices by 20% to help lift demand in a slowing economy. The stock hit an all time low of Rs 131.25 in intra-day trade. India's biggest developer had its stock rating cut to underperform from outperform at Macquarie Group, post results.

Bank stocks were volatile as investors speculated falling bond yields and lower rates would accelerate loan growth and profitability. India's second largest private sector bank by net profit HDFC Bank rose 1.17% even as its American depository receipt (ADR) fell 1.11% on Monday, 2 February 2009. The stock moved between the high of Rs 910 and the low of Rs 890.

India's largest bank in terms of assets and branch network State Bank of India (SBI) fell 0.4% to Rs 1,091.30. The stock moved between the high of Rs 1,117 and a low of Rs 1,072. The bank will lower its home loan rates to 8% for new customers over the coming year, the second time it has reduced mortgage rates in as many months as the economy slows. The new rate will be offered between 2 February and 30 April 2009, the bank said in a statement. SBI had previously charged 9.75% on a floating basis for home loans, and 11.25-12.25% on a fixed basis.

India's largest private sector bank by net profit ICICI Bank rose 1.77% to Rs 391.70 even as its ADR fell 2.55% overnight. The stocks moved between the high of Rs 404.50 and a low of Rs 383.55.

India's largest dedicated housing finance company by total income HDFC rose 0.64%.

India's largest commercial vehicle maker by sales Tata Motors fell 6.41% after its vehicle sales fell 33% in January 2009 over January 2008. Commercial and passenger vehicle sales in India and overseas dropped to 36,931 units last month from 54,796 units a year earlier, Mumbai-based Tata Motors said.

India's largest tractor maker by sales Mahindra & Mahindra fell 1.1% as its sales in January 2009 fell 21% over January 2008. Sales of cars, SUVs, trucks and three-wheeled vehicles reached 17,611 units last month in India and overseas, compared with 22,309 units a year earlier, the company said.

India's largest car maker by sales Maruti Suzuki India rose 3.06% after it reversed three months of falling sales with a record gain in January on higher demand for its SX4 and D'zire sedans.

FMCG stocks rose on defensive buying. United Spirits, ITC, Dabur India, Marico, Hindustan Unilever rose by between 0.6% to 3.23%. The BSE FMCG index outperformed the Sensex, rising 1.01%

India's largest electric equipment maker by sales Bharat Heavy Electricals gained 2.35% on reports the company signed a pact with Kerala based KEL for setting up a joint venture firm.

Metal stocks declined on worries a weakening domestic and global economy has hit demand. Tata Steel, Hindalco Industries, Steel Authority of India, Hindustan Zinc fell by between 0.07% to 2.82%. While Sterlite Industries and National Aluminum Company rose by between 0.61% to 1.5%.

IT shares rose. India's second largest software services exporter Infosys Technologies rose 0.28%.

India's third largest software services exporter, Wipro rose 1.84% even as its American depository receipt (ADR) fell 1.44% overnight. The company forecasted a 7% fall in revenue for Q4 March 2009 on global economic downturn and pricing pressure from western clients, at the time of declaring results before market hours on 21 January 2009.

India's fifth largest IT exporter by sales HCL Technologies rose 3.84%. TCS, India's largest software services exporter by sales rose 1.62%.

Cement shares advanced on reporting healthy despatches in the past month. Aditya Birla Group January 2009 cement dispatches rose 7.35% to 3 million tones. Aditya Birla Group companies Grasim industries rose 7.15% and Ultratech Cement gained 5.62%. Meanwhile, Ambuja Cements rose 1.01% and India Cements advanced 4.47%.

India's largest cement maker by sales ACC rose 5.1% after it reported a 12.5% rise in January 2009 shipments from a year ago, to 1.89 million tonnes. The company, in which Swiss cement maker Holcim holds a more than 46% stake, said production rose to 1.87 million tonnes from 1.67 million tonnes a year earlier.

Ganesh Housing Corporation slipped 1.36% after the company said its promoters have pledged 30% stake of the company with the bank.

Exide Industries soared 3.63% after a 15 lakh shares or, 0.18% equity, changed hands in a block deal on BSE at Rs 40 each.

PVR declined 4.16% after the company said one of its promoter pledged 2.17% of the company's paid up capital with the bank.

C & C Constructions rose 0.35% after the company said its promoters have pledged 12.60% of the firm's paid up capital with the bank.

Educomp Solutions slumped 12.28% on reports the corporate affairs ministry ordered inspection of accounts of the company over alleged accounting frauds.

Max India rose 0.44% ahead of the company's board meeting to be held later in the day to consider a rights issue of shares.

Varun Shipping Company fell 0.64% after a block deal of 1.95 crore shares was executed on NSE at Rs 47.75 per share.

Indiabulls Securities fell 4.14% to Rs 20.85 after its board approved a buyback of shares at a maximum price of Rs 33.

Satyam Computer Services clocked the highest volume of 3.65 crore shares on BSE. Spice Communications (3.52 crore shares), Unitech (1.32 crore shares), DLF (1.3 crore shares) and Reliance Natural Resources (1.05 crore shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 297.09 crore on BSE. Spice Communications (Rs 280.74 crore), Satyam Computer Services (Rs 204.25 crore), DLF (Rs 181.58 crore) and Reliance Infrastructure (Rs 164.42 crore) were the other turnover topper in that order.

Foreign institutional investors (FIIs) are in selling mode after an inflow of Rs 1319.10 crore in December 2008. Their outflow in January 2009 totaled Rs 4250.30 crore (till 30 January 2009).

Meanwhile the market regulator market regulator Sebi late evening on Monday, 2 February 2009 said it will look at easing takeover rules in special cases, ahead of a possible acquisition of the mega fraud hit Satyam Computer Services.

The regulator also tightened rules for warrant subscriptions, raising the upfront payment for buying warrants to 25% from 10%. It also eased rules for pricing equity offerings by allowing companies to set the price two days before the opening date of a public offer.

Rules for bonus share offerings were also modified, with the regulator stipulating all offers where shareholder approval is not required should be completed in 15 days.

Meanwhile, a new version of US President Barack Obama's economic stimulus plan intends to inject $888 billion into the recession-crippled US economy, with most of the money devoted to infrastructure spending. The Senate debated about this on Monday, 2 February 2009 after a previous version of the American Recovery and Reinvestment Act of 2009 was approved by the House or Representatives last week.

In economic data, the Institute for Supply Management reported contraction in manufacturing activity for the 12th straight month. However the reading of 35.6 came in better than expected. Construction spending fell 1.4% in December 2008 while consumer spending fell 1%.

US markets recovers a bit

Microsoft helps Nasdaq stay steady while other two indices falter little

Stocks at Wall Street ended on a mixed note and with subtle and little losses on Monday, 02 January, 2009. Though there was no such specific catalyst for the market – be it positive or negative, The Dow lingered in the red for the entire day. Economic reports checked in line with expectations, in certain cases, in fact better. The techno logy sector supported the Nasdaq and the same managed to show some steadiness.

The Dow Jones Industrial Average ended lower by 64 points at 7,936, the Nasdaq closed higher by 18 points at 1,494 and the S&P 500 closed lower by 0.45 points at 825. Dow was down by 127 points at session lows.

GE, Boeing, 3M and P&G were the main Dow laggards today. Microsoft supported the Nasdaq today. Half of the major economic sectors sported gains with telecom being the main winner and industrials, the main loser.

General Electric was a primary laggard in the Dow today amid ongoing concerns regarding the health of the company's capital arm.

Among major economic reports for the day, personal spending data showed that consumer spending remained under severe constraint pressed by rising unemployment, tight credit and declining home prices, and swooning asset portfolios. Personal spending in December was down 1%. The data were generally in-line with expectations.

January ISM Manufacturing data came in a better-than-expected 35.6 after coming in at 32.9 in the prior month. The latest reading was expected to hit just 32.5.

In a separate report, construction spending in December fell 1.4%, which was a bit steeper than the 1.2% decline that was widely forecast. Spending was down 1.2% in the prior month.

Retail sector came under pressure today after retailer Macy's indicated it expects earnings for fiscal 2009 to range from $0.40 to $0.50 per share. The company also announced it plans to reduce its quarterly dividend by 68%. Macy's also indicated it plans to eliminate some 7,000 jobs.

On Monday, crude-oil futures for light sweet crude for March delivery closed at $40.08/barrel (lower by $1.6 or 3.8%) on the New York Mercantile Exchange. Earlier during the day, it touched a low of $39.83. Last week, crude prices ended lower by 10%. In January, 2009, crude shed 14%.

At the currency market on Monday, the dollar index, which tracks the dollar against a trade-weighted basket of six major currencies, fell by 0.5%. But the dollar strongly firmed up against the British pound.

The earning reports for tomorrow will feature Dow Chemicals and Merck. Among economic reports, December pending home sales and January auto sales are due tomorrow.

KEC International

KEC International

IT Services, Auto Sector

IT Services, Auto Sector

DOW - 8000

TO MOST casual observers, the fact that the Dow Jones Industrial Average (DJIA) has bounced back every time it dipped below 8,000 points (see attachment) over the past few months - even when there is bad news - suggests that the 8,000 mark is where the 'support' or the magical 'market bottom' lies. This means that as soon as the index nears 8,000 on the downside, chartists and traders will start calling a 'buy' on the market.

Closer examination, however, reveals that the bounces around the 8,000 mark are simply a function of the way the index is constructed. Because the Dow is price-weighted, it is also inherently flawed.

In Thoughts from the Frontline weekly newsletter dated Jan 23, writer John Mauldin correctly points out that the divisor for the DJIA is 7.964782, which means that for every dollar an index stock falls, the DJIA falls 7.964782 points, regardless of the stock's capitalisation.

As a result, if the stock of Microsoft, with a price of US$17 and a market cap of US$156 billion, was to crash to zero, the DJIA would only lose 135 points (17x7.964782). But if the same was to happen to IBM, with a smaller market cap of US$124 billion but a higher share price of US$92, it would cost the index to lose a whopping 700 points.

Now consider the four financial stocks currently in the DJIA - Citigroup (US$3.90), Bank of America (US$6.78) Amex (US$16.70) and JPMorgan (US$25.43) - using last Thursday's prices.

If all four stocks were to crash to zero, the DJIA would only lose 300 plus points, not that huge a loss in the context of the market, yet imagine the repercussions on the US and global economies if these four institutions collapsed totally.

Most of the news on Wall Street these days centres on the crippled financial and auto sectors. But because the share prices of these companies are now so low, these stocks do not affect the DJIA by much (General Motors' shares, for example, are now just above US$3).

In other words, because the index stocks most affected by bad news are already battered to rock-bottom levels, the DJIA doesn't seem to fall much when bad news is released, thus giving the mistaken impression of resilience to adverse news and of strong support around 8,000 points.

By right, these financial and auto stocks should have been removed from the index, given that it has been past practice to replace stocks whose prices drop below US$10.

For some reason, the DJIA's guardians have been reluctant to do the same now, possibly because of the political fallout that might ensue - imagine the repercussions of removing pillars like Citigroup or General Motors.

This then leads to the inevitable conclusions: the DJIA is not comparable over time; the only reason the DJIA appears well-supported around 8,000 is because the collapsed financial and auto components have not been replaced as they should have been; and that movements in large-price stocks are magnified because the index is heavily skewed in favour of these counters.

If the index was to be correctly re-balanced by removing the battered financials and autos and replacing them with stocks with prices above US$10, you'd have to wonder whether the 8,000 mark would hold as well as it has.

You'd also have to dismiss arguments that it is safe to buy since the index is at its lowest level in many years because historical comparisons are invalid - unless, of course, the same re-balancings that were done in the past are performed now.

via Business Times

Market may remain choppy

Overnight flat close in the US markets and a mix trend in several Asian indices in the ongoing trading session may help the domestic indices rebound from lower levels. However, lack of clarity in the market and higher volatility may drag down the market. Among the indices, the Nifty could test higher levels at 2800-2850 and has a supports at 2750.The Sensex has a likely support at 9000 and may face resistance at 9200

US indices closed flat on Monday. While the Nasdaq advanced 18 points to 1494, the Dow Jones was down 64 points at 7937.

However, Indian ADRs were largely weak on the US bourses. Tata Motors dropped over 4%, while VSNL, ICICI Bank, Rediff, Wipro, HDFC Bank, MTNL and Dr Reddy were down around 0.50-2% each. Satyam, Infoys and Patni Computer, however, ended with modest gains.

Crude oil prices in the US market was marginally down, with the Nymex Light Crude oil for March 09 delivery losing $1.60 to close at $40.08 a barrel. However, in the Commodity space, the Comex gold for April series dropped $21.20 to settle at $907.20.

Daily trend of FII/MF investment in equities
On January 30, 2008, FIIs were net sellers of stocks to the tune of Rs16 crore (purchases worth Rs1319 crore and sales of Rs1335 crore).

Markets may bounce back

Key benchmark indices are likely to open higher mirroring positive global cues. However the recent selling by foreign institutional investors (FIIs) may prove to be a dampener. Volatility may be high as stock and sector specific activity may rule the roost.

Asian stocks were trading higher today, 3 February 2009 led by banking and technology stocks. China's Shanghai Composite was up 0.46% or 9.33 points at 2,021.01, Hong Kong's Hang Seng rose 0.74% or 94.67 points at 12,956.16, Japan's Nikkei was up 0.10% or 7.62 points at 7,881.60, Singapore's Straits Times gained 1.11% or 18.85 points at 1,724.14, South Korea's Seoul Composite advanced 0.83% or 9.56 points at 1,156.51 and Taiwan's Taiwan Weighted jumped 1.75% or 74.65 points at 4,334.63.

However US markets ended on a mixed note on Monday, 2 February 2009. A rally in technology stocks lifted the Nasdaq Composite Index by 18.01 points, or 1.22%, to 1,494.43 on bets Obama administration's economic stimulus will boost spending on telecommunications and tech infrastructure. However, the Dow and S&P 500 fell as uncertainty about a plan to stem bank losses dragged. The Dow Jones industrial average ended down 64.11 points, or 0.80%, at 7,936.75 and the Standard & Poor's 500 Index dipped 0.45 point, or 0.05%, to 825.43.

Meanwhile, a new version of US President Barack Obama's economic stimulus plan intends to inject $888 billion into the recession-crippled US economy, with most of the money devoted to infrastructure spending. The Senate debated about this on Monday, 2 February 2009 after a previous version of the American Recovery and Reinvestment Act of 2009 was approved by the House or Representatives last week.

In economic data, the Institute for Supply Management reported contraction in manufacturing activity for the 12th straight month. However the reading of 35.6 came in better than expected. Construction spending fell 1.4% in December 2008 while consumer spending fell 1%.

World oil prices rose in Asian trade today, 3 February 2009 in a cautious market still confronted by weak global demand. New York's main futures contract, light sweet crude for March 2009 delivery, gained 27 cents to 40.35 dollars a barrel.

Back home, wide-based selling in stocks and sectors across the board took their toll on bourses, sending key benchmark indices lower on Monday, 2 February 2009. The BSE 30-share Sensex lost 357.54 points, or 3.79%, to 9,066.70 and the S&P CNX Nifty fell 108.15 points, or 3.76%, to 2,766.65.

Foreign institutional investors (FIIs) are in selling mode after an inflow of Rs 1319.10 crore in December 2008. Their outflow in January 2009 totaled Rs 4250.30 crore (till 30 January 2009).

According to provisional data on NSE, FIIs were net sellers worth Rs 125.68 crore while mutual funds sold shares worth Rs 161.38 crore on Monday, 2 February 2009.

Pre Session Commentary - Feb 3 2009

Today domestic markets are likely to open positive. The markets may rebound in today’s trade as other Asian markets have also opened with remarkable gains. The only news that is spreading a feel good factor across Asia is the Australian Government proposing $25 billion stimulus package. This second stimulus package is aimed to support 90,000 jobs besides boosting the economic growth. On the domestic macro economic front, Merchandise exports shrunk 1% in December, 2008 and stood at $12.7 billion, compared to $12.82 billion in the same month last year. Imports during the month increased by 9% to $20.25 billion from $18.61 billion in the year ago month. Trade deficit in December stood at $7.5 billion, a rise of 31.5% compared to $5.7 billion in December 2007. We anticipate a positive trend in today’s session.

On Monday, the markets opened with a negative gap and further deteriorated to close with huge loss. Huge selling was witnessed since the opening session as there was panic prevailing in the other Asian markets as well. On the macro economic scenario the traded deficit of $7.5 billion also added fuel to the negative sentiments of the markets. The front line stocks were thrashed badly as they pared off their gains on Friday. Amongst the frontline stocks, Jaiprakash Associate, DLF and Reliance Infra were the top losers as they lost 13.70%, 13.54% and 10.50% respectively. The grim was witnessed across all the sectors however sectors like Realty, Metal and Bankex suffered severe injuries as they lost 10.32%, 5.34% and 5.11% respectively. Mid caps and Small caps also felt the burn as they lost 1.55% and 1.53% respectively. During the session we expect the markets to be trading positive.

The BSE Sensex closed low by 357.54 points at 9,066.70 and NSE Nifty ended with losses of 108.15 points at 2,766.65. The BSE Mid Caps and Small Caps ended with losses of 45.56 points and 51.10 points at 2,895.91 and 3,287.95 respectively. The BSE Sensex touched intraday high of 9,363.58 and intraday low of 9,048.97.

The US markets on Monday closed mixed. The lack of news in the markets left investors to trade with little sentiments to lead a direction and hence markets closed mixed. The financial stocks managed to close with a gain of 0.2% after a volatile market trade. The investors are still waiting for the ‘Bad Bank’ plan of the government. On other macro economic news construction spending in December fell 1.4% worse than the expected 1.2% decline. The drop in December indicates an accelerated decline from the 1.2% decline registered in the prior month. Further personal spending for December was down 1% while personal income decreased by 02%. Crude oil futures for the month of Mach delivery fell by $1.60 to $40.08 per barrel on New York Mercantile Exchange.

The Dow Jones Industrial Average (DJIA) closed lower by 64.11 points at 7,936.75 NASDAQ index gained 18.01 points at 1,494.43 and the S&P 500 (SPX) tumbled 0.45 points at 825.43.

Indian ADRs ended mixed. In technology sector, Satyam ended up by 5.79% along with Patni Computers by 0.90%. Further, Infosys ended with increase of 0.23% while Wipro closed lower by 1.44%. In banking sector ICICI Bank lost 2.55% andHDFC Bank dropped by 1.11%. In telecommunication sector, Tata Communication and MTNL slipped 2.83% and 1.03 respectively Sterlite Industries decreased by 2.06%.

Today major stock markets in Asia have opened positive. Shanghai composite is up by 27.64 points to 2,039.24, Japan''s Nikkei is also up by 210.43 points at 8,084.41 along with Hong Kong''s Hang Seng that surged 134.73 points at 12,996.23. South Korea''s Seoul Composite is up by 22.28 points at 1,169.23 and Singapore''s Strait Times is also up by 18.67 points to 1,723.96.

The FIIs on Monday stood as net sellers in equity and debt. Gross equity purchased stood at Rs 1,318.80 Crore and gross debt purchased stood at Rs 49.40 Crore, while the gross equity sold stood at Rs 1,335.40 Crore and gross debt sold stood at Rs 335 Crore. Therefore, the net investment of equity and debt reported were Rs (16.60) Crore and Rs (285.60) Crore respectively.

On Monday, the Indian rupee ended at 48.92/93 per dollar, 0.05 paise weaker than Friday’s close of 48.87/88. The rupee slogged due to the drastic fall in stock markets showing concerns of foreign capital outflow.

On BSE, total number of shares traded were 31.66 Crore and total turnover stood at Rs 3,026.12 Crore. On NSE, total number of shares traded were 64.32 Crore and total turnover was Rs 8,446.36 Crore.

Top traded volumes on NSE Nifty – Unitech with 63675896 shares, Suzlon Energy with 25713557 shares, DLF with 22895073 shares, Reliance Comm with total volume traded 9590086 shares followed by Reliance Petro with 8766368 shares.

On NSE Future and Options, total number of contracts traded in index futures was 802375 with a total turnover of Rs 10,302.39 Crore. Along with this total number of contracts traded in stock futures were 905376 with a total turnover of Rs 8,545.57 Crore. Total numbers of contracts for index options were 1002065 with a total turnover of Rs 14,482.79 Crore and total numbers of contracts for stock options were 82639 and notional turnover was Rs 874.51 Crore.

Today, Nifty would have a support at 2,745 and resistance at 2,878 and BSE Sensex has support at 8,985 and resistance at 9,325.

Crude goes lower

Economic data weighs on the price

Oil prices dropped to the lowest levels in two weeks on Monday, 02 January, 2009 as weak demand concerns once again unnerved traders.

On Monday, crude-oil futures for light sweet crude for March delivery closed at $40.08/barrel (lower by $1.6 or 3.8%) on the New York Mercantile Exchange. Earlier during the day, it touched a low of $39.83. Last week, crude prices ended lower by 10%. In January, 2009, crude shed 14%.

Prices reached a high of $147 on 11 July but have dropped almost 72% since then. Year to date, in 2009, crude prices are lower by 17.8%. On a yearly basis, crude prices are lower by 68%.

Among major economic reports for the day, personal spending data showed that consumer spending remained under severe constraint pressed by rising unemployment, tight credit and declining home prices, and swooning asset portfolios. Personal spending in December was down 1%. The data were generally in-line with expectations.

The Commerce Department reported last week that the U.S. economy contracted at a 3.8% annualized rate in the fourth quarter, a decline that would have been worse except that the government counts an unwanted buildup of goods on store shelves as growth. Adjusted, gross domestic product contracted at a 5.1% pace in the final three months of 2008, the weakest in 28 years. But still it was less bad than feared.

Against this background, March reformulated gasoline fell 9.4%, to $1.1492 a gallon, and March heating oil dropped 6.4% to $1.3424 a gallon.

March natural gas futures rose 3.2% to $4.557 per million British thermal units.

At the MCX, crude oil for February delivery closed at Rs 2,023/barrel, lower by Rs 35 (1.7%) against previous day's close. Natural gas for February delivery closed at Rs 226.2/mmbtu, higher by Rs 8.8/mmbtu (4.04%).

Trading Calls - Feb 3 2009

Nifty (2767) Sup 2720 Res 2815

Buy BEL (854) SL 846
Target 870, 875

Sell ACC (494-496) SL 502
Target 486, 482

Sell Cairn (157) SL 160
Target 151, 150

Buy Cummins (170) SL 166
Target 177, 179

Buy Reliance Cap (387-391) SL 382 Target 400, 404

Daily News Roundup - Feb 3 2009

Ministry for Corporate Affairs has ordered to scan the books of Educomp and six PSUs. (BL)

DLF has suspended work for more than a quarter of its commercial projects in a bid to save costs as demand for homes and offices slow down. (BS)

DLF plans to raise Rs40bn through asset sale and private placement. (ET)

DLF and Parsvnath plan to cut property prices by 15% in the next few months to boost sales. (BS)

Reliance Communications has decided to transfer the optical fibre business of the company to Reliance Infratel, a subsidiary of the company. (BL)

Reliance Power may get letter of intent for the 4,000mw ultra mega power project at Tilaiya this week. (ET)

Reliance Industries has begun talks with over a dozen power and fertilizer firms to sell gas from its KG basin. (ET)

SAIL to invest Rs40bn for implementation of its various mining projects in Orissa. (BS)

Punjab National Bank to merge its primary dealership subsidiary PNB Gilts with self instead of selling the company. (BS)

NMDC Ltd to secure mining lease for Sansangora deposit in Jharkhand. (BS)

Mastek to put 10% of staff on ‘virtual bench’ for up to 12 months, a move which it says will help it stay profitable in the current economic downturn. (BL)

Central Bank of India plans to raise Rs5-6bn through Tier-I and Tier-II bonds this year in order to boost its capital adequacy ratio (CAR) to over 11%.(BS)

Gail India has signed an agreement with Indian Farmers Fertiliser Cooperative for exploring options to set up units. (FE)

The Spice Group has acquired a 100% stake in the Indian arm of the Dubai-based mobile retail chain Cellucom in an all stock deal. (BL)

Idea Cellular will roll-out operations in five service areas by end of 2009. (FE)

GMR Infra negotiates to buy SA company based Homeland Mining & Energy for US$100mn. (BS)

Parsvnath promoter has pledged 10% of the promoter's shares with lenders to fund expansion plans. (BS)

Indian Overseas Bank has received approval from the RBI to acquire Pune-based Shree Suvarna Sahakari Bank (SSSB). (BS)

Essar Steel’s US$2bn investment in Trinidad and Tobago faces uncertainty as its lead banker has fallen pray to the financial meltdown. (BS)

Tata Tea is restructuring its US operations with a view to bringing down costs substantially. (BS)

Hindustan Unilever plans to hike variable component in employee salaries. (ET)

Senior executives across the Tata Group are bracing for a 10-15% cut in salaries. (ET)

Sobha Developers to raise Rs7.5bn through a combination of preferential share sale, land sale and bringing in strategic investors in some projects in an attempt to reduce debt. (BS)

Bhushan Steel plans to raise Rs4.5bn by issuing 1.5mn redeemable cumulative preference shares. (ET)

Adani group quotes the lowest price in Gujarat Urja Vikas Nigam Ltd's power purchase bid. (BS)

KVK Energy and Infrastructure has parted ways with its JV partner, Maytas Infra, in setting up a 1,050MW thermal power plant in Orissa under the banner of KVK Nilachal Power Pvt Ltd. (BS)

Merck & Co Inc plans to expand its research collaboration with Indian companies and is currently in talks with 10 major and minor firms. (BL)

Cosmo Films plans to invest Rs2.6bn to treble its capacity in the next two years. (FE)

IL&FS Realty Fund has picked up a 15% stake in Akruti SPV for Rs2bn. (ET)

Companies coming out with an IPO will be allowed to declare the floor price/ price band at least two working days before the date of opening of IPO. (BS)

Other state run banks are likely to offer home loans at an interest rate of 8% fixed for a specified period. (ET)

The Central Board of Excise and Customs in its circular has said that realtors will not be required to pay service tax on sale of flats. (ET)

Upfront margin that promoters will have to pay when they are allotted warrants to be raised from 10 to 25%. (BS)

Nabard has reduced refinance interest rates by 25%. (FE)

Tax exemption on gas output is unlikely soon. (ET)

The Telecom Commission has approved the introduction of national and international calling cards. (FE)

India’s exports declined marginally by 1.1% yoy to US$12.7bn in December 2008. (ET)

The group of ministers of FDI will meet today to discuss the revised guidelines for calculation of direct and indirect foreign holding in sectors attracting foreign investment caps. (ET)

Listed companies will have to declare dividend on a per-share basis, rather than percentage basis. (BS)

Bonus issue will have to be completed in 15 days where no shareholders’ approval is required and in 60 days where shareholders’ approval is required. At present this timeframe is six months. (BS)

RBI increased the prudential inter-bank exposure limit for the Urban Cooperative Banks to 20% from 10% of their total deposit liabilities. (BS)

The slowdown in the economy, coupled with higher outgo on account of stimulus package measures, has pushed the fiscal deficit during April-December 2008 to Rs2,183bn. (BL)

Indian cement sector is expected to witness volume growth of 6-7% over 2010 and most of 2011:Fitch (FE)

Populism and politics!

The first lesson of economics is scarcity... The first lesson of politics is to disregard the first lesson of economics.

Populism seems to be gaining ground, with the announcement on Lok Sabha polls expected anytime now. After the fuel price cut, the Government now wants nationalised banks to lower rates further. PNB has already cut its PLR while SBI has unveiled a special home loan scheme. Some more state-run banks may give into the Centre’s demands. Whether private banks will follow suit or not is not clear as yet.

Coming to the market, the key indices could regain their footing after US stocks managed to hold their own. European shares too recovered from day’s lows. Most Asian markets are up this morning. However, it remains to be seen if the global markets can hold their gains for long given the strong economic headwinds.

All eyes are on Capitol Hill, where the Obama regime is battling hard to get its massive stimulus plan cleared. On the domestic front, there aren’t many catalysts that can drive the market higher. As a result, the market’s direction will largely hinge on global developments. On the whole, we expect the market to be sideways in a tight range in the near term.

FIIs were net sellers in the cash segment on Monday at Rs1.26bn (provisional) while the local institutions too pulled out Rs1.61n. In the F&O segment, the foreign funds were net sellers of just Rs10mn. On Friday, FIIs were net sellers at Rs166mn in the cash segment.

US stocks ended mixed on Monday, as investors grappled with persistent fears about the economy's worsening health and its fallout on corporate earnings. Anxiety over the fate of the Obama administration's stimulus bill and nervousness ahead of Friday's monthly jobs report kept investors jittery.

The Dow Jones Industrial Average lost 64 points, or 0.8%, to 7,936.75. The Dow briefly fell to 7,867, touching the lowest level since November, when the market carved out what some pros think were bear market lows.

The Standard & Poor's 500 index ended just below unchanged, at 825.44. The Nasdaq Composite index gained 18 points, or 1.2%, to 1,494.43.

US stocks slipped in the early going but managed to cut losses as investors breathed a sigh of relief after the release of a slightly better-than-expected manufacturing report. Energy, industrials and materials were down the most while technology shares helped the market pare losses.

The Dow and S&P 500 finished their worst January ever on Friday as investors eyed abysmal reports on economic growth and quarterly earnings. In the month, the Dow lost 8.8% and the S&P 500 lost 8.6%.

Select stocks managed gains on Monday, but any advance is likely to be short-lived.

Consumer spending continued to decline in December, according to a government report. Personal spending fell 1% after falling a revised 0.8% in the previous month. Economists thought it would fall 0.9%. Personal income dropped 0.2% versus forecasts for a drop of 0.4%. Income dropped 0.4% in the previous month.

Another report showed a slight improvement in manufacturing activity in January, rising from a record low. The Institute for Supply Management's manufacturing index rose to 35.6 in January from a revised 32.9 in December. Economists expected the index at 32.5. The number still reflects a recessionary environment.

A third report showed that construction spending fell a worse-than-expected 1.4% in December, after falling a revised 1.2% in the previous month. Economists thought it would fall 1.2%.

After a narrow party-line approval in the House of Representatives last week, the economic stimulus package moved to the Senate. Among the topics of debate: ways to spur housing sales and to help current homeowners avoid foreclosure.

Bank of America tumbled 8.8% on published reports that a group of angry shareholders are planning to demand that Chairman and CEO Ken Lewis be removed at the upcoming annual meeting. BofA was the Dow's biggest loser.

Other big decliners included Boeing, 3M and GE, which tumbled amid the economic worries.

Dow component P&G fell for a second session. On Friday, it reported a higher quarterly profit that was short of forecasts and warned that full-year earnings won't meet its earlier forecast. Shares slipped 3%.

Microsoft and Intel were among the Dow's gainers, rising along with the broader technology sector.

Macy's shares lost 4% in active New York Stock Exchange trading after the retail major said that it was cutting 7,000 jobs or 4% of its total workforce and trimming its dividend.

Chrysler is offering buyouts to all hourly workers in its newest attempt at cutting costs. The news comes one day before Chrysler and other automakers report what are expected to be terrible January sales.

Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.72% from 2.85% on Friday. Treasury prices and yields move in opposite directions. Yields on the 2-year, 10-year and 30-year Treasurys all hit record lows last month.

Lending rates were mixed. The 3-month Libor rate rose to 1.22% from 1.18% on Friday. Overnight Libor fell to 0.28% from 0.30% on Friday. Libor is a bank-to-bank lending rate.

US light crude oil for March delivery fell $1.60 to settle at $40.08 a barrel on the New York Mercantile Exchange. Gasoline prices rose 1.3 cents to a national average of $1.88 a gallon.

The dollar fell versus the euro and yen. COMEX gold for April delivery fell $21.20 to settle at $907.20 an ounce.

On the earnings front, Mattel reported a 46% fourth-quarter profit decline from last year, with the results from the world's biggest toy maker much worse than expected. Manufacturer Rockwell Automation lowered its yearly forecast while reporting a 25% slide in fiscal first-quarter profit.

Chip-tools maker Applied Materials lowered its earnings forecast ahead of reporting its first-quarter results next Tuesday.

Tuesday morning brings earnings from Dow stock Merck as well as Motorola and UPS. All three are due to report results before the start of trade. On the economic front, the December pending home sales index is due in the early morning. It is expected to show no change after sliding 4% in the previous month.

European shares declined, with banks by far the worst performers, as investors turned the leaf on a new month. The Dow Jones Stoxx 600 index fell 2.6% to 186.32, with the banking sector down fully 5.6%. The pan-European Stoxx 600 lost roughly 4% in January.

Germany's DAX 30 index declined 1.6% to 4,271.04 and the French CAC-40 index lost 1.5% to 2,930.05. In London, the FTSE 100 index closed down 1.7% to 4,077.78. The biggest snowstorm to hit southeastern England in 18 years left much of the area paralyzed.

Indian stocks gave up nearly half of last week's gains on Monday as investors chose to lock in gains amid mounting concerns about the longevity of the global recession. Apprehensions about the new stimulus package in the US coupled with grim corporate commentary weighed on Asian and European markets. Meanwhile, macro-economic reports on PMI and Trade suggested that the much-awaited economic recovery could still be a little while away. Traders also booked profit after some of the top names like Tata Motors, M&M, DLF and Unitech came out with grim set of results over the weekend.

Stock losses increased amid mounting worries that the global economy may take longer to recover from one of the worst recessions in recent memory. Government data last week showed that the US economy contracted at its fastest pace in well over two decades. Though the fourth-quarter GDP report was better than Wall Street's expectations, global investors are still jittery about the health of the world's biggest economy. Obama says that the US is in for a tough several months before a recovery takes hold. Poor corporate earnings and outlook, coupled with a slew of job cuts also kept investors on tenterhooks.

The BSE Sensex closed the day at 9,066.70, down 357 points, or 3.8% from the previous close while the NSE Nifty slid 108 points, or 3.8%, to end at 2,766.65. Both the indices closed near intra-day lows of 9,048.97 and 2,760.70, respectively. The broader market, however fared better than their frontline peers. The BSE Small-Cap and Mid-Cap indices were down about 1.5% each.

The BSE Real Estate was the worst performer, down 10.3%. DLF and Unitech, India’s two-biggest property developers, tumbled after reporting third-quarter results that missed market expectations. Among the other top losers were Metals (5.3%), Banking (5.1%), Consumer Durable (4.2%), Power (3.6%) and Oil & gas (3.1%). Capital Goods and IT were down 2.7% and 2.5%, respectively.

Within the Sensex, the top losers were Jaiprakash Associates, DLF, Reliance Infra, ICICI Bank, HDFC, Tata Steel, RCOM and Hindalco (losing between 6-14%). SBI, Wipro, Tata Motors, Sterlite, NTPC, L&T, TCS, HDFC Bank, Reliance, M&M, ONGC and Bharti Airtel were down (3.6%). Hindustan Unilever was the only stock that ended in the green, up about 0.2%.

Outside the key indexes the top losers are HDIL, Indiabulls Real Estate, Aptech, Cranes Software, Ansal Infra, Unitech, Jindal Saw, TV18, Puravankara, Axis Bank, Redington, Astra Micro, Reliance Capital, SAIL, OBC, Renuka Sugars and Titagarh Wagons.

Among the prominent gainers in the market included Spice Tele, Arshiya International, Kalyani Steel, Consolidated Construction, Carborundum Universal, Alok Industries, Geodesic, Nagarjuna Fertilizers, Mascon Global, Panacea Biotec, Indiabulls Financial, Ess Dee Aluminium, Amtek Auto, EMCO, Jagaran, Deepak Fertilizers, Simplex Infra, GE Shipping, Texmaco and Hinduja Ventures.

Asian stocks dropped for a second day, led by technology and financial companies, as losses at Hitachi and Mizuho Financial Group fueled concern that the global recession was deepening. Hitachi plunged 17% after forecasting a record loss. Mizuho, Japan’s second-largest listed bank, declined 6.6% after posting its second quarterly loss in a row.

The MSCI Asia-Pacific Index lost 1.9% to 81.53 as of 7:24 p.m. in Tokyo. About seven stocks declined for every two that advanced on the gauge, which has slumped 9.1% this year amid mounting signs corporate profits are deteriorating.

Japan’s Nikkei 225 Stock Average dropped 1.5% to 7,873.98 at the close. Hong Kong’s Hang Seng Index finished 3.1% lower. China’s Shanghai Composite Index added 1.1% following a holiday last week for the Lunar New Year. Other markets fell except Taiwan, the Philippines and Sri Lanka.

European shares too declined, with banks by far the worst performers in the first trading day of the new month. The pan-European Dow Jones Stoxx 600 index fell 2.6% to 186.35, with the banking sector down 7.6%.

Germany's DAX 30 index declined 2% to 4,254 and the French CAC-40 index lost 2.3% to 2,905. The UK's FTSE 100 index fell 1.6% to 4,083. The biggest snow storm to hit southeast England in 18 years left much of London paralyzed today.

Coming back to the Indian markets, the cash market turnover on the NSE was Rs84.46bn as against Friday's Rs98.36bn while the traded volume stood at 643.21mn shares versus 729.72mn shares.

Total turnover on the BSE was Rs30.26bn while traded quantity was 316.6mn shares.

The market breadth on the BSE was negative, with 867 shares rising as opposed to 1,577 shares declining.

Meanwhile, the FIIs were net sellers in the cash segment today at Rs1.26bn (provisional) while the local institutions also pulled out Rs1.61bn. On Friday, the foreign funds were net sellers at Rs166mn in the cash segment.

IOC, Larsen Tourbo, Sun Pharma, PNB, Tata Motors, Hindalco, Unitech, MTNL, Titan Industries, Tata Tea, OBC, Indiabulls Real Estate, Andhra Bank,IVRCL

IOC, Larsen Tourbo, Sun Pharma, PNB, Tata Motors, Hindalco, Unitech, MTNL, Titan Industries, Tata Tea, OBC, Indiabulls Real Estate, Andhra Bank,IVRCL, Vishal Retail, Radico Khaitan, Havells

Tata Tea

We recommend a sell on Tata Tea from a short-term trading perspective. It is evident from the charts of Tata Tea that it had been on a medium-term uptrend between late November 2008 and mid January 2009 when it moved from Rs 430 to Rs 635. The stock almost gained 47 per cent during this period. This up move of the stock retraced exactly 38.2 per cent (fibonacci retracement level) of its prior downtrend.

The stock has a significant long-term resistance between Rs 635 and Rs 650. It encountered resistance at Rs 635, and lost its bullish momentum. Subsequently the stock breached its medium-term up trendline and 21-day moving average. The daily relative strength index (RSI) is falling in the neutral region towards the bearish zone.

Moreover, the price rate of change indicator has entered in to the negative territory that indicates increase in selling pressure. We are bearish on the stock from a short-term horizon. We expect the stock to decline further until it hits our price target of Rs 534. Traders with short-term perspective can sell the stock while maintaining a stop-loss at Rs 618.

SGX Nifty Live Update - 2 - Feb 2 2009

SGX Nifty Live Update : 2,778.5 trading +40.5 points

SGX Nifty Live Update - Feb 3 2009

SGX Nifty currently at 2,765.0 trading +27.0 points

Cummins India

Cummins India



IRB Infrastructure Developers

IRB Infrastructure Developers





Elecon Engineering

Elecon Engineering

Indian Hotels

Indian Hotels

ABG Shipyard

ABG Shipyard

3i Infotech

3i Infotech

India Pharma Trends

India Pharma Trends

Sun Pharma

Sun Pharma

India Economics

India Economics





India Cement Sector

India Cement Sector

IT Services

IT Services



Tata Motors, Larsen Tourbo, IVRCL, Colgate Palmolive, BHEL, Tata Power, Thermax, Titan Industries, Unitech, Britannia , Colgate

Tata Motors, Larsen Tourbo, IVRCL, Colgate Palmolive, BHEL, Tata Power, Thermax, Titan Industries, Unitech, Britannia , Colgate



Jindal Steel

Jindal Steel

Reliance Communications

Reliance Communications

Maruti Suzuki

Maruti Suzuki



Cairn India

Cairn India