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Tuesday, April 07, 2009

IT Services Sector

IT Services Sector

Losses reappear in Asian markets

Hang Seng, Nikkei echoed Sentiments on Wall Street while Shanghai resumed as gainer

Stock market in Asian region ended lower on Tuesday 7 April 2009, reverberating sentiment on Wall Street where the major indices, despite regaining some lost ground, ended lower, on profit booking. Investors awaited first-quarter corporate earnings in the U.S. and in some regional markets pushed the markets lower.

Stocks in New York pared their losses late in the day to close just modestly lower Monday, but the drop ended a streak of four consecutive wins for the major averages. Citigroup and JP Morgan Chase were the worst performers on the Dow, losing 4.6% and 3.7%, respectively. General Motors went against the grain, adding 8.1% to $2.27. The Dow Jones Industrial Average gave up 41.74 points, or 0.5%, to 7975.85, and the S&P 500 lost 7.02 points, or 0.8%, to 835.48. The Nasdaq shed 15.16 points, or 0.9%, to 1606.71.

In the commodity market, crude oil traded near $51 a barrel after falling yesterday as declines in equity markets indicate an extended recession that will cut fuel demand.

Crude oil for May delivery was at $51.17 a barrel, up 12 cents, at 1:24 p.m. Singapore time on the New York Mercantile Exchange. Oil has risen 15 % this year and is down 65 % from a record in July. Yesterday, crude dropped $1.46, or 2.8 %, to settle at $51.05 a barrel.

Brent crude oil for May settlement was at $52.41 a barrel, up 17 cents, on London's ICE Futures Europe exchange at 1:23 p.m. Singapore time. It dropped $1.23, or 2.3 %, yesterday to $52.24 a barrel. The Brent contract was more than $1 a barrel above Nymex's May crude oil. The difference reached $1.19 yesterday, the most since Feb. 17.

Gold gained for the first day in four in Asia, after a decline to its lowest in more than two months lured physical buyers of the metal. Gold for immediate delivery rose 1% to $877.60 an ounce at 1:55 p.m. in Singapore. The metal dropped to $865.49 an ounce yesterday, the lowest since 23 January 2009. June-delivery gold added 0.7% to $878.50 an ounce on the Comex division of the New York Mercantile Exchange.

In the currency market, the Australian dollar shrugs off unexpected rate cut from RBA today and recovers from intraday low of 0.7048 again dollar. Elsewhere, the Japanese yen's recovery extends further today following weakness in the regional stock markets. BoJ left rates unchanged at 0.10% as the bank set to expand the range of eligible assets as collateral for loans to bolster the current liquidity boosting measures.

The Japanese yen the yen strengthened from a five- month low against the dollar and the euro as Asian stocks fell, damping demand for higher-yielding securities. The Japanese yen was quoted at 100.22 against the US dollar.

The Hong Kong dollar was trading at HK$ 7.7510 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 trades, The Australian dollar closed weaker on Tuesday as risk averse investors sold high-yielding assets such as the local currency. But a surprising cut, 25 basis points, to the cash rate by the Reserve Bank of Australia (RBA) buoyed sentiment for the domestic unit.

At the closing bell, the Australian dollar was trading at $US0.7156/60, down from Monday's close of $US0.7166/71. During the day, the unit traded between $US0.7050 and $US0.7166.

In Wellington trades, the New Zealand dollar rose to its highest level since early this year as investors became more comfortable with the global economic outlook. Towards it's closing, the NZ dollar was buying US59.40c from US58.56c on Friday.

The South Korean won ended at 1,322.5 won against the U.S. dollar, down 13 won from Monday's close, as foreign investors cut their holdings of Seoul stocks.

The Taiwan dollar weakened in today's trading snapping its five straight session gaining streak as it was trading at NT$33.4870 from yesterday's NT$ 33.250.

Coming back in equities, in Japan, stock market finished the choppy session slightly lower, snapping five days of winning streak, with losses in financials on concerns about loss on equity investments and Oil stocks on lower crude oil prices. Resource companies declined after commodity prices slid. The Nikkei 225 Stock Average index dropped 25.08 points, or 0.3%, to 8,832.85, while the broader Topix was 1.63 points, or 0.2%, higher to 833.

On the economic front, the Japan's central bank leave its key interest rate on hold at 0.1%, as the world's second largest economy struggles through its worst recession in decades. On Monday, the Bank of Japan, European Central Bank, Bank of England and Swiss National Bank said they would enter into swap arrangements to provide foreign exchange liquidity to the U.S. Federal Reserve if needed.

In other economic news, foreign financial institutions in Japan cut their workforces by 4,315 employees, or 15.5% of the estimated total workforce of 27,819, during the 15 months to March, due to the global financial crisis, a survey by a consulting firm showed Monday.

In Mainland China, the stock index finished the session higher, touching seven month high, on strong gains in the shares of energy, coal sectors, and pharmaceutical sectors after China issued plans for a health-care sector overhaul. Banks stocks were firmer on hopes their fundamentals are improving.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, gained 19.40 points, or 0.8%, to 2,439.18, while the Shenzhen Component Index on the smaller Shenzhen Stock Exchange erased 12.39 points, or 0.13%, to 9,232.26.

On the economic front, China is likely to emerge from its economic slump later this year, helping the rest of Asia stabilise and possibly rebound, the World Bank said in a statement.

China unveiled a three-year action plan on health care reform Tuesday, which it said would lay a solid foundation for equitable and universal access to essential health care for all in China.

Under the 850 billion Yuan (124 billion U.S. dollar) plan for 2009 to 2011, the government promised universal access to basic health insurance, introduction of an essential drug system, improved primary health care facilities, equitable access to basic public health services and pilot reform of state-run hospitals.

In Hong Kong, the stock market finished the session lower, snapping three days of winning streak on tracking Wall Street overnight plunge and weakness in resources and other commodity shares after metals prices dropped yesterday'. Financials plunged on concerns over banks and upcoming results from U.S. companies, while property developers were lower on reports Shanghai's home sales fell last week.

The Hang Seng Index dropped 69.07 points, or 0.46%, to 14,928.97, while the Hang Seng China Enterprise Index, which tracks H shares of Chinese companies, dived 31.80 points, or 0.36% to 8,772.65.

In Australia, the stock market finished the session lower, in response to profit taking on Wall Street and weakness in resources and banking stocks. Financials were lower after the Reserve Bank of Australia cut interest rates less than market anticipated. Major miners and materials were lower after the triple whammy of equities and commodities falls and speculation of a Rio rights issue.

The benchmark S&P/ASX200 tumbled 50.30 points, or 1.34%, to 3,706.30, while the broader All Ordinaries dropped 47.90 points, or 1.3%, to 3,648.50.

On the economic front, the Reserve Bank of Australia lowered cash rate by 25bps to 3.0% today. The total accumulative policy easing is now 425bps in the past seven months. The bank judged that there was scope for "further modest adjustment" to cash rate even though market and mortgage rates are at every low level. RBA believes that with this monetary policy easing and substantial fiscal initiatives, "significant support" will be provided to domestic demand and that is taken as a signal of halting the easing cycle by the markets.

In New Zealand, equity markets gave up its three-day winning streak on Tuesday. The NZ market dipped down as banking shares also took a plunge after bad news on the financial front. The benchmark NZX50 fell 0.80% or 20.973 points to close at 2612.47. While 12 stocks rose, 30 stocks dropped and 8 remained unchanged. NZX 15 was down 0.85 or 41.591 points to close at 4832.854.

On the economic front, as per NZIER's Quarterly Survey of Business Opinion (QSBO), New Zealand's domestic activity continued to contract further in the first three months of 2009. As per the report, the ongoing recession is likely to be deeper than previously thought after a net 38% of firms reported that they expect a drop in their own activity in the June quarter.

When seasonally adjusted, the net balance of firms reporting a fall in their own activity worsened to 47% in the March quarter, which is the worst result for this indicator since at least 1970. Also, a net 36% of firms reported that they intend to reduce staff numbers over the next three months, after a net 34% actually did so in the last three months, as per the survey. These figures are the highest since late 1991.

Increasing numbers of firms expect cost pressures to continue easing and prices to fall in the near future, which suggest that inflation will drop further. The latest QSBO suggests little inflation risk in the short run which gives scope for further monetary stimulus.

In South Korea, stock markets closed higher as optimism about an economic recovery overshadowed profit taking. Reversing earlier losses, the benchmark Korea Composite Stock Price Index climbed 2.25 points to 1,300.1. Foreign investors sold a net 152.7 billion won worth of local stocks on the main bourse, and were net sellers for the first time in five sessions.

In Taiwan, stock market continued to close higher for 6th straight session, as investors bought property and shipping shares on continued hopes they would benefit from improving ties with China. However, gains were capped by financial shares fall ahead of a potential legislative move to lower the cap on credit card interest rates. The regional stock market opened the day lower tracking the Wall Street cues, recovered towards the end of the session.

The main Taiex share index stayed with the gains for the sixth straight session, the longest winning streak since May 2008, keeping its self above level of 5500 – points by resting at 6 months high. Taiex added 20.63 points or 0.37%, closing the day at 5576.85, the highest closing since 3 October 2008 when market closed the day at 5742.23.

On the economic front, the loans extended by Taiwan's domestic banks to small- and medium-sized enterprises (SMEs) dropped a monthly NT$37.894 billion i.e.US$1.148 billion to NT$3.0421 trillion i.e. US$92.18 billion as of the end of February.

In other economic news, approximately 45,000 students who graduated from university in 2008 and had their resumes posted with online employment broker 104 Job Bank are still looking for work. According to statistics released by the company, the group represents some 21% of the 210,000 graduates who posted their resumes on the job bank site, the company said.

Stock market in India was closed on the account of public holiday.

Elsewhere, Malaysia's Kula Lumpur Composite index was down 0.43% or 3.93 points to 919.84, while Indonesia's Jakarta composite decreased by 25.78 points or 1.70% to 1,490.86.

In other regional market, stocks in Europe turned lower as nerves were tested on the eve of first-quarter earnings season. On a regional level, the U.K. FTSE 100 index fell 0.9% to 3,956.21, the German DAX 30 index dropped 1.2% to 4,294.80 and the French CAC-40 index fell 1.4% to 2,888.97.

India Strategy - Apr 7 2009

India Strategy - Apr 7 2009

Markets Closed Today

Markets are closed today on account of Mahavir Jayanti

See the list of Trading holidays in 2009



Bullion metals shed more glaze

Gold gives up all its year to date gains

Bullion metal ended lower and gave up almost all of their yearly gains on Monday, 06 April, 2009. Prices fell as traders remained a bit optimist about the overall recovery of the global recession thereby decreasing the appeal of the precious metal. The stronger dollar also added to the selling pressure.

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 Monday, Comex Gold for April delivery fell $24.1 (2.7%) to close at $871.5 an ounce on the New York Mercantile Exchange. During intra day trading, it fell to a low of $865.1. Last week, gold ended lower by 3%. Year to date, gold prices are lower by 1.3%.

For the month of March, gold fell 2.1%, down for the first month in five. But the metal gained 4.3% in the first quarter. Before March, for the month of February, gold ended higher by 7.4%. For January, 2009, gold had gained 3.9%.

On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (15.8%) since then.

On Monday, Comex silver futures for May delivery fell 62.5 cents (4.9%) to end at $12.11 an ounce. Year to date, silver has climbed 7.2% this year. For 2008, silver had lost 24%.

In the currency market on Monday, the dollar pared early losses and gained considerably against its counterparts. The dollar index, which calculates the strength of dollar against a basket of six major currencies rose almost 1%.

In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.

Last year, the weakening dollar and higher global demand for raw materials had led to records for commodities including gold. Gold reached a record in March 2008 as a U.S. housing slump and credit crisis spurred the Federal Reserve to slash borrowing costs. In the last move, the Federal Reserve has cuts its target bank lending rate to 0.25% from 5.25% in September, 2007. The Fed did it in nine steps.

Prior to 2008, gold had witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Silver had climbed 16% in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.

At the MCX, gold prices for June delivery closed lower by Rs 355 (2.4%) at Rs 14,121 per 10 grams. Prices rose to a high of Rs 14,425 per 10 grams and fell to a low of Rs 14,022 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 922 (4.3%) lower at Rs 20,347/Kg. Prices opened at Rs 21,206/kg and fell to a low of Rs 20,100/Kg during the day's trading.

Crude tumbles again

Prices slip for second straight day

Oil prices fell for second straight day on Monday, 06 April, 2009. Prices continued to fall as last week's job loss data once again raised concerns about the overall health of the US economy questioning the demand for energy in the coming months.

On Monday, crude-oil futures for light sweet crude for May delivery closed at $51.05/barrel (lower by $1.46 or 2.8%) on the New York Mercantile Exchange. Last week, crude ended higher by 0.3%.

Crude ended March trading up 10.9%. It rallied 11.3% in the first quarter. For the month of February, crude prices had ended higher by 1.5%.

Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 65% since then. Year to date, in 2009, crude prices are higher by 20%. On a yearly basis, crude prices are lower by 50%.

On last Friday, the Labor Department reported that the total number of jobs lost since the recession began climbed to 5.1 million. As per the report, U.S. nonfarm payrolls fell by 663,000 in March, while the unemployment rate jumped to a 26-year high 8.5% from 8.1%, as expected.

In the currency market on Monday, the dollar pared early losses and gained considerably against its counterparts. The dollar index, which calculates the strength of dollar against a basket of six major currencies rose almost 1%.

Also at the Nymex on Monday, May reformulated gasoline fell 1.1% to $1.4755 a gallon and May heating oil lost 1.9% to $1.4191 a gallon.

May natural-gas futures slid 0.5% to $3.801 per million British thermal units.

Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

At the MCX, crude oil for March delivery closed at Rs 2,522/barrel, lower by Rs 121 (4.6%) against previous day's close. Natural gas for April delivery closed at Rs 186.8/mmbtu, lower by Rs 5.1/mmbtu (2.6%).

India Mobile Sector

India Mobile Sector

India Telecom Sector

India Telecom Sector

Q4FY2009 Auto earnings preview

The sales volume for the automobile companies picked up well in Q4FY2009, showing some respite after the sluggish third quarter. During the fourth quarter, the automobile companies beat street expectation in terms of volume gains, particularly in the passenger car and two-wheeler segments. Traditionally, the fourth quarter is the best as sales pick up in this period driven by the year-end demand. The fourth quarter of FY2009 was no different, as automakers reported a strong sequential growth despite the slowdown and macroeconomic woes. The sales were mainly driven by the positive impact of the implementation of the Sixth Pay Commission’s recommendations (the automobile sector is considered the biggest beneficiary of the hike in the salary of government employees); the attractive discounts being offered by the automakers; and the continued strong rural demand despite deceleration in agricultural growth in the previous quarter. Moreover, major public sector banks also contributed to the growth by easing finance availability and lending at lower rates. The announcement of various stimulus packages by the government also provided some remedy for the automobile sector especially the commercial vehicle (CV) segment that has been hit hard by the slowing demand.

Q4FY2009 Cement earnings preview

* Driven by strong dispatches in January and February 2009, the total dispatches for Q4FY2009 are estimated at 49.9 million metric tonne (MMT), higher than that of 46MMT in the same quarter of the last year (Q4FY2008). However, the capacity during the same period has increased by 15.8% to 51.9MMT, which is expected to pull down the utilisation ratio to 96% in Q4FY2009 from 102% in Q4FY2008.

*Overall, the Sharekhan’s cement universe is expected to register a 7.6% growth in volumes in Q4FY2009. Shree Cement, Ultratech Cement and Orient Paper & Industries Ltd (OPIL) are likely to report an impressive volume growth of 13.4%, 9.9% and 13.1% respectively in Q4FY2009.

* In terms of top line, the Sharekhan’s cement universe is likely to register an 11.9% growth in revenues. Madras Cement, Ultratech Cement, Shree Cement and OPIL are expected to post impressive sales growth of 20.3%, 20.1%, 15.3% and 12.4% respectively due to strong demand in northern and southern regions and capacity addition carried out by the aforesaid cement companies.

* In terms of realisation, all the companies have raised cement prices during the quarter due to a strong demand and supply shortage in some areas. In terms of price hike, companies operating in the eastern region have benefited the most. The south-based companies are fetching healthy realisation compared to companies operating in other regions. During the quarter on an all India level, the average cement price has gone up by Rs15-20 per bag of 50 kg.

* The adjusted profit after tax (PAT) of the companies under the Sharekhan’s cement universe is expected to decline by 5.6% which is on the back of downfall in the operating profit margin (OPM). The OPM is expected to decline in the range of 331 basis points to 466 basis points. Moreover, the sharp increase in the interest and depreciation charges due to capacity expansion will have an adverse impact on the bottom line of the companies.