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Monday, May 31, 2010
Sensex ends volatile session higher; M&M soars
Indian equities continued to gain for the fourth day on Monday. The Sensex ended the volatile session on a higher note. PSU, auto, healthcare and oil & gas stocks gained, while realty, IT, teck and capital goods edged lower. Midcap index outperformed smallcap index.
It opened on a sensitive note and traded in a narrow range amid volatility. The index advanced after government data showed robust economic performance for the Q4 and year ended March 2010 and even firm Asian shares also supported the upmove. Buying was seen in select heavyweights. Finally, it closed in the green after touching a high of 16,971.15.
At the close, the benchmark 30-share index, BSE Sensex gained 81.57 points or 0.48% at 16,944.63. Meanwhile, the broad based NSE Nifty climbed by 19.75 points or 0.39% at 5,086.30.
As per government data released today, India`s economy grew at 8.6% in the March quarter driven by robust manufacturing sector on the back of government and consumer spending. The growth figure for FY`10 stood at 7.4%. Most economists expected the economy would have expanded higher than the official advance estimate of 7.2% for FY10. For the fourth quarter, economists expected the economy to have grown anywhere between 8.7 and 9.3%. The first three quarters of the past fiscal grew by 6.1%, 7.9% and 6% in that order.
On global front, Asian stocks rose, led by health-care and consumer shares, as signs of earnings growth in the region overshadowed a credit-rating downgrade on Spain and concern China will step up measures to curb property speculation. European stocks advanced as Federal Reserve Bank of Chicago President Charles Evans indicated the region`s debt crisis will prompt the US central bank to delay raising interest rates. US futures rose.
Sensex Movers
Reliance Industries contributed rise of 25.86 points in the Sensex. It was followed by Oil & Natural Gas Corporation (19.99 points), Mahindra & Mahindra (15.67 points), State Bank Of India (12.8 points) and Bharat Heavy Electricals (8.5 points).
However, Infosys Technologies contributed fall of 10.85 points in the Sensex. It was followed by Sterlite Industries (India) (9.04 points), Tata Consultancy Services (5.63 points), Grasim Industries (2.95 points) and Jaiprakash Associates (2.81 points).
Major gainers in the 30-share index were Mahindra & Mahindra (5.03%), Oil & Natural Gas Corporation (3.21%), Bharat Heavy Electricals (1.62%), State Bank Of India (1.48%), Hero Honda Motors (1.34%), and Maruti Suzuki India (1.13%).
On the other hand, Sterlite Industries (India) (2.79%), Reliance Communications (1.76%), Jaiprakash Associates (1.54%), DLF (1.34%), ACC (1.20%), and Tata Consultancy Services (1.00%) were the biggest losers in the Sensex.
Mid & Small-cap Space
The BSE Mid and small caps outperformed their larger counterparts gaining 1.17% and 0.62% respectively.
The major gainers in the BSE Midcap were Allcargo Global Logistics (3.51%), Allahabad Bank (2.45%), Alfa-Laval (India) (1.78%), Amtek Auto (1.67%) and Core Projects and Technologies (0.37%).
The major gainers in the BSE Smallcap were A B G Shipyard (4.13%), Action Construction Equipment (3.3%), A B G Infralogistics (2.26%), Adhunik Metaliks (1.15%) and Aarti Industries (0.85%).
Sectors in Limelight
The Auto index was at 7,699.94, up by 141.51 points or by 1.87%. The major gainers were Bajaj Auto (1.99%), Bharat Forge (1.88%), Amtek Auto (1.67%), Exide Industries (1.49%) and Apollo Tyres (1.06%).
The HC index was at 5,490.27, up by 95.66 points or by 1.77%. The major gainers were Dr Reddy`S Laboratories (2.98%), Cadila Healthcare (1.96%), Aurobindo Pharma (1.79%), Divis Laboratories (1.49%) and Biocon (0.92%).
The Oil & Gas index was at 10,180.68, up by 166.40 points or by 1.66%. The major gainers were Cairn India (3.45%), Bharat Petroleum Corporation (3.26%), Essar Oil (1.72%), G A I L (India) (1.43%) and Hindustan Petroleum Corporation (1.06%).
On the other hand, the Realty index was at 3,097.92, down by 25.95 points or by 0.83%. The major losers were Anant Raj Industries (5.62%), Ackruti City (1.65%), D L F (1.34%), Housing Development and Infrastructure (1.27%) and Phoenix Mills (0.93%).
Market Breadth
Market breadth was positive with 1,662 advances against 1,178 declines.
Value and Volume Toppers
Sesa Goa topped the value chart on the BSE with a turnover of Rs. 2,399.47 million. It was followed by Tata Steel (Rs. 1,212.03 million), Educomp Solutions (Rs. 984.35 million) and State Bank Of India (Rs. 809.12 million).
The volume chart was led by Cals Refineries with trades of over 19.60 million shares. It was followed by Suzlon Energy (12.94 million), Sesa Goa (6.28 million) and Punj Lloyd (5.33 million).
BSE Bulk Deals to Watch - May 31 2010
Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
31/5/2010 532166 Alka Securities SKYLARK MERCENTILE PVT.LTD. B 520259 6.32
31/5/2010 531761 Amulya Leas SANGEETA PAREEK U B 100000 38.87
31/5/2010 531761 Amulya Leas KUMAR SURENDRA JAIN S 30000 39.16
31/5/2010 531761 Amulya Leas MADHUR JAIN S 50000 39.16
31/5/2010 531761 Amulya Leas BP FINTRADE PRIVATE LIMITED S 31100 37.97
31/5/2010 506074 Arshiya Intl ARCHANA AJAY MITTAL B 541368 205.13
31/5/2010 506074 Arshiya Intl ABN AMRO BANK NV S 540744 205.02
31/5/2010 500463 Avaya Glob RAJASTHAN GLOBAL SECURITIES LTD B 78151 264.82
31/5/2010 500463 Avaya Glob CONSOLIDATED SECURITIES LIMITED B 74329 257.79
31/5/2010 530755 Coral News BALWANTSINGH BISHT B 35500 7.45
31/5/2010 530755 Coral News INDER PAL DOGRA S 35000 7.45
31/5/2010 526550 Country Club SHRI BHAWANI INDIA PVT LTD B 1850000 22.95
31/5/2010 532542 Crew Bos LEASEMEN FIN-INVEST (INDIA) LIMITED B 70000 98.71
31/5/2010 512361 Cupid Trades PARVATI MINERALS PRIVATE LTD B 10000 54.00
31/5/2010 512361 Cupid Trades SHAMANJWALI PVT LTD S 10000 54.00
31/5/2010 531270 Dazzel Conf RADHADEVI KHATORIA B 35000 23.00
31/5/2010 531171 Devika Prot NARENDRA VALLABHAJI BAHUVA B 51914 26.93
31/5/2010 517973 DMC Intl OURS TRADING AND HOLDINGS PRIVATE LIMITED B 209019 15.48
31/5/2010 517973 DMC Intl ATUL MITTAL B 136601 15.48
31/5/2010 517973 DMC Intl MUKESHKUMAR GUPTA S 132001 15.49
31/5/2010 517973 DMC Intl OURS TRADING AND HOLDINGS PRIVATE LIMITED S 209019 15.39
31/5/2010 532707 Dynemic Prod DHEERAJ KUMAR LOHIA B 92248 23.94
31/5/2010 532957 Gokak Textiles SPS CAPITAL & MONEY MANAGEMENT SERVICES PVT LTD B 34297 50.00
31/5/2010 532957 Gokak Textiles TATA INVESTMENT CORPORATION LIMITED S 34297 50.00
31/5/2010 514312 Jaihind Syn JMP SECURITIES PVT LTD B 30000 11.35
31/5/2010 514312 Jaihind Syn S L GUPTA AND Co. S 39900 11.35
31/5/2010 514312 Jaihind Syn REKHA KUNTAL NARCHENIA S 30001 11.35
31/5/2010 523405 JM Financial MORGAN STANLEY MAURITIUS COMPANY LIMITED B 18413458 37.06
31/5/2010 523405 JM Financial CITIGROUP GLOBAL MARKETS MAURITIUS PRIVATE LIMITED S 8123358 36.50
31/5/2010 523405 JM Financial TIGER GLOBAL LIMITED S 10290100 37.50
31/5/2010 523712 JMG Corp MDG ASSOCIATES PRIVATE LIMITED B 449000 5.00
31/5/2010 523712 JMG Corp GE CAPITAL INVESTMENT PVT LTD S 449000 5.00
31/5/2010 530955 Kailash Ficom SPARKLE TOOTHBRUSH MFG CO PVT B 100000 30.09
31/5/2010 508306 Ledo Tea VEENA SHANTILAL GANDHI B 8507 74.75
31/5/2010 508306 Ledo Tea VEENA SHANTILAL GANDHI S 5550 74.54
31/5/2010 507912 LKP FIN PRASU LEASING AND FINANCE PRIVATE LIMITED B 1900200 120.00
31/5/2010 507912 LKP FIN MAHENDRA VASANTRAI DOSHI S 1900000 120.00
31/5/2010 506919 Makers Lab GINNI FINANCEPVT LTD B 25000 52.98
31/5/2010 590111 MASTER VENMKATADURGA NAGESWARARAO ATLURI B 30010 34.13
31/5/2010 590111 MASTER JAYA VEERA VENKATA DURGA PRAKASH MADDULA B 51000 34.30
31/5/2010 590111 MASTER MALLIKHAR JUNARAO V S 77001 33.61
31/5/2010 531453 Mohit Inds CHANDRAKANT B SHAH B 25000 29.67
31/5/2010 531453 Mohit Inds NIRANJAN VENI S 30000 28.70
31/5/2010 526622 My Fair Lady GIRISH GULATI B 46143 7.43
31/5/2010 531496 Omkar Overseas PANKAJ BABULAL KOTECHA B 26559 81.47
31/5/2010 531496 Omkar Overseas YUMA FINANCIAL SERVICES PVT LIMITED B 36253 81.50
31/5/2010 531496 Omkar Overseas J V STOCK BROKING PRIVATE LIMITED S 25773 81.26
31/5/2010 531496 Omkar Overseas ARVIND KASHMIRILAL PUNJABI S 43000 81.33
31/5/2010 512097 Oregon Comm KRUPASANJAY SONI B 14587 333.72
31/5/2010 512097 Oregon Comm SANJAY JETHALAL SONI B 14696 332.33
31/5/2010 512097 Oregon Comm KRUNAL GOPALDAS RANA S 5050 330.54
31/5/2010 512097 Oregon Comm BHAVESH SHANTILAL TRIVEDI S 7000 322.00
31/5/2010 531118 Pacific Cotspin PRATAP RAI B KAMDAR HUF B 160000 3.13
31/5/2010 531118 Pacific Cotspin CHANDRAKANT PRANJIVAN VORA B 160000 3.47
31/5/2010 531118 Pacific Cotspin CHANDRAKANT PRANJIVAN VORA S 160000 3.13
31/5/2010 531118 Pacific Cotspin BHAVIK KOTHARI S 175010 3.42
31/5/2010 531467 Polypro Fibrils JASVINDER SINGH B 30000 33.38
31/5/2010 531467 Polypro Fibrils ABHI CAPITAL SERVICES LIMITED S 30005 33.37
31/5/2010 511016 Premier Cap PROMETHEUS E SERVICES PRIVATE LIMITED B 13900 62.07
31/5/2010 511016 Premier Cap YUKTI INVESTMENT PRIVATE LIMITED S 15000 62.54
31/5/2010 531802 Prerna Infra CHANDULAL D VARIA (HUF) S 31890 21.78
31/5/2010 503873 Priyadarshini Spn PRADEEP K R AGGARWAL B 104638 35.10
31/5/2010 590077 Ranklin Sol ROBART. S 27115 80.45
31/5/2010 590077 Ranklin Sol M SRINIVASA REDDY S 45000 78.32
31/5/2010 512359 Rotam Comm NILESH RASIKLAL PANDYA B 49975 83.50
31/5/2010 533056 SARK SYS DEVASHISH GARODIA B 57680 43.48
31/5/2010 533056 SARK SYS MV TRADECOM PRIVATE LIMITED S 59820 43.92
31/5/2010 526133 Supertex Inds DHAVAL AMRISH SHAH B 500000 2.83
31/5/2010 526133 Supertex Inds DHAVAL AMRISH SHAH B 600000 2.82
31/5/2010 526133 Supertex Inds PARAMESHWAR EXPORTS PRIVATE LIMITED S 500000 2.81
31/5/2010 526133 Supertex Inds SUPER INFINCON PVT LTD S 1486583 2.83
31/5/2010 522080 Vulcan Engr SUVIR MALANEY TRUST S 44245 35.56
31/5/2010 531249 Well Pack Papers SANTOSH VISHRAM GHADSHI B 550000 39.71
31/5/2010 531396 Women Networks RADIANT FINANCIAL SERVICES LIMITED B 37600 30.59
31/5/2010 531396 Women Networks KANTA CHHAJER S 30000 30.32
NSE Bulk Deals to Watch - May 31 2010
Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
31-MAY-2010,AUSTRAL,Austral Coke & Projects L,V. P. CONSULTANTS PRIVATE LIMITED,BUY,2088546,7.06,-
31-MAY-2010,AVAYAGCL,Avaya GlobalConnect Limit,CONSOLIDATED SECURITIES LTD,BUY,84223,260.37,-
31-MAY-2010,AVAYAGCL,Avaya GlobalConnect Limit,RAJASTHAN GLOBAL SECURITIES LTD,BUY,106899,261.19,-
31-MAY-2010,DCHL,Deccan Chronicle Hold Ltd,BIRLA SUN LIFE INSURANCE COMPANY LIMITED,BUY,1400000,120.45,-
31-MAY-2010,DCM,DCM Ltd,PRIMORE SOLUTIONS PVT.LTD,BUY,20869,60.05,-
31-MAY-2010,MPHASIS,MphasiS Limited,DEUTSCHE SECURITIES MAURITIUS LIMITED,BUY,2394023,564.60,-
31-MAY-2010,NAHARINDUS,Nahar Industrial Enterpri,SHIVALIK SEC. LTD,BUY,285155,63.49,-
31-MAY-2010,AUSTRAL,Austral Coke & Projects L,V. P. CONSULTANTS PRIVATE LIMITED,SELL,2088546,7.02,-
31-MAY-2010,BRANDHOUSE,Brandhouse Retails Limite,LEASEMEN FIN-INVEST (I) LTD,SELL,500000,40.89,-
31-MAY-2010,DCM,DCM Ltd,PRIMORE SOLUTIONS PVT.LTD,SELL,92763,58.77,-
31-MAY-2010,MPHASIS,MphasiS Limited,BARING INDIA INVESTMENTS LTD PCC,SELL,2394023,564.60,-
31-MAY-2010,NAHARINDUS,Nahar Industrial Enterpri,SHIVALIK SEC. LTD,SELL,1,63.75,-
Listless session; Q4 GDP at 8.6%
Today's major news
Mahindra & Mahindra’s Q4FY2010 total income surges 45.5% year on year; the stock jumps 5.03%
Q4FY2010 gross domestic product (GDP) comes at 8.6%
Diamond Power Infrastructure bags Rs117-crore order; the stock closes 1.70% higher
Global signals
European stocks edged higher in early trades recovering ground lost on Friday with pharmaceutical stocks gaining in subdued trading, as key markets remain closed. FTSE 100 is closed today.
All the major Asian indices closed positive except Shanghai Composite that closed more than 2% lower. SGX Nifty closed 18.5 points higher.
The US market will be close today on the eve of Memorial day.
Indian indices
Continuing the charge for the fourth straight day, bulls pushed domestic indices higher on supportive Asian markets and robust gross domestic product (GDP) readings. The GDP for Q4FY2010 came in at 8.6%. The GDP for FY2010 stood at 7.4% and topped the government's projection of 7.2%. The buoyant sentiment was also supported by news that the monsoon is also progressing at a steady pace.
On mixed leads from Asian indices, Sensex opened mere nine points higher but turned negative though for a brief period. It shuttled between negative and positive zones right till the announcement of GDP numbers. Above-expected GDP readings lifted sentiments and Sensex edged higher. However, profit booking dragged the index back in red in afternoon and Sensex touched the day’s low—of 16806. In the last hour, late buying in heavyweights such as Reliance Industries and automobile and oil & gas stocks catapulted Sensex to day’s high—of 16971. Sensex ended the session at 16945, up 81 points. Nifty settled at 5086, 20 points higher.
Market sentiment
The market breadth was positive as advancing stocks outnumbered trailing stocks. Of the 2,898 stocks traded on the BSE, 1,627 stocks advanced, whereas 1,160 stocks declined. Hundred and eleven stocks remained unchanged.
Sectoral & stock screening
Of the 13 sectoral indices on the BSE, nine rallied while four posted losses. BSE PSU was up 2.70%, followed by the BSE Auto that gained 1.87%. Rest of the sector gainers were in the range of 0.26% to 1.77%. Among losers, BSE Realty shed the most—0.83%, followed by BSE IT (information technology) that declined 0.50%.
Among 'A' group stocks, Hindustan Copper surged the most—by 19.31%—followed by Educomp Solutions, which rose 10.98% and IVRCL Infrastructure that jumped 7.69%. On the losers’ list, Punj Lloyd topped with a loss of 12.66% followed by Suzlon Energy, which slid by 7.78% and REI Agro, which fell 6.15%.
Viewing volumes
Wind turbine major—Suzlon Energy saw highest trading with over 1.29 crore shares changing hands on the BSE, followed by industrial finance company IFCI (1.23 crore shares), iron and steel maker Sesa Goa (0.62 crore shares), Punj Lloyd (0.53 crore shares) and Anil Dhirubhai Ambani Group firm–Reliance Natural Resources (0.43 crore share).
Nifty June 2010 futures at discount
Turnover declines
Nifty June 2010 futures were at 5056.05, at a discount of 30.25 points compared to spot closing of 5,086.30. Turnover in NSE's futures & options (F&O) segment was Rs 62,506.35 crore, lower than Rs 68,591.35 crore on Friday, 28 May 2010.
JSW Steel June 2010 futures were at discount at 1097 compared to the spot closing of 1103.20.
Tata Motors June 2010 futures were at discount at 757 compared to the spot closing of 758.
IFCI June 2010 futures were near spot price at 54.95 compared to the spot closing of 54.65.
In the cash market, the S&P CNX Nifty rose 19.75 points or 0.39% at 5,086.30.
Sensex gains 5.75% in four days
Key benchmark indices clocked decent gains in a choppy trade with indices extending last three-day gains, as robust GDP data and steady progress of monsoon lifted investor sentiment. Global cues were supportive with Asian markets closed higher. While European markets turned mixed after a firm start. The BSE 30-share Sensex rose 81.57 points or 0.48%, up close to 30 points from the day's low and off close to 25 points from the day's high. Small and mid-cap stocks attracted buying fancy evident from the strong market breadth. From the recent low of 16022.48 on 25 May 2010, the BSE Sensex gained 922.15 points or 5.75% in four trading sessions.
The market was volatile. It rose in early trade ahead of the key GDP data. It hit the day's high in mid-morning trade after government data showed robust economic performance for the Q4 and year ended March 2010. It pared gains in early afternoon trade. Market moved between the positive and negative terrain in afternoon trade after slipping into the red to hit fresh day's low. Buying demand at lower levels helped market cut losses in mid-afternoon trade. Late buying frenzy propelled market to day's high in late trade.
As per government data released today, India's economy grew at 8.6% in the March quarter driven by robust manufacturing sector on the back of government and consumer spending. The growth was significantly higher than the revised 6.5% expansion in Q3 December 2009 and a 5.8% growth in Q4 March 2009. The manufacturing sector grew 16.3%, farm output rose 0.7%, mining sector expanded 14% and services increased by 8.4% in January-March 2010 from a year earlier.
For the full year to March 2010, the economy expanded 7.4%, above a government forecast of 7.2%. Economic growth had slowed down to 6.7% in year ended March 2009.
The India Meteorological Department (IMD) said today that the monsoon has hit the southern coast. The weather office late April 2010 said rainfall is likely to be 98% of the long-term average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.
The south west monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector. The quantum of rainfall in the crucial sowing month of July and distribution of rainfall during the monsoon season also holds key.
PSU stocks gained on renewed buying demand. Auto stocks were in limelight ahead of the release of May 2010 sales figures due to be announced during the week. IT stocks saw mixed trend. But, metal stocks declined after the commodity prices declined on Friday, 28 May 2010. Realty stocks too declined, reversing a three-day rising trend, on profit booking.
European shares turned mixed after ea firm start. France's CAC 40 fell 0.24%. Germany's DAX rose 0.33%. London Stock Exchange remains closed today for a holiday.
Most Asian stocks edged higher, as gains among health-care companies overshadowed declines by commodity-related shares. Key benchmark indices in Indonesia, South Korea, Singapore, Japan and Taiwan were by up between 0.06% to 3.06%. However, indices in China and Hong Kong were down 2.40% and 0.01% respectively.
US markets declined on Friday, 28 May 2010 as a downgrade by Fitch of Spain's credit rating reignited worries about euro-zone debt issues. The Dow Jones industrial average fell 122.36 points, or 1.19%, to 10,136.61. The Standard & Poor's 500 Index shed 13.65 points, or 1.24%, to 1,089.41 and the Nasdaq Composite Index declined 20.64 points, or 0.91 percent, at 2,257.04.
Global ratings firm Fitch Ratings cut Spain's credit rating by one level to AA+ from AAA, saying the country's debt burden is likely to weigh on growth. Fitch cited an inflexible labor market and a restructuring of regional and local savings banks as hindrances to the pace of adjustment. Spain is struggling to lower debt amid a fiscal crisis that prompted the European Union to forge an almost $1 trillion loan package for its weakest economies.
Spain's downgrade follows similar cuts in ratings earlier this month of Greece and Portugal as those nations attempt to grapple with debt problems by implementing austerity measures.
In economic data, personal spending in the U.S. was unchanged last month as Americans used wages to rebuild savings, according to a Commerce Department report. The Institute for Supply Management-Chicago Inc. said its business barometer fell to 59.7 this month from 63.8 in April.
US markets will remain closed on Monday, 31 May 2010, for the Memorial Day holiday. Trading in US index futures showed the Dow could rise 33 points at the opening bell on Tuesday, 1 June 2010.
Back home, government data released on 28 May 2010 showed food inflation rose 16.23% in the year through 15 May 2010, lower than previous week's annual rise of 16.49%. The fuel price inflation also slowed to 12.08% from the previous week's 12.33%. The primary articles index was up 15.90%, compared with the previous week's annual reading of 16.19%.
Also data of six core infrastructure industries registered a 5.1% growth in April 2010 compared with 3.7% rise in April 2009. For the financial year ended March 2010, the core sector posted a growth 5.5% as against 3% in the same period last year.
The Reserve Bank of India (RBI) on 26 May 2010, eased rules to boost liquidity at banks to avoid a cash crunch because of payments for corporate advance tax and license fees for third-generation mobile-phone spectrum. As per RBI's circular released on 26 May 2010, banks can borrow as much as 0.5% of their deposits from the central bank under the repurchase agreement till 2 July 2010. In addition, RBI said that as an ad hoc measure, banks can seek a waiver for any shortfall in maintenance of the prescribed 25% statutory liquidity ratio (SLR) while availing the temporary facility.
Besides, the central bank has decided to conduct two rounds of liquidity adjustment facility (LAF) operations till 2 July 2010. Through LAFs, that are conducted at least once a day, banks can avail of funds through the repo window or park surplus cash through the reverse repo route.
China, India, Brazil and Russia are powering ahead, the Organisation for Economic Cooperation and Development (OECD) said on 26 May 2010, revising upwards its growth outlook for all four largest emerging economies. The OECD revised India's GDP growth forecast for 2010 to 8.2% from its earlier estimate of 7.3%. It also raised the growth forecast for 2011 to 8.5% from its earlier estimate of 7.6%. The OECD also said that underlying inflationary pressures are likely to persist given the strong outlook for demand.
In its World Economic Outlook in April 2010, the International Monetary Fund (IMF) pegged India's GDP growth forecast at 8.75% in calendar 2010 and 8.5% in calendar 2011. IMF's optimism was based on expectations of strengthening of domestic demand as the labour market improves. Expectations of increase in investment on the back of strong corporate profitability, rising business confidence and favourable financing conditions, were other factors cited by IMF for its prediction of strong growth in India's economy.
Prime Minister Manmohan Singh late May 2010 said inflation is showing signs of moderating and the government expects to achieve a medium term target of 10% GDP growth annually. The Prime Minister said he expects inflation to moderate to 5-6% by December 2010. Singh expects 8.5% GDP growth in the year ending March 2011 (FY 2011).
The RBI expects India's economy to expand 8% in the year ending March 2011 (FY 2011) with an upward bias, assuming a normal monsoon this year and sustenance of good performance of the industrial and services sectors on the back of rising domestic and external demand. The RBI at its annual policy review on 20 April 2010 said it will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted.
The fourth quarter corporate results season is almost over. The combined net profit of a total of 3,155 companies rose 14.4% to Rs 86535 crore on 25.2% rise in sales to Rs 9,09,419 crore in the quarter ended March 2010 over the quarter ended March 2009.
The BSE 30-share Sensex rose 81.57 points or 0.48% to 16,944.63. The index rose 108.09 points at the day's high of 16,971.15 in late trade. The Sensex fell 56.56 points at the day's low of 16,806.50 in afternoon trade.
The S&P CNX Nifty rose 19.75 points or 0.39% to 5086.30.
The market breadth, indicating the overall health of the market, was strong. On BSE, 1645 shares advanced as compared with 1171 that declined. A total of 85 shares remained unchanged.
The total turnover on BSE amounted to Rs 3753 crore lower than Rs 3979.07 crore on Friday, 28 May 2010.
Among the 30-share Sensex pack, 19 gained while the rest declined.
The BSE Mid-Cap index rose 1.17% and the BSE Small-Cap index gained 0.62%. Both the indices outperformed the Sensex.
Most of the sectoral indices on BSE rose. BSE PSU index (up 2.7%), BSE Auto index (up 1.87%), Healthcare index (up 1.77%), Oil & Gas index (up 1.66%), Banking sector index Bankex (up 0.75%), FMCG index (up 0.65%), Power index (up 0.51%), BSE Consumer Durables index (up 0.49%), outperformed the Sensex.
BSE Realty index (down 0.89%), IT index (down 0.5%), Capital Goods index (down 0.04%), Metal index (up 0.26%), and underperformed the Sensex.
Index heavyweight Reliance Industries (RIL) rose 1.08% to Rs 1045.05 after moving in a range of Rs 1030.10 -1047.95 during the day. The company during market hours on 28 May 2010 said it made a fifth oil discovery in Cambay basin in Gujarat
India's largest oil exploration firm by sales Oil & Natural Gas Corporation gained 3.21% after its net profit jumped 71.13% to Rs 3776.41 crore on 7.37% rise in net sales to Rs 14713.26 crore in Q4 March 2010 over Q4 March 2009.
Auto stocks were in limelight ahead of the release of May 2010 sales figures due to be announced during the week. India's largest tractor maker by sales Mahindra & Mahindra (M&M) surged 5.03%, extending three-day gains, after net profit rose 36.40% to Rs 570.26 crore on 45.80% surge in net sales to Rs 5278.86 crore in Q4 March 2010 over Q4 March 2009. The company declared its results on Saturday, 29 May 2010. The stock was the top gainer from the Sensex pack.
India's top truck maker by sales Tata Motors gained 0.89%. The company reported a consolidated net profit of Rs 2571.06 crore in the year ended March 2010 as against a net loss of Rs 2505.25 crore in the year ended March 2009. Net sales rose 30.7% to Rs 91893.45 crore in the year ended March 2010 over in the year ended March 2009. Surge in consolidated net profit was helped by rising sales and profitability at its Jaguar Land Rover (JLR) unit. The result was announced after market hours on 27 May 2010.
India's largest small car maker by sales Maruti Suzuki India rose 1.13%.
Two wheeler makers, Hero Honda Motors and Bajaj Auto rose by between 1.34% to 1.99%.
Some metal shares declined after LMEX, a gauge of six metals traded on the London Metal Exchange, fell 0.81% to 3,178.10 on Friday, 28 May 2010. India's largest non-ferrous metal producer by sales Sterlite Industries lost 2.79% and was the top loser from the Sensex pack.
Hindalco Industries, Hindustan Zinc and Jindal Steel & Power fell by between 0.14% to 0.6%.
IT stocks saw mixed trend on the back of persistent debt worries in the euro zone area. Europe is the second largest export market for Indian IT firms. India's second largest software services exporter by sales Infosys fell 0.64%. India's largest software services exporter by sales TCS slipped 1%.
However, India's third largest software services exporter by sales Wipro rose 0.66%. India's fourth largest software services exporter by sales HCL Technologies gained 1.95%.
Realty stocks declined, reversing a three-day rising trend, on profit booking DLF, Anant Raj Industries, Housing Development & Infrastructure, Sobha Developers, Unitech, Omaxe fell by between 0.11%t o 5.62%.
The rise in realty stocks came after Lodha Developers last week paid more than twice the asking price to win a 25,000-square meter plot of land in the central Mumbai suburb of Wadala for Rs 4050 crore.
India's largest dam builder by sales Jaiprakash Associates slipped 1.54% despite consolidated net profit surging 166.31% to Rs 1119.18 crore on 35.90% increase in consolidated total income to Rs 6788.76 crore in the year ended March 2010 over the year ended March 2009. The result was announced before trading hours today, 31 May 2010.
PSU stocks gained on renewed buying demand after the Indian government recently gave its nod to the appointment of merchant bankers and intermediaries to ensure smooth handling of disinvestment in state-run enterprises. Hindustan Copper, State Trading Corporation of India, Dredging Corporation of India, HMT, Nationa Fertilizer rose by between 8.23% to 19.31%.
Shares of state-run oil marketing stocks on reports of a fuel price hike next month. A meeting of the empowered group of minister (eGoM) is scheduled on 7 June 2010 to discuss fuel pricing. HPCL (up 1.06%), BPCL (up 3.26%) and Indian Oil Corporation (up 3.44%), gained.
JM Financial clocked the highest volume of 2.04 crore shares on BSE. Cals Refineries (1.96 crore shares), Suzlon Energy (1.29 crore shares), IFCI (1.23 crore shares) and Sesa Goa (62.78 lakh shares) were the other volume toppers in that order.
Sesa Goa clocked the highest turnover of Rs 239.94 crore on BSE. Tata Steel (Rs 121.20 crore), Hindustan Copper (Rs 104.68 crore), Educomp Solutions (Rs 98.43 crore) and State Bank of India (80.91 crore) were the other turnover toppers in that order.
Standard Chartered Grey Market - May 31 2010
| Company Name | Offer Price (Rs.) | Premium (Rs.) |
| Standard Chartered PLC | 104 | Discount |
Spain pain weighs on crude
Crude registers biggest monthly drop since December 2008
Crude oil prices fluctuated for entire session but ultimately ended lower at Nymex on Friday, 28 May 2010. A downgrade for Spain's debt brought back concerns about a potential European debt crisis weighing on oil demand. Today's session marked the final trading day of the month since markets will be closed on Monday, 31 May in observance of Memorial Day.
On Friday, crude-oil futures for light sweet crude for July delivery closed at $73.97/barrel (lower by $0.58 or 0.8%). For the week, crude gained 5.6%.
For the month of May, crude shed 14%. It was the biggest monthly drop for crude since December 2008. For the month of April, crude rose 2.8%. For the first quarter of this year, crude rose by 5.5%. Year to date, crude is higher by 5%.
Fitch Ratings on Friday downgraded Spain's debt to AA+ from AAA, citing concerns about the country's level of debt relative to its gross domestic product.
In the currency market on Friday, the dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 0.4%.
Among economic reports for the day, The Reuters/University of Michigan consumer sentiment index reported that U.S. consumer sentiment rose in May from the prior month. The report stated that the UMich index rose to 73.6 in late May from 72.2 in April. This May's reading is up from 68.7 in May 2009. However, it is below the long-term average of about 87. The report detailed that index of consumer expectations rose to 68.8 in May from 66.5 in April, while the current conditions index remained at 81.
Separately, the Commerce Department reported that consumer spending was weaker than expected in April but rising personal incomes hinted that the economy could actually be on firmer ground. Consumer spending was flat in April after six straight monthly increases. Total personal income rose by a seasonally adjusted 0.4% in April to an annual rate of $12.27 trillion. Incomes were in line with expectations.
Earlier during the week, the EIA reported in its weekly inventory report that crude stockpiles showed an increase of 2.4 million barrels in the week ended 21 May against an increase of 100,000 barrels. The report also showed that gasoline stocks fell 200,000 barrels, while distillates stocks fell 300,000 barrels. The EIA also reported a rise in demand for gasoline and other oil products. Over the last four weeks, gasoline demand was up by 1.2% over the same period last year. Distillate fuel demand in the four-week period rose 16%. Total products supplied over the last four-week period were up 7% compared to last year's.
Among other energy products on Friday, Gasoline for July delivery lost a penny, or 0.4%, $2.03 a gallon. Heating oil for June delivery retreated 2 cents, or 1%, to $1.98 a gallon. Gasoline lost more than 15% in May, although it posted a 4.1% weekly increase. Heating oil prices declined 15% for the month, and gained 3.6% on the week.
Natural gas for July delivery added 5 cents, or 1.1%, to $4.34 per million British thermal units. Natural gas gained nearly 11% for the month, and it advanced almost 6% on the week.
Crude ended FY 2009 higher by 78%, the highest yearly gain since 1999. It reached a high of $82 earlier in October 2009 and hit a low of $33.98 on 12 February 2009. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.
Market seen halting three-day rise, GDP data eyed
The market is likely to edge lower, ending a three-day winning streak, after Spain's credit rating downgrade and downbeat U.S. economic data reignited concerns about the global economic recovery. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated that the Nifty could fall 6 points at the opening bell. The fourth quarter March 2010 GDP data to be released by 11:00 IST today, 31 May 2010 will be closely watched.
Auto, steel and cement shares may see action ahead of release of May 2010 sales figures due to be announced this week.
Asian stocks were mixed on Monday after Spain had its credit rating reduced and downbeat U.S. economic data. Key benchmark indices in Hong Kong, South Korea and Taiwan were by up between 0.04% to 2.47%. However, indices in China and Japan were down 0.61% and 0.21% respectively.
US markets declined on Friday, 28 May 2010 as a downgrade by Fitch of Spain's credit rating reignited worries about euro-zone debt issues. The Dow Jones industrial average fell 122.36 points, or 1.19%, to 10,136.61. The Standard & Poor's 500 Index shed 13.65 points, or 1.24%, to 1,089.41 and the Nasdaq Composite Index declined 20.64 points, or 0.91 percent, at 2,257.04.
Global ratings firm Fitch Ratings cut Spain's credit rating by one level to AA+ from AAA, saying the country's debt burden is likely to weigh on growth. Fitch cited an inflexible labor market and a restructuring of regional and local savings banks as hindrances to the pace of adjustment. Spain is struggling to lower debt amid a fiscal crisis that prompted the European Union to forge an almost $1 trillion loan package for its weakest economies.
Spain's downgrade follows similar cuts in ratings earlier this month of Greece and Portugal as those nations attempt to grapple with debt problems by implementing austerity measures.
In economic data, personal spending in the U.S. was unchanged last month as Americans used wages to rebuild savings, according to a Commerce Department report. The Institute for Supply Management-Chicago Inc. said its business barometer fell to 59.7 this month from 63.8 in April.
US markets remain closed on Monday, 31 May 2010, for the Memorial Day holiday.
As per government data released on 28 May 2010, food inflation rose 16.23% in the year through 15 May 2010, lower than previous week's annual rise of 16.49%. The fuel price inflation also slowed to 12.08% from the previous week's 12.33%. The primary articles index was up 15.90%, compared with the previous week's annual reading of 16.19%.
The Reserve Bank of India (RBI) on 26 May 2010, eased rules to boost liquidity at banks to avoid a cash crunch because of payments for corporate advance tax and license fees for third-generation mobile-phone spectrum. As per RBI's circular released on 26 May 2010, banks can borrow as much as 0.5% of their deposits from the central bank under the repurchase agreement till 2 July 2010. In addition, RBI said that as an ad hoc measure, banks can seek a waiver for any shortfall in maintenance of the prescribed 25% statutory liquidity ratio (SLR) while availing the temporary facility.
Besides, the central bank has decided to conduct two rounds of liquidity adjustment facility (LAF) operations till 2 July 2010. Through LAFs, that are conducted at least once a day, banks can avail of funds through the repo window or park surplus cash through the reverse repo route.
China, India, Brazil and Russia are powering ahead, the Organisation for Economic Cooperation and Development (OECD) said on 26 May 2010, revising upwards its growth outlook for all four largest emerging economies. The OECD revised India's GDP growth forecast for 2010 to 8.2% from its earlier estimate of 7.3%. It also raised the growth forecast for 2011 to 8.5% from its earlier estimate of 7.6%. The OECD also said that underlying inflationary pressures are likely to persist given the strong outlook for demand.
In its World Economic Outlook in April 2010, the International Monetary Fund (IMF) pegged India's GDP growth forecast at 8.75% in calendar 2010 and 8.5% in calendar 2011. IMF's optimism was based on expectations of strengthening of domestic demand as the labour market improves. Expectations of increase in investment on the back of strong corporate profitability, rising business confidence and favourable financing conditions, were other factors cited by IMF for its prediction of strong growth in India's economy.
Prime Minister Manmohan Singh late May 2010 said inflation is showing signs of moderating and the government expects to achieve a medium term target of 10% GDP growth annually. The Prime Minister said he expects inflation to moderate to 5-6% by December 2010. Singh expects 8.5% GDP growth in the year ending March 2011 (FY 2011).
The RBI expects India's economy to expand 8% in the year ending March 2011 (FY 2011) with an upward bias, assuming a normal monsoon this year and sustenance of good performance of the industrial and services sectors on the back of rising domestic and external demand. The RBI at its annual policy review on 20 April 2010 said it will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted.
The India Meteorological Department (IMD) late April 2010 said rainfall is likely to be 98% of the long-term average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.
The south west monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector. The quantum of rainfall in the crucial sowing month of July and distribution of rainfall during the monsoon season also holds key.
The fourth quarter corporate results season is almost over. The combined net profit of a total of 3,044 companies rose 14.90% to Rs 86631 crore on 25% rise in sales to Rs 889227 crore in the quarter ended March 2010 over the quarter ended March 2009.
Stocks extended gains for the third straight session on Friday, 28 May 2010, as world equities rose after China denied reports that it would pare euro-bond holdings. The BSE 30-share Sensex rose 196.66 points or 1.18% to 16,863.06 and the S&P CNX Nifty was up 63.45 points or 1.27% to 5,066.55.
From a recent low of 16,022.48 on Tuesday, 25 May 2010, the Sensex has jumped 840.58 points or 5.24% in the past three trading sessions.
As per the provisional data from the stock exchanges, foreign institutional investors (FIIs) bought stocks worth a net Rs 409.68 crore while domestic funds bought equities worth a net Rs 342.63 crore on 28 May 2010.
Mixed end for precious metals
Gold adds to its gains but silver sheds gains in May
Yellow metal prices managed to eke out marginal gains on Friday, 28 May 2010 at Comex. Precious metals put in a lackluster session on Friday, which marked the final trading day of the month since markets will be closed on Monday in observance of Memorial Day. But silver prices slipped.
Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa.
On Friday, gold for August delivery ended at $1,215 an ounce, higher by $0.60 (0.1%) an ounce on the New York Mercantile Exchange. During intra day trading, gold fell to a low of $1,203.8. Gold for June delivery had settled above $1,200 in early December, only to pull back to $1,172 area and dip as much as the $1,050 vicinity in early February.
For the week, gold ended higher by 3.3%. Gold ended May higher by 3%. For the month of April, gold ended higher by 6%. For the first quarter of this year, gold rose by 1.7%, its sixth quarterly rise. On a year to date basis, gold is higher by 10.7%.
On Friday, July Comex silver futures ended lower by 5 cents (0.3%) at $18.42 an ounce. For the week, silver ended higher by 4.3%. For May, silver shed 1.1%. For the month of April, silver ended higher by 4.1%. For the first quarter of this year, silver rose by 3%. On a year to date basis, silver is higher by 6%.
In the currency market on Friday, the dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 0.4%.
Among economic reports for the day, The Reuters/University of Michigan consumer sentiment index reported that U.S. consumer sentiment rose in May from the prior month. The report stated that the UMich index rose to 73.6 in late May from 72.2 in April. This May's reading is up from 68.7 in May 2009. However, it is below the long-term average of about 87. The report detailed that index of consumer expectations rose to 68.8 in May from 66.5 in April, while the current conditions index remained at 81.
Separately, the Commerce Department reported that consumer spending was weaker than expected in April but rising personal incomes hinted that the economy could actually be on firmer ground. Consumer spending was flat in April after six straight monthly increases. Total personal income rose by a seasonally adjusted 0.4% in April to an annual rate of $12.27 trillion. Incomes were in line with expectations.
Gold had ended FY 2009 higher by 24%. Silver futures had ended 2009 up 50%. The dollar index had lost 4.2% against its counterparts last year.
Daily News Roundup - May 31 2010
M&M makes bid to buy South Korea’s bankrupt Ssangyong Motor Corp. (ET)
Reliance Industries made fifth oil discovery in exploration block CB-ONN-2003/1, located in the Cambay Basin, about 130 km from Ahmedabad. (BS)
Reliance Power to buy three gas-based power plants from group firm Reliance Infrastructure for an enterprise value of Rs10.95bn. (ET)
Amtek Auto has acquired a 26.3% stake in group firm Amtek India from the promoters in a deal worth Rs2.15bn to consolidate business under one flagship company. (ET)
ADAG scales up stake to 15.03% in multiplex chain operator Fame India. (ET)
US Exim Bank may extend credit lines to Spicejet, for its maiden purchase of Boeing aircraft. (ET)
City Union Bank to raise Rs 1,000 cr through QIP route. (BS)
HDIL plans to launch 4-6mn square feet of residential projects in the current financial year. (BS)
Ahluwalia Contracts is looking for acquisition or tie-up with a specialised construction firm to help it become an integrated urban infrastructure company. (BS)
Essar Group plans to buy majority stake in AGC Networks from Avaya of the US for US$$44.5mn. (BS)
Dewan Housing Finance raised Rs5bn through a combination of QIP and preferential allotment of equity shares. (BS)
Uttam Galva Steel plans to commission the Wardha unit by June-end. (BS)
Alstom-Schneider plans to make an open offer to acquire 20% additional stake in Areva T&D India. (BS)
SAIL has hinted at a reduction in prices in line with the downward trend overseas. (DNA)
GTL likely to take 26% stake in Qualcomm's BWA foray. (BS)
Kingfisher Airlines repays 40% of its overdue fuel bill and agreed to give bank guarantee as insurance against default on future jet fuel purchases. (ET)
Magma Fincorp expects regulatory clearance for its general insurance venture with a Germany based company during this year. (ET)
Core sector industries expanded by 5.1% in April, a drop from the healthy 7.2% growth in March. (ET)
Foreign exchange reserves up by US$64mn to US$273bn for the week ending May 21. (BL)
Sugarcane production is likely to increase by 10% to over 300mn tons in the 2010-11 crop year. (BS)
The electrical equipment industry clocks 11.25% growth in 2009-10 compared to this, the industry grew only 2.73% last year. (BS)
DoT asked the finance ministry to give defence forces a waiver of about Rs100bn on spectrum charges. (BS)
Value of pan India broadband spectrum has reached Rs52bn at the end of the fourth day of bidding. (BL)
Good Day Probably!
Survival is triumph enough. Harry Crews
World markets survived yet another tumultuous week, though Spain’s rating downgrade and the subsequent decline in the US as well as European markets served as a grim reminder of the challenges that lie ahead. So, we will kick off the new week with a slightly negative bias due to shaky global markets. With the US markets shut on Monday, the trend may remain rangebound and choppy.
However, things for the Indian market could turn positive as the GDP report is expected to be quite good. FY11 promises to be even better than FY10, though monsoon remains a big ‘X’ factor along with the global economy. Even in the worst case scenario, India should be able to register a decent performance. Still, it won’t be a cakewalk amid high inflation and rising interest rates.
In the near term, the market may remain volatile as uncertainty prevails over the European debt crisis and its wider fallout on the world. Headline risks will continue to play spoilsport with every effort to move higher. As a result, one should not take undue risks at this stage and wait for some more stability.
Wall Street and European markets surrendered gains after Fitch cut Spain’s rating. The VIX jumped back above 31, while the euro slipped and the dollar index rose. Japan's Nikkei is struggling for direction while South Korea and Australia both have managed slim gains.
Beginning of the new month also means that we will get fresh manufacturing PMI data from across the globe. This particular data has been holding up well and may help restore confidence. Among the other data points to watch out for will be the monthly auto sales and the US employment report.
FIIs were net buyers of Rs4.09bn in the cash segment on Friday on a provisional basis, according to the NSE data. The local institutions were also net buyers at Rs3.43bn on the same day. In the F&O segment, the foreign funds were net buyers of more than Rs12bn.
US stocks ended lower on Friday at the end of the Dow's worst month in 70 years, after a downgrade of Spain's debt revived concerns about the ongoing debt problems in the eurozone.
Fitch Ratings lowered its rating on Spain's debt to AA+ from AAA, but said that the country's outlook is stable. The downgrade came despite the passage of austerity measures by the Spanish government.
The Dow Jones industrial average lost 122 points, or 1.2%. The S&P 500 index fell points, or 1.3%, and the Nasdaq composite dropped 21 points, or 0.9%.
US stocks had rallied on Thursday after China said that it will stay invested in European debt. The Dow jumped 285 points, or almost 3%, and the S&P 500 and Nasdaq both gained more than 3%.
Friday marked the end of a rough month on Wall Street in which stocks plunged on worries about the European debt crisis and the weak euro.
The Dow lost 7.9%, its worst month since February 2009, when it fell 11.7%, and worst May since 1940, when it plunged 21.7%.
The Nasdaq lost 8.3%, its worst month since November 2008, when it dropped 10.8%, and its worst May since 2000, when it skidded 11.9%.
The S&P 500 declined 8.2%, its worst month since February 2009, when there was an 11% loss, and its worst May since 1962, when the drop was 8.6%.
Stock declines were broad, with 27 of 30 Dow components falling.
Volume was light ahead of a three-day weekend. Composite turnover in New York Stock Exchange-listed companies hit 5.1 billion shares, well below the month's average daily volume of nearly 7 billion shares.
The CBOE Volatility (VIX) index, Wall Street's fear factor, rallied nearly 8% to 31.97.
The euro fell 0.7% versus the dollar but remained above that four-year low of $1.2146. The dollar was barely changed against the yen.
The Dollar Index, tracking the US currency against a basket of six others, jumped 0.6%.
US light crude oil for July delivery fell 58 cents to settle at $73.97 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery rose 30 cents to settle at $1,212.20 an ounce.
Treasury prices gained modestly, lowering the yield on the 10-year note to 3.31% from 3.34% late on Thursday.
A morning report from the Commerce Department showed that consumer income picked up last month, but spending didn't follow suit.
Personal income rose 0.4% in April, matching the gain in March. Economists expected the 0.4% gain. Personal spending was flat after rising 0.6% in the previous month. Spending was expected to grow by 0.3%.
The Core PCE, the report's inflation component, rose 0.1%, in line with estimates, after increasing 0.1% in March.
The May consumer sentiment index from the University of Michigan rose to 73.6 from 73.3 last month. Economists had expected it to ease to 73.2.
The Chicago PMI, a regional reading on manufacturing, fell to 59.7 in May from 63.8 in April, versus forecasts for a drop to 60.
European shares closed in the red on Friday after Spain's ratings downgrade and disappointing data on US consumer sentiment.
The Stoxx Europe 600 index gave up earlier gains to end down 0.3% to 244.09. The decline came after two days of strong gains for the index, which rose 3% on Thursday and 2.4% on Wednesday. It pared weekly gains to 2.9%.
German DAX index rose 0.2% to 5,946.18, the UK FTSE 100 index slipped 0.1% to 5,188.43 and the French CAC-40 index declined 0.3% to 3,515.06.
A week of wild swings finally ended on a positive note as sentiment across the world got a fillip after the Chinese government dismissed reports that it was considering paring down its holdings of eurozone bonds. The Indian market got off to a happy start coinciding with the ‘less expected’ truce between the earlier warring Ambani brothers. Tuesday and Wednesday saw some panic sales with the indices falling below the 200 DMA. By Thursday some semblance was restored especially during the last hour of F&O expiry. The usual short-covering on account of expiry of derivatives contract brought the Indian markets higher for the week. Finally, the NSE Nifty added 2.7% and BSE Sensex added 2.5% for the week.
Sensex intra-week high of 16,891 and low of 15,960
Nifty intra-week high of 5,077 and low of 4,786
The top gainers: The top gainers in the Sensex were Reliance Power (up 12.8%), Reliance Infrastructure (up 6.9%), Tata Motors (up 5.6%), TCS (up 4.5%) and ITC (up 4.4%).
The Top Losers: The top losers in the Sensex were Grasim Inds (down 24.7%), ACC (down 4.3%), Tata Steel (down 2.4%), Bharti Airtel (down 2.1%) and SBI (down 1.4%).
The BSE IT Index (up 3.2%): The top gainers in the IT sector were Mahindra Satyam (up 6.9%), TCS (up 4.5%), Infosys (up 3.7%), Wipro (up 3.4%) and HCL Tech (up 2.6%).
The top losers were Mphasis (down 8.9%) and Sasken Communication (down 3.3%).
The BSE Consumer Index: The top gainers in the Consumer Durables sector were Blue Star (up 6.3%), Videocon Industries (up 1.6%), Su-Raj Diamonds (up 0.3%) and Samtel Color (up 0.3%).
The BSE Healthcare Index (up 2.3%):The top gainers in the Pharma space were Ipca Labs (up 7.7%), Fresenius Kabi (up 7.5%), Natco Pharma (up 7.2%), Divi Labs (up 6.1%) and Sun Pharma (up 5.5%).
The top losers were Dishman Pharma (down 5.5%), Astrazeneca Pharma (down 2.4%), Glaxosmithkline (down 2.4%), Aurobindo Pharma (down 2%) and Suven Life (down 1.5%).
The BSE Banking Index (up 1.6%):The top gainers in the banking space were Yes Bank (up 6.2%), Federal Bank (up 6%), Andhra Bank (up 5.9%), HDFC Bank (up 3.8%) and OBC (up 3.8%).
The top losers were Canara Bank (down 3.5%), Karnataka Bank (down 3%), IOB (down 2.6%), SBI (down 1.4%) and Union Bank of India (down 0.3%).
The BSE Auto Index (up 2%):The top gainers in the auto space were Tata Motors (up 5.6%), Hero Honda (up 3.5%), Bajaj Auto (up 3.1%), Hindustan Motors (up 1.6%) and M&M (up 1.4%).
The top losers were Ashok Leyland (down 1.2%) and Maruti Suzuki (down 1.1%).
The BSE Oil & Gas Index (up 3.4%): The top gainers in the oil & gas space were Gujarat NRE (up 10.4%), Hindustan Oil (up 6.5%), Cairn India (up 4.5%), Reliance Industries (up 4.1%) and ONGC (up 3.4%).
The top losers were Chennai Petroleum (down 3.9%), MRPL (down 1.1%), Essar Oil (down 0.8%), Shiv-Vani Oil & (down 0.8%) and Jindal Drilling (down 0.1%).
The BSE Capital Goods Index (up 2%):The top gainers in the Capital Goods space were Areva T&D (up 20.1%), Siemens (up 7.3%), Aban Offshore (up 5.2%), Jyoti Structures (up 5.1%) and Crompton Greaves (up 4.9%).
The top losers were Esab India (down 2.4%), LMW (down 1.6%), Bharat Electron (down 1.5%), BEML (down 1.4%) and Greaves Cotton (down 1.4%).
The Cement Sector: The top gainers in the cement sector were Dalmia Cement (up 3.6%), JK Cements (up 2.7%), Kakatiya Cement (up 2.7%), Gujarat Sidhee (up 1.8%) and India Cements (up 1.4%).
The top losers in the cement sector were Grasim Inds (down 24.7%), Acc (down 4.3%), Shree Cement (down 2.6%), Binani Indus (down 1.9%) and Ultratech Cement (down 1.5%),
The Telecom Sector: The top gainers in the telecom space were RCom (up 10.6%), Tata Communication (up 2.7%), WWIL (up 1.1%), TTML (up 1%) and Himachal Futuristic (up 1%).
The top losers were Idea Cellular (down 3.3%), Shyam Telecom (down 2.4%), Bharti Airtel (down 2.1%), Gemini Comm (down 1.2%) and MTNL (down 0.8%).
The Realty Sector (up 4.1%):The top gainers in the real estate space were Parsvnath (up 10.7%), Omaxe (up 7.8%), Mahindra Lifespace (up 7.1%), HDIL (up 6.8%) and Unitech (up 6.5%).
The Metals sector (up 1.5%):The top gainers in the metals sector were Adhunik Metaliks (up 8.1%), Tata Metaliks (up 6.5%), Jindal Steel (up 3.1%), Sunflag Iron (up 2.1%) and Jindal Stainless (up 1.8%).
The top losers in the metals sector were Tata Steel (down 2.4%), Bhushan Steel (down 2.1%) and Tata Sponge (down 0.4%).
Flat to negative start likely on Spain debt woes
Headlines for the day:
Kaiser, Caldwell acquire stake in BSE
GTL likely to take 26% stake in Qualcomm's BWA foray
Real estate projects boom in tier-II and tier-III cities
Events for the day:
Major corporate action
GDP for Q4 to be announced today
Zensar Technologies board to consider bonus issue
Marathon Nextgen board to consider bonus issue
Results: Tata Communications
For more events, log on to Sharekhan.com
Pre-market report
Global signals
The European shares closed lower on Friday, snapping two consecutive days of gains ahead of the weekend, with British Petroleum down over uncertainty as to whether it has managed to plug its Gulf oil well and other energy stocks tracking a fall in crude CLc1 prices.
The US stocks fell on Friday, capping off their worst month in over a year as a downgrade by Fitch of Spain's credit rating reignited worries about euro-zone debt issues.
In today's trade, the Asian markets were trading mixed. At the time of writing this report, SGX Nifty was trading 6 points lower.
Indian Indices
The Asian stock markets were mixed on Monday, with sentiment weighed by concerns that the euro zone's debt crisis could spread after Spain's ratings downgrade. The investors were cautious after news that Fitch Ratings had cut Spain's sovereign debt rating to AA+ from AAA, which sent Wall Street stocks lower on Friday. Owing to the lack of support from the global indices and following the Asian cues, the Indian markets are expected to have a gap-down opening.
Also going in to the session, the market is expected to remain volatile owing to the GDP for fourth quarter to be announced later today. The earning of Tata Communications is later to be announced today — the stock will be closely eyed.
Commodity cues
In the commodity space, the crude oil prices posted losses on Friday (May 28, 2010), with the Nymex light crude oil for the June series declined by $0.58 per barrel, whereas in the metals space, the Comex Gold for the June series rose by $0.30 and the Comex Silver for the June series was down by $0.05 to a troy ounce respectively.
Daily trend of FII/MF investment in equities
On May 28, 2010, the FIIs were the net sellers of the Indian stocks to the tune of Rs10.30 crore, whereas the domestic mutual funds, on May 25, 2010, were the net sellers of the stocks to the tune of Rs432.80 crore.
Henkel India
Investors with medium-term perspective can consider buying the stock of Henkel India (Rs 56.3).
The company operates in laundry, home care, cosmetics, toiletries and hair care segments. The stock formed a strong base by consolidating sideways in the band between Rs 11 and Rs 13 from November 2008 and March 2009. Since then, it has been on an intermediate-term uptrend. However, after forming a medium-term downward channel from Rs 55, Henkel found support around Rs 32 in late March.
The stock thereafter resumed its uptrend by penetrating through its moving average compression (21, 50, 200-day moving averages) around Rs 35 in early April. In the third week of May, the stock almost jumped 27 per cent breaking through its important medium-term resistance level of Rs 50.
The stock is currently trading well above its long-term resistance band between Rs 40 and Rs 45 that will now cushion any declines.
We observe good weekly volume in the stock over the past two weeks. Both daily as well as weekly relative strength indices are featuring in the bullish zone. Further, the daily and weekly moving average convergence and divergence indicators are hovering in the positive territory, reinforcing the bullish momentum. Our medium-term outlook on the stock is bullish. We believe that Henkel has the potential to head higher to our medium-term price target of Rs 78 in the upcoming weeks. Investors with medium-term perspective can consider buying the stock with stop-loss at Rs 45.
Follow up- GAIL (Rs 447.2)
The stock slipped Rs 5 or 1 per cent from our recommended price level. However, it is trading well above the stop-loss specified last week. We re-affirm our medium-term bullish outlook on it. A decline below our medium-term stop-loss would negate the bullish outlook.
via BL
Sunday, May 30, 2010
Sun Pharma
Better-than-expected financial performance, promising outlook for its domestic and international formulations business and the possibility of resumption in manufacturing at Caraco's site by the end of this year make Sun Pharmaceuticals a reasonable long-term investment bet.
The company's fairly strong pipeline of drug applications also adds to its appeal. At the current market price of Rs 1630, the stock trades at about 23 its likely FY-11 per share earnings, which seems justified by its many growth triggers.
Investors nevertheless can accumulate the stock in lots given the broader market volatility.
Improving performance
For the quarter-ended March 2010, the company reported a 2 per cent fall in consolidated revenues. This was largely led by a 21 per cent dip in its Indian branded generics (domestic formulation) sales as export formulations (excluding that of Caraco, its US-based subsidiary) grew by over 33 per cent.
But, after adjusting for the one-off sales spurt of approximately Rs 200 crore in the fourth quarter of last year, the domestic formulation growth looks healthy at about 14 per cent.
Caraco's revenues also grew 8 per cent, while overall formulations exports grew by 11 per cent. Net profits remained flat while there was a three-percentage point improvement in operating margins to 33 per cent.
For the coming year, the management has guided for 18-20 per cent growth in revenues. While this may seem difficult in the absence of high sales opportunities from generic Protonix and Eloxatin this year, it might not be very ambitious.
The growth guidance appears plausible given the low base of domestic formulations and the likely resolution of the FDA issue at Caraco. Improving business outlook for its international formulation business too could pitch in.
Upside from the expected approval for its version of Effexor XR in the US may also present an additional growth avenue, though there isn't any specific timeline on when that may happen.
Domestic dominance
Domestic formulations, which contribute over 45 per cent of the total revenues, hold the key to its growth guidance.
The company appears to be at a fairly strong vantage here with an overall market share of 3.7 per cent and leading market shares in select therapeutic areas.
A favourable revenue mix between existing and new products also strengthens its hold in the highly fragmented domestic market. Sun derives close to 70 per cent of its revenues from older products (launched before 2006), with new launches making up for the rest. This provides it with a sustainable competitive advantage over peers.
The company also plans to add, albeit slowly, to its differentiated products count; this may help it improve on its market share in the IPR regime. Besides, with global pharmaceutical companies showing increased interest in the Indian market, Sun's strong reach (2500 sales agents) and brand presence makes it a strong contender for in-licensing deals too.
Caraco issue
The likely resolution of the cGMP issues at Caraco Pharmaceuticals may also be strong growth trigger for the company. While Caraco has already received an approval from the US FDA for the remediation work plan it had submitted earlier — remedial activities are underway now — it would be able to resume manufacturing operations only on receiving a final nod from FDA. This, the management expects to get by end of the financial year.
That notwithstanding, Sun has also filed for site transfer for some of its key products.
While the management doesn't expect a dramatic increase in its market share in the US thereafter, site transfer or better still, final nod from the drug authority, would in itself be reason enough for a re-rating. Delays in approval, therefore, could present a risk to its earnings.
Strong pipeline
Between Sun Pharma and Caraco, over 84 ANDAs (abbreviated new drug applications) now stand approved, while 123 await US FDA approval.
Sun had filed 30 products in the US last year and plans to file a similar number this year too. This would help it seal a long-term growth potential in its US generic business.
In the controlled-substance segment, Sun presently has approvals for formulations of three such products. However, it is yet to capture a significant market share in them. Though the growth potential in this business remains attractive, the management expects the growth rates to remain modest given the quota system followed by Drug Enforcement Authority in the US (quotas are allotted depending on existing sales and not based on product approvals).
What to watch out for
While the company has stopped further shipment of Pantoprazole following the US Federal jury's verdict upholding the innovator's patent (Pfizer Inc.), the management is confident of the strength of its litigation. However, if the court were to uphold the patent, it may cost Sun heavily.
In such case, the company may have to cough up roughly over three times the sales loss suffered by the patent-holder (estimated at about Rs 1800-5,400 crore).
The court's verdict, therefore, will hold the key. Israel's Supreme Court ruling on the disputed Sun-Taro acquisition could be the other trigger; though there still is not enough clarity on if and when that could happen.
via BL
Hindustan Unilever
The Hindustan Unilever (HUL) stock has been the sole exception to the re-rating enjoyed by consumer companies over the past year.
The stock made no gains even as the BSE FMCG index soared by 41 per cent. This is a good opportunity for conservative investors to add this blue-chip to their portfolio.
Signs of better-than-market volume growth in HUL's recent numbers, strong pace of new launches and its ability to massively outspend rivals in defending market shares may help it accelerate sales growth in the year ahead.
Pessimism about HUL's sluggish sales and market share losses have also resulted in the stock's valuation slipping into a discount relative to its peers. At current market price (Rs 235), HUL trades at a one-year forward PE of 21, against Nestle India's 34 times and Dabur India's 27 times, offering room for re-rating.
HUL's financials for 2009-10 were not impressive, as its net profit remained flat while sales grew a tepid 6.3 per cent. However, this hides the big improvement in its growth trajectory in recent quarters.
The key concerns for HUL last year were its slow volume sales in categories such as soaps, laundry and tea, where rivals managed to gain market share through aggressive price cuts. Benign input costs also allowed regional brands to undercut HUL and capitalise on consumer down-trading.
However, HUL has managed to address most of these concerns over the past couple of quarters.
One, it has taken price corrections in segments such as laundry and advertised aggressively to fortify its presence across price points. The steady improvement in HUL's overall volume growth to a healthy 11 per cent for the March quarter (from 1 per cent in the September quarter), seems to indicate prevention of further market share losses.
Two, recent months also saw an exceptional pace of new product launches as it entered segments such as premium male grooming and rolled out new offerings in branded tea, skin care and ice creams.
Though this has required HUL to set aside a whopping 14.5 per cent of its sales towards adspend, it is likely to pay off through a better product mix.
The latest March quarter numbers in fact show that HUL managed to hold on to its gross margins despite taking deep price cuts in its laundry segment. Personal products, beverages and foods revved up to a 15-23 per cent sales growth and aided margins.
Finally, firming raw material prices and rising competitive pressure in FMCGs may also give HUL – with its massive scale – a sizeable edge over its rivals whether in procuring inputs, ramping up advertising budgets or garnering shelf space.
Over the medium term, HUL's strength in modern trade, plans to treble its rural reach and reduce distribution inefficiencies too could boost its size as well as competitive advantage.
via BL
SAIL
Investors can consider holding on to steel major SAIL, whose massive size in terms of production capacity, raw materials and cash, coupled with low levels of debt and a robust domestic market for its products, makes for a compelling case to stay invested.
Despite SAIL's advantages within the steel space, in terms of a domestic market focus, low leverage and abundant raw material supplies, the stock trades at a valuation that is on a par with its peers at around 12.6 times FY10 earnings at Rs 206
SAIL currently produces 13.4 million tonnes of crude steel at eight locations led by units in Bhilai and Bokaro. The company's sales and profits have grown at an annual compounded rate of 10 and 13 per cent since FY06. The commodity price collapse had led most of the top ten steel producers to slip into red over the last year.
SAIL, however, was among the exceptions, managing a profit growth of 9.4 per cent with operating profit margins at 24.4 per cent for the last financial year.
Expansion plans
It owes this to two factors: A robust business model that revolves around two production facilities in proximity to huge captive iron ore mines and a domestic market whose demand remained quite tight through the crisis.
Even by 2010, 75 per cent of SAIL's expanded capacity will be located in the mining belt of Chhattisgarh, Orissa and Jharkhand in close proximity to its various captive mines. The company's expansion plans include upping brownfield capacities by 70 per cent by FY13.
Factors that work strongly in favour of SAIL are the 20,000 acres of surplus land at its Bokaro facility and abundant quality captive iron ore mines rendering it self-sufficient on that front for the long term.
The land and the mines have been a major draw for steel majors, including Tata Steel, Posco and Arcelor Mittal, all of whom are seeking to collaborate with SAIL on facilities ranging from rolling mills to integrated steel production.
The upside for SAIL from such an alliance is quick access to value-added products in cold-rolled steel which would enable it move up the value and margin chain, in addition to access to technology such as FINEX which uses non-coking coal(readily available at a lower cost domestically).
The resulting reduction in dependence on coking coal(currently SAIL imports 70 per cent of its requirement) could reduce the cost structure for SAIL. Coking coal prices are up 55-60 per cent this quarter; the shift to quarterly contracts is a source of risk for SAIL, possibly denting operating margins. A good portion of the company's product mix is dominated by semi-steel, steel plates and hot rolled coils.
The company, through a combination of brownfield expansions and rolling facilities, hopes to eliminate the lower margin semis category in addition to doubling its capacities in higher margin categories such as structurals, cold rolled coils and coated products.
This will tilt the current 60:40 flat:long mix in favour of the more lucrative flat and value-added segment. This will augur well for margins over the medium term.
SAIL is nearly fully dependent on the Indian market for sales where the outlook is mixed. Volumes have remained buoyant through the downturn and recent evidence from indicators such as IIP numbers, construction activity indicate that volumes may hold up nicely over the next year.
Steel realisations, however, do not have the same sanguine outlook. After a four-month dream run where realisations and demand rose even as costs remained low, the converse situation may now pan out. Higher prices of coking coal and lower realisations now look set to moderate margins in the latter half of this fiscal.
With China applying the brakes on lending and construction activity in the last two months, global steel realisations may be hurt for the next few months. This could mean softer prices in the domestic markets too as Indian steel prices typically do follow global trends though with a lag.
Some growth risks
There are a few medium term risks to SAIL's volume growth too. China's capacity addition binge could cause a global overhang on steel capacity that can moderate prices.
A smaller but equally potent source of near-term annoyance is the European crisis leading to choppy commodities markets.
Domestically, long-term concerns relate to disruptions to SAIL's operations from local insurgencies.
The other is long term domestic over-capacity fears with scepticism over whether Indian infrastructure will be able to make the leap on investments.
On the leverage front, the company's capex plans are being funded through a mix of debt, cash and equity. The debt component has pushed its debt:equity figure from 0.27:1 at the end of FY09 to the current 0.5:1, a very manageable number considering the EBIT covers interest 26 times over! With cash balances of about Rs 22,000 crore as of March 2010, SAIL appears well placed to fund the capex.
Plans are also on to raise equity through dilution at the time of a government planned FPO which is likely to happen around the middle of the current financial year.
The expected equity dilution of 10 per cent, when viewed in context with the expanded business, does not pose a worry for investors who are in for the long haul.
via BL
NIIT Ltd
Investors with a two-year horizon can consider taking exposure to the stock of NIIT, a training solutions provider for individuals and corporates, given the broad-based recovery in all its key segments of operations.
The revival in IT sector hiring leading to higher training enrolments, continuing deal wins from governments towards ensuring computer-led education in schools, and increased volumes in corporate training point to robust prospects for NIIT over the next couple of years.
At Rs 61, the share trades at 12 times its likely FY-11 per share earnings, which is the lowest among what companies under the education/training category enjoy. The valuation includes the 25 per cent stake that NIIT has in NIIT Technologies.
Over a four-year period, the company has seen its net sales increase at a compounded annual rate of 27.7 per cent to reach Rs 1,199.4 crore in FY-10, while net profits grew at 14.2 per cent to Rs 70.2 crore.
NIIT has managed a turbulent FY-10, marked by a 6 per cent increase in revenues and flat profits.
The company has a desirable geographic mix with 49 per cent of system-wide revenues coming from India, 27 per cent from the US and Europe and 24 per cent from the rest of world, from China. This creates a blend of growing and mature markets to which NIIT makes targeted offerings.
NIIT operates in three segments — individual IT training (57 per cent of system-wide revenues), corporate (34 per cent) and school learning solutions (8 per cent).
Training looks up
The company is partly a play on the economy, in general, and the slowdown, especially in the IT sector hiring, affecting enrolments for the company.
With the revival in IT hiring, seekers of careers in the sector have once again propped up enrolments.
Enrolments in FY-10 have risen 12 per cent, much of it supported by a spurt over the last couple of quarters. 17 per cent of revenues from this segment comes from China, which is still a nascent market as far as software training is concerned, providing an early mover advantage to companies such as NIIT.
Importantly, enrolments for courses such as infrastructure management services, an area of increasing focus and deal wins for IT majors, are up over 64 per cent.
This is in addition to its core “edgeineers” programme witnessing a spike in enrolments. This learning business is a high-margin one for the company (EBITDA of 23 per cent).
Placements after course completion are also up 25 per cent, suggesting an all-round revival that would enable margin expansion for NIIT.
New alliances and programs have been formed with companies and institutions such as IGNOU for innovative training programs.
Corporate training is another important area for the company, which was affected significantly during the slowdown.
However, volumes are looking up over the past few quarters, though pricing and currency appreciation may be risks to realisations.
NIIT has signed three multi-million dollar deals over FY-10 and has orders worth $90.3 million, 58 per cent of which is executable over 12 months, giving a reasonable revenue visibility.
More schools added
School learning solutions, mostly a domestic play, have seen a 45 per cent increase in revenues to Rs 200 crore. NIIT has added as many 2,812 schools over FY-10, taking the total number of schools in its portfolio to 15,000. That momentum has continued this fiscal too with a deal-win from the Maharashtra Government.
Though orders from the government are hardware-intensive (and commands lower margins), there have been several repeat orders for the company, thus assuring annuity revenues.
Significantly, the number of non-governmental schools, particularly private ones, has increased by 334, expected to bring in better realisations. With a healthy blend, margins in this segment would be at comfortable levels of around 15 per cent.
NIIT also has a new segment where training is imparted to students for careers in BPOs and in financial services (specifically banks).
This is still nascent and loss-making, though there has been significant increase in enrolments, making a case for growth over the next few years.
Operationally, key positives are increase in IP-led revenues, which accounted for 43 per cent of revenues in FY-10 and expansion in annuity-based order book, which now constitutes nearly 52 per cent.
Saturday, May 29, 2010
IBM acquires Sterling Commerce from AT&T
IBM is to acquire Sterling Commerce from AT&T for approximately US$1.4 billion in cash. The acquisition of the Dublin, OH-based company will expand IBM's ability to help organizations create more intelligent and dynamic business networks by simplifying and automating the way they connect and communicate with customers, partners and suppliers both on-premise or through cloud computing delivery models. Sterling Commerce is well known in the banking industry for its payment automation solutions. Typically, a bank will work with Sterling to build payment hubs that can handle ACH payments, checks, wire transfers, EDI and other payment types - with audit trails and data analysis built in. This has been an area of investment of most treasury management departments. Sterling's bank clients include Ameriprise Financial, BNP Paribas, Russell Investment Group and Bank of China.
US economic growth revised down
The US government revised its reading on first-quarter gross domestic product (GDP) to an annual growth rate of 3%. The figure was below expectations of 3.3%, according to a consensus of economists. The initial reading, released last month, was a 3.2% rate. But the revision also showed that the rate of consumer spending has doubled since the fourth quarter of 2009, and remains consistent with the forecast for annual GDP to grow between 3% and 3.5% in 2010. Consumer spending, which accounts for about 70% of the US economy, rose at a 3.5% pace last quarter, compared with the 3.6% the government estimated last month. Consumer spending rose by 1.6% in the previous three months. The first-quarter increase was the biggest since 2007.
Company earnings increased 5.5% in the first quarter after climbing 8% in the previous three months. Profits were up 31% from the same time last year, the biggest year-over-year gain since 1984. Business spending on new equipment and software advanced at a 12.7% pace last quarter after growing at a 19% rate the previous three months, the biggest gain since 1998, the GDP report showed. Spending on structures, including office buildings and factories, dropped at a 15.3% pace in the first quarter. The GDP report was the second for the January to March quarter and will be revised in June as more information becomes available to the government.
OECD raises global growth forecast
The pace of global economic growth is picking up faster than expected, but the recovery process could be hit by the ongoing euro-zone debt crisis and overheating in countries like China, the Organization for Economic Cooperation and Development (OECD) said. In its twice-yearly economic outlook, the Paris-based organisation for industrialised nations raised its forecast for global growth to 4.6% in 2010 and 4.5% in 2011. Last November, it predicted growth of 3.4% this year and 3.7% in 2011, after a 0.9% contraction in 2009. "Strong growth in emerging-market economies is contributing significantly," the OECD said. "The spillover from growth in non-OECD Asia could be stronger than expected, especially in the United States and Japan. From this point of view, the overall environment is relatively auspicious." the Paris-based organisation said.
Gross Domestic Product (GDP) across member countries will rise by 2.7% this year and 2.8% in 2011, up from November's forecasts for 1.9% growth this year and 2.5% growth in 2011, the OECD said. "Instability in sovereign debt markets poses a serious risk. It has highlighted the need for the euro area to strengthen its institutional and operational architecture and take bolder steps to ensure fiscal discipline," the OECD said.
The OECD raised its forecast for US economic growth in 2010 and 2011 to 3.2% each, from 2.5% and 2.8% in its forecasts of last November. Japan's growth will be 3% in 2010 and 2% in 2011, up from 1.8% and 2% previously. The euro-zone will lag with growth of 1.2% and 1.8% this year and next, still marginally more than forecasts of 0.9% and 1.7% announced in November 2009. For China, the OECD forecast economic growth of 11.1% this year and 9.7% in 2011, saying there was a danger that measures to cool property markets and curb land prices would not see off the risk of overheating. In November, the OECD had forecast Chinese growth of 10.2% in 2010 and 9.3% in 2011.
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