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Wednesday, January 19, 2011
Sensex falls 114 points to end below 19,000; Infy, RIL drag
Indian markets dropped on Wednesday erasing earlier gains. After trading strong in the first half, markets plunged in the later to close deep in the red after touching a low of 18,898.56. Metal stocks, led by SAIL, gained coupled with Realty stocks while IT stocks, except HCL Tech witnessed some profit booking. Capital Goods stocks continued their southern journey. European markets, slipped after a positive opening and were trading modestly in the negative.
Onion Rs65/kg, Petrol Rs65/litre, Beer Rs65!
For the first time in history, basic needs, life style needs, luxury needs are at the same price, prompting us to explore why basic needs like onions are so expensive.
The visit: We visited Pimpalgaon and Lasalgaon - Asia’s biggest onion wholesale markets (240km from Mumbai) - and interacted with over 25 farmers, a wholesaler, assistant to APMC chairman (Agriculture Produce Marketing Committee) and visited three farms.
Key Takeaways: The price rise is due to significant supply shortage arising from unseasonal rains, with crop yields falling to a tenth of the normal 70-80 quintals per acre in many cases. At these yields, despite farm realizations reaching 2-3x of last year (Rs2500-3000/quintal) a farmer is still unable to break even. With the next onion harvest expected only in March, supply shortage is expected to continue for at least two months. However, we see pressure on onion prices even beyond that as unseasonal rains have also damaged seeds, due to which seed plantation is likely to be lower than last year. Unseasonal rains have also damaged grapes and tomatoes and thereby prices have doubled.
Our view:
We believe pressure on the price of onion, tomatoes and grapes is going to sustain for at least 6-9 months due to supply shortage (albeit not to the same levels seen last month when onion prices touched Rs 70-80/ kg). A bigger concern, though, is the possibility of high sustained inflation continuing, especially if supply shortages occur frequently across food commodities (as seen in the past year). Even if supply gets back to normal levels, prices will not reduce to the levels last year for two reasons: 1) farmers, having seen increasing crop disruptions, will demand higher prices in normal years to create a higher safety net for a bad year; 2) having seen that the consumer is willing to pay Rs60/ kg, the entire supply chain will attempt to extract slightly higher prices than earlier (scarcity-driven prices that touch super-normal levels always settle at a higher normal due to the sticky nature of inflation). In this case, with onion prices currently at ~Rs45/ kg (up from Rs 20/ kg last year), even if supply does get back to normal in 6-9 months, it is unlikely to get back to Rs20/ kg seen earlier and is more likely to settle at ~Rs25-30/ kg (still at least a 20% increase). While government interventions in terms of export bans are likely to provide temporary relief to consumers, the threat of sustained long-term inflation is likely to stay.
BSE Bulk Deals to Watch - Jan 19 2011
Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
19/1/2011 531678 Anand Credit MAHESH DHARIRA B 60000 7.77
19/1/2011 512535 Asahi Infra INDRAVARUN TRADE IMPEX PVT LTD B 461066 11.04
19/1/2011 512535 Asahi Infra BASMATI SECURITIES PRIVATE LIMITED S 199118 10.14
NSE Bulk Deals to Watch - Jan 19 2011
Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
19-JAN-2011,AGRE,Agre Developers Ltd,SANGHAI COMMERCIAL & CREDITS PVT LTD,BUY,198223,45.60,-
19-JAN-2011,ASSAMCO,Assam Company India Ltd,SIRIYARI TRADECOM PRIVATE LIMITED,BUY,11200000,19.05,-
Markets end below key levels on heavy sell-off
The Indian markets closed the session with losses on account of selling pressure in capital goods, IT, oil & gas stocks, with the Sensex below 19K and the Nifty below 5700
Major headlines
Hindustan Zinc Q3 net profit rises by 12% yoy
LIC Housing Finance Q3 net profit rises 39% yoy
Bajaj Auto Q3 net profit up 40% yoy
Asian markets end moslty up
Positive economic data supports sentiments, strong commodities also help
Asian equities ended mostly up with an excellent bounce in the Chinese markets lifting the sentiments though rising inflationary worries and profit selling pressures pulled select markets lower. The undertone mostly remains upbeat on strong commodity prices and strong corporate earnings growth. The markets also eyed tomorrow's Chinese gross domestic product (GDP) data, which is expected to show that the Asian juggernaut once again clocked a surge of around 9%. The overnight cues were strong as the US stocks shrugged off concerns surrounding Apple Inc, which was hit by news of Chief Executive Steve Jobs' medical leave as strong earnings for the iPhone and iPad maker triggered a sound rally in the stock and lifted overall sentiments.
Tata Steel FPO Analysis
Fortunes tied to European recovery
Domestically the company is on a strong footing. But European operations remain vulnerable to fluctuations in raw material prices and volatile European economies
Tata Steel is one of the world's largest steel companies with a steel production capacity of approximately 27.2 million tonnes per annum (mtpa). According to World Steel Association (WSA), the company was the seventh largest steel company in the world in terms of crude steel production volume in 2009. The company has operations in 26 countries and a commercial presence in more than 50 countries. As of March 31, 2010, the company had approximately 81,000 employees.
SKS Microfinance gains on RBI measures to ease liquidity crunch for MFIs
SKS Microfinance rose 2.73% at Rs 668.50 at 15:04 IST on BSE after the central bank said banks can classify restructured loans to microfinance companies as a special regulatory asset, a move that will ease liquidity constraints in the sector.
Meanwhile, the BSE Sensex was down 168.66 points, or 0.88%, to 18,923.39.
On BSE, 1.60 lakh shares were traded in the counter as against an average daily volume of 3.58 lakh shares in the past one quarter.
Sensex below 19,000; Nifty under 5,700
The key benchmark edged lower in volatile trade, snapping last two days' gains, weighed down by weak European stocks and lower US index futures. Index heavyweights Reliance Industries (RIL) extended losses in late trade. IT and capital goods stocks declined. FMCG and consumer durables stocks reversed initial gains. Bajaj Auto gained in volatile trade as Q3 net profit surged. The BSE 30-share Sensex was down 113.73 points or 0.6%, off close to 190 points from the day's high and up close to 80 points from the day's low.
Grey Market Premiums - Jan 19 2011
| Company Name | Offer Price (Rs.) | Premium (Rs.) |
| C. Mahendra Export | 110 | 3 to 5 |
| Mid Valley Enter | 70 | 3.50 to 4.50 |
| Tata Steel | 594 to 610 | -- |
| Omkar Specialty Chemical | 95 to 98 | 6.50 to 7 |
Crude ends marginally lower
IEA raises its forecast for global oil demand in 2011
Crude prices ended marginally lower on Tuesday, 18 January 2011 at Nymex. Prices fell despite the International Energy Agency revising up its forecast for global oil demand for 2011. The weak dollar and rise in US equities put a brake on price decline. Electronic and floor trading were closed on Monday for the Martin Luther King Jr. holiday.
Market may open lower; Bajaj Auto Q3 result eyed
The market may open lower if trading of S&P CNX Nifty futures on the Singapore stock exchange is of any indication. It indicate a fall of 9.50 points at the opening bell. Bajaj Auto is due to report earnings today, 19 January 2011
As per provisional figures on NSE, foreign funds bought shares worth Rs 72.54 crore and domestic funds sold shares Rs 26.20 crore on Tuesday, 18 January 2011.
Precariously poised
In a gentle way, you can shake the world. - Mahatma Gandhi.
A minor tremor shook up Delhi following a powerful earthquake in southwestern Pakistan. The capital will remain in the spotlight due to the impending Cabinet reshuffle today. A full-fledged one is likely after the Union Budget.
Daily News Roundup - Jan 19 2011
TCS will hire 37,000 professionals for its domestic and overseas markets through campus placements in the next fiscal. (ET)
The government has given more time to 20 SEZ developers, including TCS and Mahindra World City, to execute their projects. (ET)
Tulip Telecom plans to sell 20-30% in its subsidiary Tulip Data Center for Rs3bn to a private equity investor. (ET)
Sensex rises for 2nd straight day...Nifty ends atop 5700
The relief rally continues on Dalal Street as the Indian market ended with smart gains for the second day running. The upswing was led by IT, Metals , Pharma, FMCG, Banking and Telecom stocks. even the broader indices , which had been in doldrums lately, participated in today's rally. However, the BSE Oil & Gas index closed in the red.
Flat start on the cards
The domestic markets are likely to witness a flat opening as the Asian indices does not seem to be supportive.
Headlines for the day:
Essar to issue $500-million FCCBs to finance acquisitions
Tata Steel may invest $2-2.4 billion annually in capacity expansion
Traders halt off-take of sugar, fear price freefall
Bullion metals shine
Prices rise as dollar weakens
Precious metals ended higher on Tuesday, 18 January 2011 at Comex. Prices rose as the dollar lost ground thereby increasing the appeal of precious metals as a hedge against inflation. Electronic and floor trading were closed on Monday for the Martin Luther King Jr. holiday.
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