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Friday, June 24, 2011
Weekly Stock Picks - June 24 2011
Buy UFLEX
Buy Godrej Inds
Buy Tata Steel
Buy Core Projects
Buy HCL Tech
Weekly Newsletter - June 24 2011
Fantastic Friday saved Indian markets the blushes after starting the week on a sour note. Stocks tumbled on Monday amid speculation that India and Mauritius were considering altering a current tax treaty that could spell trouble for FIIs. However, clarification from the North Block helped sooth some of the frayed nerves.
The market was pretty lackluster after that due to a disappointing monsoon forecast. But stocks rallied on the last two days, sending the Sensex and the Nifty up ~2% on the week.
World equities recovered on Friday on hope that Greece could soon be out of the current fiscal mess. A steep drop in crude oil on Thursday came in handy as well.
Finally, Govt looks like biting bullet on fuel prices
The much-awaited meeting of a high-powered Government panel on fuel prices was postponed to 7:30 pm on Friday. The EGoM on fuel prices was earlier scheduled to meet at 1:00 pm. The EGoM was postponed because the panel was considering various options, and to prevent any possible hoarding, Union Petroleum Minister Jaipal Reddy told reporters in New Delhi.
Meanwhile, shares of IOC, ONGC, HPCL, BPCL, Gail India and Oil India gained in a rising market on hope that the Centre will finally take the bold step of aligning the local fuel prices with the international market.
Markets rise 2% this week
The Indian markets snapped their two-week losing streak and closed on a higher note on Greek optimism and declining crude oil prices
Major news for the week
Food inflation at 9.13% versus 8.96%
PFC consolidated net profit up 11% in FY11
SAIL FY11 consolidated net profit declines by 27%
Zee Entertainment FY11 consolidated net profit at Rs625 crore
Reliance Infrastructure, Reliance Communications to move out of Sensex
Market could be choppy ahead of derivatives expiry
The market is likely to be choppy next week ahead of the expiry on the near-month June 2011 derivatives contracts on Thursday, 30 June 2011. Shares of auto, steel and cement firms will be in focus ahead of monthly sales numbers for June 2011, which will start trickling in from Friday, 1 July 2011. On the macro front, investors will watch the HSBC India Purchasing Managers' Index (PMI), which indicates the performance of the manufacturing sector, for June 2011.
Expectations for Q1 June 2011 results will start building as the first quarter draws towards a close. Housing finance major HDFC kicks off the results season on 8 July 2011. IT bellwether Infosys Technologies will unveil Q1 results on 12 July 2011.
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FII outflow in June 2011 totaled Rs 512.10 crore (till 22 June 2011). FIIs had offloaded shares worth a net Rs 6614.40 crore in May 2011. FII outflow in calendar 2011 totaled Rs 2413.90 crore (till 22 June 2011).
Investors will continue to watch the progress of the monsoon rains. The India Meteorological Department (IMD) recently revised downwards the forecast for the vital monsoon rains this year to slightly below normal from the normal forecast given in April 2011. On the flip side, crop output may not be adversely affected significantly due to the onset of the monsoon rains on time this year and expectations that the rains will be well distributed.
On the global front, the Greek government faces votes next week on the austerity measures and putting it into law before a deadline in mid-July to secure a new bailout from the European Union and IMF.
Greek Prime Minister George Papandreou has reportedly assured European Union (EU) leaders that he would deliver the budget cuts they are demanding in exchange for the next installment of emergency loans and a new rescue plan. The approval of the five-year austerity plan, including deep spending cuts and more tax hikes, by the parliament would bring Greece one step closer to securing the much-needed financial aid.
BSE Small-Cap, Mid-Cap indices slide
The market recovered last week as value buying emerged after a recent steep slide. The recovery helped the Sensex regain the psychological 18,000 level. A steep fall in crude prices on Thursday, 23 June 2011, boosted sentiments. But, the broad market depicted weakness. The BSE Small-Cap index and the BSE Mid-Cap index, both declined.
Stock prices witnessed a steep intraday slide in early trade on Monday, 20 June 2011, on reports the Indian government is reviewing a double tax avoidance treaty with Mauritius. The reports rattled the market given that a big chunk of India's foreign direct investment (FDI) and FII money comes from Mauritius. The market came off lows after the steep intraday slide in early trade on that day after reports later suggested that the government was not currently in talks with Mauritius to review the double tax avoidance treaty with Mauritius. The Sensex ended with a loss of more than 2% on that day as world stocks fell after European finance ministers delayed a decision to hand more bailout cash to Greece.
Market near 1-1/2-week high; Sensex settles above 18,000
Key benchmark indices galloped to attain their highest closing level in almost 1-1/2-week buoyed by firm world stocks. The barometer index BSE Sensex surged past the psychological 18,000 mark. The market edged higher for the second straight day. The Sensex vaulted 513.19 points or 2.89%, up close to 435 points from the day's low and off close to 30 points from the day's high. The market breadth was strong. World stocks rose after Greece reached an agreement with the European Union and the International Monetary Fund over further austerity measures and as comments from China's premier provided reassurance over inflation.
Muthoot Finance Ltd: ‘Dominant player’
Largest gold financing company in the country
Muthoot Finance (Muthoot) is the largest gold financing company in India with a gross gold loan portfolio of Rs. 15.9bn as at March 2011 and a commanding market share (20% in FY10). Company’s AUM has witnessed a phenomenal 82% CAGR over the past four years driven by substantial network expansion, significant improvement in branch productivity, sustained rally in gold prices and strong brand recognition. Gold stock has increased from 23MT to 112MT over FY07-11 representing 49% CAGR. About 67% of the current ~2,900 branches are located in the southern region which contribute 74% to the gold loan portfolio.
Bullions end winning streak
Prices drop considerably in tandem with other commodities
Precious metals ended their seven-day winning streak and ended lower on Thursday, 23 June, 2011 at Comex. Prices fell in tandem with other commodities as crude prices plunged and dollar strengthened considerably.
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. But bullion metals have registered increase in prices despite strong dollar in recent times and vice versa.
Crude prices plunge
Prices drop drastically as IEA decide to pump oil in market
Decision from International Energy Agency to pump in more oil in the market pushed crude oil prices considerably lower on Thursday, 23 June 2011 at Nymex. Prices also fell following mixed economic data from US and China and strong dollar. IEA came out with this decision as they think that recent troubles in Libya have removed close to 130 million barrels of oil from market by May end.
Market opens on a firm note as crude drop
Key benchmark indices edged higher in early trade on firm Asian stocks, which rose as European leaders voiced support for Greece and as a slump in energy prices eased concern the global recovery will falter. The BSE Sensex was up 135.52 points or 0.76%. The market breadth was strong. Index heavyweight Reliance Industries (RIL) advanced for the second day in a row. PSU OMCs jumped on a steep slide in crude oil prices and ahead of a meeting of the empowered group of ministers (EGoM) to discuss fuel prices.
At 09:25 IST, the BSE Sensex was up 135.52 points or 0.76% to 17,863.01. The Sensex jumped 163.51 points at the day's high of 17,891 in early trade, its highest level since 20 June 2011. The index rose 77.45 points at the day's low of 17,804.94 in early trade.
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