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Thursday, March 22, 2007
STRATEGY INPUTS FOR THE DAY
Global strength may lift D-Street
Reason has always existed, but not always in a reasonable form.
Looks like Ben Bernanke & Co. has given the bulls another reason to feel good about. Markets in the US and Asia have rallied after the Federal Reserve left the key rates static and signaled that they may be ready in future to cut rates if the need arises. We expect the market here to follow in the footsteps of their Asian counterparts and extend yesterday's gains. Having said that, the market breadth was negative yesterday and so was the volume. Though, the Fed's decision and its remarks have lifted the spirits of the bulls, one should be cautious as the change in stance could mean more trouble for the US economy.
FII inflows have slowed down considerably compared to the same time last year. We have our own issues with inflation and possibility of some more tightening by the RBI next month. Also, the way the Government is going about fighting inflation has not gone down well with the market. If the ministers continue with their arm-twisting tactics, that could potentially do than good for the market. One also have to see how India Inc. performs not just in the latest quarter but over the next fiscal year amid rising cost pressures. In a nutshell, a good start may not always mean a strong finish. There may be fresh bumps ahead in the near term. All the more reason for one to remain highly alert even as the key indices move further up.
US stocks posted their biggest gain in eight months, wiping away most of the losses for the year, after the Fed indicated it was no longer biased toward higher interest rates.
Citigroup and JPMorgan sent the S&P 500 to its steepest three-day rally in four years on optimism that the Fed will lower borrowing costs. Morgan Stanley climbed the most since March 2003 after reporting first-quarter profit surged 70%.
The advance, one month after stocks recorded their biggest decline since 2003, pushed the S&P 500 up 1.2% for the year and pared the Dow Jones Industrial Average's 2007 drop to 0.1%. The Nasdaq Composite's third straight jump, bolstered by Oracle's better-than-expected profit, lifted it to a 1.7% rise this year.
The S&P 500 added 24.10, or 1.7%, to 1435.04, its best performance since July 19. The Dow increased 159.42, or 1.3%, to 12,447.52. The Nasdaq rose 47.71, or 2%, to 2455.92.
Treasury prices cut losses and turned higher after the Fed announcement. The advance sent the yield on the 10-year note down to about 4.54% from about 4.58% before the meeting and 4.55% late on Tuesday.
US light crude oil for May delivery rose 1 cent to settle at $59.61 a barrel on the New York Mercantile Exchange. Oil prices were volatile following the release of the weekly oil inventories report. The front-month contract was quoting 43 cents higher at $60.04 a barrel in extended trading in Asia.
COMEX gold for May delivery rose $1 to settle at $660 an ounce. In currency trading, the dollar declined versus the euro and trimmed gains versus the yen after the announcement.
European shares closed a touch higher. The pan-European Dow Jones Stoxx 600 index rose 0.3% at 368.31. The UK's FTSE 100 closed up 0.6% at 6,256.80. The German DAX Xetra 30 added 0.2% at 6,712.06, the French CAC-40 finished virtually flat at 5,502.18.
Latin American markets soared. In Mexico City, the benchmark IPC index of 35 most-traded issues jumped 3%, or 812 points, to 28,219.55. Brazil's benchmark Ibovespa stocks index closed 2.9% higher at 45,630.86.
Asian stocks climbed to the highest in three weeks. Sony and Samsung led gains among exporters. The Morgan Stanley Capital International Asia-Pacific Index gained 1.7% to 145.80 at 10:32 a.m. in Tokyo. It was set to close at the highest since Feb. 27. All of its 10 industry groups advanced.
Japan's Nikkei rose 292 points to 17,455 while the Hang Seng in Hong Kong was up 227 points at 19,743. Singapore's Straits Times Index jumped 65 points to 3220, the most in the region. Taiwan's Taiex Index gained 1.1%. All markets open for trading rose.
HOW MARKET FARED
All eyes on Fed
All eyes on Fed
Bulls were back in charge as volatile session ends on a strong note. The large Cap stocks were impressive today as they rode the rally from front stocks like ONGC, ICICI Bank, HLL, Bharti Airtel and ITC were the star performers of the day. Although markets witnessed intra-day gyrations with Sensex swinging over 300 points and Nifty nearly 100 points throughout the session. All the key sectoral indexes ended in green with BSE Bank index leading the pack by gaining 4.04%. Others like FMCG, Technology and Metal index followed suit. The Mid-Cap and the small cap stocks were not that attractive as both the indices ended almost flat. Cement stocks sadly fizzled out towards the end as heavy selling pressure was witnessed.
Finally, the 30-share benchmark Sensex surged 239 points to close at 12945. NSE Nifty was up 67 points to close at 3764. ICICI Bank, HLL and Dabur were the major gainers. However, Gujarat Ambuja, BPCL and GAIL were the major losers among the 50-scrip’s of NSE Nifty.
Among the Telecom stocks Idea Cellular was the one that ended on the receiving end, the scrip fell 1% to Rs92. The company announced that they have a 10 year business transformation pact with & IBM. The scrip touched an intra-day high of Rs94 and a low of Rs92 and recorded volumes of over 61,00,000 shares on NSE.
Among the Power stocks REL was in action, the scrip gained by over 3% to Rs491 following reports that the company won road order worth Rs5.76bn. The scrip has touched an intra-day high of Rs496 and a low of Rs478 and recorded volumes of over 8,00,000 shares on NSE.
Great Offshore declined 1.4% to Rs572. The company declared that it would pay Rs8 per share as mid-year dividend. The scrip touched an intra-day high of Rs589 and a low of Rs570 and recorded volumes of over 70,000 shares on NSE.
Ashok Leyland paced ahead by 3% to Rs40 after the company announced that they would pay Rs1.5 per share as mid-year dividend. The scrip touched an intra-day high of Rs41 and a low of Rs39 and recorded volumes of over 31,00,000 shares on NSE.
Banking stocks were the star performers of the day, as the index was the top gainer by gaining 4.04%. Index heavy weights led from front; ICICI Bank spurred by over 5.5% to Rs870, SBI was up 3.2% to Rs982 and HDFC Bank gained 1.1% to Rs965. Bank of Baroda, Corp Bank and OBC were the major gainers among the Mid-Cap stocks.
FMCG stocks also ended on a firm note. Cigarette major ITC surged by over 2.7% to Rs144, HLL was up 3.8% to Rs191, Dabur gained 3.7% to Rs87, Colgate rose 0.8% to Rs315 and Marico added 0.6% to Rs55.
Broadcasting stocks also put on a good show today. Sun TV surged by 3% to Rs1546, NDTV was up by 1% to Rs310 and Zee Telefilms advanced by over 2.5% to Rs251.
Metal stocks also shined brightly again. SAIL surged by over 4.5% to Rs108, Tata Steel gained by 1.6% to Rs430, Sterlite industries gained 1% to Rs449 and Hindalco added 0.6% to Rs133.
Domestic bourses to track firm global markets
The market is likely to extend this week’s gains tracking firm global markets after the US Federal Reserve policy-setting meeting on Wednesday dropped an explicit reference to the possibility of taking rates higher in its statement, sparking talk the next move could be a cut. The Fed left interest rates unchanged at 5.25%. US interest-rate futures indicated a 48 percent chance of a rate cut by the end of June 2007, compared with 24 percent before the Fed's announcement.
The Dow Jones industrial average shot up 159.42 points, or 1.30 percent, to 12,447.52. The Standard & Poor's 500 Index jumped 24.1 points, or 1.71 percent, to 1,435.04. The Nasdaq Composite Index surged 47.71 points, or 1.98 percent, to 2,455.92.
Exporters led Asian stocks higher. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore, China and Taiwan were up by between 0.4% to 2.1%.
Back home, it remains to be seen whether volumes accompany rise on the bourses. Volumes on the bourses have dropped over the past few days, partly due to advance tax payments. Daily volumes on BSE have dropped since the middle of March. It had hovered in 17.12 - 20.8 crore shares a day from 12 March to 21 March compared to 22.94 - 29.57 crore shares a day from 1 March to 9 March.
Foreign institutional investors (FIIs) turned buyers on Tuesday (20 March 2007), the day when the Sensex had risen 61 points tracking firm Asian markets. FIIs were net buyers to the tune of Rs 136.30 crore on Tuesday compared to a withdrawal of Rs 250 crore on Monday (19 March 2007). As per provisional figures, FIIs were net buyers to the tune of Rs 187.87 crore on Wednesday 21 March 2007, the day when Sensex had surged 240 points.
Volatility may rise over the next few days ahead of the expiry of the March 2007 derivative contracts next Thursday (29 March 2007). With the market scheduled to remain closed next Tuesday (27 March) for a public holiday, only five trading sessions are left before the expiry of the March 2007 contracts. The rollover has already started to April 2007 contracts from March 2007 contracts.
Nifty March 2007 futures settled at 3757 on Wednesday, a discount of 7.55 points over spot Nifty closing of 3764.55. Nifty April futures settled at 3752.80, a discount of 11.75 points over spot Nifty closing of 3764.55.
The next major trigger for the domestic bourses is Q4 March 2007 earnings, reports of which by corporates will start next month. Analysts expect Q4 results to be strong. Market men will closely watch what company managements have to say about the outlook for FY 2008.
The undercurrent on the bourses remains cautious due to high inflation and rising interest rates. Strong industrial production data released early last week makes a strong case for the Reserve Bank of India (RBI) to raise interest rates at its annual policy review for FY-2008 on 24 April 2007. Industrial output rose 10.9% in January 2007 from a year earlier. The wholesale price index rose 6.46% in the 12 months to 3 March 2007, up from the previous week's annual increase of 6.10% due to higher edible oil and naphtha prices.
The long-term India story remains intact. India’s long-term growth drivers are a favourable demography (large share of young population), robust domestic consumption and an acceleration in infrastructure creation
Upmove may continue
Increasing investors' confidence for heavyweight and other sectoral stocks coupled with firm global indices and continuing higher domestic fund inflows could see the market extend its winning streak. However, caution should be maintained as higher bouts of intra-day volatility is likely to persist on the back of RBI's move to restrict the banks from lending funds from money market operations for customer credit. Key local indices, the Nifty could test higher levels around 3785 in the short term and has a key support at 3740. The Sensex is likely to test 12880 on the downside while it may face resistance at 13000.
U.S. indices rallied sharply on Wednesday after investors viewed a statement from the Federal Reserve as signaling the central bank's next move may be a cut in interest rates., with the Dow Jones soaring by 1.30% or 159 points while Nasdaq also ended firm with gains of 47 points at 2456.
All the Indian ADRs witnessed decent to firm buying support. VSNL was the major gainer amongst the ADRs and vaulted over 5%, while ICICI Bank gained over 4%. Infosys, Satyam, Wipro, Dr Reddy's, Tata Motors, Patni computers and HDFC Bank were up over 2-3% each.
Crude oil prices moved up, while the Nymex light crude oil for May series went up by 36 cents at $59.61 a barrel. In the commodity segment, the Comex gold shot up by a dollar to settle at $660 an ounce.
Investsmart - Morning Call
Market Grape Wine :
In House :
Nifty at a support of 3725 & 3681 levels with resistance at 3800 & 3845
levels .
Markets to open positive with selling at higher levels and IT sector to be
under pressure .
Buy : Maruti above 792 target 810 s/l 785
Buy : SunTV above 1546 target of 1580 s/l 1526
Buy : PunjLLoyd above 818 target 835 s/l 808 in F&O
Out House :
Sensex at a support of 12818 & 12786 levels with resistance at 13113 &
13245 levels .
Buy : RIL & RelCap
Buy : Aban & SesaGoa
Buy : Ongc & Bharti
Buy : IciciBank , SBIn & Wipro
Buy : Polaris & Mphasis
Buy : EKC , IBulls , Voltam , Skumar & IDBI
Buy : PRAJInd
Buy : IFCI & IDFC
Dark Horse : Aban , Skumar , PRAJ , IciciBank , Bharti , IDEA & SesaGoa
US Market soars on Federal Reserve’s neutral decision
A flat market goes wild as stocks shoot up on unchanged interest rates and Federal Reserve’s softer wording
U.S. stocks rallied on Wednesday, lifting the Dow Jones Industrial Average by over 160 points, after the Federal Reserve left interest rates unchanged at 5.25% for the sixth straight time as market had expected. Financial stocks were the biggest winners from the Fed’s decision. The Fed no longer said that data are suggesting firmer economic growth, instead describing those indicators as mixed. It also dropped a previous reference that additional firming of monetary policy may be needed. Wall Street just loved the words that Fed used today.
29 out of 30 Dow stocks closed higher for the day. Only exception was Alcoa. But before Fed meeting details came out, 17 of the 30 stocks were trading higher. For the day (21 March, Wednesday) the Dow Jones Industrial Average closed higher by a massive 159 points at 12447.52, Nasdaq higher by 47.71 points at 2455.92 and S&P 500 higher by 24.1 points at 1435.04. JP Morgan, Caterpillar, Exxon Mobil and Citigroup were the major Dow winners. 144 of the 147 S&P industry groups posted gains.
From a sectoral standpoint, banks and broker-dealers were the maximum winners. With today’s gain, the S&P 500 and Nasdaq soaring 1.7 % and 2.0%, respectively, they climbed back into positive territory for the year. Dow remains marginally down by 0.1% for the year.
Some softening in the Fed's long-standing tightening bias was perhaps was market was just looking for. Treasuries rallied soon after 2.15 pm after Fed announcement set in. The economy looks mixed, the Fed said today, though it may expand "at a reasonable pace over coming quarters" even as the housing slowdown continues. In its 31 Jan statement, the Fed had noted "somewhat firmer economic growth."
Regarding inflation, Fed’s comment was - Inflation remains an issue, but it's not an overwhelming issue. Rather than talking about "additional" firming, the Fed said that future adjustments will depend on the evolution of the outlook for inflation and the economy. Losing the word "additional" was the key change.
Morgan Stanley up 7% on superb earnings report
Stocks opened modestly higher in the morning with Dow up by 4 points, Nasdaq up by 6 points and S&P 500 up by 1.9 points. Oracle shares surged after posting a better-than-expected 35% jump in Q1 profits and saying it "exceeded guidance on every metric with strong revenue growth across all product lines." Adobe Systems was also considerably up after reporting a 37% rise in Q3 earnings.
But within half an hour market went in a split mode with Dow turning negative and only 5 sectors trading higher, Energy leading the way.
Morgan Stanley handily topped expectations with record Q1 results, giving the brokerage group another boost of optimism. The stock closed up 7%. But, FedEx which is regarded as an economic proxy, posted its first profit decline in three years and lowered its Q4 guidance. FedEx shares dropped 1.5%.
The indices kicked off the afternoon session exactly where they traded throughout most of the morning, roughly flat. Market waited to see if the Fed changes any of the wording to its latest policy directive.
Market rallies on softer sweeter words from Fed
During the lunch hours, Treasury Secretary Henry Paulson saying he believes the U.S. economy is still healthy gave stocks a modest boost. Then as expected, at 2.15 pm Fed chairman Ben Bernanke announced that the Federal Reserve left the fed funds rate unchanged at 5.25% for a sixth straight time. The indices extended their reach to the upside, especially the S&P 500's most heavily weighted sector - Financials. Citigroup and JP Morgan were both up by almost 3%.
Thereafter there was no looking back for Wall Street. Stocks just had a wild run and Dow oscillated within a 217 point range for the day. This was the biggest one-day move for the Dow since last July. Going into close, market just cheered every word the Fed had uttered.
Crude-oil futures for light sweet crude for May delivery closed at $59.61/barrel (higher by $ 0.36/barrel or 0.6%) on the New York Mercantile Exchange. Prices increased today after weekly inventory report showed that U.S. gasoline supplies fell for a sixth straight week as refiners increased operating rates and was more than market expectations.
In the last couple of hours of trading, stock market activity picked up steam, with 1.6 billion shares exchanging hands on the New York Stock Exchange and 2.2 billion shares trading on the Nasdaq. Advancing issues topped decliners by 27 to 5 on the NYSE, while decliners topped advancers by 22 to 7 on the Nasdaq.
Sharekhan Investor's Eye dated March 21, 2007
Elder Pharmaceuticals
Cluster: Apple Green
Recommendation: Buy
Price target: Rs508
Current market price: Rs392
Angellini hikes stake in Elder
Italian pharma company Angellini ACRAF SPA (Angellini) has hiked its stake in Elder Pharmaceuticals (Elder) by 5% to 15%. According to Elder, the stake hike would not activate the takeover code; rather it would strengthen the business tie-up between the two companies. Angellini is one of Italy's top five pharmaceutical companies in terms of sales volume and has a wide presence in 60 countries. During FY2006, Elder had entered into an ownership deal with Angellini, whereby the Italian company had out-licenced three products to Elder and picked up a 10% stake in the company.
SECTOR UPDATE
Telecommunication services
TRAI reduces ADC burden
The Telecom Regulatory Authority of India (TRAI) has announced a reduction in the access deficit charge (ADC) levied on the private sector operators to provide support to Bharat Sanchar Nigam Ltd (BSNL) for its operations in unviable rural areas. The regulator has gone ahead with the decision to reduce the ADC despite a strong protest voiced by BSNL and it clearly reflects that TRAI intends to gradually phase out the ADC regime.
VIEWPOINT
Dish TV India
Dish TV India-new listing
Dish TV, India's first private direct to home (DTH) service provider will be listing next week (on March 26 or March 28) The promoters of Zee Telefilms (ZTL) housed the DTH venture, which was launched in May 2005, in ASC Enterprises, a company wholly-owned by the Zee promoters. Post the restructuring of Zee Telefilms (ZTL) a holder of 100 shares in ZTL has been allotted 57.5 shares in Dish TV India on transfer of certain DTH assets held in ZTL. Thus the shareholders of ZTL get a 57.5% holding in Dish TV
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