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Monday, June 18, 2007
Sensex drops 83 points amid choppy trades
Despite Asian indices hitting new highs, the market seemed to have lost its steam after opening strong in the morning. The Sensex opened with a positive gap of 79 points at 14242 and touched the day's high of 14284 within a few minutes of trading on brisk buying in heavyweights. However, it shed its early gains on account of heavy selling in IT, pharma, auto and consumer durable stocks, and entered the negative territory by the afternoon. The Sensex swung between negative and positive thereafter, as investors turned cautious in view of the circular of the Central Board of Direct Taxes. The Sensex tumbled below the 14100 mark towards the close to touch the intra-day low of 14057 amid relentless selling pressure. The Sensex finally closed with losses of 83 points at 14080. The Nifty closed at 4147, down 24 points.
The market breadth was weak as the losers outpaced the gainers in a ratio of 1.27:1. Of the 2,597 stocks traded on the BSE, 1,413stocks declined, 1,123 stocks advanced and 61 stocks ended unchanged. Select sectoral indices slipped sharply. The BSE IT index dropped 1.10% followed by the BSE CD index (down 1.07%), the BSE Teck index (down 0.84%) and the BSE Auto index (down 0.77%).
Most of the index heavyweights witnessed correction. Among the Sensex majors Ranbaxy tumbled by 3.89% at Rs359, Hero Honda dropped 3.87% at Rs654, Tata Steel lost 1.86% at Rs489, HDFC Bank slumped by 1.66% at Rs1,090, TCS slipped by 1.51% at Rs1,167, Wipro shed 1.44% at Rs523, HDFC lost 1.43% at Rs1,759, Bajaj Auto fell by 1.42% at Rs2,079, Satyam crumbled by 1.23% at Rs477 and L&T dipped 1.06% at Rs1,927. The other front-line stocks lost around 1% each. However, select counters saw some buying action and ended with gains. ICICI Bank advanced by 1.08% at Rs918 while ONGC, Hindalco, ACC, ITC, Maruti Udyog and HLL ended with modest gains.
IT stocks were hit hard and dropped sharply. Geometric Software crumbled by 8.92% at Rs111, Info Edge lost 3.88% at Rs786, Igate Global shed 3.62% at Rs321, Mphasis declined by 3.05% at Rs307 and CMC was down 3.01% at Rs1,155.
Over 1.89 crore IKF Technologies shares changed hands on the BSE followed by Glory Polyfilms (1.56 crore shares), IFCI (1.54 crore shares), Reliance Natural Resources (76.88 lakh shares) and GV Films (57.36 lakh shares).
Time Technologies was the most actively traded counter on the BSE and registered a turnover of Rs217 crore followed by Nestle (Rs122 crore), Reliance Industries (Rs103 crore), Divi's Lab (Rs98 crore) and Glory Polyfilms (Rs96 crore).
Sensex settles below 14,100
The market witnessed high volatility, moving between positive and negative zones during the day. A late sell-off emerged, similar to the trend witnessed on Friday, 15 June 2007.
Market men said the latest circular issued by the Central Board of Direct Taxes (CBDT) on Friday, 15 June 2007, failed to provide the much-needed clarity with regard to tax on profit/gain arising from sale of shares. CBDT issued the circular after trading hours on Friday, 15 June 2007. The domestic bourses bucked cues from strong global markets for the second straight day.
Selling was seen across the sectors, with shares from auto and IT pivotals leading the fall, while buying was witnessed in select index heavyweights. Some buying was seen in banking and FMCG stocks.
All the Asian shares gained today as the yen's continued weakness against the US dollar lifted shares of exporters such as Toyota Motor Corp. and Canon Inc. Hong Kong's Hang Seng gained 2.69% to 21,582.89 while Japan's Nikkei surged 0.99% to 18,149.52 .
Singapore's Straits Times (up 1.19% to 3,623.79) and South Korea's Seoul Composite (up 1.95% to 1,806.88) also edged higher.
European markets were trading on a mixed note.
The 30-share BSE Sensex lost 82.57 points or 0.58% at 14,080.14. The Sensex had opened higher at 14,241.76 and advanced to a high of 14,283.71 shortly. But it was not able to sustain at higher levels. Fresh sell-off in late-afternoon session pulled it to a low of 14,057.26 at 15:07 IST.
The S&P CNX Nifty declined 24.35 points or 0.58% at 4147.10. The Nifty June 2007 futures settled at 4,134, a discount of 13.10 points compared to the spot closing.
The total turnover on BSE amounted to Rs 3774.26 crore while the NSE F&O turnover was at Rs 30785.27 crore. The turnover was muted, indicating that the action might have shifted to primary market. The Rs 8750-crore follow-on public offer by ICICI Bank opens for subscription on Tuesday, 19 June 2007.
The market breadth turned negative on BSE in late trade, after staying positive throughout the day’s trading session, as small and mid-cap stocks succumbed to selling pressure: 1,323 shares declined as compared with 1,237 that advanced, while 68 remained unchanged.
The BSE Small-Cap index declined 0.46% to 7,316.68 while the BSE Mid-Cap Index slipped 0.13% to 6,172.87.
Among the Sensex pack, there were 22 losers, while the rest were gainers.
Bike maker Hero Honda Motors was the top loser among the Sensex constituents, down 3.82% to Rs 654, on volume of 92,982 shares. The stock saw fresh selling after Macquarie Research recommended an underperformer rating on the stock with a 12 -month target price of Rs 608.
The Hero Honda Motor stock has been declining steadily ever since reports that it has cut production following reduced demand as interest rates surged to five-year-high. From a recent high of Rs 732.35 on 31 May 2007, the stock lost 7.10% to Rs 680 by 15 June 2007.
Other auto stocks were not spared either. Bajaj Auto (down 1.57% to Rs 2076), Tata Motors (down 0.60% to Rs 646.50) also declined. The BSE Auto Index settled with loss of 0.90% to 4,633.97.
Ranbaxy (down 3.81% to Rs 359.55), HDFC Bank (down 2.01% to Rs 1086), and Tata Steel (down 2% to Rs 588) were the other losers.
IT stocks declined on renewed selling following rupee's appreciation against the US currency. The BSE IT Index lost 1.11% to 4,940.61, and was the top loser among the sectoral indices on BSE.
Satyam Computers (down 1.11% to Rs 477.65), Infosys (down 1.16% to Rs 1986), Wipro (down 1.58% to Rs 522), and TCS (down 1.30% to Rs 1169.15) edged lower.
The rupee resumed higher at 40.75/76 a dollar from Friday's (15 June 22007) close of 40.85/86 per dollar and later edged up to 40.74/7450 a dollar in the late morning deals.
Hindalco Industries advanced 1.61% to Rs 163.90, and was the top gainer among the Sensex pack. The Aditya Birla group’s aluminium and copper major has proposed to set up a new extrusion press at an investment of Rs 50 crore.
The BSE Bankex was rose 0.24% at 7,453.52, and was the top gainer from sectoral indices on BSE.
ICICI Bank advanced 1.21% to Rs 919 on 1.78 lakh shares, and was the top gainer among the Sensex pack. Before trading hours today, 18 June 2007, ICICI Bank set price band for its follow-on public issue. The price band for the issue has been fixed at Rs 885 to Rs 950 per equity share. The stock had closed at Rs 908 on BSE on Friday, 15 June 2007.
Retail bidders would be allotted shares at a discount of Rs 50 per share to the issue price determined by the book-building process. The public issue opens for subscription on Tuesday, 19 June 2007. The issue size is Rs 8,750 crore. In addition, there is a green shoe option under which the Bank may allocate additional equity shares up to Rs 1,312.5 crore. The issue including the green shoe option aggregate to Rs 10,062.5 crore.
Union Bank of India (up 3.53% to Rs 124.55), UTI Bank (up 2.24% to Rs 610), and Vijaya Bank (up 0.91% to Rs 49.70), were the noteable gainers from the banking pack.
State run oil exploration major Oil and Natural Gas Corporation (ONGC) advanced 0.31% to Rs 885.80. ONGC’s overseas exploration unit, ONGC Videsh (OVL), last week, received Cabinet approval to buy a 33% stake in a deep-water gas field in Egypt from Royal Dutch Shell Plc.
Index heavyweight Reliance Industries (RIL) was down 0.42% to Rs 1672.90 on 6.09 lakh shares. As per reports, global oil giants including Shell, Exxon and Chevron are eyeing a stake in Reliance Industries’ overseas oil & gas assets. RIL recently hived off these assets into a separate company called Reliance Exploration and Production DMCC.
The BSE FMCG Index closed 0.02% higher at 1,789.09 as ITC (up 0.85% to Rs 153.30) and Hindustan Unilever (up 0.65% to Rs 188.25) gained.
State-run engineering major Bhel was down 0.35% to Rs 1385. As per reports, Bhel has won a Rs 139 crore order to supply 27 transformers to NTPC. Bhel would deliver the equipments within 25 months. NTPC will use the transformers for its Korba, Dadri and Farakka extension projects.
IKF Technologies tops volume charts on BSE On BSE, 1.89 crore shares were traded in IKF Technologies counter It was the top traded scrip on BSE, in terms of volume of shares. The share price dipped 5% to Rs 9.13.
Debutant Glory Polyfilms clocked the second highest volume of 1.56 crore shares on BSE. The share price closed at 28.85% premium at Rs 61.85 on BSE over IPO price of Rs 48. The Glory Polyfilms stock made its debut at Rs 50. The scrip touched a high of Rs 84 and a low of Rs 50 during the day. The scrip is placed in the B1 group of securities on BSE.
Time Technoplast topped the turnover chart with total turnover of Rs 217 crore followed by Nestle India (Rs 123 crore), Reliance Industries (Rs 103 crore), Divi's Labs (Rs 98 crore) and debutant Gory Polyfilms (Rs 96.75 crore).
Suven Life Sciences soared 6.26% to Rs 45 on volumes of 31.36 lakh shares after a block deal of 30 lakh shares at Rs 41.75 per share on BSE by 15:18 IST on BSE.
3M India fell 1.10% to Rs 1725 after the company said its Indian promoters sold 6.2% of their stake in the company in the open market between 7 May 2007 - 1 June 2007. Consequently, the Indian promoters hold 1% in the company and are no longer termed as promoters of 3M India. United States-based Minnesota Mining and Manufacturing Company holds 76% stake in the company.
Rajesh Exports dipped 2.6% to Rs 518.50 even as its net profit jumped 123.09% in Q4 March 2007 to Rs 33.33 crore as against Rs 14.94 crore in Q4 March 2006. Sales inched up 0.75% to Rs 1796.52 crore in Q4 March 2007 as against Rs 1783.07 crore in Q4 March 2006.
Geodesic Information Systems soared 10% to Rs 274.50 after reporting jump in net profit to Rs 29.68 crore in Q4 March 2007 as against Rs 12.74 crore in Q4 March 2006. Sales jumped 64.68% to Rs 48.12 crore in Q4 March 2007 (Rs 29.22 crore). Along with the Q4 March 2007 and FY 2007 results announced during trading hours today, 18 June 2007, the company's board also declared a 1:2 bonus issue.
Cadila Healthcare advanced 5.30% to Rs 365.15 after its board approved raising up to $100 million by issuing foreign currency convertible bonds (FCCBs)/ American depository receipts (ADRs)/global depository receipts (GDRs) or such other foreign currency instrument with a green shoe option.
Madhucon Projects surged 7.58% at Rs 215.05 after a block deal of 1.5 lakh shares was executed in the counter at Rs 208.50 per share at 10:26 IST.
Cranes Software International vaulted 5.14% at Rs 133.95 after it approved the acquisition of equity shares of Dunn Solutions Group, (DSG), technology based consultancy company in the US though its wholly owned subsidiary in the US, Cranes Software Inc., for about Rs 60 crore. It will also acquire another firm Tilak Autotech for Rs 10 crore thereby making it a wholly owned subsidiary of the company.
Ashapura Minechem rose 0.71% to Rs 341 on reports that BHP Billiton, the world’s largest mining company, is entering into a joint venture with the mineral producer and exporter. Reports suggest that the Australian giant will pick up 51% in Ashapura Minechem’s Rs 2,500-crore alumina refining project in Orissa. Ashapura will hold the remaining 49%.
Wall Street advanced again on Friday, 15 June 2007, after the week's most anticipated economic reading indicated that inflation excluding the price of gas remained tepid last month, easing some concerns that have jolted stock and bond markets in recent sessions. The Dow jumped 85.76 points, or 0.63%, to 13,639.48. The Nasdaq Composite index, still well off its record levels reached during the dot-com boom, rose 27.30, or 1.05%, to 2,626.71.
Crude oil was little changed in New York after rising to a nine-month high on concern US gasoline supplies are inadequate to meet peak summer demand. Crude oil for July 2007 delivery was at $68.10 a barrel, up 10 cents, in after-hours electronic trading on the New York Mercantile Exchange today, 18 June 2007.
Morning Call
Market Grape Wine :
In House :
Nifty at a support of 4100 and 4150 levels with resistance at 4210 and
4240 levels .
Sell : Intraday : ACC below 817 target of 801 with SL of 825
Buy: Intraday : UNIPHOS above 317.50 target of 326 with SL 313
Buy: Positional: Balkrishna Industries above 525 target 650 and 850.
Buy: Positional : Vivimed labs around 150 to 155 target 270
Out House :
Markets at a support of 14014 & 13959 levels with resistance at 14276
& 14324 levels .
Buy : RIL
Buy : I-Flex & INFY
Buy : Praj at dips
Buy : IBulls & Unitech
Buy : GujNre at dips
Buy : LUPIN & Auropharma
Buy : Centextile & SesaGoa
Buy : AsianElec & SKumar
Dark Horse : SesaGoa , Prajind , CenTextile , Auropharma , IBulls & Unitech
Bullet : Bhel & Divis with strict stop loss .
Intraday Stock Ideas
NIFTY (4171) S4146 R4202
BUY Welspun Guj (189)
SL 184 T 197, 200
BUY Balaji Tele (216)
SL 212 T 224, 226
BUY 3i Infotech (308)
SL 303 T 316, 319
SELL NTPC (151)
SL 155 T 145, 142
SL 165 T 153, 150
STRATEGY INPUTS FOR THE DAY
Avoid the trap
"I don't want the cheese, I just want to get out of the trap"
This morning appears to be more of a trap for the bulls. Signs from the global markets are pointing towards a higher opening. However, the uncertainty over the latest CBDT circular on the tax treatment of stock trading may hurt sentiment. The circular says that profits from the sale of shares, which till now was being treated as business income or capital gains, will be taken on a case by case basis. This may lead to some confusion and trepidation, especially for FIIs as they are the most significant player in the market.
The public issues of DLF and the ICICI Bank may mean more offloading in the secondary market. Among the other worries is that oil prices in New York has crossed the $68 per barrel mark and there has been some talk of hike in local fuel prices as well. A further spike in oil prices will not auger well for the markets. Liquidity flows, particularly from the FIIs, have also turned volatile this month after being strong in the last two months.
In the week ended June 14, India Equity Funds recorded net outflows of $367mn, extending their losing streak to eight straight weeks, says global funds flow tracking firm EPFR Global. It was the second-worst week for these funds and took year-to-date outflows to $1.67bn. None of the major fund groups tracked posted positive performance during the week and a majority saw money pulled out by nervous investors.
We strongly advocate caution at this juncture, as the bulls are clueless about the near-term direction. There are a few uncertainties like interest rate movement across global markets, the rise in the bond yields in the US, higher oil prices and volatile global capital flows. Avoid fresh purchases in a big way for the short to medium term unless you have something stock specific. Lock in gains at every rally for better opportunities in the near future. We see a higher opening on the back of firm global markets. However, things will turn choppy as the day wears on.
FIIs were net sellers to the tune of Rs447.8mn (provisional) in the cash segment on Friday. On the other hand, local institutions pumped in Rs3.64bn on the same day. In the F&O segment, foreign funds were net buyers of Rs888.2mn.
One should keep an eye on Reliance Capital. The stock has risen sharply in the last few days and may have some more steam left for further appreciation. IFCI may do well as the troubled public sector term lender looks to close the deal for selling up to 26% stake to strategic investor(s). Idea Cellular may be in the thick of things amid reports that the merger talks with Spice Telecom have fallen through on the issue of valuation.
Zicom might gain as it is likely to tie up with the future Group (Pantaloon Retail). The company will also declare its results today. Ashapura Minechem is likely to advance amid reports that it is going to form a joint venture with mining major BHP Billiton. The company will also announce a bonus on June 27. ICICI Bank will attract a lot of attention as its follow-on public offering kicks off tomorrow. The bank has set a price band of Rs885-950 per share.
Retail firms like Pantaloon Retail and Shoppers' Stop could take a hit amid reports that the government may restrict the expansion of big organised retailers to cushion the impact on the so-called mom-and-pop stores. Sparsh BPO may see some action amid expectations that Blackstone and the management of Intelenet may announce an open offer after the former bought out the stake of HDFC and Barclays in Intelenet.
Equity shares of Glory Polyfilms will get listed in the bourses today. The issue was priced at Rs48 per share. The premium being bandied about on the street is just Rs1-2.
UK and German stocks rose to multi-year highs on Friday. The UK's FTSE 100 closed 1.2% higher at 6,732.40, hitting a high not seen since September 2000, while the German DAX Xetra 30 advanced 2.3% to 8,030.64, a level not seen since March 2000. The French CAC-40 rose 1% to 6,105.28, and the pan-European Dow Jones Stoxx 600 index rose 1.3% at 399.26.
In the emerging markets, the Ibovespa in Brazil was up 1.5% at 54,518 while the IPC index in Mexico closed flat at 32,128 and the RTS index in Russia added 0.7% to 1883.
Asian stocks rose for a third day, led by exporters, after the yen weakened and reports showed that inflation is slowing in the US. Samsung and Toyota led technology companies and automakers higher. BHP Billiton climbed to a third straight record after metals prices advanced.
The Morgan Stanley Capital International Asia-Pacific Index added 1% to 153.16 as of 11:55 a.m. in Tokyo, extending a two-day 1.4% rally. Five of the region's benchmarks jumped to records, with China's CSI 300 Index adding 3.2%.
Japan's Nikkei 225 Stock Average climbed 1%, while Hong Kong, South Korea, Singapore and the Philippines set new highs. Taiwan's market is closed for a holiday.
US stocks gained on Friday, helping the Standard & Poor's 500 Index to its biggest weekly advance since April. The core consumer prices, which exclude food and energy, rose 0.1% last month after increasing 0.2% in April, reducing the chance that interest rates will be hiked to tame inflation in the region's No. 1 export market.
Sluggishness likely to continue
Markets ended on a flat note following its trend of losing ground in the last hour of the trading session. Thursday's impressive rally was carried forward in the early trades of Friday led by gains in the index heavy weights like BHEL, ACC, L&T and Hindalco. However, bulls faced stiff resistance at higher levels as key indices Technology, Oil & Gas and Metal stocks dragged the markets to close almost from where they started. Finally, the 30-share Sensex slipped 41 points to close at 14162. NSE-50 Nifty was flat and ended at 4171.
In a high volatile week, the BSE 30-share Sensex ended with 52 points or 0.37% to close at 14162 and NSE Nifty added 16 points or 0.38% to close at 4171.
Elecon Engineering surged by 3% to Rs509 after the Board of Directors f the company announced that they would meet today consider and approve a proposal for declaration of bonus shares. The scrip touched intra-day high of Rs527 and a low of Rs490 and recorded volumes of over 2,00,000 shares on NSE.
Nicholas Piramal slipped 2% to Rs300. Reports stated that it might hive off its R&D business and sell stake to private equity players. The scrip touched intra-day high of Rs314 and a low of Rs299 and recorded volumes of over 3,00,000 shares on NSE.
Hind Rectifiers plunged by 10% to Rs911. The company announced a dividend of 100% and also proposed a stock split from Rs10 per share to Rs2. The scrip touched intra-day high of Rs1001 and a low of Rs911.05 and recorded volumes of over 1,00,000 shares on NSE.
ANG Auto spurred by 3.8% to Rs314 after the company approved the plan to set up a wholly owned subsidiary in Hong Kong / Singapore. The scrip touched intra-day high of Rs318 and a low of Rs299 and recorded volumes of over 1,00,000 shares on NSE.
Banking stocks recorded smart gains in a volatile trading session. Index heavy weight SBI advanced by 0.8% to Rs1323, HDFC Bank was up by 1% to Rs1108 and ICICI Bank added 0.5% to Rs908. However, Union Bank, Corp Bank and OBC were the major gainers among the Mid-Cap stocks.
Capital God stocks were on the move held on to its gains in yet another volatile session. BHEL surged by over 3% to Rs1389, ABB advanced by 1% to Rs4522 and L&T gained by 1.5% to Rs1947. However, Punj Lloyd lost 1.6% to Rs239.
IT stocks were on the receiving end. Index heavy weight Infosys slipped 0.6% to Rs2009; Satyam Computer was down by 1.5% to Rs483 and Wipro edged lower by 0.4% to Rs530.
Select metal stocks also list its shine after being in the limelight in the previous trading session. Frontline stock Tata Steel slipped by 2.3% to Rs600, Hindalco was down by 1.6% to Rs161. However, Hindustan Zinc was up by 4% to Rs672 and Sterlite Industries edged higher by 0.5% to Rs542.Tame inflation reports put US Market in a partying mood
In spite of $68 crude, US stocks witness best three day rally since mid-March, 2007 as bond yields stabilize
After a slow start for the week, US stocks picked up momentum during the last three trading days for the week ended Friday, 15 June, 2007. Tame inflation figures and moderate economic growth portrayed by Fed’s Beige Book lifted stocks and the three day rally between 13June and 15 June, 2007 was the best rally for the market since 19-21 March, 2007.
Rising bond yields initially checked US market’s momentum on Monday and Tuesday. On Tuesday, the 10 year Treasury notes hit a all time high of 5.3% after crossing the psychological 5% mark for the first time last week. At the end of the week, it closed at 5.152%. Former Federal Reserve Chairman, Alan Greenspan, mentioning that the market might be limited for US securities also had a negative impact on stocks.
But once bond yields stabilized as the PPI and CPI report checked in better than expected, there was no looking back for the stocks. The Dow Jones Industrial Average added 215 points in its kitty for the week. Tech heavy Nasdaq gained 53 points while S&P 500 too gained 26 points.
On the economic news front, Commerce Department's May retail sales report came in better than expected. Fed's Beige Book report showed the U.S. economy continued to expand at a moderate pace in the first part of the second quarter and inflation remained under control.
Stocks continued their rally on Thursday following more good news on the inflation front. Total PPI rose a larger than expected 0.9% in May boosted by a big 4.1% increase in energy costs. But the core rate (excluding food and energy) rose 0.2%. That was in line with expectations and continued the benign trend from the previous month.
On Friday, Labor Department showed that total CPI rose 0.7% in May, marking the second largest monthly increase in 16 years. The core rate, which excludes the 5.5% spike in energy prices, increased by just 0.1% (consensus 0.2%).
On the earnings front, Lehman Brothers kicked off earlier this week handily beating estimates. Goldman Sachs too handily beat analysts' expectations, but investors were disappointed with the paltry 1% y-o-y rise in Q2 profits. Bear Stearns missed expectations.
During the week, the acquisitions news that hit the headlines were – Penn National Gaming confirmed it will be taken private for $8.6 bln. There was also some speculation that Nymex is exploring a possible sale. Also, Financial Times parent Pearson is supposed to be seeking partners for a possible bid for Dow Jones provided some spice to investors.
Executive Summary
For the week, DJIx is up by 1.6%, S&P 500 is up by 1.7% and Nasdaq is up by 2.1%. Last week’s sell-off was contained this week as bond yields stabilized after reaching an all time high on last Tuesday. Upbeat economic reports, mainly Thursday and Friday’s inflation reports gave a major boost to stocks. For the year, the Dow is up by 9.4%, Nasdaq is up by 8.8% and S&P 500 is up by 8.1%.
During the week, the inflation data put a check on rising bond yields and the yield on the 10-year note fell and closed at 5.152%. Stocks rallied in spite of crude crossing $68/bbl and gaining 5% for the week.
Trading volume on Friday, 15 Jun 2007, was heavier than usual, which was a function of the increased trading that took place with the expiration of stock options, index options, index futures and single stock futures.
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