Daily Call - Nov 1 2007
India Equity Analysis, Reports, Recommendations, Stock Tips and more!
Search Now
Recommendations
Thursday, November 01, 2007
Morning Call
Market Grape Wine :
In House :
Nifty at a supp of 5895 and 5830 with resis at 5978 and 6040
Long position can be held on till Nifty stays above 5900 with expected TGT of 6100
Intra Day: Buy Satyamcomp above 477 with a TGT of 490 and a SL of 469
Buy federal bank above 392.50 with a TGT of 405 with a SL of 386
F&O: Buy Indian bank above 155.50 with a TGT of 165 and a SL of 151
Buy Centurytext with a TGT of 1110 and a SL of 1052
Out House :
Markets at a support of 19696 & 19595 levels with resistance at 19987 & 20142 levels .
Buy : RIL
Buy : REL & RPL
Buy : JindalPower
Buy : RComm & RNRL
Buy : JpAsso
Buy : IBUlls & IBullReal
Buy : Centextile
Buy : Aban
Dark Horse : ABAN , REL , REL , RIL , Centextile , Powergrid & SBIN
Bullet for the Day : REL & JpAsso with stop loss .
Market to head higher following Fed rate cut
The market is expected to head higher on positive cues from US markets. Profit booking cannot be ruled out in the second half of the day’s trading session.
The US Federal Reserve cut interest rates by a quarter percentage point to 4.5% yesterday, 31 October 2007 as widely expected. US markets advanced yesterday, 31 October 2007, after the Federal Reserve moderated some of investors fears about a sinking economy, stating that risks to the financial markets from the subprime crises have eased. The Dow Jones industrial average gained 137.54 points, or 1%, to 13,930.01. The S&P 500 index surged 18.36 points, or 1.20%, to 1,549.38, and the Nasdaq Composite index rose 42.41 points, or 1.51%, to 2,859.12.
Asian markets were trading mixed today, 1 November 2007. Hong Kong's Hang Seng (up 0.78% at 31,598.43), Japan's Nikkei (up 0.75% at 16,863.83), Singapore's Straits Times (up 0.47% at 3,823.66) rose. However, Taiwan's Taiwan Weighted (down 0.51% at 9,661.43) and South Korea's Seoul Composite (down 0.35% at 2,057.69) slipped.
US crude oil prices surged over $1.60 to hit new record high of $96.21 on Thursday, 1 November 2007. The gains followed an unexpected sharp fall in US crude stocks, strong US economic data and further losses for the dollar after the Federal Reserve cut interest rates by a quarter percentage point.
As per provisional data, FIIs purchased shares worth a net Rs 198.74 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 444.25 crore on Wednesday, 31 October 2007.
The 30-share BSE Sensex rose 54.48 points, or 0.28%, to 19,837.99, on Wednesday, 31 October 2007. The broader based S&P CNX Nifty was up 31.9 points, or 0.54%, to 5,900.65 on that day.
Good Q2 September 2007 results and FII buying aided a solid surge on the bourses in October 2007. The BSE 30-shares Sensex gained 14.73% to 19,837.99 in one month to 31 October 2007.
US Market applauds another rate cut
Indices react late to Federal Reserve’s decision on cutting fed fund rate and discount rate
US stocks rallied today, Wednesday, 31 October 2007, after the Federal Reserve cut interest rates (fed fund rate and discount rate) by 25 bps and 50 bps respectively. The cut in interest rate came for the second time in six weeks and as per the Federal Reserve Chairman, it was aimed to help the economy weather stress from the housing slump and a weakening financial system. Better than expected read on third quarter growth also added fuel to today’s rally.
Though market was acting in a bullish tone since the morning hours today, stocks slipped initially once Federal Reserve’s decision was out at 2.15 pm E.T. After some time, they made a U-turn and picked up momentum. The Dow Jones industrial Average closed higher by 137 points at 13,792. The Nasdaq Composite Index, finished higher by 42 points at 2,859. S&P 500 finished higher by 18 points at 1,549.
Twenty-eight out of thirty Dow components ended in green today. Microsoft led the team of Dow winners and the stock reached a six-year high today. Verizon was another top winner. Wal-Mart was one of the two laggards. All ten economic sectors posted gains today, led by the energy sector.
The Federal Open Market Committee gave the market what it wanted when it decided to cut the fed funds rate and discount rates by 25 and 50 basis points each to 4.5% and 5% respectively.
The financial sector played an influential role in driving the late-afternoon rally today but it was mainly the Technology sector that was in the forefront. Apart from Microsoft, there was Apple and Google. Google shares crossed the $700 mark for the first time.
Wal-Mart shares were down today after the world's largest retailer said that it would start its holiday discounting early. But Verizon shares were up on reports that the company was in talks with Google to come out with a product against Apple’s iPhone.
Third quarter real GDP figure surprises investors
On the economic news front, third quarter real GDP rose at a 3.9% annual rate. Further good news comes from the fact that GDP deflator (inflation measure) was up at just a 0.8% annual rate in the quarter. The figures were quite surprising in nature given the nature of housing slump and sub prime mess market has witnessed this quarter.
On the other hand, the October Chicago Personal Manufacturing Index, a regional manufacturer survey, slipped to 49.7 as against an expected figure of 53.0. A number below 50 indicates a decline in manufacturing.
The earnings reports that poured in today was good. Among others, Kraft and MasterCard topped expectations.
Indian ADRs closed mixed today. HDFC Bank and ICICI Bank were the main winners gaining 6.5% and 4.6% respectively. VSNL and Patni Computers were the main losers shedding 7.8% and 5.8% respectively.
Unexpected drop in crude inventories taking fuel inventories to two-year low level sent crude prices to a new all time high today. Prices crossed and closed above the $94/barrel mark for the first time ever. A falling dollar just aggravated the situation further. Till yesterday, traders had speculated that this week’s energy inventory report is expected to show rise in US crude inventories.
Crude-oil futures for light sweet crude for December delivery closed at $94.53/barrel (higher by $4.15/barrel or 4.6%) on the New York Mercantile Exchange. Prices rose to $94.74/barrel today earlier in the day during intraday trading. Prices are up 61% on a yearly basis. Futures prices for petroleum products and natural gas also rose today. Oil rose 16% in October, the biggest one-month gain since September 2004.
Volume on the New York Stock Exchange neared 1.6 billion, and advancing stocks ran ahead of those declining nearly 3 to 1. On the Nasdaq, more than 2.5 billion stocks exchanged hands, with advancers edging ahead of declining stocks almost 2 to 1.
Pre Market Watch
Indian market is likely to have a positive opening for the day, as the market participants have got a positive response from the US Fed meeting in which federal funds rate are lowered by 25bps to 4.5% & the discount rate by a quarter-point to 5%. On Wednesday, the benchmark index Sensex ended up with marginal gain of 54.48 points at 19,837.99, whereas Nifty also closed with a gain of 31.90 points to close at 5,900.65. We expect that the market may trade with little volatility with buying across the key indices.
On Wednesday, the US markets ended in green territory as the Dow Jones Industrial Average (DJIA) ended with a gain of 137.54 points to close at 13,930.01. Further the NASDAQ Composite & S&P 500 (SPX) index also ended up by 42.41 points & 18.36 points at 2,859.12 & 1,549.38 respectively.
Indian ADRs traded mixed. In telecommunication sector, VSNL & MTNL plunged by (7.81%) & (2.65%) respectively. In Pharma sector, Dr. Redddy''s Lab is down by (0.56%). However, in Banking sector ICICI bank & HDFC bank surged (4.56%) & (6.55%). Further in Technology sector, Patni Computers decreased by (5.84%), whereas Wipro & Satyam are up by (3.52%) & (2.85%).
The major stock markets in Asia are also trading mixed. Hang Seng is trading up by 245.85 points at 31,598.43. Along with this, Japan''s Nikkei is trading with a gain of 126.20 points to trade at 16,863.83. Singapore''s Straits Times index is also trading higher by 17.96 points at 3,823.66, whereas Seoul Composite lost 7.16 points to trade at 2,057.69.
Yesterday, the FIIs stood as the net sellers as the gross equity purchased was Rs.4534.00 (in crores), and the gross debt purchased was Rs.0.00 (in crores) as against the gross equity sold was Rs.4837.30 (in crores) and the gross debt sold was Rs.0.00 (in crores). The net investment of equity was Rs.-303.30 (in crores) and the net debt investment was Rs.0.00 (in crores).
Today, Nifty has support at 5,805 and resistance at 6020 and BSE Sensex has support at 19,690 and resistance at 20,250.
Market may advance on Fed rate cut
A strong overnight gains in US markets after Fed rate cut and positive opening in most of the Asian indices in ongoing trades may help the local indices advance further. Uncertainty is likely to prevail on rising oil prices and higher intra-day volatility. Among the key indices, the Nifty has a resistance around 5975 levels and has a key support at 5860-5830 levels in the near-term. The Sensex has a likely support at 19000 and may face resistance at 20500.
US indices rallied on Wednesday after the Federal Reserve cut a key short-term interest rate by a quarter point. While the Dow Jones soared by 138 points at 13930, the Nasdaq advanced by 42 points at 2859.
However, the Indian ADR pack had a mixed outing on the US bourses. HDFC Bank led the upmove and zoomed nearly 6.55% while Satyam, Wipro, ICICI Bank and MTNL flared up over 1-4% each. But, Dr Reddy's, Tata Motors, VSNL, MTNL, Patni Computer and Rediff slipped over 1-7% each.
Crude oil rose to a record high in New York after U.S. inventories unexpectedly fell to a two-year low and the economy expanded at the fastest pace in more than a year. While the Nymex light crude oil for December series rose by $4.15 at $94.53 a barrel. In the commodity space, the Comex gold for December delivery surged by $8.20 to settle at $787.80 an ounce.
Daily Trading Calls
Nifty (5901) Sup 5842 Res 5988
Buy RCom (772) SL 765
Target 784, 787
Buy Aptech (374) SL 769
Target 384, 386
Buy Tata Steel (906) SL 899 Target 920, 924
Sell Balram Chini (80) SL 84 Target 74, 72
Sell GDL (130) SL 134 Target 123, 121
As expected, Fed cuts bears
Whatever we expect with confidence becomes our own self-fulfilling prophecy.
Mr. Ben S. Bernanke & Co. has done what was expected of them. The Federal Reserve has cut its key short-term rate by a quarter percentage point to protect the US economy from the housing slowdown and a tight credit market. Global markets are naturally happy, but not as much as they were the last time around. The reason is there may not be any more Fed rate cuts in the near term, as the US central bank is also worried about inflation. That perhaps explains the tempered optimism in the US as well other markets. The rally in Asian markets this morning is not that spectacular.
We expect a spike in our market when the opening bell rings, but do not rule out some cooling later on, as most of the big events are now out of the way. FII buying too seems to have slowed in the past couple of days. The market will remain choppy with lower volumes in the near term due to lack of fresh catalysts and a possible slowdown in overseas capital inflows. Gains this month may not be as phenomenal as the outperforming October, which was not just the best this year but the best October in a decade.
Sugar stocks could fall after the UP Government announced a state advised price (SAP) of Rs125 per quintal for cane. This is likely to hit sugar mills in the state, as they will have to pay Rs12.5/kg to farmers as against the retail sugar price of Rs14/kg. However, in another news, the Allahabad High Court has granted a major reprieve to UP sugar mills, permitting them to discharge 25% of their outstanding cane arrears within 5-6 weeks time. Watch out for auto stocks as they will announce their monthly sales volume. Oil and airline companies will also be in the limelight as crude oil nears the $100 per barrel mark.
US stocks rallied and bonds slumped on Wednesday after the Fed cut a key short-term interest rate by a quarter percentage point and indicated that it doesn't need to cut rates again as it could start fueling inflation.
Microsoft and Intel led gains on prospects that consumers will keep spending. Exxon Mobil advanced as oil rose to a record $94.74 a barrel. Newmont Mining, the second-largest gold producer, jumped the most in six years after profit doubled.
The S&P 500 added 18.36 points, or 1.2%, to 1,549.38. The Dow Jones Industrial Average increased 137.54 points, or 1%, to 13,930.01. The Nasdaq advanced 42.41 points, or 1.5%, to 2,859.12. Almost four stocks rose for every one that fell on the New York Stock Exchange.
FOMC, the US central bank's policy setting arm cut the fed funds rate by 25 basis points to 4.5%. But, the decision was not unanimous, with Kansas City Fed President Thomas M. Hoenig preferring no change.
The cut in October follows a half-point cut made on Sept. 18. That cut was aimed at easing the strain in credit markets and to try and prevent the financial market crisis and housing sector collapse from sending the US economy into a recession.
Treasury prices slumped on bets that the Fed is not going to cut rates again anytime soon. The selloff boosted the yield on the benchmark 10-year note to 4.47% from 4.38% late on Tuesday.
US light crude oil for December delivery briefly hit an intra-day record high of $94.74 a barrel on the New York Mercantile Exchange, before pulling back a bit to settle at a new record of $94.53. Crude was quoting above US$96 per barrel in Asian trading.
Oil prices had already risen after the government's weekly report showed a surprise drop in crude inventories, but the gains accelerated after the Fed announcement.
COMEX gold for December delivery settled at $795.30 an ounce in New York and hit a high of $800.80 in electronic trading, a close to 27-year high. In currency trading, the dollar fell to another record low against the euro and inched higher versus the yen.
The US economy grew at a 3.9% annual rate in the third quarter, the government said, after having grown at a 3.8% annual rate last quarter. Economists had predicted a reading of 3.1%.
The GDP price deflator, the report's inflation component, rose at a pace of 0.8%, much slower than what economists were forecasting. The more closely-watched "core" PCE deflator rose at an annual rate of 1.8%, faster than the previous quarter but still within the Fed's comfort zone.
European shares closed higher. The pan-European Dow Jones Stoxx 600 index rose 0.9% to 388.43. The French CAC-40 rose 0.8% to 5,847.95, while the UK's FTSE 100 added 0.9% to 6,721.60 and the German DAX 30 climbed 0.5% to 8,019.22.
Brazilian stocks hit a record high while Mexican stocks finished lower. Brazil's Bovespa rose 1.5% to 65,317.70, its third record close this week. Mexico's IPC fell 1% to 31,458.67. Argentina's Merval index rose 0.5% to 2,351.44 while Chile's IPSA lost 0.8% to end at 3,451.18.
Asian stocks rose after the Fed rate cut and on a government report that the US economic growth accelerated in the third quarter of 2007, bolstering confidence in the region's biggest export market. Canon was set for its biggest advance in two months. BHP Billiton climbed after crude jumped the most since March.
The Morgan Stanley Capital International Asia-Pacific Index added 0.8% to 172.73 as of 11:01 a.m. in Tokyo, set for a record. The Nikkei 225 Stock Average advanced 0.8% to 16,863.83. Stock benchmarks rose across the region, except in China. The Philippines' market is closed for a holiday.
After opening with strong gains market ended on a flat note before the Fed meet. A strong first half was followed by a range bound and later in the session also profit booking dragged the key indices from their days high to end the day with modest gains. However, major support for the market was provided by the Metal, Banking and the PSU stocks. Broader indices i.e. Mid-Cap and the Small-Cap index also gained over 1% each.
Finally, the 30-share Sensex gained 54 points to close at 19,837. Nifty index added 31 points to close at 5,900.
TCS slipped 1.1% to Rs1037. Tata Sons sold 1% stake in the company via block deal. The scrip touched an intra-day high of Rs1063 and a low of Rs1017 and recorded volumes of over 1,00,00,000 shares on NSE.
Tata Steel advanced 0.8% to Rs908 after the company announced that they signed MoU with Vietnam Steel Corporation. The scrip touched an intra-day high of Rs922 and a low of Rs896 and recorded volumes of over 11,00,000 shares on NSE.
VSNL gained 1.5% to Rs575. The company declared its Q2 result with net profit at Rs614mn (down 42.9%) and revenue at Rs9.88bn (down 1.4%). The scrip has touched an intra-day high of Rs587 and a low of Rs567 and has recorded volumes of over 3,00,000 shares on NSE.
Reliance Energy advanced by 4.5% to Rs1869 after reports stated that the company approved a proposal to transfer its infrastructure projects to a wholly owned subsidiary. The scrip touched an intra-day high of Rs1899 and a low of Rs1800 and has recorded volumes of over 43,00,000 shares on NSE.
ONGC advanced by 2.2% to Rs1245 after the company announced that they would invest Rs4,000cr to upgrade Mumbai high North. The scrip touched an intra-day high of Rs1264 and a low of Rs1220 and recorded volumes of over 18,00,000 shares on NSE.
Glemark Pharmaceuticals advanced by 3.8% to Rs492 after the company licensed out experimental drug developed to Eli Lilly in a deal potentially worth US$350mn. The scrip touched an intra-day high of Rs538 and a low of Rs490 and recorded volumes of over 16,00,000 shares on NSE.
Videocon Industries gained 2.5% to Rs378 after the Group announced that they would bid for
CESC advanced by 1% to Rs580 after the company announced their Q2 net profit rose 47.6% to Rs930mn and net sales were at Rs7.3bn (up 8.1%). The scrip touched an intra-day high of Rs595 and a low of Rs574 and recorded volumes of over 3,00,000 shares on NSE.
Stocks in News:
L&T set to win Rs10bn contract for railway factory at Chhapra district in Bihar.
Tata Steel signs a MoU with Vietnam Steel Corporation for a cold rolling mill complex.
IOC plans to retail CNG via its chain of petrol pumps.
CISCO and Wipro form a JV to develop IT solutions across the globe.
UB holdings to raise Rs13.2bn by November end.
The Videocon Group plans to bid for the new Greenfield airport coming up at Navi Mumbai.
ONGC may partner Hinduja for a refinery to be constructed in AP.
Marico buys South African consumer arm of Enaleni Pharmaceuticals for Rs520mn.
SBI plans to hire 3,000 officers for soft recovery.
Patni stake sale was called off over differences over management control.
Ashok Leyland plans Rs40bn capex for building capacity, developing products and upgrading technology.
Indonesian state-run Krakatau Steel is considering a strategic alliance with four steel companies including Essar and Ispat.
Gujrat State Petroleum Corp (GSPC) may sell 30% equity in KG block.
Exide Industries acquires lead smelting firm in Pune.
Pyramid Saimira acquires Texasbased FunAsia.
The RBI and the finance ministry working on a concept paper to introduce sterilisation tax and auctioning of limited foreign loans to stem the Dollar flows.
Maharashtra Government to remove octroi across the state except Mumbai.
The Central Board of Trustees is likely to revive discussion on investing up to 5% of corpus in stock market.
Oil companies to hike aviation turbine fuel prices between 4% and 6% from Wednesday night.
Telecom Engineering Centre (TEC) to recommend a steep increase in spectrum usage charges for GSM mobile service providers for seeking additional spectrum.
The central government’s fiscal deficit for the first six months fell to 53.8% of the budget target from last year’s 58.2%.
NCAER raises GDP growth target to 8.9% from 8.5% estimated previously.
UP sugar mills have been granted a major reprieve by the HC, permitting them to discharge 25% of their outstanding cane arrears within 5-6 weeks time.
US Fed cuts rate by 25 bps
The Federal Open Market Committee (FOMC) decided today to cut the federal funds rate by 25 basis points to 4.5 per cent.
"Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time," FOMC said in a release.
"Readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully," the it added.
Crude shoots back above $94
Prices increase on unexpected drop in crude and fuel inventories
Unexpected drop in crude inventories taking fuel inventories to two-year low level sent crude prices to a new all time high today. Prices crossed and closed above the $94/barrel mark for the first time ever. A falling dollar just aggravated the situation further. Till yesterday, traders had speculated that this week’s energy inventory report is expected to show rise in US crude inventories.
For the day ending Wednesday, 31 October, 2007, crude-oil futures for light sweet crude for December delivery closed at $94.53/barrel (higher by $4.15/barrel or 4.6%) on the New York Mercantile Exchange. Prices rose to $94.74/barrel today earlier in the day during intraday trading. Prices are up 61% on a yearly basis. Futures prices for petroleum products and natural gas also rose today. Oil rose 16% in October, the biggest one-month gain since September 2004.
As per the weekly inventory report by the Energy Department, U.S. commercial crude oil inventories, fell by 3.9 million barrels to 312.7 million barrels in the week ending 26 October, the lowest since October 2005. Market was expecting a build up of 1.25 million barrel in crude inventories. Refinery capacity utilization fell sharply by 0.9% to 86.2%.
Also, the EIA reported that gasoline supplies rose by 1.3 million barrels to 195.1 million barrels in the latest week, down from last year's 206.4 million, while distillate stocks, which include heading oil, diesel and jet fuel, grew by 800,000 barrels to 135.3 million barrels, down from 144.1 million of the same period in last year.
Brent crude oil for December settlement rose $3.19 (3.7%) to $90.63 on the London-based ICE Futures Europe exchange.
In the currency market today, the dollar hit a record low of $1.4503 per euro after the Federal Open Market Committee, the Fed's rate-setting arm, cut the fed funds rate by 0.25% to 4.5% today afternoon.
All crude product prices shoot up
Natural gas rose in New York as traders shifted their focus to the arrival of cold weather and crude oil rose to a record. Gas for December delivery rose 30.9 cents (3.9%) to settle at $8.33 per million British thermal units
Against this backdrop, November reformulated gasoline jumped 3.7% to $2.3400 a gallon and November heating oil rose 3.4% to $2.5078 a gallon.
At the MCX, crude oil for November delivery closed at Rs 3687/barrel, higher by Rs 88 (2.4%) against previous day’s close. Natural gas closed at Rs 324.7/mmtbu as against previous close of Rs 316.9/mmtbu, higher by Rs 7.8/ mmtbu.
OPEC has planned to boost daily oil production by 500,000 barrels. OPEC's production target is 27.2 million barrels a day, beginning 1 Nov. OPEC, has decided to raise their daily output by 500,000 barrels per day, starting 1 November.
Attacks on oil facilities in Middle East and tight supplies from OPEC have bolstered crude prices this year. As per the U.S. Energy Information Administration, tight global energy supplies are expected to keep energy prices high through 2008.
The Energy Department will come out with the weekly inventory report on natural gas for week ended Friday, 26 October, tomorrow morning at Washington at 10.30 E.T.
Subscribe to:
Comments (Atom)