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Tuesday, January 08, 2008
Morning Call - Jan 8 2008
Market Grape Wine :
In House :
Intra Day: Buy Airdeccan above 297 with a TGT of 310 and a SL of 292.50
Buy Arvindmill above 87.50 with a TGT of 93 and a SL of 85.50
Delivery buy: DCMShriramconsolidated, Mcleodrussel,JCT
F&O: Buy REL above 2620 with a TGT of 2670 and a SL of 2590
Buy Unitech above 539 with a TGT of 554 and a SL of 530
Out House :
Markets at a support of 20454 & 20591 levels with resistance at 20898 & 20989 levels .
Buy : RIL & REL
Buy : Kohinoor & Adhunik
Buy : NTPC & Jphydro
Buy : Kotak Bank & IciciBank
Buy : TataMotor
Buy : IBUllsreal & IBullsFin
Buy : ITC & HLL bullet
Buy : SBIN
Buy : RNRL & RPL
Dark Horse : REL , RPL , Kohinooor , Jphydro , RNRL , IBullReal , Aban , RIL & SBIN
Pre Open Market Commentary
The Indian market today is likely to have a positive opening due to mixed cues from the global markets. Yesterday, the Indian market closed in the positive territory after struggling a lot throughout the trading session. The market opened on a negative note tracking the weak global cues but managed to recover from the fall on the back of heavy buying at the lower levels. BSE Bankex, Realty and Capital Goods remained the centre of attraction as most buying is seen from these baskets. The BSE Sensex closed higher by 125.76 points at 20,812.65 and NSE Nifty closed up by 4.8 points at 6,279.10. We expect that the market may gain some grounds during the trading session.
On Monday, the US market closed mixed. The Dow Jones Industrial Average (DJIA) closed higher by 27.31 points at 12,827.49 and S&P 500 index closed up by 4.55 points at 1416.18 while Nasdaq fell by 5.99 points at 2,499.46.
Indian ADRS closed in green. In technology sector, Infosys grew by (2.09%) along with Satyam by (1.62%) and Wipro by (0.81%). In banking sector, ICICI bank and HDFC bank inched up by (9.81%) and (6.53%) respectively.
The major stock markets in Asia are trading mixed. Hang Seng is trading higher by 345.75 points at 27,525.24. Taiwan Weighted is trading up by 117.69 points to trade at 8,001.06 while Japan''s Nikkei is trading lower by 41.81 points at 14,458.74. Singapore Strait Times is trading at 3,368.56 up by 15.50 points.
On Monday the FIIs stood as net buyer both in equity and debt. The gross equity purchased was Rs4,549.40 Crore and the gross debt purchased was Rs730.80 Crore while the gross equity sold stood at Rs4,040.60 Crore and gross debt sold stood at Rs209.80 Crore. Therefore, the net investment of equity reported was Rs508.80 Crore and net debt was Rs521Crore.
Today, Nifty has support at 6,213 and resistance at 6,374 and BSE Sensex has support at 20,634 and resistance at 21,102.
A late rally at US Markets
Market ends mixed after whipsaw trading as Nasdaq continues to be in the red
US stock market witnessed volatile trading today and all the three indices were about to finish in the red, if not for the last fifteen minutes of trading. In the last few minutes, Dow and S&P 500 were pushed into the green. Nasdaq continued with its losing streak and the index ended in the red for the seventh consecutive day. Investors seemed to remain confused about the country’s current economic outlook.
IBM weighed heavily on the technology stocks after UBS Securities downgraded the stock citing that the company’s hardware and services sales could be pressured because IBM has the largest financial services exposure in the sector.
The Dow Jones industrial Average ended the day with a gain of 27.3 points at 12,827.5. The Nasdaq Composite Index, finished lower by 5.19 points at 2,499. S&P 500 finished higher by 4.55 points at 1,416.18.
Twenty-one out of thirty Dow stocks ended in the green today. Altria and Mc Donalds led the team of Dow winners while IBM and Alcoa led the team of Dow laggards.
Stocks today opened modestly higher today though there was no specific economic news for the day. But at the end, Technology, Industrials, Energy, and Materials - all sectors posted losses.
Mc Donalds shares closed up 1.7%, following a report that the fast-food chain would compete with Starbucks by opening coffee bars offering cappuccinos and lattes. Starbucks shares too ended almost 2% higher.
ICICI Bank and HDFC Bank ADRs end considerably higher
Among other major events of the day, President Bush today spoke about the economy. He noted that the housing slump and high energy prices are among today's challenges. He also said he is determined to make sure taxes stay low. His comments did not have any dramatic effects on the stock market.
Indian ADRs ended mixed today. But ICICI Bank and HDFC Bank ADRs ended very strong today. Both ADRs closed higher by 9.8% and 6.5% respectively. They were followed by Tata Motors whose ADr closed by higher by 3.5%.
Crude prices continued to be affected by recession fears. Crude prices dropped more than $2 today after a US report came up with much below-expected job data on last Friday. The same raised concern of a recession that would curb energy demand. Forecasts of higher-than-normal temperatures through 20 January in the Northeast part of USA also pressured prices.
Crude-oil futures for light sweet crude for February delivery closed at $95.89/barrel (lower by $2.82/barrel or 2.9%) on the New York Mercantile Exchange. Earlier, the contract hit an intraday low of $94.55. Prices are 69% higher on a yearly basis.
More than 1.7 billion shares traded hands on the New York Stock Exchange, where advancing stocks outpaced those declining 9 to 7. On the Nasdaq, volume neared 2.6 billion, and declining stocks edged just ahead of those advancing.
Tomorrow will be another day when investors will focuss on the economic reports to set the tone of trading. The monthly reading of Pending Home Sales will be announced by the National Association of Realtors in the morning providing market with the latest gauge in housing demand. In the afternoon, November's consumer credit data is scheduled for release which is indicative of consumer finances and consumer health.
IPO Grey Market Premiums
Future Capital Holdings 700 to 765 650 to 700
Reliance Power 405 to 450 440 to 445
SVPCL 42 DISCOUNT
Aries Agro 130 30 to 35
Manaksia Ltd. 160 15 to 20 (Listing Today)
Porwal Autocomponents 75 DISCOUNT
Daily Trading Calls
Nifty (6279) Sup 6205 Res 6331
Buy Orchid Chem (314) SL 309 Tgt 323, 326
Buy Siemens (2025) SL 2000 Tgt 2080, 2090
Buy Welspun Guj (465) SL 460 tgt 475, 479
Sell Strides Arcolab (273) SL 276 tgt 265, 261
Sell Polaris (121) SL 125 tgt 114, 112
Bulls hook on to liquidity
You never know how a horse will pull until you hook him up to a heavy load.
The bulls have been pulling themselves out of most global concerns. Strong support from both overseas as well as domestic institutions saw bulls staging the expected comeback despite weak global cues. Today, we see a higher opening as most Asian markets appear to be holding firm in the face of the looming threat of a recession in the US, the region's biggest overseas market. Our market should be alright for the day unless there is fresh weakness in Asian or European markets later. Street smart signs may indicate that markets may remain firm till the mega IPO of Reliance Power gets out of the way. But, remain on guard for a reversal anytime. For the day enjoy the gains.
If liquidity remains strong our market should not face too many issues in combating global concerns that seem to spring up every now and again. Corporate results will have a say on money flows as would the outcome of meetings by the Fed and the RBI. The undertone continues to be positive though valuations have reached unchartered territories, prompting many market observers to raise the red flags.
BHEL has decided to modify the scope of the proposed JV with NTPC to include manufacturing and supply of equipment for power plants and other infrastructure projects in India and abroad. BHEL had signed an agreement with NTPC on Dec. 17, for setting up a JV for EPC business.
The equity shares of Manaksia Ltd. will get listed today.
Results Today: Kopran, Patel Engineering, Prism Cement, Shree Cement, Supreme Industries and TVS Electronics. Shares of Refex Refrigerants might gain as the company has reported a 53% growth in topline and 47% in the bottomline for the quarter ended December.
Consolidated Construction Consortium has received orders worth Rs1.84bn for construction of buildings and factories in Karnataka, Rs683.9mn in Tamilnadu during December. The total orders received total Rs2.52bn.
Clutch Auto is launching host of new products for the International and domestic markets with technologies to suit arduous Indian operating conditions and to meet diverse customer requirements.
US stocks ended mixed on Monday with the Nasdaq registering its seventh consecutive decline while the broader market managed slim gains on the back of strength in drugmakers and utilities.
The key indices were highly choppy through the day given the mounting worries over the state of the world's largest economy while some buying crept in following the big falls on Friday. The S&P 500 swung between gains and losses at least 35 times during the day.
Investors also considered comments about the economy from President George W. Bush, Treasury Secretary Henry Paulson and a Federal Reserve official, as well as news of an incident between Iran and the US military.
Eli Lilly, Biogen and Celgene helped push healthcare companies to their biggest advance in five months. FPL Group led gains in utilities. AT&T and Altria climbed after Deutsche Bank and Goldman Sachs advised purchasing the stocks.
The S&P 500 Index advanced 5 points, or 0.3%, to 1,416.18, rebounding from its worst start to a year since 2000. The Dow Jones Industrial Average rose 27 points, or 0.2%, to 12,827.49. The Nasdaq lost 5 points, or 0.2%, to 2,499.46, hurt by a 10% drop in chip maker Nvidia.
About six stocks rose for every five that fell on the New York Stock Exchange.
Shortly before the close, the major indexes were down sharply, until a last-minute advance propelled the Dow and S&P 500 into positive territory and helped the Nasdaq cut losses.
President Bush and Treasury Secretary Paulson said that US economic indicators were sending mixed signals and that they were considering whether a stimulus was needed. "We're all focused on this," Paulson told the New York Society of Security Analysts. This is a decision the President still has to make, Paulson said.
Meanwhile, Atlanta Fed president Dennis Lockhart said negatives in the US economy were picking up speed and market experts were worried about further deterioration. Lockhart is not a voting member of the Fed's 2008 policy committee, but will be an alternate for the upcoming Jan. 29-30 meeting.
Adding to the volatility was news from the US military that five Iranian boats harassed three US naval ships in international waters over the weekend. Iran denied that the matter was a serious incident. The White House said it will confront such behavior if Iran threatens the US or its allies.
US light crude oil for February fell $2.82 to settle at $95.09 a barrel on the New York Mercantile Exchange. COMEX gold for February delivery fell $3.50 to settle at $859.60 an ounce.
Treasury prices climbed, lowering the yield on the 10-year note to 3.835 percent from 3.89 percent late Thursday. In currency trading, the dollar gained versus the yen and the euro.
European shares could not hold early gains for the second session in a row, as fears of a recession hurt companies exposed to economic shifts, such as metal producers, technology providers and construction firms. The pan-European Dow Jones Stoxx 600 index closed 0.2% lower at 351.27. The French CAC-40 advanced 0.1% to 5,452.83, and the German DAX 30 added 0.1%, rising to 7,817.17. The UK's FTSE 100 ended 0.2% lower at 6,335.70.
In the emerging markets, the Bovespa in Brazil was down 0.4% at 60,772 while the IPC index in Mexico tumbled 0.6% at 28,152 and the ISE National-30 index in Turkey finished flat at 66,150.
Asian markets, barring Japan were trading higher this morning. The Nikkei in Tokyo was down 41 points at 14,458 while the Hang Seng in Hong Kong advanced 415 points to 27,594. The Kospi in Seoul was flat at 1832 while the Straits Times in Singapore rose 16 points to 3369. The Shanghai Composite in China added 57 points at 5450 and the Taiex in Taiwan was up 105 points at 7988.
Bulls hope to stand firm
Weak cues from the International markets triggered a sell off in the early trades dragging the benchmark Sensex to slip to a low of 20,438. However, after staging a bounce back, the Sensex remained choppy in the mid afternoon session before gaining momentum led by the Banking, FMCG and the Realty stocks. Even the Sugar stocks were in the limelight. Finally, 30-share Sensex closed at 20,812 gaining 125 points and Nifty ended at 6,279 up 4 points.
Sugar stocks had a sweet session after reports stated that Ethanol may get ‘declared goods’ status in Budget. Sakhti Sugar rallied by over 19% to Rs110, Renuka Sugar surged by over 4.5% to Rs1081, Rana Sugar was locked at 5% upper circuit to Rs23.85 and Balrampur Chini surged by over 5% to Rs122.
Hikal spurred by over 7.5% to Rs492 after the company announced that it entered into an agreement with Pfizer for APIS. The scrip has touched an intra-day high of Rs512 and a low of Rs465 and has recorded volumes of over 58,000 shares on NSE.
Su-Raj Diamonds ended flat at Rs97. The company announced its plans to sell Rs3.62mn shares to promoters. The scrip touched an intra-day high of Rs102 and a low of Rs95 and recorded volumes of over 3,00,000 shares on NSE.
L&T gained 1% to Rs4282 after the company announced that it secured order of more than Rs13bn from Cairn. The scrip touched an intra-day high of Rs4315 and a low of Rs4190 and recorded volumes of over 8,00,000 shares on NSE.
Vikas WSP was frozen at 10% upper circuit to Rs65.50 after the company announced that it acquired 1,985 acres of Farm land in Rajasthan. The scrip touched an intra-day high of Rs65.5 and a low of Rs59 and recorded volumes of over 16,00,000 shares on NSE.
Bartronics India was up 7.5% to Rs284 after the company announced the successful issuance of US$50mn zero coupon unsecured foreign currency convertible bonds. The bonds have a maturity of 5 years and are convertible at a price of Rs290 which represents a premium of around 20% over the current market price. Silverdale Services Limited, London, was the sole Lead Manager for the offering. The scrip touched an intra-day high of Rs294 and a low of Rs258 and recorded volumes of over 5,00,000 shares on NSE.
Bihar Tubes advanced 4% to Rs208 after the board of directors of the company would consider Preferential warrant sale on January, 15 2008. The scrip touched an intra-day high of Rs217 and a low of Rs199 and recorded volumes of over 1,00,000 shares on NSE.
ICICI Bank spurred by over 6% to Rs1362 after media reports stated that the company would list its 100% subsidiary ICICI securities. The scrip touched an intra-day high of Rs1379 and a low of Rs1234 and recorded volumes of over 72,00,000 shares on NSE.
Indowind Energy advanced 3% to Rs159 after reports stated that the company would raise Rs250 cr-300 cr Via QIP. The scrip touched an intra-day high of Rs166 and a low of Rs151 and recorded volumes of over 4,00,000 shares on NSE.
ABG Shipyard slipped 1.5% to Rs978. The company announced its Q3 result with net profit at Rs47cr (up 60%) and net sales at Rs274cr (up 54.8%). The scrip touched an intra-day high of Rs1035 and a low of Rs967 and recorded volumes of over 1,00,000 shares on NSE.
Parsvnath rallied by over 8.5% to Rs574 after the company announced that it secured contract worth Rs900mn to build Ashram at Shirdi. The scrip touched an intra-day high of Rs598 and a low of Rs520 and recorded volumes of over 84,00,000 shares on NSE.
What the FIIs are doing
FIIs were net buyers of Rs15.43bn (provisional) in the cash segment on Monday while the local institutions pumped in Rs3.28bn. In the F&O segment, foreign funds were net sellers of Rs7.29bn.
On Friday, FIIs were net buyers of Rs5.09bn in the cash segment. Mutual Funds were also net buyers of Rs6.17bn on the same day.
News Snippets:
ICICI Bank and ADAG Group are planning to set up syndicates in London’s Lloyd’s Market, one of the larges reinsurance markets in the world. (FE)
The Power Ministry has asked Reliance Power to advance commissioning of units at Sasan UMPP. (FE)
Pantaloon Retail is planning to increase Future Money outlets from 95 to 400 by 2010. (FE)
ICICI Bank is planning to list its investment banking and broking subsidiary, ICICI Securities. (ET)
The Government’s move to allow GAIL to market entire PMT gas has impacted gas supplies to GSPC and Gujarat Gas. (BL)
Reliance Energy and GMR are the only Indian companies short listed for buying US$2bn Tuas Power owned by Temasek. (ET)
ADAG is to tie up with US lignite miner, North American Coal Corporation to ensure fuel supply to its 28,200 MW projects. (ET)
Gitanjali Gems has purchased ‘Nakshatra’ brand from Diamond Trading Company (DTC) for Rs1bn. (ET)
Nitco Tiles is planning to set up a new tile manufacturing unit in Gujarat. (ET)
The proposal of merger of State Bank of Saurashtra with the State Bank of India will be taken up by the Cabinet on January 10. (ET)
Fortis Financial Services is planning to make an application to RBI to surrender its NBFC licence. (ET)
Sical Logistics has received Madras High Court approval to demerge its non-logistics business into a separate subsidiary. (ET)
GNFC plans to invest Rs780mn for setting up six eco-friendly wind power generators. (BL)
RNRL may buy out some mines in Indonesia and Australia for dedicated fuel supplies to support the Krishnapatnam UMPP. (BL)
Cranes Software has announced the acquisition of US based specialized auto consulting and product development firm, Engineering Technology Associates. (BL)
States have arrived at a consensus to bring about uniform duty structure for liquor across the country. (ET)
The Finance Ministry is understood to have allocated Rs310bn for fertilizer subsidies and concessions during FY09. (ET)
Cement manufacturers in Tamil Nadu have agreed to take a decision on reducing prices before February 10. (ET)
FDI inflows into the country surged to US$15.7bn in FY07 and the target for FY08 is US$30bn. (BL)
The Empowered Group of Ministers will meet on January 17, to discuss fuel price hike. (BL)
ULCRA would be completely scrapped in the country as AP, West Bengal and Jharkhand agree to repeal the act. (BL)
The Government has denied plans to privatize Dabhol project. (FE)
The Government would consider tax sops to promote low cost housing in the country. (FE)
The Maharashtra Government has agreed to withdraw export duty on ethanol. (FE)
Newsprint prices may increase by ~20% yoy in FY08. (BS)
The Government is set to import 1.2mn tons of vegetable oils in the first quarter of 2008. (BS)
Daily Technical Analysis
Nifty — The index opened on a negative note after which it witnessed a rise throughout the day’s trading session. It ended the day with a gain of 7 points.
Support & Resistance — The index tested the 6185 support level in the opening session and bounced back. On the daily bar chart, index has posted an inside day (i.e. yesterdays price range is totally within the prior day’s price range). Breakout above the 6300 level would see index exhibit intra-day strength. Intra-day index has support around 6230-6185 range. Intra-day declines should find support around these levels.
Conclusion — Expect intra-day strength above 6300 levels.
Precious metals end lower
Gold and silver prices decline as crude slips by more than $2 and dollar strengthens
Precious metals ended lower for the second consecutive day as both gold and silver prices dropped today, Monday, 07 January, 2008. Gold and silver prices fell today after oil prices slipped and dollar strengthened against its rivals.
Gold generally moves in the opposite direction of the U.S. currency. Gold, as a dollar-denominated commodity, suffers from dollar strength. Gold gained 31% in FY 2007 while oil jumped 57% and the dollar fell 9.5% against the euro.
Comex Gold for February delivery today fell $3.7 (0.4%) to close at $862 an ounce on the New York Mercantile Exchange. Last week, gold prices gained $23/ounce (2.7%).
Prices touched $872 during intraday trading on 3 January, 2008 and finally had closed at $869.3/ounce. That closing price was the highest price after a record $873 that gold hit on 21 January, 1980.
Comex Silver futures for March delivery today fell 17.2 cents (1.1%) to $15.29 an ounce. Prices touched 26 year high on 7 November, 2007, after reaching $16.275. Silver has gained 2.5% in 2008. The metal had climbed 15.5% in FY 2007. The metal also has gained for seven straight years.
Gold witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.
In the currency market today, the dollar rose against most major counterparts. The dollar index, which tracks the performance of the greenback against a basket of other currencies, gained 0.6% to 76.210
In the energy market today crude oil fell more than $2 a barrel in New York after renewed concerns about recession hinted that a a recession would curb energy demand. In FY 2007, crude prices had gained $57%.
Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. Rising crude increases inflationary pressures and vice versa. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.
Gold had climbed 31% in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record.
The Fed reduced federal funds rate three times in FY 2007. The current interest rate stands at 4.5%. The Fed also lowered its discount rate twice, the interest it charges on direct loans it makes to banks, and currently it stands at 4.75%. With these interest rate cuts, dollar has been tumbling down. Market anticipates that there will be more rate cut in the coming year.
Gold is expected to rally to all-time highs in the first quarter in FY 2008 as higher oil prices and a weaker dollar will continue to boost demand. Market expects another phase o interest rate cut in the end of the month.
Crude gives up almost $3
Demand concerns and above average temperature put pressure on price
Crude prices continued to be affected by recession fears. Crude prices dropped more than $2 on Monday, 7 January, 2008 after a US report came up with much below-expected job data on last Friday. The same raised concern of a recession that would curb energy demand. Forecasts of higher-than-normal temperatures through 20 January in the Northeast part of USA also pressured prices.
Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.
Crude-oil futures for light sweet crude for February delivery closed at $95.89/barrel (lower by $2.82/barrel or 2.9%) on the New York Mercantile Exchange. Earlier, the contract hit an intraday low of $94.55. Prices are 69% higher on a yearly basis. Last week, crude prices gained $2.
As per Labor Department, U.S nonfarm payrolls rose by a seasonally adjusted 18,000 in December. It was the weakest growth seen since August 2003. The data hit the wires last Friday, 4 January, 2008.
In the currency market, the dollar rose against most major counterparts. The dollar index, which tracks the performance of the greenback against a basket of other currencies, gained 0.6% to 76.210.
Brent crude oil for February settlement today fell $2.4 (2.5%) to $94.39 on the London-based ICE Futures Europe exchange. The London benchmark rose 54% in FY 2007, the most since 1999 when prices more than doubled.
Natural gas remains the only exception registering gains
Natural gas in New York rose amid forecasts for lower temperatures and higher demand next week. Gas for February rose 3.8 cents (0.5%) to settle at $7.879 per million British thermal units.
Against this backdrop, February reformulated gasoline fell 8.12 cents (3%) to end at $2.4298 a gallon. February heating oil dropped 9 cents (3%) to finish at $2.5935 a gallon.
As per National Weather Service, above average temperature will dominate most part of US for the next two weeks. This is the time of peak demand for gasoline and heating oil.
Members of the OPEC left production targets unchanged at the 5 December meeting in Abu Dhabi. The group, which produces 40% of the world's oil, will review output at a 1 February, 2008 meeting in Vienna.
Monday, January 07, 2008
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