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Thursday, March 27, 2008
March 2008 derivatives expiry to keep market volatile
The market is expected to see volatile trade as March 2008 derivative contracts are set to expire today, 27 March 2008. As per reports, the marketwide rollover of derivative positions from March 2008 series to April 2008 series stood at 58%, while that of Nifty was 52%.
US markets slipped yesterday, 26 March 2008 while Asian markets opened lower today, 27 March 2008. However year-end net asset value (NAV) boosting exercise from local mutual funds may prevent steep losses.
Meanwhile, the Finance Minister P Chidambaram speaking at a lecture in Singapore yesterday, 26 March 2008, said that GDP may grow at 9% for the year-ending March 2008. He added that rising food prices are putting pressure on inflation. He added that developing economies were shouldering an enormous burden from the relentless rise in prices of food and commodities.
The sharp rise in inflation has been a cause of concern, which has now risen above the Reserve Bank of India’s caution limit of 5%. As per data released on Thursday, 20 March 2008, inflation had surged to over 11-month high of 5.92% for the week ended 8 March 2008
Marketmen are keenly awaiting Q4 and full year March 2008 results from Indian corporates. Robust corporate advance tax payments in Q4 March 2008 indicate that corporate profit growth will be strong in the quarter. Advance tax figures showed banks, hospitality and software firms are doing better than sectors like automobiles and cement.
Asian markets were trading weak today, 27 March 2008. Japan's Nikkei (down 1.78% at 12,480.98), Hong Kong's Hang Seng (down 1.36% at 22,309.91), Taiwan's Taiwan Weighted (down 1.94% at 8,597.78), Singapore's Straits Times (down 1.07% at 2,963.30) and South Korea's Seoul Composite (down 1.11% at 1,661.07) edged lower.
US markets declined yesterday, 26 March 2008 due to poor economic data. US Treasury Secretary, Henry Paulson said that there is a need to strengthen & clarify rules governing the financial sector. The Dow Jones industrial average slipped 109.74, or 0.88%, to 12,422.86. The Standard & Poor's 500 index declined 11.86 points, or 0.88%, to 1,341.13, while the Nasdaq Composite index shed 16.69 points, or 0.71%, to 2,324.36.
Back home, the 30-share BSE Sensex was down 130.66 points or 0.81% at 16,086.83 yesterday, 26 March 2008. The broader CNX S&P Nifty was down 48.65 points or 1% at 4828.85 on that day.
As per provisional data, foreign institutional investors (FIIs) purchased shares worth Rs 393.91 crore on Wednesday, 26 March 2008. Domestic institutional investors (DIIs) were net sellers of shares worth Rs 108.65 crore on that day.
FIIs were net buyers of Rs 282.32 crore in the futures & options segment on Wednesday, 26 March 2008. They were net buyers of index futures to the tune of Rs 103.13 crore and bought index options worth Rs 289.42 crore. They were net sellers of stock futures to the tune of Rs 114.23 crore and bought stock options worth Rs 4.01 crore.
Trading Calls - March 27 2008
Nifty (4829) Supp 4700 Res 4902
Buy ONGC (1063) SL 1043
Target 1103, 1120
Buy Rel Cap (1284) SL 1264
Target 1325, 1335
Buy LITL (396) SL 391
Target 406, 410
Sell Pantaloon (429) SL 434
Target 419, 416
Sell Hotel Leela (41) SL 43
Target 36, 34
Morning Call - March 27 2008
Market Grape Wine :
In House :
Nifty at a supp of 4790 and 4730 with resis at 4877 and 4939
Cash: Sell Reliance below 2300 with a TGT of 2220 with a SL of 2330
Sell SBIN below 1713 with a TGT of 1670 with a SL of 1735
F&o: Buy TITAN above 1058 with a TGT of 1100 with a SL of 1037
BUY IOC above 267 with a TGT of 280 with a SL of 260
Out House :
Markets at a support of 15678 & 15818 and resistance at 16116 & 16261 levels .
Buy : Maruti & Telco at dips
Buy : RIL
Buy : LT at dips
Buy : YesaBank at dips
Buy : HDFC
Buy : Aban
Buy : SBIN at dips
Dark Horse : RPL , ONGC , Yesbank , RIL , LT , RPL & NTPC
Today's Pick - Central Bank
We recommend a buy in Central Bank of India from a short-term perspective. The charts of Central Bank of India show that the stock was on a medium-term downtrend from its life-high of Rs 154.9 marked in early January 2008 till its mid March low of Rs 73.
More recently, the stock’s medium-term downtrend got arrested at around the support level of Rs 74.
The stock gained momentum by surging more then 11 per cent on March 25, initiating an up move. The positive divergence in the daily Relative Strength Index has supported the stock’s trend reversal. This indicator is rising towards the bullish zone in the neutral region. After penetrating the medium-term down trendline, the stock crossed over the 21-day moving average recently, signalling a buy.
Moreover, we also note a crossover in the moving average convergence divergence indicating a buy. Our short-term outlook for the stock is bullish. We expect the stock to rally further to our target level of Rs 102 in the short-term. Investors with a short-term perspective can buy the stock with a stop-loss at Rs 85.
Via BL
Global indices may weigh
The market is likely witness volatility during intra-day trades and may succumb to selling pressure amid overnight weakness in the US indices and the bearish looking Asian indices in the ongoing trades. Among the key domestic indices, the Nifty could get support at 4750 and a slip below this level may see it dip further to 4700, while on the upside, the index has a key resistance at 5050. The Sensex has a likely support at 16000 and could test higher levels of 16300.
US indices ended weak on Wednesday amid fresh rise in crude oil prices. While the Dow Jones dropped by 110 points to close at 12423, the Nasdaq ended 17 points lower at 2324.
Indian floats, too, witnessed selling pressure and all ended at lower levels. Tata Motors tumbled over 6.80% at $16.18, ICICI Bank declined 5.37% at $40.69, HDFC Bank down by 2.68% at $101.75, Patni Compuetrs slipped 2.61% at $11.20 and Wipro moved down 2.51% at $11.27 while Infosys, Satyam, Dr Reddy, MTNL and VSNL lost above 1% each. Rediff remains unchanged.
Crude oil prices moved up, with the Nymex light crude oil for May 08 delivery rising by $4.58 to close at $105.80 a barrel. In the commodity space, the Comex gold for April 08 series added $14.20 to settle at $949.20 respectively.
Driving with fear!
Fear drives you and makes you better.
The Tatas may be on the driver’s seat of Land Rover and Jaguar. But drivers seem to be missing for the market. It remains more of a rollercoaster ride. After rising for four consecutive days, the Sensex and the Nifty closed in the red though FIIs continued to be net buyers. The trend was similar across world markets, where stock benchmarks resumed their downward drift after the pull-back rally.
For the day, we see a lot of volatility due to the F&O expiry and uncertain global cues. And we maintain our stance of selectively picking the blue-chips and re-building a strong portfolio. There is still significant anxiety over the depth and length of the impending recession in the US. Fresh bad news has emerged on the slowdown in the world's biggest economy and the sorry state of the credit markets.
Deutsche Bank says it may not meet the year's profit target due to the ongoing turbulence in global financial markets. Data on new home sales and durable goods orders in the US doesn't inspire any confidence. A multi-billion-dollar deal in the US is facing a major crisis due to the gridlock in the credit markets. All this is going to make it tough for the bulls to sustain any buying momentum, though most bad news may already be reflected in stock prices.
Back home, the local economy is also suffering. Industrial and consumer spending seems to have been hit due to tight monetary policy while inflation has flared up, partly due to soaring global commodity prices. The market is eagerly awaiting quarterly results to ascertain the impact of a global as well as local slowdown on India Inc's health. RBI's annual policy meeting will also be crucial.
FIIs were net buyers of Rs3.94bn in the cash segment yesterday while local institutions pulled out Rs1.08bn. In the F&O segment, foreign funds were net buyers of Rs2.82bn yesterday. On Tuesday, FIIs were net buyers of Rs13.45bn in the cash segment. Mutual Funds were net buyers of Rs5.34bn on the same day.
Tata Motors may weaken amid apprehensions over the company's ability to manage the loss-making Ford brands - Jaguar and Land Rover. The company's ADR was down nearly 7% in the US. The stock ended flat yesterday at Rs679.
Asian markets were trading mostly down this morning, led by automakers and banks, on concern that the health of the US economy is deteriorating as the credit market crisis deepens.
The MSCI Asia Pacific Index lost 1.1% to 139.79 as of 11:20 a.m. in Tokyo, with about seven stocks retreating for each that gained. Speculation the US will limit credit market losses contributed to a 5.3% advance in the benchmark in the previous four days. It has tumbled 11% this year.
Japan's Nikkei 225 Stock Average slid 1.8% to 12,480.98, on course for its biggest decline since March 17. Benchmarks dropped in other markets open for trading.
US stocks closed lower on Wednesday after a three-day rally on a worsening outlook for banks' earnings and an unexpected drop in durable goods orders. Concerns that financing for acquisitions has collapsed due to the current logjam in the credit markets also weighed on the sentiment.
Citigroup tumbled the most in the Dow Jones Industrial Average and led financials to their biggest decline in almost two weeks after Oppenheimer's Meredith Whitney said the largest US bank's quarterly loss will be four times bigger than previously forecast.
Deere & Co. and United Technologies declined on the government's report showing the worst-ever slump in machinery demand. Clear Channel Communications posted its steepest fall since 1989 on concern that banks will pull out financing for the broadcaster's $19.5bn takeover.
The S &P 500 Index lost 12 points, or 0.9%, to 1,341.13. The Dow slid 110 points, or 0.9%, to 12,422.86. The Nasdaq Composite Index declined 17 points, or 0.7%, to 2,324.36.
Market breadth was negative. More than two stocks fell for every one that rose on the New York Stock Exchange.
Stocks slipped at the open on a weak factory orders report. But the selloff picked up steam later in the morning after the release of the February new home sales report and a spike in oil prices.
US light, crude oil for May delivery rose $4.68 to settle at $105.90 a barrel in New York. Oil prices hit a record $111.80 in electronic trading last week. COMEX gold for April delivery rose $14.20 to settle at $949.20 an ounce. Gold hit an all-time trading high of $1,033.90 an ounce one week ago.
The dollar fell versus the euro and the yen. The greenback hit an all-time low versus the euro and a 13-year low versus the yen last week. Treasury prices rose modestly, lowering the yield on the benchmark 10-year note to 3.47% from 3.5% late on Tuesday.
New home sales fell to a 13-year low in February. However, the decline was smaller than Wall Street expectations. Orders for manufactured goods slumped 1.7% in February versus forecasts for a rise of 0.8%. January's drop in durable goods was revised to 4.7% from an initial read of 5.3%.
Treasury Secretary Henry Paulson said the Bear Stearns collapse highlights the fact that investments banks need to be brought under the kind of federal regulation that has long been given to commercial banks.
After the close, Oracle reported quarterly earnings that rose from a year ago and met estimates on sales that rose a year ago and missed forecasts. Shares fell 8.5% in after-hours trading.
Ford Motor said it is selling its Jaguar and Land Rover brands to India's Tata Motors for $2.3bn in cash. Motorola said its board has approved a plan to break the company into two independent, publicly traded companies.
Clear Channel plunged 17% for the second-biggest drop in the S&P 500. The Wall Street Journal said banks financing the deal for Thomas H. Lee Partners LP and Bain Capital LLC haven't been able to agree with the buyers on terms.
Stocks in Europe also closed lower. The pan-European Dow Jones Stoxx 600 index slipped 0.7% to close at 304.62. Germany's DAX 30 ended down 0.5% at 6,489.26, while the French CAC 40 lost 0.3% to 4,676.68 and the UK's FTSE 100 closed down 0.5% at 5,660.40.
Deutsche Bank, Germany's biggest bank, fell almost 3% in Frankfurt after its annual report said possible asset writedowns and slowing economic growth will make it harder to reach its full-year profit target.
European Central Bank (ECB) President Jean-Claude Trichet said yesterday that large euro-area banks are likely to face pressure on revenues on account of the strained credit markets and reduced risk appetite.
In the emerging markets, the Bovespa in Brazil up 0.3% at 61,415 while the IPC index in Mexico gained 0.25% at 30,057. The RTS index in Russia finished nearly unchanged at 1995 while the ISE National 30 index in Turkey fell 0.7% to 50,716.
Market may consolidate further
After opening with a positive bias, markets traded in a range bound for major part of the trading session. However, towards last hour of the day, a four day rally fizzled out as weak cues from the US, Asian and the European markets coupled with selling pressure in the Banking, Oil & Gas, Telecom and Pharma stocks dragged the benchmark Sensex to close in red. Finally, the BSE benchmark Sensex slipped 130 points to 16,086 and the Nifty index lost 48 points to close at 4,828.
Overall about 1,733 stocks advanced; 978 stocks declined while 50 stocks remained unchanged. Among the 50 Nifty 19 stocks ended in positive territory. On the other hand, 31 stock ended in red.
Among the BSE Sectoral indices, BSE Bankex index (down 0.8%), BSE Oil & Gas index (down 0.8%), BSE Teck index (down 0.7%) and BSE Pharma index (down 0.7%). Gainers were, BSE Small-Cap index (up 2.1%), Mid-Cap index (up 1.5%) and Metal index (up 1.5%).
Among the 30-stocks of Sensex, ICICI Bank, Bharti Airtel, Hindustan Unilever, RIL and BHEL were among the major laggards. However, bucking the trend were HDFC, Tata Steel and ITC.
Aries Agro advanced by 2.2% to Rs120 after the company announced that they opened largest Micronutrient unit at Hyderabad. The scrip touched an intra-day high of Rs125 and a low of Rs116 and recorded volumes of over 8,000 shares on BSE.
Dewan Housing was up over 3% to Rs108 after the company said that it entered into an agreement with UAE sponsorship centre. The scrip touched an intra-day high of Rs108 and a low of Rs102 and recorded volumes of over 3,00,000 shares on BSE.
Strides Arcolab was up by 1.4% to Rs156. The company said that it secured first US approval for HIV drug, according to reports. The scrip touched an intra-day high of Rs159 and a low of Rs151 and recorded volumes of over 10,000 shares on BSE.
Ashok Leyland marginally slipped by half a percent to Rs33. The company said that they raised US$200mn in overseas loan. The scrip touched an intra-day high of Rs33 and a low of Rs32 and recorded volumes of over 6,00,000 shares on BSE.
Maruti Suzuki ended on a flat note to Rs845. The company said that they would begin selling swift Dzire in India march 29. The scrip touched an intra-day high of Rs852 and a low of Rs833 and recorded volumes of over 1,00,000 shares on BSE.
Tata Chemicals slipped by half a percent to Rs274. Reports stated that the company would raise US$850mn to part fund its US$1bn acquisition of US-based General Chemicals Industries Products. The scrip touched an intra-day high of Rs278 and a low of Rs272 and recorded volumes of over 85,000 shares on BSE.
SBI was down by 1.5% to Rs1713. Report stated that the company has secured full bank license from the Monetary Authority of Singapore to establish up to 25 outlets. The scrip touched an intra-day high of Rs1791 and a low of Rs1696 and recorded volumes of over 3,00,000 shares on BSE.
Religare surged by over 4% to Rs380 following reports that the company would acquire UK broking firm Hichens, Harrison & Co for US$100mn. The scrip touched an intra-day high of Rs390 and a low of Rs351 and recorded volumes of over 65,000 shares on BSE.
Markets would further look to consolidate and with F&O expiry on Thursday traders should be cautious.Corporate Front Page
Tata Motors has signed a deal to buy luxury brands Jaguar and Land Rover (JLR) from Ford for US$2.3bn in cash. (BS)
Pfizer has filed two law suits to block Ranbaxy's generic version of Lipitor and Caduet. (ET)
RCOM and TCS to enter last leg of bid for setting up 12,000 common service centres across the country. (ET)
Tatas to get approval to make an eco-car from the Thailand’s Board of Investment. (BS)
ONGC, along with its partner the Hinduja Group, to sign an initial agreement to develop two huge oil and gas fields in Iran. (BL)
Religare Enterprises to buy a London-based broking firm, for ~Rs7bn. (BS)
DLF to add Ferragamo to luxury brand portfolio. (BS)
IDBI reduces its benchmark prime lending rate by 50 basis points to 12.75% from 13.25%. (BL)
Gujarat NRE Coke plans to set up coke oven flu gas power plants in its production facilities. (BS)
KS Oils has acquired 50,000 acres of palm plantation in Indonesia with an investment of Rs2.3bn. (BL)
ITC stops non-filtered cigarette production. (BL)
Ashok Leyland has recently concluded an ECB program of US$200mn. (BL)
Tata Teleservices has partnered with PayMate to enable Tata Indicom customers to book domestic flight tickets. (BL)
Idea Cellular to extend its network to cover 3,000 towns and 30,000 villages by the end of the year. (BL)
Alok Infra, a subsidiary of Alok Industries, to raise $100mn through a PE fund. (ET)
Economy News
SEBI Board will take up listing norms for corporate bonds in the next board meeting. (ET)
Withdrawal of income tax holiday for refinery may hit three government refinery projects. (ET)
Cabinet to take up DPEB extension today. (ET)
The CAG has recommended the closer of 12 state PSUs on account of the poor turnover and continuous losses. (BS)
Maharashtra Government will not take further action for three months with regards to land declared as private forest. (ET)
Government to create a debt relief fund to provide liquidity to bank for implementing the Rs600bn loan waiver package. (ET)
Government still wary of easing ECB curbs. (ET)
TRAI to fix prices of pay channels on the DTH platform in line with the Rs5 per channel cap on CAS. (BS)
Government to talk to iron ore exporters for raw material security. (BS)
DoT may agree to allow niche operators specifically for providing services in the rural sector. (BL)
Cabinet nod for farm debt relief fund today. (BL)
India's crude oil production increased 2.3% yoy and natural gas output rose 4.7% yoy in February. (BL)
Indian refiners February oil processing grew 5.8% on yoy basis. (FE)
TRAI is looking to reduce a fee charged by telcos from other telcos. (Mint)
Precious metals rally
Gold and silver prices rally as economic reports from US disappoint while eurozone confidence zooms
Precious metals rose for the second consecutive day, Wednesday, 26 March, 2008 as dollar continued to weaken as poor economic news continued to pour in. A lower dollar pushes up precious metal prices as their demand lessens as it becomes cheaper for traders holding other currencies. Silver prices also rose for the day. Last week, gold and silver prices had dropped by 8% and 18% respectively.
After dropping more than 8% last week, Comex Gold for April delivery rose $14.2 (1.5%) to close at $949.2 ounce on the New York Mercantile Exchange. Earlier last week on Monday, 17 March, prices skyrocketed to a high of $1,034/ounce. But since last Wednesday, 19 March, after Fed’s interest rate cut decision was out, prices started tumbling.
This year, gold prices have gained 12.5% till date. In January, prices gained 11%, the highest monthly gain since April 2006. For February, it gained 6%. But in March, prices have succumbed. Last week, gold prices shed 8.3%.
Comex Silver futures for May delivery rose 58.3 cents (3.3%) to $18.383 an ounce. Silver has gained 34% in 2008. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years. In January this year itself, prices climbed 14%. In February, it gained another 15%.
Barring these two days, gold and silver prices had dropped in the three days prior to that. Prices were pressured as dollar strengthened. Dollar continued to rally after Federal Reserve decided to cut overnight lending rate by 75 bps to 2.25% earlier last week. A stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies. Hence, bullion metals along with other metals witnessed intense sell off together as traders parted away with commodities.
In the currency market today, the dollar index, which tracks the value of the greenback against a basket of major currencies, fell 0.5% to 71.726. The dollar came under renewed pressure, especially against the euro, after reports showing resilient business sentiment in the euro zone's two biggest economies. Reports showed German business confidence increased in March.
On the other hand, in the US, new home sales fell to a 13 year low in February and also there was a 1.7% drop in durable good order in USA for February.
In the energy market today, crude oil rose by more than 4% due to the inventory report by the Energy Department and the weaker dollar. Crude oil for May delivery rose $4.6 (4.6%) to settle at $105.9 a barrel.
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. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.
The Fed action took the federal funds rate target down to 2.25%, the lowest since December 2004. Since last September, Fed has axed interest rates six times.
Prior to this latest cut, the Fed had cut the federal funds rate to 3% this year from 5.25% in mid-September, 2007. January 2008 itself saw two rate cuts in a gap of ten days.
Gold witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (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. In 2006, silver had jumped 46% while gold gained 23%. Gold has tripled in five years as investment demand has soared and mine supplies have remained low.
At the MCX, gold prices for April delivery closed higher by Rs 215 (1.8%) at Rs 12,335 per 10 grams. Prices rose to a high of Rs 12,357 per 10 grams and fell to a low of Rs 12,131 per 10 grams during the day’s trading.
At the MCX, silver prices for May delivery closed Rs 793 (3.4%) higher at Rs 23,825/Kg. Prices opened at Rs 23,088/kg and rose to a high of Rs 23,938/Kg during the day’s trading.
Crude oil shoots up
Prices rise by more than $4 on Energy Department’s crude inventory report
Weak dollar and weekly inventory report by Energy Department for last week showing that crude inventories dropped more than forecast sent crude prices 4% higher today, Wednesday, 26 March, 2008. The dollar slumped due to some discouraging economic data.
Crude-oil futures for light sweet crude for May delivery closed at $105.9/barrel (higher by $4.6/barrel or 4.6%) on the New York Mercantile Exchange. Crude prices are 68% higher on a yearly basis. The crude ended last week lower by more than $7 (6.8%).
In the currency market today, the dollar index, which tracks the value of the greenback against a basket of major currencies, fell 0.5% to 71.726. The dollar came under renewed pressure, especially against the euro, after reports showing resilient business sentiment in the euro zone's two biggest economies. Reports showed German business confidence increased in March.
On the other hand, in the US, new home sales fell to a 13 year low in February and also there was a 1.7% drop in durable good order in USA for February.
A stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies. On the other hand, crude prices, denominated in dollars, tend to rise when the greenback falls, as a weaker U.S. currency makes crude less expensive to buyers holding other currencies. It also lowers oil producers' dollar revenue and forces them to raise prices.
The EIA reported today that U.S crude stockpiles held steady at 311.8 million barrels in the week ended 21 March. U.S. crude-oil imports averaged about 8.9 million barrels per day last week, down 570,000 barrels per day from the previous week. Refineries operated at 82.2% of their operable capacity last week, down from the previous week's 83.8%.
EIA also reported that U.S. motor gasoline demand averaged about 9.1 million barrels per day last week, or 0.3% below the same period last year. U.S. gasoline supplies fell by 3.3 million barrels in the latest week, while distillate stocks dropped by 2.2 million barrels.
Brent crude oil for May settlement today rose $3.39 (3.4%) to $103.99 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 advanced a fourth day as speculators bought commodities after the dollar weakened against the euro and crude oil surged. Gas for April delivery rose 15.3 cents (1.6%) to settle at $9.572 per million British thermal units.
Against this backdrop, May reformulated gasoline rose 6.39 cents to $2.7349 a gallon and May heating oil rallied 10.57 to $2.9458 a gallon
Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.
OPEC left production targets unchanged on its 5 March meeting at Vienna, giving 12 of its 13 members a combined quota of 29.67 million barrels a day. Also over the weekend, it was reported that OPEC President Chakib Khelil said oil prices would range between $80 and $110 a barrel for the rest of 2008.
At the MCX, crude oil for May delivery closed at Rs 4,223/barrel, higher by Rs 207 (5.1%) against previous day’s close. Natural gas for April delivery closed at Rs 389/mmtbu, higher by Rs 10.1/mmtbu (2.7%
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