Daily Market Outlook - May 16 2008
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Friday, May 16, 2008
Daily Trading Calls - May 16 2008
Nifty (5115)Sup 5056 Re 5180
Buy Patni (283)
SL 278 Target 292, 295
Buy HDFC (2802)
SL 2780 Target 2845, 2855
Buy Suzlon (293)
SL 288 Target 302, 305
Sell Welspun Gujarat (385)
SL 390 Target 375, 372
Sell Tata Motors (660)
SL 666 Target 648, 644
Bulls batting...enjoy the match
We're so busy watching out for what's just ahead of us that we don't take time to enjoy where we are,.
More exciting than the market would be today's 20-20 cricket match between Mukesh Ambani’s Mumbai Indians and Shah Rukh Khan’s Kolkata Knight Riders. The bulls seem to have been inspired by Sanath Jayasuriya’s blazing knock the other evening and stocks like RIL did manage to send many a bears to the fence.
But then it is that day of the week again, when Inflation jitters seem to make the bulls nervous. Hopefully, most of the bad news on this front has already been factored in by the market with expectations that inflation may even hit 8%. So it can’t get worse than it. Though oil prices remain at highly elevated level, the Government is not even talking about a price hike due to political compulsions. On the contrary, the Finance Minister has reportedly refused to increase the quantum of oil bonds to oil PSUs. The Centre has also forced steel and cement companies to cut prices to rein in inflation.
These three sectors are likely to bear the brunt of the Government's inflation-fighting efforts. Aviation is another sector where Government apathy has dragged the sector into deep losses. Most sectors are facing increasing number of challenges amid high interest rates, soaring inflation, currency fluctuations, slowing economic growth and uncertain market conditions. This may reflect in their performance over the next few quarters.
Coming to the market, the outlook for the day appears to be brighter after Thursday’s strong finish and firm global cues. Inflation figures may not hurt that much, and the bulls might just decide to extend their gains into a third straight day. However, one should look to reduce one's holdings at every rally as the key indices will face some resistance at higher levels. The near-term outlook continues to be one of cautious optimism.
FIIs were net buyers of Rs7.07bn (provisional) in the cash segment yesterday while local institutions poured in Rs3.63n. In the F&O segment, foreign funds were net buyers of Rs5.22bn. On Wednesday, FIIs were net buyers of Rs2.58bn while Mutual Funds too were net buyers of Rs1.33bn.
Key Results Today: Bank of India, Bongaigaon Refinery, Edelweiss Capital, Emkay Share, HT Media, NMDC, Redington, Saksoft, Shriram EPC, SAIL, Stone India and Texmaco.
Asian stocks rose for a fifth day, led by commodity producers and shipping companies, on renewed speculation that China is seeking a stake in BHP Billiton and after the price of transporting freight jumped to a record.
BHP shares climbed to a high in Sydney after the Australian newspaper reported that Chinese interests want to team up with an Australian fund to purchase a 9% stake in the mining giant. Mitsui OSK Lines, Japan's largest shipping company, rose to a six-month high.
Mizuho Financial Group rallied in Tokyo after forecasting profit will almost double this year.
The MSCI Asia Pacific Index gained 0.8% to 153.32 as of 10:55 a.m. in Tokyo, set to complete its longest winning streak since October 3. The index is headed for a 3% advance this week. About four stocks rose for every three that declined.
All Asian benchmark indexes advanced. Japan's Nikkei 225 Stock Average added 0.2% to 14,276.08. The country's economy grew faster than economists estimated last quarter as exports to Asia and emerging markets helped the nation weather the US slowdown.
US stocks rose on Thursday, with technology leading the way. The S &P 500 Index touched a four-month high, as analysts said chipmakers will benefit from rising global demand and energy shares are cheap relative to crude prices.
Intel and Nvidia led semiconductor shares to their highest level of the year on a Friedman Billings Ramsey & Co. report that orders are improving. Exxon Mobil helped push the S&P 500 Energy Index to a record after UBS said the oil industry is notably inexpensive.
Tiffany advanced to the highest level since November after the second-largest luxury-jewelry retailer boosted its dividend by 13 percent.
The S&P 500 added 14.91, or 1.1%, to 1,423.57. The Dow Jones Industrial Average increased 94.28, or 0.7%, to 12,992.66. The Nasdaq Composite Index gained 37.03, or 1.5%, to 2,533.73.
Market breadth was positive and volume was moderate. More than five stocks rose for every two that fell on the New York Stock Exchange.
US indices struggled to rise in the morning amid rising oil prices, mixed economic reports and a string of M&A news. But the tone turned positive in the late morning, despite volatile oil prices.
US stocks have been rising over the past two months as investors bet that the worst of the credit market crisis is behind them and the world's biggest economy appears to be stabilizing.
US light crude oil for June delivery fell 10 cents to settle at $124.12 a barrel in New York following a volatile session.
Meanwhile, the national average price for a gallon of regular unleaded gas rose to a record $3.776 from $3.758 the previous day, according to AAA. It was the eighth record in a row.
COMEX gold for August delivery rose $13.30 to settle at $884.10 an ounce. The dollar rose versus the euro and slipped versus the yen. Treasury prices rose, lowering the yield to 3.83% from 3.90% late on Wednesday.
Yahoo shares climbed 2.3%. Activist shareholder Carl Icahn launched a campaign to overthrow Yahoo's board as part of an effort to restart deal talk with Microsoft.
Media giant CBS said it would buy CNet Networks for a 45% premium in a move to expand its reach further onto the Web. Also on the online front, Comcast said it is buying social networking site, Plaxo, and IAC/Interactive will acquire Lexico Publishing Group.
GE has reportedly hired Goldman Sachs to seek buyers for the sale of its appliances business, which could be worth between $5- $8bn. GE shares inched lower.
JC Penney reported weaker quarterly results that beat forecasts. The retailer also said second-quarter earnings would come in just ahead of analysts' forecasts, but that full-year conditions will be difficult amid the tougher consumer spending environment. Shares gained more than 4%.
Thursday's economic news was mixed. Jobless claims rose a bit, New York-area manufacturing worsened and Philadelphia-area manufacturing weakened less than had been expected. Industrial production and capacity utilization declined more than expected in April and homebuilder confidence fell again in May.
Friday brings economic reports on housing starts, building permits and consumer sentiment.
Stocks in Europe closed higher thanks to a late-afternoon rally. The pan-European Dow Jones Stoxx 600 index, down about 10% this year, finished 0.4% higher at 328.41, with advancing stocks outpacing those declining roughly 3 to 2.
The UK's FTSE 100 ended up 0.6% at 6,251.80. The German DAX 30 finished nearly unchanged at 7,081.05 and the French CAC-40 finished virtually unmoved at 5,057.51.
Most emerging markets closed higher. The Bovespa in Brazil was up 2% at 71,492 while the IPC index in Mexico climbed 0.7% at 31,542. The RTS index in Russia gained 0.25% to 2411 while the ISE National 30 index in Turkey rose 0.4% to 52,599.
Can bulls maintain tempo
Bulls had a stellar session as bears were shrugged of the bourses amid firm global cues and all round buying in the scrips across the sectors. Bulls completely dominated the whole session. A sudden bout of buying in the index heavyweights like Reliance Industries, Infosys, L&T and RCom lifted the Nifty index to close above the 5,100 mark and the benchmark Sensex closed above the 17,300 mark.
The Capital Good, Realty, Oil & Gas, Banking and Power stocks were in demand. However, the FMCG stocks were slightly under pressure. Finally, the BSE benchmark Sensex ended 375 points higher to close at 17,353 and the Nifty index gained 103 points to close at 5,115.
Overall about 1,771 stocks advanced; 909 stocks declined while 74 stocks remained unchanged. Among the 50-Nifty 39 stocks ended in green and 11 stocks ended in red.
PNB surged by over 5.5% to Rs537 after the company announced its results for the quarter and year ended March 31, 2008. The Bank posted a net profit of Rs5437.6mn for the quarter ended March 31, 2008 as compared to Rs2377mn for the quarter ended March 31, 2007. Total Income increased from Rs37127.9mn for the quarter ended March 31, 2007 to Rs44170mn for the quarter ended March 31, 2008.
The Bank posted a net profit of Rs20487.6mn for the year ended March 31, 2008 as compared to Rs15400.8mn for the year ended March 31, 2007. Total Income increased from Rs129665.4mn for the year ended March 31, 2007 to Rs162625.8mn for the year ended March 31, 2008. The scrip touched an intra-day high of Rs540 and a low of Rs503 and recorded volumes of over 6,00,000 shares on NSE.
Torrent Power gained by 2% to Rs132 after the company announced its results for the quarter and year ended March 31, 2008. The company posted a net profit of Rs504.6mn for the quarter ended March 31, 2008 as compared to Rs443.2mn for the quarter ended March 31, 2007. Total Income increased from Rs7762mn for the quarter ended March 31, 2007 to Rs9483.8mn for the quarter ended March 31, 2008.
The company posted a net profit of Rs2112.4mn for the year ended March 31, 2008. Total Income is Rs37220mn for the year ended on March 31, 2008. The scrip touched an intra-day high of Rs136 and a low of Rs132 and recorded volumes of over 4,00,000 shares on NSE.
MLL rose over 14% to Rs114 after country’s fourth biggest shipping company by market value quadrupled earnings for the quarter ended March 31 to Rs740.4mn. The scrip touched an intra-day high of Rs117 and a low of Rs102 and recorded volumes of over 81,00,000 shares on NSE.
Reliance Industries gained momentum towards the fag end of the trading session. The scrip performed like the ‘Mumbai Indians’ the IPL team which won in handsome style against the ‘Chennai Super Kings’ on Wednesday. The scrip ended higher by over 3.5% to Rs2622 and touched an intra-day high of Rs2633 and a low of Rs2535 and recorded volumes of over 6,00,000 shares on NSE.
Madras Aluminium surged by over 9% to Rs894 after the company said that they would consider stock split on May 16, 2008. The scrip touched an intra-day high of Rs897 and a low of Rs790 and recorded volumes of over 71,000 shares on NSE.
Syndicate Bank gained by over 3% to Rs77. According to reports, the company repriced its bulk deposits. The company also on Wednesday announced its Q4 results with PAT rising over 21% to Rs1263mn. However, the company’s revenues for the fourth quarter fell by 6.8% to Rs5,626mn. The scrip touched an intra-day high of Rs77 and a low of Rs75 and recorded volumes of over 2,00,000 shares on NSE.
Neyveli Lignite gained by over 4.5% to Rs142 after the company announced that they would develop 1000MW coal based power plant and would spend Rs49.1bn to develop the power project. The scrip touched an intra-day high of Rs142 and a low of Rs137 and recorded volumes of over 90,00,000 shares on NSE.
Flawless Diamond gained by 3% to Rs68 after the company said that they secured Rs670mn order from Hong Kong’s M/s Jewelmax Company and Fine Jewellery. The scrip touched an intra-day high of Rs71 and a low of Rs66 and recorded volumes of over 1,00,000 shares on NSE.
Corporate News
Bihar Tubes' Board will meet today to consider various fund raising options for the proposed expansion plans and modernization of existing manufacturing facilities of the company.
BASF SE has announced an open offer for buying up to 6,289,591 shares or 22.31% of the voting capital of BASF India at a price of Rs 274 per share. The offer will start on July 9 and will close on July 28. The stock was up 1.2% yesterday.
Welspun India has denies media news that it was planning to acquire Linen N Things of USA. "The news reported by various TV channels and newspapers is not true and is based on speculation," the company said in a statement.
Realty firm Omaxe proposes to take up low-cost urban housing through its subsidiary National Affordable Housing and Infrastructure and other group companies. The company has already started identifying and acquiring various tracts of land for this purpose and will be finalizing the design, costs, etc., in due course.
OnMobile Global has signed an agreement to acquire 100% of Telisma SA, a leading provider of speech recognition software for Service Providers and Enterprises. Telisma is based out of Paris, France.
Jain Irrigation and the Government of Maharashtra have signed a MoU for investment of Rs5.5bn in the state through two projects.
Reliance Industries is in talks with three overseas oil companies to bid for oil and gas blocks in the seventh round of NELP. (ET)
Tech Mahindra has bagged US$700mn contract from BT. (ET)
Reliance Infratel and MCX public offers get SEBI nod. (BS)
Bharti Airtel crosses 4mn subscribers in Delhi. (ET)
Reliance Communications gets Rs30bn loan from China Development Bank to fund its nationwide GSM foray. (ET)
L&T to utilize Lafarge money for expanding shipping, power and infrastructure projects. (BS)
Government files a petition before TDSAT seeking to recover Rs20.2bn from Tata Teleservices. (ET)
Infosys is race for acquiring Aptara, a third-party BPO in technology publishing. (ET)
Wipro is planning to enter in renewable energy business. (ET)
Essar Steel to join the race for CSN’s iron ore mines. (BS)
Nalco shortlists 2-3 coal mines in Indonesia. (BS)
Neyveli Lignite gets government approval for development of 1,000MW coal based thermal power project in Tamil Nadu. (BS)
Jain Irrigation to set-up two projects in Jalgaon, Maharashtra, at an investment of Rs5.5bn. (BS)
BASF to make an open offer to BASF India’s shareholders for acquiring over 22% stake for Rs1.72bn. (BS)
PGCIL is looking for opportunities for expanding overseas especially in Africa and Middle East. (DNA)
Zydus Cadila gets nod from US FDA to market four products. (ET)
Sterling Group expects to launch DTH services by 2009. (BL)
Phoenix Mills to build 25 hotels in five years. (DNA)
Lupin is looking for acquisitions in US and emerging markets to expand its overseas operations. (DNA)
Sanyang, a Taiwan based two-wheeler maker, joins the race for acquiring controlling stake in Kinetic Motors. (BS)
SAIL to set-up a processing unit in Himachal Pradesh. (FE)
Voltas plans to acquire overseas companies to expand electro-mechanical projects business. (BS)
Rane Group earmarks Rs2bn for expanding product facilities across the country. (BL)
Wanbury plans to acquire CRAMS companies in US and Europe. (BS)
Economic News
The six core infrastructure sectors record a growth of 9.6% in March 2008. (ET)
The Supreme Court asks UP sugar mills to pay Rs110/quintal to sugarcane farmers for the 2007-08 season within three weeks. (ET)
The annual policy review on ECBs is likely to ease end-user restrictions and quantum of borrowings. (ET)
Finance Minister rules out any cut in import duty on crude oil and rollback of export duty on steel. (ET)
Government is set to review the restrictions imposed on participatory notes. (FE)
The Finance Ministry rejects NTPC’s follow-on public issue. (ET)
Liquor companies to increase prices on high input cost. (BS)
Government expects a further cut in cement prices. (BS)
Petroleum Ministry may go to Cabinet for tax breaks for natural gas production. (FE)
Company Background - ICICI Bank
ICICI Bank, a private sector bank under the house of ICICI was incorporated in the year of 1994. It is a multi-specialist financial service provider with leadership position across the spectrum of financial services in India. ICICI Bank is the 2nd largest bank in India and Bank breaking into the top 100 financial institutions in the world, in terms of market capitalisation. It got this position in short time, because the bank doing what customers want. ICICI running its business with six principal groups, such as Retail Banking, Wholesale Banking, International Banking, Rural, Micro Banking and Agri-Business, Government Banking and Corporate Centre. The Bank offers a wide spectrum of domestic and international banking services to facilitate trade, investment banking ,Insurance, Venture Capital, asset management, cross border business & treasury and foreign exchange services besides providing a full range of deposit and ancillary services for both individuals and corporates through various delivery Channels and specialized subsidiaries. ICICI Bank has 14 subsidiaries, out of that 10 in domestic and rest of 4 in international level such as UK, Canada and Russia. To efficiently distribute its products and services, the bank has developed multiple access channels comprising lean brick and mortar branches, ATMs, call centers and Internet banking. The Bank has introduced the concept of mobile ATMs in the remote/rural areas. It has also extended its mobile banking services to all cellular service providers across India and NRI customers in USA,UK,Middle-East and Singapore.
The merger and acquisition are the key kind to bank. The Bank of Madura (BOM) got merged with ICICI Bank during the period 2000-01 and in 2001 ICICI (Financial Institution) merged with ICICI Bank. The two subsidiaries of ICICI Ltd viz ICICI Personal Financial Services and ICICI Capital Services were also merged with the ICICI Bank on March 2002. During May,2003 the bank has acquired Transamerica Appple Distribution Finance Private Ltd and renamed it to ICICI Distribution Finance Private Limited which is primarily engaged in financing in the two-wheeler segment.
Bank received many awards and recognitions during the year 2005-06. Some of them are Best Bank in India by Euromoney, Best Integrated Consumer Bank Site in Asia by Global Finance, Best Cash Management-Country Awards in India by The Asset and Best Secondary Offering by Finance Asia. ICICI Bank noted as Bank of the year 2006 India by The Banker, it was a award to ICICI Bank at second time from last year. During the year 2006-07 also Bank acquired the number of awards. Samples are, Best Transaction Bank in India by Asset Triple AAA, Best Bank of the Year 2006 by Business India, National Award for Excellence in Energy Management by CII and Excellence in Multi Channel Distribution by Asian Banker.
As on April 2007 Sangli Bank Ltd was merged with ICICI Bank Ltd. In the Wholesale Banking segment, the bank has achieved a significant milestone in the market making activity by expanding the product suite to include foreign exchange options. As on May 2007 the bank have market capitalisation of Rs 77,834 crore. In 2007 June ICICI Bank has entered into an agreement with networking solutions provider GTL Ltd to lease out its call centre facility at Mahape worth of around Rs 100 crore for a period of 25 years. In August of 2007 the bank has availed of a $200-million worth Line of Credit (LoC) from The Export-Import Bank of Korea (Korea Exim bank) for the purpose of the Hong Kong branch of ICICI Bank gets funds from Korea Exim bank, and the bank lends foreign currency loans to domestic companies investing in Korea and the bank had taken a similar LoC of $200 million from the Japan Bank for International Cooperation (JBIC) last year. In 2008 ICICI Bank, come a cropper in the global stage when it comes to their brand value, which is $2,603 million, it reveals by the study of London-based consultancy Brand Finance
Company Background - SBI
SBI, started as Imperial Bank then named State Bank of India commenced its operations from the year 1955, is the largest commercial bank in India in terms of profits, assets, deposits, branches and employees. As of March 2008, the bank has had 21 subsidiaries and 10,000 branches. SBI offering the services of banking and as well as non- banking services to their customers. It provides a whole range of financial services which includes Life Insurance, Merchant Banking, Mutual Funds, Credit Cards, Factoring, Security Trading & Primary dealership in the Money market. The Bank is actively involved in non-profit activity called community services banking apart from its normal banking activity.
The bank also concentrate in agriculture, for that it took initiative spotlight kharif and spotlight rabi campaigns for higher disbursement. It introduced Automated Teller Machine with Kishan Credit Cards in all circles to assist agriculture peoples, cumulatively the bank has credit linked 7.68 lac Self Help Groups and disbursed loans to the extent of Rs 3,468 crs, so far. In the year 2001 the SBI Life was started. SBI is the only Bank to have been permitted a 74% stake in the insurance business. The Bank's insurance subsidiary "SBI Life Insurance Company" is a joint venture with Cardif S.A holds 26% stake. SBI Life enjoys the unique distinction of being the first private sector life insurance company in India to make profits for two consecutive years.
During the year 2004-05 SBI was the only one bank in India to ranked among top 100 banks in the world and also among the top 20 banks in Asia in the annual survey by "The Banker" as well as in the same year bank received two prestigious awards for technology from the same The Banker magazine. In the year 2005-06 the bank introduced "SBI e-tax" an online tax payments facility for direct and indirect tax payment, the centralized pension processing center also launched during the year. SBI made a partnership with Tata Consultancy Services for setup C-Edg Technologies and consulting services to the banking, financial services and insurance industry. The bank noted as The most preferred bank in a survey by TV 18 in association with AC Nielsen-ORG Marg along with SBI voted as The most preferred housing loan provider in AWAAZ consumer awards for 2006. In the customer loyalty survey 2006-07 conducted by "Business World", SBI has been ranked number One in all parameters of customer satisfication, service orientation, customer care/ call center, customer loyalty and home loans. SBI Funds (SBIFMPL) was judged "Mutual fund of the year" by CNBC/TV-18/CRISL. SBI FMBL Equity schemes won 11 awards and ranging of the AMC in terms of Assets under management remained at 7th position during the year 2006-07. SBI cards is in 2nd position in the country under market share. During the year 2006-07 14.81 lac additional cards were issued by SBI and they crossed the landmark of 3 million cards totally.
The strategic initiatives that SBI have launched business groups in 2007 namely rural and agri business; treasury and marketing; corporate strategy and new business; and fourth mid corporate group is on the anvil. They also introduced new products and services such as web-based remittance, instant fund transfer, online-trading, comprehensive cash management.
SBI opened its 10,000th branch in March 2008, it becomes only the second bank in the world to have more than 10,000 branches after China's ICBC. SBI is pursuing aggressive IT policy, where the Automated Teller Machines are now also enabled to pay utility bills, college fees, book air-line tickets and accept donations, further bilateral sharing of ATMs was extended to thirteen banks covering 15,700 Automated Teller Machines and an Memorandum of Understanding has been signed with the Indian railways for installing ATMs at 682 railway stations. Infrastructure fund, private equity, venture capital and pension fund management are under in process to assist the customer in time. SBI is targeting to emerge as the best rated bank among public, private, foreign and state -owned banks by the end of the next fiscal. Employee Stock Option Scheme, where employees have the option to pick up shares as per their needs is avail in SBI. SBI plans to implement the mobile banking technology will soon with aim of customer will no be just "Branch customers" but will be "Bank customers".
Today's Pick - Maruti Suzuki
We recommend a buy in Maruti Suzuki India from a short-term perspective. From the charts of the stock it is clearly evident that it was on a long-term downtrend from its October 2007 high of Rs 1,252, forming lower peaks and lower troughs till late April 2008.
Triggered by the positive divergence in the daily momentum indicator, the stock began to move up taking support at around Rs 720 during late April. Since then the stock’s up move has been continuing. On May 15, the stock penetrated the long-term down trendline as well as the 50-day moving average by surging 3 per cent.
With this, we believe that the long-term downtrend of the stock has come to an end. We notice that there is an increase in volume traded over the past two trading sessions. The daily momentum indicator has entered the bullish zone. Also, the daily moving average convergence and divergence is on the brink of entering the positive territory.
Our short-term forecast for the stock is bullish. We expect it to rally to our target price level of Rs 910 in the upcoming trading sessions. Investor with short-term perspective can buy the stock while keeping the stop-loss at Rs 782.
via BL
Nifty May 2008 futures at discount
Turnover in F&O segment surges
Nifty May 2008 futures were at 5113, at a discount of 2.25 points as compared to spot closing of 5115.25.
The NSE's futures & options (F&O) segment turnover was Rs 38,196.16 crore, which was higher than Rs 32,919.78 crore on Wednesday, 14 May 2008.
Reliance Industries May 2008 futures were near spot price at 2622 compared to the spot closing of 2622.95.
Reliance Communications May 2008 futures were near spot price at 590 compared to the spot closing of 589.75.
Reliance Capital May 2008 futures were at premium at 1371 compared to the spot closing of 1362.75.
In the cash market, the S&P CNX Nifty gained 103.50 points or 2.07% at 5115.25.
Inflation pinches corporates more
Corporate India could be a much bigger victim to rising prices than the common man with cost of doing business soaring up to 35 percent or about five times the wholesale price index levels.
It is the inflation faced by businesses in setting up and expanding manufacturing capacities, distribution and franchises, or simply investing in India and the concept becomes meaningful given the country is primarily investment led, according to new report by Citigroup global markets.
Citigroup has chosen to term this concept as "business inflation" which loosely represents the rising cost of setting up a business in India. This measure is primarily conceptual and directional and not something that seeks to be particularly robust or consistent in construct or level.
This is another kind of inflation which is not adequately captured in data or headlines, but has a more meaningful impact on corporate profitability, their investing frame-work
and over the time in equity markets, the research wing of global financial giant believes.
"Rising costs of setting up business, including asset, capital and services-based over the last three years suggests business inflation could be as high as 10-35 percent per annum, well ahead of 7-8 percent headline inflation," the report noted.
The increase in costs to establish new businesses has risen significantly ahead of the headline inflation and it has been sustaining at a high level for past three years, while
the surge in headline inflation is being noticed from just about a couple of months rather than for a sustained period, analysts believe.
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