Pre Session Commentary - May 22 2008

The Indian Market is expected to have a negative opening as the US market closed in deep red and the Asian markets are trading weak. On Wednesday, the Indian market closed with marginally higher after smart recovery from its initial losses. The market lacked the investor’s active participation till mid session on the back of surging crude oil prices above $132 a barrel as well as inflation worries. Though the market opened on the weak note but made a smart turnaround after the mid session due to selective buying across the counters. Irrespective of the negative cues, the oil and gas stocks shines through out the trading session. The BSE Sensex closed marginally higher by 12.98 at 17,243.16 and NSE Nifty also increased by 12.7 points to close at 5,117.65. We expect that the market may remain cautious during the trading session and would look for cues to take further direction.

On Wednesday, the US market closed in red. The US stocks tumbled amid fears the US economy faces stagflation after the Federal Reserve reduced its economic growth forecasts while raising estimates for inflation.

The Dow Jones Industrial Average (DJIA) closed lower by 227.49 points at 12,601.19 along with NASDAQ fell by 43.99 points to close at 2,448.27 and S&P 500 dropped by 22.69 points to close at 1,390.71.

Indian ADRS ended down. In technology sector Wipro fell by (2.19%) along with Satyam by (1.42%), Patni Computers by (1.09%) and Infosys by (0.90%). In banking sector, HDFC bank and ICICI bank slipped by (5.20%) and (4.76%) respectively. In telecommunication sector, Tata Communication and MTNL decreased by (1.81%) and (1.00%). Sterlite industries declined by (0.04%).

Today the major stock markets in Asia are trading weak. Hang Seng index is trading lower by 565.63 points at 24,894.66 along with Japan’s Nikkei trading down by 164.03 points at 13,762.27 and Taiwan Weighted trading at 8,929.46 down by 86.11 points.

The FIIs Wednesday stood as net seller in equity and debt also. The gross equity purchased was Rs3,119.70 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs3,439.50 Crore and gross debt sold stood at Rs99.20 Crore. Therefore, the net investment of equity reported was (Rs319.80)Crore and net debt was (Rs99.20)Crore.

Today, Nifty has support at 4,991 and resistance at 5,174 and BSE Sensex has support at 16,853 and resistance at 17,453.

US market gets dumped again

Indices end substantially lower for second consecutive day as crude also shoots up

US market once again ended the day with substantial losses today, Wednesday, 21 May, 2008. A lowered economic outlook at the Fed and a spike in crude oil prices were the main reasons for today’s negative mood in the market. The dollar fell after Federal Open Market Committee's 30 April meeting reinforced belief that the central bank has paused its rate-cutting cycle and clearly remains worried about inflation and growth. All ten sectors ended the session in negative territory, led by the telecom and financials sector.

According to the minutes from the Federal Open Market Committee (FOMC) 30 April meeting, real GDP growth is expected to range from 0.3% to 1.2% this year. The Fed previously forecast growth between 1.3% and 2%.

Crude-oil futures were on a roll todayafter government data showed that crude supplies unexpectedly dropped, marking their first decline in five weeks. Prices crossed the $133 mark and registered an increase of more than $4. A strengthening of the euro against the dollar added to the gains.

The Dow Jones industrial Average ended the day with a loss of 227 points at 12,601. The Nasdaq Composite Index, finished lower by 44 points at 2,448. S&P 500 finished lower by 22.7 points at 1,390. All the thirty Dow stocks ended in the red.

The FOMC released the minutes from its 30 April meeting around 2:00 ET, which sent stocks tumbling. The 2008 inflation outlook was increased, as was the unemployment rate forecast. The release of the minutes spurred the majority of today’s selling interest.

The Fed also announced that it expects unemployment will "increase significantly," raising its 2008 forecast to 5.6% from 5.25%. In addition, inflation risks have increased, with the Fed raising its core-inflation forecast to between 2.2% and 2.4% from between 2% and 2.2%.

Earnings reports were mostly better than expected, but the market's response was mixed. Hewlett-Packard and Analog Devices topped their respective earnings estimates.

Crude-oil futures for light sweet crude for July delivery today closed at $133.17/barrel (higher by $4.19/barrel or 3.3%) on the New York Mercantile Exchange. Price touched a high of $133.35 earlier during the day.

As per the weekly inventory report by the Energy Department, crude supplies fell by 5.4 million barrels to 320.4 million for the week ended 16 May. Prior to that, supplies had climbed more than 12 million barrels in the past four weeks. Market was expecting a rise of 900,000 barrels for the latest week.

Trading volumes remained light, with 1.4 billion shares exchanging hands on the New York Stock Exchange, and 925 million shares trading on the Nasdaq stock market. Decliners topped gainers by 2 to 1 on both exchanges.

For tomorrow, the weekly jobless claims report hits the wires first along with a couple of earning reports.

Market to drift lower on weak global equities, record high oil prices

The market is expected to drift lower tracking weakness in global equities. On Wednesday, the US Federal Reserve cut its 2008 US economic growth forecast and signaled that mounting concerns over inflation would make further interest rate cuts unlikely, driving the three major US indexes down over 1.5%. Oil prices surged to a record high above $135 per barrel on Thursday, 22 May 2008, stoking fears of global inflation.

In Asia, key benchmark indices in Hong Kong, China, Japan, South Korea, Singapore and Taiwan were down by between 0.72% to 2.26%.

Earnings downgrade amid rising input and interest costs, high inflation and drying up of global liquidity due to credit crisis remain major concern for the Indian stock market. Inflation based on the wholesale price index rose 7.83% in 12 months to 3 May 2008, higher than previous week's annual rise of 7.61%, government data released on 16 May 2008, showed. It was the highest since an annual reading of 7.93% on 6 November 2004.

Further, a steep increase in upward revision in inflation rate for the week ended 8 March 2008, to 7.78% from the provisional 5.92%, came as a rude shock to marketmen. According to retail brokerage Sharekhan, the steep upward revision in inflation rate is a cause for concern, as prices of many commodities have not been updated for varied periods. Moreover, a sharp fall in the rupee against the dollar in the past few days has heightened concerns about inflation. This is because the fall in rupee will raise cost of imports which in turn will result in further rise in inflation.

In a bid to rein in inflation, the Reserve Bank of India, on Tuesday, 29 April 2008, raised cash reserve ratio (CRR) by 25 basis points to 8.25%, to suck out excess liquidity in the banking system, in its annual monetary policy review.

With parliamentary elections scheduled next year (May 2009), the government may leave no stone unturned in its attempt to tame inflation. This is bad news for commodity scrips such as cement and steel. Cement maker ACC said earlier this months that its margins will be hurt by a decision to hold its prices for 2 to 3 months that was taken after the government asked cement firms to help contain price pressures.

The government recently imposed export tax on basmati rice and some steel products, and cut import duties on key inputs like ferro alloys and metallurgical coke. The government had earlier banned export of cement and non-basmati rice. On 7 May 2008, the government ordered suspension in futures trading in channa, refined soyoil, potato and rubber for four months.

Meanwhile, as per a recent study by CLSA, large amount of foreign currency convertible bonds (FCCBs) issued by Indian companies are coming up for redemption in the next 18-24 months. After recent stock market volatility many FCCBs are at risk of not converting i.e. if the stock market remains subdued, it will stop the bond holders from opting for an equity conversion as it will be easier for them to buy the stock from the open market instead of paying the agreed premium.

When the FCCBs come for redemption, some of these companies may have to take on more debt to redeem the FCCB, thereby raising interest outgo. In the event FCCBs don't get converted, companies have the option to lower the conversion price in line with the market, leading to higher equity dilution. If companies decide to issue fresh FCCBs to finance redemption of FCCBs, it will be at lower premium than earlier.

The structural growth drivers of the Indian economy remain intact – India’s economy is expected to witness a decent-to-strong growth for a long period of time due to favourable demographics. Acceleration in infrastructure creation will be another driver of strong growth in India’s economy. A CLSA report says India’s infrastructure development is set to accelerate, backed by greater private sector participation and improved finances of government and public sector enterprises. Rating agency Crisil in its outlook for Indian economy for the year through March 2009 has stated that the overall growth scenario is expected to remain strong with investment as the main driver.

Given the continued inflow to unit linked insurance plans (Ulips) and equity linked savings schemes (ELSS) of mutual funds, stock-specific buying will continue depending on fundamentals of individual stocks. Insurance firms are now a major player in the Indian stock market given the huge mop up in Ulips in recent years. It was buying support from domestic funds which had aided the recent recovery on the bourses.

Meanwhile, as per recent reports, ELSS which offer tax benefit are catching the fancy of small savers. ELSS funds saw their collective assets jump more than nine times to about Rs 16000 crore in three years ending March 2008. In 2005 the investment limit eligible for income tax breaks was raised ten times to Rs 1,00,000 rupees for ELSS funds. Systematic investment plan (SIP) are said to be driving inflows into ELSS funds

Market to drift lower on weak global equities, record high oil prices

The market is expected to drift lower tracking weakness in global equities. On Wednesday, the US Federal Reserve cut its 2008 US economic growth forecast and signaled that mounting concerns over inflation would make further interest rate cuts unlikely, driving the three major US indexes down over 1.5%. Oil prices surged to a record high above $135 per barrel on Thursday, 22 May 2008, stoking fears of global inflation.

In Asia, key benchmark indices in Hong Kong, China, Japan, South Korea, Singapore and Taiwan were down by between 0.72% to 2.26%.

Earnings downgrade amid rising input and interest costs, high inflation and drying up of global liquidity due to credit crisis remain major concern for the Indian stock market. Inflation based on the wholesale price index rose 7.83% in 12 months to 3 May 2008, higher than previous week's annual rise of 7.61%, government data released on 16 May 2008, showed. It was the highest since an annual reading of 7.93% on 6 November 2004.

Further, a steep increase in upward revision in inflation rate for the week ended 8 March 2008, to 7.78% from the provisional 5.92%, came as a rude shock to marketmen. According to retail brokerage Sharekhan, the steep upward revision in inflation rate is a cause for concern, as prices of many commodities have not been updated for varied periods. Moreover, a sharp fall in the rupee against the dollar in the past few days has heightened concerns about inflation. This is because the fall in rupee will raise cost of imports which in turn will result in further rise in inflation.

In a bid to rein in inflation, the Reserve Bank of India, on Tuesday, 29 April 2008, raised cash reserve ratio (CRR) by 25 basis points to 8.25%, to suck out excess liquidity in the banking system, in its annual monetary policy review.

With parliamentary elections scheduled next year (May 2009), the government may leave no stone unturned in its attempt to tame inflation. This is bad news for commodity scrips such as cement and steel. Cement maker ACC said earlier this months that its margins will be hurt by a decision to hold its prices for 2 to 3 months that was taken after the government asked cement firms to help contain price pressures.

The government recently imposed export tax on basmati rice and some steel products, and cut import duties on key inputs like ferro alloys and metallurgical coke. The government had earlier banned export of cement and non-basmati rice. On 7 May 2008, the government ordered suspension in futures trading in channa, refined soyoil, potato and rubber for four months.

Meanwhile, as per a recent study by CLSA, large amount of foreign currency convertible bonds (FCCBs) issued by Indian companies are coming up for redemption in the next 18-24 months. After recent stock market volatility many FCCBs are at risk of not converting i.e. if the stock market remains subdued, it will stop the bond holders from opting for an equity conversion as it will be easier for them to buy the stock from the open market instead of paying the agreed premium.

When the FCCBs come for redemption, some of these companies may have to take on more debt to redeem the FCCB, thereby raising interest outgo. In the event FCCBs don't get converted, companies have the option to lower the conversion price in line with the market, leading to higher equity dilution. If companies decide to issue fresh FCCBs to finance redemption of FCCBs, it will be at lower premium than earlier.

The structural growth drivers of the Indian economy remain intact – India’s economy is expected to witness a decent-to-strong growth for a long period of time due to favourable demographics. Acceleration in infrastructure creation will be another driver of strong growth in India’s economy. A CLSA report says India’s infrastructure development is set to accelerate, backed by greater private sector participation and improved finances of government and public sector enterprises. Rating agency Crisil in its outlook for Indian economy for the year through March 2009 has stated that the overall growth scenario is expected to remain strong with investment as the main driver.

Given the continued inflow to unit linked insurance plans (Ulips) and equity linked savings schemes (ELSS) of mutual funds, stock-specific buying will continue depending on fundamentals of individual stocks. Insurance firms are now a major player in the Indian stock market given the huge mop up in Ulips in recent years. It was buying support from domestic funds which had aided the recent recovery on the bourses.

Meanwhile, as per recent reports, ELSS which offer tax benefit are catching the fancy of small savers. ELSS funds saw their collective assets jump more than nine times to about Rs 16000 crore in three years ending March 2008. In 2005 the investment limit eligible for income tax breaks was raised ten times to Rs 1,00,000 rupees for ELSS funds. Systematic investment plan (SIP) are said to be driving inflows into ELSS funds

Trading Calls - May 22 2008

Nifty (5118) Supp 5030 Res 5197

Sell GNFC (168) SL 171
Target 161, 158

Sell Hero Honda (786) SL 792 Target 775, 771

Sell HPCL (242) SL 247
Target 232, 229

Sell JP Associates (252) SL 257
Target 242, 239

Buy ITC (228) SL 224
Target 235, 238

Crude plays sp-oil sport!

You can't let one bad moment spoil a bunch of good ones.

For the bulls, bad moments seem to carry on longer. While they did manage to recoup their losses on Wednesday, the bulls are suddenly finding life difficult. Crude oil is on fire, the rupee keeps depreciating and inflation shows no sign of cooling. Governments and central banks the world over are grappling with a slew of headwinds. So, while on one hand economic growth is slowing, inflation remains at highly elevated level. Prices of several other commodities - both industrial and foods - have also shot through the roof.

What's worse, most governments and central banks are running out of options to tackle the emerging challenges. In India, we have a peculiar situation where the Government is bent on appeasing the masses due to political compulsions. SBI's withdrawal of circular suspending loans on farm equipment like tractors is a classic case in point. The oil marketing companies, which are desperately trying to cut losses by either suspending new LPG connections or rationing of fuels may well face a similar fate.

Against this backdrop, we see renewed risks for the market. The upside looks capped, and chances of a fresh round of selling have increased. Today, we expect a slight gap-down opening due to weakness across global markets. It will take some doing for the bulls to repeat Wednesday's stellar performance when they managed to bounce back after a lower opening.

FIIs were net sellers of Rs7.77bn (provisional) in the cash segment on Wednesday while local institutions were net buyers of Rs4.53bn. In the F&O segment, foreign funds were net sellers of Rs8bn. On Tuesday, foreign funds were net sellers of Rs3.2bn in the cash segment. Mutual Funds offloaded stocks worth Rs4.9bn.

Key Results Today: Bajaj Holdings & Investment, Balaji Tele, Core Projects, Cummins India, Dalmia Cement, Dishman Pharma, Havell's India and Moser Baer.

Asian stocks fell for a third day today, extending a global slump, after oil rose to a record and the Federal Reserve signaled it is done cutting interest rates.

Nintendo and Canon led consumer-electronics makers lower. Qantas Airways and Korean Air Lines retreated among airlines after crude climbed above $135 for the first time, boosting costs.

The MSCI Asia Pacific Index fell 1% to 150.49 as of 11:34 a.m. in Tokyo, with almost four stocks dropping for each that climbed. All 10 industry groups declined. All of Asia's benchmark indexes retreated, with Japan's Nikkei 225 Stock Average declining 1.2% to 13,762.27.

US stocks sank on Wednesday as crude oil surged further on a surprising weakness in government's weekly fuel supply report. Sentiment also got hit after the minutes from the Federal Reserve's last meeting showed policy makers were reluctant to cut rates.

The Fed also forecast worse economic conditions ahead, but could still find it tough to cut rates any further. The Fed also lowered its economic growth forecast for the year. At the same time, it raised its projections for inflation and unemployment.

Citigroup, Bank of America and JPMorgan Chase sent financial shares to their lowest since April 15. Target led retailers to their worst decline in a month and an index of airlines slid to an all-time low as crude climbed above US$133 a barrel.

Shares of Moody's Corp. slumped the most since 1999 after the credit ratings company said it is investigating whether it mistakenly assigned AAA ratings to debt securities that later fell in value.

The S&P 500 slumped 22.69 points, or 1.6%, to 1,390.71. The Dow Jones Industrial Average slid 227.49 points, or 1.8%, to 12,601.19. The Nasdaq Composite Index dived 43.99 points, or 1.8%, to 2,448.27.

Market breadth was negative. Four stocks retreated for every one that rose on the New York Stock Exchange.

US light crude oil for July delivery set a closing record of $133.17 in New York Mercantile Exchange trading, up more than $4 a barrel - and then proceeded to march to another record intraday high of $134.10 in electronic trading after the settlement.

Oil prices spiked after the government's weekly inventories report showed a surprise drop in crude and gasoline supplies and a weaker-than-expected buildup in distillates, used in heating oil. Oil has been climbing lately amid supply concerns and weakness in the dollar.

The US national average price for a gallon of regular unleaded gas rose to a record US$3.807 from the previous day's high of US$3.80, according to AAA.

Stocks in Europe fell on record crude prices, resulting in sharp losses for automakers and airlines. The pan-European Dow Jones Stoxx 600 index fell 0.9% to 323.16 as crude-oil prices run up as high as $132.08 a barrel. The UK's FTSE 100 edged up 0.1% to 6,198.10, while the German DAX 30 fell 1.1% to 7,040.83 and the French CAC-40 dropped 0.5% to 5,027.55.

In the emerging markets, the Bovespa in Brazil slid 1.7% to 72,294 while the IPC index in Mexico was down 1.3% at 31,126. The RTS index in Russia gained 0.6% to 2467 while the ISE National 30 index in Turkey fell 0.75% to 50,360.

Bulls to dance to global cues

It was a flat finish to a day that started off with negative bias. Indian bourses had a weak start mirroring overnight losses in the US markets. Going forward even the Asian markets were trading weak. However, bulls managed to stage come back in the afternoon trades on back of a swift recovery seen in the Asian markets coupled with a positive start in equity markets across Europe.

Among the 30-scrips of Sensex, Reliance Industries, Tata Steel, ITC and BHEL were among the major gainers. On the other hand, HDFC, ICICI Bank, HDFC Bank and Infosys were among the major laggards.

Among the BSE Sectoral indices, BSE Oil & Gas index led from the front gaining 2.3%. Other’s like BSE Metal index (up 1.2%), BSE PSU index (up 1%) and BSE Capital Goods index (up 0.8%). On the other hand, BSE Bankex index (down 1.5%) and Pharma index (down 0.6%).

Finally, the BSE benchmark Sensex ended 12 points higher to close at 17,243 and the Nifty index gained 12 points to close at 5,117.

Overall about 1,710 stocks advanced; 1,007 stocks declined while 77 stocks remained unchanged. Among the 50-Nifty 27 stocks ended in green and 23 stocks ended in red.

HDIL ended down by 3.6% to Rs811. The company posted a net profit of Rs7082.50mn for the quarter ended March 31, 2008. Total Revenue is Rs9894.90mn for the quarter ended March 31, 2008.

The Company has posted a net profit of Rs14105.00mn for the year ended March 31, 2008 as compared to Rs5418.20mn for the year ended March 31, 2007. Total Revenue has increased from Rs12165.10mn for the year ended March 31, 2007 to Rs24323.20mn for the year ended March 31, 2008. The board of directors of the company also announced that it approved 2 bonus shares for every 7 shares held. The scrip touched an intra-day high of Rs865 and a low of Rs805 and recorded volumes of over 47,00,000 shares on BSE.

GMR Infrastructure ended flat at Rs151. The company announced that it posted a net profit of Rs373.60mn for the quarter ended March 31, 2008 as compared to Rs123.70mn for the quarter ended March 31, 2007. Total Income has increased from Rs227.50mn for the quarter ended March 31, 2007 to Rs644.40mn for the quarter ended March 31, 2008.

The company posted a net profit after tax of Rs626.90mn for the year ended March 31, 2008 as compared to Rs28.80mn for the year ended March 31, 2007. Total Income has increased from Rs339.00mn for the year ended March 31, 2007 to Rs1122.00mn for the year ended March 31, 2008. The scrip touched an intra-day high of Rs152 and a low of Rs145 and recorded volumes of over 31,00,000 shares on BSE.

Kesoram Industries gained by a percent to Rs361 as the company is reportedly planning to spend Rs25bn for expanding its tyre and cement capacity by 2009.

According to report, the company is setting up three new tyre units in the northern state of Uttaranchal to take tyre-making capacity to 734 metric tons per day from 252 metric tons. The company will add another 1.65mn tons to its cement making capacity, taking it to 6.2mn tons per annum by 2008 from 4.5mn tons now. The scrip touched an intra-day high of Rs364 and a low of Rs352 and recorded volumes of over 12,000 shares on BSE.

Firstsource rallied by over 7% to Rs43 after the company said that it won 3-year outsourcing contract from Bharti Airtel. The scrip touched an intra-day high of Rs45 and a low of Rs40 and recorded volumes of over 12,00,000 shares on BSE.

SBI gained by half a percent to Rs1661 after the bank said that they would resume tractor loans with immediate effect. The scrip touched an intra-day high of Rs1677 and a low of Rs1631 and recorded volumes of over 2,00,000 shares on BSE.

Cairn India hit an intra-day high of Rs342, the scrip witnessed profit booking and ended flat at Rs327. Reports stated that the company would explore oil and gas in Rajasthan Hadauti region. The scrip touched an intra-day high of Rs342 and a low of Rs324 and recorded volumes of over 96,00,000 shares on BSE.

Educomp Solutions gained by 1.7% to Rs4103 after the company on Tuesday announced that it acquired 51% stake in US based Learning.com for US$24.5mn. The scrip touched an intra-day high of Rs4125 and a low of Rs3999 and recorded volumes of over 32,000 shares on BSE.

IOC gained by 0.5% to Rs408 following reports that the company plans to enter retail marketing business in Turkey along with setting up a 15 mtpa greenfield refinery and a petrochemicals complex. The scrip touched an intra-day high of Rs413 and a low of Rs399 and has recorded volumes of over 56,000 shares on BSE.

Corporate News

SBI to resume tractor and farm equipment loans, reversing its decision to stop lending for farm equipment. (BL)

RIL to pick up 50% stake and will invest Rs7bn in Rewas port connectivity project of Indian Railways. (ET)

ONGC planning to sell 30-40% stake in the two blocks won in Vietnam in 2006. (BS)

ONGC infuses Rs50bn in western offshore fields. (FE)

Bharti Airtel has signed a US$35mn, three-year outsourcing agreement with Firstsource Solutions. (ET)

M&M signs non-binding pact with Kinetic Motors in its bid to acquire 76% in the company, valued at Rs1.2bn. (ET)

BSNL awards US$90mn contract to Motorola. (BL)

IOC, BPCL and HPCL have stopped issuing new LPG connections to household consumers, defying government orders. (ET)

PFC to call for proposals for the 4,000MW Tilaiya UMPP at Orissa. (BL)

Infosys hires consultant to chalk out revamp plan. (BL)

Employees of Infosys Technologies to pass certification programs to be conducted every March, to get promoted. (BS)

Lanco Infra gets US$150mn IFC credit for power projects. (BL)

Ranbaxy begins operations in Yemen. (BL)

Dabur Pharma gets FDA nod for prostrate cancer drug. (BL)

Satyam Computers and GE Healthcare to support customers deploying healthcare IT solutions based on GE Centricity enterprise software.

GMR Infrastructure to diversify into corporate jet business and would invest Rs8bn for the same. (BL)

IOC seeks nod to raise borrowing limit to Rs800bn. (BL)

IFCI has acquired 46.7% shareholding of Mohan Exports Group in Foremost Factors Ltd in a transaction valued at about Rs116mn. (BL)

NMDC and three other Indian firms in talks with Australia’s Rio Tinto Group to buy a new technology to smelt low grade iron ores and even wastes. (BL)

Standard Chartered Bank to consider listing on the Indian Stock Exchanges. (ET)

Ranbaxy Laboratories sold off its land and building to its group companies at Rs900mn and bought 24.9% stake at Rs934mn in its other group company Shimal Labs. (ET)

ArcelorMittal in talks to take over Macarthur Coal of Australia. (ET)

Reliance Retail in talks with four foreign food suppliers including US based Dole and Chiquita, Sadia of Brazil and Doux of France for alliances. (ET)

The GMR group plans to increase its equity stake in South Africa’s Homeland Energy, a company that owns coal mines, from 10% to 50%. (ET)

Consumer goods companies like LG Electronics, Godrej Appliances etc. to raise prices of products like televisions and refrigerators by 5%.to offset increase in raw material cost. (BS)

West Asian telecom companies Etisalat and Qatar Telecom have approached Videocon Industries for tie-ups in India. (BS)

Essar Steel Holdings may raise its bid after Russian steel maker OAO Severstal matched its offer of US$17 a share for acquiring US based Esmark. (BS)

UTI AMC plans to revive its US$500mn IPO which it shelved earlier this year when markets plunged. (BS)

BEML Midwest acquired its first mine in Mozambique and is close to acquiring another in Indonesia.

Economic News

Number of passengers passing through Indian airports grew at ~11% in the first quarter of the calendar year against ~28% growth recorded in the first three months of 2007.

State Coal Ministry announced no intentions of increasing prices this year. (ET)

Indian Post has tied up with US-based postal solutions provider Pittney Bowes to offer enhanced mailing services. (ET)

Government is considering re-allocating wheat in place of rice for the Targeted Public Distribution System (TDPS), as part of its measures to control inflation and augment the availability of essential commodities. (BS)

Power Ministry says that it will be able to achieve 80,000MW of capacity addition in the 11th plan. (FE)

FIIs turn sellers

Foreign institutional investors (FIIs) turned net sellers in equities worth Rs 3,198 million on May 20. They bought equities worth Rs 31,197 million and sold equities worth Rs 34,395 million. Till May 20, they have been net buyers in equities worth Rs 227 million.

FIIs turned net sellers in debt segment worth Rs 490 million on May 20. They did not bought any debt but sold debt worth Rs 490 million. Till May 20, they have been net sellers in debts worth Rs 179 million

Assam Company

Assam Company

Phoenix Mills, Suzlon Energy, Bank of Baroda, India Economy

Phoenix Mills, Suzlon Energy, Bank of Baroda, India Economy

ICI India, Thermax, Tata Chemicals, Bharat Forge

ICI India, Thermax, Tata Chemicals, Bharat Forge

KGN Industries ka kamaal

The “relisting syndrome” surfaced again on Wednesday when Ahmedabad-based KGN Industries Ltd soared to Rs 55,000 a share on BSE after listing at Rs 100, forcing the exchange to suspend trading on the stock mid-session.

The Z-category stock was trading after a gap of seven years. Before its Wednesday relisting, it had last traded at Rs 11 in 2001 when it was suspended.

A BSE release noted that there are no price bands on scrips on the opening day of trading in order to allow price discovery.

“During the early hours of trading, it was discovered that orders were being placed at an unrealistic price. In order not to distort the price discovery process, as few orders were being placed at unrealistic prices, the trading of the scrip was suspended at 12.20 hours as a proactive surveillance measure,” said a BSE news release.

KGN Industries’ spot price at the time of suspension of trading was Rs 15,001. However, BSE said it has set a closing price of Rs 5,216.30 per share using the existing methodology but taking into consideration the entire trading duration. Trading will resume on Thursday with the applicable price band, it said

SEBI has proposed to impose a 20 per cent circuit filter on the first day of re-commencement of trading in stocks in all cases of revocation of suspension, demerger, amalgamation, capital reduction and scheme of arrangements as decided by stock exchanges through a concept paper brought out last year in April.

The regulator had also proposed a base price to be fixed in consultation with SEBI registered merchant bankers for applying the 20 per cent circuit filter.

Again in January 2008, SEBI brought a concept note for a limited price band for the IPOs whose issue size was upto Rs 250 crore on their day of listings.

SEBI proposed imposing a price band of 25 per cent on the issue price on the day of listing of IPOs of issue size upto Rs 250 Cr but the proposal does not apply in case of re-commencement of trading of the equity shares of a company on the stock exchanges.

However no guideline has been issued so far for either of the two proposals.

Earlier last year on February 22 when trading in Ahluwalia Contracts began on the BSE after restructuring of the company, it opened at Rs 101.50 and touched a high of Rs 611.90 and finally closed at Rs 577.80.

(Only Metal and Mineral Trading Corporation has in recent times touched such a high price, MMTC had touched a high of Rs 56,931.50 on November 12.)

KGN Industries is engaged in the business of trading in agro commodities like castor seeds, edible oils like soyabean oil, palm oil, non edible oils like petroleum products, lubricants, used oil.

The company reported a turnover of Rs 326.87 crore during the year 2006-07

via BL

Precious metals on a roll

Precious metals continue to rise as crude surpasses $133

Precious metals registered good increase once again today, Wednesday, 21 May, 2008 after crude oil prices rallied and dollar slipped against its rivals. The dual effect once again helped restore the lost glitter back on the precious metals. Earlier this week on Monday, 19 May, gold marked its first closing above $900 level in almost a week. Crude oil's rally to a fresh record high above $133 a barrel boosted the precious metal's appeal as an inflation hedge.

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. Generally, 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, a lower dollar pushes up precious metal prices as their demand lessens as it becomes cheaper for traders holding other currencies.

Comex Gold for June delivery rose $8.4 (0.9%) to close at $928.6 ounce on the New York Mercantile Exchange. During intra day trading, prices touched a high of $933/ounce. Last week, gold prices ended higher by $14 (1.6%). On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. Prices have dropped by 10.2% since then.

This year, gold prices have gained 10.7% for the till date against a 8.8% drop for the dollar against the euro. For April, prices closed lower by 6.3%. For first quarter prices gained 10.7%. In January, prices gained 11%, the highest monthly gain since April 2006. For February, it gained 6%. But in March, prices succumbed and fell by 5.5%.

Comex Silver futures for July delivery rose 33 cents (1.9%) to $18.05 an ounce. Silver has gained 20.9% in 2008 till date. For April, it closed lower by 5.5%. Silver gained 16% in Q1. In January this year itself, prices climbed 14%. In February, it gained another 15%. For March, it ended lower by 13%. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years.

At the currency markets on Wednesday, the dollar fell against most of its major counterparts, with the dollar index dropping to 71.91 from 72.459 in late North American trading on late Tuesday.

Since last September, Fed has axed interest rates seven times and brought it down to 2%. The ECB has kept rates unchanged at 4% since June, 2007.

Dollar weakness typically benefits dollar-denominated commodities, such as gold and crude oil, because it makes them cheaper for holders of other currencies. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.

Among major economic news of the day, the official summary of the Federal Open Market Committee's 30 April meeting reinforced belief that the central bank has paused its rate-cutting cycle and clearly remains worried about inflation and growth.

In the crude market, crude-oil futures climbed past $133 a barrel to close at another record level on Wednesday after government data showed that crude supplies unexpectedly dropped, marking their first decline in five weeks. On its first full day as a front-month contract, crude for July delivery climbed to a close of $133.17 a barrel on the New York Mercantile Exchange, up $4.19, or 3.3%. It touched an all-time peak of $133.35.

Yesterday, crude oil rose for a third straight session after billionaire hedge-fund manager Boone Pickens said prices will reach $150 a barrel this year as demand outpaces supply. Last week, crude-oil futures rallied to a fresh record high near $128 a barrel as Goldman Sachs raised its second-half-of-the-year forecast for oil prices by 32% to $141.

At the MCX, gold prices for August delivery closed higher by Rs 224 (1.8%) at Rs 12,866 per 10 grams. Prices rose to a high of Rs 12,883 per 10 grams and fell to a low of Rs 12,651 per 10 grams during the day’s trading.

At the MCX, silver prices for July delivery closed Rs 596 (2.4%) higher at Rs 24,927/Kg. Prices opened at Rs 24,356/kg and went to a high of Rs 24,954/Kg during the day’s trading.

Essar Oil, IFCI, Praj Industries May 2008 futures at premium

Turnover in F&O segment surges

Nifty May 2008 futures were at 5123.90, at a premium of 6.25 points as compared to spot closing of 5117.65.

The NSE's futures & options (F&O) segment turnover was Rs 39,481.17 crore, which was higher than Rs 33,290.93 crore on Tuesday, 20 May 2008.

Essar Oil May 2008 futures were at premium at 263 compared to the spot closing of 261.15.

IFCI May 2008 futures were at premium at 66.30 compared to the spot closing of 64.55.

Praj Industries May 2008 futures were at premium at 218.45 compared to the spot closing of 217.95.

In the cash market, the S&P CNX Nifty gained 12.70 points or 0.25% at 5117.65.

Crude takes a huge leap

Prices rise more than $4 on a single day as crude supplies mark unexpected drop

Crude-oil futures were on a roll today, Wednesday, 21 May, 2008 after government data showed that crude supplies unexpectedly dropped, marking their first decline in five weeks. Prices crossed the $133 mark and registered an increase of more than $4. A strengthening of the euro against the dollar added to the gains. The dollar fell after Federal Open Market Committee's 30 April meeting reinforced belief that the central bank has paused its rate-cutting cycle and clearly remains worried about inflation and growth.

Crude-oil futures for light sweet crude for July delivery today closed at $133.17/barrel (higher by $4.19/barrel or 3.3%) on the New York Mercantile Exchange. Price touched a high of $133.35 earlier during the day.

Last week, crude prices closed higher by 29 cents. For the year, crude is up by 33% till date. Prices have more than doubled on a yearly basis.

As per the weekly inventory report by the Energy Department, crude supplies fell by 5.4 million barrels to 320.4 million for the week ended 16 May. Prior to that, supplies had climbed more than 12 million barrels in the past four weeks. Market was expecting a rise of 900,000 barrels for the latest week.

EIA also revealed that crude-oil imports averaged 9.2 million barrels per day last week, down 696,000 barrels per day from a week earlier. Meanwhile, refinery utilization rose to 87.9% of capacity from 86.6% a week ago. Still, motor gasoline supplies fell 800,000 barrels to 209.4 million barrels last week. Distillate stocks were up 700,000 barrels at 107.8 million barrels.

Yesterday crude prices had closed above $129 a barrel for the first time ever after billionaire hedge-fund manager Boone Pickens said prices will reach $150 a barrel this year as demand outpaces supply.

At the currency markets on Wednesday, the dollar fell against most of its major counterparts, with the dollar index dropping to 71.91 from 72.459 in late North American trading on late Tuesday.

Since last September, Fed has axed interest rates seven times and brought it down to 2%. The ECB has kept rates unchanged at 4% since June, 2007.

Dollar weakness typically benefits dollar-denominated commodities, such as gold and crude oil, because it makes them cheaper for holders of other currencies. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.

Last week, prices kissed $128 for first time after Goldman Sachs raised its forecast on Friday for the average price of West Texas Intermediate oil in the second half of 2008 to $141 a barrel from $107 a barrel. As per the company’s reports, long-term oil prices will need to continue to rise to bring trend oil demand growth in line with trend supply growth. Credit Suisse Group AG and Societe Generale SA raised their oil price forecasts for 2008 and 2009 citing investor flows and limited supply.

Gasoline and heating oil climb to their loftiest levels ever

Brent crude oil for June settlement today rose $2.8 (2.2%) to $130.04 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.

June natural gas futures rose 27 cents, or 2.4%, to close at $11.64 per million British thermal units. It climbed as high as $11.68, its highest level in a week.

Against this backdrop, July reformulated gasoline gained 9.65 cents to close at $3.3965 a gallon and July heating oil rose 13.8 cents to end at $3.9084 a gallon.

Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.

At the MCX, crude oil for May delivery closed at Rs 5,656/barrel, higher by Rs 206 (3.8%) against previous day’s close. Natural gas for July delivery closed at Rs 503.4/mmbtu, higher by Rs 14.4/mmbtu (2.9%).

Oil tops $130 over future supply worry

Oil climbed to a life-time high above USD130 a barrel on Wednesday, driven higher by a combination of long-term production worries and a near-term focus on tight fuel stocks.

A US government report later on Wednesday was expected to show crude inventories rose for a fifth straight week.

Stocks of refined products were also forecast to have increased slightly, but the market is concerned distillates, which include heating oil and gasoline, could run short.

US crude hit a peak of USD130.47 before easing to USD129.71 by 1328 GMT, up 73 cents. London Brent gained USD1.16 to USD129.

"This market refuses to lie down," said Robert Laughlin of MF Global. "There is fresh length coming into the market even at these lofty levels."

Investors have been drawn in by a weak US currency, which has made dollar-denominated commodities relatively cheap for holders of other currencies.

The dollar slid to a one-month low against a basket of currencies on Wednesday as the euro was pushed higher by expectations of higher euro zone interest rates.

Speaking to Reuters during a visit to Venezuela, OPEC Secretary General Abdullah al-Badri said the soft dollar was one of the factors that could keep pushing oil higher.

The Organization of the Petroleum Exporting Countries (OPEC) has kept official policy unchanged, but its biggest producer Saudi Arabia has raised production and other members have overcome problems that had reduced supplies.

Tanker tracker Petrologistics said on Wednesday OPEC`s oil output in May had risen by 700,000 barrels per day (bpd) compared with April.

Extra OPEC crude has had little impact as the market has instead focused on short-term refinery problems, which are symptomatic of chronic underinvestment.

Diesel consumption has led the energy complex higher after last week`s earthquake in China increased the need for fuel to make up for disruption of other supplies.

The perception available oil will struggle to keep up with demand for the foreseeable future has led to a series of bullish price forecasts from investment banks and influential investors.

Billionaire T. Boone Pickens said on Tuesday he expected oil to hit USD150 a barrel this year after Goldman Sachs said earlier this month a barrel of crude could reach USD200 by 2010.

Oil has risen from below USD20 in early 2002.