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Tuesday, July 01, 2008
Market may remain edgy
The market is likely to witness volatility as European market ended on positive side and major Asian gauges like the Nikkei, the Hang Seng index, the Straits Times Index and the Jakarta index are in positive territory in current trades and while us Market closed on flat note may rise the indices in early trades. However, intra-day volatility remains the major concern. Among the domestic indices, the Nifty may slip to 3995, while on the upside it could edge higher to 4090. The Sensex has a likely support at 13400 and may face resistance at 13660.
U.S. stocks ended flat on Monday with the Dow Jones gained by 4 points to close at 11350, the Nasdaq ended negative at 2293 down 23 points.
Most of the Indian ADRs trading on the US bourses closed in the green. Rediff led the pack with gains of 21.41% followed by Dr Reddy and VSNL both of which gained around 2%. Wipro, Infosys, Tata Motors and HDFC Bank gained marginally. Patni Computer however declined sharply lost 6.26% while Satyam, ICICI Bank and MTNL eased marginally.
Crude oil prices moved down marginally, with the Nymex light crude oil for August delivery declining by 21 cents to close at $140 a barrel. In the commodity space, the Comex gold for August 2008 series lost $3 to settle at $928.30.
FII outflow continues unabated
Outflow of Rs 746.10 crore on 27 June 2008
Foreign institutional investors (FIIs) sold shares worth net Rs 746.10 crore on Friday, 27 June 2008, compared to their selling of Rs 469 crore on Thursday, 26 June 2008.
FII outflow of Rs 746.10 crore on 27 June 2008 was a result of gross purchases Rs 3348.60 crore and gross sales Rs 4094.70 crore. Sensex slumped 619.60 points or 4.30% to 13,802.22 on that day.
FII outflow in June 2008 totaled Rs 10,095.80 crore (till 27 June 2008). FII outflow in calendar year 2008 totaled Rs 25,465.30 crore (till 27 June 2008).
There are a total of 1,403 FIIs registered with the Securities & Exchange Board of India (Sebi).
Trading Calls - July 1 2008
Nifty (4041) Sup 3960 Res 4105
Sell India Cements (137) SL 141 Target 131, 129
Sell HDFC (1964) SL 1985
Target 1925, 1915
Sell Maruti (616) SL 624
Target 600, 597
Buy FT (1681) SL 1660
Target 1730, 1750
Buy Raymond (226) SL 221
Target 236, 239
Drowning Street…avoid getting wet
Some people feel the rain. Others just get wet.
Few people may manage to enjoy the rain for now. While the monsoon may have brought some relief to all (including the embattled government), the bulls’ hopes of extending the 5-year rally remain washed out. The Indian stock market has been one of the worst performers in the first half (down 34%). We have China for company in this dubious club. In fact, it is even worse off with a negative return of 48%. The Dow in the US has lost 14.4% so far this year, and is on the brink of entering the official territory for bear market.
As we sit drenched mailing you this note, thanks to the heavy downpour in Mumbai, the factors behind this year's worldwide stock market rout have been already well articulated. What we would say (at the cost of repeating though) is that the current rough and tough time is unlikely to end soon. One should brace for some more downside (difficult to predict accurately), before things start looking up again. Some improvement is likely sometime either in the last quarter of 2008 or in the first half of next year.
For the day we could see the key indices opening on a cautious to slightly higher note. There is no clear trend emerging from the global markets at this point in time. Some markets are slightly down while some others are modestly up. Oil has cooled off to $140 per barrel after hitting $143.67 in electronic trading yesterday. However, this is still quite a bit high and only a drop to $100-110 levels will bring cheers to the stock markets.
What we also need is the FII outflows to turn into inflows, that too on a sustainable basis. Over the next few days, the market may remain sideways as most players will prefer to stay on the sidelines ahead of the results for the April-June quarter. Some of the effects from soaring costs, 13-year high inflation, rising interest rates and a slowing economy will be seen in India Inc's numbers. Having said that, any positive surprise may lead to a bounce.
FIIs were net sellers of Rs2.09bn (provisional) in the cash segment on Monday while the local institutions poured in Rs7.24bn. In the F&O segment, foreign funds were net sellers of Rs4.13bn. On Friday, FIIs were net sellers of Rs7.46bn in the cash segment. With this, they have pulled out more than $6.3bn from the Indian market this year.
Asian markets were mixed this morning but regional financial shares fell on concern that credit-market losses will widen after JPMorgan Chase said prices for some US mortgage securities may sink further.
Westpac Banking and Sumitomo Mitsui Financial Group paced declines by banks. Rio Tinto led materials shares higher, leaving the region's benchmark index little changed, after the world's third-largest mining company almost doubled prices for the iron ore it sells to Asian steelmakers.
The MSCI Asia Pacific Index lost 0.1% to 136.62 as of 11:45 a.m. in Tokyo, after earlier gaining as much as 0.4%. An index of financial shares on the benchmark dropped 1%, extending its first-half loss of 19%.
Japan's Nikkei 225 Stock Average climbed 0.3% to 13,526.53, snapping an eight-day, 6.7% slump. The Tankan index of manufacturer sentiment fell to a four-year low in June, with companies expecting earnings to decline for the first time since the 2001 recession, the Bank of Japan said today.
The Kospi index fell 1% in South Korea, where the central bank said today inflation this year will accelerate to the fastest pace in a decade. Benchmarks declined elsewhere in the region, except Indonesia. Hong Kong and Thailand are closed for holidays.
US stocks struggled on Monday, with the blue chip indices ending nearly unchanged and the technology shares taking a beating. The main indices still ended with sharp losses for June and the second quarter, as surging crude oil prices and ailing financial firms continued to fuel concerns about the economy and profits.
It was the worst June for the S&P 500 and the Dow Jones Industrial Average since the Great Depression on account of soaring oil prices and the financial sector mess. The Dow trimmed its monthly losses to 10.2%, still the biggest June loss for the 30-stock gauge since 1930.
The S&P 500 finished virtually flat at 1,280, paring its decline for June to 8.6%. The Dow added 3.5 points to 11,350.01. The Nasdaq lost 22.65 points, or 1%, to 2,292.98. Market breadth was mixed. Three stocks dropped for every two that rose on the New York Stock Exchange.
The Dow has now fallen 19.8% from its October 9 high of 14,165. It takes a 20% decline to be in bear-market market territory. The Dow lost 7.4% in the second quarter and 14.4% year to date. The S&P 500 slid 3.2% during the quarter, while the Nasdaq rose 0.6%.
The S&P 500 lost 8.6% in June, the worst monthly performance since September 2002 when it lost 11%, and the worst June performance since 1930, when it slumped 16.5%. During the month, 91% of the industries in the S&P 500 declined, with almost of them falling by 10% or more.
The Nasdaq fell 9.1% in June - the worst monthly performance since this past January - when it lost 9.9%, and the worst June since 2002, when it shed 9.4%. Year-to-date, the Dow is down 14.4%, the S&P 500 is down 12.8% and the Nasdaq is off 13.5%.
US light crude for August delivery reached a record high of $143.67 a barrel on the New York Mercantile Exchange before pulling back to settle at $140 a barrel, down 21 cents. The national average price for a gallon of regular unleaded gas rose to a record $4.086 from $4.079 the previous day, according to AAA.
The Chicago PMI, a regional read on manufacturing, rose to 49.6 from 49.1 in the previous month, versus forecasts for a dip to 48. However, any reading below 50 indicates continued weakness in the sector.
In currency trading, the dollar was little changed versus the euro and fell versus the yen. In the bond market, Treasury prices were barely higher, with the yield on the benchmark 10-year note at 3.96%. COMEX gold for August delivery fell $3 to settle at $928.30 an ounce.
European shares ended mixed in the final trading session of the June, but still logged their fourth quarterly decline. The French CAC 40 fell 0.65% to 4,397.32. Germany's DAX 30 lost 0.64% at 6,418.32. Meanwhile, the UK's FTSE 100 gained 1.74% at 5,625.90, helped by gains from the oil and mining sectors.
After starting off the July series on a negative note on Friday, it was a bad start to the new week as well. Markets continued its southward journey on back of global weakness and sky rocketing crude oil prices further adding to the rising inflationary pressure. Crude oil prices surged past the US$143/bbl mark hitting the record high of US$143.6/bbl.
The interest rate sensitive sectors were again badly hit, the BSE Realty index was down 6.8% and the BSE Bankex index was down 3.5%. However, bucking the negative trend were the BSE IT and the FMCG index which gained by 0.4% each in a falling market.
Finally, the BSE benchmark Sensex lost 340 points to close at 13,461 and the Nifty index lost 96 points to close at 4,040.
Steel Strips ended flat at Rs123. The company, at its Extra ordinary General Meeting approved to offer, issue and allot optionally convertible bonds (0CB) to M/s Tata Capital Ltd, up to an amount of Rs200mn, by way of Preferential allotment. The scrip touched an intra-day high of Rs133 and a low of Rs122 and recorded volumes of over 5,000 shares on BSE.
Aban Offshore declined by over 3.5% to Rs2876 after the company announced that due to unforeseen circumstances not known at the time of agreeing the LOI, the letter of intent has been terminated. The rig has been mobilized to Singapore and the company is actively marketing the same.
Company made this announcement with reference to the earlier announcement dated May 12, 2008 regarding a Letter of intent from Husky Oil for a one well contract for the rig Murmanskaya. The scrip touched an intra-day high of Rs3051 and a low of Rs2830 and recorded volumes of over 73,000 shares on BSE.
India Cements slipped by over 6.5% to Rs137 after the company posted a net profit of Rs1044.40mn for the quarter ended March 31, 2008 (down 38.2%) where as the same was at Rs1691.40mn for the quarter ended March 31, 2007. Total Income is Rs10.106bn for the quarter ended March 31, 2008 where as the same was at Rs9.182bn for the quarter ended March 31, 2007.
The Group posted a net profit of Rs6415.70mn for the year ended March 31, 2008 where as the same was at Rs5749.50mn for the year ended March 31, 2007. Total Income is Rs36.172.30bn for the year ended March 31, 2008 where as the same was at Rs26.248bn for the year ended March 31, 2007. The scrip touched an intra-day high of Rs147 and a low of Rs133 and recorded volumes of over 2,00,000 shares on BSE.
McNally Bharat slipped by 5% to Rs125. The company announced that it received an order from Mundra Port and Special Economic Zone Ltd, Ahmedabad for design engineering, manufacturing, supply, erection, commissioning and performance testing of 4 Nos. Rail Mounted Bucket Wheel Stacker reclaimer valued at Rs473mn. The scrip touched an intra-day high of Rs134 and a low of Rs125 and recorded volumes of over 15,000 shares on BSE.
L&T lost 3.7% to Rs2183. The company announced that it received Rs15.57bn order for 2 x 800 MW Steam Turbine Generator package from APPDCL. The scrip touched an intra-day high of Rs2308 and a low of Rs2165 and recorded volumes of over 5,00,000 shares on BSE.
Deccan Chronicle surged by over 3.5% to Rs107 after the company posted a net profit after minority interest of Rs3036.50mn (up 83.7%) for the year ended March 31, 2008 as compared to Rs1652.60mn for the year ended March 31, 2007.
Total Income increased from Rs6220.30mn for the year ended March 31,2007 to Rs9343.40mn for the year ended March 31, 2008. The scrip touched an intra-day high of Rs117 and a low of Rs106 and recorded volumes of over 1,00,000 shares on BSE.
Pratibha Industries slipped 3% to Rs212. The company announced that it secured a contract for construction of Mall Podium upto Ground Level from Lanco Hills Technology Park Pvt. Ltd. The value of the contract is Rs1.79bn.
The project involves 'construction of a Mall Podium of four basements upto ground level. The total constructed area shall be 15.22 sq. ft.'. The project is to be executed in 15 months. The scrip touched an intra-day high of Rs220 and a low of Rs205 and recorded volumes of over 3,000 shares on BSE.
NTPC will get Rs100bn from Power Finance Corporation (PFC) for funding its various projects for capacity addition. (ET)
ICICI Bank has decided to increase the floating rate for consumer loans and its benchmark advance rate by 75 basis points each. (BS)
HDFC has raised its minimum fixed and floating lending rates to 11% and 14% respectively. (BS)
SBI raises home and auto loan rates by 50bps. (ET)
Madras Cements has announced a 1:1 bonus issue and a 10 for 1 stock split. (BL)
Central Bank of India plans to raise Rs5-6bn in FY09 through a basket of products such as hybrid and subordinate bonds. (BS)
The Kenyan Government has favored a Libyan company ahead of Essar Oil for a 50% stake in a refinery project in Mombasa. (BS)
JSW Steel plans to invest Rs60bn in FY09 to acquire iron ore mines in the American and African continents and increase existing capacity. (BS)
Usha Martin and BHP Billiton have signed an agreement to set up a JV company to explore minerals in Jharkhand. (ET)
ICICI Bank’s contingent liabilities increased to Rs11.5tn in FY08 from Rs5.6tn in FY07. (ET)
Tata Motors and Ashok Leyland plan to hike prices by 2-3% and 3-4% respectively. (ET)
Titan Industries is aiming to become a billion dollar company by FY09. (ET)
Yes Bank has raised Rs3.64bn in a combination of upper tier II subordinated debt and hybrid tier I capital from Rabobank. (BL)
Sonke Pharmaceuticals and Cipla Medpro are among the six companies that have bagged a South African government tender for anti-retroviral drugs worth Rand3.5bn (Rs19.2bn). (BS)
Aban Offshore has terminated a Rs44.17bn contract with Husky Oil China. (DNA)
SAIL has signed a MoU with Shipping Corporation of India to promote a JV company for providing various shipping-related services to SAIL to import coking coal. (ET)
JSW Steel expects its bottomline to take a hit of Rs4.5-5bn in 2008-09, due to increasing input costs and a reduction in steel prices under government pressure. (ET)
Cipla has received product patents for new forms of two blockbuster drugs - Osemaprazole and Alendronate, from the Indian authorities. (ET)
SBI may have to set aside Rs10bn to cover depreciation of its treasury portfolio this fiscal. (DNA)
Indian Bank has waived a sum of Rs5.5bn, benefiting 281,090 farmers under the Central Government’s Agriculture Debt Waiver and Debt Relief Scheme. (BL)
NDTV’s board has approved separating its news and entertainment businesses. (DNA)
Sun Pharma has launched a cash tender offer for all outstanding ordinary shares of Taro Pharma at US$7.75 per share. (ET)
Costlier raw material and tight credit conditions have slowed down cement companies’ Rs500bn expansion plan to add 80-90mn tons capacity in three years. (ET)
Future Group plans to expand its Big Bazaar stores to 150 by June 2009. (ET)
Apollo Hospitals plans to divest 49% stake to strategic investors in the pharmaceutical retailing business. (DNA)
The London stock exchange listed, Xchanging plans to acquire Cambridge Solutions in a deal valued close to US$250mn. (ET)
Kinetic Engineering will start supplying component for Tata Motors' small car project ‘Nano’ within the next two months. (ET)
Honda Motorcycles and Scooter India launched the CBF Stunner, its second 125cc model. (BS)
Honda Motorcycles and Scooters India says that it would not compete with its sister company, Hero Honda on volumes but by gaining recognition of its brand and customer satisfaction. (BL)
Gujarat Government has tied up with Adani and Essar for purchasing 3000 MW power at a fixed rate for a period of 26 years. (BS)
Department of Telecom is likely to ask Idea Cellular to submit its spectrum position at present along with that of Spice Communications. (ET)
Core Projects & Technologies plans to raise funds up to US$500mn from domestic and/or international market. (BS)
The RPG Group-promoted Spencer’s Retail would be entering into a joint venture with a US-based bakery café chain and setting up stand alone stores under its brand name. (BL)
GVK Group in consortium with BHP Billiton has emerged as provisional winner of seven deepwater blocks in NELP VII. (BL)
Lakshmi Mittal is looking at entering the takeover battle for the Rio Tinto mining group. (DNA)
Goldman Sachs is believed to be investing ~US$80mn in a JV with Dubai developer ETA to launch luxury Four Seasons hotel in Bangalore. (ET)
ArcelorMittal, plans to raise prices for car makers by about 60% owing to a spike in cost of raw materials. (ET)
OPEC - PC's idea doesn't work for us
Oil cartel OPEC on Monday rejected India's call for regulating crude prices through a price band, saying the market was the best judge and forecast prices climbing to USD 170 a barrel on summer demand in the US.
"Producing and consuming nations never agree on any price... They never agreed with (OPEC) price band (that operated between 2000 and 2005). Then we did away with the price band... We are never going to agree (on the price band)," OPEC president Chakib Khelil told reporters on the sidelines of the World Petroleum Congress here.
Stung by high oil prices driving inflation to 13-year high of 11.42 percent, Finance Minister P Chidambaram had, at a meeting of energy ministers in Jeddah last week, asked the Organisation of Petroleum Exporting Countries (OPEC) to operationalise a price band mechanism wherein crude prices move within a specified range.
The speculative premium has been put by New Delhi at USD 60 a barrel. Khelil, however, said: "We (should) let the oil market decide."
India has blamed speculators for the rise in crude prices that have touched an all time high of USD 142.99 a barrel, but western oil firms pinned it on demand-supply mismatch.
"I don't think you can blame the speculators for the high oil price," Jeroen van der Veer, chief executive officer of Europe's biggest oil producer Royal Dutch Shell Plc, said at the 19th WPC.
While maintaining that there was more than enough oil to meet global demand, Khelil said the pressure on Iran, the second-largest producer in the cartel, as well as a falling dollar may drive prices to USD 170 a barrel.
Today's Pick -Essar Oil
We recommend a sell in Essar Oil from a short-term perspective. From the charts of the Essar Oil, we see that it has been on a long-term down trend from its 52-week high of Rs 360 recorded in early January 2008. On June 30, the stock conclusively broke through the key support level at Rs 200 where the 200-day moving average is positioned and tumbled 11 per cent accompanied by above average volume.
The daily relative strength index is featuring in the bearish zone and the weekly RSI is on the brink of entering this zone. The daily moving average convergence and divergence is also declining and is featuring in the negative territory, reinforcing our bearish stance.
The long-term down trendline of the stock is intact. Considering the above bearish facts we are negative on the stock in the short-term and expect its decline to prolong until it hits our price target of Rs 158 in the upcoming trading sessions. Traders with short-term perspective can sell the stock while maintaining a stop-loss at Rs 185.
Bullion metals register marginal drop
Gold and silver prices end second quarter with roughly 1% gains
Bullion metals ended lower on Monday, 30 June, 2008. Prices declined as the dollar strengthened against its rivals. Prices also gave up some gains after crude prices fell from their record highs. The increase in energy costs generally increase demand for the precious metal as a hedge against inflation. Silver prices also fell.
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 August delivery fell $3 (0.32%) to close at $928.3 ounce on the New York Mercantile Exchange. Earlier, gold rose as much as 0.7% as record oil prices boosted demand for the precious metal as a hedge against inflation. Last week, on Thursday, 26 June, prices surged by more than 3.5%. That was the biggest percentage gain for a most-active contract since June, 2006. Last week gold prices ended higher by $27.6 (3.1%). On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped since then.
With today’s closing, gold prices ended June, 2008 with a gain of 4.1%. The yellow metal ended second quarter with a marginal gain of 0.7%. Last month, in May, it ended with a gain of higher by $22.5 (2.5%). Before May, for April, prices closed lower by 6.3%.
This year, gold prices have gained 10.8% till date against a 8% drop for the dollar against the euro. 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%.
On Monday, Comex silver futures for July delivery fell 20 cents (1.1%) to $17.51 an ounce. Silver has gained 17.4% in 2008 till date. For the second quarter, it gained a paltry 1.4%.
Silver prices ended the month of May 2008 with a gain of 2.7%. For April, it closed lower by 5.5%. Silver had 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 Monday, the euro fell for the first time in five sessions and is headed for the first quarterly decline since September 2006. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, was last at 72.43, up from 72.306.
Last week, Federal Reserve yesterday sharpened its focus on inflation, saying that the upside risks to inflation have increased. Fed held its target for short-term interest rates steady at 2%.
Since last September, Fed has axed interest rates seven times and brought it down to 2%. On the other hand, the ECB has kept rates unchanged at 4% since June, 2007. Gold gained 38% from 17 Sept as the Fed slashed rates from 5.25%.
In the crude market on Monday, crude oil was little changed after rising to a record above $143 a barrel on concern Israel may attack Iran over its nuclear program and disrupt supply from OPEC's second-largest producer. Crude oil for August delivery fell 21 cents to settle at $140 a barrel on the New York Mercantile Exchange after rising to a record $143.67.
Gold had 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. In 2006, silver had jumped 46% while gold gained 23%.
At the MCX, gold prices for August delivery closed higher by Rs 47 (0.4%) at Rs 12,879 per 10 grams. Prices rose to a high of Rs 12,996 per 10 grams and fell to a low of Rs 12,761 per 10 grams during the day’s trading.
At the MCX, silver prices for July delivery closed Rs 314 (1.3%) lower at Rs 24,260/Kg. Prices opened at Rs 24,570/kg and fell to a low of Rs 24,140/Kg during the day’s trading.
Crude prices fall from all time highs
Prices end lower as the dollar gains some ground
Crude futures fell from their record highs at $143 today, Monday, 30 June, 2008 and ended little lower for the day. Prices slipped on concern that Israel may attack Iran over its nuclear program and disrupt supply from OPEC's second-largest producer. With this, prices infact rose for the day but then with the dollar gaining some grounds, oil prices slipped.
Crude-oil futures for light sweet crude for August delivery today closed at $140/barrel (lower by $0.21/barrel or 0.15%) on the New York Mercantile Exchange. During intra day trading prices touched a high of $143.67. With today’s closing, crude prices gained 38% in the second quarter of this year. It was the biggest quarterly increase in nine years. It ended June 2008 higher by 9.9%. Last week, crude prices closed higher by 3.6%. Prices are 104% higher than a year ago. For the year, crude is up by 43% till date.
Supported by tensions in the Middle East, concerns about Nigerian production and ongoing talk about U.S. government control over speculative trading in the commodities markets, crude prices rose earlier in the day. But then, prices fell as the dollar strengthened. It was reported during the weekend that the U.S. has stepped up the pace of covert action taken inside Iranian territory.
At the currency markets on Monday, the euro fell for the first time in five sessions and is headed for the first quarterly decline since September 2006. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, was last at 72.43, up from 72.306.
Natural gas futures in New York advanced to the highest in more than two years on speculation rising temperatures and tropical storms may limit supply gains later this summer. Natural gas for August delivery rose 15.5 cents (1.2%) to settle at $13.353 per million British thermal units.
Against this backdrop, prices for July reformulated closed almost flat at $3.5015 a gallon on Nymex. Front-month contract prices are up over 41% year-to-date. July heating oil rose 0.4 cent to end at $3.9029 a gallon, with futures prices 47.6% higher than the end of last year. The July contracts expired at the close of today’s trading. August reformulated gasoline closed the session up 1.8 cent at $3.4991, while August heating oil added 2.3 cents to finish at $3.91.
Brent crude oil for June settlement today fell $0.48 (0.3%) to $139.83 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.
At the MCX, crude oil for July delivery closed at Rs 6,078/barrel, higher by Rs 38 (0.62%) against previous day’s close. Natural gas for July delivery closed at Rs 573.8/mmbtu, higher by Rs 5.4/mmbtu (0.95%).
Monday, June 30, 2008
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