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Tuesday, July 08, 2008
Grey Market Premiums
First Winners Ind. Ltd. 125 5 to 7
Lotus Eye Care Hospital 38 3 to 3.50
KSK Energy Venture 240 Discount
Somi Conveyor Belting 35 3 to 5
Birla Cotsyn (India) 15 to 18 Discount
Morning Call - July 8 2008
Market Grape Wine :
In House :
Nifty at a support of 3926 with resistance at 4075 and 4115 levels.
Cash: sell RNRL target 59 with S/L 68
Cash: Sell RPL below 166.75 target 157 with S/L 170.
Future: sell REL INFRA below 780target 740 with S/L 795.
Future: sell RPL below 166 target 150 with S/L 171.
Out House:
Markets at a support of 13113 & 13231 resistance at 13786 & 13595 levels .
Buy : Infy at dips
Buy : Suzlon at dips
Buy : Tisco at dips
Buy : LT at dips
Buy : Adalbs at dips
Buy : Sbin
Dark Horse : LT , Infy , Gujnre , Jpasso , Suzlon & Tisco
Weakness in global markets may weigh
US indices ended weak in yesterday's trades and tracking the same the Asian markets are also trading weak in morning trades, which may weigh on the local indices and thereafter the market could exhibit volatility during intra-day trades. However, the prevailing northbound journey and sharp fall in crude oil prices may add to the market advantage and help the sentiment turn positive. Among the domestic indices, the Nifty could test 4,065 and above this level may surge to 4,100, while on the downside it could slip to 4,000-3,960 levels. The Sensex has a likely support at 13,400 and may face resistance at 13,650.
US indices closed in negative territory on Monday with the Dow Jones dropped 57 points at 11,232, the Nasdaq fell 2 points to close at 2,243.
Among the Indian ADRs trading on the US bourses, VSNL was the major gainer by 9.26%, followed by Patni Computer up by 7.60%, ICICI Bank 2.12%, Tata Motors 2.70 and ICICI Bank 2.65% while Infosys, Wipro and HDFC Bank were up with steady gains. However, only Rediff & Dr Reddy slipped into the red.
Crude prices tumbled on Monday as the dollar gained strength and traders reacted to an apparent easing of Mideast tensions. The Nymex light crude oil for August delivery settled down $3.92 to close at $141.37 a barrel. In the commodity space, the Comex gold for August series declined $4.80 to settle at $928.80.
Pre Session Commentary - July 8 2008
The Indian Market is expected to have negative opening on the back of weak global cues as the US market gave up its initial gains despite of fall in crude oil prices and this led to the Asian market to trade on the back foot. Crude oil dropped by $3.92 to close at $141.37 per barrel on the New York Mercantile Exchange. Monday On Monday, the Indian market closed with gains after it pared back its earlier gains. Market opened on the firm note tracking positive cues from the Asian markets and receding political worries as SP is expected to support the UPA in Nuke Deal. Further, it continued the same but during final trading hours it surrendered earlier gains and after a struggle managed to close in green. BSE Sense closed above 13,500 points and NSE Nifty 4,000. From the sectoral front Oil & Gas and Pharma stocks were major sufferers of selling pressure while Metal, IT, Auto and Bank stocks were best performers as witnessed most of the buying in these baskets. The BSE Sensex closed higher by 71.99 points at 13,525.99 and NSE Nifty ended up by 14.00 points at 4,030.00. We expect that market may decline during the trading session.
US markets closed lower on financial worries and weak energy sector on Monday after the U.S. Independence Day long weekend. The Dow Jones Industrial Average (DJIA) closed lower by 56.58 points at 11,231.96 along with S&P 500 down by 10.59 points to close 1,252.31 and NASDAQ dropped by 2.06 points to close at 2,243.32.
Indian ADRs ended up. In technology sector, Patni Computers ended up by (7.90%) along with Satyam by (5.00%), Wipro by (0.69%) and Infosys by (0.23%). In banking sector, ICICI bank and HDFC bank gained (2.65%) and (0.06%) respectively. In telecommunication sector, MTNL ended without any change and Tata Communication advanced by (2.70%). Sterlite industries declined (0.75%).
Today the major stock markets in Asia are trading weak. Hang Seng index is trading lower by 310.08 points at 21,602.98 along with Japan’s Nikkei trading down by 238.18 points at 13,121.86 and Taiwan Weighted trading at 7,205.55 with a fall of 135.56 points.
The FIIs on Monday stood as net buyer in equity and in debt. The gross equity purchased was Rs3,008.90 Crore and the gross debt purchased was Rs2,083.80 Crore while the gross equity sold stood at Rs2,476.20 Crore and gross debt sold stood at Rs441.50 Crore. Therefore, the net investment of equity reported was Rs532.70 Crore and net debt was Rs1,642.30 Crore.
Today, Nifty has support at 3,848 and resistance at 4,096 and BSE Sensex has support at 13,072 and resistance at 13,764.
Trading Calls - July 8 2008
Nifty (4030) Sup 3950 Res 4075
Buy Colgate (371) SL 366
Target 381, 384
Buy Infosys (1801) SL 1780 Target 1845, 1850
Buy Satyam (481) SL 475
Target 492, 495
Sell PNB (386) SL 391
Target 376, 373
Sell RPL (166) SL 170
Target 158, 156
Bulls feel Left out!
Left to themselves, things always go from bad to worse.
The Left parties are likely to announce withdrawal of their support today. While this may be factored in, future events on the political front need to be watched. The key indices may have ended positive but bulls still appear to be lacking in confidence. Much of the action will be seen in New Delhi though. The Prime Minister has announced that the Government will approach the IAEA for India-specific safeguards agreement soon. The IAEA is to meet on July 28 to consider the India proposal. The Prime Minister also says that he is ready for a trial of strength in parliament and that elections will happen as per schedule.
This morning, cues from global markets are discouraging. US shares gave up most of their gains to end slightly lower. Asian markets are down 1-2.5% this morning, except for China. The bulls may take some heart from the fact that crude oil prices have cooled off marginally and key European indices gained almost 2% yesterday.
We expect the key Indian indices to fall at the opening bell. Overall, we see them staying choppy and rangebound ahead of the political developments immediately and quarterly results. The IT sector may hog the limelight as Infosys will declare its results on Friday and others will follow suit next week. The current weakness in the rupee may have some positive spin on IT shares. This morning, the Indian currency is trading at 43.32 versus the dollar against yesterday's close of 43.29.
Banks may be in focus today amid reports of SBI suffering big MTM loss. Reliance counters of course may continue to attract attention amid the ongoing row over MTN deal.
After hitting an intra-day high of 13,793, the Sensex lost altitude and ended just 0.5% higher yesterday. This only goes to reinforce the widely held view that the bulls are still not out of the woods and there may be some more pain on the horizon.
Among the other stocks, SpiceJet will be in action again amid reports that it has apparently spurned Vijay Mallya's buyout offer and will instead go for private placement with billionaire US investor Wilbur Ross. Siemens has won baggage handling contract worth Rs3bn for the Delhi International Airport. Cairn India may remain in the limelight as it has signed an agreement for exploration in Sri Lanka.
Shares of First Winner Industries Ltd. will be listed today.
FIIs were net sellers of Rs4.4bn (provisional) in the cash segment yesterday while local institutions poured in Rs759mn. In the F&O segment, the foreign funds were net buyers of Rs8.67bn. On Friday, the FIIs pumped in Rs5.33bn in the cash segment. Mutual Funds were net sellers of Rs659mn on the same day.
US shares erased most of the day's gains to end lower as trading resumed after an extended "Independence Day" weekend. Sentiment was hit by renewed worries that banks could suffer substantial further write-downs even as crude oil prices slipped by nearly $4 per barrel.
The rumors about Fannie Mae needing more capital seemed to be a big driver in pulling down the indices from the day's highs. That revived fears about the depth of the credit market crisis ahead of the first wave of second-quarter earnings reports.
Lehman Brothers said Fannie Mae and Freddie Mac - largest US providers of home-mortgage financing - may need to raise a combined $75bn in capital if new accounting rules go through.
After rising more than 100 points, the Dow Jones Industrial Average slipped 56.58 points, or 0.5%, to 11,231.96. The Nasdaq Composite Index finished almost unchanged at 2,243.32. The S&P 500 index lost 10.59 points, or 0.8%, to 1,252.31, extending its plunge from an October record high to 19.99%.
JPMorgan Chase and Bank of America slid, dragging the S&P 500 Financials Index to a five-year low. Yahoo! led gains in technology shares that limited the market's decline after Microsoft said it may revive talks to acquire the Internet giant.
Cautious comments from San Francisco Fed Bank president Janet Yellen kept worries about a weakening economy in the forefront. She warned that the downturn in the housing market and the credit crisis plaguing Wall Street could worsen before the economy recovers.
Stocks managed a comeback late in the session after the three major indices hit bear market levels - a decline of 20% off the recent highs. But the advance proved unsustainable, with stocks falling again into the close.
The selloff in oil prices did little to relieve worries about consumer spending and rising inflation. Instead, the lower oil prices caused oil services stocks to fall, dragging on the broader market.
Wall Street is gearing up for a new round of corporate earnings that kicks off on Tuesday when Dow component Alcoa reports its second-quarter results. GE, another Dow component, will report its results later this week.
Crude for August delivery fell more than $5 to below $140 a barrel on the New York Mercantile Exchange, as the dollar gained strength and traders reacted to an apparent easing of middle-east tensions. The contract settled at $141.37 a barrel, down $3.92 after falling as low as $139.50 a barrel.
In the bond market, Treasury prices rallied. The benchmark 10-year note slumped, lowering its corresponding yield to 3.90% from 3.97% on Thursday. In currency trading, the dollar rose versus the euro and gained against the yen. COMEX gold for August delivery fell $4.80 to settle at $928.80 an ounce.
European shares ended with strong gains as a sharp pullback in oil prices and a fall in the euro against the dollar gave sentiment a lift. The pan-European Dow Jones Stoxx 600 index rose 1.3% to 283.17. Germany's DAX 30 climbed 2% to 6,395.75, while the French CAC-40 advanced 1.8% to 4,342.59 and the UK's FTSE 100 closed up 1.9% to 5,512.70.
In the emerging markets, the Bovespa in Brazil was down 0.5% at 59,088 while the IPC index in Mexico gained 0.2% at 28,383. The RTS index in Russia was virtually flat at 2189 and the ISE National-30 index in Turkey jumped 2.3% to 42,403.
Markets barely managed to end the day on a positive note as bulls were unable to hold on to their early gains. After staying in positive terrain for major part of the day, bulls lost momentum as selling pressure in the Oil & Gas and Pharma stocks dragged the benchmark Sensex to slide from day’s high.
Stocks like Reliance Industries, Cairn India and Essar Oil were the major laggards reacting to reports that private oil companies may have to give up some of their profits to share the huge subsidy burden in the oil sector. However, there were media reporting that the oil minister was not aware of private companies’ subsidy sharing move.
Finally, the BSE benchmark Sensex closed at 13,525 adding a modest 71 points and the Nifty index added 14 points to close at 4,030.
Eicher Motors surged by over 3.5% to Rs250 after the company announced that it recorded a total sale of 2,677 Nos. of commercial vehicles during June 2008, tabbing YTD growth of 10%. While domestic sales tallied at 2,432 nos. of commercial vehicles, the total sales count also included 245 nos. of CVs, exported. The scrip touched an intra-day high of Rs258 and a low of Rs244 and recorded volumes of over 10,000 shares on BSE.
Pyramid Saimira Theatre declined by over 7% to Rs162 after the company said that the stake sale reports are speculative. Earlier, the stock hit an intra-day high of Rs195 on reports that the world’s largest theater chain, US-based Regal Entertainment Group, and other PE firms are planning to pick up a combined 14% stake in the company. The stock touched an intra-day high of Rs195 and low of Rs159 and recorded volumes of over 26,00,000 shares on NSE.
PSTL aims to have 1,000 theatres in six countries by the end of 2008 and Regal, one of the interested suitors, has close to 6,500 screens across the US. The deal is expected to be in the range of Rs2.5bn to Rs3bn.
Shares of Suzlon Energy gained 1% to Rs194 on expectations it will benefit from Tanti group's investments in China. The group’s unit formed a joint venture with Arcapita Bank BSC, to invest US$2bn for developing wind power farms in China.
Spice Tele edged higher by 0.5% to Rs73. The provider of cellular phone services, continued to hog the limelight as 282mn shares changed hands on BSE at Rs77.3 per share in the morning trades on Monday.
Idea Cellular purchased 282mn shares of Spice Communication from the open market. The company had made an open offer to the shareholders of Spice Communications for acquiring additional 20% stake in the company.
Cairn India declined by over 5.5% to Rs237, following reports that private oil companies may have to pay windfall profit tax. However, other private company stocks like Reliance Industries and Essar Oil are trading with smart gains.
According to reports, private oil companies may have to give up some of their profits to share the huge subsidy burden in the oil sector. Currently, the under recoveries are split by the Public Sector E&P companies like ONGC and Gail.
SpiceJet sky rocketed by over 21% to Rs30 after reports stated that Kingfisher Airlines Ltd. may acquire shares of the company in an all-cash deal. SpiceJet's shareholders are expected to get one share of a merged company with Kingfisher for every three shares owned reports stated. The scrip touched an intra-day high of Rs32 and a low of Rs26 and recorded volumes of over 63,00,000 shares on BSE.
There were reports stating that UB Group Chairman, Vijay Mallya is negotiating with Gulf-based fund Istithmar and UK-based Bhulo Kansagra family, who together hold 26.33% in the airline. Acquisition of their stake would trigger an open offer for another 20% from other share holders.
RCom has offered a deal under which the promoters will pick up 51% in MTN through a cash and share swap. (BS)
SBI may suffer Rs7bn MTM loss in first quarter this fiscal. (ET)
DLF plans to set-up Rs8bn venture capital fund to investment in equipment manufacturing and construction companies. (ET)
RIL and GAIL to apply for gas retail licence. (BS)
The JV between Daimler AG and the Hero Group, to set up a truck manufacturing facility near Chennai for an investment of Rs30bn. (BS)
Infosys invests AUD$1.9mn in the newly formed Smart Services Cooperative Research Centre (CRC). (FE)
NTPC-BHEL JV to invest Rs60bn in setting up new power equipment manufacturing facility. (ET)
Cairn India has signed the petroleum resources agreement with Sri Lanka for exploration licence to explore oil and natural gas in the Mannar Basin. (BL)
RIL gets Government approval for 800MW Raigad project. (FE)
Moser Baer to spin off its entertainment business into a new company valued at Rs2.5bn. (BS)
ACC sets up second wind power project in Rajasthan. (BS)
Niko a partner in RIL operated D-6 blocks in the KG basin seeks Government approval to raise US$550mn by pledging its stake. (ET)
Japan based Nomura Asset Management to pick up stake in LIC’s AMC unit. (ET)
Vedanta Aluminium (VAL) to expand capacity of its existing alumina refinery in Lanjigarh, Orissa, to 6mtpa from the current 1mtpa at an investment of around Rs70bn. (BS)
Pan Atlantic LLC, Dubai, will invest US$10mn in a SPV created by Sobha and Pan Atlantic to develop a residential township with a total built up area of 1.7mn sq. ft. in Hosahalli in Bangalore South. (BL)
Garware Offshore takes the delivery of PSV christened MV Mana at Leirvik. (FE)
Tech Mahindra eyes emerging markets for BPO business. (FE)
GMR Energy Ltd, a subsidiary of GMR Infra wants CEA to recommend relocation of plant. (FE)
NHPC turns down L&T JV proposal for building up hydroelectric power projects within and outside the country. (FE)
Akruti City plans to form a 50:50 JV with Pacific Alliance Group. (FE)
Hinduja Foundries Ltd plans to raise Rs2.5bn to support its capex program spread during the next 18 to 24 months. (BL)
Economic Front Page
Left parties to withdraw support to the Government by July, 10. (BS)
Pharma companies have approached government seeking a review of prices control on key brand. (ET)
Shipping Industry has asked the finance ministry to reduce service tax and FBT. (ET)
New Port SEZ norms to be floated soon. (ET)
The Government plans regulator for tea industry. (FE)
The textile ministry plans not to impose ban on cotton export.(FE)
The Government to curb export of fertiliser raw materials like sulphuric acid, phosphoric acid, rubber and cotton. (BS)
Cotton import duty to be cut from 14% to nil. (BS)
The Government has approved allocation of 23 coking and non-coking coal blocks to leading steel, cement and power producers. (BS)
Today's Pick - Sterlite Industries
We recommend a sell in Sterlite Industries India from a short-term perspective. It is evident from the charts of Sterlite Industries India that it has been on a long-term downtrend from its all-time high of Rs 1,140 (recorded in early December 2007). In early June 2008, the stock declined breaching the 50 and 200-day moving averages. Moreover, in the recent times, the stock tested the key support level Rs 700 and broke out by tumbling almost 8 per cent on July 3 with good volume. The daily and weekly relative strength indices are featuring in the bearish zone. In line with the stock price, the moving average convergence and divergence (MACD) is also declining in the negative territory. The medium-term down trend of the stock that commenced from Rs 950 level is intact. We are bearish on the stock in the short-term. We expect the stock’s decline to continue until it hits our price target of Rs 565 in the approaching trading sessions. Traders with short-term perspective can sell the stock while maintaining stop-loss at Rs 653.
via BL
Bullion metals shave off earlier loss partly
Gold and silver prices fall for the day as the dollar strengthens
Pressured by the US dollar, bullion metals fell earlier today, Monday, 04 July, 2008. But then, dollar lost some ground and helped precious metals to shave off some of their losses. Crude prices falling today also led to lower bullion metal prices. 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 $4.8 (0.51%) to close at $928.8 ounce on the New York Mercantile Exchange. Earlier during the day, it dropped to as much low as $916. Last week, it ended higher by $2.3 (0.3%). On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped since then.
The weakening dollar and higher global demand for raw materials have led to records this year for commodities including gold. 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.
Gold prices ended June, 2008 with a gain of 4.1%. The yellow metal ended second quarter with a marginal gain of 0.7% yesterday. 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 10.7% till date against a 6% 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%.
Today, Comex silver futures for September delivery fell 45 cents (2.4%) to $17.92 an ounce. Silver has gained 20% in 2008 till date. It ended last week higher by 3.8%. 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 U.S. dollar had began the week higher against major currencies aided by a firmer tone in equity markets, a retreat in oil prices and reluctance to sell the greenback in the midst of the meeting of the Group of Eight world leaders in Japan. But the dollar lost its gains in mid-day trading after the equities market turned south, spooked by news of possible capital raising by U.S mortgage giants Freddie Mac and Fannie Mae. The dollar index which measures the greenback against a trade-weighted basket of currencies fetched 72.668, down from 73.104 earlier in the day.
During last week of June, 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, after keeping interest rates unchanged at 4% since June, 2007, ECB hiked the same to 4.25% last week.
In the crude market on Friday, crude for August delivery had dropped $5.79 earlier in the day to an intra-day low of $139.50 a barrel on New York Mercantile Exchange. But futures pared their losses and closed down $3.9 or 2.7%, to $141.37 a barrel.
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 lower by Rs 43 (0.33%) at Rs 12,986 per 10 grams. Prices rose to a high of Rs 13,007 per 10 grams and fell to a low of Rs 12,803 per 10 grams during the day’s trading.
At the MCX, silver prices for July delivery closed Rs 273 (1.1%) lower at Rs 25,256/Kg. Prices opened at Rs 25,451/kg and fell to a low of Rs 24,875/Kg during the day’s trading.
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