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Tuesday, September 09, 2008
Pre Session Commentary - Sep 9 2008
The Indian Market is expected to have negative opening as Asian markets are trading lower. On Monday, domestic markets after giving up a part of its earlier gains, concluded the day with heavy growth as the Nuclear Suppliers Group (NSG) waved India through, giving a leg-up to India''s Nuclear Deal with the US. Market opened on strong note on favorable global indicate and NSG approval for India. Further, bulls continued to nuke bears on investor’s positive attitude led by strong buying. Strong Asian and European markets also lifted the sentiment after the US government announced to takeover mortgage giant Freddie Mac and Fannie Mae. NSE Nifty ended around 4,500 mark and BSE Sensex around 15,000 level. From the sectoral front, Bank stocks outperformed the benchmark index as ended with gain of more than 4%. Along with that, Capital Goods Metal, Oil & Gas, Power and Reality stocks also contributed to the positive attitude. However, Consumer Durables stocks remained out of favor as witnesses most of the selling from this basket. The BSE Sensex closed higher by 461.14 points at 14,944.97 and NSE Nifty ended up by 130 points at 4,482.30. The BSE Mid Caps and Small Caps closed with gains of 66.17 points at 5,819.89 and by 77.55 points at 6,982.77. We expect that market may remain gave up its gains during the trading session.
On Monday, the US market closed higher as US government announced to takeover troubled mortgage giant Freddie Mac and Fannie Mae. Light sweet crude for October delivery ended marginally higher at $106.34 a barrel on the New York Mercantile Exchange, after rising as high as $109.89 a barrel and falling as low as $US104.70.
The Dow Jones Industrial Average (DJIA) closed higher by 289.78 points to close at 11,510.74 followed by the S&P 500 (SPX) ended up by 25.48 points to close at 1,267.79 and the NASDAQ index gained 13.88 points to close at 2,269.76.
Indian ADRs ended mixed. In technology sector, Wipro ended higher by (3.19%) followed by Infosys advanced by (0.15%), while Patni Computers plunged by (1.17%) and Satyam lost (0.64%). In banking sector HDFC Bank and ICICI Bank gained (4.07%) and (1.20%). In telecommunication sector, Tata Communication ended and MTNL surged (5.88%) and (0.45%). Sterlite industries increased by (2.85%).
Today the major stock markets in Asia are trading lower on profit booking. Hang Seng index is trading weaker by 454.06 points at 20,340.21 along with Taiwan Weighted trading down by 190.21 points at 6,468.48, Japan’s Nikkei plunged 185.43 points at 12,439.03 and Singapore''s Straits Times lost 44.88 points at 2,652.15.
The FIIs on Monday stood as net seller in equity and net buyer in debt. Gross equity purchased stood at Rs1,713.90 Crore and gross debt purchased stood at Rs549.60 Crore while the gross equity sold stood at Rs3,450.70 Crore and gross debt sold stood at Rs34.40 Crore. Therefore, the net investment of equity reported was (Rs1,736.80) Crore and net debt was Rs513.30 Crore.
The partially convertible rupee ended at 44.60/61 per dollar, 0.1% stronger than 44.64/65 of Friday, when it fell to a low of 44.75, a level it last traded on Dec. 21, 2006. The Indian rupee edged back from early gains on Monday to end marginally stronger as hefty dollar demand from oil firms and some foreign banks weighed.
Today, Nifty has support at 4,388 and resistance at 4,553 and BSE Sensex has support at 14,583 and resistance at 15,217.
Grey Market Premium - Chemcel Biotech, 20 Microns
20 MICRONS Ltd. 50 to 55 6 to 8
Chemcel Biotech Ltd. 16 3 to 4.50
Market seen consolidating on mixed global cues
Key benchmark indices are seen consolidating today after a sharp rally on Monday, 8 September 2008 aided by the Nuclear Supplers' Group (NSG) waiver over the weekend, strong global cues and short covering. Global cues were mixed with Asian markets declining today and US indices surging overnight.
Most Asian markets were trading lower today, 9 September 2008. Japan's Nikkei plunged 1.47% or 185.43 points at 12,439.03, Hong Kong's Hang Seng fell 2.18% or 454.06 points at 20,340.21, Taiwan's Taiwan Weighted lost 2.86% or 190.21 points at 6,468.48, Singapore's Straits Times slipped 1.66% or 44.88 points at 2,652.15, South Korea's Seoul Composite declined 1.84% or 27.17 points at 1,449.48. However, China's Shanghai Composite rose 0.14% or 3.10 points at 2,146.52
US stocks surged on Monday, 8 September 2008 as investors bet Washington's bailout of mortgage finance giants Fannie Mae and Freddie Mac would stabilize the US housing sector and calm jittery world financial markets. The Dow Jones industrial average advanced 289.78 points, or 2.58%, to 11,510.74. The S&P 500 index rose 25.48 points, or 2.05%, to 1,267.79, and the Nasdaq Composite index gained 13.88 points, or 0.62%, to 2,269.76.
US crude futures fell 9 cents at $105.43 a barrel yesterday, 8 September 2008 after dipping to a five-month low of $104.70.
Back home, key benchmark indices surged on Monday, 8 September 2008 after the 45-nations Nuclear Supplier Group (NSG) on Saturday, 6 September 2008 lifted a 34-year-old embargo on nuclear trade with India. The BSE 30-share Sensex jumped 461.14 points and the S&P CNX Nifty jumped 130 points or 2.99%, to settle at 4482.30, on that day.
Foreign institutional investors (FIIs) were net equity buyers worth Rs 253.43 crore while mutual funds sold shares worth Rs 132.62 crore on Monday, 8 September 2008, according to provisional data on NSE.
FIIs were net buyers of Rs 1527 crore in the futures & options segment on Monday, 8 September 2008. They were net buyers of index futures to the tune of Rs 954.12 crore and bought index options worth Rs 505.80 crore. They were net sellers of stock futures to the tune of Rs 146.89 crore and bought stock options worth Rs 213.96 crore.
Trading Calls - Sep 9 2008
Nifty (4482) Sup 4405 Res 4550
Buy HUL (253) SL 250
Target 259, 261
Sell Bajaj Auto (599) SL 604
Target 590, 587
Buy Sterlite (622) SL 616
Target 632, 636
Buy ONGC (1100) SL 1087
Target 1125, 1135
Sell Bombay Dyeing (573) SL 578 Target 564, 560
Limited clarity, unlimited issues
More important than the quest for certainty is the quest for clarity”
There is neither certainty nor clarity in our markets. This holds true even for the Singur issue. Despite reports of the stalemate ending, it now seems that the Nano manufacturers could say Tata to Singur as returning land would make the project unviable. Tata Motors expressed its distress at the limited clarity on the outcome. Don’t’ dismiss this issue as just a battle between one corporate versus the powers that be. Companies like Infosys may rethink their plans for
The underperformance of the broader market, coupled with the cautiousness of FIIs and uncertainties over local as well as global factors could put a lid on a sharp rally from here. Variables like movement in crude oil prices and local inflation will continue to decide the mood of the market. We expect a cautious opening today due to weakness in other Asian markets. Things may turn a bit volatile and uncertain after that.
On Monday, the impending bailout of Freddie Mac and Fannie Mae by the Bush regime helped boost sentiment across global equity markets. Locally, the NSG waiver provided the trigger for gains. Market breadth was positive. What's more, traded volume of shares jumped on both the exchanges from Friday. The cash market turnover on the NSE was also up, though on the BSE the same was down slightly.
What may be of some worry is the relatively subdued show put up by the broader market. This means that the rally was led mainly by the large caps. Also, the key indices closed lower from their intra-day peaks.
Asian markets have lost some ground (0.5-3%) this morning. This could lead to some cooling in our markets as well. With inflation softening and the macro picture not looking too bad vis-a-vis other economies we may not see any immediate sell off. The concern is the relentless outflows by the overseas investors. In fact, on a day when the Sensex and the Nifty shot up by 3% each, the local funds chose to cash out while the buying from FIIs too was at best modest.
HCL Tech and Infosys will be in action as the former has reportedly decided to bid for UK’s Axon at a price 15% higher than that of the latter. Madras Aluminium and Sterlite Industries will be in focus as their Boards meet today to consider restructuring, including a possible merger. India Foils might attract some attention as its Board has cleared the rehabilitation scheme sanctioned by the Board for Industrial and Financial Reconstruction (BIFR) for the company.
FIIs were net buyers of Rs2.5bn (provisional) in the cash segment on Monday while local institutions offloaded Rs1.32bn. In the F&O segment, the foreign funds were net buyers of Rs15.27bn. On Friday, FIIs were net sellers of Rs17.37bn in the cash segment. Mutual funds were net sellers of Rs986mn on the same day.
US stocks rallied on Monday on hope that the government's takeover of Fannie Mae and Freddie Mac will put an end to the global financial market crisis that has plagued world markets for more than a year now.
The S&P 500 Index surged 25.48 points, or 2.1%, to 1,267.79, its steepest gain since August 8. The Dow Jones Industrial Average jumped 289.78 points, or 2.6%, to 11,510.74. The Nasdaq Composite Index rose 13.88 points, or 0.6%, to 2,269.76.
Almost three stocks climbed for each that fell on the New York Stock Exchange. All but one of the 30 companies in the Dow advanced. About 1.7bn shares changed hands on the NYSE in the busiest trading session since July 23.
The S&P 500 Financials Index rallied 4.7%, posting its best gain since Aug. 5 and reaching its highest level since June 19.
Citigroup, Wachovia and Bank of America added at least 6.6% after Treasury Secretary Henry Paulson said that the government will provide short-term funding to mortgage lenders Fannie and Freddie.
KB Home and DR Horton jumped more than 12%, sending an index of homebuilders to a four- month high. An advance in banks from Germany to Japan sent the MSCI World Index up 2.1%, the most since April.
US stocks surged in the morning, with the Dow up 350 points, as investors welcomed the bailout news. But questions about what the move will really mean for the housing market took some steam off the rally in the afternoon.
However, investor sentiment improved yet again in the last hour of trade, pushing stocks higher through the close.
Some worries still remain, like the health of Lehman Brothers and the threat of a United Airlines' bankruptcy hit those stocks. Weakness in Oracle, Google and other large techs put a limit on the Nasdaq's gains.
Analysts on Wall Street are split as to how much the plan will be able to help the battered US housing market and sluggish economy. While the announcement has a psychological impact, it is not the ultimate solution, according to some experts.
After the close of trade, reports said that Dell founder Michael Dell bought $100mn of shares last week, sending the stock 1% higher in extended-hours trading.
Altria Group said that it would buy UST, the maker of tobacco dip products such as Copenhagen and Skoal, for about $10bn, confirming last week's media speculation.
UAL denied media reports that a bankruptcy filing was on the cards for United Airlines, blaming speculation on an erroneously republished news article from 2002. Shares of the air carrier's parent company had been halted by the Nasdaq after the stock plunged 27%. UAL shares slumped 11% once trading resumed.
Oil prices were choppy, ending a bit higher as Hurricane Ike headed toward the Gulf of Mexico and other tropical storms continued to pose threats. Additionally, investors were keeping an eye on the OPEC meeting in Vienna this week, amid bets that the cartel could cut production due to the recent slide in prices.
Oil prices are down more than $40 per barrel from a record high of $147.20 in July, on bets that a sluggish global economy is cutting into demand. US light crude oil for October delivery settled up 11 cents a barrel at $106.34 in New York, after ending the previous session at a five-month low.
Gasoline prices declined for an eighth straight day, according to a national survey of credit-card activity.
In the bond market, Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.67% from 3.72% late on Friday. The dollar gained versus the euro and fell versus the yen. COMEX gold for December delivery fell 30 cents to $802.50 an ounce, erasing morning gains.
European shares surged, led by financials. The pan-European Dow Jones Stoxx 600 index jumped 3.3% to 281.29 in the biggest one-day point rise for the index since January 24.
The French CAC-40 surged 3.4% to 4,340.18, while Germany's DAX 30 rose 2.2% to 6,263.74. The UK's FTSE 100 jumped, adding 3.8% to 5,440.20, before trading was suspended amid technical difficulties at the London Stock Exchange. Trading resumed six hours and 40 minutes later, with the FTSE closing up 3.9% at 5,446.30.
In the emerging markets, Brazil's Bovespa was down 2.35% at 50,717, while Mexico's IPC index rose 1.3% to 26,232. The RTS index in Russia surged 2.7% to 1508 and the ISE National-30 index in Turkey was up 4% at 50,551.
Euphoria may prove short lived
Markets ended with hansom gains despite witnessing some profit booking in late trades.
The markets rallied post the NSG waiver. Further global cues also were positive, following the US government’s decision to bail out troubled mortgage giants, Freddie and Fennie.
Buying was witnessed in scrips across the sectors with capital goods, banking and realty stocks leading from the front. All the 30 stocks of the Sensex ended in the green. Index heavyweights like Reliance Industries, ICICI Bank and L&T were among the major gainers.
Finally, the BSE benchmark Sensex closed at 14,944 losing 461 points and the NSE Nifty index gained 130 points to close at 4,482.
The capital goods and the power stocks were in the limelight after India on September 6, 2008 won the right to buy equipment from a group of nuclear-technology supplying nations.
A group of 45 nuclear-technology supplying countries granted a waiver for sales to India outside the nuclear Non-Proliferation Treaty. This grant would allow companies including L&T and BHEL to win orders for equipment generating nuclear power.
Sugar stocks recorded sweet gains after UP sugar mills reportedly finalized their accounts till June 2008 based on the cane price of Rs110 per quintal.
Last week, the Supreme Court had refused to stay payment of cane arrears in the UP sugar mills case. The last date for payment of cane arrears was fixed as September 6. Sugar mills will have to pay Rs14.8bn.
Shares of Bilpower Ltd rallied by over 3% to Rs170 after the company announced that it signed a contract with the Ministry of Energy, Government of Ghana on September 03, 2008.
Accordingly, Bilpower Ltd has awarded the EPC (Erection, Procurement and Commissioning) Contract for a value of US$30mn for Rural Electrification in Brong Ahafo and Ashanti Region of Ghana in Transmission and Distribution Sector. It is expected to complete the Contract in approx. 18 months. The Contract is backed financially by Exim Bank of India. The scrip touched an intra-day high of Rs184.9 and a low of Rs169 and recorded volumes of over 1,00,000 shares on NSE.
ICSA India surged by over 4% to Rs338 after the company announced that it secured work orders for a total contract value of Rs2.36bn from Mahavitaran (Maharashtra State Electricity Distribution Co. Ltd) and M P Paschim Kshetra Vidyut Vitaran Co. Ltd. The scrip touched an intra-day high of Rs344 and a low of Rs331 and recorded volumes of over 1,00,000 shares on NSE.
Shares of Patels Airtemp ended flat at Rs58. The company received an order of worth Rs161mn for Shell and Tube Heat Exchangers for Essar Oil Refinery Project, Gujarat. The scrip touched an intra-day high of Rs62.1 and a low of Rs57 and recorded volumes of over 17,000 shares on NSE.
Shares of SRF gained by over 3% to Rs138 after the company announced the closure of their acquisition of Thai Baroda Industries Ltd in Rayong, Thailand. All financial dues as per the restructuring plan approved by the Court have been paid as of this morning in Thailand. The scrip touched an intra-day high of Rs139 and a low of Rs133 and recorded volumes of over 1,00,000 shares on NSE.
Dolphin Offshore was locked 20% upper circuit to Rs281.15 after the company announced that it secured two orders worth Rs3.04bn from ONGC. The first contract for Euro27.03mn is expected to be completed by June 6, 2009.
The second contract worth Euro19.3mn, plus Rs87.9mn, was expected to be completed by December 31, 2009. The scrip touched an intra-day high of Rs281.15 and a low of Rs246 and recorded volumes of over 39,000 shares on NSE.
OVL submits bid for 20% stake in Angolan oil block. (BS)
The Ashok Leyland-Nissan LCV project is being put up at zero cost due to the VAT refund for 21 years. (BL)
Ashok Leyland and Nissan sign an agreement with the TN government for setting up a greenfield plant for commercial vehicles. (ET)
KEC International has bagged two orders worth Rs2.17bn from NTPC Electric Supply Company Ltd and Power Grid Corporation of India. (ET)
The Government may confer navratna status to BSNL before its initial public offer. (ET)
HPCL will start producing superior quality Euro-IV petrol from both its Mumbai and Vizag refineries by the year-end. (FE)
Unitech has raised Rs12bn for its telecom venture from a syndicate of public sector banks led by Punjab National Bank and Canara Bank. (ET)
The Government has allocated start up GSM spectrum to Tata Teleservices, Unitech, Swan and Loop Telecom in UP and Punjab. (ET)
Coal shortage forced Nalco to cut back alumina production at its refinery in Orissa for about three days last week. (ET)
Chennai Petroleum Corporation Ltd plans to set up a 15mn ton refinery-cum-petrochemical complex with an investment of around US$10bn. (BS)
JSW Steel’s steel production output in August 2008 rose by 7% yoy to 0.34mn tons. (FE)
MRPL has sold jet fuel, first time since January 2007. (ET)
Hinduja Group plans to acquire commercial vehicle related businesses in Europe and the Middle East. (ET)
Essar group is looking at acquiring telecom companies in the sub-Saharan and eastern Africa to expand international footprint. (ET)
Vedanta Resources is likely to merge Madras Aluminium Company with Sterlite Industries. (ET)
Stone India plans to acquire a controlling stake in an European firm manufacturing products for railways for ~Rs2bn. (ET)
About 10,000 contract workers at the Neyveli Lignite Corporation began an indefinite strike. (ET)
GM sets up marketing & distribution subsidiary in India. (BS)
The FIPB has given its approval to the investment by Societe Generale in the proposed custodial services joint-venture in India with SBI. (BS)
A consortium of Nagarjuna Construction Company Ltd-NCC Infra Holdings has been awarded the Rs10bn project for development of Andhra Pradesh International Centre at AP Bhawan in New Delhi. (BL)
Chinese companies likely to bag half of new telecom equipment orders.
Sebi approved The Walt Disney Company’s deal to increase stake in UTV Software Communications beyond 15%.
Subhiksha plans to raise US$80-100mn by an investment from large foreign institutional investors. (BL)
Economy Front page
Oil firms to boost naphtha export after KG gas flows. (BS)
RBI has decided to further increase the cap on advance remittances toward the import of services up to US$500,000 against the previous limit of US$100,000. (ET)
The Government has decided not to award new projects to road developers who have failed to complete two or more old projects within the time specified in their concession agreements. (ET)
Trai has asked mobile operators to slash tariffs voluntarily. (FE)
Asset reconstruction companies want industry status, power to overhaul defaulting companies. (ET)
The Oil Ministry will soon seek cabinet approval to charge higher diesel prices for industrial users and power plants. (ET)
The Government is not planning to cut import duty on natural rubber. (ET)
The Supreme Court has directed all mill owners of UP to pay cane price at the rate of Rs110 a quintal for the present crushing season of 2007-08. (ET)
Rice and wheat procurement this year is set to touch a record of over 50mn tons. Food Corporation of India. (ET)
The Government is mulling a proposal to declare separate minimum support and procurement prices for crops in future. (ET)
The Karnataka Government has signed a MoU with Chattisgarh to set up a 1,200MW thermal power project. (ET)
Today's Pick - Allied Digital Services
We recommend a buy in Allied Digital Services from a short-term horizon. It is apparent from the charts of the stock that it has been consolidating sideways in a broad range between Rs 700 and Rs 920 since late January. The support at Rs 700 is cushioning the declines while it is unable to get past the resistance at Rs 920.The stock failed to surpass this level in May and again in July. In late August, the counter took support at around Rs 700 and commenced a short-term up move. This reversal was supported by a positive divergence in the daily relative strength index (RSI). The RSI has entered in to the neutral region from the bearish zone and the weekly RSI has reversed taking support at the 40 levels. The stock has crossed over its 21-day moving average recently. The moving average convergence and divergence is also indicating a buy. We are bullish on the stock from a short-term perspective. We anticipate the stock’s short-term up move to prolong further until it hits our price target of Rs 830 in the forthcoming trading sessions. Traders with short-term perspective can buy the stock while maintaining a stop-loss at Rs 714.
via BL
Nifty futures at premium
Turnover declines
Nifty September 2008 futures were at 4510, at a premium of 27.70 points as compared to spot closing of 4482.30. NSE's futures & options (F&O) segment turnover was Rs 45,977.53 crore, which was lower than Rs 46,868.19 crore on Friday, 5 September 2008.
Larsen & Toubro (L&T) September 2008 futures were at premium at 2761 compared to the spot closing of 2737.50.
NTPC September 2008 futures were at premium at 182.70 compared to the spot closing of 181.55.
Shree Renuka Sugars (Renuka) September 2008 futures were at premium at 121.20 compared to the spot closing of 120.20.
In the cash market, the S&P CNX Nifty surged 130 points or 2.99% at 4482.30.
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