Morning Note - Nov 14 2008
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Friday, November 14, 2008
Daily News Roundup - Nov 14 2008
SAIL may defer finalizing expansion plan of increasing its production capacity from 15mtpa to over 26mtpa (ET)
Tata Steel to not cut production (ET)
NTT DoCoMo buys 26% in Tata Teleservices for US$2.7bn. (ET)
NTT DoCoMo and Tata Sons are learnt to have decided to make the 20% open offer for the shareholders of TTML at Rs24.7 a share (ET)
Tata Motors plans to shut its Jamshedpur plant for the second time by the end of November and extend the closure of its Lucknow plant by another week. (BS)
Mr RatanTata has asked all the Tata Group companies to put on hold their acquisition and capital expenditure plans. (BL)
DoT issues notice to RCom on account of showing non-voice revenue as net revenue. (ET)
NTPC’s SPV for cement plants will be in place within two months (BS)
Reliance Petro is likely to commission only half of its refinery’s capacity at Jamnagar by December-end (ET)
IOC refining margins may remain negative in November (BL)
Bharti Airtel and Nortel announced an enhanced managed services agreement under which Nortel will continue to provide its contact centre technology (CCT) solution. (BL)
Bharti Wal-Mart, grocery and retail chain operator, will be going ahead with its plans to launch its cash and carry stores by June 2009. (BS)
OVL and its partner IRP Red Sea have made a second oil & gas discovery in Egypt (BS)
Unitech is looking for potential customers for selling or leasing a commercial building in New Delhi (DNA)
Telenor, Unitech JV will not participate in 3G spectrum auction, and launch 2G services next year. (BS)
BHEL plans to tie-up with L&T for new nuclear orders (BL)
GMR Infra backs out of its US$155mn acquisition of 50% stake in Homeland Mining & Energy in South Africa (BS)
Ispat Industries is learnt to have defaulted on a loan to UTI (ET)
Indian Hotels is likely to create another brand between the Taj luxury brand and the recently-launched Gateway Hotels to attract value tourists and expand the range of its offerings. (BS)
United Spirits has entered into ‘exclusive talks’ with Diageo, for a partnership and a possible minority stake sale out. (ET)
Kingfisher Airlines has defaulted dues to Nacil, which was providing ground handling facilities to the company. (ET)
Ambuja Cements may shift its upcoming project in the Barh district of Bihar for grinding capacity, citing law and order issues. (BS)
The government has asked Gail to pay 64.4% higher or Rs6.6bn as its subsidy payout in September quarter this year. (BS)
UCO Bank has cut it prime lending rate by 75bps at 13.75%. (BL)
Andhra Bank has cut it prime lending rate by 75bps at 13.25%. (BL)
US FDA has found fifteen manufacturing deficiencies at one of Lupin’s plants in Madhya Pradesh during an inspection (ET)
GVK Power and Infrastructure to divest its 49% stake in its SPV to Australia-based Macquire Group in a deal worth Rs4.65bn (DNA)
GSPC-Essar to invest US$8mn in Indonesian block (BS)
SKF India bags Euro303mn Suzlon contract (BL)
SKF India to put its Haridwar facility on hold (BS)
3i infotech sets up wholly owned subsidiary to focus on consumer services (ET)
Dish TV aims for 85% market share by 2011 (BS)
Moser Baer expects turnaround in optical media business soon (DNA)
Shasun Chemicals expects margins to decline on two of its key APIs in this fiscal (DNA)
Inflation falls to a near six-month low of 8.98% for the week ended November 1 (ET)
Oil prices fall to a 22-month low at US$55/barrel (BS)
India crude basket likely to fall below US$50/barell (BL)
Central Government approves coal linkages for 35,000 MW power projects that are scheduled to start production by the end of 11th plan (FE)
Global IT spend to grow by 2.6% in 2009, down from expected 5.8% in 2008, and with only 0.9% growth in the US, as per IDC (FE)
Industrial production grew 4.8% in September, below 7% in the same month last year but well above 1.4% in August. (BS)
Indian drug industry’s export earnings growth is expected to fall by 10 percentage points in 2008-09. (BS)
Domestic air traffic declined for the fourth consecutive month this October, confirming fears that traffic for the entire calendar year will dip as compared with last year. (BS)
Indian textile mills have started importing raw cotton from Pakistan. (BS)
No bidders for Rs11bn NHAI projects (FE)
Government asks cash rich PSUs to declare interim dividend. (ET)
Companies may soon be forced to reveal losses from foreign exchange fluctuations in their financial results (ET)
Government will soon review its policy of allowing state-owned companies to invest 30% of their surplus in equity linked public sector MFs (ET)
Occupancies in premium hotels fall 2% yoy in September while ARR are higher 21%, as per Crisil (ET)
Coal India receives twelve bids for its proposed JV to develop eighteen abandoned mines (DNA)
Country’s engineering exports to decline by 20-30% in Q4 FY09 (ET)
Inflated hope for bulls!
In the business world, the rearview mirror is always clearer than the windshield – Warren Buffet.
Headwinds are leaving their ugly mark on the windshields of the investors. The rearview brings some hope that measures in the recent past are slowly bringing in the desired results. At least on paper! After a welcome break, the bulls have something to cheer about. A major source of relief for the battered and bruised stocks will be the unexpected sharp drop in inflation. The positive surprise has triggered speculation about further easing in monetary policy, as policymakers attempt to bolster growth in the face of a severe economic downturn worldwide. The expected announcement from the RBI could come over the next few days (may even happen over the weekend). The impending policy measures, coupled with the rebound across worldwide equity markets could well ensure a happy ending to an otherwise turbulent and highly volatile week.
Like we said, the windshields don’t offer a clear view as yet. Do not overlook the raft of grim news (both economic and corporate) over the past several days, including Thursday when our markets were shut. They point to a rapidly worsening economic and business climate around the globe. Global recession is more or less factored in but the crux of the matter is the crisis appears to be worsening by the day. The slew of steps taken by global policymakers to stem the tide do no appear to have bore fruit as yet, except for the softening in Libor rates. When will this bloodbath end? No one really has the answers. Coming to today's trade, we see a strong opening, and if all goes well, a bright day for the bulls. But, as usual, we continue to advocate caution.
FIIs were net sellers of Rs7.35bn (provisional) in the cash segment on Wednesday while local institutions pumped in Rs2.15bn. In the F&O segment, they were net sellers at Rs3.9bn. On Monday, foreign funds were net buyers of Rs1.35bn in the cash segment. Mutual funds were net buyers at Rs5.05bn on the same day.
Leaders of G-20 - a group of leading developed and emerging nations - are scheduled to meet today in Washington to discuss the financial meltdown and the global economic slump, along with fresh remedial measures. The yen rose against the dollar and the euro on speculation that the G-20 summit will fail to reach a consensus on how to kick-start the global economy. Under debate are proposals ranging from curbing executive pay and restraining hedge funds to raising capital requirements for banks and subjecting credit-rating companies to stiffer oversight.
China's spending on factories and real estate cooled in the first 10 months, adding to weaker growth in industrial output, trade and inflation in signaling that a slowdown is deepening in the world's fourth-biggest economy. Europe's economy probably fell into its first recession in 15 years in the third quarter, paving the way for deeper cuts to interest rates and taxes amid the worst financial crisis since the Great Depression.
Oil prices rose for a second day in New York, extending its rebound from a 21-month low. Crude oil for December delivery rose as much as $1.72, or 3%, to $59.96 a barrel on the New York Mercantile Exchange. It was at $58.48 a barrel at 9:54 a.m. Singapore time. Prices have tumbled 60 percent from a record $147.27 on July 11.
US stocks bounced back with a vengeance on Thursday, with the Dow Jones Industrial Average posting its third best single-session point gain ever after wild swings in both directions.
The rally came even as the raft of bad news on the economy and earnings front continued unabated, with investors reeling in the face of rising unemployment claims and reduced outlooks from Intel and Wal-Mart.
After rising more than 100 points at the start, only to lapse below 8,000 for the first time since Oct. 10, the Dow traded up and down in a 911-point range to end at 8,835.25, up 552.59 points or 6.7%.
Twenty-two of the blue-chip index's 30 components gained ground. Blue-chip financial shares were among those tallying losses.
Intel shares gained 6.7% after it cut its outlook late Wednesday, warning fourth-quarter revenue would be as much as 17% lower than previously forecast due to significantly weaker-than-expected demand in all geographies and market segments.
GE shares ended lower by 4.2% amid talk of a government bailout of the beleaguered US auto industry. GE shares were up 3.5%, reversing course on declines that came on renewed speculation the industrial conglomerate may have to raise additional cash to cover higher debt costs.
Wal-Mart advanced 4.4% after the retailing giant reported a better-than-forecast 10% profit rise in the third quarter but lowered its 2008 earnings outlook.
After lapsing to a low not seen since early 2003, the S&P 500 turned upwards, climbing 58.99 points, or 6.9% to 911.29. Energy, financials and materials fronted the solid gains that included all 10 of the S&P's industry groups.
The technology-laden Nasdaq Composite surged 97.49 points, or 6.5%, to settle at 1,596.70.
Market breadth was positive. More than 14 stocks rose for each that fell on the New York Stock Exchange, where almost 2 billion shares changed hands in the busiest trading session since Oct. 16.
US stocks had tumbled each day this week and through early Thursday afternoon. But the sell-off left the major indices at levels that many market analysts thought could represent a bear market bottom, at least in the near term.
As soon as the Dow fell below 8,000, we saw a rush of buying. It was the second time the market "retested" those lows, which were first hit around Oct. 10. The major indices slumped to around those levels at the end of October and now again in mid-November.
A key benchmark for tracking European shares moved modestly lower on Wednesday, as investors eyed more bad news on the global economy, although gains from Siemens and BT Group took the edge off losses.
The pan-European Dow Jones Stoxx 600 index dipped 0.6% to 204.08 and is now roughly 45% lower over the past year.
The French CAC-40 index advanced 1.1% to 3,269.46 and Germany's DAX 30 index rose 0.6% to 4,649.52, while the UK's FTSE 100 index fell 0.3% to 4,169.21. Austria's ATX tumbled 4.9% to 1,778.93.
After another volatile day of trade, the BSE Sensex closed at 9,536.33, down 303 points or 3% over the previous close. It touched a high of 9,928 and a low of 9,376 during wild intra-day swings. It had lost 6.6% on Tuesday.
On the other hand, the NSE Nifty shut shop at 2,848, down 90 points or 3%. It had been as high as 2,975 and as low as 2,794 in intra-day trading.
The BSE Small-Cap index and the BSE Mid-Cap index were down 1.9% and 2.25%, respectively.
In terms of sectors, the worst hit were Real Estate (down 7.3%), Banking (down 4.4%), Metals (down 3.7%), Capital Goods (down 3.6%), Power (down 3%) and Oil & Gas (down 3%). Auto, FMCG and Pharma stocks lost 2.3% and 1.4%, respectively.
Only the BSE IT index (down 0.08%) escaped unhurt from today's sell-off.
Within the Sensex, the biggest losers were Jaiprakash Associates (down 9.1%), DLF (down 8.3%), ICICI Bank (down 8%), Hindalco (down 5.6%), Hindustan Unilever (down 4.7%), Sterlite (down 4.5%), Reliance Infra (4.5%), M&M (4.3%) and L&T (4.1%).
Other big losers included Bharti Airtel, SBI, RIL, ONGC, Tata Steel, ACC, Tata Power, Ranbaxy, BHEL and Maruti.
TCS and Infosys bucked the negative trend, while fellow IT major Wipro ended flat. Satyam was down 1.6%.
Grasim ended marginally lower. HDFC and HDFC Bank were down over 1% each. ITC lost 1.4% and NTPC finished nearly unchanged.
Outside the main indices, the major losers were Mcnally Bharat, Indiabulls Real Estate, Great Offshore, Aban Offshore, Sterlite Technologies, Welspun Gujarat, Thermax, Zee Enterprise, Deccan Chronicle, IVR Prime, SAIL and Crompton Greaves.
Shares of Tata Teleservices (Maharashtra) jumped 7.6% to Rs17.99 after Japan's NTT DoCoMo said that it would buy a 26% stake in its parent, Tata Teleservices, for US$2.7bn. It will also make an open offer for another 20% shares.
Public sector oil marketing companies - IOC, HPCL and BPCL - were up as crude oil prices slipped to US$58 per barrel, almost a 20-month low. Meanwhile, Petroleum Minister Murli Deora said that the Government will consider lowering fuel prices when crude oil prices and the rupee stabilise.
Other prominent gainers outside the indices included the likes of Max India, Glenmark Pharma, Piramal Lifesciences, Allcargo Global, IOl Net Com, Madhucon Projects, Maytas Infra, Hindustan Zinc, Vijaya Bank, Cranes Software, Gujarat Gas and Tata communications.
In the day's crucial economic news, the IIP for September came mostly in line with expectations, as factories increased production ahead of Diwali. However, there are worries that the IIP for October and the coming months may throw up negative surprises.
The market rallied briefly after the release of the IIP data, but soon turned lower, as fears of a further slowdown in the Indian economy set in.
Bullion metals turn further pale
Gold sheds more than $40 in past three sessions
Bullion metals ended considerably lower for third straight day on Thursday, 13 November, 2008. Investors became concerned that global recession will definitely lower the demand for the precious metals. Since past three sessions, gold has shed almost $40.
On Thursday, Comex Gold for December delivery fell $13.3 (1.9%) to close at $705 an ounce on the New York Mercantile Exchange. Prices earlier fell to a low of $698.2. On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (33%) since then. Last week, gold prices ended higher by 2.2%. For the month of October, gold ended lower by 18%. It was the biggest percentage loss for gold since February, 1983.
This year, gold prices have lost 16.7% till date. The dollar index has gained 13% this year. For the third quarter ended September, 2008, gold prices ended lower by 5.1%. It was the first quarterly loss for the yellow metal since the second quarter in FY 2007. Prior to that, the yellow metal ended second quarter with a marginal gain of 0.7%. For first quarter prices gained 10.7%.
On Thursday, Comex silver futures for December delivery fell 68 cents (7.2%) to $8.8 an ounce. Last week, silver gained 2.3%. For the month of October, silver slipped by 20%. Till date, silver has lost 29.6% this year. Silver had ended month and quarter of September 2008 with a loss of 10%. For the second quarter, it had gained a paltry 1.4%. Silver had gained 16% in Q1. The metal also had gained for seven straight years.
Crude ends more than $2 higher
Prices pare early losses thinking recent drop in prices is not justified
After two consecutive sessions of drop, crude prices ended higher on Thursday, 13 November, 2008. A sudden and late rise in US stocks today at Wall Street was the main reason behind this. Crude had earlier dropped during the day.
On Wednesday, crude-oil futures for light sweet crude for December delivery closed at $58.24/barrel (higher by $2.08 or 3.7%) on the New York Mercantile Exchange. Prices reached a low of $54.67 during intra day trading. Prices reached a high of $147 on 11 July but have dropped almost 68% since then. Last week, prices fell by 10%. On a yearly basis, crude price is lower by 40%. For this year in 2008, crude prices have dropped 43.5%.
For the month of October, 2008, crude prices ended lower by 32.6%, the biggest monthly drop since 1983.
EIA reported today that crude supplies were unchanged for a second week to stand at 311.9 million barrels for the week ended 7 November, 2008. Motor gasoline supplies climbed 2 million to 198.1 million barrels in the latest week. And distillates, which include heating oil, were up 600,000 barrels at 128.4 million
The IEA, in its latest report, said today that it expects global demand to grow by 120,000 barrels to 86.2 million barrels a day in 2008, down 330,000 barrels from its previous daily forecast. And for 2009, it now sees demand rising 350,000 barrels to 86.5 million barrels a day, which is down 670,000 barrels a day from its previous estimate.
In its latest monthly report issued yesterday, EIA said that it expects world oil demand to rise almost 100,000 barrels per day in 2008 and to remain "virtually flat" in 2009. In US, it expects petroleum-product demand to drop 5.4%, or 1.1 million barrels per day, from the 2007 average to 19.6 million barrels per day in 2008. That marks the first time since 1980 that annual total petroleum consumption is expected to decline by more than 1 million barrels per day. The government also predicts an average crude price of $101.45 for this year and $63.50 for 2009.
OPEC officials decided last month at its meeting at Vienna that OPEC will pare production by 1.5 million barrels a day w.e.f 1 November, 2008. The official production quota is currently 28.8 million barrels, and it decided to cut by 1.5 million in November. After that, Organization of the Petroleum Exporting Countries has pledged to cut production even deeper if prices are not in the $70-$90 range in its 1st December meeting.
For the third quarter of the year crude prices ended lower by 28%. This was the biggest quarterly drop since 1991. Before that, crude prices had gained 38% in the second quarter of this year. It was the biggest quarterly increase in nine years. For the month of September, prices registered drop of 13%.
Against this background, December reformulated gasoline closed at $1.3024 a gallon, up 5.4 cents, or 4.4%, and December heating oil added 4 cents to finish at $1.875 a gallon.
December natural-gas futures shed 8.7 cents to close at $6.318 per million British thermal units. Prices are down about 15% year-to-date.
Thursday, November 13, 2008
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