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Friday, December 12, 2008
Trading Calls - Dec 12 2008
Nifty (2920) Sup 2830 Res 2990
Sell Ranbaxy (209) SL 213 Target 202, 200
Sell HPCL (224) SL 229 Target 214, 212
Sell Reliance Infra (604) SL 611 Target 590, 585
Sell Tata Power (731) SL 739 Target 715, 710
Buy Adlabs (182) SL 177 Target 190, 192
Daily News Roundup - Dec 12 2008
- Reliance Industries plans to enter the pharma business suffers a setback. (FE)
- HPCL’s plans to enter city gas distribution in Kolkata hits hurdle. (BL)
- Ranbaxy’s US sales drop 45% in 60 days. (DNA)
- TCS, Satyam, Wipro and HCL Tech are in the race for Rs3bn LIC contract. (BS)
- Union Bank of India declines merger with Bank of India. (FE)
- SBI to review interest rates following monetary measures taken by RBI. (BS)
- SBI plans to merge its wholly owned subsidiary, SBI Commercial and International Bank, with itself. (BS)
- ITC plans to buy EIH. (DNA)
- Taj Mahal Palace and Towers owned by Indian Hotels gets its first payment of Rs250mn from Tata AIG General Insurance. (DNA)
- Emirates Airlines and Jet Airways announced their partnership plans. (BL)
- GTL Infrastructure plans to utilize its Rs22bn cash reserves to buy back FCCBs and has deferred its acquisition plans. (BS)
- Orion Corporation files a lawsuit in US against Wockhardt for challenging the patents on its brand Stalevo. (BS)
No Fuel for thought!
We must embrace pain and burn it as fuel for our journey
After the gains, the pain is here for the market. Expect a weak start. US automaker bailout deal seems to have fallen apart in the Senate. Inflation falling to a seven-month low no longer fuels the bulls though rising inflation used to hurt a lot. The outlook for the day remains weak with wild swings likely once the IIP numbers for October are announced. Given the cut in production by various industries the bears may have a chance to rejoice as IIP numbers may be in the 2% range.
Talking about fuel, reports suggest that the Government plans to deregulate petrol and diesel prices. Besides political gains, this move will have a positive impact on inflation. The risks remain that companies may not be allowed to raise prices frequently and of course the government finances could take a hit.
Among other news:
The government is also likely to announce a second stimulus package to propel economic growth.
FIIs were net buyers in Index Future by Rs636cr with increase in open interest by 82,621 contracts (17.1%). In Single Stock Future, they have gone short to the tune of Rs71cr with increase in open interest by 11,895 contracts (1.3%). In the Index Option segment, they were net buyers by a mere Rs2cr. FIIs were net sellers in cash segment by Rs444cr (Provisional). DIIs were net sellers in cash segment by Rs16cr (Provisional).
RBI extends Rs90bn line of credit to NHB and Exim Bank. With RBI providing refinance to EXIM Bank, exporters will now be able to avail of lines of credit.
Index of 6 core industries fell to 3.4% in October against 4.6% in the same month last year.
India’s exports declined by 10% in November, showing a negative trend for the second month.
Excise and custom duty collections declined in November by 15% and 1% respectively.
PSU Banks are likely to announce 50-100bps cut in interest rates on home loans up to Rs2m. PSBs may waive pre-payment penalty on home loans up to Rs2m.
RBI may have relaxed norms for lending to commercial real estate by banks.
Government to miss indirect tax collection targets.
207 of the 516 central government projects, each costing Rs1bn are delayed.
Bank of America Corp. said Thursday it expects to cut 30,000 to 35,000 jobs over the next three years, as it faces a deteriorating economic environment and tries to absorb Merrill Lynch & Co.
The Government has withdrawn its affidavit from the RIL-RNRL case and that explains that volatility on these counters especially towards the end of trade.
Americans are pulling back on the debt they use to spend and fuel the economy, while their net worth is declining. The US government reported that household debt in the third quarter fell for the first time ever. Meanwhile, net worth dropped by the largest amount on record based on data going back to 1951.
US Stocks fell on Thursday on worries that the $14 billion auto rescue bill won't pass in the Senate due to Republican opposition.
The Dow Jones fell 196 points, or 2.2%. The Standard & Poor's 500 (SPX) index lost 2.9% and the Nasdaq composite (COMP) lost 3.7%.
Bank of America said it will cut up to 35,000 jobs over the next three years due to its purchase of Merrill Lynch and the weak economy.
Jobless claims continued to surge, according to a government report released Thursday. The number of Americans filing new claims for unemployment benefits rose to a 26-year high of 573,000, up 58,000 from the previous week and a bigger surge than expected. The number of people continuing to collect unemployment also hit a 26-year high.
The dollar fell versus the euro and the yen.
U.S. light crude oil for January delivery rose $4.46 to settle at $47.98 a barrel on the New York Mercantile Exchange.
COMEX gold for February delivery jumped $17.80 to settle at $826.60 an ounce.
A government report showed that China’s retail sales grew at the slowest pace in nine months
Japan’s Nikkei is down over a percent. South Korea’s Kospi Index is lower by half a percent. The MSCI Asia Pacific Index has fallen 44% this year.
Indian markets took a breather on Thursday after rallying over 5% on Wednesday. Markets traded in a range for major part of the trading session. However, key indices turned highly volatile in the second half of the day. The IT and capital goods stocks were the major losers. Also pharma and telecom stocks were under pressure.
Bucking the negative trend were, realty, oil & gas, metals and banking stocks. The BSE benchmark Sensex ended flat at 9,645 and the NSE Nifty index ended flat at 2,920.
Market breath was positive, 1,567 stocks advanced against 94 declines, while, 94 stocks remained unchanged.
Among the 30-components of Sensex, 18 stocks ended in the red and only 12 stocks ended in the positive terrain, the big gainers were JP Associates (11%), Sterlite Industries (9.5%), RCom (5.5%) and Reliance Industries (5.1%).
On the other hand, major sellers were TCS (6.5%), Satyam (5.5%), Wipro (5.2%), Hindalco (4%) and Infosys (3.3%).
Shares of Petronet LNG have advanced by 4.3% to Rs33 after the company announced that it signed one year LNG supply agreement beginning January 2009. The scrip touched an intra-day high of Rs34.2 and a low of Rs32.4 and recorded volumes of over 5,00,000 shares on BSE.
Shares of Suzlon Energy surged by over 2.5% to Rs50. according to reports, the company said that it has rejig the top management, CMD to steer company’s operations. The scrip touched an intra-day high of Rs54 and a low of Rs47 and recorded volumes of over 2,00,00,000 shares on BSE.
Shares of GMR Infrastructure gained by 4.5% to Rs65 after reports stated that the company’s Andhra Pradesh plant has started electricity generation. The scrip touched an intra-day high of Rs67.1 and a low of Rs63.4 and recorded volumes of over 31,00,000 shares on BSE.
KIC Metaliks shot up by over 18% to Rs22 after the company announced that the promoters of the company (Sri R K Kajaria, Smt. A Kajaria, R K Kajaria & Sons HUF have entered into a share purchase agreement on December 07, 2008 with Karni Syntex (P) Ltd, (the acquirer) to sell their collective holding of 47.67% of the paid up capital of the Company at Rs18 per share.
The scrip touched an intra-day high of Rs22.4 and a low of Rs19.5 and recorded volumes of over 14,000 shares on BSE.
With the RBI governor indicating that the growth forecast might be revised downwards when the central bank reviews the annual policy in January 2009 bulls might lose their steam. Also, the IIP numbers to be announced later on Friday would be anxiously awaited.
Precious metals shine
Gold and silver shine as dollar continues to weaken
With a weak dollar, gold prices rose for the fourth straight day on Thursday, 11 December, 2008. Bullion metals rose due to the falling dollar which also led to rising crude price. 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 and also vice versa.
On Thursday, Comex Gold for February delivery rose $17.8 (2.2%) to close at $826.6 an ounce on the New York Mercantile Exchange. The metal is already up 9.7% this week. On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (20%) since then. Last week, gold prices ended lower by 8.2%.
For the month of November, gold prices ended higher by 14%. Prior to this, for the month of October, gold had ended lower by 18%. It was the biggest percentage loss for gold since February, 1983.
This year, gold prices have lost 1.1% till date. Futures have averaged $878 in 2008. The dollar index has gained 10% 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 rose 23 cents (2.2%) to $10.43 an ounce. Last week, silver lost 7.7%. For the month of November, silver prices had gained 5%. Till date, silver has lost 28.4% this year.
For the month of October, silver had slipped by 20%. 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.
At the currency market on Thursday, the U.S. dollar fell sharply against other major currencies as a surge in jobless claims and other negative economic data put the greenback under heavy selling pressure. The dollar index, a measure of the greenback against a trade-weighted basket of six currencies, fell 1.2% today.
The Labor Department reported on Thursday, 11 December, 2008 that the number of first-time filings for state unemployment benefits jumped by 58,000 to a 26-year high of 573,000. The number of people collecting unemployment benefits rose by 338,000 to stand at 4.43 million, also the highest since late 1982. The increase in continuing claims in the week ended 29 November was the most since 1974.
Initial claims represent job destruction, while the level of continuing claims indicates how hard or easy it is for displaced workers to find new jobs.
Earlier this year, the weakening dollar and higher global demand for raw materials had led to records this year for commodities including gold. Gold reached a record in March as a U.S. housing slump and credit crisis spurred the Federal Reserve to slash borrowing costs. In the latest move, the Federal Reserve has cuts its target bank lending rate to 1% from 5.25% in September, 2007. The Fed did it in eight steps.
It was reported earlier this week that gold production in South Africa fell by 14% year-on-year in October. The country's total mining production, however, rose by 3.5% year-on-year in October, with non-gold output rising 6.5%.
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. Silver had climbed 16% in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.
At the MCX, gold prices for February delivery closed higher by Rs 99 (0.77%) at Rs 12,817 per 10 grams. Prices rose to a high of Rs 12,932 per 10 grams and fell to a low of Rs 12,605 per 10 grams during the day's trading.
At the MCX, silver prices for March delivery closed Rs 95 (0.55%) higher at Rs 17,262/Kg. Prices opened at Rs 17,150/kg and rose to a high of Rs 17,430/Kg during the day's trading.
Crude registers massive jump
Prices rise more than 10% as traders anticipate big production cut by OPEC
Crude prices shot up drastically today, Thursday, 11 December, 2008. This was the second consecutive rise for crude prices. Prices rose today due to the weak dollar and the on anticipation that OPEC will go for a drastic production cut in its next meeting scheduled next week.
On Thursday, crude-oil futures for light sweet crude for January delivery closed at $47.98/barrel (higher by $4.46 or 10.2%) on the New York Mercantile Exchange. Earlier in the day, prices touched a high of $49.12. Prices reached a high of $147 on 11 July but have dropped almost 61% since then. On 5 Dec, 2008, prices touched a low of $40.5. Last week, prices coughed up 25%. That was the largest weekly loss for crude in past twenty five years. For this year in 2008, crude prices have dropped 40%.
For the month of November, crude prices ended lower by 19.7%. Before this, for the month of October, 2008, crude prices had ended lower by 32.6%, the biggest monthly drop since 1983.
The Organization of Petroleum Exporting Countries ended meeting in Cairo last month without any decision on a production cut to restore crude prices. OPEC President and Algerian Oil Minister Chakib Khelil said he expects oil demand to decline from a month ago, and said the group would take necessary action on 17 December when it meets in Oran, Algeria.
At the currency market on Thursday, the U.S. dollar fell sharply against other major currencies as a surge in jobless claims and other negative economic data put the greenback under heavy selling pressure. The dollar index, a measure of the greenback against a trade-weighted basket of six currencies, fell 1.2% today.
The Labor Department reported on Thursday, 11 December, 2008 that the number of first-time filings for state unemployment benefits jumped by 58,000 to a 26-year high of 573,000. The number of people collecting unemployment benefits rose by 338,000 to stand at 4.43 million, also the highest since late 1982. The increase in continuing claims in the week ended 29 November was the most since 1974.
Initial claims represent job destruction, while the level of continuing claims indicates how hard or easy it is for displaced workers to find new jobs.
The EIA reported yesterday in its weekly inventory report that U.S. crude oil inventories rose by 400,000 barrels during the week ended 5 December, 2008 to stand at 320.8 million barrels. Market had expected a buildup of 2.7 million barrels in crude-oil stocks for the week.
The report also detailed that total motor gasoline inventories increased by 3.8 million barrels last week, and distillate fuel inventories increased by 5.6 million barrels.
EIA reported earlier this week in its monthly short-term energy outlook that the current global economic slowdown is now projected to be more severe and longer than it expected last month, leading to further reductions of global energy demand and additional declines in oil and other energy prices. The EIA is now expecting world GDP growth to slow to 0.5% in 2009, down from an expectation of 1.8% in last month's outlook.
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, January reformulated gasoline rose 11 cents, or 11%, to end at $1.08 a gallon and January heating oil gained 11 cents to finish at $1.51 a gallon.
EIA reported today that U.S. natural-gas inventories fell by 67 billion cubic feet to stand at 3,291 billion cubic feet during the week ended 5 December. January natural gas ended down 9 cents at $5.60 per million British thermal units on Nymex.
At the MCX, crude oil for December delivery closed at Rs 2,336/barrel, higher by Rs 133 (6%) against previous day's close. Natural gas for December delivery closed at Rs 273.2/mmbtu, lower by Rs 3.7/mmbtu (1.3%).
Reliance Communications - news verification
News Verification : The media had reports that strategic investors may acquire around 20-26 percent stake in the company. The Exchange, in order to verify the accuracy or otherwise of the information reported in the media and to inform the market place so that the interest of the investors is safeguarded, had written to the officials of the company. Reliance Communications Limited has vide its letter inter-alia stated, "The Company has been receiving various proposals from time to time from reputed international telecom companies expressing interest in acquiring a strategic equity stake in the Company. The Company evaluates such proposals, in line with the Company's policy to constantly endeavor to enhance overall shareholder value. The company will comply with all its obligations including timely disclosures, at the appropriate time."
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