Morning Mantra - Dec 23 2008
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Recommendations
Tuesday, December 23, 2008
Trading Calls - Dec 23 2008
Nifty (3039) Sup 2950 Res 3085
Sell Crompton (134) SL 137
Target 128
Sell HDFC (1496) SL 1515
Target 1455, 1465
Sell ACC (488) SL 493
Target 478, 476
Sell Cairn (160) SL 163
Target 154, 153
Buy Sterlite (280) SL 276
Target 286, 290
Daily News Roundup - Dec 23 2008
Bhel bags Rs11.75bn contract for setting up a 500MW thermal power plant at Bina in Madhya Pradesh. (ET)
RIL along with BP signed a production-sharing contract for the block KG-DWN-2005/2 with the Indian government. (BS)
Unitech plans to raise Rs50bn through debt and equity issues. (BS)
Cairn India has struck more oil and gas in its Rajasthan block which could take the estimated production from the area beyond the targeted 175,000 barrels a day by 2010. (BL)
Reliance Communications has set aside US$1bn for its 3G telecom services rollout. (ET)
GAIL (India) Ltd to supply additional 20mn standard cubic metres of gas to RIL for the commissioning of the latter’s east-west pipeline network at the prevailing price. (BL)
Tatas have secured funds for Jaguar Land Rover (JLR) as the bankers were convinced that the UK government would prevent a collapse of the luxury car maker. (BS)
The Tata Group may have to invest at least US$1bn to revive Jaguar and Land Rover. (ET)
Jet Airways plans to buy a stake in the maintenance, repair and overhaul facility at the new Hyderabad international airport. (ET)
Tata Sons acquires additional 2.4% stake in Tata Communications. (ET)
Rahul Bajaj to sell a 29.6% stake in Bajaj Hindusthan to Shishir Bajaj giving him full control over the sugar company. (ET)
ONGC likely to be exempted from subsidising domestic LPG and kerosene due to the sharp drop in crude oil prices. (FE)
Glenmark Pharmaceuticals to beat bigger rivals like Ranbaxy and Dr Reddy’s in selling an original drug by 2010. (BS)
ITC is planning to develop properties across the country. (ET)
Emami decides to stay rooted in realty space, plans to transfer holding in real estate arm to group companies. (ET)
Jaiprakash Associates to amalgamate its subsidiary companies Jaypee Cement Ltd, Gujarat Anjan Cement Ltd, Jaypee Hotels Ltd and Jaiprakash Enterprises Ltd with itself, from April 1 ’08. (BS)
BoI and BoB to cut its lending rates by 75bps and deposit rates across all maturities with effect from January 1 ’08. (BL)
Punjab National Bank plans to raise Rs5bn from tier II bonds. (FE)
IFC proposes to give a corporate loan of up to US$45mn to Jain Irrigation. (FE)
Sun Pharmaceuticals has extended the deadline of its open offer to Taro Pharmaceutical Industries to January 9, 2009. (ET)
Shoppers Stop has postponed its plans to acquire an additional 32% stake in HyperCITY Retail (India) to June 2010. (ET)
Carlyle Group and TPG Capital plan to buy a stake in Suzlon Energy. (FE)
Glenmark Pharmaceuticals’ new drug Crofelemer has entered phase 3 clinical trials. (ET)
Aurobindo Pharma gets USFDA approval for anti-HIV infection tablets. (ET)
JSW Steel has advanced the commissioning of its additional 3mn tons capacity line at Vijayanagar plant in Karnataka by a month to February 2009. (FE)
BGR Energy has forged a technical collaboration and a licence agreement with Italy-based Termomeccania Ecologia (TME) for condensate polishing plants in India. (BL)
Air India has agreed to pay 3% commission to agents on the gross fare, which includes basic fare and fuel surcharge. (ET)
Crompton Greaves to scale down its capex for the fiscal to Rs1.5bn from the earlier target of Rs2.2bn. (BL)
Kingfisher Airlines not to cut fares for now. (BS)
Kingfisher Airlines has approached a consortium of banks for funds to bail out the airline even as it has drawn about 80% of the Rs10bn loan it received from ICICI Bank early this year. (BL)
Tata Metaliks to consider borrowing through debentures. (FE)
Singapore based Nalanda Capital acquires 1.8% stake in Sun Network for over Rs1bn. (ET)
Pyramid Saimira Theatre to go ahead with the inter-se transfer of shares within the promoter group. (ET)
Gitanjali Gems will buy back up to 12mn shares for Rs1.44bn. (FE)
Hinduja Foundries to curtail the number of working days at its three units in Ennore, Sriperumbudur and Hyderabad. (BS)
Oil India Ltd has deferred its IPO for the second time due to the volatile market conditions. (BS)
Parsvnath pulls out of Chandigarh film city project. (BL)
Tata Capital is planning to raise ~Rs15bn through a public issue of bonds. (ET)
The workers of Coal India Ltd to go for a three-day nationwide strike beginning from January 5 ‘08. (BL)
IDBI Bank and Export Import Bank of India (Exim) plan to raise up to Rs45bn through bond issues to finance their business growth. (BS)
Renault to produce the Logan hatchback at Nashik, which is already home to the sedan version. (BL)
India has lifted a ban on cement exports as prices ease, local demand dips. (ET)
RBI has started a review of the NPA or bad loan classification norms to ease the flow of credit to corporate groups. (BS)
The Government is considering a proposal that would allow single-brand foreign retailers to dilute stakes in their Indian ventures in favour of foreign PE firms. (ET)
Government agencies that also act as regulators may soon stop partnering with private companies for new ports, power and railways projects. (ET)
Regulators may be barred from core public-private partnership projects. (ET)
DoT has decided to grant advance licences to prospective Mobile Virtual Network Operators. (FE)
The Petroleum ministry is planning to auction over 100 prospective areas for oil and gas exploration by March 2009 under the eighth round of New Exploration Licensing Policy. (ET)
India plans the next round of bidding for oil blocks under the New Exploration and Licensing Policy (Nelp) in February next year. (BS)
The Government plans to remove the fuel surcharge on tickets, but airlines resist. (ET)
Around 87 tea estates in Darjeeling are poised to get the Agri-Export Zone status w.e.f. January 1, 2009. (ET)
The Government has decided to put on hold the proposal to grant a declared goods status to aviation turbine fuel. (ET)
The Government has introduced two Bills on the insurance sector reforms in the Parliament. This would hike in FDI in an Indian insurance company to 49% from 26%, permit foreign re-insurers to set up branches here and do away with divestment restrictions on Indian promoters of insurance companies to enable entry of more players into the sector. (BL)
Companies providing value added services on mobile phones will not be brought under a licensing regime, Trai likely to issue norms to help content producers protect copyrights. (ET)
Operators are mulling increasing prices for offering round-the clock or restorable leased line services. (ET)
Sugar millers have asked the government to set up an independent regulator to look into issues of cane pricing and allocation of sugarcane to different factories. (ET)
Parliament gave its nod to the second batch of supplementary demands for grants permitting Government to raise public expenditure by an additional Rs424.8bn during FY09. (ET)
Tax collections in North grow by only 16.8% at ~Rs63.3bn till December 15. (ET)
Lull before a brief storm!
Year’s end is neither an end nor a beginning, but a going on, with all the wisdom that experience can instill in us.
Experience has taught us the hard way and markets are showing signs of fatigue. Bulls will hope this is a lull before a brief storm. Today, we expect the market to trend lower again, at least on start given continued weakness in Asian markets. Stock benchmarks also declined in the US and Europe. A bout of short-covering ahead of tomorrow's derivative settlement could prop up the indices later in the day. (Thursday is Christmas holiday).
Markets in other parts of the world may see a steep fall in trading as many players could extend their year-end vacation. As a result, there is a fair chance that volatility may increase on lower volumes.
The overall outlook remains uncertain, as nobody wants to take undue risks at this stage with only a few sessions to go in the year. Most players will take a call on the market only next year. Though the recent spurt across global equity markets has provided a much-needed boost to the bulls, one cannot rule out another steep fall. It's anybody's guess if the key indices will test October lows again or gradually advance. Much will hinge on the trend in fund flows and how fast the global economy rebounds.
As far as India is concerned, we will need proof that the string of government measures are working. There are reports of a fresh round of stimulus package being unveiled soon, including further easing in monetary policy by the RBI. But, these tend to provide only a brief relief to the market. One will also have to watch out for quarterly earnings and of course the political drama that will unfold over the next few months.
FIIs were net sellers of Rs1.9bn (provisional) in the cash segment on Monday while the local institutions poured in Rs2.07bn. In the F&O segment, the foreign funds were net sellers at Rs3.9bn. On Friday, FIIs were net buyers at Rs4.63bn in the cash segment. Mutual Funds pulled out Rs2.95bn on the same day.
US stocks ended lower on Monday after the Big Three automakers had their debt ratings cut despite the bailout package unveiled by White House last week. Sentiment was also hit after Japanese auto major Toyota forecast a loss for the year.
The Dow Jones Industrial Average slipped 59.42 points, or 0.7%, to 8,519.69. At one point, it was down more than 200 points.
The Standard & Poor’s 500 Index retreated 16.25 points or 1.8% to 871.63, wiping out last week’s 0.9% gain. Energy, consumer discretionary and financials pacing the fall among the various sectors. All of the index's 10 industry groups slipped into the red.
Of the Dow's 30 components, 19 closed in the red, with the heaviest losses tallied by General Motors (GM), whose shares surrendered 21.6%. Shares of other automakers also were pounded, with Ford sliding 12.2% and the US-listed shares of Toyota declining 5.4%.
The technology-laden Nasdaq Composite Index slid 31.97 points, or 2%, to 1,532.35. The Russell 2000 Index of small companies declined 2.3 percent to 475.07. The MSCI World Index of 23 developed markets slumped 1.6 percent to 892.73.
Market breadth was negative. Declining shares outnumbered advancers by more than 2-to-1 with about 90 million shares changing hands on the New York Stock Exchange (NYSE).
A deteriorating outlook for corporate earnings and the housing sector offset expectations that government efforts to revive the economy will succeed.
Toyota forecast an operating loss for the current year, which would be a first for the Japanese automaker since World War II. Toyota blamed a slump in global demand and a sharp appreciation in the yen against other currencies.
Monsanto lost 7.5% after Goldman Sachs said the recession will hurt profit at the world’s largest producer of seeds. Walgreen, the second-biggest US drugstore chain, sank 4.2% after posting the slowest sales growth in at least 18 years.
MetLife, the insurer invested in US$36bn worth of commercial mortgages, tumbled 12% as analysts said the number of US non-residential properties at risk of default may triple.
US stocks languished for most of the morning before falling sharply in the afternoon as oil prices slid below US$40 a barrel. That sent shares of oil industry firms Chevron and Exxon Mobil lower and weighed on the Dow. But the major indexes recovered some ground near the closing bell.
The market could come under pressure in the coming weeks, as companies begin reporting fourth-quarter results, which are expected to remain soft. December and January are traditionally some of the best months for US stocks, and January sets the tone for the rest of the year.
Stocks may find some support early next year as details about President-elect Obama's stimulus plan become clear. Obama has called for an economic stimulus that would focus on rebuilding infrastructure and creating jobs.
Trading is expected to be volatile this week, with many market participants out for the Christmas holidays. Markets will close early on Wednesday and will remain closed on Thursday for the Christmas holiday.
Truck and tractor maker Caterpillar announced plans to lay off more than 800 employees at one of its engine plants and said it will take other steps to cut costs. The stock fell nearly 3%.
Moody's placed Alcoa's credit rating under review for a possible downgrade due to weakening demand and falling aluminum prices. Alcoa shares ended down 5%.
Insurance giant AIG said it will sell Hartford Steam Boiler, a subsidiary equipment insurer, to Munich Re Group for US$742mn in cash and US$76mn in stock. Shares of AIG were up about 3%.
Internet-tracking firm comScore said that spending by online shoppers fell 1% last week, with last-minute deals for free shipping before the holidays seemingly not enough to spur Web sales. Consumer spending makes up two-thirds of the US' overall economic activity.
Elsewhere in the world, the People's Bank of China lowered its benchmark one-year lending rates, besides cutting deposit rates and the banks' reserve requirement. Last month, China cut its key rate by more than a percent as part of Beijing's multibillion-dollar plan to keep its economy afloat.
Meanwhile, finance ministers in Ireland announced a US$7.7bn bailout of three of the country's leading banks. Under the terms of the bailout, the government will take a majority stake in Anglo Irish Bank and will inject capital into Allied Irish Banks and Bank of Ireland.
The yield on the benchmark 10-year note rose to 2.14% from 2.07% on Friday. The 10-year yield dipped below 3% in November for the first time since the note was first issued in 1962.
Lending rates were mixed. The 3-month Libor rate slipped to 1.47% from 1.49% on Friday. The overnight Libor was unchanged at 0.11%. Libor is a key bank lending rate.
The dollar was mixed versus the euro and gained against the pound and the yen. COMEX gold for February delivery gained US$9.80 to US$847.20 an ounce.
US light crude oil for February delivery was down US$2.45 to settle at US$39.91 a barrel in New York. Gasoline prices fell overnight to a national average of US$1.663 a gallon from US$1.668.
European shares declined in the first session of a holiday-shortened week. The pan-European Dow Jones Stoxx 600 index fell 1.6% to 193.32 in Monday's action. The French CAC-40 index declined 2.3% to 3,151.36, while Germany's DAX 30 index lost 1.2% to 4,639.02 and the UK's FTSE 100 index fell 0.9% to 4,249.16.
Weak global cues coupled with selling witnessed in the oil & gas, metals and banking stocks dragged the BSE benchmark Sensex to close below the 10,000 levels on Monday. Markets were lackluster in the first half of the day however, as the session progressed bulls were unable to hold on the 10k levels as traders and investors preferred to book some profits at higher levels.
Finally, the BSE benchmark Sensex ended at 9,928 losing 171 points and the NSE Nifty index ended at 3,039 losing 38 points.
Barring the Consumer Durables, FMCG and Realty index all the other BSE sectoral indices ended in the red.
Market breath weakened as the day progressed, 1,295 stocks advanced against 1,242 declines, while, 76 stocks remained unchanged.
KEC International has gained by 3% to Rs152 after the company announced that it received an order for Rs880mn from national electricity company of Tajikistan. The scrip touched an intra-day high of Rs156 and a low of Rs146 and recorded volumes of over 67,000 shares on BSE.
According to reports, Parsvnath Developers said that work on 12 of its proposed SEZs is proceeding at a slow pace as the land acquisition for those projects was not yet complete.
The stock ended flat at Rs50.05 hitting an intra-day high of Rs53 and a low of Rs49 and recorded volumes of over 84,00,000 shares on BSE.
Shares of BGR Energy surged by over 2.5% to Rs158 after the company announced that it has signed a pact for condensate polishing plants in India. The scrip touched an intra-day high of Rs168 and a low of Rs157 and recorded volumes of over 3,00,000 shares on BSE.
Shares of Nalco edged higher by 0.5% to Rs186 after reports stated that the company has entered into a JV agreement with United Arab Emirates government linked RAK Minerals and Metals Investment for setting up a 0.5mn ton smelter in Indonesia at a project cost of around US$4bn. The scrip touched an intra-day high of Rs192 and a low of Rs185 and recorded volumes of over 2,00,000 shares on BSE.
Tata Steel slipped by a 1.6% to Rs225. Reports stated THAT Liberia has cleared the company of all allegations and has invited it to join the bidding process for the Western Cluster iron ore project in that country. The scrip touched an intra-day high of Rs236 and a low of Rs223 and recorded volumes of over 26,00,000 shares on BSE.
Shares of Fortis healthcare gained by 4.5% to Rs73 after the company announced that it was planning to raise Rs18-20bn via rights or warrants issue, stated reports. The scrip touched an intra-day high of Rs74 and a low of Rs70 and recorded volumes of over 4,00,000 shares on NSE.
Shares of Wockhardt gained by 3.5% to Rs111 after reports stated that the company would raise Rs5bn via preferential allotment. The scrip touched an intra-day high of Rs115 and a low of Rs107 and recorded volumes of over 1,00,000 shares on NSE.
The Government and regulators have played their roles in perking up market sentiment by unleashing a string of fiscal as well as monetary steps. However, Volatility may inch higher ahead of Wednesday's F&O expiry which is a day earlier due to Christmas holiday on Thursday.
Nifty futures at a premium
Turnover declines
Nifty December 2008 futures were at 3041.65, at a premium of 2.35 points as compared to the spot closing of 3039.30. Turnover in NSE's futures & options (F&O) segment stood at Rs 47,321.10 crore, lower than Rs 50,670.28 crore on Friday, 19 December 2008.
Reliance Industries (RIL) December 2008 futures were at premium at 1293.50 compared to the spot closing of 1285.55.
Reliance Petroleum (RPL) December 2008 futures were at premium at 89.30 compared to the spot closing of 88.75.
Educomp Solutions December 2008 futures were at discount at 2766.90 compared to the spot closing of 2801.55.
In the cash market, the S&P CNX Nifty lost 38.20 points or 1.24% at 3039.30
Precious metals shine
Gold and silver prices go up despite a strong dollar
After dropping for three successive sessions, bullion metal prices ended higher on Monday, 22 December, 2008. Bullion metals rose despite the rising dollar. Prices for precious metals went up as the demand for these metals as a safe haven increased amidst this gloomy economic scenario. 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 Monday, Comex Gold for February delivery rose $9.8 (1.2%) to close at $847.2 an ounce on the New York Mercantile Exchange. Last week, gold prices gained 2.1%. On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (18%) since then.
This month, gold prices have rose 3.3% till date. 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 are higher by 1.3%. Futures have averaged $860 in 2008. The dollar index has gained 7.5% 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 Monday, Comex silver futures for March delivery was unchanged at at $10.85 an ounce. Last week, silver gained 63 cents (6%). For the month of November, silver prices had gained 5%. Till date, silver has lost 28% 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 Friday, the dollar was up against most major counterparts. The dollar index gained 1% today.
The Federal Reserve surprised market earlier this week to save the U.S. economy slashing interest rates to just above zero and promising to try an array of new economic measures to stimulate spending. The central bank's Federal Open Market Committee established a target range for the federal funds rate of zero to 0.25%, effectively cutting its key rate for overnight lending to banks by between 0.75% and 1%.
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 0.25% from 5.25% in September, 2007. The Fed did it in nine steps.
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 282 (2.2%) at Rs 13,020 per 10 grams. Prices rose to a high of Rs 13,088 per 10 grams and fell to a low of Rs 12,760 per 10 grams during the day's trading.
At the MCX, silver prices for March delivery closed Rs 142 (0.81%) higher at Rs 17,679/Kg. Prices opened at Rs 17,633/kg and rose to a high of Rs 17,883/Kg during the day's trading.
Crude plunges again
February contract futures drop on first day of trading due to demand concerns
Crude prices continued to drop substantially even on Monday, 22 December, 2008. Prices fell due to a strong dollar, ongoing global economic crisis and lower energy demand.
On Monday, crude-oil futures for light sweet crude for February delivery closed at $39.91/barrel (lower by $2.45 or 5.8%) on the New York Mercantile Exchange. Earlier in the day, prices were trading higher by 2.5%. Prices reached a high of $147 on 11 July but have dropped almost 72.7% since then. Last, prices ended lower by almost $12.41 or 27%. For this year in 2008, crude prices have dropped 60%.
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.
As per reports, crude imports to China, the world second-largest consumer of oil, fell to their lowest level this year. The country imported 13.36 million tons of crude in November, or 3.25 million barrels a day, down 1.9% from a year ago.
OPEC President Chakib Khelil said over the weekend that that the cartel is willing to further reduce output as much as necessary to stabilize oil prices.
After a meeting in Oran, Algeria, the Organization of the Petroleum Exporting Countries agreed to cut 4.2 million barrels a day from its actual September production level of 29.045 million barrels a day on 17 December, 2008. The production cut is effective on 1 January, 2009. Excluding previously announced cuts, OPEC will actually cut its daily production by 2.2 million barrels from current levels. That constitutes its biggest production cut ever.
Against this background, January reformulated gasoline tumbled 8.6% to 88.62 cents a gallon, and January heating oil slid 3.6% to $1.3415 a gallon.
January natural-gas futures fell 3.9% to $5.334 per million British thermal units.
At the MCX, crude oil for January delivery closed at Rs 2,025/barrel, lower by Rs 24 (1.2%) against previous day's close. Natural gas for January delivery closed at Rs 254/mmbtu, lower by Rs 7.5/mmbtu (2.8%).
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