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Tuesday, May 26, 2009
Market likely to open flat
The market may witness cautious trend as US indices were closed on account of Memorial Day and Asian indices are exhibiting mix trends in the morning trades. Although the bias remains positive, investors should maintain caution as profit taking at higher levels may pull down the market. Among the local indices the Nifty could test 4200 and 4150 on the downside while on the upper side it may move up to 4300. The Sensex has a likely support at 13750 and may face resistance at 14050.
U.S. financial markets are closed Today for the Memorial Day holiday, while British markets are also shut for a bank holiday.
Daily trend of FII/MF investment in equities
On May 22 2009, FIIs were net sellers of stocks to the tune of Rs695 crore (purchases worth Rs2412 crore and sales of Rs3107 crore).
Stocks with +ve bias: Neyveli Lignite (SL 129), Suzlon (SL 87), REC Ltd (146)
Stocks for Short Term delivery: Orbit Corporation
Stocks for Investment: Man Industries, Godrej Consumer, BEL, Orient Paper
Important Results : Tata communications.
Market may remain volatile
Key benchmark indices may open lower tracking weak Asia. However volatility may remain high this week ahead of the expiry of May 2009 futures and options (F&O) contract on Thursday, 28 May 2009.
Investors
may also book profits after recent sharp rally in Indian stocks. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 5,752.82 points or 70.49% to 13,913.22 on Monday 25 May 2009. The Sensex is up 4,265.91 points or 44.21% in calendar year 2009.
While, recent buying by the foreign institutional investors (FIIs) may support the market . As per the provisional figures on NSE, foreign funds bought shares worth Rs 427.97 crore on Monday 25 May 2009 while domestic funds bought shares worth Rs 197.68 crore. FII inflow in May 2009 totaled Rs 14,242.40 crore (till Friday, 22 May 2009). FII inflow in calendar year 2009 totaled Rs 14,955 crore (till 22 May 2009).
Most of the Asian stocks were trading lower today, 26 May 2009. Japan's Nikkei stock average fell 0.86% on Tuesday, weighed down by tech shares such as TDK Corp though slides were checked by rises in shares such as drugmakers and telecommunications companies. But trade was thin, with a number of investors waiting to see how Wall Street will reopen after the Memorial Day holiday and in the wake of a public holiday in the United Kingdom.
South Korea's stocks fell 0.97% on concern that North Korea will conduct more nuclear tests after the communist state said yesterday it successfully held an underground explosion. Singapore's Straits Times fell 0.17% in a choppy trade. Hong Kong's Hang Seng fell 0.05%. Key benchmark indices in China, and Taiwan rose by between 0.19% to 0.24%.
US markets remained shut on Monday, 25 May 2009 due to Memorial Day holiday.
Back home in the political front, activity regarding expansion of the Manmohan Singh ministry gathered momentum on Monday 25 May 2009 with the Prime Minister meeting Congress chief Sonia Gandhi to finalize the list of inductees even though the sudden outbreak of violence in Punjab occupied the government's attention.
While there was no official word on the ceremony, it was hoped that the expansion could still be held today with the nominees of Trinamool Congress and DMK already in or on their way to Delhi.
. If the swearing-in of ministers does take place, it is expected to include the DMK contingent and several minister of state (MoS) nominees from Trinamool.
The UPA government got down to business in its second term with five of the six key Cabinet ministers alloted portfolios assuming charge of their respective offices on Monday 25 May 2009 and setting out their priorities.
P Chidambaram, A K Antony and Sharad Pawar returned to the Home, Defence and Agriculture ministries they were in-charge during Manmohan Singh's first term while Pranab Mukherjee came back to the Finance Ministry, a portfolio he had held 25 years back in the Indira Gandhi government.
S M Krishna, the former Karnataka chief minister and ex-Maharashtra governor, assumed office as the new External Affairs minister after making his Cabinet debut.
All the ministers convened meetings of their top officials to get a quick update on pressing issues. Mamata Banerjee, who was given the Railways portfolio, is in Kolkata and was yet to assume charge. Only six of the 19 Cabinet ministers who took oath along with Prime Minister Manmohan Singh last Friday have been allocated portfolios.
Dr Manmohan Singh was on Friday 22 May 2009 sworn-in as Prime Minister for a second consecutive term. Among others who took oath as Cabinet Ministers include Pranab Mukherjee, Sharad Pawar, A K Antony, P Chidambaram, Mamata Bannerjee, S M Krishna, Ghulam Nabi Azad, Sushil Kumar Shindae, S Jaipal Reddy, Vayalar Ravi, Meira Kumar, Ambika Soni.
A day after the swearing-in of the UPA government on Friday 22 May 2009, the Union cabinet met under the chairmanship of Prime Minister Manmohan Singh on Saturday 23 May 2009. The cabined took a decision to convene the Parliament session from 1 June to 9 June 2009. A meeting with leaders of various parties will be held in the first week of June 2009 for finalising the dates of the budget session, home minister P Chidambaram said after the cabinet meeting on Saturday. He said government is quite hopeful of passing the budget by 31 July 2009.
The Speaker's election would be held on 3 June 2009 and President Pratibha Patil will address the joint sitting on 4 June, the day Rajya Sabha will also be convened. This will be followed by the debate on motion of thanks. Explaining the process of passing the general budget, Chidambaram said this has to be completed by 31 July 2009 failing which a vote-on-account will have to be approved.
A newspaper report quoted Mukherjee as saying that the President's address on 4 June 2009 will unveil the new agenda of the government. Mukherjee said the government is all set to take legislative measures to put the economy back on track. When a stable government is in place, credit flows and other measures needed to boost the economy become easier, Mukherjee said. The Finance Minster (FM) said he was hopeful that the economy will recover by the second half of the year ending March 2010.
On the impact of the stimulus packages, the minister said that their effect would be felt in sectors like automobiles soon. The minister said that he was not in the alarmists' column over fiscal deficit.
Soon after taking charge of his office on Monday, the finance minister, Mr Pranab Mukherjee, held closed-door consultations with senior ministry officials and advisers where the talks focused on efforts to present the general budget 2009-10 in time to complete the entire process by 31 July 2009. The government had earlier indicated that it might take another vote on account for a brief period in case the finance bill was not passed before 31 July.
A comfortable victory for the Congress-led coalition government in election has raised expectations of a strong push for economic reforms by the government. Dr Manmohan Singh has reportedly prepared the broad contours of an economic revival plan to be taken up soon after the new government is formed, reports suggest. While recommendations to revive growth and ease the credit squeeze are likely to find a place in the plan, tax proposals are expected to be taken up as budget recommendations.
The telecom ministry has prioritised the much delayed auction of 3G airwaves and WiMAX spectrum. It has also prioritised introduction of a new spectrum policy.
The petroleum ministry has reportedly prepared a draft Cabinet note on a partial decontrol of petrol and diesel prices after which they will be linked to international movements. The new government is also likely to pursue disinvestment of state-run undertakings, reports suggest.
Financial sector reforms are likely to get a push in the coming days, which were relegated to the back seat due to persistent opposition from the Left parties.
Meanwhile, three days after the Congress and Dravida Munnettra Kazhagam (DMK) cracked the formula over portfolio allocations, DMK seems to have taken a soft approach. It now says it's ready to accept any portfolio that the Prime Minister Dr Manmohan Singh offers. With three DMK leaders being accommodated in the Cabinet and four as Ministers of State (MoS), a deal which for now seems to have the backing of the DMK.
However, now speculation is rife over what portfolios lies in store for the DMK. DMK supremo M Karunanidhi's nephew Dayanidhi Maran is slated to get the Textile portfolio. Karuna's son MK Azhagiri will be given the Chemical and Fertilizers portfolio. Another former minister A Raja will be handed the reigns of the information technology portfolio.
DMK on Thursday 21 May 2009 said it has decided not join the the Congress-led UPA government but the party will provide support the government from outside. This after the talks between DMK and Congress over ministerial berth for DMK broke down over berth sharing.
The Congress party-led coalition has the support of 322 lawmakers, Prime Minister-elect Manmohan Singh said on Wednesday, 20 May 2009, giving it a clear majority in a new government. Congress said it has support of 274 members of the 15th Lok Sabha. In addition, the Bahujan Samaj Party, the Samajwadi Party and the Rashtriya Janata Dal sent letters of support for a Manmohan Singh-led government directly to the President, taking the support base to 322. Dr Singh was renominated as Congress Parliamentary Party leader on Tuesday (19 May 2009).
The Congress-led UPA defied predictions of a tight election and was only about 11 seats short of an majority from the 543 seats at stake in the recently concluded Lok Sabha election. Congress' alliance took 261 seats, sweeping aside its nearest rival, the bloc led by the Hindu-nationalist Bharatiya Janata Party (BJP), which won only 159 combined. Congress, which alone won 205 seats, needs a handful of partners to reach the 272 seats needed to take power, and is expected to seek the support of more smaller parties or independents.
Oil Prices could hit 150$ again
Saudi Arabia warned oil prices could spike to beyond the near $150 record high of 2008 within three years as it joined other energy
leaders on Monday to call for more investment to boost production over the long term.
Energy ministers and officials at the Group of Eight energy summit wrapped up the two-day meeting by urging the industry to pump money into projects to expand capacity despite the credit crisis, which has put the brakes on investment.
The meeting came as oil prices hover at a six-month high of over $60 a barrel, but producers fret that it remains below the $75 level needed to spur investment while consumer nations fear further rise in prices could hurt global economic prospects.
The recent rally in prices is expected to have eased OPEC concerns about high inventories and weak demand, and OPEC officials have suggested an output cut is unlikely at a Thursday meeting, though Libya says that possibility still exists.
Saudi Arabian Oil Minister Ali al-Naimi said the world was heading for a fresh spike after the current phase of faltering demand and lower prices, which he said reflected the economic downturn rather than being an indicator of things to come.
"We are maintaining our long-term focus rather than being swayed by the volatility of short-term conditions," he said in prepared remarks at the summit.
"However, if others do not begin to invest similarly in new capacity expansion projects, we could see within two-to-three years another price spike similar to or worse than what we witnessed in 2008."
Naimi painted a bleak picture of the investment scenario, saying low prices, weak demand, high costs, tight credit markets and energy policies focused on alternative fuel sources had all combined to hurt spending on new projects.
GLOBAL OIL AGENCY
The Saudi warning was echoed by a top IMF official, who forecast price spikes over the medium-term would follow relatively stable markets in the short-term.
"With long time-to-build lags, significant setbacks to oil investment today could set the stage for future sharp price increases," IMF First Deputy Managing Director John Lipsky said.
He said energy investments were likely to remain subdued in 2010, after an expected decline in 2009. The International Energy Agency predicts investment in oil and gas exploration and production will fall 21 percent in 2009.
Paolo Scaroni, CEO of Italy's Eni, said a solution could be to create a global oil agency representing producers and consumers that would combat price volatility and ensure investments keep flowing into the energy sector.
While major producer and consumer nations debated the right oil price to spur investment without hurting the chances of an economic recovery, the World Bank urged leaders not to forget the poor in Africa.
The G8 energy summit had aimed at tackling climate change, promoting investment in new projects, spurring dialogue between producers and consumer nations and boosting energy resources in poorer countries.
It brought officials from major producer and consumer nations ahead of Thursday's OPEC meeting, when the producer group is expected to keep output levels unchanged.
Saudi Arabia's Naimi has previously said he expects OPEC to "stay the course" when it meets, and Algeria says all members agree that there is no need for an output cut.
Libya, however, says the possibility of a cut still remains, as the group considers whether the recent price rise is a trend or simply volatility.
Consumer nations like the United States have urged OPEC to keep its focus on price stability to prevent an oil spike that could derail hopes of an economic recovery.
The two sides ought to agree on a "respectful band" for prices that prevents volatility and allows for investment in the sector, Egypt's oil minister said, echoing the concerns of consumer nations who fear a spike in prices.
"Yes, there is an economic and financial crisis, but in the oil and gas sector you cannot sleep," Sameh Fahmy told Reuters. "When the high prices come back again what are you going to do?"
via ET
Stocks to watch: BoB, PNB, ONGC...
Following stocks are likely to be in the limelight today, May 26.
Bank of Baroda (BoB) has reduced interest rates on its various maturity deposits by 0.25-0.75%. Shares of the bank closed up Rs 17.5, or 4.14%, at Rs 439.95**.
Punjab National Bank (PNB) is planning to open five overseas offices over the next one year. Shares of the bank closed down Rs 19.2, or 2.89%, at Rs 644.05**.
Oil & Natural Gas Corporation (ONGC) said it would lose about Rs 140 billion if it was forced to continue in Cairn India`s prolific Rajasthan oilfields as it would have to pay all government levies. Shares of ONGC closed down Rs 6.2, or 0.59%, at Rs 1,039.10**.
Tata Motors is likely to roll over close to USD 1.05 billion of debt remaining out of the USD 3-billion bridge loan it had taken in 2008 to fund the acquisition of British automobile company Jaguar and Land Rover. Shares of Tata Motors closed up Rs 0.25, or 0.07%, at Rs 345.95**.
Ranbaxy Laboratories missed the deadline of May 2009 to start supplying raw materials to British drugmaker Astrazeneca. Shares of Ranbaxy Laboratories closed up Rs 45.8, or 20.73%, at Rs 266.70**.
Bharti Airtel, India`s leading mobile telephone service provider, announced on Monday that it has renewed its effort for a significant partnership with MTN Group (`MTN`) and is exploring a potential transaction whereby, pursuant to a scheme of arrangement, Bharti would acquire a 49% shareholding in MTN and, in turn, MTN and its shareholders would acquire an approximate 36% economic interest in Bharti, of which 25% would be held by MTN with the remainder held directly by MTN shareholders. Bharti and MTN have agreed to discuss the potential transaction exclusively with one another until Jul. 31, 2009. Shares of the company closed down Rs 46.45, or 5.41%, at Rs 811.40**.
Rural Electrification Corporation (REC), a Navratna Public Sector company registered a sharp rise in net profit for the quarter ended March 2009. During the quarter, the company posted 65.05% rise in profit of Rs 3,880.40 million compared with Rs 2,351 million in the same quarter previous year. Total income for the quarter jumped 44.68% to Rs 14,470.90 million, when compared with the prior year period. Shares of the company closed up Rs 10.6, or 7.65%, at Rs 149.20**.
IDEA Cellular, one of the leading telecom operators in the country has now entered Tamil Nadu, with the launch of its GSM mobile services in 130 towns across the state. IDEA`s 2.75G EDGE enabled network will progressively cover Chennai and over 500 towns and villages by the end of current financial year. Shares of the company gained Rs 1.9, or 2.67%, to settle at Rs 72.95**.
Jet Airways India, leading airline operator, turned to profit for the quarter ended March 2009. During the quarter, the company posted profit of Rs 529.90 million compared with a loss of Rs 2,211.80 million in the same quarter previous year. Shares of the company closed up Rs 1.95, or 0.64%, at Rs 305.25**.
**Closing share prices as on, Monday, May 25.
US dollar: Destination known, road unknown
by Vivek Kaul, DNA
"The US dollar is not strong because people want to hold the dollar, but it's strong because people have debt in dollars."
--George Soros, renowned hedge fund manager
"You know, I have been here for almost a month now and still haven't figured out what I want to do," she said, late on a Sunday afternoon.
"When you don't know where you are going, the journey is the reward," I replied.
"So funny," she replied rather agitatedly.
"OK, let's go out somewhere," I said, grabbing her hand and leading her out of the house.
"What's on your mind? You know, you can be really weird at times," she said as we reached the bus stop.
"We'll take the first bus that comes here, wherever that goes," I said, sounding weirder.
One did five minutes later; a 33 to somewhere. We hopped on and bought two tickets to the last stop.
"Where does this bus go?" she asked.
"I don't know!" I replied.
"Is this some sort of a joke?"
"Like I said, when you don't know where you are going, the journey is the reward. So, enjoy it."
"Oh! I think I'll flip the point you are trying to make. Take the US dollar, for instance. From what we have been discussing, we know it will ultimately crash --- when and how, we don't know. Destination known; road unknown. You know where you are going, but not how and when you will get there. Is the journey still the reward?"
And I thought I had the penchant for linking anything to anything.
"Interesting," I said. "But I think I have some idea of how the US dollar will get there. For 2009, the projected fiscal deficit of the United States is $1.85 trillion. That's four times higher than the maximum deficit the US has previously run. This estimate has been made by the Congressional Budget Office (CBO). It also estimates that the deficit will be $1.4 trillion in 2010. Estimates made also suggest that between 2010 and 2019, the US will run a total deficit of $10 trillion. As you know, fiscal deficit is essentially the difference between what the government earns and what the government spends. And given that it plans to spend more than what it earns, the remaining money needs to be borrowed. Also, like most forecasts, this forecast is also a wee-bit optimistic, I feel."
"As in?"
"See every forecast is made using some assumptions. The CBO has assumed an unemployment rate of 8.8% for 2009. The rate has already touched 8.9% at the end of April. Also, from the way it looks, unemployment in the US is only going to increase in the days to come. Other than this, CBO assumes that the gross domestic product (GDP) growth in 2010 will be 3.8%. Now, given that the GDP contracted by 6.1% in the first quarter of 2009, hoping it will grow at 3.8% the very next year is pretty optimistic. My view is the US fiscal deficit will be more than what it is being projected. And all this money will have to be borrowed."
"Yeah, it will have to be borrowed. But with countries like China and Japan ready to lend to the US, where is the problem?"
"Hold on. In March, China and Japan were net buyers of $48.5 billion of financial securities issued by the US government. These financial securities pay a certain rate of interest and are issued to borrow money. Even Russia bought $8.3 billion of financial securities issued by the US government. Some experts have questioned the credibility of these figures, but assuming you and I trust these figures, there are some serious problems otherwise as well," I said, looking out the window, and realising how little traffic the city had on a Sunday afternoon.
"And what are these problems, if I may ask."
"Estimates suggest the US government needs to borrow $1 trillion by September. It will be very difficult to raise such humongous amount of money given that exports of the major buyers of these securities are falling. Chinese exports are down 41% and Japanese exports are down 38%. These countries earn US dollars through exporting goods and services.
These dollars, in turn, are used to buy securities issued by the US government. When exports fall, dollar earnings also fall. Given that, where will all the dollars to buy these securities come from? Also, we need to remember that the US is not the only country in the world that is running a fiscal deficit. Most of Europe is running a fiscal deficit, and so is Japan. And all these countries need to borrow. One estimate suggests the US, Japan and Europe need to borrow $5 trillion over the next two years. Now, let me be optimistic for a change and assume that there are enough buyers for these securities. But even with that, will the US government manage to find buyers for financial securities amounting to another $5 trillion, which it needs, over the next four years? This, given that the government will continue to spend more than it earns."
"Hmmm... I see even optimism can lead to pessimism. So what is the way out?" she asked as a spurt of wind blew her hair on to my face.
"I guess the only way out is to print money. The Federal Reserve of the US is currently authorised to print $1.75 trillion. This money will be used to buy back financial securities issued by the US government. The theory is that more money in the economy will lead to people spending people more and that in turn will revive the economy. Most western economies are resorting to this in order to get their economies up and running again. Bank of England is planning to buy back bonds worth 75 billion pounds. And the European Central Bank, the central bank of the European Union countries, also recently announced that it would start printing money."
"But wouldn't all this money printing be disastrous?"
"Over a period of time? Yes. But right now, the impact of this has been extremely benign. See, the idea was that increased money in the economy will make people spend more and that in turn will lead to people spending more. But right now, people are tired of spending and not in the mood to spend. That cannot continue forever, and as and when they do start spending again, too much money will chase too few goods and inflation will start showing its ugly head."
"I recently read an interview of Ben Bernanke, where he said, "When the economy begins to recover, that will be the time that we need to unwind those programmes, raise interest rates, reduce the money supply, and make sure that we have a recovery that does not involve inflation.""
"At the cost of repeating myself, economics is not an exact science and I am sure Bernanke also knows that, notwithstanding what he said in that interview. So assume prices start rising in the US and the US government along with the Federal Reserve to start reducing money supply. The simplest way to do it would be to start selling the financial securities they have been buying these days. Once they start doing that, they will be able to suck out money from the market, at least theoretically. But imagine what impact that would have. The biggest buyer of these financial securities would suddenly turn into the biggest seller. Given that, at that point of time, will there be enough buyers of these securities? The prices of these financial securities will crash, as there would be very few buyers at that point of time. Also, as inflation rises, investors who have bought these financial securities would want to sell out."
"Why would they want to sell out?"
"Inflation reduces the value of the money and given that expectation, investors would want to get out and spend that money. All this will lead to the price of these financial securities crashing. And that will also lead to the US dollar crashing because countries like China, Japan and Saudi Arabia own most of these financial securities. Once they have sold off these securities, they would want to convert the dollars they have got selling these securities into their own currencies. A spate of dollar sales is likely to hit the market, and that in turn will lead to the value of the dollar crashing against other currencies."
"And when will this happen? she asked.
"I wish I knew. But as renowned economist Nouriel Roubini, who predicted this crash, recently said, "This decline of the dollar might take more than a decade, but it could happen even sooner if we do not get our financial house in order. The United States must rein in spending and borrowing, and pursue growth that is not based on asset and credit bubbles. For the last two decades, America has been spending more than its income, increasing its foreign liabilities and amassing debts that have become unsustainable," I said.
There was a tap on my shoulder. "Last stop," the conductor said, asking us to get down.
"So where are we?" she asked.
"Goregaon," I said, looking around. "Now that we are here, let us find a coffee shop first."
(The example is hypothetical)
Orchid Chemicals
We recommend a buy in the Orchid Chemicals & Pharmaceuticals from a short-term horizon. It is evident from the charts of Orchid Chemicals that after recording a multi-year low of Rs 56 in early March, it began to trend up. Since then, the stock has been on an intermediate-term uptrend, forming higher peaks and higher bottoms. The stock emphatically penetrated its 21 and 50-day moving averages during late March and is currently trading well above these averages. On May 25, the stock broke through a significant long-term resistance level of Rs 120 by gaining 9 per cent. We observe high volumes during the advance days of the uptrend, signalling strength in the current trend. The daily relative strength index (RSI) is featuring in the bullish zone and the weekly RSI has also entered into this zone. The daily moving average convergence and divergence is also hovering in the positive territory. We are bullish on the stock from a short-term perspective. We anticipate the stock to rally further until it hits our price target of Rs 144 in the approaching trading sessions. Traders with short-term trading perspective can buy the stock while maintaining a stop-loss at Rs 123.
via BL
FIIs in selling mode
Outflow of Rs 694.70 crore on 22 May 2009
Foreign institutional investors (FIIs) sold shares worth a net Rs 694.70 crore on Friday, 22 May 2009, as against an inflow of Rs 146.90 crore on Thursday, 21 May 2009.
FII outflow of Rs 694.70 crore on 22 May 2009 was a result of gross purchases Rs 2,412 crore and gross sales Rs 3,106.70 crore. The BSE Sensex had gained 150.61 points or 1.10% to 13,887.15 on that day.
FII inflow in May 2009 totaled Rs 14,242.40 crore (till 22 May 2009). FII inflow in calendar year 2009 totaled Rs 14,955 crore (till 22 May 2009).
There are a total of 1656 foreign funds registered with the Securities & Exchange Board of India (Sebi).
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