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Monday, June 01, 2009
Pre Session Commentary - June 1 2009
Today domestic markets are likely to open positive as the US markets closed in green and the Asian markets have opened with phenomenal gains. The preliminary US GDP data has been revised moderately upward thus strengthening the morale of investors. The market sentiments across the Asian premises are looking very strong and therefore one could anticipate a strong buying trend during the day. However as the day would progress the profit booking pressures may chop some gains.
On Friday, the domestic markets closed positive on the back of encouraging GDP numbers and supportive cues from other markets. After a phenomenal gap up opening, the traders cheered the surge in other Asian markets which was further backed by the northward movement of European markets. Finally the better than expected GDP of 6.7% for the year FY09 pumped the sentiments of traders. The anticipations of deregulation in prices of Oil helped oil marketing companies gain momentum. Sectors like Realty, CG, CD and Auto inclined by 6.76%, 4.13%, 3.55% and 3.41% respectively. On the other hand, Mid cap and Small cap stocks also gained by 2.46% and 3.01% respectively. We expect the markets to be trading positive.
The BSE Sensex closed with a gain of 329.24 points at 14,625.25 and NSE Nifty inclined by 111.85 points at 4,448.95. BSE Mid Caps and Small Caps closed with gains of 121.18 points and 175.13 points at 5,056.74 and 5,986.82 respectively. The BSE Sensex touched intraday high of 14,727.28 and intraday low of 14,319.87.
On Friday, the US Markets closed in green. After a gyrating start the markets managed to close with remarkable gains. Financial stocks were the later movers as the sector started with a loss of 1% however towards the end it closed with a gain of 3%. Diversified metal and mining companies were in the limelight with phenomenal gains of 4.2% and 3.3%.The GDP for the first quarter recorded a drop of 5.7% better than the 6.1% decline that was report in the advance GDP reading. The US light crude oil for July delivery inclined by 1.7% to settle at $66.21 per barrel on the New York Mercantile Exchange.
The Dow Jones Industrial Average (DJIA) closed high by 96.53 points at 8,500.33, the NASDAQ Composite (RIXF) index inclined by 22.54 points to close at 1,774.33 and the S&P 500 (SPX) gained 12.31 points to close at 919.14.
Indian ADRs ended Positive. In technology sector, Infosys and Wipro closed up by (3.54%) and (2.16%) respectively whereas Satyam declined by (2.75%). In banking sector ICICI Bank and HDFC Bank surged (1.30%) and (2.39%) respectively. In telecommunication sector, MTNL gained (0.47%) whereas Tata Communication plunged by (9.61). However, Sterlite Industries galloped by (4.52%).
Today major stock markets in Asia are trading positive. Hang Seng is up by 430.83 points at 18,601.83. Shanghai Composite is also up by 74.959 points at 2,707.889. However Japan''s Nikkei is trading up by 117.91 points at 9,640.41. Strait Times is also up by 43.46 points at 2,372.54. Seoul Composite is also up by 9.75 points at 1,405.64.
The FIIs on Friday stood as net buyers in equity and sellers in debt. Gross equity purchased stood at Rs 5,870.90 Crore and gross debt purchased stood at Rs 103.40 Crore, while the gross equity sold stood at Rs 3,741.80 Crore and gross debt sold stood at Rs. 2,572.50 Crore. Therefore, the net investment of equity and debt reported were Rs 2,129.10 Crore and Rs (2,469.10) Crore respectively.
On Friday, the partially convertible rupee closed at 47.11/12 per dollar, 1.04% stronger than it previous close at 47.60/62. The rupee gained strength on the phenomenal consecutive surge in local stock markets.
On BSE, total number of shares traded were 68.89 Crore and total turnover stood at Rs 8,444.33 Crore. On NSE, total number of shares traded was 149.58 Crore and total turnover was Rs 27,356.32 Crore.
Top traded volumes on NSE Nifty – Unitech with 126063917 shares, Suzlon Energy with 67799714 shares, Idea Cellular with 42030544 shares, DLF with 26527793 shares, followed by Reliance Petro with 25852072 shares.
On NSE Future and Options, total number of contracts traded in index futures was 598920 with a total turnover of Rs 12,731.64 Crore. Along with this total number of contracts traded in stock futures were 477694 with a total turnover of Rs 26,652.95 Crore. Total numbers of contracts for index options were 984168 with a total turnover of Rs 22,029.79 Crore and total numbers of contracts for stock options were 29901 and notional turnover was Rs 1,646.21 Crore.
Today, Nifty would have a support at 4,498 and resistance at 4,569 and BSE Sensex has support at 14,741 and resistance at 14,915.
Daily News Roundup - June 1 2009
Maruti Suzuki’s car sales in the domestic market increased 8-10% in May 2009. (ET)
Multiplexes resolution is expected before June 12. (BS)
M&M to undertake major revamps of its tractor business. (ET)
Bharti Wal-Mart, the JV between two companies to invest over US$100mn in setting up 15 more such outlets in the next three-four years. (BS)
Coal India to sign an agreement with NTPC for setting up a 4,000-MW pithead power plant at Brahmani block near Rajmahal in Jharkhand. (ET)
IOC, BPCL and HPCL raised the ATF price by an average of Rs108/kl. (BS)
Tata Steel UK lenders agreed to reset the terms and conditions for a £3.7bn loan that was taken at the time of the acquisition of Corus. (ET)
Wockhardt in talks with a number of multinational Pharma companies including Eli Lilly, Roche, Sandoz, Pfizer and Sanofi-Aventis to find a strategic partner for its biosimilar business. (ET)
Jet Airways freezes fleet expansion for now and put off aircraft deliveries for two years. (ET)
Real estate developers may spring up more than a hundred malls spread over 30mn sq ft in the country by end-2010. (DNA)
PNB plans to expand its branch network by 10% in 2009-10. (DNA)
Unitech plans to repay about Rs20bn of its debt and bring it below Rs60bn level by the end of this fiscal. (DNA)
Axiata Group may increase its stake in Idea Cellular through a hostile open offer. (DNA)
Tata Motors plans to lower capital expenditure committed earlier and reduce exposure to vehicle financing. (DNA)
NTPC is looking at acquiring coal assets in Mozambique and Indonesia.
GMR International, wholly-owned subsidiary of GMR Infrastructure, signed an agreement with InterGen NV to acquire 100% ownership stake in Island Power Singapore. (BS)
The board of Bharati Shipyard decides to make an open offer for Great Offshore. (ET)
The government at the Centre plans to raise Rs100bn through stake sales in state-owned units over the next one year. (ET)
Indiabulls Real Estate decides to write off the entire investment in its retail arm. (ET)
SCI enters into an agreement with Geneva-based Mediterranean Shipping Company to run its European service. (BS)
Oman Oil Company to buy a 26% stake in the upcoming refinery at Bina for Rs12bn. (BS)
Aditya Birla Retail, Bharti Enterprises, Reliance Retail, Trent, Mahindra Retail and others to open new stores spread over 5mn square feet. (BS)
Transformers and Rectifiers sets up a facility for manufacturing transformers at Moraiya in Ahmedabad with an investment of Rs1bn. (BS)
Orissa government recommends the prospecting license for Horomoto iron ore mines in favour of Jindal Stainless, which is setting up a 1.6mn tonne per annum integrated stainless steel project at Kalinganagar in Jaipur. (BS)
Hindustan Dorr Oliver is likely to go in for a rights issue. (DNA)
IVRCL Infrastructure to exit non-core operations and remain focused on water-related projects. (DNA)
Anant Raj may raise Rs20bn via QIP route. (DNA)
Tata Power Company plans to add 200 megawatts of capacity in the current fiscal year. (FE)
BOC India not increasing its equity now and is also not considering delisting of its stock. (BL)
RBI to allow SBI to guarantee the recently-concluded Rs42bn non-convertible debenture issue by Tata Motors. (ET)
Mindtree plans to address the healthcare market for technology solutions. (ET)
MNC arms’ delist plans may hit price wall. (ET)
Shopper Stop to invest Rs400mn to roll-out 3-4 stores in the current fiscal. (BS)
Tata Motors aims to sell 4,000 World Trucks in the current financial year. (BL)
Shriram Transport Finance Company is looking to invest Rs40bn for an acquisition. (BS)
SBI plans to add atleast 40mn new deposit customers from the rural area by FY11. (BL)
GDP recorded a growth rate of 5.8% in the fourth quarter of 2008-09. (BS)
Financial sector reform as well as an aggressive perusal of "new avenues of investments" on top of the policy heap, said PM. (ET)
Government may soon relax export curbs on agri products and may also lift the ban on future trading of agri commodities. (ET)
The communications ministry to seek telecom regulator Trai’s approval before going ahead with the new policy, which determine the allocation of additional airwaves to all existing telecom companies. (ET)
Forex reserves rose US$6.4bn to touch US$260.6bn during the week ended May 22 - the highest weekly rise since April 2008. (ET)
Finance minister to start the customary pre-budget consultations with different interest groups on Monday for preparation of the budget, likely to be presented in the first week of July. (DNA)
The government may consider hiking the prices of domestic coal. (DNA)
India’s iron ore exports dropped 12% yoy in March. (ET)
The government may increase the royalty rates on extraction of minerals like copper, iron ore and zinc. (ET)
The government is likely to unveil a Rs11.2bn relief package for indebted coffee growers. (ET)
The government is likely to ease control over the allocation of domestically-produced natural gas from December this year. (ET)
Bears still on summer vacation!
Winter is slumber, spring is birth, and summer is life…
The bulls got a new lease of life this summer with the Sensex up a staggering 80% since the first week of March (28% in May alone). Bears who thought stocks were headed south this summer and took off for a vacation may remain in hibernation for a while.
FIIs are back and so are local funds. And the surge in broader market suggests even the retail players may have taken the plunge. Most global markets are also on a roll on growing risk appetite. At the same time, commodity markets too are witnessing a strong rally, which may not be all that healthy after all. Worries remain over the ballooning fiscal deficit and a possible revival in inflation with so much liquidity sloshing around.
With Asian markets in the green, the start of a new week and a new month may see an extension of Friday’s bounce. Auto and Cement shares will be in focus as their monthly sales numbers are announced. Sentiment may be positive but given the sharp surge in the past three months, locking in some gains is not a bad idea.
General Motors (GM) will file for Chapter 11 bankruptcy protection in New York on Monday.
FIIs were net buyers in the cash segment on Friday at Rs2.73bn while the local institutions too poured in Rs8.7bn. In the F&O segment, the foreign funds were net buyers at Rs7.4bn. On Thursday, FIIs were net buyers at Rs21.29bn in the cash segment.
The current rally may not hold for long given the fact that we are yet to cover some distance before there is a sustained rebound both in India and globally. The Sensex was trading at around 12 P/E in early March. It is now quoting at 20 P/E, which is pretty steep, especially considering the current uncertain times. Though the Q4 GDP was better than expected and Q3 numbers too were revised up, it will take some time for India to return to the desirable growth rate of around 9%. Even the revised Q1 US GDP data is nothing to rejoice about, as the world's largest economy is still in considerable pain. The housing and financial markets there and in other advanced economies may also not recover as fast as many expect them to.
The majority of the world's leading investors do not believe the recent strong performance of stocks and other risky assets is sustainable, according to a report released on Monday. The FTSE All World equities index has surged more than 60% since hitting a low for the year in March. But Barclays Capital has revealed that just 17.5% of the 605 investors interviewed for its quarterly FX investor sentiment survey – including central banks, asset managers, hedge funds and international corporate customers – think risky assets have further to rise.
US stocks ended higher on Friday after a late-session rally pushed the major indexes to their biggest three-month run since 2007.
The Dow Jones Industrial Average rose 97 points, or 1.1%. The broader S&P 500 index gained 12 points, or 1.3%. The Nasdaq Composite index advanced by 12 points, or 1.3%.
Friday's advance capped an upbeat week for Wall Street. The Nasdaq rose 4.6% over the week while the S&P 500 was up 3.4% and the Dow gained 2.5%.
For the month, the Dow jumped 3.8%, while the S&P 500 rose 5.2% and the Nasdaq advanced 3.6%. May's gains mark the first time US stocks have risen for three consecutive months since October 2007.
US stocks seesawed for most of Friday's session but began to move higher in the last hour of trade, with blue-chip stocks like IBM and Coca Cola leading advancers on the Dow.
Rising oil prices have helped lift the US market in recent days. Oil prices have jumped around 30% in May, marking the largest monthly rise since March 1999. Crude closed above $66 a barrel as the dollar fell to a five-month low. The yield on the 10-year Treasury note slid to 3.46% as its price ticked up.
US stocks rose on Thursday after a government debt auction elicited solid demand, tempering fears that borrowing costs would rise. The major gauges all added about 1%.
The government also said that first-quarter GDP fell at a revised annual rate of 5.7%, narrower than the originally reported 6.1%. Economists expected the revision to result in a 5.5% rate of decline.
A measure of business activity in the Midwest surprisingly fell in May. The ISM-Chicago Purchasing Managers Index dropped to 34.9 in May from 40.1 in April, signaling contraction. Economists had expected it to rise to 42.
After the stock market closed on Thursday, Dell reported a drop in sales and earnings. The company said a slowdown in PC sales pressured its bottom line.
Before the opening bell on Friday, luxury retailer Tiffany & Co. reported first-quarter earnings of 20 cents per share, slightly lower than the 21-cent-per-share profit analysts had expected. But the jewelry maker maintained its full-year earnings forecast.
Activist investor William Ackman's quest to overhaul the board of Target fell flat at the retailer's annual shareholder meeting. None of Ackman's candidates for the board won a seat.
Shares of General Motors (GM) fell below $1 for the first time since the Great Depression as the troubled automaker appeared set to enter bankruptcy despite winning key concessions from the United Auto Workers.
Treasury prices rose, with the yield on the benchmark 10-year note slipping to 3.46% from 3.67% on Thursday. The yield on the 10-year note jumped to a six-month high of 3.71% earlier this week, raising fears that higher borrowing costs, particularly mortgage rates, could hinder an economic recovery.
In currency trading, the dollar plummeted against major international currencies. The dollar index, which measures the greenback's performance against a basket of other currencies, sank to a session low of 79.287, its lowest since mid-December.
NYMEX oil for July delivery rose $1.23 to settle at $66.31 a barrel. It was the highest closing price since Nov. 4, when crude settled at $70.53. COMEX gold for August delivery gained $17.30 an ounce to settle at $978.80.
European shares rose on Friday. The pan-European Dow Jones Stoxx 600 index climbed 0.8% to 209.52. Including Friday's move, the index is up 4.9% in May.
The UK's FTSE 100 index climbed 1.4% to 4,449.60, Germany's DAX 30 index rose 0.6% to 4,963.73 and the French CAC-40 index advanced 0.9% to 3,289.03.
It was the second straight day of gains for the Indian markets on Thursday. The upswing was seen despite weak cues from the US and the Asian markets. The Metal, Banking and the PSU stocks were among the top gainers followed by the Capital Goods and the Realty stocks. However, some offloading was seen in the Pharma, IT and FMCG counters.
The Sensex surged 186 points or 1.3% to close at 14,296 after touching a high of 14,377 and a low of 14,078. The index had opened at 14,115 against the previous close of 14,109.
The NSE Nifty gained 61 points or 1.4% to shut shop at 4,336.
Among the BSE Sectoral indices BSE Metal index was the top gainer adding 2.7%, followed by the BSE PSU index up 2.3%, BSE Bankex index up 1.8%, BSE Capital Goods index up 1.7% and BSE Realty index up 1.7%.
Shares of L&T gained by 2.3% to Rs1342 after the company announced its Q4 results with net profit at Rs9.99bn posting 3.3% growth as against Rs9.67bn in the same period last year. The company’s net sales grew 23.6% yoy at Rs104.7bn as against to Rs84.7bn and has one-time loss of Rs1.44bn. The company announced that it would pay dividend of Rs10.50 per share.
Shares of M&M advanced by 2.1% to Rs639 after the company announced its Q4 results with net profit at Rs4.18bn posting a growth of 89% yoy as against Rs2.21bn. Net sales were up 15% at Rs36.2 versus Rs31.4. The company Q4 EPS was at Rs10.81 versus Rs9.02 and also announced that they would pay dividend of Rs10 per share.
SAIL surged by over 6.5% to Rs164. The company’s Q4 net profit dropped 37% yoy at Rs14.9bn as against Rs23.8bn in the same period last year. The company posted revenues of Rs120.6bn as against Rs134.8bn.
After gaining over 700 points in two trading sessions, some cooling off is not ruled out as trader and investors would prefer to book some profits ahead of the weekend. No other immediate catalysts for now besides the GDP numbers tomorrow.
Sunday, May 31, 2009
Redington India
Investors with a two-year horizon may buy the shares of Redington India, an IT hardware and software distributor.
The company has potential for scaling up its sales in high growth markets of India, West Asia and Europe, even in a slowing global economy. Given the sharp rise in markets, investors may consider buying the stocks in a phased manner to capitalise on declines linked to broader markets. At Rs 230, the stock trades at 10 times its likely 2009-10 per share earnings.
In the recent March quarter, Redington’s revenues grew by 7.7 per cent over the same period in 2008, while net profits grew by 18.3 per cent over the same period.
Improving trends in IT hardware shipments, diversification from sales of electronic goods, and expanding after-sales services offer scope for revenue growth, while helping margin expansion. After two successive quarters of decline in hardware shipments around the world, sales growth is just starting to revive in the March quarter, especially in India, West Asian and African regions.
According to a recent IDC report, personal computer shipments in India have increased by 7 per cent sequentially in the recent March quarter. Further, hardware and software sales are likely to be to the tune of Rs 63,703 crore (7.1 per cent growth over 2008) and Rs 11,300 crore (17.4 per cent growth) in 2009.
This is expected to be led by Government spending on IT enablement, especially in schools and colleges, e-governance projects, and banking sectors. With the new Government in place, a continuity of policies is expected in these areas.
IDC pegs the Middle-East and African IT markets to be worth $80 billion by 2012, up from $51 billion in 2008. Other research agencies such as TPI also point out the increasing average contract values in the West Asian region.
Redington with a near 50-50 revenue split between India and the EMEA region, given its partnership with all global majors in the IT hardware and packaged software space, appears well placed to capture a substantial share of the pie.
The company has also diversified into selling non-IT products such as cameras, consumer-durables, and mobile-phones. Redington has tied up with Nokia to distribute the latter’s mobile phones in Africa. Given the relatively under-penetrated African market and the interest shown by several operators such as Bharti Airtel, Vodafone and several Chinese operators in having a larger footprint there, this partnership could be quite fruitful to the company.
Redington also has also started a chain of after-sales service and repair centres to capture revenues from services as well.
Competition from well-entrenched distributors such as Ingram Micro and the resulting pricing pressure is a key risk to this recommendation. Given the capital intensive nature of business, interest costs have increased by 35.8 per cent for the company in 2008-09, but due to margin expansion, the interest cover has been stable.
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