Derivatives - June 11 2009
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Thursday, June 11, 2009
Precious metals remain almost unchanged
Gold does not change but silver rises
Gold prices remained almost unchanged on Wednesday, 10 June, 2009. On one hand, prices were pulled up by rising crude price increasing their appeal as a hedge against inflation but at the same time strong dollar also pushed the prices down. But silver ended higher.
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 Wednesday, Comex Gold for June delivery ended at $954.7 an ounce on the New York Mercantile Exchange. Earlier during the day, it rose to a high of $966.7 and also fell to a low of $947.5. Last week, gold ended lower by 1.8%. Year to date, gold prices are higher by 10%.
Gold had ended the month of May higher by 9.8%. It was the highest monthly gain registered by gold in six months. Before this, gold had suffered losses in prior two months. For the month of April and March, 2009, gold had lost 3.7% and 2.1% respectively. But the metal gained 4.3% in the first quarter of this year.
On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (8%) since then.
On Wednesday, Comex silver futures for July delivery rose 8.5 cents (0.5%) at $15.225 an ounce. Last week, silver ended lower by 1.4%. For the month of May, silver gained 26.6%. It was the biggest monthly gain for silver in more than two decades. Year to date, silver has climbed 36% this year. For 2008, silver had lost 24%.
In the currency market on Wednesday, the dollar reversed its earlier losses. The dollar index, which weighs the strength of dollar against the basket of six other currencies, went up 1.3% at 80.541.
July crude rose $1.32, or 1.9%, to end at $71.33 a barrel on the New York Mercantile Exchange, closing at the highest level for a front-month contract in almost eight months.
EIA reported today that crude inventories fell by 4.4 million barrels in the week ended 5 June, 2009. On average, a build of 100,000 barrels was expected. Crude imports fell 676,000 barrels a day from the previous week, while gasoline demand over the past four weeks rose 0.4% from the same period last year, the report showed.
In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.
At the MCX, gold prices for August delivery closed lower by Rs 12 (0.08%) at Rs 14,595 per 10 grams. Prices rose to a high of Rs 14,720 per 10 grams and fell to a low of Rs 14,525 per 10 grams during the day's trading.
At the MCX, silver prices for July delivery closed Rs 18 (0.07%) higher at Rs 23,575/Kg. Prices opened at Rs 23,650/kg and roe to a high of Rs 23,945/Kg during the day's trading.
Crude stays above $70
Prices rise to eight month highs on energy department's weekly report
The inventory report by the energy department pushed crude prices higher on Wednesday, 10 June, 2009. Price rose to eight month high today after energy department energy department reported sudden draw in crude inventories for last week. The weekly crude oil inventory data showed a draw of almost 4.4 million barrels. On average, a build of 100,000 barrels was expected.
On Wednesday, crude-oil futures for light sweet crude for July delivery closed at $71.33/barrel (higher by $1.32 or 1.9%). Last week, crude ended higher by 3.2%.
Crude ended the month of May, 2009, higher by 30%. This was the largest month gain for crude in almost a decade. Prior to May, crude ended April and March, 2009 higher by 2.9% and 10.9% respectively. It rallied 11.3% in the first quarter. Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 51% since then. Year to date, in 2009, crude prices are higher by 42%.
The EIA reported today that crude inventories fell by 4.4 million barrels in the week ended 5 June, 2009. Refineries operated at 85.9% of their operable capacity last week, slightly lower than a week ago.
EIA also reported that crude imports fell 676,000 barrels a day from the previous week, while gasoline demand over the past four weeks rose 0.4% from the same period last year. Meanwhile, gasoline inventories fell 1.6 million barrels, and distillate stockpiles declined 300,000 barrels.
The Energy Information Administration yesterday raised its outlook for this year's crude-oil and gasoline prices. The body said that crude prices are expected to average $58.70 a barrel this year. That's up from the $52 a barrel the EIA had forecast a month ago. It also raised the outlook for next year's crude price to $67.42 from $58. The EIA also said regular gasoline prices are expected to average close to $2.70 a gallon in July. The average regular gasoline price averaged across the full year is expected to be $2.33 a gallon.
Also at the Nymex on Wednesday, July reformulated gasoline rose 4.86 cents, or 2.5%, to $2.0153 a gallon, and July heating oil added 2.5 cents, or 1.4%, to $1.8326 a gallon.
July natural-gas futures fell 2.3 cents, or 0.6%, to $3.708 per million British thermal units.
Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.
At the MCX, crude oil for June delivery closed at Rs 3,368/barrel, higher by Rs 70 (2.1%) against previous day's close. Natural gas for June delivery closed at Rs 176.1/mmbtu, lower by Rs 0.2/mmbtu (0.1%).
Daily News Roundup - June 11 2009
L&T is close to pulling out of Ultratech by selling its entire 11.5% stake. (ET)
Reliance Industries increases LPG supplies to IOC, BPCL and HPCL. (BS)
Tata Communication raises Rs1.5bn through sale of bonds. (BS)
M&M is likely to buyout its local partner in Mahindra South Africa. (BS)
Bharti Airtel has entered into a managed services deal with Conviva, a provider of value added services to mobile operators. (BS)
Unitech to launch a new home brand "Uni Homes" for affordable housing projects. (BL)
Tata Tele to roll out GSM services by month end. (ET)
Dr Reddy’s received USFDA approval for its ant-heart burn capsule. (BS)
Infosys to bet big on Latin American region. (ET)
Wipro expects muted revenue growth in current year. (BL)
SAIL may get full operational rights of the Chiria mines in next 100 days. (FE)
Cairn India arm plans to invest US$10mn in Sri Lanka. (FE)
DLF has received shareholder approval to hive-off its wind power business into a wholly-owned separate arm. (FE)
TVS exits air-brake JV with Wabco of US. (ET)
Promoters of Suzlon have revoked 4.2% stake in the company. (FE)
REC has sought government approval to raise Rs30bn by selling 20% stake to institutional investors or through an FPO. (FE)
REC is looking to place Rs20bn worth of bonds with LIC. (ET)
NMDC to acquire 51% stake in ailing public sector undertaking Kudrenukh Iron Ore company, under a share swap deal. (ET)
GMR Energy has finalized Rs4bn investment plan to relocate and restart its naphtha fired power project from Mangalore to Kakinada. (BS)
Corporation Bank may restructure another 2% of its advances in FY10. (BS)
Jet Airways, JetLite and Spice Jet have cut fares by about 48%. (ET)
Yes Bank plans to lower its BPLR by 50bps in next month. (FE)
PSL plans to raise Rs3bn through preferential private placement. (FE)
Mercator Lines is set to acquire three gearless post Panamax bulk carriers totaling 277,000dwt on a charter basis. (ET)
Kingfisher Airlines may roll over Rs8bn debt. (BS)
Royal Orchid is looking to invest Rs5bn over next two years for setting up 5-star and 4-star hotels in major cities. (ET)
Zensar may expand its delivery network in the next two years. (BL)
FM has asked public sector banks to cut rates in the next three weeks. (FE)
Service tax rate may return to 12%. (ET)
GST rate may be set at 16%. (ET)
DoT puts 2G spectrum allocation on hold. (ET)
Gold imports in the country fell by 39% in May 2009. (FE)
Glare of spotlights!
There are two kinds of light - the glow that illuminates, and the glare that obscures.
After bright starts and finishes for two days, the bulls may find the heat and light a little glaring to handle. Despite smart gains in the main indices the broader market has cooled off. While time seems overripe for frontline stocks to also ease a little, the spotlight will remain on select counters. While US indices fell, European markets did manage some gains, largely owing to strength in commodity shares. We expect a flat opening and a choppy day.
Spurt in crude and other commodities has once again brought inflation into the spotlight, which could dip to its lowest levels. Concerns have also grown over hardening of interest rates in bond markets. Govt may overshoot its estimated borrowings and fiscal deficit could widen.
Subdued credit growth is another worry. Monsoon could be lower than expected. Budget may disappoint. Exports are sliding. Fundamentals of India Inc. are yet to catch up with the surge in stocks. Considering these headwinds, one may argue that the recent run-up has gone too far, too fast. On the bright side, the downside may not be scary.
FIIs were net buyers in the cash segment on Wednesday at Rs7.38bn while the local institutions pumped in Rs5.9bn. In the F&O segment, the foreign funds were net buyers at Rs10.67bn. On Tuesday, FIIs were net buyers at Rs9.9bn in the cash segment. Mutual funds were net buyers at Rs3.2bn on the same day.
Tata Tea is likely to do well on the back of strong results.
US stocks erased partial losses, but that was not enough as they ended lower on Wednesday. Rising bond yields and higher commodity prices added to worries that inflation could limit any recovery effort.
The Dow Jones Industrial Average lost 24 points, or 0.3%, to 8,739.02. The S&P 500 index lost almost 3 points, or 0.4%, to 939.15. The Nasdaq Composite index lost 7 points, or 0.4%, to 1,853.08.
The Dow average climbed above its level at the end of 2008 only to erase its year-to-date gain by the close of trading for the fifth session in the past seven. The benchmark last ended trading above its Dec. 31 close of 8,776.39 on Jan. 6.
The S&P 500 and Nasdaq have been positive for the year since May and April and have climbed 4% and 18%, respectively.
Treasury prices slumped, boosting the corresponding yields. The benchmark 10-year note fell and its yield rose as high as 4% before ending the session at 3.94%, up from 3.86% on Tuesday. Yields rose after the government's sale of $19bn in 10-year notes received lukewarm response - and reports suggested that Russia will cut its share of US debt.
Wednesday's auction was the second of three sales this week that will raise $65bn, part of a record US borrowing program to finance economic recovery measures.
US stocks are coming off the best three-month run since 1982, as measured by the Dow industrials, and the best since the 1930s, as measured by the S&P 500. The run up from the lows of March 9 has lifted the Dow over 30%, the S&P nearly 39% and the Nasdaq around 45%.
New worries have surfaced over the last few days. The bond market is worried about inflation and the rise in commodity prices is adding fuel to fire. There is a little bit of a worry that this will dampen the economic recovery.
Commodity prices have been rallying lately, due to the weak dollar and bets that the economic recovery will drive demand for so-called hard assets. But the rise in commodity prices also added to worries over inflation.
Italian automaker Fiat has closed a deal to buy the good assets of the bankrupt automaker, after the Supreme Court cleared the way for the deal late on Tuesday. Fiat will take a 20% stake in the company to start with, but that holding can increase to 35% if the company reaches certain goals. The new company - called the Chrysler Group - will be majority owned by the United Auto Workers union. The US and Canadian governments will also own stakes. Chrysler is expected to start operating immediately.
On Wednesday, the Obama administration dropped its plan to limit salaries at firms that have taken bailout money and instead introduced legislation to give shareholders more say in executive pay. Washington attorney Kenneth Feinberg was named the new "pay czar."
Home improvement retailer Home Depot said that it now expects full-year earnings in a range of flat to down 7%, versus its earlier guidance for a decline of 7%. Shares were little changed.
The Fed released its periodic "beige book" reading of the economy in its 12 districts. The report showed that the US economy remained weak or got weaker between mid-April and early May, although five of the districts said there are signs the pace of the recession is slowing.
Another report showed the US fiscal year deficit is now near $1 trillion after a $189.7 billion shortfall in May. The April trade balance widened to $29.2 billion from a revised $28.5 billion in March. Economists thought it would widen to $28.7 billion.
In currency trading, the dollar gained versus the euro and the yen.
US light crude oil for July delivery rose $1.32 to settle at $71.33 a barrel on the New York Mercantile Exchange, building on earlier gains after the government's weekly inventory report showed a surprise plunge in crude supplies.
COMEX gold for August delivery settled at $954.70 an ounce, unchanged from Tuesday.
European shares advanced, as hopes for a strong economic recovery in China prompted solid gains for metal extractors and oil producers. The pan-European Dow Jones Stoxx 600 index climbed 1.1% to 212.58, with most of the 15 Stoxx industry sectors in the green. The index rose as high as 215.05 in the session, a level not seen since November.
The UK's FTSE 100 index rose 0.7% to 4,436.75, the German DAX 30 index gained 1.1% to 5,051.18 and the French CAC-40 index climbed 0.6% to 3,315.27.
Indian markets extended the rally to second straight session on Wednesday led by strong cues from the Asian and the European markets. The capital goods, power and the banking stocks were among the top gainers. However, the realty stocks witnessed some offloading.
Finally, the Sensex surged 343 points or 2.2% to end at 15,470 after touching a high of 15,580 and a low of 15,168. The index had opened at 15,168 against the previous close of 15,127.
The NSE Nifty gained 105 points or 2.3% to shut shop at 4,656.
Among the BSE Sectoral indices BSE Capital Goods index was the top gainer surging 3.7%, followed by the BSE Power index up 3.6%, BSE Consumer Durables index up 3%, BSE Bankex index up 2.6% and BSE Pharma index up 2.3%.
The BSE Mid-Cap index gained 1.6% and BSE Small-Cap index up 0.5%. However, BSE Realty index declined 1.2%
Shares of Dr. Reddy's Labs surged by over 4.8% to Rs746 after the company announced that the USFDA granted approval of the company's ANDA for Omeprazole Mg OTC.
Shipment of the product will be phased over the remainder of the fiscal year 2010 with the first shipment likely to commence in early Q2 of fiscal year 2010. Omeprazole Mg is indicated for the treatment of heartburn. Dr. Reddy's formulation contains 20.6mg Omeprazole Mg and the dosage form is a capsule.
Shares of Maytas Infra gained by 4% to Rs86.9 after reports stated that the company will soon start work on two airports in Karnataka. The scrip touched an intra-day high of Rs87.7 and a low of Rs83.5 and recorded volumes of over 1.4mn shares on BSE.
Shares of RCom surged by over 5% to Rs349 after reports stated that the company has signed a JV with Kribhco to market telecom products. The scrip touched an intra-day high of Rs353 and a low of Rs334 and recorded volumes of over 5.1mn shares on BSE.
Shares of OBC gained by 1.2% to Rs179 after reported stated that the bank plans to raise Rs3.5bn to grow and maintain comfortable CAR. The scrip touched an intra-day high of Rs183.9 and a low of Rs178 and recorded volumes of over 82,000 shares on BSE.
Shares of Satyam and Tech Mahindra further extended gains on Wednesday after Satyam disclosed standalone unaudited financial results for the quarter ended December 31, 2008
The company’s Profit after tax for the October-December quarter stood at Rs1.81bn while the total income for the period was Rs22.06bn.
Operating profit (excluding other income) for the third quarter of FY09 is Rs3.64bn, while the operating profit margin is 15.87%. The PBIDT for the quarter stood at Rs2.76bn while the PBIDT margin was 12.51%.
Satyam shares were frozen at 10% upper circuit for second straight trading session to Rs73.50 as against previous close of Rs66.80 on Tuesday. The total quantity traded on BSE was 1.3mn.
Shares of Tech Mahindra also rallied by over 5.5% to Rs8784 hitting an intra-day high of Rs860 and a low of Rs759 recording volumes of over 3.7mn shares on BSE.
Given the outstanding rally in the past two days and with the NSE Nifty shutting shop above the 4,650 levels, bulls will look to extend gains. However, will Nifty sustain above the crucial technical level has to be seen. One cannot rule out profit booking at higher levels.
LLoyd Electric and Engineering
We recommend a buy in Lloyd Electric and Engineering from a short-term trading perspective. The stock has been on an intermediate term up-trend since the low of Rs 13.6 recorded on March 6. Though this trend is halting since the last week of May and a consolidation is in progress, we notice that the decline halted above Rs 37 that is 38.2 per cent retracement of the up-move since the March trough. Further the hammer pattern formed on Tuesday also indicates buying support around Rs 37. Though the 14-day relative strength index is moving lower, it is still in bullish zone at 59. Investors with a short-term horizon can buy the stock with a stop at 40.5. The stock can move up to Rs 46.6 in the near future.
via BL
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