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Tuesday, December 01, 2009
Market snaps two-day slide on robust Q2 GDP data
Key benchmark indices surged, ending a two-day losing streak, as the latest data showed the economy expanded at a stronger-than-expected 7.9% pace in the second quarter. However, intraday volatility was high. The barometer index BSE Sensex fell below the psychological 17,000 mark soon after a sharp surge took it above that level in afternoon trade. Today's rally was on the back of lower turnover.
Asian stocks surged after United Arab Emirates central bank on Sunday, 29 November 2009, offered additional liquidity to local and international banks in the UAE and reassured investors it "stands behind" the lenders. Also boosting the sentiments, global banks outside the Gulf said they were not heavily exposed to Dubai debt. The BSE 30-share Sensex was up 294.21 points or 1.77%, off 100.69 points from the day's high and up 270.47 points from the day's low.
Government data released today showed the gross domestic product (GDP) grew by 7.9% in Q2 September 2009, from 7.1% in the previous year, shattering forecasts as stimulus measures boosted demand and manufacturing activity surged. The economy had registered a 6.1% growth in the first quarter.
The bulk of the recovery was led by a 9.2% growth in manufacturing, while mining and construction activities also expanded by 9.5% and 6.5%, respectively. But agriculture continued to me a major drag with a mere 0.9% growth.
Reacting to the GDP figures Montek Singh Ahluwalia, Deputy Chairman, Planning Commission said economic growth forecast for the year to March 2010 may have to be revised upwards as data released today showed a faster expansion in September quarter. He added that there was no serious concern on inflation as of now and conventional monetary policy was unlikely to be effective in curbing food price rise.
Subir Gokarn, a central bank deputy governor said today that the recovery of the economy was gaining strength but December quarter numbers could be lower than the 7.9% annual growth recorded in the September quarter. Gokarn also said food price inflation was a matter of concern and authorities would keep a watch on capital inflows.
Finance minister Pranab Mukherjee today said he expects the economy to grow around 7% in the fiscal year ending March 2010. During the weekend, the finance minister said that Dubai's debt crisis would not affect India much, but the government is keeping a close watch and will act to prevent any fallout.
India's fiscal deficit during the April to October 2009 period was Rs 2.45 lakh crore ($52.7 billion), or 61% of the full-year target, the government said in a statement on Monday. Tax receipts were Rs 2.14 lakh crore and total expenditure was Rs 5.37 lakh crore for the first seven months of 2009/10 fiscal year.
Coming back to stocks, the market breadth was strong today. A total of 26 shares from the 30-member Sensex pack advanced. Metal stocks were at the forefront of the rally on fresh buying after the recent steep fall. Telecom pivotals extended Friday's gains on fresh buying. Cement and IT shares also gained on fresh buying. Index heavyweight Reliance Industries retraced from the day's high. Banking shares also retraced from day's high on profit booking.
Intraday volatility on the bourses was high. The market pared gains in morning trade after an initial rally triggered by firm Asian stocks. The market surged later on robust Q2 GDP growth data. The market struck fresh intraday high in afternoon trade as buying demand for index pivotals intensified. The market pared gains later as European stocks dropped. The market strengthened again in mid-afternoon trade. Profit booking in late trade capped gains in the market. The market once again pared gained again in late trade.
European markets were mostly lower today, 30 November 2009, weighed by financial and oil stock. Key benchmark indices in Germany, and France were down 0.70% and 0.90% respectively. However, UK's FTSE 100 index rose 0.35%. Trading in US index futures showed the Dow could fall 24 points at the opening bell today, 30 November 2009.
Earlier in the global day Asian stocks rose after the United Arab Emirates offered emergency assistance to banks in Dubai, soothing the market fears about a looming debt default. Key benchmark indices in China, Hong Kong, Japan, South Korea and Taiwan were up by between 1.22% to 3.25%. However, Singapore's Straits Times index fell 1.09%
Chinese shares surged after Beijing late Friday said it will maintain an active fiscal policy and moderately loose monetary policy next year, allaying investor concerns over a tightening policy bias.
Japanese manufacturing activity fell to a four-month low in November 2009, a survey showed today, suggesting growth in production is moderating as the effect of global stimulus measures fades. The Nomura/JMMA Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 52.3 in November 2009 from 54.3 in October 2009. The index remained above the 50 threshold that separates contraction from expansion for the fifth month in a row but declined for the second consecutive month from a three-year high set in September.
Japan's industrial production rose less than economists estimated in October 2009. Factory output increased 0.5% last month from September 2009, the slowest pace in eight months, the Trade Ministry said today, 30 November 2009, in Tokyo.
Dubai's Nakheel, developer of man made islands in the shape of palms, said on Monday it has asked for three of its listed Islamic bonds, or sukuk, on Nasdaq Dubai to be suspended until it is in a position to inform the market more fully. Nakheel is one of two flag ship companies, along with Dubai World, which announced last week that they would seek a debt standstill agreement from creditors, until May 2010.
United Arab Emirates' (UAE) central bank said on Sunday, 29 November 2009, it would back the country's lenders from a possible default by Dubai World. Abu Dhabi-based UAE central bank said financial institutions will be able to borrow using a special facility tied to their current accounts.
Meanwhile, the International Monetary Fund (IMF) said it welcomes the announcement by the central bank of the UAE to make available a special additional liquidity facility to back local and international banks operating there. The IMF said it will continue to monitor the situation following the unexpected announcement by the government of Dubai regarding a standstill on the debt of Dubai World and its Nakheel subsidiary, which has had an adverse impact on financial markets.
The UAE is a "strong resource-based economy," the fund also said. "We look forward to further clarification by the authorities towards a cooperative mechanism to address the issues between these debtors and their creditors," the IMF said
Markets from Asia to the US fell last week after Dubai World announced on 25 November 2009 that it was seeking to delay loan repayments. Dubai World, a state-owned holding company struggling with $59 billion of debt and other liabilities, said it would seek a standstill agreement with creditors and an extension of loan maturities until at least 30 May 2010. That raised the prospects of rising loan losses for UAE and foreign banks.
Trading in US index futures indicated a flat opening of US stocks on Monday, 30 November 2009. US index futures pared initial strong gains
In US on Friday, 27 November 2009, the Dow Jones Industrial Average fell 154.48 points, or 1.48%, to 10,309.92. The Standard & Poor`s 500 Index slid 1.72% to 1,091.49 and the Nasdaq Composite index declined 37.61 points, or 1.73%, to end at 2,138.44.
Back home, many companies were quick to play down their exposure to Dubai on Friday, 27 November 2009. Engineering conglomerate Larsen & Toubro said it had exposure to Dubai of $20 million to $25 million. India's largest listed realty firm, DLF, and second ranked Unitech said they had no exposure to Dubai, and leading private bank ICICI Bank said it had no material exposure. While Indian banks are heavily focused on the domestic market, they are active in handling remittances from overseas workers. State-run Bank of Baroda (BoB) has exposure of 7-8% of its loan book in the United Arab Emirates. BoB said the assets are good performing assets
Meanwhile, India and Canada have reached a landmark agreement on civil nuclear cooperation after months of hectic negotiations, paving the way for supply of Canadian atomic technology, equipment and uranium to India after a gap of 34 years. The negotiations on the deal were concluded at a meeting between Prime Minister Manmohan Singh and his Canadian counterpart Stephen Harper during the weekend.
Canada, the world's largest producer of uranium, is the eighth country to have reached a civil nuclear agreement with India since the Nuclear Suppliers Group lifted the 34-year-old ban on India to join the global nuclear trade in September last year.
Meanwhile, the government has reportedly decided to crackdown on corporates and individuals that have defaulted on payment of their self-assessment in the year in a bid to boost direct tax collections that are well below the target for the year.
The Central Board of Direct Taxes (CBDT), the apex direct tax body that administers corporate tax, personal income tax and wealth tax, has asked its field officials to crack down on companies that have not paid self-assessed tax for the year. In a letter sent last week, the CBDT has asked its field forces to investigate about Rs 90,000 crore of tax exemption claimed by various corporate taxpayers on account of various tax holidays in their returns.
The board's letter to the field comes in the backdrop of a dismal 3.92% growth in direct tax collections in first seven months from April to October 2009. Corporate tax collections grew by 4.59% in same period, meaning that the rate of growth has to be over 18% for the rest of the year for CBDT to achieve this target for the year 2009-10.
There are concerns that a glut in share sales may suck liquidity from the secondary market. A foreign brokerage firm expects Indian firms to raise roughly $70 billion through share sales over the next three years. The brokerage expects stake sales in state-run firms will account for $10-$15 billion of the total funds to be raised. The upcoming auction of third-generation mobile spectrum will also spur potentially billions of dollars in equity raising, although not necessarily from the public markets.
Indian companies have raised about $18 billion in equity thus far this year to repay high cost debt or to fund expansion plans. Last year, Indian firms raised $7.2 billion in equity.
The Reserve Bank of India (RBI) governor Duvvri Subbarao on Friday 27 November 2009 said an assessment of the impact of Dubai's debt problems was needed before deciding on a response. India's financial integration with the global economy is deeper than its trade integration, the central bank governor said.
Subbarao said that there was no benign policy option and that inflationary pressures were building up. The government on Thursday said it was concerned about rising prices, especially of food articles, and would take appropriate fiscal and monetary measures to contain them. "We are deeply concerned when prices go high," Finance Minister Pranab Mukherjee said on Thursday. "It will have to be done by us: control of monetary policy, control of credit policy, control of fiscal policy."
The six core industries grew 3.5% in October 2009 from a year earlier, slower than upwardly revised annual growth of 4.1% in September 2009, government data showed on Friday. During April-October, the first half of the 2009/10 fiscal year, output rose 4.7% from 3.3% in the same period in 2008/09. The infrastructure sector accounts for 26.7% of India's industrial output.
The BSE 30-share Sensex was up 294.21 points or 1.77% to 16,926.22. The Sensex opened 23.74 points higher at 16,655.75, also its day's low. It gained 394.90 points at the day's high of 17,026.91 in afternoon trade.
The S&P CNX Nifty was up 90.95 points or 1.84% to 5,032.70. Nifty December 2009 futures were at 5023, at a discount of 9.70 points as compared to the spot closing. Turnover in NSE's futures & options (F&O) was Rs 67,547.79 crore, sharply lower than Rs 96,075.18 crore on Friday, 27 November 2009.
The BSE Sensex had lost 566.94 points or 3.41% in the past two trading sessions on worries about Dubai's debt problems. Debt worries in Dubai sparked fears that the global financial markets have not healed properly since last year's crisis and that the Dubai problem could expose these weaknesses.
The Sensex gained 1,029.94 points or 6.47% in November 2009. A deluge of global liquidity has boosted stocks across the globe this year. Governments and central banks around the world have injected trillions of dollars in the past one year to pull the world out of a most severe recession since the 1930s Great Depression. The Sensex is up 7278.91 points or 75.45% in calendar year 2009, as on 30 November 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8765.82 points or 107.41% as on 30 November 2009.
Coming back to today's trade, the BSE Mid-Cap index rose 1.63%, underperforming the Sensex. The BSE Small-cap index gained 2.08%, outperforming the Sensex.
All sectoral indices on BSE ended higher. The BSE Metal index (up 3.66%), the BSE Teck index (up 2.55%), the BSE IT index (up 2.10%), outperformed the Sensex.
The BSE FMCG index (up 0.73%), the BSE Healthcare index (up 0.87%), the BSE Auto index (up 1.04%), the BSE Power index (up 1.05%), the BSE Bankex (up 1.23%), the BSE Realty index (up 1.28%), the BSE PSU index (up 1.51%), the BSE Capital Goods index (up 1.55%), the BSE Oil & Gas index (up 1.60%), the BSE Consumer Durables index (up 1.72%), underperformed the Sensex.
The market breadth, indicating the overall health of the market was strong. On BSE, 2062 shares advanced as compared with 761 that declined. A total of 72 shares remained unchanged.
Today's rally came on the back of lower turnover. The total turnover on BSE amounted to Rs 4311 crore as compared with Rs 5,353.31 crore on Friday, 27 November 2009.
Among the 30-member Sensex pack, 26 gained while only 4 of them declined. NTPC (up 0.92%), HDFC (up 2.25%), and Tata Power (up 1.76%), edged higher from the Sensex pack.
Telecom pivotals extended Friday's gains on fresh buying. India's largest cellular services provider by sales Bharti Airtel surged 5.69% to Rs 299.80 and was the top gainer from the Sensex pack. The company's chairman Sunil Mittal in a television interview on Friday said the company has no plans to cut SMS charges as of now and also ruled out any global acquisitions at present.
India's second largest cellular services provider by sales Reliance Communication (RCom) rose 3.06%. On Friday, the company had slashed SMS charges, further heating up an ongoing price war in the telecom market.
RCom said it would charge customers just 1 paisa per SMS in a new bill plan. The company also launched another plan where customers can send unlimited text messages by paying Re 1 per day. Currently mobile operators charge Re 1 for local SMSes.
Metal stocks extended early gains on fresh buying. India's largest private sector aluminium maker by sales Hindalco Industries surged 3.81%. On Friday, the Reserve Bank of India allowed the company to enhance foreign institutional investors (FII) limit to 40%.
Sterlite Industries (up 3.23%), Tata Steel (up 5.54%), Hindustan Zinc (up 8.01%), Sesa Goa (up 1.57%), Steel Authority of India (up 2.96%), JSW Steel (up 5.21%), advanced
Jindal Saw gained 6.44% after the company fixed 11 December 2009 as the record date for a 5-for-1 stock split. The company announced the record date after market hours on Friday, 27 November 2009.
Kalyani Steels spurted 5% after one of the promoter group companies hiked its stake in the firm. The company made this announcement during trading hours today, 30 November 2009.
Gujarat Mineral Development Corporation (GMDC) spurted 10.38%. As per recent reports, Gujarat State Petroleum Corporation (GSPC) is raising around Rs 900 crore by placing 5% equity stake with a clutch of financial institutions and Gujarat government-owned public sector enterprises (PSEs) including IDFC, LIC, State Bank of India and PSEs like Gujarat Mineral Development Corporation (GMDC), Gujarat State Investment (GSIL), Gujarat Industrial Development Board (GIDB) and others.
India's largest oil exploration firm by sales Oil & Natural Gas Corporation (ONGC) rose 2.73% on reports it has found traces of a new oil reserve in Gujarat in western India that could raise its onshore oil production by 20%. The new hydrocarbon structure is likely to produce at least 1 million tonnes per annum (mmtpa) of oil. This could be the largest onshore oil find for ONGC in the last one decade.
India's largest private sector firm by market capitialisation Reliance Industries (RIL) advanced 1% to Rs 1059.40. But the stock retraced from the day's high of Rs 1078. RIL has reportedly offered between US$10 billion and US$12 billion for acquiring LyondellBasell Industries.
Oil exploration stocks gained following rise in crude oil aided by a weaker US dollar. Cairn India (up 2.98%), and Oil India (up 2.92%), rose after US crude for January 2010 delivery rose 50 cents to $76.55 a barrel today, 30 November 2009, retracing some of Friday's $1.91 losses. Rise in crude oil prices will boost realizations from crude sales for oil exploration firms
Banking shares slipped from day's high on profit booking. Bank stocks had surged earlier in the day following buoyant economic data.
India's largest private sector bank by net profit ICICI Bank gained 0.88% to Rs 858.70 after striking day's high of Rs 884. India's second largest private sector bank by net profit HDFC Bank rose 0.49% to Rs 1756.25, retracing from day's high of Rs 1786. India's largest bank by branch network State Bank of India fell 0.42% to Rs 2233, after striking a day's high of Rs 2290
IT stocks rose on fresh buying on reports IT firms are on a hiring spree following revival in demand. India's largest software services exporter Tata Consultancy Services (TCS) gained 2.29%. TCS reportedly plans of employing about 25,000 new people for the year 2010-11.
India's second largest software services exporter Infosys Technologies rose 2.22%. As per reports, the company Infosys last month raised its hiring target to 20,000 for the fiscal year that ends in March 2010, up from its earlier forecast of 18,000.
India's third largest software services exporter Wipro rose 0.74%. The partially convertible rupee was trading at 46.49/50 per dollar, higher than 46.64/65 on Friday. A firm rupee negatively impacts operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.
Geometric rose 4.16% after one of the promoter group companies hiked its stake in the firm. The company made this announcement during trading hours today, 30 November 2009.
India's top truck maker by sales Tata Motors surged 5.16%. The company is reportedly planning to produce hybrid versions of its low cost car Nano to join in the environment-friendly trend.
The company reported a better-than-expected performance on a consolidated basis, thanks to a pick-up in sales volumes on a sequential basis for the Land Rover brand, coupled with reduced raw material costs. On consolidated basis, Tata Motors reported a net profit of Rs 21.78 crore in Q2 September 2009, compared to a loss of Rs 941.8 crore a year earlier.
Consolidated total income declined 8.20% to Rs 21506.94 crore in Q2 September 2009 over Q2 September 2008. The results were announced at the fag end of the trading session on Friday, 27 November 2009.
Other auto stocks saw mixed trend. India's largest small car maker by sales Maruti Suzuki India fell 0.58% whereas India's top tractor maker by sales Mahindra & Mahindra gained 1.64% on reports car makers plan to raise prices in two phase from next year following rise in input costs.
India's largest bike maker by sales Hero Honda Motors lost 1.71% to Rs 1715.90 and was the top loser from the Sensex pack
Cement shares rose following recent reports of hike in prices by Rs 8-10 per 5 kg bag in Maharashtra and Gujarat. Sanjay Ladiwala, the president of Cement Stockists and Dealers Association of Mumbai was quoted as saying that the price rise was due unavailability of railway wagons.
ACC (up 0.38%), Ambuja Cements (up 3.31%), UltraTech Cement (up 3.39%), Madras Cement (up 1.47%), and India Cement (up 1%), advanced
Select real estate shares extended Friday's recovery. Housing Development & Infrastructure (up 4.24%), Indiabulls Real Estate (up 1.84%), Orbit Corporation (up 1.22%), parsvnath Developers (up 0.53%), and Anant Raj Industries (up 0.97%), gained
However India's largest real estate firm by sales DLF fell 0.29%. The company said on Friday it had no exposure to Dubai. Unitech's slipped 0.50% despite saying it had no exposure to Dubai on Friday.
India's largest engineering & construction firm by sales Larsen & Toubro (L&T) gained 1.36%. L&T during market hours today announced the formation of a joint venture with the state-run Nuclear Power Corporation of India (NPCIL) for making nuke forgings, a crucial component in the construction of nuclear reactors. NPCIL would hold 26% in the venture and L&T the remainder.
Nitco fell 1.15% after the company reported net loss of Rs 8.27 crore in Q2 September 2009 as compared to net profit of Rs 9.74 crore in Q2 September 2008. The company announced the results during trading hours today.
Shriram EPC rose 3.29% after the company announced signing of a memorandum of understanding with China based NorthWest Electric Power Design Institute for executing thermal power projects. The company made the announcement during market hours today, 30 November 2009.
Construction stocks saw an across the board rally on fresh buying. India's biggest builder of dams Jaiprakash Associates surged 5.17% after its price target was raised to Rs 288 from Rs 211 earlier by a foreign brokerage firm.
Hindustan Construction Company (up 1.99%), Gammon India (up 0.56%), Unity Infraprojects (up 5.45%), IVRCL Infrastructures (up 3.88%) and IRB Infrastructures (up 4.33%), gained.
Valecha Engineering jumped 3.14% after the company's board approved raising funds upto $20 million. The company made this announcement after trading hours on Friday, 27 November 2009.
The construction sector grew 6.5% in the September quarter versus 9.6% in the year-ago quarter, government data showed today.
Tea stocks saw an across the board rally after Tea Board of India chairman Basudeb Banerjee was quoted as saying that tea production in India will be marginally lower this year than in the year before due to erratic weather.
Dhunseri Tea (up 9.34%), Goodricke Group (up 9.92%), Warren Tea (up 6.17%), McLeod Russel (up 7.12%), Assam Company (up 1.74%), and Tata Tea (up 1.60%), surged.
Jay Shree Tea and Industries rose 2.94% on reports the company is close to announcing its first overseas acquisition in Uganda.
Adani Enterprises rose 0.11% after the company fixed 11 December 2009 as the record date for a liberal 1:1 bonus issue. The company announced the record date after market hours on Friday, 27 November 2009.
Span Diagnostics jumped 10% after the company bagged an order worth Rs 22.96 crore. The company announced the new order win after market hours on Friday, on 27 November 2009.
Tata Steel was the top traded counter on the BSE with a turnover of Rs 230.14 crore followed by Suzlon Energy (Rs 176.14 crore), State Bank of India (Rs 170.35 crore), HDIL (Rs 163.56 crore), and Thinksoft Global Solutions (Rs 114.51 crore).
Cals Refineries led the volumes charts on BSE clocking volume of 3.81 crore shares followed by Suzlon Energy (2.27 crore shares), IFCI (1.62 crore), Unitech (1.14 crore shares) and Gujarat Mineral Development Corporation (58.21 lakh shares).
Suven Life Sciences was locked at 5% upper limit after the company secured three European patents on new chemical entities. The company made this announcement during trading hours today, 30 November 2009.
Monday, November 30, 2009
Sensex to open higher
Headlines for the day
Jay Shree Tea close to buying Uganda Firm - DNA Money
L&T, NPCIL to ink pact for Rs2k crore venture today - DNA Money
Spice Mobile to set up unit to make handsets - Business Line
ONGC close to big oil find - Business Standard
B K Birla firm close to buying tea estate in Africa - Business Standard
Events for the day
Major corporate action:
· Nil
Pre-market report
Global signals
· The European stocks that opened weak on Friday due to concerns over the Dubai debt closed with gains of over 1% as the banks leads the surge.
· The major US indices fell sharply by over 1.5% each on the back of Dubai’s debt default
· Today, the major Asian indices recovered part of its losses of Friday and opened green with the gains in the range of 0.70%-3.41% each. However Straits Times bucked the trend and fell by 1.87%. While at the time of writing this report, SGX Nifty was trading 47 points higher.
Indian markets
· The positive Asian cues will help the domestic indices to open with decent gains and trade higher, volatility to continue.
· Among the local indices, the Nifty could test the 5000-5050 range on the up side, while on the down side it could find support at 4920 and 4900. The Sensex is likely to get support at 16600 and may face resistance at 17000.
Indian ADR's
· Among the Indian ADRs trading on the US bourses, all the ADRs closed in the red with heavy losses in the range of 0.5%-7.53% each, except for VSNL that rose substantially by 2.47%.
Commodity cues
· In the commodity space, the Crude oil prices slipped sharply, with the Nymex light crude oil for January 2010 series falling by $3.06 to settle at $74.90 a barrel.
· In the metals space, the Comex Gold for February 2010 series declined by $12.60 to settle at $1176.00 a troy ounce, while Comex Silver for December series fell by $0.47 to settle at $18.34 to a troy ounce.
Daily trend of FII/MF investment in equities
· On November 27, 2009, FIIs were the net buyers of the Indian Stocks in the tune of Rs306.10 crore (with the gross purchase of Rs2935.20 crore and gross sales of Rs2629.10 crore).
· While the Domestic mutual funds mutual funds, on November 26, 2009, were the net sellers of the stocks in the tune of Rs257.50 crore (with gross purchase of Rs1015.40 crore and gross sales of Rs1272.90 crore).
Grey Market - MBL Infrastructures, Cox and Kings, JSW Energy
| Company Name | Offer Price (Rs.) | Premium (Rs.) |
| Cox & Kings | 330 | 4 to 5 |
| MBL Infra | 165 to 180 | 5 to 5.50 |
| JSW Energy Ltd. | -- | 2.50 to 3.00 |
Market seen advancing on recovery in Asian markets; GDP data eyed
The market is likely to end two day losses following recovery in Asian stocks and higher US index futures. Trading in US index futures showed the Dow could rise 58 points the opening bell today, 30 November 2009. The S&P CNX Nifty futures for December 2009 expiry were trading 47 points higher in Singapore. Gross domestic product (GDP) data for Q2 September 2009 to be announced by the government later in the day day will be closely watched. The economy grew at 6.1% annual rate in the June 2009 quarter
Most Asian stocks advanced today, 30 November 2009, ending a two-day slide, as concerns about Dubai debt default eased and the yen retreated from a 14-year high on the dollar. Key benchmark indices in China, Hong Kong, Japan, South Korea and Taiwan were up by between 1.50% to 3.45%. However Singapore's Straits Times index fell 1.90%
Meanwhile, the Dubai government announced a restructuring of Dubai World after the company shocked creditors by requesting a standstill on all financings to it and its subsidiary Nakheel, the "palm island" developer. Granting of the request would result in a technical default.
Dubai World, one of the emirate's main state holding companies, asked for a delay on maturities until at least 30 May 2010. The company has total debts of $59 billion, including $3.52 billion of Islamic bonds due 14 December 2009 from its property unit Nakheel.
The government's decision risks undermining investor confidence in Dubai, a Middle East financial hub. A decision is yet to be taken on how to deal with investors insisting on repayment in December.
Fears of a possible Dubai debt default rippled through markets for a second day on Friday but the exodus from stocks and rush to the safe-haven U.S. dollar slowed as investors discounted contagion. The Dow Jones Industrial Average fell 154.48 points, or 1.48%, to 10,309.92. The Standard & Poor`s 500 Index slid 1.72% to 1,091.49 and the Nasdaq Composite index declined 37.61 points, or 1.73%, to end at 2,138.44.
Back home, auto majors Maruti Suzuki India and Mahindra & Mahindra may see action as they reportedly plan to raise prices in two phase next year as input costs have increased. State Bank of India may also be in action on its plans to open 23 branches overseas in the next four months. The bank plans to have 160 overseas branches by March 2010.
There are concerns that a glut in share sales may suck liquidity from the secondary market. A foreign brokerage firm expects Indian firms to raise roughly $70 billion through share sales over the next three years. The brokerage expects stake sales in state-run firms will account for $10-$15 billion of the total funds to be raised. The upcoming auction of third-generation mobile spectrum will also spur potentially billions of dollars in equity raising, although not necessarily from the public markets.
Indian companies have raised about $18 billion in equity thus far this year to repay high cost debt or to fund expansion plans. Last year, Indian firms raised $7.2 billion in equity.
The Reserve Bank of India (RBI) governor Duvvri Subbarao on Friday 27 November 2009 said an assessment of the impact of Dubai's debt problems was needed before deciding on a response. India's financial integration with the global economy is deeper than its trade integration, the central bank governor said.
Subbarao said that there was no benign policy option and that inflationary pressures were building up. The government on Thursday said it was concerned about rising prices, especially of food articles, and would take appropriate fiscal and monetary measures to contain them. "We are deeply concerned when prices go high," Finance Minister Pranab Mukherjee said on Thursday. "It will have to be done by us: control of monetary policy, control of credit policy, control of fiscal policy."
The six core industries grew 3.5% in October 2009 from a year earlier, slower than upwardly revised annual growth of 4.1% in September 2009, government data showed on Friday. During April-October, the first half of the 2009/10 fiscal year, output rose 4.7% from 3.3% in the same period in 2008/09. The infrastructure sector accounts for 26.7 percent of India's industrial output.
Key benchmark indices ended lower on Friday, 27 November 2009 despite a sharp rebound in second half of the day's trading session. The BSE Sensex fell 222.92 points or 1.32% to 16,632.01 and the S&P CNX Nifty was down 63.80 points or 1.27% to 4941.75.
The BSE Sensex had lost 566.94 points or 3.41% in the past two trading sessions on worries about Dubai's debt problems. Debt worries in Dubai sparked fears that the global financial markets have not healed properly since last year's crisis and that the Dubai problem could expose these weaknesses.
As per provisional data on NSE, foreign funds sold shares worth Rs 1057.18 crore and domestic funds bought shares worth Rs 698.67 crore on Friday, 27 November 2009.
Wall Street joins world in reacting to Dubai crisis
Early gains in the week help indices register little weekly losses
It was a holiday shortened week at Wall Street that ended on Friday, 27 November, 2009 with US market being closed on Thursday, 26 November, 2009 on account of Thanksgiving Holiday and half day closed the following the day. But due to weakness in the later part of the week, indices suffered little losses for the week, though market had managed a strong start on Monday, 23 November, 2009. But news of Dubai's debt crisis rattled Wall Street once again.
For the week, Dow ended lower by 8.24 points (0.1%) at 10,309.92. Nasdaq ended lower by 7.6 points (0.4%) at 2138.44. S&P 500 ended almost unchanged at 1091.49. Sector wise, financial led the pack of losers while healthcare and telecom led the pack of gainers.
Market made off to a good start on Monday, 23 November, 2009, following a weak dollar and better thane expected housing report. Market managed to cling to its gains for the following two days – Tuesday and Wednesday. Among economic reports expected for the week, the housing data showed that home sales in October rose 10.1% to 6.1 million homes, greatly outpacing expectations of 5.7 million as the first-time home buyers tax credit provided much of the incentive for the increase.
The world stock markets revisited last year's stock market crisis partly on Wednesday, 25 November, 2009 after news hit the wires that the Dubai government asked creditors, which reportedly include many European banks, particularly in the United Kingdom, to defer payments on some $20 billion in debt coming due over the next 18 months. Reportedly, Dubai World, the largest corporate entity in the Persian Gulf emirate, asked creditors last Wednesday for a six-month stay on repayment of $60 billion in debts. Indices across the world just plunged soon after the news.
Wall Street reacted a little late to the news with market being closed on Thursday, 26 November, 2009. In the US market on Friday, 27 November, sellers moved concertedly to pressure stocks amid news of credit troubles in Dubai. Their actions gave the stock market its worst single-session percentage drop of the month and caused volatility to spike.
On that day, The Dow Jones Industrial Average ended lower by 154.48 points at 10309.92. Nasdaq ended lower by 37.61 points at 2138.44. S&P 500 ended lower by 19.13 points at 1091.51. Losses were broad based, too. In fact, all 30 Dow components logged a loss. Broader market pressure and weakness among commodities took their toll on the materials sector and the energy sector. The two led declines for most of the session.
Crude prices fell at Nymex on Friday, 27 November, 2009. Prices fell as the debt concerns in Dubai further troubled investors. The rising dollar also pressured the crude oil prices.
On Friday, crude-oil futures for light sweet crude for January delivery closed at $76.05/barrel (lower by $1.91 or 2.4%). Earlier during the day, the contract dropped to a low of $72.39. For the week, crude ended lower by 1.8%.
Yellow metal prices ended their nine day consecutive winning streak and ended lower on Friday, 27 November, 2009. Prices fell as the debt concerns in Dubai further troubled investors. The rising dollar also pressured the precious metal prices. Silver prices also ended substantially lower.
On Friday, gold for December delivery ended at $1,174.2, lower by $12.8 (1.1%) an ounce on the New York Mercantile Exchange. Earlier during the day, it rose to a high of $1,195 and also fell to a low of $1,130. In the previous nine sessions, gold gained more than 7%. For the week, gold gained 2.6%. On a year to date basis, gold price is higher by 33%.
In the currency market on Friday, the dollar headed up against most of the major currencies. The dollar index, which measures the strength of dollar against basket of six other currencies, rose by almost 0.2%.
For the year, Dow, Nasdaq and S&P 500 are higher by 17.5%, 35.6% and 20.8% respectively.
Earnings season has ended for this season at Wall Street and there are no notably Treasury auctions for the coming week. But the economic calendar is full, with the ADP Employment change on Wednesday, 2 December, 2009 preceding the key Nonfarm Payrolls figure and Unemployment Rate on Friday, 4 December, 2009.
Daily News Roundup - Nov 30 2009
Suzlon Energy's subsidiary REpower Systems receives an order from Saint-Laurent Énergies, Canada, for supply of 954MW of wind turbines ;deal size is estimated at about US$1bn. (BL)
L&T is all set to ink a JV agreement with Nuclear Power Corp for setting up an Rs20bn project to make forgings for nuclear power plants. (BL)
ONGC finds traces of a new oil reserve in Gujarat which could increase the company’s total onshore oil production by about 20%. (BS)
Mahindra Satyam, Siemens and Patni Computers, are in the race for selection as IT implementing agencies for the government’s automation programme worth Rs100bn. (ET)
Wockhardt and DBS Bank have agreed to an out-of-court settlement of a dispute over loans the drug manufacturer had taken from the Singapore-based lender. (BS)
GMR Group is in talks with private equity funds 3i Investments and Macquarie-SBI Infrastructure to raise US$450mn in GMR Airport Holdings. (ET)
Barclays Capital and Calyon have petitioned the High Court to liquidate the assets of Wockhardt and distribute its proceeds to lenders. (BS)
Tatas, L&T in race for the 35-km high-speed rail transport between Bangalore International Airport at Devanahalli and the city centre. (BS)
The US drug regulator has commenced inspection of Lupin’s upcoming plant at Indore last week. (ET)
Gammon plans to make an yearly investment of up to Rs50bn for roads development projects and is looking to bid for 10 projects by fiscal end. (ET)
Shriram EPC has signed a MoU with North West Electric Power Design Institute of China to form a consortium to undertake EPC contracts for thermal power projects in India. (BL)
Marico and Godrej Consumer Products are in the race to buy British skincare brand Simple, one of the largest beauty product brands in the UK. (FE)
TCS has said that it will recruit about 25,000 people in 2010-11. (BL)
Bajaj Auto to launch sub-150 cc Pulsar. (BL)
Reliance Capital plans to acquire a controlling stake in Quant Capital. (BS)
Reliance Communications cuts SMS charges, further heating up the ongoing tariff war in the Indian mobile telephony market. (BL)
Aditya Birla Retail is considering an IPO and will time it as soon as the company starts spinning profits. (DNA)
ABG Shipyard said its open offer for 32.1% stake in Great Offshore will now commence on December 3. (FE)
Jay Shree Tea is close to announcing its first overseas acquisition, in Uganda. (BS)
Spice Group plans to enter mutual funds, stock broking and distribution and micro-finance businesses by March 2010. (BS)
Spice Mobile plans to start a manufacturing unit for mobile devices in the country by next year, with an initial investment of Rs1bn. (BS)
Foreign exchange reserves fell by US$1bn to US$285bn, for the week ended November 20. (BL)
Sufficient room for banks to cut lending rates further, says RBI governor. (BL)
Six core infrastructure industries see 3.5% yoy growth in October, compared to 4.1% and 7.8% levels of the preceding two months and the 2% for Oct’ 08. (BL)
The 46 operational airports in the country handled 42mn domestic passengers during April-Sept’ 2009-10, which is about the same as the numbers handled in 2007. (BL)
FDI into India declined 11% yoy to US$15bn in the first six months of fiscal 2009-10. (DNA)
Exports dip 6.6% yoy in October. (TOI)
Finance Ministry says no to income tax holiday for first 7 NELP rounds. (FE)
The government is assessing the needs of major export-oriented sectors hit by the economic slowdown to provide support for their fast recovery. (BS)
India’s drug retail market grew by 29.24% in value terms in October this year over the year-ago period. (ET)
Government plans ultra mega steel projects, to identify five locations adjacent to mining sites for developing UMSPS. (ET)
The Perfect Storm!
There is bound to come some pain, surely as there are storms and falling rain; just believe that the one who holds the storms will bring the sun.
The bears seem to have found the perfect storm in the desert. For long they have been scouting for a reason to break the range-bound trade and the Dubai-debt issues seem to have done the trick. UAE authorities seem to be coming up with a solution; albeit temporary, and this could at least limit the collateral damage.
We expect a bounce back at start today. Some amount of domestic buying, especially in the large caps is likely after they were randomly beaten down last week. Investors too may have pondered enough over the weekend and decide that the situation is not that bad after all for the time being. The Asian markets are staging a comeback recording decent gains.
The GDP numbers expected later in the day could add to the sentiment if above expectations. Some surveys suggest the India’s economy grew at the fastest pace in a year thanks to record-low interest rates and government stimulus measures.
The primary fears include that a bailout in Dubai may feed further bubbles. Beijing says it plans to continue its stimulus measures. Back home, the RBI says it is watching the situation closely. The event could delay the central bank’s exit measures for some time.
Japanese benchmark moved higher on expectations that the Dubai issue would be limited; moreover the yen’s appreciation halted. For the sake of the world, Dubai World will hope to live up to its tagline of "The sun never sets on Dubai World."
Finance Minister Pranab Mukherjee had said attempt was being made to balance the need to create jobs against inflation concerns. Food inflation meanwhile has climbed to 15.58% and remains a major concern.
Meanwhile Federal Reserve Chairman Ben Bernanke, has written a strong article in a newspaper warning Congress that actions limiting the Fed’s independence could prove detrimental to the causes of financial reform and economic recovery. "The government's actions to avoid financial collapse last fall -- as distasteful and unfair as some undoubtedly were -- were unfortunately necessary to prevent a global economic catastrophe that could have rivaled the Great Depression in length and severity, with profound consequences for our economy and society," he wrote.
Among other news in the media:
Foreign exchange reserves fell by US$1bn to US$285bn, for the week ended November 20.
Six core infrastructure industries see 3.5% yoy growth in October, compared to 4.1% and 7.8% levels of the preceding two months and the 2% for Oct’ 08.
The 46 operational airports in the country handled 42mn domestic passengers during April-Sept’ 2009-10, which is about the same as the numbers handled in 2007.
FDI into India declined 11% yoy to US$15bn in the first six months of fiscal 2009-10.
Exports dip 6.6% yoy in October. The government is assessing the needs of major export-oriented sectors hit by the economic slowdown to provide support for their fast recovery.
Finance Ministry says no to income tax holiday for first 7 NELP rounds.
India’s drug retail market grew by 29.24% in value terms in October this year over the year-ago period.
Government plans ultra mega steel projects, to identify five locations adjacent to mining sites for developing UMSPS.
It seems like fatigue and F&O expiry took its toll on the bulls today. The key indices were attempting to break out of a range where the correction had set-in last month. Lack of any events in the near term, which could trigger a big push towards new highs brought the indices lower.
Also, weakness in European markets following a sharp decline in Chinese stocks triggered a sell-off on Dalal Street in the afternoon trades.
The BSE Sensex lost 344 points to end at 16,854 after touching a high of 17,202.51. The NSE Nifty lost 103 points to close at 5,006.
Among the BSE sectoral indices, banking (2.64%), oil&gas (2.3%), consumer goods (2.24%), realty (2.11%) and IT (1.97%) stocks were the major losers respectively.
The BSE Mid-Cap index ended lower by 1.45% while the BSE Small-Cap index was down by 0.98%. Among the 30-components of Sensex, Hindustan Unilever, Sun Pharma, ACC, Hero Honda were among the top gainers. Top losers in Sensex were Reliance Industries, ICICI Bank, Tata Steel, M&M and SBI.
Indian stock market breadth was extremely negative and pared early morning gains as traders squared off positions on the settlement day of November series.
Private banking stocks declined sharply despite of government planning to move a bill early next year to amend a banking law for allowing foreign investors in private banks to have voting rights in proportion to their shareholdings. ICICI Bank dropped by 4%. HDFC Bank slipped by 2% and Axis Bank slipped by 2% to Rs997.
Tata Steel lost over 3% after it reported a consolidated net loss of Rs2,707cr in Q2 September 2009. Net sales fell 42.8% to Rs2,5270cr in Q2 September 2009.
Auto stocks fell on account of profit booking. Maruti, Mahindra & Mahindra and Tata Motosr were among the top losers.
Profit booking was seen in shares of Uttar Pradesh-based sugar companies, which rose on Wednesday. State's sugar mill association signed an agreement with the sugarcane farmers on the price for the ongoing season (October-September 2009-10). Balrampur Chini, Bajaj Hind and Dhampur Sugar have lost in the range of 2-3%.
In Asia, Australia's S&P/ASX ended lower by 0.29 % at 4708.60, Shanghai Index in China lost 3.6% and Hang Seng index in Hong Kong was down 1.78%.
In Europe, DAX in Germany was down by 1.85% and the CAC 40 index of France dipped 1.97%.
Asian stocks open in positive
Asian stocks may extend their best annual rally in 16 years, with a regional index poised to gain 20% in 2010 as foreign fund flows into the region`s equities increase, BNP Paribas said.
Japanese benchmark index Nikkei 225 rose 225.49 points, or 2.48%, to trade at 9,307.01.
Hong Kong`s Hang Seng is rose 553.19 points, or 2.62%, at 21,687.69.
China`s Shanghai Composite increased 72.84 points, or 0.99% to trade at 7,432.88.
Taiwan`s Taiex index was rose 90.47 points, or 1.21%, to trade at 7,581.38.
South Korea`s Kospi index increased 38.26 points, or 2.51% to trade at 1,562.76.
Singapore`s Straits Times index declined 7.37 points, or to 0.27% trade at 2,754.85. (7.42 a.m., IST)
Tata Communications
We recommend a buy in the stock of Tata Communications from a short-term perspective. It is apparent from the charts that the stock has been on a medium-term downtrend from its May high of Rs 651 (a 52-week high). In late October, the stock broke through the significant support level at Rs 450 by experiencing high selling interest. Subsequently, the stock tumbled sharply and found support at around Rs 350 in early November, a long-term support. Since then the stock had been on sideways movement just above this support. On November 27, the stock gained almost 6 per cent accompanied with high volume, crossing over the 2-day moving average. With this gain the stock has formed a bullish engulfing candlestick pattern signalling short-term strength. The daily relative strength index (RSI) had entered the neutral region from the bearish zone and weekly RSI is recovering from the oversold territory. The daily moving average convergence and divergence indicator has signalled a buy. We are bullish on the stock from a short-term perspective. We anticipate it to move up until it hits our price target of Rs 420. Trader with a short-term horizon can buy the stock while maintaining a stop-loss at Rs 364.
via BL
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