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Thursday, February 04, 2010
Daily Call - Feb 4 2010
Dow ended two day winning streak as Obama’s pledge to complete banking and healthcare reforms revived fears of increased regulation and Pfizer’s disappointing outlook weighed on the health sector. A lesser than expected growth in US service sector also added to the negative sentiment. Metal prices fell back as the dollar strengthened. European markets too broke 3 day rising streak to close with about half a percent cuts as caution came back ahead of Thursday's Bank of England monetary policy decision and Friday's U.S. jobs report.
Positive global cues and short covering propelled our market higher in yesterday’s trade. While FIIs bought Nifty futures worth 2447 cr, Nifty OI went down by 7%, indicating short covering. A provisional buying of Rs. 396 cr in cash segment by FIIs was more heartening. Kirit Parikh panel, in its report submitted to Oil Ministry yesterday, has made some bold recommendations, the prominent ones being- Complete deregulation of petrol and diesel price, Rs. 100/cylinder hike in LPG and Rs. 6/litre hike in kerosene. While it is unlikely that these recommendations will be accepted in toto, Oil PSUs are likely to get a sentiment booster. Expect the market to recover after lower opening. Day traders can initiate long positions with first 10 minutes low as SL. At the risk of repeating, 4967 remains the resistance on the upside. 4814 is the immediate support followed by important one at 4750.
Pfizer earning report sends US stocks lower
Market ignores upbeat economic reports
After two consecutive days of rally, US stocks fell on Wednesday, 03 February 2010. Earnings miss from Pfizer weighed on the healthcare sector and the same soured overall market sentiment. The economic data that checked in for the day were upbeat in nature but did little to help stocks to trade higher. Nasdaq was the only index to finish marginally higher with help from technology stocks.
At the end of the day on Wednesday, 03 February 2010, the Dow Jones Industrial Average ended lower by 26.3 points at 10,270.55. Nasdaq ended higher by 0.85 points at 2190.91. S&P 500 ended lower by 6.04 points at 1097.28. Indices had opened marginally higher during the day.
Eight of ten economic sectors ended in the red led by healthcare, financial and materials sectors. Technology and consumer discretionary sectors were the only winners.
Pfizer and Merck were the main Dow laggards today. Mac Donalds was the major Dow winner. Mac Donalds received investment upgradation in its rating from one of the investment firms.
In the latest earning report, the drug giant, Pfizer, said its fourth-quarter profit more than doubled to $767 million, but the result fell short of Wall Street estimates. The company also scaled back 2012 revenue estimates, hurting sentiment around the sector. Fellow drug component Merck also fell considerably.
In other earning area, insurers Aflac and MetLife each exceeded consensus earnings estimates.
Among economic data expected for the day, The Institute for Supply Management reported on Wednesday, 03 February 2010 that the service sector of the US economy moved back into growth territory in January 2010. The ISM nonmanufacturing index rose to 50.5% from 49.8% in December against an expected figure of 51.
Readings above 50% in the diffusion index indicate that activity at more firms is expanding than contracting. The index had been above 50% for two months in the fall but then slipped under that threshold in November and December. Only four industries reported growth, while 11 reported contraction.
A private sector job report also showed that US economy had shed the least number of jobs in January 2010 since the recession hit in 2007.
In the currency market on Wednesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 0.5%.
Crude oil prices ended lower on Wednesday, 03 February 2010. Prices fell as crude inventories rose more than expected. Earlier during the day, upbeat economic reports had pushed crude prices higher. Strong economic reports generally tend to push crude prices higher on anticipation of higher demand in coming months. The strong dollar further pushed crude price lower today.
On Wednesday, crude-oil futures for light sweet crude for March delivery closed at $76.98/barrel (lower by $0.25 or 0.3%). On a year to date basis, crude is still lower by 4.3%.
The Energy Department in US reported on Wednesday, 03 February 2010 crude oil inventories rose by 2.3 million barrels in the week ended 29 January 2010. Market was expecting a decline of 1 million barrels in crude stocks.
In the weekly inventory report, the EIA also said inventories of distillate, which includes heating oil, fell by 948,000 barrels, while gasoline stocks fell by 1.3 million barrels. Market was expecting a buildup of 1.5 million barrels in gasoline stocks. The report also stated that refinery utilization fell to 77.7%, while it was expected to rise 0.25% to 78.75%.
Barring Dr Reddys and VSNL, all Indian ADRs ended higher today. ICICI Bank and Rediff.com were the main winners soaring 3.3% and 2.6% respectively. Dr Reddys and VSNL shed 0.9% and 0.6% respectively.
Tomorrow, there are a couple of economic reports scheduled for the day – the initial and continuing claims followed by the productivity report. Other than that, earning reports will continue to dominate.
Grey Market Premium - Feb 4 2010
| Company Name | Offer Price (Rs.) | Premium (Rs.) |
| Jubilant Food Works | 135 to 145 | 18 to 19 |
| Aqua Logistics | 200 to 225 | 7 to 7.50 |
| Syncom Healthcare | 65 to 75 | 9 to 10 |
| Thangamayil Jewellery | 75 | 3 to 3.50 |
| Vascon Engg. | 165 | 8 to 9 |
| D. B. Realty | 468 | 10 to 11 |
| Emmbi Polyarns | 40 to 45 | 4.5 to 5 |
| NTPC (FPO) | 201 | 10 to 12 |
| ARSS Infrastructure Projects | 410 to 450 | -- |
| Hathway Cable & Data Comm. | -- | -- |
| REC (FPO) | -- | -- |
Copper tarnishes
Strong dollar hammers red metal price
Base metal prices ended lower on Wednesday, 03 February 2010. Prices fell as the dollar strengthened thereby reducing the appeal of commodities as an alternate investment.
At USA, copper futures for March delivery ended lower by 11.6 cents (3.7%) to $2.9735 a pound. This year, till date, copper is lower by 11.7%. Copper ended FY 2009 higher by 140%.
At LME, copper for delivery in three months ended lower by $225 (3.3%) at $6,590. On 3 July, 2008, prices had touched an all time intra day high of $8,940.
Copper ended substantially higher last year on expectations of revived global economic growth along with a decline in the dollar. The dollar index had dropped almost 4.2% last year. The metal was also pushed higher by record first-half imports to China, the world's largest user.
The U.S. buys about 13% of the 17 million metric tons of copper sold annually and China buys about 20%.
Among economic data expected for the day, The Institute for Supply Management reported on Wednesday, 03 February 2010 that the service sector of the US economy moved back into growth territory in January 2010. The ISM nonmanufacturing index rose to 50.5% from 49.8% in December against an expected figure of 51.
Readings above 50% in the diffusion index indicate that activity at more firms is expanding than contracting. The index had been above 50% for two months in the fall but then slipped under that threshold in November and December. Only four industries reported growth, while 11 reported contraction.
A private sector job report also showed that US economy had shed the least number of jobs in January 2010 since the recession hit in 2007.
In the currency market on Wednesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 0.5%.
In FY 2008, copper prices dropped by 54%. Prior to 2008, copper prices ended FY 2007 with a gain of mere 5.5% after a whopping 44% gain in FY 2006. The price of copper gained every year since 2002 as global economic growth boosted demand for the metal used in pipes and wires.
At the MCX, copper for February delivery closed lower by Rs 12.1 (3.8%) at Rs 303.5/Kg. Prices rose to a high of Rs 319.45/Kg and fell to a low of Rs 301.25/Kg during the day's trading.
Among other metals traded in the LME on Wednesday, lead ended 4.5% lower at $2,021 a ton and zinc shed 1.1% to end at $2,086 a ton. Nickel rose 1.2% to end at $17,612. Aluminum shed 2% to end at $1,997 a ton
Market seen snapping Wednesday's gains; inflation data eyed
The market is seen opening lower today mirroring lower Asian markets. The S&P CNX Nifty futures for February 2010 expiry were trading 30 points lower in Singapore. US market ended little changed on Wednesday, 3 February 2010 on tepid reports on employment and the services sector.
The government will today unveil data on some wholesale price indices for the year through 23 January 2010 viz. the food price index, the primary articles index and the fuel price index.
ACC and Ambuja Cement will unveil their December 2009 quarterly earnings today, 4 February 2010.
Oil marketing and exploration stocks will see action on reports the Congress Working Committee is set to meet on Friday to discuss price rise of essential commodities. The meeting comes in the backdrop of Congress' attempts to express concern over price rise, which has aggravated in the last three months. An expert group headed by Kirit Parikh on Tuesday suggested freeing petrol and diesel prices as well as raising LPG rates by Rs 100 a cylinder and kerosene prices by Rs 6/litre. The Parikh committee's suggestions, submitted to petroleum minister Murli Deora, would see a hike of Rs 3/litre in petrol and Rs 3-4/litre in diesel if implemented.
Asian shares declined today after Australian retail sales unexpectedly fell in December and commodity prices declined. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were down by between 0.03% to 1.23%.
The US markets snapped a two-day winning streak on Wednesday after tepid reports on employment and the services sector. The indices ended on a mixed note. The Dow Jones Industrial Average closed at 10,270.55, down 26.30 points or 0.26% and the S&P 500 Index closed just shy of the 1100 mark, shed 6.04 points or 0.55% to 1,097.28. The Nasdaq Composite closed flat at 2,190.91, up 0.85 points.
In US economic news, the ISM Non-Manufacturing index rose to 50.5 in January from 49.8 in December, but fell short of expectations. On the jobs front, ADP reported that 22,000 jobs were lost from private payrolls in January.
Closer home, investors will closely watch the response to the large follow-on public offer (FPO) of state-run power generation firm NTPC which opened for bidding on Wednesday, 3 February 2010. The issue was subscribed 0.77 times on Wednesday. Most bids were at Rs 209 per share. The government has fixed the benchmark price for the proposed divestment of government stake at Rs 201 per share.
The key benchmark indices surged on Wednesday as strong response to NTPC's follow-on public offer (FPO), robust services sector data for January 2010 and firm global stocks boosted investor sentiment. The BSE 30-share Sensex rose 332.61 points or 2.06%.
As per provisional figures on NSE, foreign funds sold shares worth Rs 455.01 crore and domestic funds bought shares worth Rs 41.93 crore on Tuesday.
Market may resume weak
Headlines for the day
GMR Infra set to refinance Rs 3,500-cr debt - Business Standard
IOCL seeks state support to expedite Paradeep refinery project - Business Standard
JSW expects nod for 4 iron ore mines in India - Live Mint
IVRCL cuts topline goal on Andhra Pradesh stir - DNA Money
CESC lines up 7,500 mw capacity addition - DNA Money
Events for the day
Major corporate action:
Earnings : GUJAMBUJA & ACC
Economic Events : Weekly Inflation to be out today
Corporate Actions : CROMPGREAV,2ND INT DIV-RS.1.40 PR SH,Ex Date: Feb 4 2010,Rcd Dt: Feb 5 2010
DCHL,3RD INT DIV-RE.1/- PR SHR,Ex Date: Feb 4 2010,Rcd Dt: Feb 5 2010
DYNAMATECH,2ND INT DIV-RS.2.50 PR SH,Ex Date: Feb 4 2010,Rcd Dt: Feb 5 2010
EDUCOMP,INT DIV-RE.1/- PER SHARE,Ex Date: Feb 4 2010,Rcd Dt: Feb 6 2010
EIDPARRY,INT DIV-RS.6/- PER SHARE,Ex Date: Feb 4 2010,Rcd Dt: Feb 5 2010
KCP,3RD INT DIV-RS.2.50 PR SH,Ex Date: Feb 4 2010,Rcd Dt: Feb 5 2010
KEMROCK,INT DIV-RE.1/- PER SHARE,Ex Date: Feb 4 2010,Rcd Dt: Feb 5 2010
NILKAMAL,INT DIV-RS.2/- PER SHARE,Ex Date: Feb 4 2010,Rcd Dt: Feb 5 2010
NMDC,INT DIV-RE.0.75 PER SHARE,Ex Date: Feb 4 2010,Rcd Dt: Feb 5 2010
PNB,INT DIV-RS.10/- PER SHARE,Ex Date: Feb 4 2010,Rcd Dt: Feb 6 2010
POLARIS,INT DIV-RS.1.75 PER SHARE,Ex Date: Feb 4 2010,Rcd Dt: Feb 5 2010
PRECWIRE,INT DIV-RS.2.40 PER SHARE,Ex Date: Feb 4 2010,Rcd Dt: Feb 5 2010
VIPIND,INT DIV-RS.2/- PER SHARE,Ex Date: Feb 4 2010,Rcd Dt: Feb 5 2010.
Pre-market report
Global signals
European shares fell on Wednesday, snapping a three-day rally as investors worried about the economic health of the euro zone's peripheral countries, with banks falling and miners tracking metal prices lower.
U.S. stocks mostly fell on Wednesday as Pfizer's disappointing outlook weighed on the health sector, and President Obama's pledge to complete banking and healthcare reform revived fears of increased regulation.
All the Asian indces are trading in negative territory with the marginal loss. At the time of writing this report, SGX Nifty is trading lower by 25 points.
Indian markets
The market is monitoring the international markets for further direction and the weakness across the global markets may drag down the local indices. The market may open in negative territory following the slump in Asian markets in morning trades coupled with the worries of continues offloading of domestic equities by the FIIs. However, after posting significant gains in last sessions, buying interest may continue on the back of firm trend.
Indian ADR's
Indian floats had a firm outing on the US bourses. ICICI Bank, Rediff, Wipro and Satyam gained around 1-3% each while VSNL, Dr Reddy, MTNL, Satyam and Tata Motors dropped marginally.
Commodity cues
In the commodity space, wherein the Crude oil prices recorded marginal loss, with the Nymex light crude oil for March series decline by $0.19 to settle at $76.79 a barrel.
In the metals space, Comex Gold for April series declines by $5.60 to settle at $1112.40 to a troy ounce.
In the metals space, Comex Silver for March series declines by $0.16 to settle at $16.58 to a troy ounce.
Daily trend of FII/MF investment in equities
On February 02, 2010, FIIs were the net sellers of the Indian Stocks in the tune of Rs312 crore (with the gross purchase of Rs2487 crore and gross sales of Rs2799 crore).
While the Domestic mutual funds, on February 02, 2010, were the net sellers of the stocks in the tune of Rs247 crore (with gross purchase of Rs418 crore and gross sales of Rs665 crore).
Daily News Roundup - Feb 4 2010
L&T has bagged orders worth Rs11bn. (ET)
Ultratech-Grasim combined will invest around Rs70bn on three greenfield facilities in the next three-four years. (ET)
Hemendra Kothari has bought 12% stake in ING Vyasa Life Insurance Company from Gujarat Ambuja. (ET)
Australia’s Rocklands Richfield has ended its takeover talks with Jindal Steel and Power. (ET)
SAIL has hiked flat product prices by Rs500/ton effective from February 1st 2010. (ET)
Mahindra and Mahindra has launched a new version of its mini truck Maxximo. (ET)
Maruti Suzuki will not pass on the benefits of lower taxes for the new petrol variant of Swift. (ET)
National Power Exchange promoted by NTPC, NHPC and TCS to be operational by the end of December. (BS)
IOC wins legal battle against international oil trading company Trafigura. (BS)
SCI to raise the borrowing limit to Rs120bn from current Rs50bn. (BS)
IOC will commission projects worth Rs37bn at its Haldia refinery next week. (BL)
Bharat Electronics is likely to receive an order worth Rs48bn from the Akash anti-aircraft missile. (BL)
GE-Hitachi Nuclear plans to source special steel and forgings from L&T’s Hazira facility. (BL)
GMR group is considering exiting the sugar business to focus on the infrastructure sector. (BL)
Inox Leisure has acquired promoter’s 43% stake in Fame India for Rs665mn in cash. (ET)
Ashok Leyland has reported over three fold jump in commercial vehicle sales in January 2010. (ET)
Educomp Solution has acquired US based Zaptive Internet Services for US$1.3mn. (ET)
Dishman Pharma has begun restructuring its Swiss subsidiary Carbogen Amcis. (BS)
GMR Infra is planning to re-finance US$750mn of debt which it had taken for acquiring 50% Intergen NV. (BS)
Whirlpool India aims to grab 15% market share in the AC segment by 2012. (ET)
Indoco Remedies has formed an alliance with Watson Pharma of US to develop and manufacture generic sterile products for the US market. (BL)
Atlas Copco to step up global sourcing from India. (ET)
IPO of Satluj Jal Vidyut Nigam is unlikely in the current fiscal years says the Power Ministry. (ET)
Volkswagen AG plans to make its low cost car manufacturing hub. (ET)
Kirit Parikh committee has suggested market linked rates for auto fuels and a sharp increase in LPG and Kersosine prices. (ET)
Pranob Sen, the country’s chief statistician has asked the government not to reverse fiscal stimulus till May. (ET)
Government will table the finance commission report on revenue sharing with states on February 25th 2010. (ET)
Business activity in the service sector accelerated for the second consecutive month in January according to HSBC Markit survey. (BS)
Government may cut bulk sugar users norms to 10-day requirement from 15-day as of now. (BS)
Top banks of the country will review the future of teaser home loans scheme in March says SBI chairman. (BS)
RBI has withdrawn the short-term foreign currency borrowing facility for non-banking and housing finance companies. (BL)
Lackluster opening on the cards
Experience teaches slowly and at the cost of mistakes.
Hopefully, the bulls will have learnt from past experience and will not go overboard with any sudden spurt. After a strong rally, we expect a subdued start as global markets have not extended this week’s spurt. However, the trading range could shift to 4900-5000 for the Nifty. A fall back to 4800 is not ruled out though and resistance is likely to kick in upwards of 5000. FII flows should turn positive, Budget should not disappoint and global situation must improve for a sustainable and meaningful advance above 5000.
Stocks in the budget-sensitive sectors could see action in the run-up to the big event. So, sectors like railways, power, infra, education, healthcare, fertilizers and textiles could hog the limelight. PSU oil marketing companies will gain in the wake of the reformist recommendations of the Kirit Parikh panel. The big question is will the Government bite the bullet on oil sector deregulation? The Government will also be hard pressed to return to the path of fiscal consolidation given the postponement of the 3G auction and expected shortfall in disinvestment proceeds.
Rising inflation and its fallout on the monetary policy could act as a dampener going ahead. Uncertainty over external factors like overheating in China, debt troubles in EU and fragile recovery in parts of industrialised world will continue to undermine sentiment.
Talking of global markets, private sector payrolls for January were down 22,000 in the US, the fewest since January 2008. Wall Street is now girding for Friday's employment report. There is a growing belief that job losses in the US economy are moderating.
As far Europe is concerned, Greece is not the only eurozone nation with debt problems, Spain and Portugal seem to be catching up fast. Outside the currency block, there could also be potential debt troubles in the UK and Japan.
After taking a pause on Monday, Indian markets resumed its road to recovery as the benchmark indices ended near day’s high. The Nifty regained the 4900 levels thanks to firm global cues and solid buying seen in the Metals and the Realty stocks. Even the Mid-Cap and the Small-Caps were in limelight. Bulls were in complete control throughout the day accompanied with good advance decline ratio and decent volumes.
The BSE Sensex advanced 333 points to end at 16,496 after touching a high of 16,525 and a low of 16,129. The Nifty lost 102 points to end at 4,932.
Equity markets in Asia ended in the green. The Nikkei in Japan was up 0.4%, while Australia's S&P/ASX ended higher by 1%. The Shanghai SE Composite rose 2.3% and Hang Seng index in Hong Kong was up 2.2%.
In Europe, stocks were trading positive. The DAX in Germany was up 0.4% and the CAC 40 index in France was up 0.4%. The FTSE in the UK was up 0.3%.
Coming back to India, all the BSE sectoral indices ended in the green. The BSE Metal index was the top gainer, advancing 4%, followed by the Realty index that was up 3% and the BSE Consumer Durable index was up 2.6%. The BSE Mid-Cap index fell 1.2% while BSE Small-Cap index added over a percent.
Among the 30-components of Sensex 29 ended in the positive terrain and only Sun Pharma ended in the red. L&T, HDFC, ICICI Bank, ITC and Tata Steel were among the top gainers.
Outside the frontline indices, the big gainers in the broader market were M&M Fin, KSK Energy, Mphasis, HDIL and Castrol India. On the other hand, losers included Spice Comm, Jain Irrigation, Power Grid and GE Shipping.
Shares of L&T surged 4% to end at Rs1449 after the company’s Buildings & Factories Operating Company - part of its Construction Division - bagged new orders aggregating to Rs11bn recently for the construction of residential tower, ware houses, mall, & a factory building project.
L&T has secured a Rs5bn contract from M/s Raghuleela Lessors & Developers Pvt Ltd (Wadhwa Group) for the construction of residential towers "The Address" at Ghatkopar(W), Mumbai.
In yet another development, Rs3.05bn contract has been secured from M/s Arshiya International Limited for the construction of Ware houses & Allied Infrastructure works at Khurja, Uttar Pradesh.
Further orders worth Rs2. 95bn has been secured from various esteemed clients for construction of a mall at Kolkata and a factory building at Samalkha, Haryana.
Shares of NTPC gained 2% to end at Rs210. The public sector company’s FPO was oversubscribed by 0.60x while the QIB book was fully subscribed. SBI and LIC have reportedly invested Rs47.6bn in the FPO.
Inox Leisure purchased 43.28% in Fame India for an all-cash deal of Rs664.8mn. Inox acquired up to 1,50,57,760 shares of Rs10 each of Fame India, by way of a block trade in a single.
The acquisition will be followed by an open offer to buy another 20% in Fame. The transaction is entirely funded by Gujarat Fluorochemicals. Inox is the wholly owned subsidiary of Gujarat Fluorochemicals. This acquisition will create the largest multiplex networks with a total of 55 multiplexes, 204 screens and 57,891 seats.
Shares of Inox Leisure shot up by over 12% to end at Rs85. On the other hand, shares of Fame India surged by 5% to end at Rs46.
Shares of Bharat Electronics surged by 2.5% to end at Rs1988 after the company won Rs48bn order from Indian Air Force. The scrip opened at Rs1960 it touched an intra-day high of Rs2068 and a low of Rs1959 and recorded volumes of over 46,000 shares on BSE.
Shipping Corporation of India (SCI) announced that the board of directors has decided to obtain the approval of the members of the Company for increasing the borrowing power limits from existing Rs50bn to Rs120bn under section 293(1)(d) through Postal Ballot.
The stock edged higher by 0.5% to end at Rs154, the scrip opened at Rs155 it touched an intra-day high of Rs157 and a low of Rs152 and recorded volumes of over 96,000 shares on BSE.
HEG
We recommend a buy in the stock of HEG from a short-term horizon. It is apparent from the charts that the stock has been on a steady long-term uptrend from its March 2009 low of Rs 94, forming higher peaks and troughs. However, in early January 2010, the stock experienced selling interest, encountering resistance at Rs 410. Since then, the stock was on a short-term correction till its recent low of Rs 328. The stock has halted after approximately 50 per cent retracement level of its prior medium-term uptrend that commenced from the November 2009 low of Rs 238. On February 3, the stock bounced up breaching the 21-day moving average by gaining 6 per cent, with above average volume. A minor positive divergence displayed in the daily relative strength index backs this bounce. The daily RSI has entered into the neutral region from the negative territory and weekly RSI is still hovering in the bullish zone. We are bullish on the stock from a short-term perspective. We anticipate it to rally further until it hits our price target Rs 390 in the upcoming trading sessions. Traders with short-term perspective can consider buying the stock while maintaining stop-loss at Rs 336.
via BL
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