Fourth quarter results, RBI policy to set the tone

Some key corporate results which are due next week could provide near-term direction for the stock markets which have corrected after hitting their highest level in more than 2 years at the beginning of this month. A hike in the key policy rates is in the offing when the central bank announces its annual monetary policy for the year ending March 2011 on Tuesday, 20 April 2010.

Major results next week include, TCS, Hero Honda Motors, Axis Bank, HCL Technologies, Wipro, Ranbaxy Laboratories, Sesa Goa, Zee Entertainment, Jindal Saw, Great Offshore, State Bank of Mysore, Reliance Industrial Infrastructure, United Spirits, Piramal Healthcare, TVS Motor Company, Hindustan Zinc, Glaxosmithkline Consumer Healthcare, Procter and Gamble, Areva T&D and MMTC.

Earnings season kicked off on a good note last week with IT sector bellwether Infosys Technologies issuing a stronger revenue guidance in dollar terms. The company has projected a 16% to 18% growth in revenue in dollar terms at between $5.57 billion to $5.67 billion for the current year.

Meanwhile, market participants expect more monetary tightening action from the central bank to contain inflation. RBI is expected to hike key policy rates by at least 25-basis-points and also tighten provisioning requirements on bank lending to the real estate sector. The central bank, last month, announced a surprise hike of 25 basis points (bps) each in repo rate and reverse repo rate.

All eyes are on the monsoon this year after last year's drought. Good rains this year after last year's drought will boost farm output and rural incomes. But another monsoon failure will add to inflationary pressure which in turn may hamper the current strong economic rebound. The June-September monsoon season is important as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector.

The Indian Meteorological Department (IMD) issues a monsoon forecast, usually in the second half of April after considering weather observations in different parts of the world and extrapolating statistical data. A weakening El Nino is a positive sign for the monsoon this year.

Overseas investors have been moving cash into Indian equities lured by the prospects for robust economic growth and rising corporate profits. FII inflow in April 2010 totaled Rs 4720.70 crore, while the inflow in the calendar year 2010 totaled Rs 25365.10 crore (till 13 April 2010).

Market snaps nine-week winning streak on Ulip controversy

The market snapped a nine-week rally on profit booking in frontline stocks as a tussle between regulators on oversight of unit linked insurance products or Ulips weighed on investor sentiment. Speculation that the Reserve Bank of India (RBI) will further tighten monetary policy next week also worried investors.

Ignoring strong global cues, the key Indian indices fell in all four trading sessions last week. The stock market was closed on Wednesday, 14 April 2010, on account of Dr. Babasaheb Ambedkar Jayanti.

There were fears that a controversy with regard to unit linked insurance plans (Ulips) will adversely impacts inflows into Ulips which are a major source of inflows into equities. On 9 April 2010, Sebi banned 14 private life insurance companies from raising funds through Ulips without its approval.

Soon after the Sebi order, insurance industry regulator Insurance Regulatory and Development Authority of India (Irda) directed the 14 insurers to ignore the Sebi order saying that the implementation of the Sebi directive will bring the insurance industry to a standstill which would not be in public interest and would be detrimental to the interests of the policyholders and prejudicial to the interests of the insurers.

Later, following intervention from the finance ministry, Sebi toned down its order on Ulips, saying that launch of new Ulip products will require its prior approval and that insurers can continue selling existing Ulip schemes which were in force as on 9 April 2010.

Ulips are products similar to mutual funds with an added life cover. A large chunk of funds raised through Ulips are invested in equities. According to IRDA, a total of 16.7 lakh Ulip policies, with a premium of Rs 44611 crore, were sold from 1 April 2009 to 28 February 2010. A total of 7.03 crore Ulip polices involving a total premium of Rs 90645 crore were in force in 2008-09.

On the macro front, the latest data showed that inflation rose less-than-expected in March 2010. The wholesale price inflation (WPI) rose 9.9% in March 2010, a tad higher than a 9.89% rise in February 2010. The headline inflation for January 2010 was revised upwards to 9.44% from 8.56% The government also announced that the primary articles price index rose 13.88% in the year to 3 April 2010. The fuel price index rose 12.43% and the food price index rose 17.22% in the year to 3 April 2010.

The BSE Sensex fell 341.96 points or 1.91% to 17,591.18 in the week ended Friday, 16 April 2010. The S&P CNX Nifty lost 99.15 points or 1.84% to 5262.60 in the week.

The BSE Mid-Cap index fell 0.87% and the BSE Small-Cap index fell 0.52% in the week. Both these indices outperformed the Sensex.

A spat between regulators on oversight of unit linked insurance products or Ulips weighed on the domestic bourses in what was a volatile trading session on Monday, 12 April 2010. The BSE 30-share Sensex fell 80.14 points or 0.45% to 17,853. The S&P CNX Nifty fell 22.05 points or 0.41% to 5339.70.

The key benchmark indices registered small losses tracking weak global stocks on Tuesday, 13 April 2010. Infosys led a rally in IT pivotals after the IT sector bellwether issued a stronger revenue guidance in dollar terms which indicated robust outsourcing demand. The BSE 30-share Sensex fell 31.04 points or 0.17% to 17,821.96. The S&P CNX Nifty declined 16.75 points or 0.31% to 5,322.95.

Profit booking in some large-cap stocks dragged the key indices to the lowest level in two weeks on Thursday, 15 April 2010. The market fell for the third consecutive session as European stocks turned negative and US index futures edged lower. Front line stocks bore the major brunt of selling with mid and small-cap indices on BSE falling to a smaller extent. The BSE 30-share Sensex fell 182.70 points or 1.03% to 17,639.26. The S&P CNX Nifty was down 49.35 points or 0.93% to 5273.60.

The key benchmark indices edged lower in volatile trade on Friday, 16 April 2010 as an imminent hike in key short-term interest rates by the Reserve Bank of India (RBI) at a policy review next week weighed on investor sentiment. Stocks fell for the fourth straight trading session. The BSE 30-share Sensex fell 48.08 points or 0.27% to 17,591.18. The S&P CNX Nifty declined 11 points or 0.21% to 5262.60.

Index heavyweight Reliance Industries (RIL) fell 3.62%. On Friday, 16 April 2010, RIL said it will provide growth capital to logistics firm Deccan 360. The investment would be done through a wholly owned subsidiary. Deccan 360 is a cargo service headed by Captain Gopinath.

RIL on 9 April 2010 said the company will pay $1.7 billion to form a joint venture at one of the most promising natural gas deposit regions in the US with Atlas Energy, becoming the latest foreign company to invest in shale plays that are expected to be very lucrative. The firm will pick up a 40% stake in Atlas's operations in the booming Marcellus Shale, a gas project that spans parts of Pennsylvania, West Virginia and New York in the United States and which, according to some geologists, could hold enough natural gas to satisfy US demand for a decade.

Capital goods pivotals declined. India's largest engineering and construction firm by sales Larsen & Toubro (L&T) fell 4.29%. The company, last week, received an order worth Rs 1,060 crore from Gujarat State Petroleum Corporation (GSPC) to build an offshore oil platform.

India's top power equipment maker by sales Bharat Heavy Electricals (Bhel) lost 2.78%. The stock hit a 52-week high of Rs 2,585 on Monday, 12 April 2010.

Bharti Airtel, India's largest mobile operator by sales fell 1.20%. The company added 30 lakh mobile subscribers in March 2010, and took its total subscribers to 12.76 crore. India's second largest mobile operator by sales Reliance Communications fell 5.65%.

India's largest private sector bank by net profit ICICI Bank declined 5.71% ahead of a policy review by the RBI.

India's largest mortgage finance firm by total income Housing Development Finance Corporation (HDFC) fell 5.87%. The company said on Thursday it has launched a Dual Rate Product-2 (DRHL-2) in which home loan interest rates will be fixed rate at 8.25% annually up to 31 March 2011, 9% for the period between 1 April 2011 and 31 March 2012, and the applicable floating rate for the balance term. The offer is for loan application made before 30 April 2010 and at least part-disbursement taken before 30 June 2010.

FMCG stocks rose on expectation of good Q4 results. ITC (up 0.24%), Dabur India (up 1.16%) and Hindustan Unilever (up 2.33%), rose.

Godrej Consumer Products spurted 10.26% on reports the company is in talks to acquire Brazilian hair care company Embelleze.

India's second largest software exporter by sales Infosys Technologies rose 3.99%. It hit a record high of Rs 2,823.80 on Thursday 15 April 2010 after the company issued a stronger revenue guidance in dollar terms for financial year ending March 2011 (FY 2011). The stock had jumped 3.69% on Tuesday, 13 April 2010, after the IT bellwether projected a 16% to 18% growth in revenue at between at between $5.57 billion to $5.67 billion for the current year.

Among other IT pivotals, India's third largest software services exporter by sales Wipro rose 1.70%. India's largest software services exporter by sales Tata Consultancy Services rose 2.83%.

Auto stocks fell on profit taking after recent strong gains triggered by expectations of strong Q4 results. Vehicle sales in India should grow 10-15% in the fiscal year to March 2011, an industry body said on Friday 9 April 2010. In 2009/10, a total of 1.23 crore vehicles were sold in the country, up 26.4% from the previous fiscal year, data from the Society of Indian Automobile Manufacturers (SIAM) showed.

India's top small car maker by sales, Maruti Suzuki India fell 2.19%. The company recently raised prices of its vehicles across different models due to higher input costs and expenses from the introduction of the new Bharat Stage IV emission norms.

India's largest tractor maker by sales Mahindra & Mahindra fell 4.85%. India's leading bike maker by sales Hero Honda Motors fell 6.68%.

India's second largest bike maker by sales Bajaj Auto fell 0.75%. Bajaj Auto has raised its stake in KTM Power Sports AG, Europe's second largest motorcycle maker.

India's largest commercial vehicle maker by sales Tata Motors fell 2.99%. The company said on Thursday, 15 April 2010 its global vehicle sales rose 39% to 101,712 units in March 2010 over March 2009.This includes sales of UK-based Jaguar and land Rover brands that rose 43% to 23,538 vehicles in March 2010 over March 2009

Most carmakers increased vehicle prices from 1 April 2010 after 13 cities across the country switched over to Bharat Stage IV emission norms. Earlier in February 2010, following the 2% increase in excise duty on all non-oil products to 10% in the Budget, auto players had hiked prices of vehicles by up to Rs 70,000.

Automobile firms are seen reporting strong Q4 results on a healthy volume growth. However, the sector is witnessing a headwind of rising input costs. Recently, Maruti Suzuki raised car prices due to a surge in input costs and shift to new emission norms from 1 April 2010. M&M, too, hiked utility vehicles prices recently.

Volatility index a tad higher

Nifty April 2010 futures at discount

The Nifty April 2010 futures were at 5257.10, at a discount of 5.50 points to the spot closing of 5262.60. In the cash market, the S&P CNX Nifty lost 11 points or 0.21% to settle at 5262.60 as investors turned cautious ahead of a monetary policy review next week from the Reserve Bank of India (RBI).

Turnover on NSE's futures & options (F&O) segment rose to Rs 75829.74 crore from Rs 73714.54 crore on Thursday, 15 April 2010.

NSE's volatility index, India VIX, rose almost 1% to 21.78. The index had jumped 7.15% on Thursday. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days. The index is calculated based on the S&P CNX Nifty options prices.

Resources and financials pull Asian stocks lower

Regional benchmarks end in red ahead of weekend

Asian stocks pared their recent advances, stumbling ahead of the weekends as the worries about an overheated property market in China resurfaced and strength in US Dollar hurt the resources and mining stocks. The overnight US cues were modestly positive but Asian stocks were under a swoon right from the start. Selling aggravated as the day proceeded as the Friday factor soon kicked into the action.

The Japanese stocks snapped recent gains as traders resorted to locking gains after the local currency strengthened against the US dollar. Modest gains on Wall Street in the previous session despite weaker jobless claims data failed to enthuse markets after internet search engine giant Google failed to impress traders despite reporting a 38% surge in first quarter revenues. Concerns about the steps being taken by China to cool off its real estate market and weak trading across other markets in the region also impacted market sentiment.

The benchmark Nikkei 225 Index dropped 171.61 points, or 1.52%, to 11,102, while the broader Topix index of all First Section issues was down 10.06 points, or 1.01%, to 989.

Steel stocks led the decline on profit taking. JFE Holdings declined 2.88%, Pacific Metals shed 1.36%, Sumitomo Metal Industries lost 2.83%, Kobe Steel fell 2.69% and Nissan Steel was down by 2.04%.

The Australian stocks slipped on profit selling today; closing under 5000 mark for the benchmark S&P/ASX 200 index as weak cues from the Asian markets and selling pressure in commodities triggered profit booing in the resources and broad markets. Financials also slipped as rising inflation worries domestically hurt the investor sentiments. However, the stocks managed to record their tenth consecutive week of rises. The benchmark ASX200 share index yesterday closed above the 5000-point mark for the first time in 19 months, ending the day at 5001.9 points.

As the closing bell rang, the benchmark S&P/ASX200 index was down 17.2 points, or 0.3 per cent, at 4984.7, while the broader All Ordinaries index fell 16.8 points, or 0.3 %, to 5007.3. Among the sectors, energy shares dropped 1.5 %, financials fell 0.2 % and materials lost 0.5 %.

Chinese equities eased, taking the centre state amid a broadly bearish day for world markets. Despite the Chinese economy recording a growth rate, highest in three years without signs yet of a surge in inflation, the Chinese stock market closed lower more than 1% today, as investors remained vigilant that these positive developments have given the government some leeway in making two crucial decisions: raising interest rates and revaluing the Chinese currency.

Adding to the investors concerns are the unemployment rate and booming real estate prices, which will further pressurize the government to hike the interest rates further, to cool the overheating property market. China's property market continued to hot up in March with home prices in major cities growing at a double-digit pace, even as the government tries to rein in prices.
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The Property section yielded mix performance after the government raised the down payment to 50 % when a family purchases its second property. Interests of the loans should not be lower than 110 % benchmark interest rates. Mixed performance by the property sector dragged down financial and real estate heavyweights.

In China, the benchmark Shanghai Composite Index, which tracks both A and B shares, ended down 1.1%, or 34.67 points, at 3130.30. China's stock index futures rose on their first day of trading Friday, mostly due to initial enthusiasm about the derivatives product, which for the first time allows investors to make trades based on their expectations the overall market will fall--not just rise. The most actively traded May futures contract closed up 0.5% at 3145.6.

In overnight trades, US stocks crawled up after the A U.S. Labor Department report that said initial claims for unemployment benefits rose unexpectedly for a second straight week raised doubts about the strength of the U.S. economic recovery and also weighed on stocks. The Dow Jones industrial average climbed by 0.2 % Thursday to 11,144.57 — its highest finish since Sept. 19, 2008.

In Mumbai, the key benchmark indices edged lower in volatile trade as an imminent hike in key short-term interest rates by the Reserve Bank of India (RBI) at a policy review next week weighed on investor sentiment. Stocks fell for the fourth straight trading session. In global cues, European stocks turned positive from negative and US index futures were off lows. Earlier, Asian stocks edged lower. The BSE 30-share Sensex was provisionally down 68.71 points or 0.39%, off close to 95 points from the day's high and up close to 40 points from the day's low. The market breadth was weak.

In other markets, Hong Kong's Hang Seng index fell 1.5 %, Indonesia slid 0.8 %, Singapore was down 0.6 % while South Korea and Malaysia skidded 0.5 %. Thailand's benchmark stock index fell 2.1 %

Greek/German bond spreads continue to widen to new all time highs despite the successful placement of Greek sovereign issues. Reports that Greece will need far more funding than has been initially promised by the EU/IMF as well EU comments that Portugal will need further fiscal consolidation have been instrumental in supporting the US dollar after the greenback plummeted to its three week low against the Euro earlier.

Light sweet crude oil futures for May delivery slipped by more than a dollar after its recent advances. The counter quotes at 84.49 a barrel in electronic trading, down $1.02 per barrel from previous close as traders eyed the weakness in equities and ideas that the latest slide in the US crude inventories might not push the prices up much given that the inventories are still at a seasonally high level.

Market extends losses for the fourth day

The key benchmark indices edged lower in volatile trade as an imminent hike in key short-term interest rates by the Reserve Bank of India (RBI) at a policy review next week weighed on investor sentiment. Stocks fell for the fourth straight trading session. The market breadth was weak. In global cues, European stocks were volatile and US index futures were off lows. Asian stocks edged lower.

The BSE 30-share Sensex shed 48.08 points or 0.27%, off close to 75 points from the day's high and up close to 60 points from the day's low. From a recent high of 17,933.14 on 9 April 2010, the Sensex has lost 341.96 points or 1.9% in the last four trading sessions.

Intraday volatility was immense in today's trade. Stocks cut losses soon after an initial slide caused by weak Asian stocks. The market weakened shortly with the Sensex hitting a fresh intraday low in early trade. The market bounced back from lower level in morning trade. The market slipped into the red once again after briefly regaining positive zone in mid-morning trade when it hit a fresh intraday high. The market moved in a range in early afternoon trade.

Weak opening of European markets kept domestic bourses depressed in afternoon trade. Stocks extended losses later. A sudden rebound saw the Sensex briefly regaining positive zone in mid-afternoon trade as the barometer index hit a fresh intraday high. The market again slipped into the red.

NSE's volatility index, India VIX, rose almost 1% to 21.78. The index had surged 7.15% on Thursday, 15 April 2010. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days. The index is calculated based on the S&P CNX Nifty options prices.

Reliance Industries (RIL) edged lower in volatile trade. Another index heavyweight ICICI Bank came off the day's high. Realty stocks fell on fears of interest rate hike by the Reserve Bank of India (RBI) next week. Auto, IT and telecom stocks also fell. Capital goods stocks were mixed. However, FMCG stocks gained on defensive buying as the Sensex fell for the fourth day in a row.

The fourth quarter earnings of India Inc are major near term trigger for the market. This is because the Q4 March 2010 results and management commentary on outlook could result in revision in earnings estimates of India Inc by analysts for the year ending March 2011 (FY 2011).

Expectations of good fourth quarter result by India Inc and heavy foreign fund inflows boosted the domestic bourses in recent weeks with the key benchmark indices surging to their highest level in more than 25 months on 7 April 2010. The market witnessed a correction later.

The combined net profit of a total of 45 companies declined 15.7% to Rs 2402 crore on 29.1% rise in net sales to Rs 22033 crore in the quarter ended March 2010 over the quarter ended March 2009.

The Reserve Bank of India is seen raising key short term interest rates by 25 to 50 basis points at a policy review on Tuesday, 20 April 2010. The central bank is also expected to raise the cash reserve ratio to suck out excess liquidity from the banking system. Last month, the RBI raised the repo rate and the reverse repo rate by 25 basis points each.

The latest data showed the wholesale prices rose 9.9% in March 2010 from a year earlier and a tad higher than February's annual rate of 9.89%. Finance Minister Pranab Mukherjee said price pressures would continue until June, when summer harvests and good rains should help cool prices.

Rising inflation remains a key cause for concern. A sharp surge in interest rates may adversely impact private investment demand as well as the proposed large scale investment in the infrastructure sector.

Meanwhile, double-digit annual growth in industrial output for the fifth straight month in February 2010 underlined the strength of the economic recovery. Data on Monday, 12 April 2010, showed the industrial output rose 15.1% in February from a year earlier, less than a rise of 16.7% in January.

Good rains this year after last year's drought will boost farm output and rural incomes. But another monsoon failure will add to inflationary pressure which in turn may hamper the current strong economic rebound. The June-September monsoon season is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector.

Tokyo-based Research Institute for Global Change has predicted normal monsoon rains in India for the current year. Agriculture secretary P K Basu said in a media interview on Monday, 5 April 2010, that early signs indicate normal monsoon rains this year. The Indian Meteorological Department (IMD) issues a monsoon forecast, usually in the second half of April after considering weather observations in different parts of the world and extrapolating statistical data.

A weakening El Nino is a positive sign for the monsoon, Ajit Tyagi, director general at the India Meteorological Department, had said on 18 March 2010.

Losses for commodity-sector firms pulled the European stocks lower on Friday in volatile trade, as the dollar gained against major rivals. The key benchmark indices in UK and Germany were down by between 0.05% to 0.16%. France's CAC 40 rose 0.06%.

Asian stocks retreated from 22-month highs on Friday as fresh doubts about the US economic recovery and Greece's rescue package prompted profit taking. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.32% to 1.52%. Property and banking stocks led the decline in China after Beijing tightened policies toward the residential property market on Thursday.

Trading in US index futures indicated that the Dow could fall 10 points at the opening bell on Friday, 16 April 2010. US index futures pared early losses.

US stocks posted their sixth straight day of gains on Thursday as an encouraging profit forecast from United Parcel Service lifted transportation shares, though concerns about a rise in weekly jobless claims limited the market's advance. The Dow Jones Industrial Average rose 21.46 points or 0.19% to 11,144.57. The Nasdaq rose 10.83 points or 0.43% to 2515.69 and the S&P 500 rose 1.02 points or 0.08% to 1211.67.

Global trade will face lingering protectionism for up to two years, as the job market reels from the global financial crisis, World Trade Organization Director-General Pascal Lamy said on Thursday

Back home, Sebi has tightened disclosure norms for foreign institutional investors (FIIs) and sub-accounts with regard to the investment structure in India. The norms are applicable for new registrations from 7 April 2010. Existing FIIs and sub-accounts can provide the additional information by 30 September 2010.

These foreign investors will now have to disclose to the regulator whether they are a multi class vehicle (MCVs), segregated portfolio company (SPC) or a protected cell company (PCCs) and whether they maintain segregated or a common portfolio.

Meanwhile, a new rule released by the Department of Industrial Policy and Promotion (DIPP) has clarified that an individual foreign institutional investor (FII) will not be allowed to pick up more than 10% equity in an Indian company even if it is coming through the foreign direct investment route thus limiting their ability to acquire big stakes in companies.

Meanwhile, it remains to be seen if and to what extent the recent controversy with regard to unit linked insurance plans (Ulips) negatively impacts inflows into Ulips which are a major source of inflows into equities. Ulips are products similar to mutual funds with an added life cover. A large chunk of funds raised through Ulips are invested in equities.

The stock market regulator Securities & Exchange Board of India (Sebi) has reportedly moved the Supreme Court and some high courts to guard against any ex parte decision after insurance regulator Insurance Regulatory and Development Authority of India (IRDA)'s decision to challenge Sebi's ban on unit-linked insurance products (Ulips). On 9 April 2010, Sebi had banned 14 life insurance companies from raising funds through Ulips without its approval.

IRDA, on the other hand, asked insurers to ignore the Sebi ban. On Tuesday, Sebi came out with a second order that exempted existing Ulips from the ban, but said its nod was must for issuing new Ulips issued after 9 April 2009.

According to IRDA, a total of 16.7 lakh Ulip policies, with a premium of Rs 44611 crore, were sold from 1 April 2009 to 28 February 2010. A total of 7.03 crore Ulip polices involving a total premium of Rs 90645 crore were in force in 2008-09.

The BSE 30-share Sensex fell 48.08 points or 0.27% to 17,591.18. The index fell 109.71 points at the day's low of 17,529.55 in early trade. The Sensex rose 24.73 points at the day's high of 17,663.99 in mid-afternoon trade.

The S&P CNX Nifty fell 11 points or 0.21% to 5256.60.

BSE clocked turnover of Rs 4087 crore, lower than Rs 4838.39 crore on Thursday, 15 April 2010.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1705 shares declined as compared with 1178 that advanced. A total of 124 shares remained unchanged. The breadth was positive in early trade.

Among the 30-member Sensex pack, 22 fell while rest rose.

The BSE Mid-Cap index fell 0.27%, matching the fall in the Sensex. The BSE Small-Cap index fell 0.19% and outperformed the Sensex.

Most sectoral indices on BSE declined. Consumer Durables index (up 1.89%), FMCG index (up 1.22%), Metal index (up 0.16%), Bankex (down 0.05%), Healthcare index (down 0.16%), outperformed the Sensex.

The Power index (down 0.71%), PSU index (down 0.62%), Capital Goods index (down 0.56%), BSE Oil & Gas index (down 0.55%), Auto index (down 0.51%), Teck index (down 0.48%), IT index (down 0.47%), Realty index (down 0.44%), underperformed the Sensex.

Index heavyweight Reliance Industries (RIL) fell 0.64% to Rs 1083.30, extending Thursday's near 3% losses. Nonetheless, the stock came off the day's low of Rs 1067.05. RIL today said it will provide growth capital to logistics firm Deccan 360. The investment would be done through a wholly owned subsidiary. Deccan 360 is a cargo service headed by Captain Gopinath.

RIL on 9 April 2010 said the company will pay $1.7 billion to form a joint venture at one of the most promising natural gas deposit regions in the US with Atlas Energy, becoming the latest foreign company to invest in shale plays that are expected to be very lucrative. The firm will pick up a 40% stake in Atlas's operations in the booming Marcellus Shale, a gas project that spans parts of Pennsylvania, West Virginia and New York in the United States and which, according to some geologists, could hold enough natural gas to satisfy US demand for a decade.

Capital goods pivotals fell. India's largest engineering and construction firm by sales Larsen & Toubro (L&T) ended flat after seeing intraday volatility. The stock hit a high of Rs 1580.20 and a low of Rs 1560.25. The company, last week, received an order worth Rs 1,060 crore from Gujarat State Petroleum Corporation (GSPC) to build an offshore oil platform.

India's top power equipment maker by sales Bharat Heavy Electricals (Bhel) lost 1.49%, with the scrip sliding for the second straight day. The stock had hit a 52-week high of Rs 2,585 on Monday, 12 April 2010.

Among other capital goods stocks, SKF India, BEML and Praj Industries fell by between 1.38% to 3.4%.

Bharti Airtel, India's largest mobile operator by sales, fell 0.16%. The company added 30 lakh mobile subscribers in March 2010, and took its total subscribers to 12.76 crore. India's second largest mobile operator by sales Reliance Communications fell 0.91%.

FMCG stocks rose on expectation of good Q4 results. Dabur India, ITC, Godrej Consumer Products, Hindustan Unilever rose by between 0.53% to 4.86%

India's second largest software exporter by sales Infosys Technologies fell 0.56% on profit taking after hitting a record high of Rs 2,823.80 on Thursday 15 April 2010. The stock had surged in the past two trading sessions after the company issued a stronger revenue guidance in dollar terms for financial year ending March 2011 (FY 2011). The stock had jumped 3.69% on Tuesday, 13 April 2010, after the IT bellwether projected a 16% to 18% growth in revenue in dollar terms at between at between $5.57 billion to $5.67 billion for the current year.

Among other IT pivotals, India's third largest software services exporter by sales Wipro rose 0.23%. India's largest software services exporter by sales Tata Consultancy Services fell 0.69% on profit taking after a two-day rise.

Realty stocks fell on fears of interest rate hike by the Reserve Bank of India (RBI) at its monetary policy review meet scheduled on 20 April 2010. Most of the property sales are driven by borrowed funds. Ackruti City, Parsvnath Developers, Unitech, Anant Raj Industries, HDIL and DLF fell by between 1.41% to 2.44%.

Auto stocks fell on profit taking after recent strong gains triggered by expectations of strong Q4 results. Vehicle sales in India should grow 10-15% in the fiscal year to March 2011, an industry body said on Friday 9 April 2010. In 2009/10, a total of 1.23 crore vehicles were sold in the country, up 26.4% from the previous fiscal year, data from the Society of Indian Automobile Manufacturers (SIAM) showed.

India's top small car maker by sales, Maruti Suzuki India fell 0.23%, extending recent losses. The company recently raised prices of its vehicles across different models due to higher input costs and expenses from the introduction of the new Bharat Stage IV emission norms.

India's largest tractor maker by sales Mahindra & Mahindra fell 1.51%. Mahindra & Mahindra said after trading hours that it is buying out Renault's stake in a joint venture that makes the Logan sedan. The Renault name and logo will continue to be used on the Logan till the end of calendar 2010, the company said in a statement.

India's leading bike maker by sales Hero Honda Motors fell 1.62%. The stock had lost 5.29% on Tuesday when the scrip turned ex-dividend for a special dividend Rs 80 per share.

India's second largest bike maker by sales Bajaj Auto fell 1.48%. Bajaj Auto today said it has raised its stake in KTM Power Sports AG, Europe's second largest motorcycle maker.

India's largest commercial vehicle maker by sales Tata Motors rose 1.15%, with the stock gaining for the second straight day after company said on Thursday its global vehicle sales rose 39% to 101,712 units in March 2010 over March 2009.This includes sales of UK-based Jaguar and land Rover brands that rose 43% to 23,538 vehicles in March 2010 over March 2009

Most carmakers increased vehicle prices from 1 April 2010 after 13 cities across the country switched over to Bharat Stage IV emission norms. Earlier in February 2010, following the 2% increase in excise duty on all non-oil products to 10% in the Budget, auto players had hiked prices of vehicles by up to Rs 70,000.

Automobile firms are seen reporting strong Q4 results on a healthy volume growth. However, the sector is witnessing a headwind of rising input costs. Recently, Maruti Suzuki raised car prices due to a surge in input costs and shift to new emission norms from 1 April 2010. M&M, too, hiked utility vehicles prices recently.

Healthcare stocks fell on profit taking. Cipla, Dr Reddy's Laboratories, Ranbaxy Laboratories and Pfizer, fell by between 0.07% to 1.62%.

Metal stocks also fell on profit taking. Sterlite Industries, National Aluminum Company, Hindalco Industries and Hindustan Zinc fell by between 0.4% to 1.05%.

India's largest private sector steel maker by sales Tata Steel rose 1.33%. The company said recently its sales for the fiscal year ended on 31 March 2010 rose 18% from a year ago to 6.17 million tonnes.

Banking stocks were mixed. India's largest bank by net profit and branch network State Bank of India fell 0.36%, with the stock sliding for the second straight day. Chairman O.P. Bhatt said recently that the bank may raise its lending and deposit rates in a couple of months. The state-owned bank will wait for the Indian central bank's monetary policy action to take a final call on interest moves, Bhatt said.

Among other PSU banks, Bank of Baroda, Bank of India and Punjab National Bank, rose by between 0.59% to 1.17%.

India's second largest private sector bank by net profit HDFC Bank was flat. Its ADR rose 0.6% on Thursday.

India's largest private sector bank by net profit ICICI Bank rose 0.39% to Rs 921.65 . The stock came off the day's high of Rs 935.80. The stock had corrected 6.07% to Rs 918.10 on 15 April 2010 from Rs 977.45 on 9 April 2010.

India's largest mortgage finance firm by total income Housing Development Finance Corporation (HDFC) fell 0.72%. The company said on Thursday it has launched a Dual Rate Product-2 (DRHL-2) in which home loan interest rates will be fixed rate at 8.25% annually up to 31 March 2011, 9% for the period between 1 April 2011 and 31 March 2012, and the applicable floating rate for the balance term. The offer is for loan application made before 30 April 2010 and at least part-disbursement taken before 30 June 2010.

The Reserve Bank of India said late last week banks would determine their lending rates with reference to the base rate, effective 1 July 2010. To stabilise the system of base rate calculation, banks are allowed to change the benchmark and methodology anytime

Airline stocks fell on reports state run oil marketing companies have raised jet fuel price by 3.2% following rise in global crude prices. The hike is effective from midnight of 15 April 2010. Jet Airways, Kingfisher Airlines and SpiceJet fell by between 1.88% to 2.7%.

Goenka Diamond clocked the highest volume of 3.03 crore shares on BSE. Cals Refineries (1.17 crore shares), Birla Power Solutions (0.83 crore shares), BAG Films (0.81 crore shares) and Unitech (0.69 crore shares) were the other volume toppers in that order.

Goenka Diamond clocked the highest turnover of Rs 387.84 crore on BSE. Orbit Corporation (Rs 152.94 crore), Solvay Pharma (Rs 122.25 crore), Tata Motors-DVR (Rs 99.75 crore) and ARSS Infra (Rs 96.87 crore) were the other turnover toppers in that order.

Daily Call - Apr 16 2010

US markets, after opening in red, recovered to close in green for the sixth consecutive day. While the jobless claims data came worse than expected, Philadelphia Fed index rose to 20.2 in April from 18.9 in March, the expectation being 20. March Industrial production stood at 0.1% versus the expectation of 0.7%

Our markets however had a sharp cut of about 1% as heavyweight stocks from Oil & Gas and Banking space saw profit booking. March inflation came in at 9.9%, a 17-month high, and resurfaced the fears of rate hike in the ensuing policy meet of RBI on 20th April. Reports that SEBI has directed FIIs and sub-accounts to disclose more information about their investment structure in India also added to the nervousness. Nifty as well as sensex for the first time after 9 weeks breached previous week’s low. For nifty the level was placed at 5290. While a lower top-lower bottom formation has already started in intraday 60 minute chart, on daily chart the same will happen when previous bottom placed at 5235 is breached. Keep a tight stop loss of 5235 in all the trading long positions.

Flat-to-negative start likely

Headlines for the day:

Sebi tightens norms for FIIs

Triveni shuts down rural retail biz

Godrej eyes 5 % market share in TV segment

Events for the day:

Major corporate action

Goenka Diamond and Jewels will list today
Ex-date for dividend of Fulford India and Paper Products
Results: Crisil, Indusind Bank
For more events, log on to Sharekhan.com

Pre-market report

Global signals

The European stock market edged higher on Thursday as investors weighed fresh moves in the Greek debt crisis against mixed US economic data and very strong Chinese growth figures.

The US stocks closed higher on Thursday as market players batted off concerns about Greece' debt woes and an unexpected rise in US jobless claims.

In today's trade, the Asian markets were trading on a negative note. At the time of writing this report, SGX Nifty was trading 23 points lower.

Indian markets

The domestic market surged for the past consecutive nine weeks, may take a breather and discontinue their winning streak, as the market in the last three trading sessions of this holiday shorten week has fallen by almost 300 points. However, the Indian indices may have a flat to negative start owing to the weak global cues. The stocks like Crisil and Indusind Bank will be eyed, as its FY10 March quarter results will be declared today.

Commodity cues

In the commodity space, the crude oil prices reported loss, with the Nymex light crude oil for the May series declined by $0.33 per barrel, whereas in the metals space, the Comex Gold for the May series rose by $0.70 and the Comex Silver for the May series was up by $0.02 to a troy ounce respectively.

Daily trend of FII/MF investment in equities

On April 15, 2010, the FIIs were the net buyers of the Indian stocks to the tune of Rs607.30 crore, whereas the domestic mutual funds, on April 09, 2010, were the net sellers of the stocks to the tune of Rs257.90 crore.

Morning Notes - Apr 16 2010

Morning Notes - Apr 16 2010

UPS earning report lifts US stocks

Gains at Wall Street for sixth straight day

Strong earning reports from UPS after yesterday's close helped US stocks make a strong start and ultimately end the day with modest gains on Thursday, 15 April 2010. With Thursday's gains, US stocks ended higher for the sixth straight session. Other than that, strong economic data on US and global front also helped improve market momentum.

At the end of the day on Thursday, the Dow Jones Industrial Average ended higher by 21.46 points at 11144.57. Nasdaq ended higher by 10.83 points at 2515.69. S&P 500 ended higher by 1.02 points at 1211.67.

Three of ten economic sectors ended higher for the day led by technology, industrial, and consumer discretionary sectors. Healthcare and financials were among the sectors that ended in the red. Intel led the pack of Dow winners.

Among the widely anticipated earning reports, better-than-expected earnings and an upside forecast from global shipping carrier, UPS, after the prior session's close seemed to set the stage for continued gains in the early going. The report propelled UPS to its best single-session percentage gain in more than one year.

Crude oil prices ended marginally higher on Thursday, 15 April 2010. Strong economic reports from US and China helped offset the effect from rising dollar. On Thursday, crude-oil futures for light sweet crude for May delivery closed at $86.75/barrel (higher by $0.02 or 0.02%). This was second consecutive rise for crude after dropping for last five sessions.

Among economic data for the day, the U.S. Labor Department reported on Thursday that the number of people applying for unemployment benefits rose by 24,000 in the latest week to 484,000. The four-week average of initial claims - a better measure of labor trends, also increased. Continuing claims climbed to a worse-than-expected 4.64 million.

Also, U.S. industrial production rose 0.1% in March, lower than expectations as utilities output showed a sharp drop. However, manufacturing activity in the New York region improved at a faster pace in April, as the Federal Reserve Bank of New York's Empire State manufacturing index rose to 31.9 in April from 22.9 in March.

Among latest data, it showed that China's economy expanded 11.9% in the first quarter of 2010 from the year-earlier period, exceeding expectations.

In the currency market on Thursday, the dollar index, which measures the strength of the dollar against basket of six other currencies rose by 0.4%. Greece's debt woes once again perked up the dollar. The dollar index gained about 0.7% in March and rallied 4% during the first quarter. The dollar index has gained 4.5% this year till date.

Declining stocks outpaced advancers on the New York Stock Exchange, where 1.2 billion shares traded. Composite volume topped 6.1 billion.

Natural gas futures tanked following a report showing a larger-than-expected increase in U.S. storages. Natural gas for May delivery lost 21 cents, or 5.1%, to settle at $3.9850 per million British thermal units.

Indian ADRs ended mixed on Thursday. Rediff.com was the main winner soaring 6.4%. ICICI Bank fell 2.4%.

Tomorrow morning, two economic reports are scheduled to be released before the open. They are building permits and housing starts. Other than that, earning reports will continue to dominate

Market may extend last three days` losses on weak Asian stocks

The market may extend last three days' losses on weak Asian stocks. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated that the Nifty could fall 15 points at the opening bell. Asian stocks fell on Friday, bucking overnight gains on the Wall Street as investors locked in profits. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.09% to 1.35%.

US stocks posted their sixth straight day of gains on Thursday as an encouraging profit forecast from United Parcel Service lifted transportation shares, though concerns about a rise in weekly jobless claims limited the market's advance. The Dow Jones Industrial Average rose 21.46 points or 0.19% to 11,144.57. The Nasdaq rose 10.83 points or 0.43% to 2515.69 and the S&P 500 rose 1.02 points or 0.08% to 1211.67.

In economic news, weekly initial jobless claims were up more than expected to 484000, while continuing claims climbed to a worse-than-expected 4.64 million. Industrial production ticked up 0.1% in March, which was lower than expected. Among major results, Internet search company Google reported after the closing bell that its first-quarter profit jumped 37% to $1.96 billion with revenue rising 23% to $6.78 billion.

Back home, the latest data showed the wholesale prices rose 9.9% in March 2010 from a year earlier and a tad higher with February's annual rate of 9.89%. Finance Minister Pranab Mukherjee said price pressures would continue until June, when summer harvests and good rains should help cool prices.

Rising inflation remains a key cause for concern. A sharp surge in interest rates may adversely impact private investment demand as well as the proposed large scale investment in infrastructure sector. Investors have already priced a 25-basis point rate rise at the Reserve Bank of India's policy review on 20 April 2010. Last month, the RBI raised the repo rate and the reverse repo rate, at which it absorbs excess cash from the banking system, by 25 basis points each.

Meanwhile, double-digit annual growth in industrial output for the fifth straight month in February 2010 underlined the strength of the recovery. Data on Monday, 12 April 2010, showed the industrial output rose 15.1% in February from a year earlier, less than a rise of 16.7% in January.

The fourth quarter earnings of India Inc are major near term trigger for the market. This is because the Q4 March 2010 results and management commentary on outlook could result in revision in earnings estimates of India Inc by analysts for the year ending March 2011 (FY 2011).

Expectations of good fourth quarter result by India Inc and heavy foreign fund inflows boosted the domestic bourses in recent weeks with the key benchmark indices surging to their highest level in more than 25 months on 7 April 2010.

Good rains this year after last year's drought will boost farm output and rural incomes. But another monsoon failure will add to inflationary pressure which in turn may hamper the current strong economic rebound. The June-September monsoon season is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector.

Tokyo-based Research Institute for Global Change has predicted normal monsoon rains in India for the current year. Agriculture secretary P K Basu said in a media interview on Monday, 5 April 2010, that early signs indicate normal monsoon rains this year. The Indian Meteorological Department (IMD) issues a monsoon forecast, usually in the second half of April after considering weather observations in different parts of the world and extrapolating statistical data.

A weakening El Nino is a positive sign for the monsoon, Ajit Tyagi, director general at the India Meteorological Department, had said on 18 March 2010.

Meanwhile, Sebi has tightened disclosure norms for foreign institutional investors (FIIs) and sub-accounts with regard to the investment structure in India. The norms are applicable for new registrations from 7 April 2010. Existing FIIs and sub-accounts can provide the additional information by 30 September 2010.

These foreign investors will now have to disclose to the regulator whether they are a multi class vehicle (MCVs), segregated portfolio company (SPC) or a protected cell company (PCCs) and whether they maintain segregated or a common portfolio.

Meanwhile, a new rule released by the Department of Industrial Policy and Promotion (DIPP) has clarified that an individual foreign institutional investor (FII) will not be allowed to pick up more than 10% equity in an Indian company even if it is coming through the foreign direct investment route thus limiting their ability to acquire big stakes in companies.

Meanwhile, it remains to be seen if and to what extent the recent controversy with regard to unit linked insurance plans (Ulips) negatively impacts inflows into Ulips which are a major source of inflows into equities. Ulips are products similar to mutual funds with an added life cover. A large chunk of funds raised through Ulips are invested in equities.

The stock market regulator Securities & Exchange Board of India (Sebi) has reportedly moved the Supreme Court and some high courts to guard against any ex parte decision after insurance regulator Insurance Regulatory and Development Authority of India (IRDA)'s decision to challenge Sebi's ban on unit-linked insurance products (Ulips). On 9 April 2010, Sebi had banned 14 life insurance companies from raising funds through Ulips without its approval.

IRDA, on the other hand, asked insurers to ignore the Sebi ban. On Tuesday, Sebi came out with a second order that exempted existing Ulips from the ban, but said its nod was must for issuing new Ulips issued after 9 April 2009.

According to IRDA, a total of 16.7 lakh Ulip policies, with a premium of Rs 44611 crore, were sold from 1 April 2009 to 28 February 2010. A total of 7.03 crore Ulip polices involving a total premium of Rs 90645 crore were in force in 2008-09.

Profit booking in some large-cap stocks dragged the key indices to their lowest level in two weeks on Thursday, 15 April 2010. The BSE 30-share Sensex fell 182.70 points or 1.03% to 17,639.26 on that day.

As per provisional figures on NSE, foreign funds bought shares worth Rs 99.70 crore and domestic funds sold shares worth Rs 76.87 crore on Thursday.

Daily News Roundup - Apr 16 2010

HDFC has revived its teaser home loan rates for two weeks to protect market share. (ET)

L&T to make industrial tyres with Mitsubishi. (ET)

ONGC says that it will not be economically viable to produce gas from its Krishna-Godavari basin block at current sale price of US$4.2/mmBtu. (ET)

SAIL is in talks with Posco and Kobe Steel for technology tie-ups for jointly setting-up steel plants. (ET)

IOC may see revenue loss on fuel sales jump 63% in FY10. (BS)

Bank of India has cut interest rates on its bulk deposits by up to 1.25% across various tenures with immediate effect. (ET)

Tata Motors global sales grow 39% in March. (BS)

Ranbaxy has voluntarily recalled two consignments of one of its antibiotics from US market. (BL)

UBI to raise upto US$500mn through a maiden MTN programme. (BL)

Japan’s JFE is in advanced talks to buy a small stake in JSW Steel. (ET)

Jet Airways seeks more FSI for BKC plot, eyes lease income. (ET)

Triveni Engineering has formed a JV with GE to make and sale steam turbines for small power generation projects. (ET)

Aurobindo Pharma has received final approval for Ondansetron orally disintegrating tablets from US FDA. (BL)

Pipavav Shipyard is in talks to buy an oil rig and shipping company in West Europe. (ET)

Glodyne close to buying a US company for Rs5bn. (ET)

Areva T&D has won three turnkey project orders worth Rs630mn. (BL)

WPI inflation for the month of March stood at 9.9%. (BS)

Domestic air traffic climbs 23% yoy in March 2010. (ET)

CMI pegs FY10 growth at 7.1% and FY11 growth at 9.2%. (ET)

One link at a time

It is a mistake to try to look too far ahead. The chain of destiny can only be grasped one link at a time - Winston Churchill.

The weak link for the market appears to be fears of an adverse outcome of the RBI’s annual policy meet next week. Meanwhile, India’s quest to break into the elite global space club will be delayed. In a rare failure, ISRO’s indigenously made rocket (GSLV-D3) crashed soon after take off on Thursday.

Even the bulls will have to wait for better links before they see the NSE Nifty cross 5400. A sudden bout of selling pulled the market down despite inflation being steady. What is more disturbing is that fund flows have started to taper off. Even the FIIs, who till recently were pouring money at a steady pace have turned a bit cautious.

Its still early days as far as results are concerned. So, the volatility will prevail for a while amid a mix bag of earnings. In any case, the market seems to be looking far ahead at FY12 numbers. Today we see a sluggish opening and another choppy session. A rebound cannot be ruled out after Thursday’s selloff.

US stocks closed higher for a sixth straight session at fresh 2010 highs, bolstered by upbeat economic reports and a strong forecast from UPS. Shares of Google fell in extended trading despite reporting earnings that beat Wall Street estimates. European stocks closed at an 18-month high.

However, Japanese stocks fell for the first time in three days as jobless claims by Americans unexpectedly increased and China announced measures to cool its real-estate market. Hong Kong shares declined, tracking weakness in Shanghai stocks, as Chinese property and banking stocks fell after Beijing tightened policies toward the residential property market.

Results Today: CRISIL, DCB, IndusInd Bank and Stone India.

Unlike the US market, where the S&P 500 and the Nasdaq crossed key psychological milestones, the BSE Sensex and the NSE Nifty actually slid by 1% each. The key indices finished with a whimper after a smart opening despite inflation staying static in March. Selling intensified post 2 pm as European markets gave up early gains.

The benchmark indices gradually lost ground on the back of selling in the index heavyweights like Reliance Industries, ICICI Bank and L&T. Not all was gloomy in today’s trade as the small-cap and mid-cap indices escaped a sharper selloff. In terms of sectors, Real Estate, IT and Pharma indexes stood out as they bucked the negative trend. On the other hand, Oil & Gas, Banking and Capital Goods indices bore the brunt of the fall.

The Sensex lost over 330 points and the Nifty shed over 100 points from their respective intra-day highs. "Market players turned cautious ahead of the RBI monitory policy scheduled on April 20. The central bank is widely expected to raise key short-term policy rates to rein in stubbornly high inflation", says Amar Ambani VP Research IIFL.

The BSE Sensex fell 183 points to end at 17,639 and NSE Nifty lost 49 points to close at 5,274. Among the 30 components of Sensex, 19 ended in the negative terrain and 11 were in the green.

Markets in Asia ended in the green; the Nikkei in Japan was up 0.6%, Australia's S&P/ASX edged higher by 0.2%. Shanghai SE Composite ended lower by 0.5% and Hang Seng index in Hong Kong was up 0.2%.

On the other hand, European indices were trading with a slight negative bias, the DAX in Germany was down 0.3%, the CAC 40 index in France was down 0.3% and the FTSE in the UK was down 0.2%.

Coming back to India, among the BSE sectoral indices, the BSE Oil & Gas index was top loser, the index lost 1.8%, followed by BSE Banking index down 1.5% and Capital Goods index down 1.4%.

Among the top gainers were, BSE Realty index up 1.5% and BSE Consumer Durables index up 0.7%.

Outside the frontline indices, the big losers in the broader market were Max India, LIC Housing Fin, BOB and GVK Power. On the other hand, gainers included Apollo Hosp, JP Hydro, Titan Ind and Castrol.

Shares of ABB erased early gains and ended at Rs832 losing 0.8%. The stock hit an intra-day high of Rs852 after the company won an order worth Rs630mn from Haryana Vidyut Prasaran Nigam Ltd. to build a 400 kV (kilovolt) substation that will facilitate the transmission of electricity from new power generation plants being constructed in the region. The order was booked in the first quarter.

Shares of IVRCL Assets & Holdings gained by 1.7% to end at Rs180 after the company announced that the board of directors declared bonus shares in the ratio of 1:2.

The board also approved raising of equity funds to the extent of Rs10bn by way of QIP in one or more tranches.

Shares of Zee News plunged over 75% to end at Rs18. Zee News had approved the Scheme of Arrangement whereby the Regional General Entertainment Channel (GEC) business of the company would be de-merged and transferred to Zee Entertainment Enterprises with effect from January 1, 2010 (appointed date).

April 16 was fixed as the Record Date for determination of members of the company who would become eligible for issuance of equity shares by Zee Entertainment Enterprises.

Triveni Engineering announced that the company has signed a joint venture with GE Oil & Gas, through one if its affiliates (GE Pacific Mauritius Ltd.) to design, manufacture, supply, sell and service advanced technology steam turbines in India in the above 30 to 100MW-range for power generation applications in the Indian and worldwide markets. Triveni will hold one extra share with both parties having equal representation on the Board.

Shares of Triveni Engineering gained 1% to end at Rs131. The stock opened at Rs132. It hit an intra-day high of Rs135 and an intra-day low of Rs130. Total traded quantity was 0.43mn on NSE.

Tata Sons Ltd, the largest Differential Voting Rights (DVR) shareholder in Tata Motors are planning to cut stake in the company further by selling shares that have less voting rights than common shares.

Tata Sons had reduced its stake to 54% from 73% in 2009 and is further planning to cut it in an attempt for better pricing for the DVR, which is currently quoting at an almost 30% discount.

Tata Sons plans to sell the shares in the open market through an auction and has also reportedly appointed Tata Capital for the transaction.

On Tuesday, in bulk deal on the exchanges, Tata Sons sold ~1.6mn shares. HDFC MF bought ~1.05mn shares at an average rice of Rs485 per DVR.

The BSE IT index surged to record high and rose to its highest level since February 2007 after heavyweight Infosys came out with its results beating street estimates.

On the other hand, shares of Infosys gained 0.5% to end at Rs2801. The scrip opened at Rs2799 it touched an intra-day high of Rs2823 and a low of Rs2760 and recorded volumes of over 0.47mn shares on BSE.

Finally the BSE IT index ended at 5526 level rising nearly 0.4%, the index pared losses in the second half on account of profit booking.

Areva T&D India

Investors with short-term trading perspective can consider selling Areva T&D India. The stock has been trundling downward since the peak of Rs 385 recorded in June 2009. This decline is however received medium-term support around Rs 255. The rebound from this level from February 24 was arrested at the key short-term resistance at Rs 320 and the stock is currently in a down-trend over the last couple of weeks. Moving average convergence divergence oscillator in the daily chart is signalling a sell for the first time since March 3 signalling a short-term reversal in the stock. The 10-day rate of change oscillator has also declined in to the bearish zone implying that the stock could move lower in the days ahead.

The medium-term trend in the stock is sideways but strong reversal from the resistance zone around Rs 320 can pull the stock lower towards its February lows. Short-term investors can therefore sell the stock with the stop at Rs 306. Downward targets for the stock are Rs 298 and Rs 294.

via BL

SGX Nifty Live Update - Apr 16 2010

5,270.00 -5.00

Why Irda seems an industry lobby and not a regulator

Jandhyala Hari Narayan, chairman of Insurance Regulatory and Development Authority (Irda), has termed the order of the Securities and Exchange Board of India (Sebi) barring 14 private life insurance companies from raising unit linked insurance plan premiums as being against public interest.

But does Hari Narayan himself, or for that matter Irda, have public interest in mind? Or are they only interested in protecting the business interests of the life insurance companies that they are supposed to regulate?

More likely they are serving the industry’s cause, much less that of investors. Here’s why:

1. Highest NAV guaranteed plans: Insurance companies have been launching and raising crores in new premium through highest net asset value (NAV) guaranteed Ulips. Ulips are investment plans carrying a dash of insurance. Typically, highest NAV guaranteed Ulips are 10-year plans. Some of these plans guarantee the investor the highest NAV they achieve for the first seven years of the plan and others guarantee the highest NAV for the entire duration of the plan.

There are a number of issues here

First, how can a regulator which claims to have “public interest” in mind clear an insurance plan that has the flexibility to invest up to 100% of the total money it collects in the stock market and yet offers a guarantee? Guarantees and stock markets don’t go together. Those in doubt can recall the case of the once much loved but now almost defunct institution called the Unit Trust of India (UTI). UTI had around Rs 17,000 crore invested in its assured return schemes and all these schemes had to be shut down in 2002 when things started to go haywire.

Second, the insurance companies in their promotional literature haven’t elaborated on how they plan to manage the guarantee. As the recent financial crisis shows, there are no holy cows in the world of finance.

Third, highest NAV guaranteed Ulips are being blatantly sold and advertised as a stock market product, giving an impression that all the money collected will be invested in the stock market and there it shall stay for the entire period of the plan, and the highest NAV will be guaranteed. Of course, no insurance company will take on the risk of having to pay off investors out of its own pockets. So it will in all likelihood have a higher exposure to equity initially and gradually move the investments into debt as the date of maturity nears.

If Irda had public interest in mind, it would never allow any of this. More so, considering it only benefits the insurance companies, who find it much easier to raise money by using the world guaranteed in their product.

Sebi does not allow mutual funds to use guaranteed returns. In fact, till sometime back mutual funds used to give indicative returns on fixed maturity plans to solicit investment. Even that has been stopped now.

2. Joining the Ulip sales pitch: Recently Irda put out advertisements in newspapers using taxpayers’ money, asking people to invest in Ulips. Is that a function of an industry lobby or a regulator which has public interest on its mind?

3. Identifying the best Ulip: Irda should work on building an infrastructure to help investors figure out which of the Ulips in the market is the best at any given point. In a mutual fund, the difference between the net asset value between two points of time can tell the investor how well a scheme has performed. This is primarily because the expense structure of mutual funds is more or less the same. The expense structure of Ulips offered by different insurance companies is widely different. Therefore, there is no way an individual can figure out which is the best performing Ulip going. This essentially ensures that insurance agents can push anything they want to. Now who does that help? Definitely not the investor!

4. Front loaded commissions: Most Ulips come with a top-loaded commission structure. This means insurance companies offer a significantly higher commission in the first two years of the policy. This has led to a situation wherein insurance agents, which include big banks, get investors to exit their existing Ulip policies once the lock-in is over, and get them to invest in new Ulips. This ensures that agents can continue to earn a high commission. As highlighted earlier by DNA Money (Guess what got Sebi’s goat?, April 13, 2010), the premium collected in latter years of insurance policies is not significantly different from the premium collected in the first year. Irda, as a good industry lobby should, has turned a blind eye towards this. In fact, spreading around the commission equally throughout the tenure of the policy will ensure that insurance agents do not go around mis-selling.

Over and above this, currently a life insurance agent is allowed to sell products only from one company. This has led to a situation where some big banks have switched insurance companies just because of more commission being offered. This obviously left a lot of current investors in Ulips in the lurch. A staggered commission structure will take care of this problem as well to some extent. But then that may not be.

5. Switching Ulips: If the Ulip an investor has invested in delivers mediocre returns, switching to another Ulip is a very expensive process. This is primarily because the commissions in the first two years of any policy are very high. So the investor has to pay the high commission all over again.

A staggered commission structure was in place, an investor could easily switch Ulips. This would ensure that insurance companies will compete on their performance as well, rather than the current situation where it is more a question of who has the better distribution system, pays higher commission and can get a bigger celebrity to endorse its product.

Mutual funds are currently not allowed to use celebrities to advertise their products.

6. ‘The commission-free structure will kill the insurance industry’: Irda chief Hari Narayan has gone on record with this statement after the recommendations of the Committee on Investor Awareness and Protection headed by D Swarup, the last chairman of the Pension Fund Regulatory and Development Authority, was released. The committee, which had members from the ministries of finance and corporate affairs, the Reserve Bank of India, Sebi and Irda, recommended that all retail financial products should go no-load and hence no-commission by April 2011. It recommended that upfront commissions given by insurance companies should fall to 7% by April 2010 and 0% by 2011. Now, that’s keeping “public-interest” in mind, for this would benefit the Ulip investor rather than the insurance company. Is Irda on the investor’s side?

via Vivek Kaul/DNA