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Wednesday, September 19, 2007
Pre Market Watch
Indian market is likely to have a positive opening due to strong global cues as the Fed lowered the benchmark fed funds rate to 4.75% as well as cutting down of discount rate by half a percent to 5.25%. On Tuesday, the Indian markets ended on a firm positive note, as BSE Sensex closed higher by 164.69 points at 15,669.12 while Nifty grew by 51.55 points to close at 4,546.20. We expect the market to see some bull run during the trading session, as the Federal reserve interest cut will triggered the market to trade higher.
On Tuesday, The Dow Jones Industrial Average (DJIA) surged by 335.97 points to close at 13,739.39. The S&P 500 (SPX) index increased by 43.13 points to close at 1,519.78 and the NASDAQ Composite (RIXF) grew 70 points to close at 2,651.66.
Indian ADRs ended in positive territory. In technology sector, Patni computers grew by (7.36%) along with Infosys by (5.39%), Wipro by (4.39%) and Satyam by (4.37%). In banking sector, HDFC bank and ICICI bank advanced by (7.46%) and (5.45%) respectively. VSNL and MTNL grew by (7.81%) and (5.26%) respectively.
The major stock markets in Asia are trading strong. Hang Seng surged by 914.85 points to close at 25,491.70. Japan''s Nikkei advanced by 531.49 points to trade at 16,333.29. Taiwan weighted trading higher by 44.17 points at 8,944.08. Singapore Strait times increased by 86.12 points to trade at 3,563.87.
Today, Nifty has support at 4,542 and resistance at 4,735 and BSE Sensex has support at 15,665 and resistance at 16,255.
Market may surge after US Fed lowers interest rates
After the announcement of interest rate cuts by Fed chief the US markets rallied sharply and tracking the same currently Asian markets are also up over 2-3%. However, investors should remain cautious as intra-day volatility remains the major concern. Among the domestic indices, the Nifty could test higher levels of 4580 and may dip to 4520 on the downside. The Sensex has a likely support at 14900 and may face resistance at 15850.
Major US indices rallied sharply on Tuesday, after the Federal Reserve cut a key short-term interest rate by a half-percentage point, reassuring investors that it was taking aggressive action amid the credit and mortgage market meltdown. While the Dow Jones registered biggest one day gain was up by 336 points at 13739, the Nasdaq jumped by 70 points to close at 2652.
All the Indian ADRs traded firm on the US bourses. VSNL led the pack with gains of over 7.81% followed by Patni Computer and HDFC Bank gaining over 7%, while Infosys, Satyam, Wipro, Dr Reddy's Lab, Tata Motors, ICICI Bank and MTNL jumped over 1-5% each.
Crude oil prices rose on Tuesday, with the Nymex light crude oil for October delivery gaining 94 cents to close at $81.51 a barrel. In the commodity space, the Comex gold for December delivery slipped by 10 cents to settle at $723.70 an ounce.
US Market overjoyed with Federal Reserve’s big decision
Indices see their best day of the year as traders see their dream come true
Federal Reserve Chairman, Ben Bernanke shocked and cheered US market today, Tuesday, 18 September 2007, by cutting fed fund interest rate (what banks charge each other for overnight loans and is the basis for everything from business loans to credit card charges) by 50 basis points from 5.25% to 4.75%. Though market was expecting a 25-50 bps cut in interest rate, traders knew that the chances of a 50 bps cut was really dim.
This was the first rate cut since June 2003. Bernanke and group clearly reiterated today that turmoil in financial markets was a threat to economic growth. The Fed also cut its discount rate (the rate it charges member banks and institutions for short-term loans) from 5.25% to 4.75%.
The Dow Jones Industrial Average was trading higher by 70 points before Fed came out with its decision. Soon after the news hit the wires, the indices skyrocketed. The Dow Jones industrial Average closed higher by 336 points at 13,739.4. The Nasdaq Composite Index, finished higher by 70 points at 2,651.66. S&P 500 finished higher by 43.13 points at 1,519.78.
Twenty-nine out of thirty Dow stocks ended in green today. Financial stocks were in the forefront. Better-than-expected earnings report from Lehman Brothers also helped in fuelling the rally. Among other stocks, while P&G hit an all time high, GE scored a five-year high. Boeing was the sole laggard and the stock closed marginally lower.
The Dow's rise marked its largest one-day jump since 15 October, 2002, and its biggest percent rise since 2 April, 2003. All ten economic sectors posted gains today.
The Federal Open Market Committee meeting noted that today's action is intended to "forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time."
Financials lead the rally after Fed cuts interest rate
When market opened in the morning, all 10 economic sectors were in positive territory. The Labor Department reported that wholesale prices fell 1.4% in August, led by falling food and energy prices. However, the core producer-price index climbed a greater than expected 0.2%.
Better than expected earnings news from the likes of Lehman Brothers, Best Buy and Kroger and the reassuring PPI report, helped market rally in the morning hours. Dow trading up by more than 130 points.
Lehman Bros. had a better-than-feared fiscal third quarter earnings report, topping the consensus estimate of $1.47 by seven cents. This gave the financial sector a good boost.
Then at 2.15 P.M, the Fed diction was out. The Fed directive did indicate that readings on core inflation have improved modestly but also ascertained that some inflation risks remain. The financial sector set the pace of the rally and was followed by consumer discretionary materials and industrials.
The FOMC also said that it is going to continue to assess the developments in the financial markets and will act as needed to foster price stability and sustainable economic growth.
Indian ADRs were also not left far behind in today’s rally. Indices registered gains between 2.5%-7.5%. VSNL and HDFC Bank topped the list gaining 7.8% and 7.6% respectively. Patni was a close third going up by 7.3%. MTNL, Infosys and ICICI Bank – all gained more than 5.3%. Wipro Technologies closed up by 4.4%.
Crude ends above $82 in after hours trading
Crude oil future prices surpassed $81/bbl at today’s close of regular trading and crossed $82/bbl in the after hours electronic trading. Prices got a boost after Federal Reserve cut interest rate as traders anticipated that this will boost energy demand across the country.
Crude-oil futures for light sweet crude for October delivery closed at $81.51/barrel (higher by $0.94/barrel or 1.2%) on the New York Mercantile Exchange. A potential storm risk in the Gulf of Mexico and speculation about falling inventories of fuel and fuel products in the past week also fuelled up crude price.
At the New York Stock Exchange, volume topped 1.6 billion shares, and advancing stocks outdid decliners nearly 10 to 1. At the Nasdaq, more than 2.1 billion shares traded hands, and advancers outpaced decliners nearly 4 to 1.
Tomorrow investors will again look for economic data to help set the tone of trading. The influential CPI report and August Housing Starts and Permits will garner notable interest given the persisting weakness in the US housing market. That will be followed by the Energy Dept.'s weekly inventories report at 10:30 ET. Morgan Stanley to come out with its earnings report.
Morning Call - Sep 19 2007
Market Grape Wine :
In House :
Nifty at a supp of 4520 and 4480 levels with resistance at 4582 and 4625 levels.
Intraday: Buy ultracemco above 990 target 1025 with S/L 978
Intraday: Buy TISCO above 710 target 729 with S/L 701.
Intraday: F & O : Buy Bank of Baroda above 299 target 313 with S/L 294.
Intraday : F & O : Buy Siemens above 1292 target 1325 with S /L 1275.
Out House :
Markets at a support of 15515 & 15651 levels with resistance at 15858 & 15995 levels .
Buy : RIL & RelCap
Buy : REL
Buy : IFCI
Buy : SBIN
Buy : Titan
Buy : IolBroad & ABAN
Buy : SKumar & Muru
Buy : JpAsso & CenTextile
Dark Horse : RIL , Aban , RelCap , REL , SBIN , Kotak , IFCI , & JpAsso
Bullet for the Day : Titan & Aban with strict stop loss
Stock in News
Moody's downgrades outlook on Tata Steel from stable to negative.
Anant Raj Industries plans to set-up 16 hotels in four and five-star category in NCR by 2010.
Educomp acquires 70.5% stake in a Canada-based e-learning company Savvica.
Pantaloon Retail receives shareholders approval to raise Rs12.6bn.
Hotel Leelaventure has earmarked Rs22bn in next three years for developing hotels.
DLF Assets, a privately held company promoted by DLF promoters, plans to raise US$2bn in Singapore through listing as a Real Estate Investment Trust.
Maruti Suzuki India is planning to set up JV with Japanese component Futaba Industrial Company for making exhaust system components for its cars.
GAIL plans to borrow Rs70bn in the next four years to partially fund its capex.
BPCL plans to submit a US$350mn non-binding bid to acquire 10% in a Congo oil field.
Gati has postponed the launch of its dedicated freighter service from its original plan of Sept 15 to mid October.
Crompton Greaves has won bid to distribute and bill power in three major divisions in Nagpur.
Aditya Birla Nuvo expects revenues of Rs17bn from its textiles and garments businesses in the current fiscal.
PSL has bagged $17mn contract from UK based Fusion Provida.
SBI is likely to merge its seven associate banks with itself by March 2009.
Orient Express Hotels has rejected Tata Group’s offer to forge a strategic alliance.
IOC is eyeing an annual turnover of Rs20bn from non-fuel retail in next five years.
Kirloskar Brothers is planning to buy a steel casting company to strengthen core operations.
ITC is planning to set up a third food factory in Bangalore.
Trent is scouting for partnerships with premium apparel brands.
Hikal Technologies, a 100% subsidiary of Hikal, is setting up a contract research and development facility at the International Biotech Park in Hinjhewadi, Pune.
Fund Activity:
FIIs were net buyers of Rs233.8mn (provisional) in the cash segment on Tuesday and the local institutions pulled out Rs2.33bn. In the F&O segment, foreign funds were net sellers of Rs5.47bn.
On Monday, FIIs were net sellers to the tune of Rs2.67bn in the cash segment. Mutual Funds were net sellers of Rs2.04bn on the same day.
Grey Market - Consolidated, Kouton, Circuit, PGICL
Consolidated 460 to 510 130 to 150
Koutons India 370 to 415 85 to 90
Circuit Systems 35 4 to 5
PGICL 44 to 52 19 to 20
Dhanus Tech 280 to 295 80 to 90
Kaveri Seeds 150 to 170 6 to 8
Allied Computers 12 1 to 1.50
Magnum Ventures 27 to 30 1 to 2
Trading Calls
NIFTY (4546) Supp: 4523 Res: 4593
Buy ICICI Bank (925) SL 919 Target 940, 945
Buy
Buy Ultratech Cem (979) SL 970 Tgt 1005, 1010
Sell Amtek Auto (355) SL 360 Tgt 347, 343
Bulls well Fed for all-time high
The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.
For the day you can bank on the Fed's move to push key Indian indices to a lifetime high. The Federal Reserve cut its benchmark interest rate by 50 basis points. The US central bank hinted at more steps to prevent a recession in the US amid a chronic slowdown in the housing sector and the turmoil in credit market. The result. US stocks soared as did bond prices but the dollar fell to a new low against the euro.
Markets also surged across Europe, Latin America and in other emerging markets. Barring China, most Asian markets are all up sharply this morning. We will also have a gap-up opening here and the Sensex and the Nifty are expected to test new peaks.
The rupee should also benefit from the Fed move, in line with other Asian currencies. As a result, we will see some fresh pressure on IT stocks. On the whole, the bulls, not only in India but across the globe, have got a new lease of life thanks to Bernanke & Co. Still, doubts remain about the strength of the US economy and whether the rate cuts are enough to shore up the housing sector there.
Back home, the market should resume its advance and the Sensex could test the 16k levels today itself. FII inflows may also pick up amid the resumption in the so-called 'carry trades'. The Fed decision might also prompt the RBI to relax its hawkish stance on the monetary policy going forward.
The next trigger could come from the quarterly results. However, the political uncertainty could well put some hurdles in the way for the bulls, albeit only temporarily. As we mentioned yesterday, the spurts could be used to lighten your position. Some cooling off may well be on the cards in the coming days.
US stocks jumped the most in four years on Tuesday after the Fed cut interest rates and raised hopes that the US economy could come out of a prolonged housing slump and turmoil in the credit markets.
The cut in the Fed's benchmark short-term rate, the first in four years, was more aggressive than many investors had expected. The market responded by pushing the S&P 500 to its biggest percentage gain since March 2003. It was the blue-chip Dow's best one-day percentage gain since 2003.
Before the rate cut was announced, Lehman Brothers reported unexpectedly strong earnings that helped allay worries about the impact of credit market contraction on banks. Its shares jumped 10%.
The Dow Jones Industrial Average shot up 335.97 points, or 2.51%, to end at 13,739.39. The S &P 500 Index surged 43.13 points, or 2.92%, to finish at 1,519.78. The Nasdaq Composite Index climbed 70 points, or 2.71%, to close at 2,651.66.
Oil stocks also rose sharply, as crude oil futures hit a fresh record high above $81 a barrel.
Banking gains pushed European markets higher. The pan-European Dow Jones Stoxx 600 index rose 1.5% to 367.67, as UK mortgage banks advanced following a pledge by the British government to guarantee deposits at lender Northern Rock.
The FTSE 100 index rose 1.6% to 6,283.30 and the French CAC-40 index advanced 2% to 5,549.35. The German DAX 30 index added 1.3% to 7,575.21.
Asian stocks climbed the most in a month following the Fed decision. Toyota and Samsung Electronics led gains by regional exporters. Mizuho Financial Group and National Australia Bank advanced on speculation that the Fed's rate cut will ease the current credit crunch.
Japanese exporters were also boosted after the yen weakened against foreign currencies, increasing the value of their overseas sales.
The Morgan Stanley Capital International Asia-Pacific Index jumped 3% to 153.48 as of 10:33 a.m. in Tokyo, headed for the biggest gain since Aug. 20. The Nikkei 225 Stock Average surged 3.5% to 16,347.70 in Japan.
Australia's S&P/ASX 200 Index gained 2.2% while South Korea's Kospi index climbed 2.9%. All markets open for trading in the region advanced.
All eyes on Fed
Bulls staged a strong come back in the second half erasing early losses ahead of the Federal Reserve meet. The recovery was led by Banking, Oil & Gas and Small-Cap stocks. On the other hand shares of Consumer Durable and Pharma stocks were offloaded. Also the frontline stocks like L&T, SBI, ICICI Bank and Reliance Industries provided vital support holding the markets from any further dip. Finally, BSE 30-share benchmark Sensex surged 164 points to close at 15669. NSE Nifty added 51 points at 4546.
Trent surged by over 2.5% to Rs631 after the company announced that it has formed a strategic partnership with Benetton India Limited. The scrip touched an intra-day high of Rs648 and a low of Rs615 and recorded volumes of over 66,000 shares on NSE.
Tata Steel edged higher by 0.7% to Rs710. Moody cut the company’s outlook to negative. The scrip touched an intra-day high of Rs713 and a low of Rs702 and recorded volumes of over 13,00,000 shares on NSE.
PVR slipped by 1% to Rs198. The company announced that they would sell 1.2mn warrants to Founder Priya Exhibitors. The scrip touched an intra-day high of Rs204 and a low of Rs195 and recorded volumes of over 46,000 shares on NSE.
Indian Hotels edged lower 0.7% to Rs129. Reports stated that the company has acquired 10% stake in US based Orient Express Hotels for Rs8.5bn. The scrip touched an intra-day high of Rs135 and a low of Rs129 and recorded volumes of over 25,00,000 shares on NSE.
Lanco Infratech surged by over 4% to Rs330 after the company announced that they have entered into a MoU with Gulftainer Company Ltd, UAE to co-operate on a variety of port and transportation projects. The scrip touched an intra-day high of Rs334 and a low of Rs316 and recorded volumes of over 18,00,000 shares on NSE.
Educomp advanced by 1.3% to Rs2900 after the company announced that it has acquired 70.05% stake in Canada’s Savvica. The scrip touched an intra-day high of Rs2933 and a low of Rs2845 and recorded volumes of over 1,00,000 shares on NSE.
Banking stocks recorded smart gains on expectation’s that Federal Reserve would cut the interest rates and RBI would follow suit. ICICI Bank gained by 3.2% to Rs924, SBI was up by 3% to Rs1694 and Bank of Baroda added 4.5% to Rs295.
Realty stocks gained momentum towards the end. Akruti was the pick pf the day as the scrip surged by over 10% to Rs695, DLF gained 1% to Rs656, Unitech edged higher by 0.5% to Rs281, and Sobha added 1.2% to Rs763.
IT stocks were on the receiving end as rupee continues to strengthen against the US dollar. Wipro slipped by 1.2% to Rs444, I-Flex dropped by 1% to Rs1894 and Mastek slipped 0.2% to Rs290.
Capital Good stocks also ended higher led by gains in the index heavyweights. Siemens surged by over 3% to Rs1283, ABB rose 1.8% to Rs1232, L&T gained 1.1% to Rs2618 and Punj Lloyd added 1.7% to Rs295.
Small-Cap stocks continued to be in demand as the index was up by 1.6%. Adhunik Metal surged by over 7.5% to Rs100, Andhra Cement rose over 8.5% to Rs39 and Binani Industries jumped by over 6% to Rs208.
Infosys, Microsoft planning on Sage group
India's tech poster boy Infosys may face off global software behemoth Microsoft in a rumoured e4.6-billion bid for UK-headquartered IT major Sage Group with annualised billings of around e1.4 billion.
While blazing stock market rumours placed Infosys along with Microsoft, Intuit and Goldman Sachs as possible suitors for the accounting software company Sage, a section of industry experts said India’s best-known tech brand could be gunning for a bigger French player Atos Origin in the consulting and IT services space, with revenues touching euro 5.5 billion and 50,000 employees on board.
Infosys has been hunting for global acquisitions, especially in the European market, with its name being linked to the likes of Capgemini and LogicaCMG in the recent past. However, Capgemini has vehemently denied any talks while Infosys has maintained a standard comment — “We do not comment on market rumours” — on all the recent speculations.
Infosys chairman Nandan Nilekani, who recently moved out of operational charge, is seen leading the M&A activity, which is increasingly coming on the company’s radar in recent months.
As the bid talk galvanised, Sage remained volatile on London Stock Exchange surging over 2.77% to 250 pence before declining 1.25% at the time of going to the press. Sage was yet to react to the developments, and it is not yet clear whether the company would entertain any bids at all.
Sectoral experts said Infy’s bid for Sage was highly unlikely as the Indian company usually chases large clients with service offerings while Sage provides software product to the over five million SMBs globally.
Sage, which has around 13,000 people across the world, gets major part of its revenues from the North American market and is expected to issue a trading statement by the month-end showing strong future business growth.
In context, some analysts are betting on Infy chasing a bigger target like Atos Origin, paving way for a transformational deal, especially with consulting expertise that the latter has. Industry sources have been constantly saying that Infosys is actively scouting for acquisitions, especially in Western Europe to get a significant presence in the region. British media reports quoting BG Srinivas, head of Infosys operations in EMEA (Europe, Middle East and Africa): “We are looking for opportunities that will transform our business in Europe.... That could be in the UK, France or Germany.”
Despite the conservative outlook by Infosys towards acquisitions, analysts felt that software services giant will have to go in for buyout to keep up with its growth momentum and get into newer market. The recent takeover of the Philips BPO business was also an inkling of what was in store, as for the first time it took over a contingent of around 700 people.
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