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Friday, May 29, 2009
Market may extend recent gains
The key benchmark indices may extend last two day's of gains on positive global cues. Investors will keenly watch the GDP figures for the quarter ended March 2009 to be announced today.
The market expectations are that the economy is estimated to have expanded 5.2 % in the fiscal fourth quarter to 31 March 31, compared with a year earlier, Asia's third-largest economy grew 7.9 % in the June 2008 quarter, 7.6% in the September 2008 quarter and 5.3 % in the December 2008 quarter.
Meanwhile, the barometer index Sensex has risen 706.78 points or 5.2% in the last two trading sessions.
Asian stocks rose today led by mining companies, as a better-than-expected Japanese factory output report boosted copper prices. Key bechchmark indices in HongKong and Singapore rose by between 0.43% to 1.25%.
Japan's Nikkei rose 0.06% after its industrial output rose 5.2 % in April 2009, the biggest monthly gain in more than half a century and sharply higher than the median market forecast for a 3.2 % rise. It was the second month in a row of increasing production after five months of decline.
The US markets ended higher on Thursday 28 May 2009 as crude prices climbed to 65 dollars after an inventory pare-down and the results of the Treasury bond auction eased concerns about government debt. The Dow gained 103.78 points, or 1.3%, to 8,403.80. The S&P 500 index added 13.77 points, or 1.5%, to 906.83, and the Nasdaq composite index advanced 20.71 points, or 1.2%, to 1,751.79.
In the day's economic news, new-home sales ticked up 0.3 % to a seasonally adjusted rate of 352,000 in April 2009, less than expected. March sales were revised sharply lower. Meanwhile, initial jobless claims dropped by 13,000 to 623,000 from a slightly revised 636,000. Continuing claims rose to another record around 6.8 million.And durable-good orders rose 1.9 % in April 2009 but enthusiasm was tempered by a sharply lower revision for March 2009.
Crude shot up to near a six-month high of 65 dollars as OPEC left production quotas unchanged and a report showed that crude inventories were pared down by 5.413 million barrels last week.
Back home, the wholesale price index rose 0.61% in the 12 months to 16 May 2009, matching the previous week's annual rise, government data showed today, 28 May 2009. The government, meanwhile, revised upwards the rate of inflation for the year through 21 March 2009 to 0.84% from 0.31%. Finance Minister Pranab Mukherjee on Wednesday said inflation is reasonably down and reviving growth will be the government's top priority.
Mukherjee during on Wednesday said that a sustained stimulus to economic growth is possible by next round of reforms. He said reviving growth momentum is a top priority for the government adding that fiscal prudence will also be kept in mind.
Mukherjee said the government will stick to fiscal deficit target of 5.5% of GDP in the current financial year that ends on March 2010 (FY 2010). He said the government is committed to fiscal consolidation in 2-3 years.
Mukherjee said the government will continue to step up spending this year to support growth, risking a wider budget deficit. Growth and employment are not possible without increased spending and borrowing, the Finance Minister said. The prophets of doom have been unduly focusing on increased public spending and a consequent increase in the fiscal deficit, Mukherjee said. "An early return to our recent growth performance will help us get back to our preferred path of fiscal prudence," he said.
The fiscal deficit jumped to an estimated 10.6% of the nation's gross domestic product in the year ended 31 March 2009. India's credit rating may come under pressure if the government is not able to rein in a widening budget deficit, Moody's Investors Service today, 28 May 2009, said. “The stable outlook on the ratings has recently faced growing pressure, mainly due to substantial deterioration in the fiscal position,” Aninda Mitra, a senior analyst at Moody's in Singapore, said in a report today. “Inability of the newly re- elected government to meaningfully adjust fiscal policies and push ahead with reforms could pressurize the foreign currency credit rating.”
Moody's Baa2 rating on India's long-term foreign debt is the second-lowest investment grade. The ranking is the highest in South Asia after Kazakhstan's, four levels below China's, two levels under Malaysia's and six levels above Pakistan's.
“If the newly re-elected government proves able to quickly outline and sustain a credible program for reducing consolidated deficits, then the sustainability prospects for general government debt would improve,” Moody's said in its report. “These trends could boost the outlook for the country's local currency credit ratings.”
The comments from Moody's came after Fitch Ratings, which ranks India's debt BBB-, on 14 May 2009 said it expected the new government to step up spending to arrest slowing growth. That would widen India's national budget deficit, including state government finances, to more than 10% of GDP for a second year in a row, Fitch said.
According to analysts the new government should give priority to reforming the subsidy mechanism aimed at improving delivery mechanism while at the same time reducing costs. Analysts also say labour reforms are needed as a number of youngsters enter the job market.
The FM on Wednesday said he would be able to announce the full-budget for FY 2010 by the first week of July 2009 and try to get it approved by 31 July 2009. He said the common man will be the focus of the government policy.
Mukherjee said the industry and business have been hurt by high cost of finance but added that coordinated steps taken by central bank and government have stabilised the economy. He said the liquidity situation eased considerably adding that international capital flows have resumed.
The FM said he hoped banks would take advantage of the monetary policy and make cheap credit available. "One of the first steps I propose to take is to meet bankers and get them committed to a more benign plan of action," he said. His comments came in the backdrop of a newspaper report that state-run banks plan to cut lending rates by 100-150 basis points within the next fortnight after a finance ministry directive to lower interest rates in line with falling cost of funds.
In the political front, ending nearly a fortnight of suspense, the United Progressive Alliance (UPA) cabinet under the leadership of Prime Minister Manmohan Singh finally took shape on Thursday. While eight of the 27 cabinet ministers retained their portfolios Jairam Ramesh becomes minister of state with independent charge. Key cabinet ministers who retained their portfolios are Jaipal Reddy (urban development), Sushil Kumar Shinde (power), Vayalar Ravi (overseas Indian affairs), A. Raja (communications and information technology), Murli Deora (petroleum and natural gas), Kumari Selja (housing and urban poverty alleviation), Subodh Kant Sahay (food processing industries) and M.S. Gill (youth affairs and sports).
Vilasrao Deshmukh, who was removed as chief minister of Maharashtra after the 26/11 terror attacks in Mumbai, has got heavy industries and public enterprise and former Himachal Pradesh chief minister Virbhadra Singh the ministry of steel. Former Jammu and Kashmir chief minister Ghulam Nabi Azad was given health and family welfare.
Moily was given charge of law ministry, while another former Jammu and Kashmir chief minister Farooq Abdullah was allocated the ministry of new and renewable energy. Debutant C.P. Joshi from Rajasthan was given the portfolio of rural development and panchayati raj.
Another first-timer, Shashi Tharoor, was appointed minister of state (MoS) in the external affairs ministry, while Sachin Pilot will take charge as an MoS in the communications and information technology ministry and Agatha Sangma as his counterpart in the rural development ministry.
Jyotiraditya Scindia will now move to the commerce ministry as MoS. Dayanidhi Maran from Dravida Munnetra Kazhagam got textiles and B.K. Handique from Assam was made minister of mines as well as the development of north-eastern region. Among those with independent charge, Praful Patel retains civil aviation. Congress leader Prithviraj Chavan, too retained his post as MoS in the Prime Minister's Office and got additional charge as an MoS for science and technology, ministry of earth as well parliamentary affairs, among others. Salman Khurshid was made MoS with independent charge of corporate affairs, along with minority affairs.
The portfolio announcements came late in the evening, well after the conclusion of the second round of cabinet expansion. On Thursday, 14 cabinet ministers, seven ministers with independent charge and 38 ministers of state were sworn in, while 19 cabinet ministers were sworn in on 22 May. Of the 59 ministers inducted on Thursday, 42 are from the Congress, taking the total number of ministers from the party to 60, including the Prime Minister.
Dr Manmohan Singh was on 22 May 2009 sworn-in as Prime Minister for a second consecutive term. A day after the swearing-in of the UPA government on Friday 22 May 2009, the Union cabinet met under the chairmanship of Prime Minister Manmohan Singh on Saturday 23 May 2009. The cabined took a decision to convene the Parliament session from 1 June to 9 June 2009. A meeting with leaders of various parties will be held in the first week of June 2009 for finalising the dates of the budget session, home minister P Chidambaram said after the cabinet meeting on Saturday. He said government is quite hopeful of passing the budget by 31 July 2009.
The Speaker's election would be held on 3 June 2009 and President Pratibha Patil will address the joint sitting on 4 June, the day Rajya Sabha will also be convened. This will be followed by the debate on motion of thanks. Explaining the process of passing the general budget, Chidambaram said this has to be completed by 31 July 2009 failing which a vote-on-account will have to be approved.
A comfortable victory for the Congress-led coalition government in election has raised expectations of a strong push for economic reforms by the government. Dr Manmohan Singh has reportedly prepared the broad contours of an economic revival plan to be taken up soon after the new government is formed, reports suggest. While recommendations to revive growth and ease the credit squeeze are likely to find a place in the plan, tax proposals are expected to be taken up as budget recommendations.
The telecom ministry has prioritised the much delayed auction of 3G airwaves and WiMAX spectrum. It has also prioritised introduction of a new spectrum policy.
The petroleum ministry has reportedly prepared a draft Cabinet note on a partial decontrol of petrol and diesel prices after which they will be linked to international movements.
The new government is also likely to pursue disinvestment of state-run undertakings, reports suggest. It remains to be seen whether the government undertakes privatisation of state-run firms.
Financial sector reforms are likely to get a push in the coming days, which were relegated to the back seat due to persistent opposition from the Left parties.
The Congress party-led coalition has the support of 322 lawmakers, Prime Minister-elect Manmohan Singh said on Wednesday, 20 May 2009, giving it a clear majority in a new government. Congress said it has support of 274 members of the 15th Lok Sabha. In addition, the Bahujan Samaj Party, the Samajwadi Party and the Rashtriya Janata Dal sent letters of support for a Manmohan Singh-led government directly to the President, taking the support base to 322.
The Congress-led UPA defied predictions of a tight election and was only about 11 seats short of an majority from the 543 seats at stake in the recently concluded Lok Sabha election. Congress' alliance took 261 seats, sweeping aside its nearest rival the Bharatiya Janata Party (BJP), which won only 159 combined. Congress, which alone won 205 seats, needs a handful of partners to reach the 272 seats needed to take power, and is expected to seek the support of more smaller parties or independents.
Tata Communications
We recommend a sell in the Tata Communications stock from a short-term trading perspective. It is evident from the charts of Tata Communications that it was on an intermediate-term uptrend from February support level of Rs 390 till the May peak of Rs 651.The stock changed its trend after encountering resistance at Rs 651. This reversal was backed by a negative divergence in the daily moving average convergence and divergence indicator. Since mid of May, the stock has been on a short-term down trend. While trending down, it tumbled almost 7 per cent on May 26, conclusively penetrating the 21-day moving average. The stock’s decline continued on May 28when it broke the key support at Rs 510 by diving 5 per cent. It is currently trading well below the 21 and 50-day moving averages. The daily relative strength index has entered into the bearish zone from the neutral region and the weekly RSI is declining in the neutral region. We are bearish on the stock from a short-term horizon. We expect its fall to prolong until it hits our price target of Rs 450 in the approaching trading sessions. Traders with short-term perspective can utilise rallies to sell the stock while maintaining a stop-loss at Rs 524.
via BL
Daily News Roundup- May 29 2009
Petroleum consultant Gaffney, Cline & Associates has confirmed the presence of oil & gas in two offshore blocks in Reliance’s KG basin-D3 and D9. (BL)
Suzlon Energy has successfully renegotiated financial covenants and amended key terms of the bank loan facilities it had taken for acquiring REpower Systems AG and Hansen Transmission. (BS)
Aditya Birla Group may not buy L&T stake in Ultratech Cement. (ET)
Tata Motors may have to infuse funds to bridge JLR pension gap. (ET)
R-Power in talks with Australian mining firm BHP Billiton and Rio Tinto for setting up a coal mining joint venture. (ET)
Tata Motors has concluded an agreement for amending its bridge loan, extending the final maturity of US$1bn by 18 months upto December 31st, 2010. (BL)
JSW Steel plans to raise US$1bn via QIP and a FCCB issue. (BS)
Datacom and Sistema Shyam Teleservices have short listed Wipro, Tech Mahindra and IBM for an IT outsourcing contract worth US$150mn each. (ET)
The 1,000MW NTPC-Simhadri Unit III will be ready by Nov 2010. (BS)
SAIL plans to nearly double it capital expenditure to Rs100bn in FY10. (BL)
Satyam may downsize overseas operations and terminate lease contracts. (BL)
Aditya Birla Group Company to set up 10mn tons captive port at Chudamani. (BS)
Novartis has revised the open-offer price for its shares to Rs450 from Rs351 to buy back an additional stake of up to 39%.(BS)
Finance Ministry mulls special audit of Satyam accounts. (FE)
US FDA to review Ranbaxy corrective plan. (FE)
Government to allow UBI, Dena Bank and Bank of Maharashtra to tap market to boost their capital base. (ET)
Dewan Housing Finance Corporation (DHFL) is planning to issue non-convertible debentures (NCDs) worth up to Rs10bn in July to meet its credit disbursal targets for the current financial year. (BS)
Spice Group is diversifying into financial services with plans to start businesses which will deal with asset reconstruction, remittances, over-the-counter exchange and fixed income products. (BS)
The consortium led by GMR Infrastructure Ltd has won the 181km Hyderabad-Vijayawada highway project to be executed on a BOT basis. (BL)
Coromandel Fertilisers Ltd has signed a JV with Soquimich European Holdings BV, Netherlands, a subsidiary of SQM, Chile, for setting up 15,000 tons water soluble fertilisers plant at Kakinada in Andhra Pradesh. (BL)
Siemens Ltd plans to invest Rs2.7bn to triple capacity of its steam turbine manufacturing facility in Vadodara, Gujarat. (BL)
Religare to acquire Maharashi Housing Development Finance Corporation to foray into home finance business. (ET)
Ericsson bags order worth US$500mn from Unitech Wireless to supply and manage all network equipments for its three telecom circles. (ET)
Government of India raised Rs150bn (US$3.14bn) by selling four bonds maturing between 2016 and 2035. (BS)
SEBI plans to extend the facility of internet trading in securities on exchanges by enabling use of wireless technology. (BS)
The annual wholesale inflation rate remained unchanged at 0.61% for the week ended May 16. (BL)
Moody’s has toned down its pessimism on India by retaining a stable outlook. (ET)
Government has decided not to apply an area limit of 5,000 hectares for SEZ if two or more such zones are merged. (ET)
Dis-May…bears run for cover!
Great things are not done by impulse, but by a series of small things brought together.
With ~28% gain in the May F&O series, the bulls seem to have managed their impulse for quite some time now. The rollover to June was around 58%, which is relatively less.
The outlook at start is expected to be positive though FIIs were net sellers to the tune of Rs7.29bn. Moody’s meanwhile has toned down its pessimism on India by retaining a stable outlook. Hold on to your horses as the GDP numbers for March will be announced today. Expectations are the growth in March quarter may have been the slowest with the economy expanding a little over 5%. Should it disappoint, some profit taking could be seen.
The cues from the global markets show no concerns for the day. The US market ended higher after the government’s recent debt auction saw healthy demand. The Treasury Department said it received $58.7 billion worth of bids for the $26 billion in 7-year notes offered Thursday.
Meanwhile, Government of India raised Rs150bn by selling four bonds maturing between 2016 and 2035.
The Dow Jones industrial average (INDU) rose 103 points, or 1.2% while the broader S&P 500 (SPX) added 14 points, or 1.5%. The Nasdaq composite (COMP) gained 1.2%, adding 20 points.
Asian stocks were mixed in the morning trades, however, the mining stocks recorded smart gains as a better-than-expected Japanese factory output report boosted copper prices. Mitsui & Co gained 1.6%, BHP Billiton advanced 2%, Mitsui O.S.K. Lines was u p 3.4%.
The Nikkei index was flat at 9,457. The Hang Seng index was up 0.3% at 17,949. Straits Times gained 1%. Australia's S&P/ASX gained 1.4% at 3,806. The MSCI Asia Pacific Index gained 0.3% to 100.45 as of 10:38 a.m. in Tokyo.
Japan’s unemployment rate rose to a 5-year high in the month of April. The jobless rate rose to 5% from 4.8% in the month of March.
Crude oil shot up to US$65.08 a barrel after OPEC decided to leave production quotas unchanged.
In news from the media:
Petroleum consultant Gaffney, Cline & Associates has confirmed the presence of oil & gas in two offshore blocks in Reliance’s KG basin-D3 and D9.
Suzlon Energy has successfully renegotiated financial covenants and amended key terms of the bank loan facilities it had taken for acquiring REpower Systems AG and Hansen Transmission.
Aditya Birla Group may not buy L&T stake in Ultratech Cement.
R-Power in talks with Australian mining firm BHP Billiton and Rio Tinto for setting up a coal mining joint venture.
SEBI plans to extend the facility of internet trading in securities on exchanges by enabling use of wireless technology.
The annual wholesale inflation rate remained unchanged at 0.61% for the week ended May 16.
It was the second straight day of gains for the Indian markets on Thursday. The upswing was seen despite weak cues from the US and the Asian markets. The Metal, Banking and the PSU stocks were among the top gainers followed by the Capital Goods and the Realty stocks. However, some offloading was seen in the Pharma, IT and FMCG counters.
The Sensex surged 186 points or 1.3% to close at 14,296 after touching a high of 14,377 and a low of 14,078. The index had opened at 14,115 against the previous close of 14,109.
The NSE Nifty gained 61 points or 1.4% to shut shop at 4,336.
Among the BSE Sectoral indices BSE Metal index was the top gainer adding 2.7%, followed by the BSE PSU index up 2.3%, BSE Bankex index up 1.8%, BSE Capital Goods index up 1.7% and BSE Realty index up 1.7%.
Shares of L&T gained by 2.3% to Rs1342 after the company announced its Q4 results with net profit at Rs9.99bn posting 3.3% growth as against Rs9.67bn in the same period last year. The company’s net sales grew 23.6% yoy at Rs104.7bn as against to Rs84.7bn and has one-time loss of Rs1.44bn. The company announced that it would pay dividend of Rs10.50 per share.
Shares of M&M advanced by 2.1% to Rs639 after the company announced its Q4 results with net profit at Rs4.18bn posting a growth of 89% yoy as against Rs2.21bn. Net sales were up 15% at Rs36.2 versus Rs31.4. The company Q4 EPS was at Rs10.81 versus Rs9.02 and also announced that they would pay dividend of Rs10 per share.
SAIL surged by over 6.5% to Rs164. The company’s Q4 net profit dropped 37% yoy at Rs14.9bn as against Rs23.8bn in the same period last year. The company posted revenues of Rs120.6bn as against Rs134.8bn.
After gaining over 700 points in two trading sessions, some cooling off is not ruled out as trader and investors would prefer to book some profits ahead of the weekend. No other immediate catalysts for now besides the GDP numbers tomorrow.
Inflation stands unchanged at 0.61%
India's Wholesale Price Index (WPI) based inflation rose 0.61% in the week ended 16 May 2009 from year earlier same as in the previous week, but substantially lower compared to 8.66% a year ago. However, the index rose 0.1% to 232.2 from previous weeks level, recording seventh weekly gains.
The index of primary articles rose 0.04% from previous weeks level, recording rise for the seventh consecutive week, while manufacturing index rose 0.1% posting tenth weekly rise. However, the index of fuel, power, light and lubricants also moved 0.1% during the week compared to its previous weeks level.
Within the primary articles, the index of food articles declined 0.04% from the previous weeks level due to lower prices of gram, fruits & vegetables and jowar (1% each), but non-food articles increased 0.2% powered by higher prices of raw cotton (2%) and linseed (1%). However, the primary article inflation climbed up to 6.22% from 6.05% in the previous week.
The index for manufacturing product group rose 0.1% from previous week, while the annual inflation in the manufactured product group stood at 1.1%. Among the manufactured products, the index for food product climbed up 0.5% due to higher prices of bagasse (25%), unrefined oil (21%), malted food (7%), imported edible oil (3%) etc, while the index of beverages tobacco & tobacco products rose 0.1% from the previous week level. However, the index of textile group and transport equipment & parts declined 0.1% each from their previous weeks levels.
The inflation has continued to be below 1% for the sequential eleventh week, but it has been rising for the seventh week on week-on-week basis, which is raising concerns. The weekly rise is largely contributed by primary articles, while lower industrial production has also pressured the prices of manufactured products.
A survey of professional forecasters conducted by the Reserve bank has projected the WPI based inflation to be negative at -1.4% in the first quarter of 2009-10 and further deeper negative at –2.5% in the second quarter, due to rapid rise in prices in the corresponding previous period. However, during the first seven weeks out of the 13 weeks in the first quarter, the inflation stood at 0.5% compared to 8.3% in the corresponding previous year period.
Satyam to downsize operations, close offices
A handful of the 105 offices and 30 delivery centres that Satyam Computer Services has worldwide may soon cease to exist.
The Hyderabad-based company, recently acquired by Tech Mahindra, is evaluating options to downsize operations at its overseas development centres and terminate lease contracts for offices and other properties.
By consolidating its offices and delivery infrastructure, Satyam will be able to up capacity utilisation and also reduce overhead costs, two persons in the knowledge of the development told Business Line.
“The concept of global delivery centres is good but all delivery centres and offices will be right-sized both in terms of people and physical infrastructure,” one of them said.
Resurrection Plan
This review of operations is part of Operation Phoenix, Tech Mahindra’s plan of resurrecting Satyam.
Satyam has seven development centres in China, Germany, Brazil, Egypt and Malaysia, which act as near-shore destinations for getting work done in the same time zone as places such as the US and the UK.
A spokesperson for Satyam refused to comment on the news.
In April, Satyamites on bench in the US were asked to quit and return to India.
Satyam has already pruned its sales force across the globe.
However, recent news reports indicate that it plans to increase the sales team by 20 per cent. This could not be verified independently.
Another official said that Satyam is likely to consolidate sales operations in the US as a section of customers based there has severed ties with the company. The company has 14 offices in the country.
Apart from its 10,000 excess employees, Satyam is believed to have 20,000 spare seats in India across the 23 delivery centres.
“We have identified several rented premises whose lease will be terminated to provide sizeable savings. This space is anyway in excess and was invested based on anticipated growth,” Mr A. S. Murthy, Chief Executive Officer of Satyam, told staff in a recent email.
High-profile exodus
Meanwhile, the exodus of high-profile officials from Satyam continues
Those who have quit include Mr Virender Agarwal, Business Head of India, the Middle-East and the Asia-Pacific regions; Mr Hetzel Folden, head of the strategic deals group; Mr Naresh Jhangiani, human resource head of business process outsourcing, and Mr Deepak Nangia, head of the Australian region.
Ms Archana Muthappa, India-based spokesperson for Satyam, too has put in her papers.
Last week, Mr Vineet Nayyar, CEO of Tech Mahindra, had said Satyam has excess staff of 10,000
via BL
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