Smart Invest and Smart Trade -Sep 3 2010
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Friday, September 03, 2010
Global News - Sep 3 2010
US manufacturing sector grows unexpectedly
Manufacturing sector growth in the United States accelerated in August. The US PMI grew faster than expected, offering a positive note amid worries about the state of the economic recovery. Economists had expected US manufacturing to slow further in August, but the closely watched figures from the Institute of Supply Management (ISM) pointed to an acceleration of output growth even as separate regional surveys painted a more downbeat picture. The US purchasing managers’ index rose to 56.3 from 55.5 in July. A reading above 50 indicates growth and a figure below it points to contraction. The US sector expanded for its 13th straight month in August, according to the ISM. Stock indexes surged across the globe after an unexpectedly strong US manufacturing survey further eased tensions about the global economic recovery. Across the world, the global manufacturing PMI indicated manufacturing activity continued to rise for the 15th month in a row although the data indicated that the most rapid phase of the recovery was over. The big question is whether the economic momentum can be sustained going ahead.
Pawar pushes for sugar decontrol
Food and Agriculture Minister Sharad Pawar has reportedly made a detailed presentation to the Prime Minister on the issue of deregulating the sugar sector. According to Pawar's plan, the Centre should buy sugar at prevailing market prices for the public distribution system (PDS) directly from the open market in the new sugar year starting October. At present, mills are obliged to sell 20% of their sugar produce to the Central Government for distribution under the PDS at almost half the market price. The Centre also directs each month how much sugar should be released for the open market sale. Under decontrol, this release mechanism will be discontinued and sugar mills will be free to sell their produce as they wish.
Food, fuel inflation climbs
Food inflation in India inched higher in the third week of August as did inflation for the Fuel group and the Primary Articles group, data released by the Government showed. Inflation for the Food Articles group stood at 10.86% in the week ended August 21 as against 10.05% in the previous week, the Commerce & Industry Ministry data showed. It was at 14.86% in the comparable week last year. The index for Food Articles group rose by 1.8% to 303.3 in the week ended August 21. Inflation for the Primary Articles group also rose to 15.19% from 14.75% in the week ended August 14, the data revealed. It stood at 8.87% during the week ended Aug. 22, 2009. The index for the Primary Articles group rose by 1.4% to 312.5 in the week under review.
Mutual Fund industry's AAUM up 3% in August
The Indian mutual fund industry had a better August with the average assets under management (AAUM) of the industry growing by a respectable 3.30%.
The AAUM of the Indian Mutual Fund industry increased to Rs6.87 lakh crores in August from Rs6.65 lakh crore in July, according to data published by the Association of Mutual Funds in India (Amfi).
Weekly Newsletter - Sep 3 2010
With data showing improvement in the US macroeconomic numbers, especially in manufacturing and payrolls, the global risk aversion could subside further. Monday promises to be a good day for the bulls, as world markets are expected to rejoice a better than expected US jobs data. The overall lost jobs were lower than forecast and private hiring turned out to be higher than anticipated. But, the unemployment rate is still pretty high at 9.6%. Jobless rate is also pretty elevated in the debt-plagued euro-zone, which could see some slowdown due to the tough austerity measures.
Indian economy on strong wicket...grows 8.8% in Q1
India's economy grows by 8.8% in Q1 FY11 as against 8.6% expansion in the previous quarter (January-March), data released by the Government showed. This is the fastest pace of economic growth for the country in two-and-a-half years and might put further pressure on the Reserve Bank of India (RBI) to hike key interest rates to rein in inflation. India’s US$1.3 trillion economy may expand by 8.5% in the year ending on March 31, 2011, the most in three years, the RBI said on July 27. The benchmark wholesale-price inflation rate has hovered around or above 10% since January. 10-year government bond yields climbed last week to as much as 8.07%, near the highest level in four months, on concerns that the RBI may raise rates for the fifth time since mid-March to contain inflation. The RBI is scheduled to release its next monetary policy statement on Sept. 16. The RBI's repurchase rate is currently at 4.5% and the repurchase rate is at 5.75%.
Sensex, Nifty log tepid weekly gains...broader mkt shines
During the week, caution and optimism went hand in hand. A rare error in Q1 GDP numbers was sorted out after a credible explanation from the Government. Overall, the GDP data only reinforced a growing view that economic fundamentals remain fairly robust. Having said that, PMI data on manufacturing and service sector activity and trade figures indicated that some softening could be underway and that growth may have peaked out. Also, inflation continues to hover near double digits, putting relentless pressure on the RBI to raise rates. The BSE Sensex and the NSE Nifty gained 1% each this week ending at 18,221 and 5,479 respectively but the broader market indices clearly outpaced the gains in the main indexes.
Asian stocks have nowhere to go
Markets enter into a typical pre non-farm period of tranquility
Asian markets witnessed mostly listless trades ahead the non-farm payrolls, as investors were hesitant to enter into the markets on the heels of such a critical data. The economic indicators have improved in Asia and US over the last couple of sessions but the traders seemed reluctant to add to their recent longs given that a sharp downward bias in non farm is good enough to ruin off all the other positive economic endeavors. Moreover, with the US Labor Day holiday on Monday, the participants are not willing to take much of a risk. Select Asian stocks still eked out gains, buoyed by a late surge on Wall Street in the prior session.
Market may consolidate at higher level
Profit booking may emerge at higher level after recent strong gains, but rising confidence among foreign investors in India's rapid pace of economic growth should provide support to equities.
Sensex gains 1.2% on robust auto sales, macro data
Strong Q1 June 2010 GDP data and robust automobile sales for August 2010, helped the market gain upward momentum last week. Healthy manufacturing data in China and better-than-expected GDP figures from Australia also supported Asia-Pacific stocks last week. Data showing resumption of buying by foreign funds also underpinned sentiments on the domestic bourses.
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