Overheated…cool down a little!
Winter is on my head, but eternal spring is in my heart. – Victor Hugo
Winter has been on the bear’s head ever since summer May. And the bulls have had a favorable weather since then. The F&O settlement day is behind us now. It is the start of a new derivative series. The overall rollover was in line with expectations, but the same in Nifty Futures was lower than the market-wide rollover. Also, there are indications that investors and traders alike are getting a bit jittery about holding long positions. More short positions have been carried forward this time around, leading to a fall in the cost-of-carry and in the Nifty Futures premium to the spot Nifty. Market observers, including us, have been repeatedly warning of overheated conditions in the market and a possible correction. Though the same has not materialised so far, it may happen without any prior warning. FII inflows have also slowed down in the past few days, and if the trend continues the bulls will find it tough to retain their hold on the proceedings. Having said that the scene is not all that grim either, as the long-term outlook for the Indian economy and corporate earnings remains upbeat. Just that the market has rallied quite a bit since the carnage in May and June without any significant break and needs to pause. Globally, markets in the US ended flat overnight while Asian indices are mixed. Crude is still well above the $62 per barrel mark. We are expecting a cautious opening and a lackluster day ahead of the weekend.
Hero Honda could be the focus of attention as it has reported a 12% year-on-year increase in November sales. But, compared to the previous month, which was a festival month, the company's sales are down 22.6%. Moreover, a national daily reports that the Hero Group is considering entering the car manufacturing and auto component space. The company is also making an announcement this afternoon in Mumbai. Indiabulls is likely to gain as steel baron Lakshmi Mittal and Farallon Capital have together picked up 13.3% stake in its real estate arm for almost Rs4.5bn. Another stock to keep an eye on is Thomas Cook amid reports that it is buying Travel Corporation of India. City Union Bank is likely to be in action as a L&T arm has picked up a 10% stake in the Kumbakonam-based bank. However, the deal could face some hurdles as the RBI doesn't allow any corporate house to have more than 5% stake in a bank.
US shares closed nearly unchanged on Thursday. The Dow Jones was down 4.80 at 12,221.93, while the broader S&P 500 closed nearly flat at 1,400.63. The Nasdaq too finished nearly unchanged at 2,431.77.
Crude oil for January delivery gained 67 cents to settle at $63.13 a barrel on the New York Mercantile Exchange, rising after Wednesday's weekly oil inventories report showed a surprise dip in crude, gas and distillate supplies. The contract was quoting 29 cents lower at $62.84 in extended trading in Asia.
COMEX gold for February delivery jumped $11.10 to $652.90 an ounce. Treasury bond prices rallied, lowering the yield on the 10-year note to 4.46% from 4.52% late on Wednesday. In currency trading, the dollar continued its retreat versus other major currencies.
Among the Indian ADRs, Patni was down nearly 1%, Wipro gained 2.35% and Dr. Reddy's rose 1.6%.
European shares closed lower after weak US manufacturing data put further pressure on the dollar. However, gains in shares of Rio Tinto and BHP Billiton helped curb losses. The French CAC-40 finished down 1% at 5,327.64, the German DAX Xetra 30 lost 0.9% to 6,309.19 and the UK's FTSE 100 declined 0.6% to 6,048.80.
In the emerging markets, ended lower by 0.1% at 41,931, while the IPC index in Mexico rose 0.75% to 24,962 and the RTS index in Russia gained 0.65% to 1776.
Asian stocks were mixed this morning. The Nikkei in Tokyo advanced 45 points to 16,320 while the Hang Seng in Hong Kong was down 56 points to 18,904. The Kospi in Seoul was flat at 1433 and the Straits Times in Singapore added 4 points to 2842.
The Morgan Stanley Capital International Asia-Pacific Index rose 0.2% to 136.62 as of 11:30 a.m. in Tokyo. The measure is set for a 3.1% jump this week, the most since the five days to Aug. 18.
Indexes advanced in Taiwan, Indonesia and China and fell elsewhere. Markets were closed in the Philippines.
Major Bulk Deals:
Morgan Stanley has sold Gitanjali Gems; Prudential ICICI MF has bought Gujarat Apollo Equipment; UTI MF has sold IDFC; Morgan Stanley has bought IOL Broadband but Bear Stearns has sold it; Lehman Brothers has purchased Pioneer Embroidery and T. Rowe Price has sold SREI Infrastructure.
Insider Trades:
TVS Motor Company Limited: T K Balaji, Director has sold in open market 29250 equity shares of TVS Motor Company Limited on 22nd November, 2006.
Goldiam International Limited: Mr. Rashesh M Bhansali (Vc Chairman & Mg. Director) has purchased from open market 57437 equity shares of Goldiam International Limited on 27th November 2006.
Nava Bharat Ventures Limited: P. Punnaiah, Director has sold in open market 7946 equity shares of Nava Bharat Ventures Limited on 27th November, 2006.
Market Volumes:
The turnover on NSE was up by 57% to Rs127.25bn. BSE Technology index was the major gainer and gained 1.37% and BSE Bank index (up 1.29%) was the other major gainer. However, BSE Metal index lost 1.13%, BSE Consumer Durable index (down 0.63%) and BSE Auto index (down 0.29%) were the other major losers.
Volume Toppers:
Parsvnath Dev, Torrent Power, Hindalco, R Com, ACE, IVRCL Infra, SAIL, NTPC, Zee, Guj NRE Coke, ITC, Indiabulls, ONGC, Gitanjali Gems, Ranbaxy and GE Ship.
Delivery Delight:
Aditya Birla Nuvo, Aurobindo Pharma, Bank of India, BHEL, Bharti Airtel, Dr Reddys, Educomp, GAIL, HDFC Bank, ICICI Bank, Indiabulls, Infosys, ITC, IVRCL Infrastructures, M&M, McDowell & Co, NIIT LTD, Rain Calcining, Reliance Communications, Sun TV, Wipro and Zee Telefilms.
Brokers Recommendations:
Elecon Engineering – Buy from Prabhudas Liladhar
Dr Reddy’s Labs – Neutral at HSBC
Long Term Investment:
BHEL
Major News Headlines:
MTNL revises Q2 net profit to Rs1.1bn from Rs1.2bn
IOC, other refiners cut Jet Fuel prices by 2.5%
PSL secures orders worth Rs3.08bn
Reliance units hire ICICI Bank for $925mn loan
GMR Infrastructure unit in pact with ACCOR for Hyderabad hotel
BHEL to expand annual capacity to 10,000 MW pa