Purge continues for the third day

The market has been unable to come to terms with a surprising CRR hike announced by RBI after market hours on Friday(8 December). This is the third day of a steep decline, which has brought the bull-run to an abrupt halt. The Sensex was shaved of close to 980 points in just three days, in a knee-jerk reaction to the RBI move, with banking stocks unwittingly falling prey. The BSE benchmark also hit a record high of 14,035.30 on 6 December 2006.

India’s premier index, the Sensex, regained some lost ground during the final minutes of trade after plunging over 575 points to an intra-day low of 12,801.65, in what can be referred to as an absolute bloodbath on the Bombay bourse. The premier index swung 690.56 points during the day.

Extensive damage across the board was evident in the market-breadth; only 442 shares rose while a huge, huge 2,124 scrips declined. The BSE Small-Cap index closed at 6,278.75, which is down 269.56 points (4.12%), while the BSE Mid-Cap index tanked 231.44 points (4.13%), to 5,370.10.

The 30-shares BSE Sensex settled below 13,000, at 12,995.05, registering a huge loss of 404.41 points (3.02%) for the day. It had witnessed high volatility in the opening session of trade. After opening flat at 13,413.61, it declined sharply. It also struck a high of 13,492.21 during the day.

The NSE Nifty tanked 131.60 (3.42%), to end at 3,717.90.

The frenzied selling is attributed to margin-selling, which has become an add-on feature of steep index declines. The BSE Sensex had tumbled 400 points on Monday, its 10th biggest ever.

Renewed selling gripped the bourses after latest data showed a lower-than-expected 6.2% growth in industrial production for October 2006.

Finance Minister P Chidambaram declined to comment on today’s 3% fall and added, "I have already commented yesterday. In fact, there is no need for any comment," he said.

On Monday, the minister had said the fall was no cause for worry.

The total turnover on BSE amounted to Rs 4,913 crore.

HDFC Bank was the lone gainer from the 30-Sensex pack. It rose 0.10% to Rs 1,035 as 99,558 shares changed hands. It swung in a wild range of Rs 1,065.90 - Rs 1,002.20.

Bharti Airtel was the top loser, down 6.77% to Rs 566, on a volume of 3.18 lakh shares. It had surged to a high of Rs 613.50.

Diversified firm Grasim lost down 6.47% to Rs 2,529.40. The company is reportedly said to be buying a stake in Austrian cellulose-fibre maker Lenzing AG. The deal could help the firm to get a foothold in the global viscose staple fibre market, and will increase its fibre production capacity by almost 453,000 tonnes. The deal is likely to be completed during the current fiscal.

ACC (down 6.39% to Rs 970), SBI (down 5.52% to Rs 1,174.10), Tata Steel (down 3.39% to Rs 438), and Maruti Udyog (down 3.20% to Rs 878) were the other losers.

L&T declined 3.63% to Rs 1,384.20, on 4.55 lakh shares as GMR Infrastructure-promoted Delhi International Airport (DIAL) awarded the company a contract worth Rs 5,400 crore on Monday, for design and construction of terminal, runway and associated works at the Delhi airport. The order involves design and construction of a passenger terminal, and a 4.43-km runway, which will be one of Asia's longest. L&T will execute the work in time for the Commonwealth Games.

Index heavyweight Reliance Industries (RIL) lost 2.30% to Rs 1,210, as 26.67 lakh shares changed hands in the counter on BSE. The stock recovered smartly, after declining to Rs 1,181.

Reliance Industries (RIL) was a top-traded counter on BSE, with a total turnover of Rs 329.59 crore, followed by Indiabulls (Rs 162.71 crore) and Parsvnath Developers (Rs 158.41 crore).

Shares of power equipment makers tumbled under intense selling pressure. The BSE Capital Goods lost 4.14%. ABB plunged 9% to Rs 3,442, Siemens tumbled 7.33% to Rs 1,043 while Bhel had lost 3.94% to Rs 2,433.30.

Banking stocks extended their downward journey, as selling pressure continued following the surprise CRR hike. The BSE Bankex was down 3.23%. Major losers were Punjab National Bank (down 5.02% to Rs 483.10), Kotak Mahindra Bank (down 1.56% to Rs 375), Indian Overseas Bank (down 6.72% to Rs 103.35), Bank of Baroda (down 8.01% to Rs 220), Oriental Bank of Commerce (down 7.37% to Rs 218) and Canara Bank (down 10.43% to Rs 250).

Heavy selling was witnessed across the board and all BSE sectoral indices ended in the red.

Fastener maker Lakshmi Precision Screws plunged 10% to Rs 122.95 ahead of a board meeting to consider an issue of 10 lakh shares on a preferential basis.

SpiceJet lost 3.21% to Rs 54.40, down from an intra-day high of Rs 61.90, which was attained on board's approval of a preferential issue of shares worth $118.5 million to foreign and domestic investors, including the Tatas, on a preferential basis. The scrip surged on Monday amid reports that Tata group is eyeing 10% stake in the company as a purely financial investment.

Rajesh Exports jumped 5% to Rs 307.20, after the gold jewellery maker said it will aggressively pursue real estate development. The jewellery maker will transfer its property holdings to a new subsidiary -Bangalore Infra. The company already has a property division and has acquired prime properties in Bangalore.

Garware Offshore Services advanced 2.67% to Rs 200, after the company said its board will meet on 20 December 2006, to consider raising up to $25 million, and also increasing the foreign investment limit to 60%.

Bank of India lost 9.37% to Rs 166.90. It decided to acquire 76% shareholding of P T Bank Swadesi Tbk, Indonesia. On 11 December 2006, Bank of India signed a conditional sale purchase agreement with majority shareholders of P T Bank Swadesi Tbk. The acquisition will be completed after necessary approvals/confirmations from Bank Indonesia and capital market regulators in Indonesia.

Most of the selling came after India's industrial production rose 6.2% in October from a year earlier, which was well below market expectations, lower-than-expected manufacturing output being the prime culprit for the slowdown. Output growth for September remained unchanged at an annual 11.4% reported earlier. Manufacturing production, which represents more than 75% of industrial output, rose 6.0% in October from a year earlier, compared with 12.0% annual growth in September.

The Nikkei average rose 0.66% on Tuesday as exporters such as Kyocera Corp advanced on a weak yen, while seafood suppliers jumped after a merger announcement by Maruha Group Inc fuelled speculation of a further sectoral shake-up. The Nikkei 225 index was up 0.66%, or 109.79 points, at 16,637.78.

The Hang Seng index was down marginally by 0.09%, or 17.49 points, at 18,907.17.

As per provisional data, FIIs were net buyers to the tune of Rs 334 crore in the cash segment on 11 December, the day when the Sensex had lost 400 points. They were net sellers to the tune of Rs 152.60 crore on 8 December, the day when the Sensex lost 173 points.

US stocks edged higher on Monday. The Dow Jones industrial average rose 20.99 points, or 0.17%, to close at 12,328.48. The Standard & Poor's 500 Index ended up 3.20 points, or 0.23%, to finish at 1,413.04. The Nasdaq Composite Index gained 5.50 points, or 0.23%, to end at 2,442.86.

Oil fell nearly a dollar on Monday as mild weather prevailed over much of the United States, cutting into heating oil demand from the world's largest fuel consuming nation. US crude prices slipped 77 cents, or 1.2%, to $61.28 a barrel, while London Brent crude fell 22 cents to $61.98 a barrel.

A major near term trigger for the domestic bourses is Q3 December 2006 results. Another quarter of strong performance from corporate India may be on the cards.

Meanwhile, healthy FII allocations are expected in the calendar year 2007.

Markets plunge

The Sensex notched up gains of 93 points in early trades and touched an intra-day high of 13492. However it could not hold on to the gains and drifted into negative territory. The market appeared extremely bearish as the trading session progressed. Hectic selling in heavyweight, capital goods, PSU, metal and banking stocks in the afternoon dragged the index to the day's low of 12802. The Sensex ended the session with losses of 404 points at 12995, while the Nifty shed 133 points to close at 3717.

All the Sensex stocks closed in negative territory. Grasim Industries tumbled 7.33% at Rs2,506, ACC faltered 6.16% at Rs972, Reliance Communication lost 6.11% at Rs403, Gujarat Ambuja Cement dropped 5.10% at Rs130, SBI slipped 5.06% at Rs1,180, Bharti Airtel shed 4.94% at Rs577, TCS slumped 4.47% at Rs1,119, Ranbaxy fell 4.32% at Rs360, NTPC declined 4.24% at Rs137 and BHEL dipped 4.12% at Rs2,429. Hindalco, Reliance Energy, ONGC, ITC and HDFC shed 3% each.

The market breadth was extremely negative. Of the 2,625 stocks traded on the BSE, 2,160 stocks declined, 424 stocks advanced and 41 stocks ended unchanged. All the 11 sectoral indices on the BSE ended in negative territory. The BSE PSU index was the biggest loser and dropped 4.39% at 5712 followed by the BSE CG index (down 4.14% at 8755), the BSE Metal index (down 3.90% at 8,341), the BSE Bankex (down 3.23% at 6532) and the BSE Auto index (down 3.13% at 5080).

Over 36.25 lakh Parsvnath shares changed hands on the BSE followed by Reliance Communication (32.35 lakh shares), Zee Telefilms (30.02 lakhs shares), Reliance Industries (27.01 lakh shares) and Hindalco (20.35 lakh shares).

Value-wise Reliance Industries registered a turnover of Rs326 crore followed by Parsvnath (Rs152 crore), Reliance Communication (Rs130 crore), SBI (Rs110 crore) and Zee Telefilms (Rs94 crore).

Kal Phir Aayega

Not my views .. I only post their views.. There are followers of Chamatkar .. this is for them.. if you don't follow them .. just ignore ..

There was nothing wrong in the market which made market operators to create this kind of V share (to be realized) correction. Correction is over and come what it may market will cross previous high in next 30 days. Once again I am telling bolding that markets will cross 16 K before Dec 07. My conviction is based on certain factors which our economist shows to us and also with my reading of the market. I am sure it is not easy bullet to digest at this given point in time.

CRR hike is really positive and market drivers used this trigger to create an ideal platform for Wave 3 rally starting from tomorrow. It all started with RBI which killed the entire lending industry against shares which in other way saved millions of retail investors who were deprived of this facility. This was factored in by the big operators. They even did not like Cairns getting valuations 4 times better than RIL an Indian MNC. Third important factor is the under leveraged positions and funding was available to only HNI and big drivers for whom 1000 points correction is digestible and therefore we have not seen any stains of blood on retail investors especially who are trading in B gr. Sanguine still takers though RIL, ACC and SBI lost 20% each in less than 3 days. This will prove once again that we should not trade intra-day as well as in derivatives. The only way to make money is B gr shares. Fourth important factor is the community of arbitrage (FII) started selling cash because the difference in cash stock and futures stock started rising beyond 1% which is a good spread. Rs 20000 crs is the arbitrage position which can vitiate any market on a given day and for FII manipulation becomes easy. Simply sell in cash in huge quantity which will confuse the best in the industry and buy in futures. The reversal will have reverse impact with cash stock prices rising. This will also explain why they FII cash plus and futures minus.

Only one thing I will repeat again is that correction never comes when you want it and when come you can't buy it. Ever since 12500 FII wanted correction of 1000 odd points not because correction was due but simply they were feeling the heat of left out in the second wave too. However at 14 K they echoed that if you talk of correction Sensex target 20 K and no correction Sensex target of 30 K and suddenly the correction started. Its not a great deal that market has corrected. Market is taking U turn because now sellers are afraid to sell fresh at 12800. Who bell the cat first is the situation for all the funds because all fund managers are alike and lack the skill and dynamism our Indian operators like KP, RJ and AK possess. This is the precise reason only few funds like RIL MF are known as most prolific and dynamic funds.

When we were chatting on market and I was suggesting a bottom of 12800 to one of FII fund manager, he disagreed and passed a joke…"Some Big FII wanted to invest in India but had condition to enter at 10,000. He approached; FM said no problem Dear….. we will bring in 7 days flat and rest is in front of you." Well as far as my opinion is concerned market has bottomed out and the recovery will be equally sharp.

I kwon lot of investors must have criticized us including me for our failure to predict market movement. We believe your next door neighbor should always be a critic especially if they belong to a category which has no identity of their own. Hawa me taash ka GHAR nahie banta, Rone se bigda mukkaddar nahi banta, Duniya ko jitney ka hausala rakho yaro, Ek jit aur haar se koi sikkandar ya faqir nahi banta. KAL PHIR AAYEGA……

Best picks in U turn are Bajaj Auto, RIL, Sterlite, IPCL, Tisco, Tata Motors, Maruti and ACC till budget. I expect fireworks and only after 2 week or as and when market crosses earlier top of 14 K investors will realize my version. Please save this article till the time I will come back to you


Thanks Vinit

2-day fall 7th highest since ’03

The two-day fall in benchmark indices has sent jitters among several market participants. The current fall is the biggest one after the crash in May this year. The 572-point fall in Sensex is the seventh highest, in terms of points, since the beginning of the bull run in April 2003. And in percentage terms, the fall is 4.1%. There have been 20 bigger falls than the latest Sensex crash.

The biggest continuous fall was five-day long. But, it may be extended further after a brief pullback, which may last only for one trading session. Usually, this pullback will be very weak. There have been five such five-day continuous falls since April 2003.

The biggest such fall shaved off 17.2% from the Sensex. This happened in May 2004 when the ruling party was toppled and the Congress-led UPA took control at the Centre.

Big falls occur when there are key concerns such as ripe valuations and political hurdles. RBI’s decision to raise the cash reserve ratio of banks may have been the key trigger for the latest fall. At roughly 17 times the one-year forward earnings, domestic equities are among the most expensive in emerging markets.

This is the only major correction in December since the beginning of the bull run. December has always been a month where markets have ended on a positive note. Historical data shows that Sensex has ended in the negative territory only 5 times in the previous 27 years.

FIIs have been at the centre of every major market correction. In the previous few market sessions, FIIs have sold around Rs 2,000 crore of stocks, both in the cash and futures & options segment. Normally, indices pull back at least one-third of their losses. Market watchers feel there is lot of money waiting on the sidelines, so this correction could turn out to be a short-lived one.

Lalit Thakkar, director, Angel Broking, says, “We are not seeing it as a significant correction like the one witnessed in May this year. What happened in May was a global correction and that is why the recovery was slower.”

Technical chartist Vijay Bhambwani feels, “Indices are exhibiting a “long pole” formation on intra-day charts as the steep fall resembles a pole due to the vertical fall of nearly 3%. While the 3913-point support in Nifty advocated for Monday’s session did not hold, the bearish pressure was significant and seems to be placing the extremely short-term oscillators in the near oversold zone. That indicates a short pull-back rally, though the same can terminate without a warning and therefore maybe very treacherous to trade.”

1,000 points down the drain in three days

In merely three sessions the Sensex has lost 977.01 points, the sharpest fall after June 2006.

Then, the Sensex had tumbled 1,521.89 points, from 10,451.33 on 2 June to 8,929.44 on 14 June 2006.

The last such major fall was in July 2006, when the Sensex had lost 922.75 points; from 10,930.09 on 12 July to 10,007.34 on 19 July.

A massive fall had occurred in May, when the Sensex had lost 1,736.04 points to 10,481.77 on 22 May from 12,217.81 on 17 May. A lower-than-expected industrial output growth for October 2006 worsened the fall on the bourses today, after the Sensex had lost 400 points on Monday (11 December) following a surprise hike in cash reserve ratio (CRR) by the RBI, which raised fears of another rate hike.

The latest sharp fall will help reduce some of the excesses of Indian bourses like stretched valuations. The Indian bourses are trading at high PE multiple compared to its regional and emerging market peers. The premium valuations it commanded because of strong earnings growth of India Inc as on 11 December 2006, the Sensex’s PE multiple was 22.18 based on the trailing 12-month September 2006 earnings. The PE multiple will fall further following today’s 404-point fall.

The latest sharp fall has occurred after a sharp surge, when the Sensex had risen 10.6% in a short while, to a lifetime closing high of 13,972.03 on 7 December, from 12,623.28 on 23 October. FII buying, on expectations that earnings growth of India Inc will continue, had triggered the solid surge. There was a surge in open interest in NSE’s futures & options segment during this rally, indicating that the market was overbought.

After the latest economic data, market men will now be closely eyeing advance tax payment by corporates for the third installment, which is due on 15 December 2006. The corporate advance tax payment will provide a broad outline of Q3 corporate results. More so given that strong earnings growth has been a key driver of the bull-run on the bourses.

In the near term, US Federal Reserve’s decision on US interest rates remains a principal trigger for domestic bourses. US Fed meeting is due later today, and expectations of interest rates staying unchanged run high. Analysts will closely watch the Fed’s accompanying statement for cues of future rate moves. Investors are waiting to see if the Fed will tone down its hawkish stance in its statement accompanying the decision.

Market men will also be watching FII allocations for India for calendar year 2007

Small-Caps, Mid-Caps mauled

A number of small-cap and mid-cap shares declined sharply in sync with a broad market fall.

Some major losers in the small-cap and mid-cap space, were ABG Heavy Industries (down 11% to Rs 210), GMR Industries (down 10% to Rs 322), SSI (down 10% to Rs 148), Flex Industries (down 10% to Rs 96.15), Tricom India (down 10% to Rs 107.60), Saurashtra Cement (down 10% to Rs 63.10), Rane Madras (down 10% to Rs 100), Vivimed Labs (down 9% to Rs 152), Alchemist (down 9% to Rs 30.85), Gemini Communications (down 9% to Rs 260), Mangalam Cement (down 9% to Rs 179), Polaris Software (down 11% to Rs 133), Escorts (down 11% to Rs 100), NDTV (down 10% to Rs 195), Shoppers’ Stop (down 10% to Rs 630), Bombay Rayon (down 10% to Rs 207), SRF (down 9% to Rs 176), IndusInd Bank (down 10% to Rs 39.70) and India Cements (down 8% to Rs 196).

A lower-than-expected industrial output growth for October 2006 accentuated the fall on the bourses, after the Sensex had lost 400 points on Monday (11 December) following a surprise hike in cash reserve ratio (CRR) by the RBI, which raised fears of interest rate rise. Sensex’s provisional closing today was 13,007.71, a fall of 391.72 points.

Since late-November 2006, selective recovery was witnessed in small-cap and mid-cap stocks. The BSE Mid-Cap Index had recovered to 5,829.47 by 5 December from 5,454.43 on 20 November. Although the BSE Mid-Cap index had surged since late-November, it had failed to breach the record closing of 6,033.30 of 10 May 2006.

BSE Small-Cap Index had surged to 6,799.99 on 5 December from 6,298.49 of 20 November. It is still sharply off its record closing of 7,812.84 of 10 May 2006.

The market-breadth was quite weak. For 2,124 shares that declined on BSE, 442 rose. As many as 46 shares were unchanged. Losers outpaced gainers by a ratio of 4.8:1.

Kotak Reports - Dec 12 - Madhucon Projects

Download here

Weak industrial output beats living daylights out of Sensex

Renewed selling gripped the bourses after the latest data showed a lower-than-expected 6.2% growth in industrial production for October 2006.

At 13:30 IST the Sensex was down 197 points, at 13,201. The data of October industrial output hit the market at about 12:15 IST.

Some of the major losers among the Sensex constituents were State Bank of India (down 3.9% to Rs 1,194), Bhel (down 3.4% to Rs 2,445), Tata Motors (down 3.4% to Rs 810.50), Reliance Energy (down 3.2% to Rs 508.80), HDFC (down 2.6% to Rs 1,503.50), Hindustan Lever (down 2.7% to Rs 223), TCS (down 2.2% to Rs 1,145) and ONGC (down 2.2% to Rs 817).

India's industrial production rose 6.2% in October from a year earlier, well below market expectations due to lower-than-expected manufacturing output, government data showed on Tuesday. Output growth for September remained unchanged at an annual 11.4% reported earlier. Manufacturing production, which represents more than 75% of industrial output, rose 6% in October from a year earlier, compared with 12% annual growth in September.

After the latest economic data, market men will now be closely eyeing advance tax payment by corporates for the third installment, which falls due on 15 December 2006. The corporate advance tax payment will provide a broad outline for the quality of Q3 corporate results. This is more so given that strong earnings growth has been a key driver of the bull-run on the bourses.

The market witnessed immense volatility today. The barometer index has swung over 700 points so far, between some vital intra-day tops and bottoms.

Fears of rise in interest rates following RBI’s surprise 50 basis point hike in cash reserve ratio (CRR) rattled the bourses on 11 December, when the Sensex tanked 400 points.

FIIs pressed heavy sales in the derivatives segment in the past two trading sessions. FIIs were net sellers to the tune of Rs 1,250 crore in index based futures on 11 December, the day when the Sensex plunged 400 points. FIIs were net sellers worth 1,087 crore in index based futures on 8 December, when the Sensex lost 173 points.

In the near term, US Federal Reserve’s decision on US interest rates remains a principal trigger for domestic bourses. US Fed meeting is due later today and expectations of interest rates staying unchanged run high. Analysts will closely watch the Fed’s accompanying statement for cues of future rate moves. Investors are waiting to see if the Fed will tone down its hawkish stance in its statement accompanying the decision.

Emkay - CRR hike - negative for banks

Download here

Thanks Vishesh

Sharekhan Commodities Buzz dated December 12, 2006

Bullions: Consolidation likely
Gold rose on Monday after hitting a three-week low with bargain hunters and physical buyers supporting a market that remained vulnerable on thin trading ahead of Christmas. As a currency hedge, the market is waiting to see further weakness in the dollar. But the greenback has been steady against the other major currencies. Today's FOMC minutes might dictate the future direction for gold and any hint of no rate cuts would send the dollar higher and the precious metals complex lower. On the data front, October's trade balance is likely to be $63 billion against $64.3 billion, which should support the dollar.

Download here

Deutsche - India - A Study in Contrasts

Download here

Indiainfoline - Daily Market Strategy

Download here

KR Choksey - Britannia

Download here

Market may remain cautious

The market may exhibit cautious trend after taking a strong dip in yesterday's trades. And also on the negative side, FIIs have turned net sellers of equities in the last sessions and the Asian indices are trading higher in current trades. Among the local indices Nifty could rise to 3885 or 3900 level on the upside while it has a crucial support at 3800 on the downside. The Sensex has resistance at 13450 and support at 13310.

US indices registered gains, while the Dow Jones closed above the level at 12328, up 21 points, while the Nasdaq moved up by 6 points to close at 2443.

One Indian ADRs ended positive out of 11 floats trading on the US bourses. Rediff advanced 1.27% however, among the major loser VSNL declined 5.23% and Wipro shed 3.04%, Infosys, Satyam, ICICI Bank, HDFC Bank, Patni Computers, MTNL and Tata Motors lost over 1-2% each while, Dr Reddy's was marginally down.

In the commodity segment, the Comex gold for the February adavnced $3.80 to settle at $634.80 an ounce. The Nymex light crude oil for January delivery declined 81 cents to close at $61.22 a barrel, while the London brent crude was up 62 cents at $59.46 per barrel.

5 Intra-day Stock Ideas

In view of the unexpected carnage in the market yesterday, we would refrain from making any intra-day calls. Investors are advised to remain cautious as there might be fresh selling in the coming days. Wait for things to settle down before resuming one's buying spree.