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Wednesday, February 21, 2007
Tuesday, February 20, 2007
Close: A profit taking day on the back of no positive triggers !
What started off as a lacklustre market, ended on a weak note of profit taking. Market were weak . The markets were a bit volatile in the morning session and in the absense of any news or positive triggers closed in deep red. Investors played in a safer side ahead of FNO expiry. The FNO expiry for February Futures and Options expires this Thursday. There was not much support from the global markets. Selling pressure was witnessed across all the board only selective stock had buying activity like Media, FMCG, Energy and Steel stocks. The Asian markets traded mixed for the day and European markets were in red. The Key would be interest rates in Japan. Bank of Japan will announce its decision. A hike in interest rates could bring in downsides. Low interest rates in Japan have been the source of easy money across the world and may be its time for this to flow back.
Sensex closed down by 150 points at 14253.38. Weighing on the Sensex were losses in ONGC (875.6,-3 percent), Grasim (2570.8999,-3 percent), Rel Energy (520.9,-3 percent), HLL (199.65,-3 percent) and RCVL (452.15,-2 percent). Losses are restricted by gains in Ranbaxy (395.5,+1 percent), ITC (175.8,+1 percent), Cipla (254.55,+0 percent), NTPC (142.1,+0 percent) and TISCO (444.15,+0 percent).
Automobile stocks closed in red for the day. As per reports Bajaj Auto Ltd is close to setting up a new manufacturing plant at Chakan near Pune for its foray into the four-wheeler segment. There are also plans to set up a production unit in Brazil for two wheelers. Bajaj is under negotiations to get land for new plant. The plan is to set up new goods carrier manufacturing facility in Chakan, Pune, and the new goods-carrier would be of one tonne capacity on the lines of Tata Ace. Bajaj is also planning to set up a two wheeler plant in Brazil. Its diversification but really in essense its not. The company's 3 wheelers have been doing well in the goods segment as well. ACE threatens to take that market and the natural reaction would be to counter that with an aspirational product like the Ace. However near term the increase in interest rates could see worries on demand. The margins are under pressure as the company has chosen the competitive route. Bajaj closed down by 1.2% and its peer Hero Honda closed marginally down as well.
FMCG stocks traded mixed for the day, Hindustan Lever Ltd (HLL) posted results for the fourth quarter and full year ended December 2006 which came in lower than expectation. For FY06 the company has posted a topline growth of 9.4% at Rs 12,103 cr yoy, operating margins expanded by 60 basis points due to stock related adjustments, lower interest charges. Bottomline growth was 13.7% at Rs 1855 cr yoy (excluding the extraordinary). For Q4 it has posted the topline growth of 6% at Rs 3156 cr, bottom line growth of 10% at Rs 483 cr on yoy basis. Food business grew by 11% on yoy basis. Results for the quarter are not comparable to those of 4FY06 to the extent of amalgamation of Vashisti Detergents Limited and the demerger and subsequent disposal of Doom Dooma and TEI plantation divisions. HLL closed down by 2.78% and its peer Colgate, P&G, Dabur also closed in red.
Technically Speaking: It was a volatile session for the whole day before closing. Sensex touched intraday high of 14466 and low of 14230. It has good support at 14230 and resistance at 14500. Expect a pullback to 14500 as the expiry gets closer. Market turnover stood at Rs 3871 cr. Overall breadth was in favor of Decliners where they stood at 1908 and Advancers stood at 707. The Resistance level was at 14400-14551 while Support at 14164-14079 levels.
Sensex sheds 150 points
In early trades it appeared that the market would continue its upward march as the Sensex opened with a positive gap of 46 points at 14449 and moved up to touch an intra-day high of 14467. However the Sensex came off its high on sustained selling pressure and remained subdued with a negative bias through the afternoon. The resumption of substantial selling towards the close saw a sharp fall in auto, banking, consumer durables and heavyweight stocks that dragged the Sensex to an intra-day low of 14230. The Sensex finally ended the session with losses of 150 points at 14253. The Nifty shed 58 points to close at 4107.
The breadth of the market was weak. Of the 2,630 stocks traded on the BSE, 1,892 stocks declined, 684 stocks advanced and 54 stocks ended unchanged. Among the sectoral indices, the BSE CD index dropped sharply and shed 1.58%. The BSE Auto index, the BSE Bankex, the BSE CG index, the BSE PSU index and the BSE Teck index were down around 1% each.
The fall in the Sensex was led by the heavyweights. ONGC slipped 3.24% at Rs876, Grasim slumped 3.01% at Rs2,571, Reliance Energy shed 2.76% at Rs521, HLL lost 2.66% at Rs200, HDFC was down 2.34% at Rs1,653 and Reliance Communication tumbled 2.34% at Rs452. Maruti, SBI and Wipro shed around 2% each. Among the gainers Ranbaxy rose 1% at Rs396. ITC, Cipla, NTPC and Tata Steel ended with modest gains.
Consumer durables stocks slipped sharply. Blue Star dropped 3.69% at Rs215, Gitanjali Gems declined 2.82% at Rs231, Titan Industries lost 2.55% at Rs955, Lloyd Electric slipped 2.49% at Rs166 and Videocon Industries closed with marginal losses.
Over 60.41 lakh Reliance Petro shares changed hands on the BSE followed by SAIL (33.41 lakh shares), HLL (26.87 lakh shares), IDBI (22 lakh shares) and Hindalco (21.09 lakh shares).
Reliance Industries was the most actively traded counter with a turnover of Rs165 crore on the BSE followed by HLL (Rs54 crore), Reliance Petro (Rs42 crore), TCS (Rs42 crore) and SAIL (Rs39 crore).
Worry weary Sensex sheds 150 points
The market drifted lower today in what was a broad-based correction. The undertone was cautious due to rising domestic interest rates, and also due to concerns that the short-term capital gains tax may be hiked in the Union Budget 2007-08, which will be tabled in Parliament on 28 February 2007. Caution was also partly due to worries of a possible interest rate hike by the Bank of Japan.
The 30-share BSE Sensex lost 149.52 points (1%), to 14,253.38. The S&P CNX Nifty lost 57.60 points (1.3%), to 4,106.95.
The market-breadth was quite weak. For 1,908 shares that declined on BSE, 707 rose. Just 58 shares were unchanged. Losers outpaced gainers by a ratio of 2.69:1.
While the BSE Small-Cap index shed 102.20 points (1.4%) to 7,214.73, the BSE Mid-Cap index lost 73.05 points (1.2%) to 5,877.90.
Nifty February futures were at 4,115.55, compared to the spot Nifty closing of 4,106.95. Nifty March futures were at 4,115 compared to the spot Nifty closing of 4,106.95. The turnover on NSE’s derivatives segment surged to Rs 39,292 crore from Monday’s Rs 32,491 crore.
February 2007 derivatives contracts expire this Thursday (22 February). The rollover in Nifty contracts, till end of Monday’s trading, was 36%. The overall rollover in individual stock futures was about 25%. The rollover was strong, at 50 - 60%, in Reliance Petroleum, Satyam Computers, Balrampur Chini Mills and Bajaj Hindustan.
The cash segment turnover on BSE dropped to Rs 3873 crore, from Monday’s Rs 4217 crore.
All sectoral indices of BSE ended in the red today. The BSE Auto index lost 84.05 points (1.5%), to settle at 5,537.42. BSE’s banking sector index, the Bankex, shed 102.86 points (1.41%), to settle at 7,186.24. The BSE Capital Goods index shed 142.69 points (1.48%), to 9,503.10. The BSE Oil & Gas index shed 49.98 points (0.7%), to finish at 6,683.43.
The Sensex is up 3.3% in calendar 2007 so far. It is down 2.7% from the lifetime closing high (14,652.09) of 8 February 2007.
State-run State Bank of India (SBI) today joined some other state-run banks in raising the benchmark prime lending rate (PLR). Interest rates on working capital loans are linked to PLR. Any rise in PLR increases borrowing cost of working capital loans for corporates. Last week three state turn banks Bank of India, Bank of Baroda and Punjab National Bank raised their prime lending rate by 50 basis points each following a hike in cash reserve ratio by RBI on 13 February 2007.
Following the announcement, SBI shares dropped 2.4% today to Rs 1103.15. ICICI Bank shed 0.7% to Rs 971, while HDFC Bank lost 0.7% to Rs 1025.35.
Housing finance major HDFC lost 2.4% to Rs 1651, on concerns that rising interest rates may impact demand for housing loans.
Oil exploration major, ONGC, dropped 3.5% to Rs 873, following reports that the Directorate General of Hydrocarbons (DGH) had disallowed gas discovery in the Krishna-Godavari basin. ONGC is likely to contest DGH views, reports suggest.
Cement shares edged lower on market talk that the government may impose a ban on exports in the budget to check cement prices. Grasim lost 3% to Rs 2565, and Gujarat Ambuja Cements shed 2.2% to Rs 129.50.
FMCG major Hindustan Lever (HLL) lost 2.5% to Rs 199.80 amid post-results' volatility. The stock had weakened to Rs 200.70 by 12:04 IST ahead of the results, which hit the market in afternoon trade. HLL had firmed up to a high of Rs 207.85 by 13:43 IST. As many as 26.8 lakh shares changed hands in the counter on BSE. HLL’s net profit declined 1.9% in the December 2006 quarter to Rs 511 crore from Rs 521 crore in the December 2005 quarter.
Telecom shares edged lower. Reliance Communications shed 2.3% to Rs 452.10, and Bharti Airtel shed 1.1% to Rs 788.10.
Reliance Industries (RIL) dropped 0.3% to Rs 1412.85. The stock weakened in the latter part of trading. It rose as much as 1.8%, to a high of Rs 1444.80, by 13:32 IST. This is a new all-time high for the stock. In intra-day trade, RIL’s market-cap crossed Rs 2,00,000 crore today. At end of the trading session, RIL’s market cap was Rs 1,97,118.96 crore.
As per reports, global oil major, Chevron Corporation, may assist RIL in developing an exploration block in the fertile Krishna-Godavari (KG) basin.
Auto shares drifted lower. Maruti Udyog lost 2% to Rs 895.20. The stock had surged in the last couple of days after the cut in retail prices of petrol and diesel. While Tata Motors lost 1.6% to Rs 854, Bajaj Auto dropped 1.1% to Rs 2991.
State-run crude oil refiner, HPCL, rose 1.6% to Rs 286.55 on reports of Mittal Investments having picked up 49% stake in HPCL’s new refinery under construction in Punjab. The refinery at Bathinda will have an annual capacity of 180,000 barrels per day.
Real estate developers barring Unitech dropped. Parsvnath Developers dropped 5.5% to Rs 312.20, Akruti Nirman shed 5% to Rs 423.50, Sobha Developers lost 4% to Rs 795, and Mahindra Gesco Developers shed 2.6% to Rs 602. Unitech surged 4.5% to Rs 421.80.
Sesa Goa rose 1.6% to Rs 1934, following reports that mining giant Anglo American had joined the race to bid for Japan's Mitsui & Co's 51% stake in the Indian iron ore exporter. Other companies reported to be in the fray for Mitsui's stake are Arcelor-Mittal, Australia's Rio Tinto, London-listed Vedanta Resources, Australia's BHP Billiton and Aditya Birla Group.
Tata Tea lost 1.4% to Rs 663.30. The company said on Monday it will offload 80% stake in its North India Plantation Operations (NIPO) to a group of investors and employees. Amalgamated Plantations, the company to which the Tatas will transfer its NIPO business, covers Tata Tea’s 20 plantations in Assam and five in Dooars (West Bengal), spread over 24,000 hectares.
A key trigger for the market in the near-term is Union Budget 2007-08. Concerns that the government may raise short-term capital gains tax on sale of shares from the current 10% have gained currency. The securities transaction tax (STT) may also go up further. The previous budget had increased STT. The removal of a 10% corporate surcharge may be offset by removal of certain open-ended exemptions.
Market men also expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget.
The immediate trigger for global markets is the Bank of Japan’s two-day policy meeting ending on Wednesday (21 February 2007). Analysts are divided over whether it will lift rates to a decade-high of 0.5% from 0.25% currently. Hedge funds, who benefited from low rates in Japan, may resort to cutting of positions in global assets including equities following any rate hike, or a signal of a rate hike.
India Economics - Pre Budget Expectations
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Market may remain volatile
Rising interest rates are a cause for concern. The State Bank of India (SBI) on Tuesday (20 February 2007) joined some of the other state-run banks in raising the benchmark prime lending rate (PLR). Interest rates on working capital loans are linked to PLR. Any rise in PLR increases borrowing cost of working capital loans.
After staying cautious for a while, FIIs have once again stepped up buying. FIIs bought shares worth a net Rs 617.10 crore on 15 February, which was much higher than their purchase of Rs 210.50 crore on 14 February 2007. FIIs had stepped up buying since the onset of February 2007, but turned austere later.
Foreign funds turned net sellers on 13 February 2007. The FII inflow was a robust Rs 2909.90 crore in five trading sessions, from 2 February 2007 to 8 February 2007. The strong inflow was triggered by an upgrade in India's sovereign rating to investment grade by global rating agency, Standard & Poor's, on 30 January 2007.
But provisional data showed that FIIs were net sellers on Monday (19 February 2007) to the tune of Rs 6 crore. The Sensex had risen 47 points on that day.
Volatility may heighten this week ahead of the expiry of the February 2007 derivatives contracts on 22 February 2007. On Monday, Nifty February 2007 futures settled at 4,176.45, a premium of 11.90 points over the spot Nifty closing of 4,164.55. Nifty March 2007 futures settled at 4,175.80, a premium of 11.25 over the spot Nifty closing of 4,164.55. FIIs were net buyers to the tune of Rs 437 crore in index-based futures on Monday (19 February). They were net buyers to the tune of Rs 116 crore in individual stock futures that day.
A key near term trigger for global markets is the Bank of Japan’s two-day policy meeting ending on Wednesday (21 February 2007). Analysts are divided over whether it will lift rates to a decade-high of 0.5% from 0.25% currently.
Ahead of the Union Budget, the market will focus more on sectors, which are expected to benefit from the budget proposals. Meanwhile, concerns that a short-term capital gains tax on sale of shares, which is currently at 10%, getting hiked abound. The securities transaction tax (STT) may also go up further. The previous budget had increased STT. The removal of a 10% corporate surcharge may be offset by removal of certain open-ended exemptions.
Most Asian markets were closed on Tuesday for the Lunar New Year holiday. Markets in China and Taiwan are shut for the entire week. Japan’s Nikkei 225 average was down 0.5%, whereas South Korea’s Seoul Composite index was up 0.15% on Tuesday. US markets were closed on Monday.
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