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Friday, December 28, 2007
Pre Market Watch
The Indian Market is likely to have a negative opening on the back of weak cue from the global markets. Yesterday the Indian market closed with marginal gains after struggling a lot throughout the trading session. A lot of volatility was seen in yesterday''s trading session. However, both the Mid Cap and Small Cap indices outperformed the benchmark indices as most buying was seen from these baskets. The Nifty December futures closed at 6,007.50, up 218 points while the Nifty January futures closed at 6,001.55 up 226 points. The BSE Sensex closed with marginal gains of 24.20 points at 20,216.72 and NSE Nifty closed up by 10.75 points at 6,081.50. We expect the market to remain cautious during the trading session.
On Thursday the US market closed in red. The Dow Jones Industrial Average (DJIA) closed lower by 192.08 points at 13,359.61. S&P 500 index fell by 21.39 points at 1,476.27 and NASDAQ dropped by 47.62 points to close at 2,676.79.
India ADRs ended in negative territory. In technology sector, Satyam fell by (5.91%) along with Wipro by (4.70%) and Infosys by (2.19%). In banking sector, ICICI bank and HDFC bank fell by (5.79%) and (5.17%) respectively. VSNL and MTNL decreased by (5.12%) and (2.70%) respectively.
The major stock markets in Asia are trading weak. Japan''s Nikkei is trading lower by 257 points at 15,307.78. Hang Seng index is trading down by 300 points at 27,543.27. Taiwan Weighted is down by 22 points to trade at 8,292.08. Sanghai Composite is trading lower by 21.78 points at 5,287.11. Strait Times is down by 21.43 points at 3,455.77.
On Thursday, the FIIs stood as net buyers in equity while no transaction was reported in debt. The gross equity purchased was Rs4,727.30 Crore while the gross equity sold stood at Rs2,306.80 Crore. Therefore, the net investment of equity reported was Rs2,420.50 Crore.
Today, Nifty has support at 5,948 and resistance at 6,136 and BSE Sensex has support at 19,829 and resistance at 20,341.
eClerx Services to debut on bourses
On 31 December 2007
eClerx Services will list on exchanges on Monday, 31 December 2007. The stock will be placed in the B1 group on BSE.
The company had fixed the IPO price at the top end of the Rs 270-315 price band. At the IPO price of Rs 315, the PE multiple works out to 14.65, based on the year ended March 2007 EPS of Rs 21.50.
eClerx Services IPO had ended on 7 December 2007 with 26.30 times subscription. The issue received bids for 9.83 crore shares as against 37.40 shares on offer.
The qualified institutional buyers' (QIBs) category was subscribed 31.59 times. The non institutional investors' category, made up of corporates and high net-worth individuals, was subscribed 36.36 times. The retail investors' category was subscribed 12.37 times.
eClerx Services IPO had managed to get a CRISIL IPO Grading of 3 out of a scale of 5. This rating of 3 indicates that the fundamentals of eClerx Services are inline (average) with that of other listed companies in India.
eClerx Services proposes to utilise the net proceeds to fund acquisitions, infrastructure investments and for setting up additional facilities.
eClerx Services’ portfolio of services comprises data analytics, operations management, data audits, metrics management and reporting services. It provides service solutions using a mix of custom designed data processes with the assistance of delivery teams comprising generalists and domain specialists, and in-house software to automate processes.
eClerx Services reported a profit after tax of Rs 40.52 crore on sales of Rs 86.12 crore in the year ended March 2007.
Daily Trading Calls
Nifty (6082) Sup 6022 Res 6107
Buy Bombay Dyeing (735) SL 728 Tgt 746, 750
Buy SUN TV (410) SL 405 Tgt 420, 422
Buy IVRCL Infra (517) SL 512 Tgt 527, 530
Sell Wockhardt (399) SL 404 Tgt 390, 386
Sell Praj Inds (239) SL 244 Tgt 230, 228
Bulls hope for indomitable spirit!
Death comes to all. But great achievements build a monument.
The assassination of former Prime Minister Benazir Bhutto, coupled with a few negative news has hurt global markets. This could well cloud the outlook for the Indian market today, at least at start. Equity benchmarks across key global markets, except Europe, have reacted to the fresh political upheaval in Pakistan. So, we expect a similar knee-jerk reaction in India as well. Given that the market has had a good rally over the past few days and with the main indices close to their previous all-time highs, bears were waiting for an excuse. But as we mentioned yesterday, remember a Santa Claus rally was something we were into. On the birth day of Dhirubhai Ambani, bulls might pray that the indomitable spirit may guide them to stage a comeback. And as Rabindranath Tagore says, taking shelter in the dead is death itself, and only taking all the risk of life to the fullest extent is living.
The near term outlook is positive though one cannot rule out the possibility of a small correction. The settlement in the F&O segment has been pretty good, with about 79% rollover in Nifty December futures. This is one of the highest figures in recent memory. In November the rollover in Nifty futures was around 75%. According to reports, traders and investors have created long positions in the Nifty January futures, which are quoting at a 40-point premium to the spot Nifty. Most signs from the derivative side are bullish, though there may be some choppiness in the next few days ahead of next month's quarterly results, and key events like the Fed meeting and the RBI policy review.
US shares slumped on Thursday amid renewed geo-political concerns after former Pakistani Prime Minister Benazir Bhutto was killed in a suspected suicide attack in Rawalpindi, Pakistan. Wall Street was also hurt by a slew of economic reports that reinforced concerns about the health of the world's biggest economy.
Reports on durable goods and unemployment heightened worries that growth is slowing in the US. Citigroup fell to a five-year low after Goldman Sachs analyst William F. Tanona said it will cut its 54-cent dividend to preserve capital amid the current turmoil in credit markets.
The Standard & Poor's 500 Index lost 21 points, or 1.4%, to 1,476.27. The Dow Jones Industrial Average dived 192 points, or 1.4%, to 13,359.61. The Nasdaq Composite Index dropped 48 points, or 1.8%, to 2,676.79.
Traded volume was once again unusually low since many Wall Street traders are on an extended Christmas vacation this week. This means that the market's reaction to new developments, good or bad, could be exaggerated.
Market breadth was negative. About seven stocks fell for every one that gained on the New York Stock Exchange.
On the economic front, the US Commerce Department said that factory orders for November came in lower than expected. Meanwhile, the US Labor Department said the number of workers applying for unemployment benefits last week was higher than expected.
Consumer confidence in December was slightly higher than expected, despite concerns about economic instability, according to the Conference Board. Separately, the government's weekly oil inventory report showed a larger-than-expected drop in domestic crude supplies last week.
The reports helped lift bond prices, for the first time in four sessions, as the weak economic outlook drove investors to safe haven investments.
US light crude oil for January delivery rose 11 cents to US$96.73 in New York. COMEX gold for February delivery rose US$2.20 to US$830.80 an ounce. The dollar fell versus the euro and the yen. Treasury prices rose, with the yield on the 10-year note falling to 4.19%, down from 4.28% on Wednesday.
European shares managed modest gains as investors bought producers and dumped travel firms on the news of Bhutto's assassination and a sharper-than-forecast drop in US oil inventories. The pan-European Stoxx 600 index ended with a rise of 0.2% to 365.08. Germany's DAX 30 rose by 0.5% to 8,038.60 while the French CAC-40 moved up 0.2% to 5,627.48 and the UK's FTSE 100 gained 0.3% at 6,497.80.
In the emerging markets, the scene was mixed. The Bovespa in Brazil shed 0.8% at 63,774 while the IPC index in Mexico was down 1.2% at 29,642. The RTS index in Russia rose 0.4% at 2291 and the ISE National-30 index in Turkey dropped 0.4% at 70,253.
Asian markets were down in line with the weakness across world markets. Toyota led declines among exporters after US durable goods orders rose less than forecast last month, while jobless claims unexpectedly increased.
Mitsubishi UFJ Financial Group led a drop among lenders after Goldman Sachs said that top US banks may have additional writedowns linked to the collapse of the subprime-mortgage market.
The MSCI Asia Pacific Index lost 0.7% at 155.94 as of 10:11 a.m. in Tokyo, its steepest decline since Dec. 17 and adding to a 3.8% drop this quarter. The regional index is up 11% this year, on course for its worst annual gain in five years.
The Nikkei in Tokyo shed 257 points or 1.65% at 15,307. The benchmark Japanese index has lost 11% in the year 2007, marking its first annual decline in five years. The Hang Seng in Hong Kong was down 339 points or 1.2% at 27,508.
The Kospi in Seoul was down 0.5%, while the Straits Times in Singapore fell 0.65%. The Shanghai Composite in China was flat and the Taiex in Taiwan too was nearly unchanged. All other Asian benchmarks dropped.
Bulls seek direction!
Bulls again managed to end the day with modest gains extending its wining streak to fifth straight trading session. After a positive gap up opening markets were unable to capitalize on to the start as volatility was witnessed on account of F&O expiry.
The frontline stocks like ONGC, REL and ITC remained range bound on the expiry day to end with moderate gains. On the other hand, small-cap stocks outperformed key indices, the small-Cap index was the top gainer adding over 2%.
The IT stocks were on the receiving end as the rupee held at a two-week high against the dollar. Others like Satyam, Rolta and Moser-Baer also lost ground.
Finally, 30-share Sensex closed at 20,216 adding 24 points and Nifty gained 10 points to close at 6,081.
VSNL slipped 2% to Rs735. The company announced Tata Group sold a 10% stake in its Sri Lankan unit for 75mn Sri Lankan rupees. The scrip touched an intra-day high of Rs770 and a low of Rs721 and recorded volumes of over 16,00,000 shares on NSE.
Spice Communications ended marginally loser by 0.5% to Rs62. Reports stated that the company would sell its tower arm to Srei Infrastructure for over Rs5bn. The scrip touched an intra-day high of Rs64 and a low of Rs61 and has recorded volumes of over 40,0,000 shares on NSE.
Gemini Communication rallied by over 9% to Rs252 after reports stated that the company along with Midas Communication Technologies bagged Rs2.6bn order from BSNL. The scrip touched an intra-day high of Rs274 and a low of Rs234 and recorded volumes of over 7,00,000 shares on NSE.
Videocon Industries rallied over 9% to Rs683 as reports stated that the company was planning to generate 5,000MW at an estimated cost of Rs250bn. The scrip touched an intra-day high of Rs689 and a low of Rs632 and recorded volumes of over 12,00,000 shares on NSE.
Ahluwalia Contracts spurred by over 6.5% to Rs351 after the company announced that it received new work orders worth Rs3.41bn. The scrip touched an intra-day high of Rs3560 and a low of Rs331 and recorded volumes of over 1,00,000 shares on NSE.
Shree Cement marginally slipped 1.4% to Rs1340. The company announced that they commissioned its second 1.5 MTPA cement grinding unit at Village Khushkhera, near Gurgaon on December 26, 2007. The scrip touched an intra-day high of Rs1439 and a low of Rs1325 and recorded volumes of over 8,000 shares on NSE.
MindTree declined 2% to Rs498. The company announced that it completed the process of acquiring TES PV Electronic Solutions on December 17. The scrip touched an intra-day high of Rs515 and a low of Rs480 and recorded volumes of over 81,000 shares on NSE.
PTL surged by over 3% to Rs173 after the company announced that the board of Directors of the company approved splitting each stock into five. The scrip touched an intra-day high of Rs174 and a low of Rs164 and recorded volumes of over 9,000 shares on NSE.
SAIL gained 1.1% to Rs273 after reports stated that the company would invest Rs200bn in West Bengal, about two fifth’s of its total planned investments. The scrip touched an intra-day high of Rs275 and a low of Rs270 and recorded volumes of over 1,00,00,000 shares on NSE.What the FIIs are doing
FIIs were net sellers of Rs7bn (provisional) in the cash segment on Thursday while the local institutions pumped in Rs7.87bn. In the F&O segment, foreign funds were net sellers of Rs35.6mn.
On Wednesday, FIIs were net buyers of Rs24.2bn in the cash segment. Mutual Funds were net buyers of Rs7.4bn on the same day.
Stocks in News:
SEBI clears decks for Reliance Power IPO by disposing complaints against the offer and asking promoters to lock-in entire 20% of their contribution for five years. (BS)
DLF plans to raise US$5bn over the next three years by listing five of its business units. (ET)
NTPC has signed agreements for loan and bond subscription worth Rs20bn LIC. (ET)
L&T plans to invest Rs25bn in building shipyard and expanding its engineering manufacturing unit. (ET)
GMR Infrastructure is considering listing GMR Energy on domestic bourses to fund its upcoming projects. (DNA)
Unitech is close to announcing two joint development deals in Hyderabad and Chennai. (ET)
Reliance Communication slaps legal notice to DoT asking to freeze allocation of additional spectrum to existing GSM players. (FE)
ONGC Videsh strikes crude in Arabian Gulf Block off Qatar. (ET)
BOI gets board approval to raise Rs15bn via QIP. The floor price has been fixed at Rs359 per share. (FE)
GSPL and a subsidiary of Gujarat State Petroleum Corporation plans to invest Rs25bn on new pipelines. (DNA)
Dabur India to foray into milk-based beverage segment. (BS)
Yamaha is likely to team up with Bajaj to create a common engine platform for high-end bikes. (DNA)
L&T to hive-off concrete business into separate entity. (FE)
BoB raises Rs5bn through issue of bonds. (ET)
Bhushan Steel in technical assistance JV with Sumitomo Metal for the Orissa plant. (BL)
GSK Pharma to launch two vaccines in India. (Mint)
Canara Bank ups its open offer price for Can Fin Homes to Rs78 per share from Rs63. (FE)
Wipro Consumer Care to provide lighting solutions for retail industry in India. (FE)
Infosys plans to offer wealth management solution in the domestic market. (ET)
JSW Steel and Essar Steel to set-up retail outlets for showcasing products. (BL)
Combined output growth of six key infrastructure industries was lower at 4.5% in October Vs 9.9% last year. (ET)
The Government is likely to scrap service tax on business and first-class air tickets for international journeys. It is also likely to halve duty on ATF from 10% to 5%. (ET)
The Railway Budget is likely to bring down freight on key commodities including steel, cement and petroleum products by 5%. (ET)
Mobile companies may have to shell out a higher percentage of their annual revenues as spectrum charges. (ET)
Leading tea players have hiked prices and the remaining companies are expected to follow suit. (ET)
Trai has asked I&B ministry to specify the date on which the CAS would become mandatory in 55 of the country’s top cities. (ET)
FIIs step up buying
Inflow of Rs 2420.50 crore on 26 December 2007
Foreign institutional investors (FIIs) bought shares worth net Rs 2420.50 crore on Wednesday, 26 December 2007, compared to their buying of Rs 167.40 crore on Monday, 24 December 2007.
FIIs inflow of Rs 2420.50 crore on 26 December 2007 was a result of gross purchases of Rs 4727.30 crore and gross sales Rs 2306.80 crore. The 30-share BSE Sensex jumped 338.40 points or 1.70% to 20,192.52 on that day.
FII inflow in December 2007 totaled Rs 3494.20 crore (till 26 December 2007). FII inflow in calendar year 2007 totaled Rs 69,401.50 crore (till 26 December 2007).
There are a total of 1,214 FIIs registered with the Securities & Exchange Board of India (Sebi).
Precious metals end mixed
Weak dollar and geo-political tension send gold prices higher
Precious metals ended mixed today, Thursday, 27 December, 2007 after gold gained but silver slipped. The precious yellow metal once again gained after the dollar slipped against almost all its rival currencies and geo political tensions surfaced on the news of assassination of Benazir Bhutto, former Prime Minister of Pakistan. Crude oil price also rose substantially today.
Gold closed above the $830/ounce mark once again. Gold generally moves in the opposite direction of the U.S. currency. Gold, as a dollar-denominated commodity, suffers from dollar strength. US stocks also slumped after the news of tension in Pakistan.
Comex Gold for February delivery rose $3.4 (0.4%) to close at $832.9 an ounce on the New York Mercantile Exchange today. Prices touched $835/ounce during intra day trading. Last week, the yellow metal gained $17.4/ounce (2.2%). On, 7 November, prices had touched $848/ounce. It was the highest price after a record $873 on 21 January, 1980.
Comex Silver futures for March delivery fell 5.5 cents (0.4%) to $14.78 an ounce. Prices touched 26 year high on 7 November, after reaching $16.275. The metal has climbed 14.5% this year.
Gold is headed for a seventh straight annual gain. In 2006, silver had jumped 46% while gold gained 23%.
In the currency market today, the dollar index, which tracks the value of the U.S. currency against a basket of other major currencies, fell for a fourth day, down 0.7% at 76.58.
In the energy market, oil prices ended substantially higher after Energy Department report showed that U.S. inventories fell more than expected. Crude oil for February delivery rose 65 cents (0.7%) to settle at $96.62 a barrel.
Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. Rising crude increases inflationary pressures and vice versa. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.
Gold had climbed 30% this year till date as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Dollar is still 9% down against the euro this year.
The Fed has reduced overnight lending rates by 1% in FY 2007. On 11 December, Federal Reserve lowered the federal funds rate by a quarter-point to 4.25%. The Fed also lowered its discount rate, the interest it charges on direct loans it makes to banks, by a quarter-point to 4.75%.
Before 11 December, Federal Reserve had cut the fed funds rate by a quarter-point to 4.50% on 31 October, 2007. Prior to that, Federal Reserve had cut interest rates by half percentage point on 19 September, 2007. With these interest rate cuts, dollar has been tumbling down. Market anticipates that there will be more rate cut in the coming year.
Nifty January 2008 futures at premium
Turnover in F&O segment declines
The Nifty January 2008 futures were at 6126 at premium of 44.50 points as compared to spot closing of 6081.50. Derivative contracts for December 2007 series expired today, 27 December 2007.
The NSE's futures & options (F&O) segment turnover was Rs 94,658.80 crore, which was lower than Rs 96,144.43 crore on Wednesday, 26 December 2007.
Reliance Energy January 2008 futures were at premium, at 2177, compared to the spot closing of 2134.10.
Reliance Industries January 2008 futures were at premium, at 2945.50, compared to the spot closing of 2893.85.
Essar Oil January 2008 futures were at premium, at 313.50, compared to the spot closing of 307.85.
In the cash market, the S&P CNX Nifty gained 10.75 points or 0.18% at 6081.50.
Crude gains for fourth straight day
Prices are on the verge of kissing $97 again as report shows sharp drawdown in crude inventories
Oil prices marked the straight fourth day rally after Energy Department reported that crude stockpiles fell more than expected for the week ended Friday, 21 December, 2007. Assassination of former Pakistan Prime Minister, Benazir Bhutto, also led to some added tension firming prices up. Prices have been on a roll since last Friday, 21 December and have gained more than $5.5/barrel since then. Prices once again are on the verge of kissing the $97/barrel mark. Price also rose as the greenback slipped against its rival currencies.
For the day ending Thursday, 27 December, 2007, crude-oil futures for light sweet crude for February delivery closed at $96.62/barrel (higher by $0.67/barrel or 0.7%) on the New York Mercantile Exchange. Prices are 60% higher than the year before.
As per the weekly inventory report by the Energy Department, U.S. crude inventories fell by 3.3 million barrels to 293.6 million barrels in the week ending 21 December, the lowest in nearly three years. Market was expecting a drawdown of 1.2 million barrels.
Total crude oil and petroleum products inventories dropped 10.5 million barrels to 981.9 million barrels during the week under review. Refineries operated at 88.1% of their operable capacity last week, up from the previous week's 87.8%.
U.S. gasoline supplies rose by 700,000 barrels in the latest week to 205.9 million barrels, but are in the lower half of the average range. Distillate supplies, which include heating oil and diesel, fell by 2.8 million barrels to 126.6 million barrels and are near the lower limit of the average range for this time of year.
In the currency market today, the dollar index, which tracks the value of the U.S. currency against a basket of other major currencies, fell for a fourth day, down 0.7% at 76.58.
Brent crude oil for February settlement today rose $0.84 (0.9%) to $94.78 on the London-based ICE Futures Europe exchange.
Today, natural gas rose as buyers who had made bets that prices would fall bought the positions back to protect gains or limit losses. Gas for January delivery rose 12.6 cents (1.8%) to $7.172 per million British thermal units.
Against this backdrop, January reformulated gasoline gained 4.36 cents to $2.4962 a gallon and January heating oil rose 3.91 cents at $2.6803 a gallon.
As per EIA, global oil markets will likely remain tight through 2008 and monthly average oil prices are expected to near $85 per barrel over the next year. The IEA, an adviser to 27 nations, said global demand in 2008 will rise 2.5% to 87.8 million barrels a day.
Daily Technical Analysis
Nifty — The index opened on a flat note and saw range-bound movement throughout the day’s trading session. It ended the day with a gain of 11 points.
Range-bound trading — The index exhibited range-bound trading in the 6111- 6060 band throughout the day’s trading session. On the upside, index faces resistance around yesterday’s high at 6111. Intra-day strength can be expected above the 6111 level and index could test 6185 levels on the upside. On the downside, intra-day support is around 6060, and a break below the 6060 level could see the index drift down intra day. Lower support levels are 6040-6000.
Conclusion — Trade a breakout from the 6111-6060 range intra day.
Whirlpool of India
We recommend a buy in Whirlpool of India at current market price. It is clearly evident in the weekly chart of Whirlpool of India that it has been on a long-term uptrend since March 2007 trough of Rs 22. However, the stock met with a resistance at Rs 55 in mid-November and began to consolidate sideways. This sideways consolidation appears to be an ascending triangle pattern with the upper boundary at Rs 55 level. Generally, ascending triangle patterns are a bullish continuation pattern. The stock is trading well above the 21-day moving average line. The weekly momentum indicator is featuring in the bullish region and the daily momentum indicator is likely to enter the bullish region. The weekly moving average convergence divergence is gradually rising in the positive region. The immediate support for Whirlpool of India is at Rs 45 level and the next support is at Rs 37 level. We expect the stock to break out of the ascending triangle pattern and move up to Rs 60 in the short-term. Short-term investors can buy the stock with stop-loss at Rs 45.
Via BL
Day Trading Calls
ICICI Bank
Buy the stock in dips with stop loss at Rs 1,228.
Infosys
We maintain our cautious view. Fresh long position should be initiated only when it moves above Rs 1,840.
L&T
Though the stock fell in the last session, we reiterate our buy recommendation.
ONGC
The stock is still finding it difficult to move above the resistance level of Rs 1,260. Fresh buy should be initiated only when the stock moves above this resistance level.
Reliance Capital
The near-term trend is positive as long as the stock trades above Rs 2,500. We reaffirm our buy recommendation.
Reliance Communications
Negating our view, the stock declined in the last session forming a bearish engulfing candlestick pattern. Fresh sell should be initiated if the stock declines below Rs 725 level.
Reliance Industries
We uphold our buy recommendation in RIL.
Satyam Computer
Traders should be cautious at current levels. Initiate long position when the stock breaches Rs 465.
SBI
Buy the stock in dips with stop loss at Rs 2,360.
TCS
We notice a flag pattern. Fresh buy should be initiated only when the stock moves above Rs 1,120.
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