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Tuesday, September 02, 2008
Fire up
The market seemed to be in no mood to give up the gusto it exhibited towards the closing yesterday. It simply ignored the pessimistic signs—negative Nikkei —and picked the optimistic signs—drop in crude oil prices and positive Hang Seng and Straits Times. The benchmark 30-stock Sensex opened 111 points higher and after remaining range-bound for the first one-third of the session, went ballistic and gained 450 points in the second one-third of the session. Relentless buying in index heavyweights, reality, banking, capital goods and public sector units stocks propelled the index to an intra-day high of 15106, up 607 points over its last close. In the last one-third of the session, the index maintained its high and ended 552 points higher than its previous close. Following almost a ditto pattern, the 50-stock Nifty finished the day 155 points higher at 4,504.
Realty and banking stocks played instrumental role in the home-run gains posted by the Sensex and the Nifty. The BSE Realty and the BSE Bankex, the sectoral indices of realty and banking stocks ended 6.93% and 5.94% higher respectively. In fact all the 13 sectors registered gains for today.
The market breadth was visibly positive, as of the total 2,732 stocks that trade on the BSE, 61% stocks (1,664 stocks) advanced while only 36% stocks (995 stocks) declined. 73 stocks ended unchanged.
Among the 30 stocks in the Sensex only two—Ranbaxy Laboratories and Tata Motors--ended negative. The State Bank of India led the upsurge among the index stocks and flared up by 7.44% at Rs1,521 followed by ICICI Bank and DLF each of which gained more than 7% for the day. Among the other major gainers, ONGC surged 6.97% at Rs1,101.55, JP Associates moved up by 6.83% at Rs173.65, Reliance Infrastructure advanced 5.99% at Rs1,041.70, Maruti Suzuki vaulted 4.84% at Rs664.45, HDFC shot up by 4.66% at Rs2,445.15, Larsen & Toubro added 4.63% at Rs2,680.70 and Tata Consultancy Services rose 4.23% at Rs848.80. ACC, Reliance Communications, Wipro, BHEL, HDFC Bank, Reliance Industries, Grasim Industries, Infosys, Tata Power and Mahindra & Mahindra spurted over 2-4% each.
Reality stocks were the star attraction for the day and rallied sharply. Orbit Corporation soared 16.80% at Rs304.55, HDIL jumped 16.27% at Rs325.85, Indiabulls Real Estate added 9.64% at Rs322.25 and Unitech gained 7.14% at Rs169.60. Sobha Developers, Omaxe and Peninsula Land were up over 5-7% each.
Over 2.05 crore Reliance Natural Resources shares changed hands on the BSE followed by Resurgere Mines & Minerals India (1.62 crore shares), IFCI (1.05 crore shares), Infrastructure Development Finance Company (90.39 lakh shares) and Marksans Pharma (85.23 lakh shares).
Sideways movement may continue
The market is likely to witness sideways movement on the back of a strong intra-day volatile move. Stocks across the sectors along with heavyweights may gyrate sharply. Mixed Asian markets in mornings trades may further dampen the investors' sentiment. On the technical side, the Nifty has a stiff resistance at 4400-4440 levels and the downside strong support at 4330-4290, while the Sensex could test higher levels of 14700 and has a likely support at 14400.
US indices was closed on Monday on account of Labor Day.
Daily Call - Sep 2 2008
The markets are likely to heave a sigh of relief that Gustav slowed down to a category 2 hurricane before making landfall. The topping of the levees at some places, amply demonstrated, what could have happened if Gustav had not weakened. Crude nose dived to take support at its 200 DMA at around $109. This should help the markets open higher this morning.
We are saddened that Dr Reddy has not got an extension. But that should gladden the hearts of the interest rate sensitive bulls, who are large in number. Two of the three events that could have been negative have turned positive for the markets, imparting it a positive bias. The put writing at 4300 has taken the support from 4200 to 4300. Some profit taking could be round the corner in the afternoon on account of Ganesh Chaturthi holiday tomorrow.
Market may edge higher on fall in oil prices
The market may edge higher following a sharp fall in oil prices. However, subdued trend in Asian stocks may cap gains. Traders may refrain from building large positions ahead of a market holiday tomorrow, 3 September 2008. The market remains closed tomorrow on account of Ganesh Chaturthi.
Oil extended losses toward $111 a barrel on Tuesday, 2 September 2008, after Hurricane Gustav eased before slamming into the US Gulf Coast, pushing up the US dollar to a 7-month high against the euro and causing a broad sell-off of commodities.
Asian stocks were mostly in the red today, 2 September 2008. Key benchmark indices in Hong Kong, China, South Korea, Singapore and Taiwan were down by between 0.04% to 1.62%. Japan’s Nikkei was up 0.5%. US markets were closed on Monday, 1 September 2008, for Labour Day holiday.
As per provisional data released by the stock exchanges, foreign funds on Monday, 1 September 2008, sold shares worth a net Rs 241.85 crore. Domestic funds bought shares worth a net Rs 82.62 crore.
Equity mutual funds are sitting on large cash pile and the market may find support once mutual funds start deploying the idle cash. Equity funds are having 11% of assets in cash.
The market ended with small losses on Monday, 1 September 2008, staging a smart comeback from an intra-day fall. BSE Sensex lost 66.02 points or 0.45% at 14,498.51, recovering from an intra-day fall of 283.43 points.
Two biggest concerns which are weighing heavily on the stock markets are slowing economic growth and high inflation. Concerns on the inflation front had eased a bit last week when data showed inflation had softened for the first time in 28 weeks. The inflation trajectory suggested one more round of rate hikes before the central bank halts its current cycle of tightening, Kotak Securities said in a recent report. Inflation remains far above central bank’s target level of 7% towards the year ending March 2009.
In Annual Report for 2007-08 released after trading hours on Friday, 29 August 2008, the Reserve Bank of India (RBI) said inflation rates have hardened beyond tolerable levels and the monetary policy will continue to address aggregate demand pressures, which appear to be strongly in evidence. The central bank also said it had to ensure that the effectiveness of monetary policy was not diluted by fiscal expansion.
Concerns about populist measures by the government and their adverse impact on fiscal deficit will continue to haunt the bourses in the coming months ahead of the parliamentary elections which must be held by May 2009. Recently, the government approved an average 21% pay rise for central government employees and military personnel, the first revision of government salary scales in 12 years.
RBI sees several risks to growth prospects of the economy in the short term, stemming from both global and local factors. India's gross domestic product (GDP) grew 7.9% in the June 2008 quarter from a year earlier, easing from the previous quarter's 8.8% rise as industrial activity slowed due to monetary tightening, data released by the government during trading hours on Friday, 29 August 2008, showed.
As per a recent report by Goldman Sachs, the outcome of the southwest monsoon is key as 60% of India’s labour force is engaged in the agricultural sector and it has big knock-on effect on industry and services. The monsoon rains between 1 June 2008 to 24 August 2008 were near normal at 1% below the long-term average.
Meanwhile, the market will closely watch developments on the Indo-US nuclear deal. A crucial two-day meeting of the Nuclear Suppliers Group (NSG) begins in Vienna on Thursday, 4 September 2008. India on Friday, 29 August 2008, made it clear that it will only accept a clean waiver without any conditions from the cartel that controls global export of nuclear fuel and know-how.
All 45 members of NSG must approve the nuclear accord, which the US Congress must also pass for the deal to come through. The last meeting of the NSG, held in Vienna on 20 August 2008-21 August 2008 ended on an inconclusive note with some countries in the NSG raising objections about some aspects of the India-US civil nuclear deal that they suspect can adversely affect global non-proliferation regime.
Morning Call - Sep 2 2008
Market Grape Wine :
In House:
Nifty at a support at 4310 and 4270 with resistance at 4400and 4445.
Cash: Buy BANK OF INDIA above 272 target 284 with S/L 267.
Cash: Buy REL CAP above 1350 target 1425 with S/L 1325.
Future: Buy JP ASSOCIATE above 165 targets 179 with S/L 158.
Future: Buy BANK OF INDIA above 274 target 300 with S/L 264.
Out House:
Markets at a support of 14252 & 14324 and resistance at 14643 & 14786 levels .
Buy : RIL & RelCap
Buy : LNT & Bhel
Buy : Coreproject
Buy : Titan
Buy : EssarOil
Buy : NTPC
Buy : IBulls & IbReal
Buy : SBIN
Buy : Tisco & sail
Dark Horse : IBulls , Bhel , PunjLLoyd , RIL , Core , LNT , Infy , & NTPC
Trading Calls - Sep 2 2008
Nifty (4349) Sup 4300 Res 4420
Buy Punj Lloyd (310)
SL 305 Target 320, 322
Buy Axis Bank (723)
SL 717 Target 735, 738
Buy UTV Software (798)
SL 790 Target 815, 820
Sell Tata Power (1040)
SL 1055 Target 1010, 1000
Sell Cipla (238)
SL 242 Target 230, 228
Tuesday turnaround…don’t bank too much!
You do not have to be a hurricane, to turn things around.
The stock market game across the world has become quite simple these days. Global equity markets tend to climb if crude oil falls and vice versa. For a country like India which relies heavily on imports of crude, any sharp correction in oil prices is a big plus. So, the overnight steep fall in oil prices due to the weakening of Hurricane Gustav coupled with relatively stable Asian markets could help the bulls extend Monday's late rally into today's trade, at least at start of the session. Thereafter, things may turn choppy as investors may not want to take a chance ahead of Wednesday's holiday on account of Ganesh Chaturthi.
Interest-rate sensitive stocks could gain from their oversold positions. For the short term, use these upmoves to lighten positions rather than making an entry. A new RBI Governor could also have some bearing on inflation and movement in interest rates. The Government has named Duvvri Subbarao, currently secretary in the Finance Ministry, as the successor to Dr. Y.V. Reddy, whose term ends on Sept. 5. Subbarao has been appointed for a three-year term, which can be extended by two more years. Deputy RBI chief Rakesh Mohan was among the leading contenders for the top job in the central bank. Reports suggest that he is likely to be moved to the World Bank or the IMF.
In the near-term the Nifty may cross 4400-4450. A level of 4650 is also possible if crude oil dips below the $100 per barrel mark and local inflation softens. The correction in commodity complex globally augers well for India. Already, oil companies have slashed ATF prices by 16%, though airlines have refused to pass the on the benefit to consumers. Oil Minister Murli Deora has ruled out an immediate cut in fuel prices, but a steep fall in crude oil will surely lead to one. There is talk of some correction in steel prices as well (market driven or manipulated). In short, any decline in the inflationary trend may boost the sentiment.
In stock specific counters, some acquisition is likely to be announced by the Minda group later in the day. Moser Baer could be in action as some corporate announcement is likely tomorrow.
Short-covering seemed to be behind yesterday's late rebound. The market breadth remained negative and as always, volume on the first day of the week were lower than Friday.
FIIs were net sellers of Rs2.42bn (provisional) in the cash segment while local institutions pumped in Rs826.2mn. Foreign funds offloaded shares worth Rs2.57bn from the cash segment on Friday, when the Sensex had rallied by over 500 points.
So, one should not read too much into the bounce back from the lows of the day either. Fresh sustainable buying, especially from the overseas investors, is what is required for a meaningful advance.
In Asian markets, the Nikkei in Tokyo ended the morning session up 63.11 points at 12,897.29. Resignation of Japan's Prime Minister had little effect on Tokyo stocks, as gains for automakers, financials and industrials led to a modest advance in key regional stock benchmarks.
The Hang Seng in Hong Kong was down 42 points or 0.2% at 20,864 while the Kospi in Seoul added 5 points or 0.3% to 1419. Australia's S&P/ASX 200 index was up 48 points or almost 1% at 5166.
The Straits Times in Singapore was nearly unchanged at 2715 while the Shanghai Composite in China slid 29 points or 1.3% at 2295 and the Taiex in Taiwan slumped 117 points or 1.7% at 6695.
Crude oil traded near a four-month low after Hurricane Gustav weakened before striking the Louisiana coast, easing concern of major damage to rigs and refineries. Gustav moved past the New Orleans area on Monday, but the damage was much lower than expected.
Damage from the hurricane, which halted all the region's offshore oil output and 10% of US refining capacity, may be about a quarter of the record $41.1bn Hurricane Katrina caused in 2005. Gustav was downgraded to a Category 2 hurricane before crossing the Louisiana coast and was easing as it headed inland.
Crude oil for October delivery was at $111.18 a barrel, down 3.7% from last week's close, on the New York Mercantile Exchange at 8:57 a.m. in Singapore. Yesterday's trading is combined with today's for settlement purposes because of the Labor Day holiday in the US.
US oil prices are down 24% from the record $147.27 reached on July 11 on signs of slowing global demand and a rising dollar. Prices jumped to $118.60 yesterday as Gustav crossed the Gulf of Mexico as a Category 4 hurricane.
Brent crude oil for October settlement fell 4.1% to $109.41 yesterday, the lowest close since April 11. It, however rose as much as $1.04, or 1%, to $110.45 a barrel on the ICE Futures Europe Exchange and was trading at $109.50 at 8:35 a.m. in Singapore.
Meanwhile, the US National Weather Service has warned of a string of new storms from the Atlantic, beginning with Hurricane Hanna, which was working its way toward the Florida coast from the Bahamas. Hanna is expected to make landfall near Savannah, Ga. later in the week.
Three other tropical depressions were forming farther out in the Atlantic, though only one was likely to develop into a major threat.
The Bank for International Settlements says that the strains in the global money markets that pushed relative borrowing costs higher will probably persist for some time, as financial institutions struggle to raise cash.
The difference between what banks charge each other for three-month dollar loans and the overnight indexed swap rate, the Libor-OIS spread that measures the availability of funds in the market, remains elevated, the Basel, Switzerland-based BIS says in its quarterly report.
European shares kicked off the first day of September on a mildly lower note. Shares of Commerzbank tumbled after the German lender agreed to buy competitor Dresdner Bank.
The pan-European Stoxx 600 index ended 0.3% lower to 287.1. Germany's DAX 30 finished nearly flat at 6,421.80 while the French CAC-40 fell 0.2% to 4,472.13. The UK's FTSE 100 ended 0.6% lower to 5,602.80.
Commerzbank shares were down 10.2% after analysts said the price tag for the Dresdner Bank deal was on the high side.
Meanwhile, the British pound accelerated its recent fall, plunging to its lowest level against the US dollar since April 2006 after UK Chancellor of the Exchequer said the British economic environment is the most difficult in 60 years.
News reports said the interview caused tensions between Prime minister Gordon Brown and Darling, who later clarified that he had been speaking in terms of the global economic backdrop.
In the emerging markets, Brazil's Bovespa was down 0.9% at 55,162 while Mexico's IPC index rose 0.5% to 26,424. The RTS index in Russia climbed 1.2% to 1666 and the ISE National-30 index in Turkey was down nearly 1% at 48,780.
Markets may turn lackluster
Markets ended on a flat note thanks to a surge in the last hour of the trading session. Market players defied weak global cues as the BSE benchmark Sensex managing to recover over 200 points and the Nifty index recouped over 60 points.
The smart recovery was led by the banking, oil & gas and FMCG stocks. Even the small-cap stocks attracted buying momentum towards the end. Finally, the benchmark Sensex closed at 14,498 slipping marginally by 66 points and the Nifty ended at 4,348 down 11 points.
Resurgere Mines & Minerals India, formerly known as Exfin Shipping (India) Ltd. started trading at Rs285 on NSE against its issue price of Rs270. The scrip ended at Rs524 translating into a premium of 83% touching an intra-day high of Rs562 and an intra-day low of Rs272 and recorded volume of over 3,00,00,000 shares on BSE.
The company proposes to utilize the proceeds to part finance its plan for purchasing Plant and Machinery worth Rs1.25bn for setting up its own extraction and crushing facilities at the mines. And also purchase six railway rakes worth Rs1.16bn to set up own logistics infrastructure facilities.
Shares of TVS Motor gained by 1.5% to Rs33.1 after the company announced that it posted an 11% growth, registering total two wheeler sales of 114,321 units in August as against 102,734 units in the corresponding month of the previous year.
During the month, the company's motorcycle sales grew by 13% to 52,304 units from 46,235 units recorded in August 2007. The scrip touched an intra-day high of Rs34 and a low of Rs32 and recorded volumes of over 2,00,000 shares on NSE.
Shares of Maruti Suzuki slipped by 2.5% to Rs633 after the company announced that its August sales fell 9.2% to 59,908 units. During the month, the A3 segment grew strongly with 12.2%.
The company’s domestic sales for the month of August also fell by 10.2% at 54,113 units. It had sold 60,229 units in August 2007. However, exports rose merely 1% at 5,795 unit’s vs 5,739 units. The scrip touched an intra-day high of Rs643 and a low of Rs618 and recorded volumes of over 2,00,000 shares on NSE.
Shares of TTK Prestige surged by over 6% to Rs169 after the company announced that the board of directors decided September 25, 2008 to accord approval to M/s T T Krishnamachari & Co. the promoters of the company to undertake a voluntary delisting of the shares of the company from the BSE and NSE. The scrip touched an intra-day high of Rs174.7 and a low of Rs158 and recorded volumes of over 1,00,000 shares on NSE.
Shares of Rain Commodities surged by over 3% to Rs222 after the company announced that the board of directors approved buy back of the company's fully paid-up equity shares of Rs10/- each, from open market not exceeding Rs307/- per equity share and subject to a maximum of 12,00,000 equity shares. The scrip touched an intra-day high of Rs228 and a low of Rs214 and recorded volumes of over 3,00,000 shares on NSE.
Shares of Gammon Infra surged by over 3% to Rs98 after the company announced that it received the letter of allotment worth Rs15.10bn for the development of the Youngthang Khab Hydro Electric Project on BOT basis from the Government of Himachal Pradesh and has accepted the same and paid a sum of approx. Rs530mn towards 50% of the upfront premium. The scrip touched an intra-day high of Rs103 and a low of Rs93 and recorded volumes of over 2,00,000 shares on NSE.
M&M slipped by 1% to Rs572. The company announced that its August total domestic sales were up by 5% and up by 12% YTD. Three wheeler sales for the month were up by 51% and YTD sales were up by 49%.
The company’s exports sales for the month were up by 7% and YTD sales grew by 33%. For the month of August 2008, domestic sales of tractors grew by 16% and exports during the month showed a growth of 6% over the corresponding month last year. The scrip touched an intra-day high of Rs578 and a low of Rs565 and recorded volumes of over 15, 000 shares on NSE.
Oil India (OIL) is aiming to hit the capital markets in the first half of November to raise around Rs16bn. (BS)
Reliance Communications plans to borrow US$1bn for general working capital. (BS)
Reliance backs out of Unifi deal. (BS)
Sterlite Energy, a Vedanta Resources Group company, will set up a 1,980MW power plant in Punjab with an investment of Rs90-100bn. (BL)
A senior Government official said that there is likely to be a slight delay in starting of gas production from the D-6 block in KG basin. (BL)
SAIL’s cost to be incurred to increase its capacity to 26mtpa by FY12 to increase to Rs540bn from Rs350bn estimated earlier. (BS)
The Union Bank of India plans to raise capital worth Rs10bn through a mix of tier-I and tier-II bonds in the next one month to support business growth. (BS)
Reliance Infrastructure invites bids for power supply in Mumbai. (FE)
L&T has called upon the power ministry to ensure that power projects capacity of 660MW and 800MW should be specified as nominal capacities. (FE)
ONGC to start Coalbed Methane (CBM) gas in Jharkhand by December 08. (FE)
L&T and Karnataka Power Corporation Ltd (KPCL) are on the verge of entering into a joint venture agreement for acquiring a coal mine in Indonesia. (BL)
Kuwait-based Zain Telecom and Norway telecom giant Telenor have started negotiations with Loop Telecom, a fully-owned subsidiary of BPL Mobile, for a strategic stake. (BS)
Sterlite Industries has set a target of smelting 1mtpa copper by 2010. (FE)
Ranbaxy Fine Chemicals to acquire US based speciality chemical major Mallinckrodt Baker in a deal estimated at US$340mn. (ET)
Reliance Infra makes a fresh bid for the first phase of monorail project to MMRDA. (ET)
BHEL plans to set-up locomotive plant in India. (ET)
Mercedes-Benz is contemplating setting up a plant to manufacture engines, gearboxes and other components in India at an investment of Rs25-30bn. (BS)
Puravankara Projects plans to raise ~US$300mnto fund its new projects and buy land in the current financial year. (BS)
Tata Industries, a promoter company of the Tata group, to invest up to US$350mn in international start-up businesses. (BS)
The Munjals, promoter of Hero Honda Group to foray into aviation sector with an investment of Rs5bn and is planning to develop a 300-acre SEZ. (ET)
Economy Front page
India’s trade deficit widened to US$10.79bn in July, up 83% yoy. (BS)
Cement prices up Rs3 per bag in Mumbai. (BS)
The Telecom Regulatory Authority of India has directed the operators to stop charging processing fee, which in most cases amounts to 30-40% of the recharge value of the coupon at present. (BL)
Goa Government is planning to take back SEZ land from three promoters Cipla, K Raheja and Peninsula Land. (ET)
Private banks are increasingly buying the farm loan portfolio of micro-finance institutions (MFIs) to meet the agriculture sector lending targets. (BS)
The attrition in the BPO industry is roughly 7.8 percentage points higher than other sectors, a report by global management consulting firm Hay Group. (BL)
Government plans to raise export duty on iron-ore. (FE)
GoM clears Insurance Amendment Bill aimed at raising the FDI cap in the sector from 26% to 49%. (FE)
Sugar mills to pay UP farmers Rs14.8bn more by 6th September. (FE)
GoM on insurance has agreed to include 10 new provisions in the draft insurance laws bill. (ET)
Mundra Port and Sez
We recommend a ‘buy’ in Mundra Port and Special Economic Zone (SEZ) from a short-term perspective. It is apparent from the charts that the company has been on a medium-term uptrend from early July low of Rs 388, that was also a 52-week low. The stock has been trending up shaping higher peaks and higher troughs since then. In early August, the stock crossed over its 50-day moving average and is currently trading well above this average. We notice high volume during the advance days of the medium-term uptrend. The daily relative strength index is rising in the neutral region towards the bullish zone. Moving average convergence and divergence is rising in line with the stock and is featuring in the positive area. The medium-term up trendline is also intact. We are bullish on the stock from a short-term perspective. We anticipate the stock to rally until it hits our price target of Rs 650 in the forthcoming trading sessions. Traders with short-term perspective can buy the stock while maintaining a stop-loss at Rs 560.
RIL, SBI September 2008 futures at premium
Turnover slumps
Nifty September 2008 futures were at 4361, at a premium of 12.35 points as compared to spot closing of 4348.65. NSE's futures & options (F&O) segment turnover was Rs 37,943.16 crore, which was lower than Rs 43,170.27 crore on Friday, 29 August 2008.
Reliance Industries (RIL) September 2008 futures were at premium at 2160.95 compared to the spot closing of 2141.65.
State Bank of India (SBI) September 2008 futures were at premium at 1427.90 compared to the spot closing of 1415.60.
Punj Lloyd (PLL) September 2008 futures were at premium at 313.70 compared to the spot closing of 310.35.
In the cash market, the S&P CNX Nifty lost 11.35 points or 0.26% at 4348.65.
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