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Monday, May 04, 2009
Daily News Roundup - May 4 2009
Reliance Industries increased its holding in Reliance Petroleum to 75.4% by buying Chevron’s 5% stake for Rs13.5bn. (ET)
IOC will take up 4% stake in ONGC-Reliance Industries alliance that plans to pick up stake in an oilfield in Venezuela. (ET)
Bharti Airtel entered into a JV with Alcatel-Lucent to manage its landline and broadband business. (ET)
Wipro won the Rs25bn contract from Unitech Wireless to provide IT services. (ET)
M&M enters into the sub-30HP tractor market. (FE)
PNB cuts its benchmark PLR by 50bps to 11%. (FE)
Siemens India will execute Rs7.2bn of the Rs13.8bn transmission contract awarded by Adani Power, balance will be executed by the German parent. (ET)
CL Technologies signed a 5 year multi-million dollar outsourcing deal with supply chain services firm UTi Worldwide. (ET)
Jindal Steel and Power is in advanced talks with Hudson Resources, Australia, to form a JV for exploration and mining of coking coal there. (ET)
Suzlon Energy has paid €30mn as part payment to Martifer SGPS SA for acquiring the latter’s stake in a Germany-based wind turbine maker.(TOI)
Solar power firm Cobol Technologies, owned by the promoters of Moser Baer, raises US$30mn through a sale of minority stake to Pangea Emerging Infrastructure Fund. (ET)
SREI Infrastructure Finance plans to raise up to Rs10bn from the market to meet its long term working capital requirements. (ET)
Balco is planning to close its plant-1, which produces 100,000 tonnes of aluminum every year, as the dip in prices makes production unprofitable.(BS)
Aditya Birla Nuvo plans to rejig its apparel business by opening 150 new stores at city centers, where footfall is higher, after closing 30 unviable stores.(BS)
Reliance Industries which faces possible penalties by the US administration for its business ties with Iran, has paid about Rs10mn for lobbying among US lawmakers.(BS)
Hindustan Unilever along with a few associations for glass and detergents, has filed writs in the Delhi and Bombay High Courts to get a stay against a safeguard duty imposition of 20% on import of soda ash from China.(BS)
Punj Lloyd Ltd is in talks with Areva NP and Westinghouse Electric for a tie-up to build nuclear power plants in the country.(BL)
Corus' US$480mn deal with a consortium of buyers to sell its Teesside steel mill "is in danger of being scrapped," leading British daily Financial Times has said.(DNA)
International Coal Ventures, an SPV created by five PSU majors including Coal India and SAIL, may bid for a coal block in Mozambique this month.(BL)
Reliance Gas Transportation Infrastructure has approached the competent authorities to seek a nod for the transportation tariff to be levied by it for ferrying Reliance Industries’ D6 Block gas.(BL)
Pipe manufacturer Man Industries has bagged a Rs13.5bn order from Middle East in April.(BL)
Jet Airways and Sahara India Commercial Corporation have told the Bombay High Court that both the parties would soon meet to sort out the ongoing issue related to the takeover deal of Sahara Airlines.(BL)
Tata Motors to bring Jaguar, Land Rover to India.(BL)
Tata Steel to consider restructuring the continental European operations of Corus. (BS)
GMR Infra may raise upto Rs30bn through PE route. (ET)
Sobha Developers plans to raise Rs3.5bn by offloading around 25% stake through preferential allotment and is expected to also evaluate the QIP route. (BS)
DLF plans to launch more mid-income housing projects in Kochi, Bangalore and Hyderabad, among other cities, and divest stakes in some hotel projects to generate liquidity in the current fiscal. (BS)
ACC has no plans to increase the prices of the commodity in Delhi. (BS)
DLF plans to raise Rs55bn through the sale of non-core assets such as power units and hotels to help it reduce its debt.
DLF is banking on Rs20bn of additional inflows from group company DLF Assets. (BS)
SBI reduces the interest rate on domestic term deposits by 25bps across maturities. (BS)
NTPC may set up 600MW hydel power plant in Bhutan. (ET)
Tata Steel may re-bid for Liberian mine. (ET)
Ranbaxy Laboratories is forced to withdraw all batches of a generic urinary infection antibiotic drug from the US market. (BS)
Talks between Jaguar Land Rover and the UK government over a financial aid package for the carmaker have reached an impasse. (ET)
Titan Industries to close its two Tanishq jewellery brand boutiques in the US. (ET)
Godrej Consumer is eyeing acquisitions worth US$1bn in emerging markets in this fiscal. (ET)
Reliance Industries may neither start any greenfield initiative nor raise new funds in this fiscal, as it looks to consolidate its diverse portfolio of biz. (ET)
ONGC Videsh and its partners, IOC and Oil India, are likely to invest about US$4bn to start production from a gas field they discovered in offshore Iran, in the next 3-4 years. (ET)
R-Power may not get entire Sasan coal. (ET)
GMR Infrastructure has tied-up funds for its 1,050MW power project in Kamalanga in Orissa (ET)
TCS has shelved plans to increase its headcount in Australia to around 2,000 (BS)
RNRL has decided to procure six ships for transportation of imported coal to its proposed 4,000MW UMPP in Krishnapatnam (ET)
IOC has forayed into the wind power sector by commissioning its first wind farm at Kandla in Gujarat (ET)
Wockhardt has reached an out-of-court settlement on three patent infringement cases in the US with Orion Corporation (BS)
Apollo Tyres to fully acquire a Netherlands-based premium tyre maker for an undisclosed sum (BS)
Parsvnath Developers is planning to cut its debt by a quarter by the end of FY10 (BS)
UTV earmarks Rs9bn for its movie production venture (BS)
Sterlite Technologies to raise Rs419mn by issuing warrants to promoters (BS)
Siemens, BHEL plans to form JV for manufacturing super critical and ultra super critical steam turbines. (ET)
Aditya Birla Nuvo is considering plans to raise fresh equity of about Rs15bn to finance the group’s life insurance business (BS)
L&T reaches an agreement to end a standoff over its 60MW Singoli-Bhatwari hydel project in Rudraprayag district of Uttarakhand (BS)
Inflation inches higher to 0.56% as food prices remain high. (ET)
State run banks will now charge 9.25% or less interest rate for the first 5 years on home loans up to Rs3mn. (ET)
Index of six core industries registered a growth of 2.9% in Mar’ 09 (ET)
New premium collection in the life insurance industry fell by 12% in Q4 FY09 to Rs348bn from Rs394bn last year. (ET)
Anti¬dumping duty on some auto parts likely.(Mint)
Mumbai Metropolitan Region Development Authority is planning a 100km network of monorail in the Mumbai metropolitan area in next seven years.(BL)
Government has extended the special dumping duty on nylon tyre cord fabric imports from China for another 5 years. (ET)
State run oil companies cut jet fuel prices by 1% in tandem with the international prices. (ET)
India’s crude oil output fell 1.8% in FY09 to 33.5mn tons. (ET)
Planning commission has proposed to set up a National Electricity Fund with a corpus of Rs1-1.5trn to finance the development of T&D network of the state utilities. (ET)
DoT panel mulls new 2G spectrum pricing formula.(BL)
Indian gas companies may soon boast their first gas swap arrangement that could slash transportation costs by more than 50%.(BS)
Airport developer to raise over Rs 18bn by pledging revenues from passenger charges.(BS)
India plans to increase stockpiles of the anti-influenza drug Tamiflu or its generic version by 10-fold, from 1mn to 10mn currently.(BS)
India’s exports declined a record 33.3% in March 2009, marking a contraction for the sixth consecutive month to US$11.5bn. (BS)
Number portability charges likely to be below Rs300. (BS)
India’s foreign exchange reserves increased by US$631mn to US$253.1bn during the week ended April 24. (BS)
Public-sector banks chalk out expansion plans to open at least 15,300 ATMs across the country by the end of this fiscal. (ET)
General insurance industry, comprising 16-odd players, has registered a drop in premium income growth for the fiscal 2008-09.(DNA)
Government has decided to create separate quality guidelines for medical devices and not treat them as drugs. (ET)
Government plans to impose a 20% safeguard duty on imported acrylic fibre (ET)
GSM mobile service providers are opposing an 11-digit mobile numbering proposal (BS)
Government may decide on steel safeguard duty next week. (ET)
Global feel-good to rub off on India
Take calculated risks. That is quite different from being rash.
Today we expect the key Indian indices to rally as risk appetite is holding up globally. World markets were up while we enjoyed a long weekend. The intermediate trend remains up as things are looking up globally as well as back home. But, there is a likelihood of correction after 7-8 week’s rally. The outcome of the Lok Sabha could provide a trigger for that. Another cause for concern is the spread of swine flu and its economic fallout.
US Treasury’s stress test results will be out later this week, which will reveal the health of the large American banks. Monthly labour report is also due on Friday in the US. On the whole, key global data points show continued signs of improvement, though the recovery is still fragile. There may be a few more hiccups going ahead but not as bad as the ones suffered in October-November and in early March. The upside will hinge on persistent improvement in economic conditions, pick-up in earnings and foreign capital inflows.
One also must not forget that the generous doses of fiscal stimulus administered by most governments could lead to its own set of problems. Running large fiscal deficits leads to inflation, higher interest rates and debt, besides crowding out private borrowing. Countries like Germany and New Zealand have already expressed concern on this front, so has the RBI Governor. In short, the recovery will not be a walk in the park and one should brace for a bumpy ride.
Key Results Today: Allahabad Bank, Century Textiles, HDFC and Indian Overseas Bank.
FIIs were net buyers in the cash segment on Wednesday at Rs3.65bn (provisional) while the local institutions were net sellers of Rs4.04bn. In the F&O segment, the foreign funds were net buyers at Rs12.96bn. On Tuesday, FIIs pulled out Rs1.74bn from the cash segment.
US stocks ended higher on Friday, as encouraging reports on manufacturing and consumer sentiment raised optimism that the worst of the global recession may be behind us. All the three major stock benchmarks closed up for the week as well as for April.
Stocks slumped in the morning, fluctuated in the afternoon and then made a run higher near the close. The Dow and S&P 500 have now gained for seven of the last eight weeks. The Nasdaq has gained for eight weeks in a row.
Last week's gains are a continuation of strong gains made in April amid growing expectations that the world's largest economy is close to stabilising. For the month of April, the Nasdaq gained 12.3%, the S&P 500 gained 9.4% and the Dow Jones gained 7.3%.
Market experts say this improved undertone should continue to benefit stocks in the weeks ahead, but there could be some hiccups next week. There are some concerns about the results of the banks' 'stress tests' and its implications for the market.
The results of the stress tests of the nation's largest banks are now expected late on Thursday, according to reports. Results were initially expected to be released on Monday.
In major corporate developments, auto major Chrysler filed for Chapter 11 bankruptcy protection after failing to reach a deal with some of its smaller lenders to cut debt. But a deal has been negotiated to combine the company with Italian automaker Fiat, allowing Chrysler to stay in business. Chrysler is privately owned. Shares of rivals General Motors (GM) and Ford Motor slipped Friday after rallying on Thursday.
Separately, Ford reported a 31.6% drop in sales versus a year ago, a steeper decline than expected. But the pace of the decline was smaller than a month ago. GM said sales fell 33.2% from a year ago, beating forecasts. But sales were an improvement after the 45% decline in March. Toyota Motor reported a worse-than-expected April sales decline of 41.9%. Toyota's March sales fell 30.9% versus a year earlier.
In the day's economic reports, the Institute for Supply Management's (ISM) manufacturing index rose to 40.1 in April from 36.3 in March beating forecasts for a rise to 38.4. The report was consistent with recent signs that the pace of the economic slowdown is easing.
Another report showed that consumer sentiment improved in April. The University of Michigan's consumer sentiment index was revised up to 65.1 from a previous reading of 61.9. Economists had forecast no change.
A third report showed that March factory orders fell 0.9% after rising 0.7% in February. Economists predicted a 0.6% fall, on average.
Dow component Chevron reported a big drop in first-quarter sales and earnings, that missed expectations, due to a steep drop in energy prices. Shares of the No. 2 oil services firm ended higher.
Fellow Dow component Exxon Mobil reported weaker sales and earnings on Thursday. Shares gained 2%. MasterCard reported weaker quarterly earnings that topped estimates on weaker revenue that missed expectations. Shares fell nearly 6%.
Citigroup is selling its Japanese retail brokerage business to Sumitomo Mitsui Financial Group in a deal worth US$7.9 billion. Shares fell 2.6%.
Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.15% from 3.14% on Thursday.
Lending rates were mixed. The 3-month Libor rate fell to 1.01% from 1.02% on Thursday. The overnight Libor rate rose to 0.24% from 0.23%. Libor is a bank-to-bank lending rate.
In currency trading, the dollar fell versus the euro and gained against the yen.
US light crude oil for June delivery rose US$2.08 to settle at US$53.20 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery fell US$3 to US$889 an ounce.
The majority of developed markets were closed on Thursday on account of Labour Day. Among the world markets that were open for trading, Japan's Topix added 1.1%, while the UK's FTSE 100 Index slipped less than 0.1%.
A sharp rally for European stocks on Thursday helped a key index to record its best-ever monthly performance in April. Trading over the 200-point mark for the first time since early February, the pan-European Dow Jones Stoxx 600 index jumped 1.5% to 200.23. This move brings gains for the month to 13.5% - the best monthly performance for the index since Stoxx started tracking the data at the end of 1986.
Germany's DAX 30 index rose 1.4% to 4,769.45, the UK's FTSE 100 index advanced 1.3% to 4,243.71 and the French CAC-40 index gained 1.4% to 3,159.85.
After a sharp cut on Tuesday, Indian markets staged a strong come back as bulls ended the week on a high. Strong cues from the Asian markets coupled with buying witnessed in the heavyweights lifted the key indices to end with healthy gains erasing previous day’s losses.
The BSE Sensex surged 401 points to close at 11,403 and the NSE Nifty rose by 111 points at 3,473.
Among the 30-components of Sensex, 29 stocks ended in the green and only Grasim ended in the negative terrain. Among the major gainers were ICICI Bank, Sterlite, JP Associates, Tata Power, Wipro and Reliance Infra.
Among the BSE Sectoral indices BSE Bankex index was the top gainer, the index gained 5%. Among the other major gainers were BSE IT index (up 4.4%), BSE Teck index (up 4%), BSE Oil & Gas index (up 3.7%) and BSE Power index (up 3.5%)
Market breath was positive, 1,406 advanced against 1043 declines, while, 90 remained unchanged.
For the week:
The BSE IT Index (up 4.2%): IT stocks were among the major gainers after the tech companies (both mid-caps and large caps) announced quarterly earnings without any major negative surprises.
The top gainers in the IT sector were TCS (up 6.8%), Wipro (up 6%), Infosys (up 4.2%) and Financial Tech (up 2.7%).
Patni surged 3% during the week. The revenues for the quarter stood at Rs79.54bn, a decrease of 11.4% as compared to Rs85.70bn in the earlier quarter. The operating income stood at Rs8.12bn, an increase of 7.7% as compared to Rs7.20bn in the earlier quarter.
The top losers were Sasken Communication (down 5.3%), Oracle Financial (down 1.7%) and Satyam (down 0.5%).
The BSE Consumer Index: The top losers in the consumer durables space were Videocon Industries (down 11.1%), Su-Raj Diamonds (down 1.8%), Titan (down 1.5%)
Blue Star surged 4.5% during the week.
The BSE Healthcare Index (up 0.1%): The top gainer in the Pharma space was Piramal Healthcare. The stock surged over 7% during the week. The net profit for the quarter increased by 59% at Rs1149mn as compared to Rs722.8mn.The total operating income was up by 9.3% to Rs8.5bn over Q4FY08.
Sun Pharma (up 6.9%), Lupin (up 1.6%), Astrazeneca Pharma (up 1.4%) and Panacea Biotec (up 0.9%) were among the major losers.
The top losers were Wockhardt (down 13%), Strides Arcolab (down 10.4%), Glenmark Pharma (down 9.1%), Orchid Chem (down 7.1%) and Ranbaxy Labs (down 5.6%).
The BSE Banking Index (up 1.7%): The top gainer in banking space was ICICI Bank. The stock was up 10.4% during the week. ICICI Bank posted a net profit of Rs7.44bn for the quarter ended March 31, 2009 compared to Rs11.5bn for the quarter ended March 31, 2008. Total Income decreased to Rs92.03bn for the quarter ended March 31, 2009 from Rs103.91bn for the quarter ended March 31, 2008.
Among the other major gainers were Bank of Baroda (up 7.1%), Axis Bank (up 5.2%), Federal Bank (up 5.2%) and Canara Bank (up 2%).
The top losers were Bank of India (down 12%), PNB (down 7.8%), Karnataka Bank (down 5.9%), IOB (down 5.5%) and Union Bank of India (down 4.2%).
The BSE Auto Index (up 0.7%): The top gainer in the auto space was M&M. Hero Honda gained 3.1% during the week. Hero group and Honda are reportedly considering plans to extend their 25-year-old partnership. Both the companies may look at sharing details of new products with each other, including engines, design sequences and vehicle platforms, says a financial newspaper.
Among the other major gainers were Eicher Motors (up 2.8%), Bajaj Auto (up 2.4%) and Swaraj Mazda (up 2.2%). The top losers were Ashok Leyland (down 5.7%) and Tata Motors (down 3.8%).
Why government should tax less and work more
One of the key challenges before companies is to figure out what business they are really in. Once this is clear, everything else -- strategy, etc -- follows. If you know what you want to be, you know what to do.
Xerox Corp thought it was in the business of selling copiers. You had to hardsell the product, and convince the customer why he should invest money in expensive machines. But when the management probed a little deeper, it found that the customer's real need was making copies; owning a copier was incidental to the process. The change in the company's self-definition yielded significant benefits to both the company and its customers.
Governments, like companies, need to be clear about what business they are in. They do lots of things they shouldn't be doing, and don't do the things they should be. Most governments define their jobs as defending the country from external aggression, maintaining internal law and order, promoting economic and social development and ensuring a fair distribution of the fruits of growth.
But look closer: are these responsibilities that need to be done within government or should government merely be ensuring that someone does the job? When governments try to do too much, the net result is bureaucracy, waste, corruption and lack of accountability.
More here
Bullion metals end mixed
Gold registers 3% weekly drop in prices
Precious metals (gold) ended lower on Friday, 01 May, 2009. Prices dropped as earning and economic reports checked in better than expected on Friday reducing the appeal of precious metals as a safe bet for investment. But silver gained for the day.
Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa.
On Friday, Comex Gold for June delivery lost $3 (0.3%) to close at $888.2 an ounce on the New York Mercantile Exchange. For the week, gold ended lower by 3%. Year to date, gold prices are practically unchanged.
For the month of April, gold lost 3.7%, the second consecutive monthly drop. For the month of March, gold fell 2.1%, down for the first month in five. But the metal gained 4.3% in the first quarter. Before March, for the month of February, gold ended higher by 7.4%. For January, 2009, gold had gained 3.9%.
On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (15%) since then.
On Friday, Comex silver futures for July delivery gained 17.5 cents (1.4%) at $12.5 an ounce. Year to date, silver has climbed 6.5% this year. For 2008, silver had lost 24%.
On Friday, the ISM Manufacturing Index for April came in at 40.1. That was much better than the 38.4 that was expected, and was also up from 36.3 in March. But economic conditions remained dour as factory orders for March declined 0.9%, which was worse than the 0.6% decline that was widely expected, and February orders were revised lower to reflect an increase of 0.7%.
In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.
Crude goes further higher
Crude witnesses second consecutive weekly gains
Crude oil ended higher for the third straight day on Friday, 01 May, 2009 helping crude register its second consecutive weekly gain. Better than expected earning and economic reports gave some hopes that the worst might be over for the overall economy in terms of recession and things might just get better from here thereby increasing the demand for energy in the coming months.
On Friday, crude-oil futures for light sweet crude for June delivery closed at $53.2/barrel (higher by $2.08 or 4.1%) on the New York Mercantile Exchange. For the week, crude ended higher by 3.2%.
Crude ended April higher by 2.9%. Previously, March trading ended up 10.9%. It rallied 11.3% in the first quarter. For the month of February, crude prices had ended higher by 1.5%.
Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 68.8% since then. Year to date, in 2009, crude prices are higher by 14%. On a yearly basis, crude prices are lower by 51%.
On Friday, the ISM Manufacturing Index for April came in at 40.1. That was much better than the 38.4 that was expected, and was also up from 36.3 in March. But economic conditions remained dour as factory orders for March declined 0.9%, which was worse than the 0.6% decline that was widely expected, and February orders were revised lower to reflect an increase of 0.7%. Also, U.S. consumer sentiment rose in April, but remained at relatively low levels, according to a survey released by the University of Michigan.
Also at the Nymex on Friday, June reformulated gasoline rose 5.16 cents, or 3.5%, to $1.5174 a gallon and June heating oil gained 5.16 cents, or 3.9%, to $1.3884 a gallon.
June natural-gas futures added 16.5 cents, or 4.9%, to $3.538 per million British thermal units.
Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.
SRF
We recommend a buy in the SRF stock from a short-term trading perspective. It is apparent from the charts of SKF that it has been on a medium-term up trend since its one-year low of Rs 62, recorded on February 3. Since this low the stock has been forming higher peaks and higher bottoms. While trending upward, the stock breached its 50-day moving average in late February and has been trading well above this average. Most recently the stock encounters resistance around Rs 95 and made a minor pullback to Rs 75 level. However, the stock resumed its medium-term uptrend after taking support from the up trendline around Rs 78. The daily relative strength index is on the verge of re-entering the bullish zone from the neutral region. Considering that the medium-term up trendline is intact, we are bullish on the stock from a short-term horizon. We expect the stock’s uptrend to continue until it hits our price target of Rs 94 in the upcoming trading sessions. Traders with short-term trading perspective can buy the stock while maintaining a stop-loss at Rs 81.
FIIs restructure portfolio
The last 45 days have seen heightened FII investment flows after nearly a quarter of lull and more than four quarters of gradual sell off.
The last month alone, FIIs have pumped in about $1 billion in stock markets.
These investors have restructured their portfolios to protect their interest in a volatile market, according to a study of FII investments patterns conducted by Mumbai-based, CNI Research on 394 companies listed on the stock exchanges in India.
The study covering the fourth quarter of fiscal 2009 reveals that there is a direct co-relation between FIIs hiking stake and their investment pattern with the company share performance.
Smart strategy?
“Wherever the FIIs have hiked stake, the share prices have gone up and conversely, wherever they have exited, the prices have lowered. Therefore, for an investor, this offers some broader hints at where to invest,” Mr Kishor Ostwal, Managing Director of CNI Research, said.
The Mumbai-based research company analysed 394 companies where FII stake has changed during the fourth quarter of 2008-2009.
The stake patterns of the 394 companies show that in 121 companies the FII stake has dropped below 5 per cent, in about 164 companies it is still above 5 per cent and in about 109 companies, they stepped up their holding.
Sector specific
Mr Ostwal told Business Line that the last four quarters have seen volatile markets and continuous efforts by the FIIs to restructure their portfolio. This was also compounded by tough markets back home where the FII come from.
This meant constant asset reallocation. However, for FIIs with sector specific mandate, say IT or real estate, it has been a tough way out, especially in a falling market.
“The research sought to analyse the co-relation between FII holding and stock prices. After the recent re-allocation of portfolio and heightened investment, it is time to have re-look at some of the stocks where FIIs have earlier exited due to tough market conditions due to pressure on some sectors. It won’t be long before they will come back to them,” he explained.
The study covered Maruti Suzuki, Grasim Industries, Infosys Technologies, Hero Honda, Lanco Infrastructur, HDFC, Colgate Palmolive, Tata Steel and host of others.
via BL
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