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Wednesday, September 23, 2009
Market may open lower on weak Asia
The key benchmark indices may open lower on weak Asia. Investors may take home some cash after indices surged to their 16 month high. Volatility may be the order of the day for next two days as traders rollover derivatives contracts from September 2009 series to October 2009 series ahead of the expiry of September 2009 contracts on Thursday, 24 September 2009. The next major trigger for the market is Q2 September 2009 results next month.
Advance tax collections have registered a positive growth in the second quarter after witnessing a negative growth in the first quarter. Corporate advance tax and advance personal income-tax were up by 14.7% and 1.7%, respectively in September quarter.
Earlier, market expectations of strong Q2 results were tempered after a news agency quoted an unnamed government official as saying on 17 September 2009 that the government expects only a marginal improvement in corporate advance tax in second quarter. Media reports had on Wednesday, 16 September 2009, indicated a surge in advance payment by top Indian firms that raised expectations of strong Q2 September 2009 results.
Finance Minister Pranab Mukherjee said on Saturday, 19 September 2009, that the Centre will not roll back the stimulus package given to the industry in wake of the global economic meltdown till signs of clear recovery are visible across recession-hit US and Europe. The Finance Minister also said the nation's equities index is moving steadily and authorities will avoid disturbing the pattern.
The Securities Exchange Board of India (SEBI) has revised its takeover norms provisions. In a press conference, Sebi, Chairman, CB Bhave said on Tuesday the board has approved two changes in the Indian Depository Receipts (IDR) norms and has allowed the concept of anchor investors for IDRs. He added that the takeover regulation were applicable for American Depositary Receipt (ADR) as well as Global Depositary Receipt (GDR) holders with voting rights. He said that GDR/ADR holders with voting right would now be on par with shareholders but added that there would be no retrospective effect to the amendment on takeover norms.
Changes in the Takeover Code also made it compulsory for holders of depositary receipts to make an open offer once their holding crossed the 15% threshold limit in an Indian firm. Earlier, an open offer was triggered only on conversion of depositary receipts into shares with voting rights.
Asian stocks fell today after positive start. The key benchmark indices in Hong Kong, South Korea, Singapore and Taiwan fell by between 0.02% to 0.46%. But, China's Shanghai Composite rose 0.13%.
Japanese stock markets have been shut since Monday, 21 September 2009, for national holiday. Trading will begin on Thursday, 24 September 2009.
The US markets advanced on Tuesday, the benchmark indices closed at fresh 2009 highs as the two-year treasury auction met with strong demand and the dollar retreated. A falling dollar drove buying in commodities and commodity-related stocks. The Dow Jones industrial average gained 51.01 points, or 0.5%, to 9,829.87. The S&P 500 index gained 7 points or 0.7%, to 1,071.66, while the Nasdaq Composite Index rose 8.26 points, or 0.4%, to 2,146.30.
At a policy meeting of the Federal Open Market Committee which resumed on Tuesday, 22 September 2009, the Fed policy makers will assess the early signs of improvement now taking shape across the economy. The Fed is expected to hold rates steady but markets will be interested to know when its ultra-loose policy will start to be tightened.
Meanwhile, the world economy is likely to be the focus of a two-day G20 financial summit in Pittsburgh on 24-25 September 2009. The G20 leaders will discuss overhauling global financial regulation and fixing long-term imbalances in the world economy. The G20 leaders are also considering ways to rein in bank bonuses that many say contributed to the global financial crisis by encouraging excessive risk-taking. Bank bonuses are part of the G20 agenda to consider ways to reshape global financial rules after the 2008-2009 crisis.
Leaders from some of the largest Western powers rallied support Tuesday behind a U.S. plan to build a more balanced global economy and warned against returning to business as usual once recovery takes hold.
Back home, the key benchmark indices extended gains for the fifth straight day on Tuesday on expectations of good Q2 September 2009 results. The Sensex and S&P CNX Nifty today, 22 September 2009, attained their highest closing level in 16 months. The BSE 30-share Sensex rose 145.13 points or 0.87% to 16,886.43, its highest closing since 22 May 2008 on that day.
As per provisional data, foreign funds on 22 September 2009, bought equities worth a net Rs 852.73 crore. Taking an opposite stance, domestic funds dumped stocks worth a net Rs 539.14 crore.
Daily Grey Market Premiums - Sep 23 2009
| Company Name | Offer Price (Rs.) | Premium (Rs.) |
| Globus Spirits Ltd. | 100 | 4 to 6 |
| Oil | 1050 | 33 to 35 |
| Pipavav Shipyard | 58 | 3 to 5 |
| Thinksoft Global | 120 to 130 | 5 to 7 |
| Euro Multi Vision | 70 to 75 | 4 to 4.50 |
Daily News Roundup - Sep 23 2009
New takeover rules may make Bharti Airtel’s takeover of MTN even more expensive. (ET)
NTPC is set to ink an agreement with Reliance Industries to buy gas at the officially approved price of US$4.2/mmBtu. (ET)
IOC and Adani Energy combine has bagged rights to retail CNG to automobiles and piped gas to industries in Ghaziabad by quoting zero pipeline tariff. (FE)
ONGC to speed up exploration in western offshore, looks to hire an ultra deep-sea drill rig at a daily cost of ~Rs50mn. (BS)
Planning Commission study says ONGC and OIL gas prices are too low and they should be aligned to US$4.2/mmBtu. (BS)
Tata Steel Kalinganagar plant to start work on its 6mn ton greenfield steel project. (BS)
GAIL has signed contracts for sourcing of natural gas from PY-1 fields in the Cauvery basin. (BS)
DLF sold off the entire block of 1,250 apartments in the second phase of its Capital Greens project in West Delhi. (ET)
Axis Bank slashed interest rates by 150-200bps in the car loan segment over the past one month in select southern markets. (ET)
Axis Bank fixed the price for the sale of equity shares through the QIP route at Rs906.7/share. (BL)
Sterlite Industries, inorder to sweeten its bid for Asarco, offers to limit the extent of a lawsuit recovery from Grupo Mexico to US$900mn. (ET)
Vedanta Resources Plc has increased its stake in Sesa Goa by 2.12% through open market purchase. (FE)
Reliance Communication will seek regulatory approval to sell 10% stake in it is telecom infrastructure unit, Reliance Infratel. (ET)
Large companies are looking to tap the real estate revival with HUL and Mafatlal putting their real estate assets on the block. (ET)
Jaiprakash Associates is set to sell the second tranche of its treasury shares to raise US$200mn to finance its existing projects. (ET)
Tata Motors owned premium luxury carmaker Land Rover launched its compact SUV Freelander 2 in India. (ET)
Britannia plans to enter flavoured milk mart. (BS)
Cipla will sell ~4% of its equity to institutional investors to raise close to US$175mn to fund its capital expansion plans. (BS)
Blackstone will convert its 1.1mn compulsorily convertible debentures of Allcargo Logistics Global at its pre-set price of Rs934/share. (BL)
After facing stiff resistance from villagers at Khunti and Gumla of Jharkhand, Arcelor Mittal is seriously contemplating some alternative site for its 12mtpa project in the state. (ET)
Kingfisher Airlines seeks to raise US$80-100mn via a rights offer and another US$60-75mn via GDRs to repay its Rs60bn debt. (BS)
Astra Zeneca and US based Nektar Therapeutics have entered into a worldwide licencing agreement for two drug development programs. (FE)
Natco Pharma plans to sell 10mn capsules of Natflu for treatment of swine flu by the end of next month. (ET)
Patni Computers has identified two acquisition targets, one each in USA and continental Europe and hopes to close one by November. (ET)
Federal Bank has started due diligence of Catholic Syrian Bank for a merger proposal. (FE)
Dewan Housing Finance has raised Rs2.5bn through private placement of debt and plans to raise another Rs5bn through private placement of non-convertible debentures. (BS)
Pipavav Shipyard has fixed the issue price at Rs58/share. (ET)
Hinduja Group looks to establish a pan-India footprint in healthcare through its second 100 bed hospital in Mumbai. (BL)
Yamaha plans to enter the automatic scooter market in India in the next three years. (BS)
MERC has decided to draft rules that allow consumers to switch from one power utility to another. (ET)
RBI plans to allow banks to trade in loan portfolios bought from other banks and specialized financial institutions to meet priority lending obligations. (ET)
Asian Development Bank has raised India’s growth forecast to 6% in the current fiscal. (ET)
Government has levied a penalty of Rs320mn on mobile operators for failing to adhere to the subscriber verification norms in 2008-09. (ET)
Private terminal operators in major ports may soon get to independently decide tariffs for various activities like cargo and container handling and documentation. (ET)
SEBI amended the takeover regulations and offered the facility of anchor investors to IDR issues. (FE)
Draft code set to do away with review of double taxation pacts. (FE)
CERC says that for the derivatives market to function correctly the price discovery process in the spot market has to be robust. (FE)
Total funds raised by India Inc through ECB and FCCB have fallen by 45% to US$1.08bn during August 2009. (FE)
Punjab government has decided to defer the power tariff hike. (FE)
Road projects worth over Rs2.4bn in Himachal Pradesh, falling under the Pradhan Mantri Gram Sadak Yojna, have been cleared by the central government. (BS)
What lies ahead!
What lies behind us and what lies before us are tiny matters compared to what lies within us.
It’s no tiny matter that the market has run this far. Today, we expect a flat start though. Mixed global cues, uncertain external environment and Thursday’s F&O expiry could stop the bulls in their tracks momentarily. What the Fed policymakers say at the end of a two-day meeting later today (US time) will have some bearing in the short-term. All in all, there could be some added volatility at least this week.
Caution has been thrown to the winds for now. Concerns about the six-month rally having been too fast and too furious have been blown away by strong FII inflows. In fact, their net investment into Indian stocks this year has crossed $10bn. Last year, they had pulled out $13bn. That is history now. What matters is the present, and at the moment it doesn't appear to be anywhere near as tense as it was post Lehman Brothers' implosion.
Contrary to some skepticism, the green shoots do appear to have weathered the storm(s). Though the pace of growth is slow, one shouldn’t be complaining too much when one looks at the situation a year ago. A big question is whether the ascent will continue or will it meet with any sort of resistance.
The current bull-run is bound to be tested in the days, weeks and months ahead. Inflation will be the biggest challenge, along with hardening interest rates. Before the bad news starts trickling in, the market may get some good news in the form of another round of encouraging quarterly results.
What will happen when governments and central banks start reversing their stimulus measures? Will the liquidity that is fueling the frenzied rush toward risky assets continue unabated? How will the markets, companies and individuals react when this happens? Will there be another twist in the tale? There are some tough questions that needs to be answered.
US stocks rallied on Tuesday after a choppy morning, with the Dow, S&P 500 and Nasdaq all hitting one-year highs. The Dow Jones Industrial Average rose 0.5% to end at 9,829.87 - its highest point since Oct. 6, 2008. The S&P 500 index added 0.7%, ending at 1,071.66 - its highest point since Oct. 3, 2008. The Nasdaq Composite index gained 0.4% to end at 2,146.30 - its highest point since Sept. 26, 2008.
US stocks have notched up one-year highs repeatedly over the past two weeks, with the Nasdaq ending Monday's session at its highest level since shortly after the collapse of Lehman Brothers a year ago. The slow, steady move up is creating anxiety among a few investors who have missed the six-month rally, which in turn is drawing more money into the market at every dip. Despite calls for a September slide, investors continue to use declines as an opportunity to get back in.
Stocks have also benefited from the weakness of the US dollar versus other major currencies. Dollar-traded commodities and corresponding commodity stocks tend to rise when the greenback weakens. In addition, the weaker dollar impacts the stocks of companies that have a strong presence overseas.
Since bottoming at a 12-year low March 9, the S&P 500 has gained 57.4% and the Dow has gained 49%, as of Monday's close. After hitting a six-year low, the Nasdaq has gained 68.5%. Stocks have risen during those 6-1/2 months on signs that the US economy has stopped worsening. Unprecedented amounts of fiscal and monetary stimulus have also lent good support.
Dow gainers were fairly broad based, with 20 of 30 issues rising. A number of financial stocks gained. The KBW Bank sector index gained 2.3%.
Citigroup rose 5% after Singapore sovereign wealth fund GIC said it sold half of its stake in the company. GIC had bought a 9% stake in Citigroup at its lows and opted to cash in on the recent market rally to earn $1.6 billion.
The Federal Reserve concludes its two-day policy meeting on Wednesday. The central bank is expected to hold short-term interest rates unchanged at levels near zero. Investors will also look to the central bank's statement for clarity on how they see the economic outlook. Fed chief Ben Bernanke said last week that the recession is likely over, but the labor market still has a long way to go. Investors will also be looking to see if they say anything about how the Fed policymakers plan to wind down programs that pumped trillions into the economy to cushion the blow of the recession.
Also Wednesday, Treasury Secretary Timothy Geithner is set to testify before the House Financial Services committee on regulatory reform.
July home prices rose 0.3%, according to a report from the Federal Housing Finance Agency (FHFA) released shortly after the start of trading. That was short of forecasts for a rise of 0.5%. Home prices rose a revised 0.1% in June.
US light crude oil for October delivery rose $1.84 to settle at $71.55 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery rose $10.60 to settle at $1,015.50 an ounce. Gold closed at a record high of $1,020.20 last week.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.46% from 3.48% late on Monday.Indian markets extended its winning streak to 12th straight trading session on Tuesday. It was another momentous day as the NSE Nifty closed above the 5,000 mark for the first time since May 22, 2008.
After starting off on a cautious note, markets gained momentum defying weak cues from the Asian markets. The upswing was led by the Auto, Realty and the FMCG stocks. Even Mid-Cap and the Small-Cap stocks were in demand. However, towards fag end oil & gas stocks like Reliance Industries, ONGC and Gail India turned out be party poopers as the stocks witnessed some offloading.
The BSE Sensex gained 145 points or 0.9% at 16,886 after touching a high of 16,943 and a low of 16,763. The index opened at 16,805 against the previous close of 16,741. The NSE Nifty gained 44 points to shut shop at 5,020.
In Asia, the Nikkei in Japan was shut while Australia's S&P/ASX ended lower by 0.4% at 4,663. Shanghai SE Composite in China fell by 2.2% at 2,897. However, the Hang Seng index in Hong Kong ended up 1% at 21,701.
In Europe, stocks were in the green. The FTSE in the UK was up 0.9%, The DAX in Germany was up 1.2% and the CAC 40 index in France gained 0.8%.
Coming back to India, among the BSE sectoral indices, the IT index was the top gainer, gaining 2%, followed by the FMCG index that was up 1.6%. The BSE Realty index up 1% and the BSE Auto index was up 1%.
The BSE Mid-Cap index gained 0.8% and the BSE Small-Cap index added by 1%.
Among the 30-components of Sensex, 24 stocks ended in the green and 6 ended in the negative terrain. Among the major gainers were HDFC, TCS, Tata Motors, ITC, Infosys, HDFC Bank and SBI.
On the other hand, Bharti, JP Associates, Hindalco and ONGC were among the major laggards.
Outside the frontline indices, the big gainers in the broader market were P&G, Moser Baer, LIC Housing, Mphasis, TTML and Alstom Projects. On the other hand, losers included Bharat Forge, Jubilant Org, Concor, Madras Cement and Divis Bank.
Shares of Reliance Industries ended flat at Rs2096. Reports stated that the company is looking at acquiring the assets either partly or fully of the bankrupt Dutch petrochemicals company LyondellBasell.
According to reports, Reliance Industries could make a cash payment of US$3.25bn to LyondellBasell's vendors for the deal. LyondellBasell is in the process of putting together a rights offering to provide the company with additional liquidity after it emerges from Chapter 11 bankruptcy, reports added.
LyondellBasel, which filed for bankruptcy on 6 January 2009, filed its Chapter 11 reorganisation plans with bankruptcy court in New York on 18 September 2009.
Shares of Tata Motors gained by 2.5% to Rs614 after report stated that its wholly-owned subsidiary received loan of Rs788mn from the UK government for its Rs1.97bn electric car programme. The stock opened at Rs597 and made an intra-day high of Rs621 and a low of Rs597. Total traded volumes stood at 1.4mn shares.
The board of directors of Reliance Communications approved the proposal by Reliance Infratel Ltd, a subsidiary company, a part of Reliance Anil Dhirubhai Ambani Group, to undertake an IPO of equity shares of the company. The Net Issue will constitute 10.0% of the post-Issue paid-up equity capital of the Company. The draft red herring prospectus for the said IPO will be filed by Reliance Infratel Ltd with SEBI shortly.
Reliance Infratel Ltd. is one of the leading passive telecommunication infrastructure providers in India. Shares of RCom gained by 0.5% to Rs307. The stock opened at Rs307 and made an intra-day high of Rs311 and a low of Rs302. Total traded volumes stood at 2.5mn shares.
Shares of Gateway Distriparks shot up by over 6.5% to Rs119 after reports stated that Blackstone is set to buy a 25% stake in Gateway Rail Freight Ltd, the container train services unit of Gateway Distriparks, for Rs2.5bn. The stock opened at Rs115 and made an intra-day high of Rs124 and a low of Rs114. Total traded volumes stood at 0.26mn shares.
Kingfisher Airlines may sell stock to existing shareholders to raise US$80mn-100mn. The company may also sell GDR for fund raising. The airline plans to raise funds for reducing debt.
Shares of Kingfisher Airlines ended flat at Rs51.95 The stock opened at Rs52.70 and made an intra-day high of Rs54.50 and a low of Rs51. Total traded volumes stood at 3.4mn shares.
GAIL signed two contracts for sourcing of natural gas from PY-1 field for supply to a power plant in Tamil Nadu here. A long term Gas Sale Contract (GSC) for the PY-1 gas supplies was signed between GAIL and HOEC.
Shares of GAIL ended lower by 0.5% to Rs348, while, Hindustan Oil marginally gained by 0.2% to end at Rs351.7.
Shares of Allcargo Global shot up by over 7% to end at Rs887 after reports stated that Blackstone Group LP will raise its stake in the company.
Allcargo Global will issue 1.51mn warrants to Blackstone Group LP that are convertible as of September 26, 2009 to equity at Rs934 per share, increasing holding by 6.8%.
Blackstone would have a 17.25% stake in Allcargo Global after the conversion, according to reports.
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