Search Now

Recommendations

Thursday, May 13, 2010

Put on your armor!


The best armor is to keep out of range - Italian Proverb.

Wild swings are here to stay though the outlook for the day appears slightly brighter. Risk aversion is still high with investors across the globe flocking to the safety of gold and the dollar. At the same time, stocks and commodities are showing some signs of staging a comeback. British shares rose as David Cameron took charge of the first coalition government in London since World War II. Spain’s announcement of a new austerity plan also helped boost confidence in equities.

Stocks in Europe as well as in the US posted smart gains. Asian markets are up this morning, led by Japan and South Korea though Shanghai continues to struggle amid tightening concerns. We expect a higher opening on Indian bourses. The NSE Nifty may take a shot at 5200 but will find it tough to get past 5300. Fund flows from overseas investors have tapered off lately and valuations remain quite rich. We are going through a volatile consolidation phase. It’s better to stay at a safe range and invest lesser than your means.

Results Today: Crompton Greaves, Educomp, Gammon India, Graphite India, Kewal Kiran, Koutons Retail, Lok Housing, MTNL, Plethico Pharma and Tata Coffee.

FIIs were net sellers of Rs2.97bn in the cash segment on Wednesday on a provisional basis, according to NSE web site. Local institutions were net buyers of Rs1.8bn. In the F&O segment, the foreign funds were net buyers of Rs12.89bn. FIIs were net buyers of Rs1.43bn in the cash segment on Tuesday, as per the SEBI data. Mutual Funds were net sellers of Rs1.97bn in the cash segment on the same day.

US stocks rose on Wednesday, with the Dow logging triple-digit gains, as concerns about European debt eased and investors focused on an improving domestic economy and corporate earnings. An optimistic outlook from IT major IBM too helped give a fillip to the sentiment.

After finishing nearly 37 points lower on Tuesday, the Dow Jones Industrial Average closed up 148.65 points, or 1.4%, to 10,896.91.

Of the Dow's 30 components, all but three rose, with gainers led by IBM. The IT services company's shares rallied 4.6% after the chief executive said that it would double its earnings by 2015.

Industrial conglomerate 3M Co. gained 1.7% after it declared a cash dividend late Tuesday for a 375th consecutive quarter.

The S&P 500 Index advanced 15.88 points, or 1.4%, to 1,171.67, with technology and industrial companies leading an advance that included all of the index's 10 industry groups.

Among the notable gainers, shares of Fluor Corp. rose 5.8% after the largest publicly traded US engineering firm said new business in the second quarter could top $8.8 billion.

The Nasdaq Composite Index gained 49.71 points, or 2.1%, to 2,425.02.

For every stock falling roughly six were on the rise on the New York Stock Exchange, where about 1.3 billion shares traded. Composite volume cleared 5.4 billion.

The dollar erased earlier losses and turned higher against the euro in the afternoon, rising 0.2%. The greenback also gained 0.9% against the British pound and was up 0.6% against the Japanese yen.

Gold prices continued to soar, rising $23.20 an ounce, or 1.9%, to settle at a record $1,243.50.

Uncertainty over the euro, which is used by 16 countries, is among the factors propelling gold prices to a fresh high, with investors turning to the metal as an alternative vehicle to paper currencies.

Europe's common currency traded near a 14-month low against the dollar, with the euro, slipping to $1.2617 from $1.2697 in late North American trades on Tuesday.

US light crude oil slipped 72 cents, or 1%, to settle at $75.65 a barrel after a larger-than-expected build in crude supplies.

Treasury prices extended gains, with the benchmark 10-year yield up to 3.63%, after a $24 billion auction of 10-year notes.

Cisco Systems, which reported its best quarter even after the close, finished up more than 3%.

US stocks had finished lower on Tuesday in a volatile session as investors digested a $1 trillion European aid package, but remained cautious amid lingering fears that the Greek debt crisis could spread to other nations if they don't manage to reduce large budget deficits.

Stocks rose sharply on Monday after the announcement of the massive rescue package for the debt-laden euro-zone economies.

Spain's Prime Minister Jose Luis Rodiguez Zapatero announced that civil servant salaries will be cut by 5% beginning in June in an effort to reduce costs. But fiscal problems in Europe will continue to resurface as long as deficits remain high.

The CBOE Volatility index (VIX), Wall Street's fear gauge, dipped 9%. Last week, the measure had shot up to 13-month highs as investors remained nervous about the sovereign debt crisis.

The Commerce Department said the trade deficit increased 2.5% in March, widening to $40.4 billion from a downwardly revised $39.4 billion the previous month. That was lower than the $40.5 billion that analysts.

The Treasury reported the 19th consecutive monthly deficit, with a shortfall of $82.7 billion in its April budget. That is much larger than the $52 billion gap economists were expecting during month, and it also topped March's $65.4 billion deficit. Historically, the government's budget posts a surplus during the month thanks to the April 15 tax filing deadline.

US federal prosecutors are looking into whether Morgan Stanley misled investors about complex mortgage derivatives it designed, according to the Wall Street Journal. The company, however, denies any knowledge of the investigation. Shares of the bank fell more than 2%.

After the closing bell, Cisco posted a fiscal third-quarter profit that surged 63% to $2.2 billion from a year earlier. Adjusted for one-time charges, the network equipment maker earned 42 cents per share, beating analyst estimates of 39 cents per share. Sales climbed 27% to $10.4 billion and also topped analysts' expectations. Shares of the company fell 1% in after-hours trading.

Disney reported profit and revenue that beat analysts' expectations late on Tuesday. Thanks to the success of "Alice in Wonderland," the media giant's profit surged 55% to $953 million, or 48 cents per share, and sales climbed 6% to $8.58 billion. Stock in Disney ended 1.8% lower.

Strength in the financial space lifted stocks in Europe on Wednesday, while shares in London got a boost after the formation of a coalition government by the Conservative Party and Liberal Democrats.

The Stoxx Europe 600 index gained 1.5% to 256.83. It was its second advance in three sessions since the EU-IMF approved a 750-billion euro rescue plan late on Sunday.

Government data showed first-quarter GDP growth of 0.2% in the euro-zone, but the figure beat economists' forecasts for growth of 0.1% and also covered a period of bad weather. Portugal's GDP was up 1% quarter-on-quarter. The Portuguese PSI 20 index climbed 2.9% to 7,380.66.

Spain announced budget cuts and the Spanish Ibex 35 index rose 1% to 10,107.7. The Greek ASE Composite Index rose 0.8% to 1,749.59.

The German DAX index rose 2.4% to 6,183.49, with Daimler shares up 2.9% and Infineon Technologies rising 4.6%. The French CAC-40 index advanced 1.1% to 3,733.87.

The UK FTSE 100 index rose 0.9% to 5,383.45 as a new UK government began to take shape.

The British pound declined 0.5% to $1.4855.

Crude drops again


Prices drop as crude stockpiles rise more than expected

Crude oil prices ended lower at Nymex on Wednesday, 12 May 2010. More than expected build up in crude inventories for last week as reported by the energy department affected prices today. Long-term implications of the European Union's rescue package and its impact on the currencies, specially on the euro, also bothered investors and raised question about global demand for oil in coming months.

On Wednesday, crude-oil futures for light sweet crude for June delivery closed at $75.65/barrel (lower by $0.72 or 0.9%). For the month of April, crude rose 2.8%. For the first quarter of this year, crude rose by 5.5%. Year to date, crude is higher by 0.8%.

Prices are very much lower as compared to 3 July, 2008 settlement of $145.29 a barrel and an intraday high of $147.27 on 11 July, 2008, an all-time high. However, oil has also gained nearly 143% from a December 2008 nadir. That day prices settled at $33.87 a barrel following an intraday low of $32.40.

In the latest weekly inventory report, the EIA reported today an increase of 1.95 million barrels in the nation's oil inventories for last week, slightly above expectations. The biggest surprise was a decrease in gasoline inventories by 2.8 million barrels, whereas market was expecting a small increase. Stockpiles of distillates, which include diesel and heating oil, rose by 1.4 million barrels. The refinery utilization rate dropped more than expected to 88.4%. Meanwhile, inventories at Cushing, Okla., the delivery point for Nymex futures, rose by 784,000 barrels to a record high on 37 million barrels.

A decision by the European Union and International Monetary Fund leaders to pledge financial support to the eurozone brought about a wave of buying and short covering that caused the stock markets across globe to surge in its best single-session percentage gain in more than a year on Monday, 10 May. As per plan, countries in the eurozone that face financial uncertainty will be eligible to receive some 500 billion euros from the EU and another 250 billion euros from the IMF. In addition to those measures, the European Central Bank will buy eurozone bonds from the secondary market and the Federal Reserve has reactivated swap lines with foreign institutions. At least for the time being, those efforts have eased contagion concerns that have surrounded Greece for weeks.

But traders mulled over the fact today that in the long term how much financial aid will be pledged for euro zone countries that face tenuous fiscal conditions and also the issue of how those funds will be allocated efficiently and whether recipients can remedy their underlying problems. The long-term implication of this on the euro and worries about inflation also bothered investors.

In the currency market today, the euro dropped once again against the dollar. The euro has slipped 10.6% against the dollar this year. The dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 0.4%.

The International Energy Agency today lowered by 220,000 barrels a day its forecast for global oil demand for 2010. Oil demand is estimated to grow from 2009 by 1.9%, equating to 1.6 million barrels a day, to 86.4 million barrels a day.

In contrast, yesterday, the U.S. Energy Information Agency raised its outlook for global oil demand to 1.6 million barrels per day in 2010, slightly higher than the 1.5 million barrels-a-day projection made last month. Separately, The Organization of the Petroleum Exporting Countries had also said on Tuesday it was raising its estimate for global oil demand for 2010. OPEC expects global oil demand to grow by 950,000 barrels a day to 85.38 million barrels a day. It previously expected growth of 900,000 barrels a day.

Among other energy products on Wednesday, reformulated gasoline for June delivery, the most active contract, added 2 cents, or 0.7%, to settle at $2.2104 a gallon.

Crude ended FY 2009 higher by 78%, the highest yearly gain since 1999. It reached a high of $82 earlier in October 2009 and hit a low of $33.98 on 12 February 2009. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

At the MCX, crude oil for May delivery closed lower by Rs 70 (2%) at Rs 3,390/barrel. Natural gas for May delivery closed at Rs 193, higher by Rs 5.6 (2.95%).

Precious metals shine brightly


Gold marks another all time high record closing

Precious metals ended substantially higher on Wednesday, 12 May at Comex as euro zone debt problems just failed to abate. Long-term implications of the European Union's rescue package and its impact on the currencies, specially on the euro, bothered investors and lured investors into safe-haven assets such as gold.

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 Wednesday, gold for June delivery ended at $1,243.1 an ounce, higher by $22.8 (1.9%) an ounce on the New York Mercantile Exchange. It was the highest ever closing for gold at Comex since trading commenced in 1974. It rose to a high of $1,249.3 during intra day trading. Gold for June delivery had settled above $1,200 in early December, only to pull back to $1,172 area and dip as much as the $1,050 vicinity in early February. Before today, on 3 December 2009, gold had touched an all time intra day high of $1,226.4.

Last week, gold ended higher by 2.5%. For the month of April, gold ended higher by 6%. For the first quarter of this year, gold rose by 1.7%, its sixth quarterly rise. On a year to date basis, gold is higher by 12.9%.

On Wednesday, July Comex silver futures ended higher by 37 cents (1.9%) at $19.66 an ounce. Earlier, prices reached a high of $19.365. Last week, silver ended lower by 0.9%. For the month of April, silver ended higher by 4.1%. For the first quarter of this year, silver rose by 3%. On a year to date basis, silver is higher by 11%.

A decision by the European Union and International Monetary Fund leaders to pledge financial support to the eurozone brought about a wave of buying and short covering that caused the stock markets across globe to surge in its best single-session percentage gain in more than a year on Monday, 10 May. As per plan, countries in the eurozone that face financial uncertainty will be eligible to receive some 500 billion euros from the EU and another 250 billion euros from the IMF. In addition to those measures, the European Central Bank will buy eurozone bonds from the secondary market and the Federal Reserve has reactivated swap lines with foreign institutions. At least for the time being, those efforts have eased contagion concerns that have surrounded Greece for weeks.

But traders mulled over the fact today that in the long term how much financial aid will be pledged for euro zone countries that face tenuous fiscal conditions and also the issue of how those funds will be allocated efficiently and whether recipients can remedy their underlying problems. The long-term implication of this on the euro and worries about inflation also bothered investors.

In the currency market today, the euro dropped once again against the dollar. The euro has slipped 10.6% against the dollar this year. The dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 0.4%.

Gold had ended FY 2009 higher by 24%. Silver futures had ended 2009 up 50%. The dollar index had lost 4.2% against its counterparts last year.

Last year, after hitting a low at $807.30 per ounce on 15 January 2009, gold futures rallied almost 51% to hit an all-time high at $1217.40 per ounce during early December of 2009 but fell from those levels at the end. Silver futures had hit a low at $10.42 on 15 January 2009 and hit a high at $19.30 per ounce on 2 December 2009. Like gold, silver also ended lower than its all time high level.

At the MCX, gold prices for June delivery closed higher by Rs 332 (1.85%) at Rs 18,229 per ten grams. Prices rose to a high of Rs 18,278 per 10 grams and fell to a low of Rs 17,920 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 444 (1.5%) higher at Rs 29,942/Kg. Prices opened at Rs 29,460/kg and rose to a high of Rs 30,050/Kg during the day's trading.

DB Corp


DB Corp

W-shaped recovery…Nifty regains 5150


Indian markets ended with modest gains on Wednesday after a volatile day. Markets took a hit after industrial output data showed a drop in March at 13.5% from 15.1% in February. Economists had forecast a reading of ~15%. Industrial production had grown by 16.7% and 17.7% in January and December.

However, as the day progressed, "markets showed some resilience as compared to its international peers. The benchmark indices managed to stage a smart come back with the key indices managing a W-shaped recovery", says Amar Ambani, Vice President Research IIFL. Pharma, FMCG and Banking stocks were among the major gainers.

Telecom stocks were battered for a second day running after TRAI said that telecom companies will have to pay a one-time fee running into crores of rupees for holding 2G spectrum in excess of 6.2 MHz. Aggressive bids by telcos in the ongoing 3G auction has also raised concerns about the financial health of the telecom operators.

In addition, stocks like Infinite Computers shone on account of impressive earnings, while Bajaj Auto slipped despite Q4 net profit quadrupling.

The BSE Sensex advanced 54 points to end at 17,195 and NSE Nifty gained 20 points to close at 5,157. Among the 30 components of Sensex, 19 ended in the positive terrain and 11 ended in the red.

Markets in Asia ended mixed; the Nikkei in Japan was down 0.2%, Australia's S&P/ASX was up 0.5%, the Hang Seng index in Hong Kong was up 0.4% and Shanghai SE Composite was down 0.3%.

European indices were trading with mixed, the DAX in Germany was flat, the CAC 40 index in France was up 0.2% and the FTSE in the UK was down 0.4%.

Among the BSE sectoral indices, BSE Pharma index was the top gainer, the index gained 1.6% followed by BSE FMCG index up 1.5% and BSE Consumer Durables index up 1%. On the other hand, BSE Teck index was down 0.6% and BSE Power index down 0.4%. Even the Mid-Cap index ended flat and the Small-cap index fell 0.4%.

Outside the frontline indices, the big gainers in the broader market were Jubilant Org, Neyveli Lignite, Union Bank and Allahabad Bank. On the other hand, losers included Gujarat NRE, Piramal Health, Jain Irrigation and TTML.

Shares of Rural Electrification Corp. Ltd. (REC), Adani Enterprises Ltd. and Piramal Healthcare Ltd. were in demand on Wednesday after they were added to the MSCI India Index. Idea Cellular has been removed from the MSCI India index.

REC ended with smart gains, however, shares of Adani Enterprise and Piramal healthcare erased early gains and ended in the red. Idea also fell 8.2% to end at Rs54.80.

MSCI also added 51 Indian stocks in the Global Small-Cap indices while removing 12 stocks from the index.

These changes result from the May 2010 Semi-Annual Index Review and will come into effect from May 26.

Forty-two securities were added to and 45 securities were deleted from the MSCI Global Standard Indices.

Five hundred eleven securities were added to and 188 securities were deleted from the MSCI Global Small Cap Indices.

Daily Call - May 13 2010


Daily Call - May 13 2010

Tech Mahindra


Tech Mahindra

Ranbaxy Labs


Ranbaxy Labs

Voltamp Transformers


Voltamp Transformers

HT Media Ltd


HT Media Ltd

Godrej Consumer Products


Godrej Consumer Products

Monnet Ispat


Monnet Ispat

Infotech Enterprises


Infotech Enterprises

Market Outlook - May 13 2010


Market Outlook - May 13 2010

SGX Nifty Live Update - May 13 2010


5,180.00 +30.00