Cautious start...bulls on defensive!
There is always more spirit in attack than in defence.
The spirit of attack or defence seems to be lacking for our 'Men in Blue' in South Africa. The stock market is a different ball game and betting on the bulls seems to be only picking up steam. After an attack for the last couple of months, the bulls may get on the defensive and lose a few wickets. Though they appear to be in total control, some hiccups are not ruled out. We expect a cautious opening due to weakness in US and Asian markets. But, the bulls may regain their confidence as the day wears on.
With the foreign funds pumping up the volume, the main indices are unlikely to face any major resistance. What's more, every fall is likely to be used as an opportunity to buy for the long-term. A lot of money is waiting on the sidelines to make way into the market. Mutual Funds too are sitting on a huge pile of cash. As a result, the market has rebounded with a vengeance after every big fall. Global concerns like a slowing US economy and higher oil prices aside, the domestic factors are fairly bullish. Among the key worries include rich valuations and expectations of further increase in interest rates.
A lot of stock specific action is expected. TCS and Wipro could gain amid reports that they have bagged orders from Cable & Wireless. TCS is also believed to have won a big contract from the Bank of China. Videocon Industries is likely to be in the limelight as it is reportedly eyeing LG.Philips Displays. Britannia may benefit from the cooling of temperatures with joint venture partner Danone over the Tiger brand. GHCL could rise amid reports of another acquisition in the textile business, this time in the US. Four-wheeler companies such as Tata Motors, M&M and Maruti are likely to advance after all of them reported robust volume growth in November. Maruti is also likely to launch a new Zen this week.
Nirlon is witnessing some pick-up in buying. The company is all set to build an IT park inside its complex at Goregaon in Mumbai. Tyre stocks too appear to be back in favour with surging domestic automobile sales and stable raw material prices. Adani Enterprises' Board has decided to raise up to $250mn through issue of securities. Gujarat State Petronet has commissioned the Kalol-Mehsana Pipeline. Essar Shipping is seeking the approval of its shareholders on January 2 for delisting the company's equity shares from BSE. Havells India is entering into a collaboration with a leading European motor manufacturing company for its new project of Electric Motors at Nimrana, Rajasthan.
FIIs were net buyers to the tune of Rs1.95bn (provisional) in the cash segment on Friday. In the F&O segment, they poured in Rs4.22bn. On Thursday, foreign funds were net buyers of Rs2.58bn. Their net inflows in November stood at $2bn, taking the total for the year to $8.85bn. Mutual Funds were net sellers of Rs884.3mn on Thursday.
US stocks closed lower on Friday after a report showed a surprising contraction in the manufacturing sector and a measure of inflation jumped, raising fears of excessive slowdown in the world's largest economy.
The S&P 500 Index lost 3.92, or 0.3%, to 1396.71. The broader index had its worst first trading day in December since Dec. 3, 2001, when it dropped 0.8%. The Dow Jones lost 27.80, or 0.2%, to 12,194.13. The Nasdaq declined 18.56, or 0.8%, to 2413.21.
For the week, the S&P 500 dropped 0.3%, the Dow lost 0.7% and the Nasdaq retreated 1.9%. Both the S&P 500 and Dow fell for a second week, the first back-to-back losses since July, as oil prices rallied.
Crude futures rose 30 cents or 0.5% to US$63.43 per barrel on the New York Mercantile Exchange. This was the highest close since Sept. 18. The front-month crude contract was trading nearly unchanged at $62.42 a barrel in extended trading in Asia this morning.
The dollar tumbled to the lowest level since March 2005 against the euro following the release of the manufacturing report. Against the British pound, the US currency declined to the lowest in 14 years.
COMEX gold lost 50 cents to end the day at US$415.40 an ounce. Treasury bond prices ended the session higher, with yield on the benchmark 10-year note falling to 4.05% from 4.08% late on Thursday.
Among the Indian ADRs, Patni was down 3.3%, VSNL gained 2.4%, Infy lost 1%, Wipro dropped 1.3%, Satyam was down 0.6%, Tata Motors surged 4.65%, Dr Reddy's climbed 2.5%, HDFC Bank and ICICI Bank closed flat while MTNL rose 1.85%.
Asian stocks fell Monday morning, snapping a three-day rally, after a report showed that manufacturing in the US unexpectedly shrank for the first time in more than three years. Toyota and LG.Philips LCD led exporters down.
The Morgan Stanley Capital International Asia-Pacific Index dropped 0.5% to 136.03 as of 10:55 a.m. in Tokyo, halting a three-day, 3.4% rally. Indexes open for trading elsewhere in the region declined, apart from in China and Malaysia.
Japan's Nikkei 225 Stock Average fell by 52 points to 16,269 while the Hang Seng in Hong Kong was down 10 points at 18,680. The Kospi in Seoul dropped 3 points to 1430. Japanese exporters including, Sony also declined after the dollar weakened against the yen.
European shares fell on Friday following the release of the weak report on US manufacturing sector. A rapidly strengthening euro and pound added to the sell-off.
The pan-European Dow Jones Stoxx 600 index slipped 0.6% at 349.53. The French CAC-40 closed down 1.4% at 5,254.05 and the German DAX Xetra 30 fell 1.1% at 6,241.13. The UK's FTSE 100 was down 0.5% at 6,021.50.
In the emerging markets, the Bovespa in Brazil was down 1.4% to 41,327 while the IPC index in Mexico shed 0.75% to 24,962 and the RTS index in Russia gained 0.2% to 1780.
Insider Trades:
Simplex Infrastructures Limited: Franklin Templeton Mutual Fund (through its various schemes) (i) Franklin India Smaller Companies Fund (FISCF) (ii) Franklin India Prima Fund (FIPF) (iii) Franklin India Opportunities Fund (FIOF) (iv) Franklin India Flexi Cap Fund (FIFCF) has purchased from open market 3241350 equity shares of Simplex Infrastructures Limited on 29th November, 2006.
Matrix Laboratories Limited: Dr. Hari Babu, Senior Vice President (Manufacturing) has sold in open market 34375 equity shares of Matrix Laboratories Limited on 30th November, 2006.
Gujarat Ambuja Cement Ltd: Shri Anil Singhvi (Managing Director) has sold in open market 101000 equity shares of Gujarat Ambuja Cement Ltd on 28th November, 2006.
Apollo Tyres Ltd: HDFC Trustee Company Limited A/C - HDFC Prudence Fund has purchased from open market 406414 equity shares of Apollo Tyres Ltd on 28th November 2006.
Market Volumes:
The turnover on NSE was down 55% to Rs82.00bn. BSE Auto index was the major gainer and gained 2.84%. BSE Capital Good index (up 1.84%), BSE FMCG index (1.61%), BSE Pharma index (up 1.33%) and BSE Technology index (up .98%) were among the other major gainers.
Volume Toppers:
IFCI, Parsvnath Developers, Indiabulls, Reliance Comm, ITC, Indian hotels, Dena Bank, HLL, SRF, DCB, Ashok Leyland, IVRCL Infra, MTNL, NTPC, APIL, Reliance Inds, EKC and JP Associates.
Delivery Delight:
3i Infotech, ABB, AIA Engineering, APIL, Bata India, BHEL, Bombay Dyeing, BRFL, Educomp Solutions, Era Constructions, EKC, Hero Honda, Indiabulls, Jaiprakash Associates, Mahindra Gesco, Maruti Udyog, Punj Lloyd, SRF, SBI, Tata Motors and Tata Power.
Brokers Recommendations:
Dr Reddy’s Laboratories – Buy from Motilal Oswal
Long Term Investment:
Tata Motors
Major News Headlines:
Inflation was 5.45% in week ended Nov 18 vs expectation of 5.6%
ACC Nov cement sales nearly flat at 1.52mn tons
TVS Nov sales at 118157 units (up 4.3%)
Maruti Nov sales rises 16% to 55033 units
M&M Nov vehicle sales up 11.5% at 13600 units
Tata Motors Nov sales up 43% to 49061 units
Bajaj Auto Nov sales up 32.8%; to expand motorcycle capacity
Punj Lloyd group company signs a large contract
Ranbaxy buys South African Company for $70mn
Color Chips to build new facility at Vishakhapatnam
Mcleod Russel to acquire Moran Tea for Rs414.9mn
Thomas Cook India is acquiring Travel Corporation India