Tuesday, December 12, 2006
Deep fall continued for the second day, Market started Red at the beginning even of positive global cues. There were some signs of recovery at early trades with markets up almost 90 points in intraday but heavy selling continued and that again created history. It was the second highest fall in a day after May 18. The hike in CRR effect was given as the excuse which pushed Banks into negatives. The selling pressure was seen not only in large caps but also in mid and small caps. The intensive selling pressure was witnessed in all sectors like Cement, Software, Pharma, FMCG. The Asian and European markets traded in mix.
Sensex closed down by 404 points at 12996. Weighing on the Sensex were losses in ACC (945.25,-9 percent), Grasim (2490,-8 percent), RCVL (396,-8 percent), Guj Ambuja (127.5,-7 percent) and Bharti Tele (564,-7 percent). There were no winners at all.
L&T won a contract valued at over Rs 5400 cr from the GMR for the expansion and modernization of the Delhi International Airport, scheduled to be commissioned in time for the Commonwealth Games in 2010. It is an end-to-end contract for design and construction of the passenger terminal and one of Asia?s longest runways. L& T is in contention for the Mumbai airport as well. The company also intends to bid for the Kolkata and Chennai airports when they come up for tendering. Order book continues to overflow but the valuations at 24 times FY 08 leaves little upsides was our view in hunters pick. The stock started off really strong but then fell closing down by 3.60%.
Grasim is planning to acquire a stake in Austrian firm Lenzing. Lenzing is into manufacture of Pulp, Paper and Fibre for textiles applications and the Non-woven industry and plastics. The company has revenue of Rs 5400 cr in the year 2005. The Lenzing has production capacity of 453800 tonnes in US, UK, Austria, China and Indonesia. Grasim's businesses comprise viscose staple fibre, cement, sponge iron, chemicals and textiles. Recently, Grasim had signed an agreement to take over the assets of Hubei Jing Wei Chemical Fibre Company through a joint venture. The acquisition will help Grasim to increase the fibre production capacity. The stock closed 6% lower and its group companies Hindalco closed 4% lower and Aditya Birla Nuvo also closed 2% lower in weak market.
Technically speaking: Overall market was in red and ended the same. Volumes were at Rs 4913 cr. The breadth has been in favor of Decliners as they were at 2124 while Advances at 442. The Resistance was at 13791 - 13399 while Support at 12708 - 12409 levels. Technically Sensex is headed for 12550 levels and that could come early in the morning tomorrow itself given the negativism. However the positive is that almost everyone on the street is now negative and thats a positive. However one thing is clear, all upsides will be used as an exit opportunity. So the upsides seem to be a bit capped for now. Such correction was really on cards and it has come. Everyone was expecting one but the Markets surprised the markets by the ferocity of the fall. The economic data was not very encouraging and that brought in more selling.
Mid cap stocks have also crashed. interesting to note that they had not run up as much and we believe that these will be the ones where interest will come in when it comes. We believe that the large cap stocks will find the going tough as valuations will be screened even more now.
The three-day continuous fall, a 984 point correction in the benchmark index – Sensex may not be all that bad for the small retail investors. It’s rather a boon in disguise. Here’s why?
December is the month when a lot of small retail investors start their tax planning. With the current 7% plus correction, many equity linked tax savings instruments such as equity linked savings schemes (ELSS) and unit linked insurance plans (ULIPs) have seen massive correction in their net asset values (NAVs).
In many of these funds, the correction in NAV is more than 7%. This is because, these funds invest in the broader market and not just the benchmark indices. And since the second rung (small and mid cap) stocks have fallen much higher than the benchmark indices, NAVs for both ELSS and ULIP schemes have plunged more than 7%.
So suddenly ELSS and ULIPs might see a lot of inflows. Already domestic institutions are sitting on plies of cash, which might start finding its way into the equity market after the current correction.
Tax payout can be cut down by investing into 80C investment vehicles and investments up to Rs 1 lakh in 80C eligible instruments qualify for the same. Assuming a flat 30% tax rate, you can save nearly Rs 30,000 in taxes per annum by investing into 80C instruments.
There are seven investment categories where you can invest to save taxes – provident fund, PPF (public provident fund), NSC (national savings certificate), infrastructure bonds, pension plans, ULIPs (unit linked insurance policies) and ELSS (equity linked savings schemes). But, with a marked rise in the equity market, many small retail investors are being led to invest into the equity linked savings option in order to save taxes.
Nucleus Software Exports
Cluster: Emerging Star
Price target: Rs680
Current market price: Rs497
- Niche player with established presence: Nucleus Software Exports Ltd (NSEL) is a niche player offering software products and services to companies in the banking and financial service space. It has established itself globally with product installation base of over 250 application modules in more than 30 countries.
- Product business drives growth: The product business grew exponentially in FY2006, on the back of some impressive order wins like the $12-million multi-year deal with GMAC. Apart from this, it added 21 new clients and bagged orders for 38 new installations in FY2006. In the first half of FY2007 also, the company added 14 new clients and continued to grow its pending order book that stood at Rs135 crore as on September 2006. Consequently, we expect the product revenues to grow at a CAGR of 67% over FY2006-08.
- Margins are sustainable: In spite of the cost pressures and the aggressive employee addition targets for this year, the company is likely to sustain its overall profitability. The growing contribution from the high-margin product business is expected to mitigate the adverse impact of the rising wage bill and the expansion-related pressures in the intermediate term.
- Alliance could throw positive surprises: The initiatives to forge joint marketing alliances with global technology giants and develop a network of channel partners could result in higher-than-expected order bookings. The partnership model has already started yielding results.
- Valuation: Revenues and earnings are estimated to grow at CAGR of 38% and 40% respectively over FY2006-08E. At the current price the stock trades at 11x its FY2008 earnings, which is relatively cheaper compared with the peer companies. We recommend a Buy on NSEL with a one-year price target of Rs680.
The market has been unable to come to terms with a surprising CRR hike announced by RBI after market hours on Friday(8 December). This is the third day of a steep decline, which has brought the bull-run to an abrupt halt. The Sensex was shaved of close to 980 points in just three days, in a knee-jerk reaction to the RBI move, with banking stocks unwittingly falling prey. The BSE benchmark also hit a record high of 14,035.30 on 6 December 2006.
India’s premier index, the Sensex, regained some lost ground during the final minutes of trade after plunging over 575 points to an intra-day low of 12,801.65, in what can be referred to as an absolute bloodbath on the Bombay bourse. The premier index swung 690.56 points during the day.
Extensive damage across the board was evident in the market-breadth; only 442 shares rose while a huge, huge 2,124 scrips declined. The BSE Small-Cap index closed at 6,278.75, which is down 269.56 points (4.12%), while the BSE Mid-Cap index tanked 231.44 points (4.13%), to 5,370.10.
The 30-shares BSE Sensex settled below 13,000, at 12,995.05, registering a huge loss of 404.41 points (3.02%) for the day. It had witnessed high volatility in the opening session of trade. After opening flat at 13,413.61, it declined sharply. It also struck a high of 13,492.21 during the day.
The NSE Nifty tanked 131.60 (3.42%), to end at 3,717.90.
The frenzied selling is attributed to margin-selling, which has become an add-on feature of steep index declines. The BSE Sensex had tumbled 400 points on Monday, its 10th biggest ever.
Renewed selling gripped the bourses after latest data showed a lower-than-expected 6.2% growth in industrial production for October 2006.
Finance Minister P Chidambaram declined to comment on today’s 3% fall and added, "I have already commented yesterday. In fact, there is no need for any comment," he said.
On Monday, the minister had said the fall was no cause for worry.
The total turnover on BSE amounted to Rs 4,913 crore.
HDFC Bank was the lone gainer from the 30-Sensex pack. It rose 0.10% to Rs 1,035 as 99,558 shares changed hands. It swung in a wild range of Rs 1,065.90 - Rs 1,002.20.
Bharti Airtel was the top loser, down 6.77% to Rs 566, on a volume of 3.18 lakh shares. It had surged to a high of Rs 613.50.
Diversified firm Grasim lost down 6.47% to Rs 2,529.40. The company is reportedly said to be buying a stake in Austrian cellulose-fibre maker Lenzing AG. The deal could help the firm to get a foothold in the global viscose staple fibre market, and will increase its fibre production capacity by almost 453,000 tonnes. The deal is likely to be completed during the current fiscal.
ACC (down 6.39% to Rs 970), SBI (down 5.52% to Rs 1,174.10), Tata Steel (down 3.39% to Rs 438), and Maruti Udyog (down 3.20% to Rs 878) were the other losers.
L&T declined 3.63% to Rs 1,384.20, on 4.55 lakh shares as GMR Infrastructure-promoted Delhi International Airport (DIAL) awarded the company a contract worth Rs 5,400 crore on Monday, for design and construction of terminal, runway and associated works at the Delhi airport. The order involves design and construction of a passenger terminal, and a 4.43-km runway, which will be one of Asia's longest. L&T will execute the work in time for the Commonwealth Games.
Index heavyweight Reliance Industries (RIL) lost 2.30% to Rs 1,210, as 26.67 lakh shares changed hands in the counter on BSE. The stock recovered smartly, after declining to Rs 1,181.
Reliance Industries (RIL) was a top-traded counter on BSE, with a total turnover of Rs 329.59 crore, followed by Indiabulls (Rs 162.71 crore) and Parsvnath Developers (Rs 158.41 crore).
Shares of power equipment makers tumbled under intense selling pressure. The BSE Capital Goods lost 4.14%. ABB plunged 9% to Rs 3,442, Siemens tumbled 7.33% to Rs 1,043 while Bhel had lost 3.94% to Rs 2,433.30.
Banking stocks extended their downward journey, as selling pressure continued following the surprise CRR hike. The BSE Bankex was down 3.23%. Major losers were Punjab National Bank (down 5.02% to Rs 483.10), Kotak Mahindra Bank (down 1.56% to Rs 375), Indian Overseas Bank (down 6.72% to Rs 103.35), Bank of Baroda (down 8.01% to Rs 220), Oriental Bank of Commerce (down 7.37% to Rs 218) and Canara Bank (down 10.43% to Rs 250).
Heavy selling was witnessed across the board and all BSE sectoral indices ended in the red.
Fastener maker Lakshmi Precision Screws plunged 10% to Rs 122.95 ahead of a board meeting to consider an issue of 10 lakh shares on a preferential basis.
SpiceJet lost 3.21% to Rs 54.40, down from an intra-day high of Rs 61.90, which was attained on board's approval of a preferential issue of shares worth $118.5 million to foreign and domestic investors, including the Tatas, on a preferential basis. The scrip surged on Monday amid reports that Tata group is eyeing 10% stake in the company as a purely financial investment.
Rajesh Exports jumped 5% to Rs 307.20, after the gold jewellery maker said it will aggressively pursue real estate development. The jewellery maker will transfer its property holdings to a new subsidiary -Bangalore Infra. The company already has a property division and has acquired prime properties in Bangalore.
Garware Offshore Services advanced 2.67% to Rs 200, after the company said its board will meet on 20 December 2006, to consider raising up to $25 million, and also increasing the foreign investment limit to 60%.
Bank of India lost 9.37% to Rs 166.90. It decided to acquire 76% shareholding of P T Bank Swadesi Tbk, Indonesia. On 11 December 2006, Bank of India signed a conditional sale purchase agreement with majority shareholders of P T Bank Swadesi Tbk. The acquisition will be completed after necessary approvals/confirmations from Bank Indonesia and capital market regulators in Indonesia.
Most of the selling came after India's industrial production rose 6.2% in October from a year earlier, which was well below market expectations, lower-than-expected manufacturing output being the prime culprit for the slowdown. Output growth for September remained unchanged at an annual 11.4% reported earlier. Manufacturing production, which represents more than 75% of industrial output, rose 6.0% in October from a year earlier, compared with 12.0% annual growth in September.
The Nikkei average rose 0.66% on Tuesday as exporters such as Kyocera Corp advanced on a weak yen, while seafood suppliers jumped after a merger announcement by Maruha Group Inc fuelled speculation of a further sectoral shake-up. The Nikkei 225 index was up 0.66%, or 109.79 points, at 16,637.78.
The Hang Seng index was down marginally by 0.09%, or 17.49 points, at 18,907.17.
As per provisional data, FIIs were net buyers to the tune of Rs 334 crore in the cash segment on 11 December, the day when the Sensex had lost 400 points. They were net sellers to the tune of Rs 152.60 crore on 8 December, the day when the Sensex lost 173 points.
US stocks edged higher on Monday. The Dow Jones industrial average rose 20.99 points, or 0.17%, to close at 12,328.48. The Standard & Poor's 500 Index ended up 3.20 points, or 0.23%, to finish at 1,413.04. The Nasdaq Composite Index gained 5.50 points, or 0.23%, to end at 2,442.86.
Oil fell nearly a dollar on Monday as mild weather prevailed over much of the United States, cutting into heating oil demand from the world's largest fuel consuming nation. US crude prices slipped 77 cents, or 1.2%, to $61.28 a barrel, while London Brent crude fell 22 cents to $61.98 a barrel.
A major near term trigger for the domestic bourses is Q3 December 2006 results. Another quarter of strong performance from corporate India may be on the cards.
Meanwhile, healthy FII allocations are expected in the calendar year 2007.
The Sensex notched up gains of 93 points in early trades and touched an intra-day high of 13492. However it could not hold on to the gains and drifted into negative territory. The market appeared extremely bearish as the trading session progressed. Hectic selling in heavyweight, capital goods, PSU, metal and banking stocks in the afternoon dragged the index to the day's low of 12802. The Sensex ended the session with losses of 404 points at 12995, while the Nifty shed 133 points to close at 3717.
All the Sensex stocks closed in negative territory. Grasim Industries tumbled 7.33% at Rs2,506, ACC faltered 6.16% at Rs972, Reliance Communication lost 6.11% at Rs403, Gujarat Ambuja Cement dropped 5.10% at Rs130, SBI slipped 5.06% at Rs1,180, Bharti Airtel shed 4.94% at Rs577, TCS slumped 4.47% at Rs1,119, Ranbaxy fell 4.32% at Rs360, NTPC declined 4.24% at Rs137 and BHEL dipped 4.12% at Rs2,429. Hindalco, Reliance Energy, ONGC, ITC and HDFC shed 3% each.
The market breadth was extremely negative. Of the 2,625 stocks traded on the BSE, 2,160 stocks declined, 424 stocks advanced and 41 stocks ended unchanged. All the 11 sectoral indices on the BSE ended in negative territory. The BSE PSU index was the biggest loser and dropped 4.39% at 5712 followed by the BSE CG index (down 4.14% at 8755), the BSE Metal index (down 3.90% at 8,341), the BSE Bankex (down 3.23% at 6532) and the BSE Auto index (down 3.13% at 5080).
Over 36.25 lakh Parsvnath shares changed hands on the BSE followed by Reliance Communication (32.35 lakh shares), Zee Telefilms (30.02 lakhs shares), Reliance Industries (27.01 lakh shares) and Hindalco (20.35 lakh shares).
Value-wise Reliance Industries registered a turnover of Rs326 crore followed by Parsvnath (Rs152 crore), Reliance Communication (Rs130 crore), SBI (Rs110 crore) and Zee Telefilms (Rs94 crore).
Not my views .. I only post their views.. There are followers of Chamatkar .. this is for them.. if you don't follow them .. just ignore ..
There was nothing wrong in the market which made market operators to create this kind of V share (to be realized) correction. Correction is over and come what it may market will cross previous high in next 30 days. Once again I am telling bolding that markets will cross 16 K before Dec 07. My conviction is based on certain factors which our economist shows to us and also with my reading of the market. I am sure it is not easy bullet to digest at this given point in time.
CRR hike is really positive and market drivers used this trigger to create an ideal platform for Wave 3 rally starting from tomorrow. It all started with RBI which killed the entire lending industry against shares which in other way saved millions of retail investors who were deprived of this facility. This was factored in by the big operators. They even did not like Cairns getting valuations 4 times better than RIL an Indian MNC. Third important factor is the under leveraged positions and funding was available to only HNI and big drivers for whom 1000 points correction is digestible and therefore we have not seen any stains of blood on retail investors especially who are trading in B gr. Sanguine still takers though RIL, ACC and SBI lost 20% each in less than 3 days. This will prove once again that we should not trade intra-day as well as in derivatives. The only way to make money is B gr shares. Fourth important factor is the community of arbitrage (FII) started selling cash because the difference in cash stock and futures stock started rising beyond 1% which is a good spread. Rs 20000 crs is the arbitrage position which can vitiate any market on a given day and for FII manipulation becomes easy. Simply sell in cash in huge quantity which will confuse the best in the industry and buy in futures. The reversal will have reverse impact with cash stock prices rising. This will also explain why they FII cash plus and futures minus.
Only one thing I will repeat again is that correction never comes when you want it and when come you can't buy it. Ever since 12500 FII wanted correction of 1000 odd points not because correction was due but simply they were feeling the heat of left out in the second wave too. However at 14 K they echoed that if you talk of correction Sensex target 20 K and no correction Sensex target of 30 K and suddenly the correction started. Its not a great deal that market has corrected. Market is taking U turn because now sellers are afraid to sell fresh at 12800. Who bell the cat first is the situation for all the funds because all fund managers are alike and lack the skill and dynamism our Indian operators like KP, RJ and AK possess. This is the precise reason only few funds like RIL MF are known as most prolific and dynamic funds.
When we were chatting on market and I was suggesting a bottom of 12800 to one of FII fund manager, he disagreed and passed a joke…"Some Big FII wanted to invest in India but had condition to enter at 10,000. He approached; FM said no problem Dear….. we will bring in 7 days flat and rest is in front of you." Well as far as my opinion is concerned market has bottomed out and the recovery will be equally sharp.
I kwon lot of investors must have criticized us including me for our failure to predict market movement. We believe your next door neighbor should always be a critic especially if they belong to a category which has no identity of their own. Hawa me taash ka GHAR nahie banta, Rone se bigda mukkaddar nahi banta, Duniya ko jitney ka hausala rakho yaro, Ek jit aur haar se koi sikkandar ya faqir nahi banta. KAL PHIR AAYEGA……
Best picks in U turn are Bajaj Auto, RIL, Sterlite, IPCL, Tisco, Tata Motors, Maruti and ACC till budget. I expect fireworks and only after 2 week or as and when market crosses earlier top of 14 K investors will realize my version. Please save this article till the time I will come back to you
The two-day fall in benchmark indices has sent jitters among several market participants. The current fall is the biggest one after the crash in May this year. The 572-point fall in Sensex is the seventh highest, in terms of points, since the beginning of the bull run in April 2003. And in percentage terms, the fall is 4.1%. There have been 20 bigger falls than the latest Sensex crash.
The biggest continuous fall was five-day long. But, it may be extended further after a brief pullback, which may last only for one trading session. Usually, this pullback will be very weak. There have been five such five-day continuous falls since April 2003.
The biggest such fall shaved off 17.2% from the Sensex. This happened in May 2004 when the ruling party was toppled and the Congress-led UPA took control at the Centre.
Big falls occur when there are key concerns such as ripe valuations and political hurdles. RBI’s decision to raise the cash reserve ratio of banks may have been the key trigger for the latest fall. At roughly 17 times the one-year forward earnings, domestic equities are among the most expensive in emerging markets.
This is the only major correction in December since the beginning of the bull run. December has always been a month where markets have ended on a positive note. Historical data shows that Sensex has ended in the negative territory only 5 times in the previous 27 years.
FIIs have been at the centre of every major market correction. In the previous few market sessions, FIIs have sold around Rs 2,000 crore of stocks, both in the cash and futures & options segment. Normally, indices pull back at least one-third of their losses. Market watchers feel there is lot of money waiting on the sidelines, so this correction could turn out to be a short-lived one.
Lalit Thakkar, director, Angel Broking, says, “We are not seeing it as a significant correction like the one witnessed in May this year. What happened in May was a global correction and that is why the recovery was slower.”
Technical chartist Vijay Bhambwani feels, “Indices are exhibiting a “long pole” formation on intra-day charts as the steep fall resembles a pole due to the vertical fall of nearly 3%. While the 3913-point support in Nifty advocated for Monday’s session did not hold, the bearish pressure was significant and seems to be placing the extremely short-term oscillators in the near oversold zone. That indicates a short pull-back rally, though the same can terminate without a warning and therefore maybe very treacherous to trade.”
In merely three sessions the Sensex has lost 977.01 points, the sharpest fall after June 2006.
Then, the Sensex had tumbled 1,521.89 points, from 10,451.33 on 2 June to 8,929.44 on 14 June 2006.
The last such major fall was in July 2006, when the Sensex had lost 922.75 points; from 10,930.09 on 12 July to 10,007.34 on 19 July.
A massive fall had occurred in May, when the Sensex had lost 1,736.04 points to 10,481.77 on 22 May from 12,217.81 on 17 May. A lower-than-expected industrial output growth for October 2006 worsened the fall on the bourses today, after the Sensex had lost 400 points on Monday (11 December) following a surprise hike in cash reserve ratio (CRR) by the RBI, which raised fears of another rate hike.
The latest sharp fall will help reduce some of the excesses of Indian bourses like stretched valuations. The Indian bourses are trading at high PE multiple compared to its regional and emerging market peers. The premium valuations it commanded because of strong earnings growth of India Inc as on 11 December 2006, the Sensex’s PE multiple was 22.18 based on the trailing 12-month September 2006 earnings. The PE multiple will fall further following today’s 404-point fall.
The latest sharp fall has occurred after a sharp surge, when the Sensex had risen 10.6% in a short while, to a lifetime closing high of 13,972.03 on 7 December, from 12,623.28 on 23 October. FII buying, on expectations that earnings growth of India Inc will continue, had triggered the solid surge. There was a surge in open interest in NSE’s futures & options segment during this rally, indicating that the market was overbought.
After the latest economic data, market men will now be closely eyeing advance tax payment by corporates for the third installment, which is due on 15 December 2006. The corporate advance tax payment will provide a broad outline of Q3 corporate results. More so given that strong earnings growth has been a key driver of the bull-run on the bourses.
In the near term, US Federal Reserve’s decision on US interest rates remains a principal trigger for domestic bourses. US Fed meeting is due later today, and expectations of interest rates staying unchanged run high. Analysts will closely watch the Fed’s accompanying statement for cues of future rate moves. Investors are waiting to see if the Fed will tone down its hawkish stance in its statement accompanying the decision.
Market men will also be watching FII allocations for India for calendar year 2007
A number of small-cap and mid-cap shares declined sharply in sync with a broad market fall.
Some major losers in the small-cap and mid-cap space, were ABG Heavy Industries (down 11% to Rs 210), GMR Industries (down 10% to Rs 322), SSI (down 10% to Rs 148), Flex Industries (down 10% to Rs 96.15), Tricom India (down 10% to Rs 107.60), Saurashtra Cement (down 10% to Rs 63.10), Rane Madras (down 10% to Rs 100), Vivimed Labs (down 9% to Rs 152), Alchemist (down 9% to Rs 30.85), Gemini Communications (down 9% to Rs 260), Mangalam Cement (down 9% to Rs 179), Polaris Software (down 11% to Rs 133), Escorts (down 11% to Rs 100), NDTV (down 10% to Rs 195), Shoppers’ Stop (down 10% to Rs 630), Bombay Rayon (down 10% to Rs 207), SRF (down 9% to Rs 176), IndusInd Bank (down 10% to Rs 39.70) and India Cements (down 8% to Rs 196).
A lower-than-expected industrial output growth for October 2006 accentuated the fall on the bourses, after the Sensex had lost 400 points on Monday (11 December) following a surprise hike in cash reserve ratio (CRR) by the RBI, which raised fears of interest rate rise. Sensex’s provisional closing today was 13,007.71, a fall of 391.72 points.
Since late-November 2006, selective recovery was witnessed in small-cap and mid-cap stocks. The BSE Mid-Cap Index had recovered to 5,829.47 by 5 December from 5,454.43 on 20 November. Although the BSE Mid-Cap index had surged since late-November, it had failed to breach the record closing of 6,033.30 of 10 May 2006.
BSE Small-Cap Index had surged to 6,799.99 on 5 December from 6,298.49 of 20 November. It is still sharply off its record closing of 7,812.84 of 10 May 2006.
The market-breadth was quite weak. For 2,124 shares that declined on BSE, 442 rose. As many as 46 shares were unchanged. Losers outpaced gainers by a ratio of 4.8:1.
Renewed selling gripped the bourses after the latest data showed a lower-than-expected 6.2% growth in industrial production for October 2006.
At 13:30 IST the Sensex was down 197 points, at 13,201. The data of October industrial output hit the market at about 12:15 IST.
Some of the major losers among the Sensex constituents were State Bank of India (down 3.9% to Rs 1,194), Bhel (down 3.4% to Rs 2,445), Tata Motors (down 3.4% to Rs 810.50), Reliance Energy (down 3.2% to Rs 508.80), HDFC (down 2.6% to Rs 1,503.50), Hindustan Lever (down 2.7% to Rs 223), TCS (down 2.2% to Rs 1,145) and ONGC (down 2.2% to Rs 817).
India's industrial production rose 6.2% in October from a year earlier, well below market expectations due to lower-than-expected manufacturing output, government data showed on Tuesday. Output growth for September remained unchanged at an annual 11.4% reported earlier. Manufacturing production, which represents more than 75% of industrial output, rose 6% in October from a year earlier, compared with 12% annual growth in September.
After the latest economic data, market men will now be closely eyeing advance tax payment by corporates for the third installment, which falls due on 15 December 2006. The corporate advance tax payment will provide a broad outline for the quality of Q3 corporate results. This is more so given that strong earnings growth has been a key driver of the bull-run on the bourses.
The market witnessed immense volatility today. The barometer index has swung over 700 points so far, between some vital intra-day tops and bottoms.
Fears of rise in interest rates following RBI’s surprise 50 basis point hike in cash reserve ratio (CRR) rattled the bourses on 11 December, when the Sensex tanked 400 points.
FIIs pressed heavy sales in the derivatives segment in the past two trading sessions. FIIs were net sellers to the tune of Rs 1,250 crore in index based futures on 11 December, the day when the Sensex plunged 400 points. FIIs were net sellers worth 1,087 crore in index based futures on 8 December, when the Sensex lost 173 points.
In the near term, US Federal Reserve’s decision on US interest rates remains a principal trigger for domestic bourses. US Fed meeting is due later today and expectations of interest rates staying unchanged run high. Analysts will closely watch the Fed’s accompanying statement for cues of future rate moves. Investors are waiting to see if the Fed will tone down its hawkish stance in its statement accompanying the decision.
Bullions: Consolidation likely
Gold rose on Monday after hitting a three-week low with bargain hunters and physical buyers supporting a market that remained vulnerable on thin trading ahead of Christmas. As a currency hedge, the market is waiting to see further weakness in the dollar. But the greenback has been steady against the other major currencies. Today's FOMC minutes might dictate the future direction for gold and any hint of no rate cuts would send the dollar higher and the precious metals complex lower. On the data front, October's trade balance is likely to be $63 billion against $64.3 billion, which should support the dollar.
The market may exhibit cautious trend after taking a strong dip in yesterday's trades. And also on the negative side, FIIs have turned net sellers of equities in the last sessions and the Asian indices are trading higher in current trades. Among the local indices Nifty could rise to 3885 or 3900 level on the upside while it has a crucial support at 3800 on the downside. The Sensex has resistance at 13450 and support at 13310.
US indices registered gains, while the Dow Jones closed above the level at 12328, up 21 points, while the Nasdaq moved up by 6 points to close at 2443.
One Indian ADRs ended positive out of 11 floats trading on the US bourses. Rediff advanced 1.27% however, among the major loser VSNL declined 5.23% and Wipro shed 3.04%, Infosys, Satyam, ICICI Bank, HDFC Bank, Patni Computers, MTNL and Tata Motors lost over 1-2% each while, Dr Reddy's was marginally down.
In the commodity segment, the Comex gold for the February adavnced $3.80 to settle at $634.80 an ounce. The Nymex light crude oil for January delivery declined 81 cents to close at $61.22 a barrel, while the London brent crude was up 62 cents at $59.46 per barrel.
In view of the unexpected carnage in the market yesterday, we would refrain from making any intra-day calls. Investors are advised to remain cautious as there might be fresh selling in the coming days. Wait for things to settle down before resuming one's buying spree.
Don't CRRy over spilled milk
Things are seldom what they seem, skim milk masquerades as cream.
We won't debate on whether the actual headline should be spilled milk or split milk. In hindsight everything can be reversed. What one needs is insight, which is the transfer point between hindsight and foresight. And, in the midst of all this market drama, don't lose sight of your portfolio.
Coming to the market, the first reaction on a day after a big crash is that the market should bounce back. Global cues are positive, but they were also encouraging yesterday, and still the Indian market was perhaps the only one in the world that collapsed like a pack of cards. Its the sentiment that is key in our market. At the moment it is not particularly strong. It will take time for the market to settle down. How much time only time will tell. Our obvious advice is to be highly alert and just stay on the sidelines and wait for a clear trend.
One thing that could lift the spirits is the provisional figure on FII transactions for the cash segment. According to the NSE web site, foreign funds were net buyers of Rs3.34bn yesterday. In the derivative segment, they were net sellers to the tune of Rs13.84bn. On Friday, they pulled out Rs1.53bn from the cash segment. Mutual Funds were net buyers of Rs738.9mn on the same day.
All the euphoria of the past five months appeared to have vanished in a jiffy. It took just one day of sharp correction to push the bulls to the wall. On Friday morning, we had mentioned - Time to unwind. Last week's fall, especially on Friday gave some indications. In the past it has been seen that whenever the market falls sharply on Friday, there is every chance of it cracking on Monday. But, the bulls have failed to learn from their past mistakes, and bears have taken advantage of that folly. The non-stop advance since July coupled with the surge in open interest in the F&O segment and the slowdown in FII inflows were enough indications of things to come. Still, the bulls chose to ignore them.
In the overseas markets, US stocks were marginally up on Monday, as investors preferred to remain cautious ahead of the Federal Reserve's meeting on interest rates. The Dow Jones was up 20.99 at 12,328.48 while the broader S&P 500 gained 3.20 to 1,413.04, and the tech-fueled Nasdaq advanced 5.50 to 2,442.86. At one point in the session, the 30-share Dow briefly eclipsed its record closing high of 12,342.56, reached Nov. 17, before backing off.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 4.52% from 4.55% late on Friday. The dollar fell against the euro but rose versus the yen. Gold prices climbed $3.80 to $634.80 an ounce.
Oil prices sank on strong inventory expectations. US light crude for January delivery fell 81 cents to settle at $61.22 a barrel on the New York Mercantile Exchange. The front-month contract was quoting 2 cents lower at $61.24 per barrel in extended trading in Asia.
Among the Indian ADRs, Patni shed 1.9%, VSNL has tumbled 5.2%, Infy has lost 1.1%, Wipro dropped 3%, Satyam gave up 2.1%, Tata Motors dived 1.9%, HDFC Bank slumped 2.5%, ICICI Bank slid 2.3% and MTNL was down 1.7%.
In the emerging markets, the Bovespa in Brazil was up 0.7% at 43,297 while the RTS index in Russia dropped 0.65% to 1838, and the IPC index of Mexico gained 0.3% at 25,828.
Asian stocks rose this morning, led by Sony and Toyota after the yen weakened against the dollar and the euro, boosting the value of exports. Samsung and Singapore Airlines gained after crude oil prices dropped the most in a week. Woodside Petroleum and Inpex Holdings led oil stocks down.
The Morgan Stanley Capital International Asia-Pacific Index advanced 0.7% to 137.27 as of 10:55 p.m. in Tokyo. Markets elsewhere rose, except in Taiwan and the Philippines. Singapore's benchmark was set for a record.
Japan's Nikkei 225 Stock Average added 151 points to 16,679, while the Hang Seng in Hong Kong fell 17 points to 18,906. South Korea's Kospi declined 6 points, while the Straits Times was up 10 points at 2898.
Shares of LG.Philips LCD fell after the company said that it was part of an industry investigation by antitrust officials.
Major Bulk Deals:
Bear Stearns has bought Crew BOS while Macquarie Bank has sold the stock; CLSA Mauritius has purchased Indiabulls from the promoters - Sameer Gehlaut and Rajiv Rattan; Blackstone Asia has picked up Indotech Transformers; Fidelity MF has bought Mcnally Bharat; Bear Stearns has purchased Paramount Communications; Merrill Lynch has picked up SpiceJet.
Surana Telecom Ltd: Devendra Surana, Director has purchased from open market 88020 equity shares of Surana Telecom Ltd from 25th November to 7th December, 2006.
The turnover on NSE was up by 23.6% to Rs93.44bn. BSE Bank index was the major loser and lost 6.43%. BSE Metal index (down 4%), BSE PSU index (down 3.88%), BSE Consumer Durable index (down 3.18%) and BSE Auto index (down 2.76%) were among the other major losers.
IVRCL Infrastructure, Indiabulls, Tata Steel, SAIL, Polaris, R Com, IDBI, Gujarat Ambuja, Reliance Industries, India Cements, ITC, Parsvnath Developers, HLL, Hindalco, Unitech, Ashok Leyland, Satyam Computer and Lanco Infratech.
Bharat Electronics, Godrej Industries and Thermax.
ABB – Overweight from JP Morgan
Reliance Industries – Out performer from ENAM
ICICI Bank - Outperform at Credit Suisse
Long Term Investment:
Major News Headlines:
BRFL approves hike in FIIs limit upto 40%
Swiss Re to acquire 26% in TTK Healthcare Services
CCS Infotech wins orders worth Rs6mn from BSNL
CSN raises offer for Corus to 515 pence
Jet Airways to start flights to US, China next year
Tata Motors' ratings raised to BB+ by S&P
Hexaware ties up with Fluensee for RFID technology
Aurobindo Pharma bags MEB Netherlands nod for Simvastatin
ICICI Bank Ltd’s Board has approved the merger of The Sangli Bank Ltd. with itself. Deloitte Haskins & Sells have recommended a share exchange ratio of 100 shares of ICICI Bank for 925 shares of Sangli Bank.
Infosys Technologies Ltd will be added to the NASDAQ-100 index, effective with the market opening on December 18. Infosys is the first Indian company to be added to the NASDAQ-100 index and is the only Indian company to be part of any of the major global indices.
The Tata group is reportedly planning to buy up to 10% in Delhi-based budget carrier SpiceJet in a deal worth about Rs 1bn, The Economic Times reports.
GMR DIAL has awarded Larsen & Toubro Ltd (L&T) the contract for Design and Construction of Terminal, Runway and Associated Works of Delhi Airport. The deal, valued at about Rs54bn will give shape to the Master Plan unveiled by GMR-DIAL recently.
Bank of India (BOI) would buy more than 50% stake in Indonesia's PT Bank Swadesi, Bank Indonesia's Deputy Governor Siti Chalimah Fadjriah said on Monday.
MindTree Consulting Ltd., the Bangalore-based IT services company has filed a Draft Red Herring Prospectus (DRHP) with the Securities & Exchange Board of India (SEBI) to enter the capital market with an Initial Public Offering (IPO) of equity shares.
Arcelor Mittal has successfully concluded the review of the mining development agreement, signed in 2005, with the Government of Liberia.
Arihant Foundation and Housing Ltd. BUY CMP: Rs462
Chennai and its suburbs are fast turning into a hot spot for the IT/ITES sector. Skilled labour along with quality Grade A & B space is driving demand for real estate. Arihant Foundation and Housing Ltd (AFHL) with 2 IT Park projects and 15 residential projects in hand is well poised to benefit from the pick up in Chennai real estate demand. We expect the company to report 76% revenue and a 116% profit CAGR over F9/05-08 period respectively. We initiate coverage with a BUY rating and price target of
Most IT companies have started setting up shop in tier II cities due to the dwindling cost competitiveness in tier I cities. Chennai offers them with quality grade A & B real estate with abundant skilled manpower. We expect Chennai to fast grow into the next outsourcing destination in line with Hyderabad and Pune.
With 17 in hand projects, AFHL is well poised to benefit from the growth in the property boom in the Chennai market. 15 of the 17 projects are residential in and around the Central Business District (CBD) and Old Mahabalipuram road (OMR), while the remaining 2 are IT parks in the upcoming Ambattur and OMR
The company is fast adding size and has planned two townships, one out of which is a 50:50 JV with a national developer. We view the company’s slow evolvement in bringing bigger projects in its fold as a positive sign towards revenue
sustainability. We estimate revenue CAGR of 76% over F9/05-F9/08.
Most old projects with low gross margins (GM) are expected to get completed in F9/06. New projects would improve GMs by 500bps in F6/07 to 37%, which is still 5-7% lower than current prevalent. This would aid a profit CAGR of 116% over F9/05-F9/08.
A major portion of the future revenues, 27% in F9/07 and 65% in F9/08 are expected to come from new projects, which are either recently commenced or would be launched in the next 8-12 months. Delays in launch and execution, could impact profitability and there by valuations.
Bulls bleed, Bears party
The Bears made their presence felt on Dalal Street as the markets plunged deep into red with benchmark Sensex losing 400 points and NSE Nifty falling 112 points. RBI hiked CRR by 50 basis points, which was among the major triggers that dragged the key indices lower. ICICI Bank, SBI were the major losers among the 30-share Sensex after RBI raised the amount of cash they must set aside to cover deposits in an attempt to curb inflation. The benchmark Sensex after slipping 173 points on Friday last week, today further lost ground by 400 points altogether losing 573 points in last two trading session.
Mid-Cap and the small Cap indexes also fell sharply The BSE Mid-Cap index fell 2.51% and small cap index was down 2.71%. SBI, Zee Telefilms and ICICI Bank were the top losers among the 50-scrips of NSE Nifty. Finally, the BSE benchmark Sensex lost 400 points to close at 13399. NSE Nifty slipped 112 points to close at 3849.
Infosys pared its intra-day gains on back of selling pressure, the scrip edged lower by 0.7% to Rs2179 as the company would be added to the NASDAQ-100 index, effective with the market opening on December 18, 2006. The scrip touched an intra-day high of Rs2235 and a low of Rs2167 and recorded volumes of over 14,00,000 shares on NSE.
Spice Jet surged higher over 8.5% to Rs58 as Tata Group is reportedly eyeing a stake in the company. The scrip touched an intra-day high of Rs64 and a low of Rs53 and recorded volumes of over 49,00,000 shares on NSE.
UTV Software lost 5.1% to Rs251. The company entered into an arrangement with Indiagames Ltd for acquisition of controlling equity stake in the Mumbai based mobile and online gaming company for Rs680mn. UTV would also be acquiring majority stake in Ignition Entertainment Ltd, a UK based company involved in developing console games for Rs600mn. The scrip touched an intra-day high of Rs267 and a low of Rs246 and recorded volumes of over 5,00,000 shares on NSE.
GAIL dipped by over 3.3% to Rs253. Singapore based Silver Wave Energy and Myanmar Oil and Gas Enterprise have reportedly signed an agreement to explore off-shore oil and gas in Block A-7 off the southernmost coast of Rakhine state in Myanmar. The companies have signed a contract to share exploration, drilling and production of oil and gas in Block A-7. The scrip touched an intra-day high of Rs263 and a low of Rs251 and recorded volumes of over 9,00,000 shares on NSE.
RBI’s decision to raise Cash Reserve limit by 50 basis points dragged the Banking stocks down. Index heavy weights like SBI plunged by over 8.8% to Rs1235, ICICI Bank dropped over 7.5% to Rs814 and HDFC Bank slipped 4.8% to Rs1032. Among the Mid-Cap stocks Bank of India plunged 10.1% to Rs184, Bank of Baroda slipped 8.9% to Rs238 and PNB lost 8.4% to Rs507 were among the major losers.
Pharma stocks were in bad health. Ranbaxy dropped 3.1% to Rs375, Sun Pharma slipped 3.2% to Rs962, Dr Reddy’s Lab was down 1.3% to Rs763 and Cipla lost 1.7% to Rs242.
Auto stocks were in reverse gear. Tata Motor lost 3.2% to Rs839, Hero Honda slipped 2% to Rs730, M&M was down 3.6% to Rs801 and TVS Motor dropped 5.3% to Rs88.
Power stocks ended lower. Tata Power, Suzlon Energy and Reliance Energy were among the major losers.
Cement stocks were also on a southward journey. ACC plunged 6.2% to Rs1036, Gujarat Ambuja dropped 2.6% to Rs137, Grasim fallen 2.8% to Rs2682 and Mangalam Cement lost 4.2% to Rs197.
Telecom stocks were down on back of selling pressure. Index heavy weights Bharti Airtel dipped 4.3% to Rs603, Reliance Communication dropped 4% to Rs429, VSNL was down 5.6% to Rs401 and MTNL fell 3.1% to Rs130.
A further correction is likely with data showing heavy FII sales in the derivatives markets for the second day in a row on Monday (11 December). FIIs were net sellers to the tune of Rs 1250 crore in index based futures on 11 December, the day when Sensex had plunged 400 points. Data showing FII sales of Rs Rs 1,087 crore in index based futures on 8 December and fears of rise in interest rates following RBI’s surprise 50 basis point hike in cash reserve ratio had rattled the bourses on 11 December.
As per provisional data, FIIs were net buyers to the tune of Rs 334 crore in the cash segment on 11 December, the day when Sensex had lost 400 points. They were net sellers to the tune of Rs 152.60 crore on 8 December, the day when Sensex had lost 173 points.
But steady to firm trend in Key Asian markets would cap further downside on the domestic bourses. Japan’s Nikkei was up nearly 1% and Hong Kong’s Hang Seng was up 0.14%. In the near term, US Federal Reserve’s decision on US interest rates remains a principal trigger for domestic bourses. US Fed meeting is due later today and expectations of interest rates staying unchanged run high. Analysts will closely watch the Fed’s accompanying statement for cues of future rate moves. Investors are waiting to see if the Fed will tone down its hawkish stance in its statement accompanying the decision.
US stocks edged higher on Monday. The Dow Jones industrial average rose 20.99 points, or 0.17 percent, to close at 12,328.48. The Standard & Poor's 500 Index ended up 3.20 points, or 0.23 percent, to finish at 1,413.04. The Nasdaq Composite Index gained 5.50 points, or 0.23 percent, to end at 2,442.86.
US crude oil for January delivery fell 81 cents, or 1.3 percent, to settle at $61.22 a barrel, while London Brent crude fell 36 cents to $61.84 a barrel.
A major near term trigger for the domestic bourses is Q3 December 2006 results. It is expected to be another quarter of strong performance from corporate India.
Meanwhile, good FII allocations are expected for India in the new calendar year 2007.
The response to the IPO of Cairn India was strong on day one of opening of the IPO on 11 December notwithstanding the sharp fall on the bourses on that day. The IPO received bids for 43.01 crore shares compared to issue size of 32.87 crore. Most of the bidding on the first day was from FIIs. They bid for 42.85 crore shares against 19.72 crore shares reserved for this category in the IPO.
What do you think is the dominant emotion in the minds of Indian fund managers right now? With the markets at an all-time high (and how routine that phrase sounds nowadays) and their funds having given investors fantastic returns, you would expect the investment managers of Indian mutual funds to be in the highest possible spirits right now.
So why are they not going around with smiles on their lips and songs in their hearts? As far as I can see, the dominant emotions among fund managers are fear, uncertainty and doubt. Last week, I met a number of the leading fund managers of the country to get a sense of what they felt about the markets and the investment climate. While there were many differences between their views at the level of individual industries, I was struck by the common thread of apprehension about the direction that the markets are taking.
And this fear is amply reflected in the portfolios of most equity funds in the country. Uninvested cash is on the rise in almost every equity fund. In some of the best funds in the country, the cash component could be as high as 30 per cent. This is almost the level of cash at which a fund should actually be called a hybrid fund, not an equity one.
Why are cash levels so high? Because while investors have given fund managers the money to invest, but the managers can't find enough stocks that they think are investment-worthy at the current price levels.
Even in the stocks that funds are holding, many managers are configured in a heavily defensive position. I know that sounds like something out of football, but in investment management, a defensive position means investing in stocks which you think will fall relatively less if the markets start falling. What all this means is that if one goes by actions of fund managers, then the markets could be expected to start falling at any point now.
Could they be right? No one knows, and at this point no one can possibly know. If one looks back at past trends then many stocks' levels are definitely too high to be sustained. It is true that corporate profits are booming and there are many, many positives that were never there earlier. need for long time should be invested in stocks.
What should an investor do? It is important that investors should not leave any short-term money in the stock market. If you think you have some definite financial need to fulfill which will need cash over the next two to three years, you should gradually start offloading your shares now. Clearly, from this point onwards, only money that you definitely won't need for long time should be invested in stocks.
That, and any 'fun money' that you would otherwise have taken to Las Vegas or some place like that.