No pause as yet for bulls
The right word may be effective, but no word was ever as effective as a rightly timed pause.
As expected by us, RBI Governor Dr. YV Reddy has decided to take a pause in his long sequence of monetary tightening measures. All markets - stock, bond and currency - have given him a thumbs up. The biggest movement was seen in the forex market where the rupee touched a new nine-year peak of 41.04 to the dollar on an intra-day basis. This certainly spells bad news for the export-centric sectors like IT, Textiles and Gems & Jewellery. Having said that the deliberate attempt to let the rupee appreciate is expected to help the central bank in monetary management and containing inflation over the medium to long term. The RBI's medium-term inflation target of 4-4.5% has even surprised the Finance Minister. It remains to be seen if Dr. Reddy manages to attain his monetary targets for FY08. It won't be a smooth sailing for the central bank governor that's for sure given the ongoing boom in the economy.
Coming to today's session, the twin factor of short-covering ahead of tomorrow's F&O expiry and the encouraging Monetary & Credit Policy may keep the bulls in good spirits for some more time. India Inc's report card for the latest quarter has been good if not spectacular with some negative surprises. What has been really strong is the inflows from the FIIs. They have pumped in close to a billion dollars in the cash segment this month with three more trading days still to go. Having said that, the weak global markets could see cooling at higher levels. Also, with the key indices having rallied so much in the past 2-3 weeks, there is a case for some cooling from higher levels. Real estate stocks surged yesterday after the RBI slashed the risk weight for housing loans of up to Rs2mn. However, one should be careful as most these players are into large projects in big cities. The same caveat holds for banking and auto shares as well.
The Dow Jones Industrial Average moved closer to the 13,000 mark on Tuesday, but the broader market struggled as upbeat corporate earnings and lower oil prices countered weaker reports on housing and consumer confidence.
The Dow was up 34.54 points or 0.3% at 12,953.94, retreating after hitting an intraday record of 12,989.86 during the session. It ended just a few points shy of the record closing high of 12,961.98 reached on Friday.
The S&P 500 index finished flat at 1,480.41 and is within striking distance of a new six-year high. The Nasdaq too closed flat at 2,524.54, and is not far from a six-year high either.
Texas Instruments, Altera and DuPont all reported solid earnings or issued bullish forecasts. Meanwhile, IBM's $15bn share buyback plan made the stock the Dow's biggest gainer.
Existing home sales came in lower than expected, falling to a 6.12mn unit annual rate in March from a 6.69mn unit rate in February. Economists had forecast sales would fall to a 6.45mn unit rate. The Consumer Confidence index fell to 104 in April from a revised 108.2 in March. Economists had projected a decline to 105. Both reports fueled worries about the imminent economic slowdown, ahead of the first-quarter GDP report due on Friday.
US light crude oil for June delivery fell $1.31 to $64.58 a barrel on the New York Mercantile Exchange. The front-month contract was trading unchanged in extended hours of trading in Asia.
COMEX gold for June delivery fell $6.50 to $687.70 an ounce. Treasury prices rose, lowering the yield on the 10-year note to 4.62% from 4.65% late on Monday. In currency trading, the dollar fell against the euro and was barely changed versus the yen.
European shares slipped on Tuesday. The pan-European Dow Jones Stoxx 600 index lost 0.9% to 386.71. The UK's FTSE 100 closed down 0.8% at 6,429.50, the German DAX Xetra 30 lost 0.9% at 7,270.32 and the French CAC-40 slipped 0.5% to 5,886.03.
Stocks in Brazil and Mexico also fell. Brazil's Bovespa and Mexico's IPC stock indexes each finished with a loss of 0.2%. In Sao Paulo, the Bovespa lost 91 points to close at 49,070.86. In Mexico, the IPC fell 50 points, or 0.2%, at 29,554.18.
Asian stocks declined for the first time in four days on Wednesday on the back of disappointing US home sales and consumer confidence data fueled concern about the state of the region's biggest export market.
The Nikkei in Tokyo slumped by 167 points to 17,284 while he Hang Seng in Hong Kong is down 37 points to 20,535. The Kospi in Seoul declined by 10 points to 1545 and the Straits Times in Singapore shed 7 points to 3366.
The Morgan Stanley Capital International Asia-Pacific Index lost 0.6% to 146.97 as of 12:09 p.m. in Tokyo, ending a three-day, 0.6% advance. Benchmarks fell across the region, with the exception of the Philippines and Hong Kong while Malaysia's was little changed. Markets in Australia and New Zealand are closed for holidays today.
HOW MARKET FAREDProfit booking likely
Credit policy set the direction for the markets after declaring its decision to keep all the key interest rates untouched favoring the bulls. Markets ended with healthy gains as the blue chip stocks like SBI, Bharti Airtel, Tata Steel and HLL led from front lifting the benchmark index Sensex to hit an intra-day high of14197.32. Even, Mid-Cap and small cap stocks participated in the rally. However, Technology stocks lost grip as rupee strengthened against the US Dollar dragging them down. Finally, the 30-share benchmark Sensex surged 208 points to close at 14136. NSE Nifty was up by 56 points to close at 4141.
Sesa Goa slipped 2.4% to Rs1699. Vedanta agreed to buy Mitsui & Co.'s entire stake in Sesa Goa for $981mn, beating rivals including Arcelor Mittal to secure supplies of the steel-making raw material. The scrip touched an intra-day high of Rs1850 and a low of Rs1676 and recorded volumes of over 17,00,000 shares on NSE.
SUN TV lost 1% to Rs1633 after the company approved giving one free share for each held. The scrip touched an intra-day high of Rs1672 and a low of Rs1621 and recorded volumes of over 1,00,000 shares on NSE.
Bajaj Hindusthan gained 0.4% to Rs164. The Company announced its Q2 result with net profit at Rs36.6mn (down 94%) and sales at Rs5.14bn (up 30%). The scrip touched an intra-day high of Rs167 and a low of Rs160 and recorded volumes of over 30,00,000 shares on NSE.
MTNL declined by over 6% to Rs152. The company announced its Q4 result with net profit at Rs2.06bn (up 47%) and revenue at Rs13.86bn (down 13%). The scrip touched an intra-day high of Rs165 and a low of Rs150 and recorded volumes of over 52,00,000 shares on NSE.
Maruti paced ahead 3.8% to Rs796 after the company announced its Q4 result with net sales at Rs44.13bn (up 35%) and net income at Rs4.49bn (up 24%) and also to pay Rs4.5 per share as dividend. The scrip touched an intra-day high of Rs810 and a low of Rs762 and recorded volumes of over 23,00,000 shares on NSE.
Banking stocks were the star performers of the day following RBI’s decision to leave Interest rates unchanged. Index heavy weight SBI surged over 6.5% to Rs1133, ICICI Bank advanced 3.6% to Rs950 and HDFC Bank added 2.8% to Rs1013. Canara Bank, OBC and Syndicate Bank were the major gainers among the Mid-Cap stocks.
Auto stocks are among the major gainers. Maruti has surged by over 4.5% to Rs802, Tata Motors has advanced by 4.2% to Rs748, Bajaj Auto has gained by 3% to Rs2474 and Hero Honda has added 1.5% to Rs665.
Power stocks advanced further led by gains in PFC and Tata Power. PFC surged by over 5% to Rs123, Suzlon advanced by 2% to Rs1168 and Tata Power added 2.3% to Rs581.
Cement stocks ended with gains. Gujarat Ambuja surged by 3.5% to Rs119, ACC advanced by 2.5% to Rs816, Mangalam Cement gained 0.3% to Rs146 and India Cement added 0.8% to Rs170. However, Grasim pared its gains on back of profit booking, the scrip fell 1% to Rs2378.Insider Trades:
ABB Ltd: Life Insurance Corporation of India has purchased from open market 12480 equity shares of ABB Limited on 12th April, 2007.
Petronet LNG Ltd: T. Rowe Price Associates, Inc. & its affiliates has sold in open market 6264026 of Petronet LNG Limited on 17th April, 2007.
Market Volumes:
The turnover on NSE was up by 41% to Rs108.9bn. BSE Bank index was the major gainer and gained 4.06%. BSE Auto index (up 1.65%), BSE Metal index (up 1.49%) and BSE Oil & Gas index (up 1.42%) were among the other major gainers. However, BSE IT index lost 0.70%.
Volume Toppers:
IFCI, RNRL, Tata Steel, IB Real Estate, Unitech, ITC, Indian Bank, Bank of India, IDFC, Idea, PFC, Parsvnath, MTNL, R Com, Rolta, Ashok Leyland, HCC, NTPC and IVRCL Infrastructure.
Upper Circuit:
Ramco Systems, Dawn Mills, Ansal Infrastructure, Eicher Motors, Godrej Industries, Tanla, Tulip IT, Penland Ltd, Auto Industries, GTC Industries, Nirlon, Swan Mills and Teledata Informatics.
Results Today:
3i Infotech, Alfa Laval, Glenmark, Grasim, GTL, IDFC, Mahindra Gesco, Maharashtra Seamless, Nalco and Tulip IT.
Delivery Delight:
ABB, Aptech, Bank of Baroda, Bharti Airtel, Bombay Dyeing, Canara Bank, Century Textiles, CESC, Corporation Bank, HCC, HDFC, ICICI Bank, IVRCL Infrastructures, Jaiprakash Associates, Maharashtra Seamless, Maruti Udyog, Patel Engineering, Ranbaxy Laboratories, Reliance Capital, Siemens, SBI and Tata Motors.
Abnormal Delivery:
SAIL, BEL, UTI Bank, Kotak Mahindra Bank, Aurobindo Pharma, National Aluminium, SRF and BEML.
Stock Futures with Largest Increases in OI:
Sun Pharmaceuticals, Indian Bank, Jindal Steel & Power, PNB, Satyam Computer, Bank of Baroda, Canara Bank, RPL, BHEL and Tata Chemicals.
Stock Futures with Largest Decreases in OI:
Jet Airways, Balrampur Chini, Tata Steel, Zee Telefilms, Siemens, Bajaj Auto, ACC and Aban Offshore.
Results Corner:
HDFC Bank Q4 profit at Rs3.44bn (up 31%), revenues at Rs23.84bn (up 41%)
MTNL Q4 profit at Rs2.06bn (up 47%), revenue at Rs13.86bn (down 13%)
Maruti Q4 sales at Rs44.13bn (up 35%), net income at Rs4.49bn (up 24%) and to pay Rs4.5 per share as dividend
Bajaj Hindusthan Q2 profit at Rs36.6mn (down 94%), sales at Rs5.14bn (up 30%)
Brokers Recommendations:
Reliance Capital – Buy from Merrill Lynch with target of Rs850
Wipro - Underperform from CLSA with target of Rs575.
Long Term investment:
Infosys
Major News Headlines:
RBI slashes risk weight on housing loans of up to Rs20 lakh from 75% to 50%
Wockhardt gets US FDA approval for marketing Lisinopril
Parsvnath to Develop Metro Station Cum Mall at Common Wealth Games Village
SUN TV approves 1:1 bonus
Vedanta agrees to buy Mitsui's 51% stake in Sesa Goa for $981mn
Alok Industries signs agreement with Peacock Alley
SpiceJet Board approves plan to purchase 10 Boeing planes.