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Monday, June 04, 2007

STRATEGY INPUTS FOR THE DAY


Peek at peak

Dreams are the windows of the soul--take a peek and you can see the inner workings, the nuts and bolts.

The bulls have had a dream run mainly on account of select stocks. The big question (and the question only gets bigger) is whether this rally can sustain. Concern arises if you look at the nuts and bolts, read valuations and lack of fresh catalysts. There could be some bumps ahead once the so-called landmarks are achieved. The NSE Nifty, has crossed the 4300 mark and is sitting pretty at a new all-time high. The Sensex is trying to follow suit. Given the current momentum, strong inflows (from both overseas and local institutions) and firm global markets, the Sensex could have its 'moments' of glory. Will it happen today itself? Well, the bulls appear confident enough to not only lift the Sensex to a new life-time peak, but could also take the benchmark index near 15,000 in the near term. While a new high for the Sensex this week is a foregone conclusion, the ride to mount 15k may face resistance.

We expect a positive opening as US stocks advanced further on Friday on the back of a slew of positive economic reports. Asian markets, barring China, are all up today. Oil is trading above $64 per barrel mark and may pose some threat in the coming days due to the onset of summer and the hurricane season in the US. Though everything looks rosy at the moment, one must be on guard for any unforeseen negative surprises as the market is at or near historic peak.

As usual, a lot of stock specific action is likely to continue. Among the scrips to keep an eye on include Indian Hotels. The Tata Group company is expected to announce good results this week and a new acquisition. Development Credit Bank is also expected to do well amid expectations of a minor stake sale and improvement in the fundamentals.

Media Video is another stock one can watch out for, as it is likely to sign a deal with the Godrej Group and is also planning to unlocking value through the demerger of its infrastructure business. It is also foraying into real estate and has already announced a township project. Rain Calcining and Rain Commodities are likely to be in the limelight. Rain Calcining has decided to acquire all of the outstanding equity of CII Carbon LLC for $595mn.

FIIs were net buyers of Rs3.73bn (provisional) in the cash segment on Friday. While the local institutions pumped in Rs3.19bn on the same day. In the F&O segment, they were net buyers of Rs6.93bn. Foreign funds were net buyers of Rs3.1bn in the cash segment on Thursday.

US stocks rose on June 1, lifting the Standard & Poor's 500 Index to a record. US employers added 157,000 non-farm jobs in May after boosting payrolls by 80,000 in April, a government report showed. Economists surveyed had expected an increase of 132,000 jobs in May.

European shares advanced on Friday. The pan-European Dow Jones Stoxx 600 index added 0.8% to 399.95. The UK's FTSE 100 closed up 0.8% at 6,676.70 and the German DAX Xetra 30 rose 1.3% to 7,987.85. The French CAC-40 increased 1.1% to 6,168.15.

In the emerging markets, the Bovespa in Brazil rose 2.2% to 53,422 while the IPC index in Mexico was up 1.7% to 31,946 and the RTS index in Russia climbed 2.8% to 1829.

Asian stocks were trading higher this morning after government reports showed that employment and manufacturing growth in the US expanded more than expected and metals prices gained.

The Morgan Stanley Capital International Asia-Pacific Index added 0.5% to 152.12 as of 11:16 a.m. in Tokyo, extending a two-day, 2% rally. Benchmarks in South Korea, Australia and Singapore climbed to new highs. New Zealand's market is closed for a holiday.

In Japan, the Nikkei 225 Stock Average added 0.2%. Stocks also rose after a Ministry of Finance report showed that the country's largest companies increased spending more than expected in the first quarter.

China's stocks fell to a five-week low today after official media said that the slide in shares since stamp duty was tripled last week is a normal correction, suggesting that the government won't act to stem the decline.

The benchmark CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, declined 213.03, or 5.6%, to 3590.92 as of 10:14 a.m. local time, set for its lowest close since April 30.

Markets greeted good Buy to May as bulls welcomed June on a flat note. Bulls managed to survive the so called May Mayhem as the benchmark Sensex instead on tanking added on over 3% during the month. And history says the month of June is always the month of bulls, but with no major triggers on the horizon and the result season far away, market players would look upon Global developments, dollar concerns and crude oil prices.

On Friday markets managed to close with marginal gains as selling pressure in the Oil & Gas, FMCG and Consumer Durable index dragged the markets to wipe off almost all its intra-day gains. However, BSE Technology, Bank and Auto index bucked the negative trend holding the markets from a huge fall. Finally, the 30-share Sensex gained 26 points to close at 14570. NSE-50 Nifty was flat at 4297.

MTNL rallied almost by 7% to Rs163 after the company said that it plans to announce Noida Property Developer in 10 days. The scrip touched intra-day high of Rs165 and a low of Rs151 and recorded volumes of over 59,00,000 shares on NSE.

Bajaj Auto gained momentum towards the end as the scrip added 0.7% to Rs2242. The company announced its May sales which were at 193437 units (down 12%). The scrip touched intra-day high of Rs2252 and a low of Rs2211 and recorded volumes of over 3,00,000 shares on NSE.

M&M gained by 0.5% to Rs758 after the company announced its May auto sales which was at 18116 units (up 49.5%). The scrip touched intra-day high of Rs770 and a low of Rs751 and recorded volumes of over 8,00,000 shares on NSE.

Tata Tea further gained ground for second consecutive after reports stated that the company would buy majority stake in MT Everest. The scrip surged by over 3.5% to Rs952 touching an intra-day high of Rs970 and a low of Rs938 and recorded volumes of over 1,00,000 shares on NSE.

Lupin advanced by 1.7% to Rs711 after the company announced that they have secured FDA approval for Cefadroxil Capsules. The scrip touched intra-day high of Rs733 and a low of Rs714 and recorded volumes of over 2,00,000 shares on NSE.

Consumer Durable stocks were on the receiving end as after being in the limelight for previous couple of trading session. Videocon Industries declined by over 4.5% to Rs470 and Gitanjali Gems was down by 0.4% to Rs189. However. Rajesh Exports and Titan managed to buck the negative trend as Rajesh Export gained by 2.5% to Rs515 and Titan was up by 1.4% to Rs1140.

Oil & Gas stocks also witnessed some selling pressure. ONGC declined by 0.5% to Rs910, RNRL was down by 1.3% to Rs35.60, RPL dropped by 1.5% to Rs99.05 and BPCL edged lower by 0.6% to Rs357.

Banking stocks recorded smart gains led by gains in the heavy weight ICICI Bank surged by 1.3% to Rs930, HDFC Bank was up by 0.5% to Rs1153 and SBI added 1.8% to Rs1378. Canara Bank, OBC and PNB were the major gainers among the Mid-Cap stocks.

Capital Good stocks also ended on a firm note. BHEL advanced 1.4% to Rs1418, ABB gained 2.5% to Rs4720, Gammon India advanced by 3.6% to Rs399 and Punj Lloyd added 1.8% to Rs222.