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Thursday, September 20, 2007

After Wonderful Wednesday, Tired Thursday!


On the day of victory no one is tired

The bulls batting on the bourses more or less resembled Yuvraj Singh smashing 36 runs (6x6) in an over. The bears, like the beaten bowler Stuart Broad had to look over the covers to find the ball. For the market, it was by far the best day for the bulls in recent memory. The Sensex surged past the 16k mark in the initial trades itself and made a new all-time high. The Nifty too crossed its own lifetime peak, as did some other indices. The fact that the trend has reversed in favour of the bulls after the carnage last month made it even better. The market's ability to bounce back after a brief correction has improved considerably. The main indices are taking less time now to stage a turnaround from an intermediate downtrend. This should be music to the ears of the bulls.

Today could be a tired Thursday as bulls may run out of energy. Expect indices to drop in the red. The bears will look at staging a comeback sooner or later. Liquidity in terms of FII inflows will be the key. We may have a situation of domestic funds booking profits even as FIIs may look at putting in fresh money.

The rate cuts by the Fed will boost inflows towards emerging markets where returns are better. India, with its strong economic fundamentals and earnings momentum, should get a big slice out of this. So, the outlook remains upbeat, though one needs to be careful as valuations may just be getting a little bit expensive.

A stock centric approach always pays rich dividends in every market cycle. Its no different today. While the global response to the Fed rate cuts so far has been positive, the question is what happens after investors get over the euphoria. Locally, we have to grapple with the developing political situation with mid-term polls a certainty. Oil is also on the boil again. And, of course how the RBI copes with the deluge of foreign money and what it does with interest rates remains a mystery.

IT stocks should be under pressure as the Rupee has risen past the 40 per dollar mark this morning.

Also keep an eye on Magnum Ventures, which gets listed on the bourses today.

US stocks extended their biggest rally in four years on hope that the interest rate cuts will help contain the housing sector mess and boost earnings growth.

AT&T helped lead the Dow Jones Industrial Average to within 1.4% of a record after saying sales of Apple's iPhone have increased. Freeport-McMoRan Copper & Gold, the world's second-largest copper producer, climbed to a new high.

The Standard & Poor's 500 Index rose 9.25 points, or 0.6%, to 1,529.03. The Dow gained 76.17 points, or 0.6%, to 13,815.56. The Nasdaq Composite Index added 14.82 points, or 0.6%, to 2,666.48. All 10 S&P 500 industry groups gained for a second day.

Ten-year Treasury notes fell for a third day as investors bet that rate cuts will fuel inflation, even after the government said consumer prices fell in August. The dollar rose from an all-time low against the euro and gold gained.

Thursday brings earnings reports from Bear Stearns, Goldman Sachs and Circuit City. Thursday also brings several economic reports after the start of trading, including the leading economic indicators and the Philadelphia Fed index - a regional manufacturing reading.

Fed chief Ben Bernanke is due to testify on Capitol Hill as part of a hearing on the subprime mortgage crisis. Treasury Secretary Henry Paulson is also due to testify.

The day's economic news seemed to support the Fed decision. Housing starts fell to a 12-month low in August, according to a government report that also showed a big drop in building permits, a measure of builder confidence. But another government report was more positive, showing a surprise drop in consumer prices in August, versus forecasts for a flat reading.

US light crude oil for October delivery rose 42 cents to settle at $81.93 a barrel on the New York Mercantile Exchange, briefly hitting a fresh record trading high of $82.50 after a report showed a negligible rise in weekly crude oil and gas inventories.

Treasury prices tanked, pushing the yield on the 10-year note to 4.53% from 4.47% late on Tuesday. In currency trading, the dollar slumped against the euro and was little changed versus the yen. COMEX gold for December delivery rallied $5.80 to $729.50 an ounce.

European shares ended higher. The broad pan-European Dow Jones Stoxx 600 index rose 2.7% to 377.61, putting in its best one-day gain this year. The UK's FTSE 100 index closed up 2.8% at 6,460.00, the German DAX 30 added 2.3% to 7,750.84 and the French CAC-40 climbed 3.3% to 5,730.82.

In the emerging markets, the Bovespa in Brazil rose 1% to 57,264 while the IPC index in Mexico was down 0.3% at 30,512. The RTS index in Russia shot up by nearly 4% to 2015 and the ISE National-30 index in Turkey soared by 7.4% to 68,691.

Asian markets were trading mixed this morning. The the Hang Seng in Hong Kong was up 0.5% while the rest of the markets were more or less flat.

Markets further extended its rally and the benchmark Sensex not only tested the 16k levels but managed to breach it as bulls were overjoyed after Federal Reserve announcement that it had cut its benchmark interest rate by 50 basis points. The Banking and the Realty stocks were the leading gainers on hopes that the Fed’s decision might also prompt the RBI to relax its hawkish stance on the monetary policy going forward.

The index heavyweights partied hard as RIL, SBI, DLF, BHEL, SAIL, Tata Steel and RPL hit their respective lifetime high. Further announcement from the government it may allow mills to make Ethanol directly from Cane juice lifted the sugar stocks from their lows and Cement stocks also recorded concrete gains after cement manufacturers increased prices by Rs3 a bag in the largest markets of Maharashtra and Gujarat across both wholesale and retail segments.

Reliance Communication surged by over 5% to Rs564 after the company’s owned Flag Telecom signed a five year contract with UK based virtual network operator Vanco to share their networks. This agreement provides Flag and its customer’s access to further 81 countries. The scrip has touched an intra-day high of Rs584 and a low of Rs545 and has recorded volumes of over 58,00,000 shares on NSE.

Bharti Airtel jumped by over 6.5% to Rs886 after reports stated that the company has awarded $150mn contract to Chinese vendor Huawei for building and managing GSM mobile infrastructure for its Sri Lankan operations. The scrip touched an intra-day high of Rs894 and a low of Rs845 and recorded volumes of over 11,00,000 shares on NSE.

Crompton Greaves advanced 2.2% to Rs316 following reports that the won bid to distribute and bill power in three major divisions in Nagpur. The scrip has touched an intra-day high of Rs325 and a low of Rs314 and recorded volumes of over 9,00,000 shares on NSE.

Hotel Leelaventure shed by 0.5% to Rs47. According to reports the company has earmarked Rs22bn in next three years for developing hotel properties spanning the major cities in the country. The scrip touched an intra-day high of Rs49 and a low of Rs47 and recorded volumes of over 25,00,000 shares on NSE.

BPCL ended flat at Rs310. Reports stated that the company has planned to submit a US$350mn non-binding bid to acquire 10% interest in a Congo oil field. The scrip touched an intra-day high of Rs315 and a low of Rs306 and recorded volumes of over 2,00,000 shares on NSE.

ITC gained by 4% to Rs187 following reports that the company is planning to set up a third food factory in Bangalore. The scrip touched an intra-day high of Rs189 and a low of Rs180 and recorded volumes of over 85,00,000 shares on NSE.

Sugar stocks turned sweeter as government would allow mills to make Ethanol directly from Cane juice. Renuka Sugar jumped by over 24% to Rs683, Bajaj Hindustan surged by over 20% to Rs176, Sakhti Sugar was locked at 20% upper circuit to Rs92.80.

Cement stocks recorded concrete gains after cement manufacturers increased prices by Rs3 a bag in the largest markets of Maharashtra and Gujarat across both wholesale and retail segments. ACC surged by over 3% to Rs1155, Kesoram Industries advanced by 2.8% to Rs549 and India Cement added 3% to Rs284.

Banking stocks rallied after the Fed's decision to cut interest rates by 50 basis points. HDFC Bank surged by over 7.5% to Rs1324, ICICI Bank surged by over 5% to Rs973 and SBI added 4.4% to Rs1769. Union Bank, Bank of Baroda and PNB were the major gainers among the Mid-Cap stocks.

Realty stocks also were among the major gainers. DLF surged by over 8.5% to Rs713, Parsvnath advanced by 5.4% to Rs337, Sobha gained by 4.5% to Rs797, Akruti added 3.2% to Rs718 and Peninsula land added 2.6% to Rs586.


Tata Motors is planning to replace its existing range of 100-180hp trucks with the 'world truck' by September 2008 to meet competition from Volvo, Man and others.

The PMO has asked the Jharkhand Government to renew SAIL's Chiria mines lease.

Bharti Airtel is the only Indian company left in the fray for bagging the second mobile license in Qatar.

Shipping Corporation of India has floated four joint ventures to enter into shipbuilding, container terminal operation, dredging and offshore services.

Titan Industries has entered into a five-year tie-up for exclusive marketing-cum-distribution of Hugo Boss watches in India with MGI Luxury.

HCL Infosystems plans to set up a major systems integration hub in Kolkata over next 8-12 months.

L&T is close to acquiring a stake in Feedback Ventures.

ONGC Videsh, the overseas investment arm of ONGC, has won three exploration blocks in Colombia in the latest round of auctions.

The Carlyle Group and Citigroup Venture are in the race to acquire 15% stake in Pyramid Saimira.

Britannia will take legal action against Group Danone for unauthorized use of the Tiger biscuit brand in other countries.

SREI Infrastructure Finance has proposed a preferential issue of up to 25mn warrants to the promoter group at Rs100 per share.

The government is planning to allow manufacturing of ethanol directly from sugarcane.

Production of kharif foodgrains during FY08 will touch 112.24mn tons. This is 1.72mn tons more than that of last year.

The Ministry of Information & Broadcasting may cut the entertainment tax.

The Telecom Regulatory Authority of India has suggested that telecom operators can offer mobile television services to subscribers without licence.

Fund Activity:

FIIs were net buyers of Rs24.58bn (provisional) in the cash segment on Wednesday and the local institutions pulled out Rs3.28bn. In the F&O segment, foreign funds were net buyers of Rs42.55bn.

On Tuesday, FIIs were net sellers to the tune of Rs1.38bn in the cash segment. Mutual Funds were net sellers of Rs190mn on the same day.

Major Bulk Deals:

Macquaire Bank has sold Atul; Merrill Lynch has bought Dwarikesh Sugar while HSBC Global has sold it; Emerging Capital Advisors has sold Evinix and has purchased Gremac Infra; Deutsche Bank has sold Karuturi Networks; BNP Paribas has picked up Megasoft while Sundaram BNP Paribas Select Mid-Cap Fund has sold it; Deutsche Securities has bought Unity Infra.

Upper Circuit:

RIIL, Mawana Sugar, Rana Sugar, Tourism Finance, KM Sugar, Bombay Burmah, Goldstone Tech, Uttam Sugar, Jai Corp and Prakash Industries.

Lower Circuit:

Hindo SPG and Shree Precoated Steels.