Search Now

Recommendations

Friday, September 28, 2007

Rolling bulls gather no loss


People willing to roll up their sleeves seldom lose their shirts.

The bears seem to have lost their shirt for the time being. A smooth September is over for the bulls. The rollover in the F&O segment indicates October optimism is in. Shorts have been squared off and fresh longs created. The market looks poised to break new grounds and conquer new frontiers. The sentiment is definitely upbeat. Where have all the bears gone?

Today, we see a flat to slightly higher opening and a dull end to what has been another good week for the bulls. The market may turn a bit rangebound and choppy in the coming days ahead of the quarterly results, especially that of the IT firms. The bulls may swing to the techno beat for a month and take the IT index to new highs in October. Reliance could probably wait a little before it backs the raging bulls as a slew of announcements are likely by December.

The aggressive rate cuts by the Fed has re-opened the tap of foreign money for emerging markets like India. The sudden spurt in FII inflows has done the trick, by pushing the Sensex and the Nifty past new landmarks in a very short period of time. However, credit should also be given to Fed chief Ben Bernanke, who has in a sense given a new lease of life to the bulls around the globe.

Emerging markets like India are clearly the toast of global investors for mouth-watering prospects in terms of economic growth and earnings visibility. Having said that, some caution is warranted as the main indices have rallied quite a bit since the Fed rate cuts were announced. At the risk of sounding clichéd, we would say that a small correction, which will obviously be healthy for the market, is overdue to set the stage for the next round of advance.

US stocks closed with marginal gains, as investors bet that a big drop in new home sales and a weak GDP growth data will force the Federal Reserve to cut interest rates further. However, gains were capped by surging oil prices and nervousness ahead of Friday's economic reports.

The Standard & Poor's 500 Index added 5.96 points, or 0.4%, to 1,531.38. The Dow Jones Industrial Average rose 34.79 points, or 0.3%, to 13,912.94. The Nasdaq Composite Index advanced 10.56 points, or 0.4%, to 2,709.59.

The Dow climbed to within 0.7% of a record following the biggest plunge in new home prices in almost four decades.

Friday brings readings on personal income and spending - and the PCE deflator, the report's inflation component. After the start of trading, the consumer sentiment index from the University of Michigan is due, along with the read on construction spending and the Chicago PMI, a regional manufacturing report.

New home sales fell to a 795,000 annual unit rate in August, the lowest level in seven years, from an 867,000 unit rate in July. It was a steeper-than-expected decline.

US GDP growth was revised down to 3.8% in the second quarter from a previous read of 4%. Economists had been expecting reading of 3.9%. A separate report showed a surprise drop in weekly jobless claims last week.

US light crude oil for November delivery rose $2.58 to settle at $82.88 a barrel on the New York Mercantile Exchange, a jump of more than $3. The contract was up 37 cents at $83.25 a barrel in extended trading in Asia. Last week, the October contract settled at a record high of $83.32.

Treasury prices rose, lowering the yield on the 10-year note to 4.56% from 4.62% late on Wednesday. In currency trading, the dollar fell versus the euro and also dipped versus other major currencies. COMEX gold for December delivery rose $4.40 to settle at $739.90 an ounce.

European shares advanced, paced by gains in construction companies and airlines, though BMW weakened after revealing a new strategy. The pan-European Dow Jones Stoxx 600 index rose 0.8% to 377.83. The UK's FTSE 100 closed up 0.8% at 6,486.40, while the French CAC-40 advanced 0.8% to 5,733.37 and the German DAX 30 rose 0.6% to 7,853.79.

Most emerging markets were up. The Bovespa in Brazil jumped 2.2% to 61,052 while the IPC index in Mexico was up 0.7% at 30,528. The RTS index in Russia gained 0.7% at 2064 and the ISE National-30 index in Turkey rose 0.3% to 69,127.

Asian markets were trading mostly flat to slightly lower though shares in China were up sharply. The Nikkei in Tokyo was down 47 points at 16,784 while the Hang Seng in Hong Kong was up 12 points at 27,077. The Kospi in Seoul was down 4 points and the Straits Times in Singapore fell by 9 points to 3705.

Undoubtedly another stellar session ended at all time high levels as bulls absolutely dominated the day. Nifty and benchmark Sensex ended above the 5k and the 17k mark respectively for first time ever. NSE cash turnover also recorded all time high.

The Reliance Pack was a mixed bag, however Reliance Energy was the star performer, the scrip rose over 8.5%. Among the 30-scrip’s Sensex, ICICI Bank, Infosys, Tata Steel and ONGC were the leading movers. However, Hindustan Unilever, R Comm and Ambuja Cement were among the major laggards. Finally, BSE 30-share benchmark Sensex ended 229 points higher to close at 17,150. NSE Nifty added 60 points to close at 5,000.

VSNL advanced by 2% to Rs445 after reports stated that the company has bagged a bandwidth contract form the UK’s National Network for Research and Education, Janet for an undisclosed amount. The scrip touched an intra-day high of Rs460 and a low of Rs440 and recorded volumes of over 10,00,000 shares on NSE.

Reliance Energy sparked up by 9% to Rs1117 on reports that the company is planning to restructure its business under three verticals - utility, infrastructure and real estate. The scrip touched an intra-day high of Rs1130 and a low of Rs1145 and recorded volumes of over 63,00,000 shares on NSE.

Pantaloon Retail declined 2.5% to Rs526 after the nation's biggest publicly traded retailer said Q4 profit rose 18% as it added stores in the world's second-fastest growing major economy. Net income rose to Rs186.7mn, in the three months ended June 30 from a year earlier. Sales rose 79%. The scrip touched an intra-day high of Rs555 and a low of Rs522 and recorded volumes of over 2,00,000 shares on NSE.

Praj Industries slipped by 2% to Rs234. Tata Sons bought 7.3% stake in Praj Industries for Rs3.4bn to expand its business of making fuel from plants. The scrip touched an intra-day high of Rs246 and a low of Rs232 and recorded volumes of over 43,00,000 shares on NSE.

MRPL fell 2.8% to Rs72. According to reports Japanese trading houses Mitusui & Co and Mitsubishi Corp are likely to take stake in an aromatics unit planned by the company. The scrip touched an intra-day high of Rs78 and a low of Rs69 and recorded volumes of over 1,00,00,000 shares on NSE.

Indian Hotels dropped by over 3% to Rs136. The company announced that they would sell 1 share for 5 held atRs70 per share. The scrip touched an intra-day high of Rs144 and a low of Rs135 and recorded volumes of over 44,00,000 shares on NSE.

IT stocks continued its recovery despite Rupee hit fresh 9-year high of Rs39.62 this morning. Index heavyweight Infosys advanced 5% to Rs1915, Satyam Computer gained 2.5% to Rs442 and TCS added 2% to Rs1062.

Optimistic outlook on the sector and rising prices of metal boosted the metal stocks on Dalal Street. Tata Steel surged by over 5.5% to Rs795, Hindalco gained by 0.6% to Rs164, SAIL was up by 0.3% to Rs201 and JSW Steel added 2.6% to Rs822.

Auto stocks ended higher led by gains in the index heavyweights like Maruti, the scrip advanced by 2% to Rs980, Tata Motors gained by 1.6% to Rs751 and Bajaj Auto added 1% to Rs2535.

Profit booking dragged the Sugar stocks lower. According to reports the industry may get interest free loans equivalent of excise payments. Renuka Sugar slipped 2% to Rs692, Balrampur Chini dropped 4% to Rs74, Sakhti Sugar slipped 3% to Rs85 and Bajaj Hindusthan lost 10% to Rs170.

Banking stocks also continued to be in momentum. HDFC Bank surged by over 4% to Rs1433, SBI advanced 1.8% to Rs1880 and ICICI Bank added 0.8% to Rs1028. Others like Andhra Bank and Bank of Baroda were the major gainers among the Mid-Cap stocks.

FMCG stocks were under pressure. Dabur slipped 3.9% to 103, Hindustan Unilever lost 3% to Rs218, McDowell dropped 2.1% to Rs1691 and Marico declined 1.8% to Rs59.

Stocks in News:

Alphageo India's Board will meet today to consider issue of Warrants to Promoters, their associates, their family owned companies and companies.

Arvind Mills' Board will meet today to consider and approve the issue of equity shares / Fully Convertible Debentures / Partly Convertible Debentures / Warrants Convertible into equity shares or any other financial instruments which would be converted into or exchanged with equity shares at a later date on a preferential basis.

Oudh Sugar Mills will announce its results for the financial year ended June 30, 2007 and to consider recommendation of a dividend.

United Breweries' Board will meet today to consider a Rights Issue.

NIIT Technologies is in preliminary discussions with PE players Carlyle and Texas
Pacific Group for a 25-40% stake sale.

IFCI has short-listed eight bidders for sale of 26% stake including a consortia led by
Wilbur Ross and Shinsei Bank.

Reliance Industries and Gail India examining feasibility of setting up
petrochemical plants in Russia.

The joint venture between L&T and Japan’s Mitsubishi Heavy Industries will invest
Rs.7.5bn in its power equipment plant in Hazira.

Dr Reddy’s Laboratories has secured an exclusive license to sell dermatitis drug
Sebclair in the US.

Suzlon entered the Turkish market by securing an order for 31.5MW of wind turbine
capacity from Ayen Enerji Co Inc.

ICICI Bank raises US $2bn through a 5 year fixed rate notes issue.

The Union Cabinet to sanction Rs1,000bn worth of power projects in the 11th plan.

The Finance Ministry may notify guidelines within a week for determining fair market
value of stock options issued to employees.

The textile machinery sector may come under Textile Upgradation Fund Scheme (TUFS) to facilitate the modernization and upgrade of the Rs38bn segment
.

Fund Activity:

FIIs were net buyers of Rs22.27bn (provisional) in the cash segment on Thursday and the local institutions pulled out Rs3.11bn. In the F&O segment, foreign funds were net buyers of Rs11.17bn.

On Wednesday, FIIs were net buyers to the tune of Rs10bn in the cash segment. With this, their net investment in Indian shares in the past seven six days has risen to US$2.17bn. Mutual Funds were net sellers of Rs5.17bn on Wednesday.

Major Bulk Deals:

Morgan Stanley has bought Arvind Mills; ICICI Bank, ICICI Ventures and UBS have sold Deccan Aviation; Merrill Lynch has picked up Gitanjali Gems; Morgan Stanley has purchased both HTMT Global and Hinduja TMT; Merrill Lynch has sold HFCL; Lehman Bros has sold IFCI; Merrill Lynch has sold Praj Industries; Bear Stearns has sold Satnam Overseas; Fidelity has bought Shree Renuka Sugars; HSBC, Lehman Bros, Merrill Lynch and The Master Trust Bank of Japan have picked up Sintex Industries; Kotak Mahindra UK has purchased Tera Software; Merrill Lynch has sold TVS Motor; Morgan Stanley has bought Vakrangee Software; BNP Paribas has picked up Vishnu Chemical; Citigroup has sold Welspun Gujarat.

Upper Circuit:

Ruby Mills, Swan Mills, Shree Precoated, Deep Industries, Jayant Agro, Jai Corp, RIIL, Rei Agro and Marksans.

Lower Circuit:

Accel Frontline, IID Forgings and Tanla.