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Friday, December 28, 2007

Bulls hope for indomitable spirit!


Death comes to all. But great achievements build a monument.

The assassination of former Prime Minister Benazir Bhutto, coupled with a few negative news has hurt global markets. This could well cloud the outlook for the Indian market today, at least at start. Equity benchmarks across key global markets, except Europe, have reacted to the fresh political upheaval in Pakistan. So, we expect a similar knee-jerk reaction in India as well. Given that the market has had a good rally over the past few days and with the main indices close to their previous all-time highs, bears were waiting for an excuse. But as we mentioned yesterday, remember a Santa Claus rally was something we were into. On the birth day of Dhirubhai Ambani, bulls might pray that the indomitable spirit may guide them to stage a comeback. And as Rabindranath Tagore says, taking shelter in the dead is death itself, and only taking all the risk of life to the fullest extent is living.

The near term outlook is positive though one cannot rule out the possibility of a small correction. The settlement in the F&O segment has been pretty good, with about 79% rollover in Nifty December futures. This is one of the highest figures in recent memory. In November the rollover in Nifty futures was around 75%. According to reports, traders and investors have created long positions in the Nifty January futures, which are quoting at a 40-point premium to the spot Nifty. Most signs from the derivative side are bullish, though there may be some choppiness in the next few days ahead of next month's quarterly results, and key events like the Fed meeting and the RBI policy review.

US shares slumped on Thursday amid renewed geo-political concerns after former Pakistani Prime Minister Benazir Bhutto was killed in a suspected suicide attack in Rawalpindi, Pakistan. Wall Street was also hurt by a slew of economic reports that reinforced concerns about the health of the world's biggest economy.

Reports on durable goods and unemployment heightened worries that growth is slowing in the US. Citigroup fell to a five-year low after Goldman Sachs analyst William F. Tanona said it will cut its 54-cent dividend to preserve capital amid the current turmoil in credit markets.

The Standard & Poor's 500 Index lost 21 points, or 1.4%, to 1,476.27. The Dow Jones Industrial Average dived 192 points, or 1.4%, to 13,359.61. The Nasdaq Composite Index dropped 48 points, or 1.8%, to 2,676.79.

Traded volume was once again unusually low since many Wall Street traders are on an extended Christmas vacation this week. This means that the market's reaction to new developments, good or bad, could be exaggerated.

Market breadth was negative. About seven stocks fell for every one that gained on the New York Stock Exchange.

On the economic front, the US Commerce Department said that factory orders for November came in lower than expected. Meanwhile, the US Labor Department said the number of workers applying for unemployment benefits last week was higher than expected.

Consumer confidence in December was slightly higher than expected, despite concerns about economic instability, according to the Conference Board. Separately, the government's weekly oil inventory report showed a larger-than-expected drop in domestic crude supplies last week.

The reports helped lift bond prices, for the first time in four sessions, as the weak economic outlook drove investors to safe haven investments.

US light crude oil for January delivery rose 11 cents to US$96.73 in New York. COMEX gold for February delivery rose US$2.20 to US$830.80 an ounce. The dollar fell versus the euro and the yen. Treasury prices rose, with the yield on the 10-year note falling to 4.19%, down from 4.28% on Wednesday.

European shares managed modest gains as investors bought producers and dumped travel firms on the news of Bhutto's assassination and a sharper-than-forecast drop in US oil inventories. The pan-European Stoxx 600 index ended with a rise of 0.2% to 365.08. Germany's DAX 30 rose by 0.5% to 8,038.60 while the French CAC-40 moved up 0.2% to 5,627.48 and the UK's FTSE 100 gained 0.3% at 6,497.80.

In the emerging markets, the scene was mixed. The Bovespa in Brazil shed 0.8% at 63,774 while the IPC index in Mexico was down 1.2% at 29,642. The RTS index in Russia rose 0.4% at 2291 and the ISE National-30 index in Turkey dropped 0.4% at 70,253.

Asian markets were down in line with the weakness across world markets. Toyota led declines among exporters after US durable goods orders rose less than forecast last month, while jobless claims unexpectedly increased.

Mitsubishi UFJ Financial Group led a drop among lenders after Goldman Sachs said that top US banks may have additional writedowns linked to the collapse of the subprime-mortgage market.

The MSCI Asia Pacific Index lost 0.7% at 155.94 as of 10:11 a.m. in Tokyo, its steepest decline since Dec. 17 and adding to a 3.8% drop this quarter. The regional index is up 11% this year, on course for its worst annual gain in five years.

The Nikkei in Tokyo shed 257 points or 1.65% at 15,307. The benchmark Japanese index has lost 11% in the year 2007, marking its first annual decline in five years. The Hang Seng in Hong Kong was down 339 points or 1.2% at 27,508.

The Kospi in Seoul was down 0.5%, while the Straits Times in Singapore fell 0.65%. The Shanghai Composite in China was flat and the Taiex in Taiwan too was nearly unchanged. All other Asian benchmarks dropped.

Bulls seek direction!

Bulls again managed to end the day with modest gains extending its wining streak to fifth straight trading session. After a positive gap up opening markets were unable to capitalize on to the start as volatility was witnessed on account of F&O expiry.

The frontline stocks like ONGC, REL and ITC remained range bound on the expiry day to end with moderate gains. On the other hand, small-cap stocks outperformed key indices, the small-Cap index was the top gainer adding over 2%.

The IT stocks were on the receiving end as the rupee held at a two-week high against the dollar. Others like Satyam, Rolta and Moser-Baer also lost ground.

Finally, 30-share Sensex closed at 20,216 adding 24 points and Nifty gained 10 points to close at 6,081.

VSNL slipped 2% to Rs735. The company announced Tata Group sold a 10% stake in its Sri Lankan unit for 75mn Sri Lankan rupees. The scrip touched an intra-day high of Rs770 and a low of Rs721 and recorded volumes of over 16,00,000 shares on NSE.

Spice Communications ended marginally loser by 0.5% to Rs62. Reports stated that the company would sell its tower arm to Srei Infrastructure for over Rs5bn. The scrip touched an intra-day high of Rs64 and a low of Rs61 and has recorded volumes of over 40,0,000 shares on NSE.

Gemini Communication rallied by over 9% to Rs252 after reports stated that the company along with Midas Communication Technologies bagged Rs2.6bn order from BSNL. The scrip touched an intra-day high of Rs274 and a low of Rs234 and recorded volumes of over 7,00,000 shares on NSE.

Videocon Industries rallied over 9% to Rs683 as reports stated that the company was planning to generate 5,000MW at an estimated cost of Rs250bn. The scrip touched an intra-day high of Rs689 and a low of Rs632 and recorded volumes of over 12,00,000 shares on NSE.

Ahluwalia Contracts spurred by over 6.5% to Rs351 after the company announced that it received new work orders worth Rs3.41bn. The scrip touched an intra-day high of Rs3560 and a low of Rs331 and recorded volumes of over 1,00,000 shares on NSE.

Shree Cement marginally slipped 1.4% to Rs1340. The company announced that they commissioned its second 1.5 MTPA cement grinding unit at Village Khushkhera, near Gurgaon on December 26, 2007. The scrip touched an intra-day high of Rs1439 and a low of Rs1325 and recorded volumes of over 8,000 shares on NSE.

MindTree declined 2% to Rs498. The company announced that it completed the process of acquiring TES PV Electronic Solutions on December 17. The scrip touched an intra-day high of Rs515 and a low of Rs480 and recorded volumes of over 81,000 shares on NSE.

PTL surged by over 3% to Rs173 after the company announced that the board of Directors of the company approved splitting each stock into five. The scrip touched an intra-day high of Rs174 and a low of Rs164 and recorded volumes of over 9,000 shares on NSE.

SAIL gained 1.1% to Rs273 after reports stated that the company would invest Rs200bn in West Bengal, about two fifth’s of its total planned investments. The scrip touched an intra-day high of Rs275 and a low of Rs270 and recorded volumes of over 1,00,00,000 shares on NSE.

What the FIIs are doing

FIIs were net sellers of Rs7bn (provisional) in the cash segment on Thursday while the local institutions pumped in Rs7.87bn. In the F&O segment, foreign funds were net sellers of Rs35.6mn.

On Wednesday, FIIs were net buyers of Rs24.2bn in the cash segment. Mutual Funds were net buyers of Rs7.4bn on the same day.

Stocks in News:

SEBI clears decks for Reliance Power IPO by disposing complaints against the offer and asking promoters to lock-in entire 20% of their contribution for five years. (BS)

DLF plans to raise US$5bn over the next three years by listing five of its business units. (ET)

NTPC has signed agreements for loan and bond subscription worth Rs20bn LIC. (ET)

L&T plans to invest Rs25bn in building shipyard and expanding its engineering manufacturing unit. (ET)

GMR Infrastructure is considering listing GMR Energy on domestic bourses to fund its upcoming projects. (DNA)

Unitech is close to announcing two joint development deals in Hyderabad and Chennai. (ET)

Reliance Communication slaps legal notice to DoT asking to freeze allocation of additional spectrum to existing GSM players. (FE)

ONGC Videsh strikes crude in Arabian Gulf Block off Qatar. (ET)

BOI gets board approval to raise Rs15bn via QIP. The floor price has been fixed at Rs359 per share. (FE)

GSPL and a subsidiary of Gujarat State Petroleum Corporation plans to invest Rs25bn on new pipelines. (DNA)

Dabur India to foray into milk-based beverage segment. (BS)

Yamaha is likely to team up with Bajaj to create a common engine platform for high-end bikes. (DNA)

L&T to hive-off concrete business into separate entity. (FE)

BoB raises Rs5bn through issue of bonds. (ET)

Bhushan Steel in technical assistance JV with Sumitomo Metal for the Orissa plant. (BL)

GSK Pharma to launch two vaccines in India. (Mint)

Canara Bank ups its open offer price for Can Fin Homes to Rs78 per share from Rs63. (FE)

Wipro Consumer Care to provide lighting solutions for retail industry in India. (FE)

Infosys plans to offer wealth management solution in the domestic market. (ET)

JSW Steel and Essar Steel to set-up retail outlets for showcasing products. (BL)

Combined output growth of six key infrastructure industries was lower at 4.5% in October Vs 9.9% last year. (ET)

The Government is likely to scrap service tax on business and first-class air tickets for international journeys. It is also likely to halve duty on ATF from 10% to 5%. (ET)

The Railway Budget is likely to bring down freight on key commodities including steel, cement and petroleum products by 5%. (ET)

Mobile companies may have to shell out a higher percentage of their annual revenues as spectrum charges. (ET)

Leading tea players have hiked prices and the remaining companies are expected to follow suit. (ET)

Trai has asked I&B ministry to specify the date on which the CAS would become mandatory in 55 of the country’s top cities. (ET)