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Monday, August 11, 2008

Rigour of finding triggers!


Next in importance to having a good aim is to recognize when to pull the trigger.

Just when people were thinking most triggers are out of the way, we realize this short week (on account of Independence Day, not for shorting) is set to be packed with action. Triggers will come and go, just ensure you have your aim clear. In the current scenario, it is better to spend more energy on when to exit rather than when to enter.

We have the IIP numbers on Tuesday, which may be better than expected; though it remains to be seen if there is some base effect to it. Then there is the SEBI meet on Wednesday, which will have a host of issues market expects, including revisiting P-Note norms and possibility of KYC norms for FIIs. The usual inflation expectations will be the last thing to end the week on Thursday.

Friday's drop in oil prices will ensure that the bulls will remain in a cheerful mood today. Wall Street had a strong rally on Friday. Asian markets, barring China are up 1-2% this morning. The bulls are likely to prevail over the bears in the near term. Though the current momentum may be dismissed as a bear market pull-back, indices have inched higher five weeks in a row. Resistance at higher levels is bound to be there.

The environment remains challenging, from local as well as global perspective. The US economy continues to be in the doldrums, as does the large European economies. In Asia, though the overall situation isn't as bad as the western world, the situation in Japan is precarious. Uncertainties still prevail surrounding the western financial sector.

As far as India is concerned, the macro-economic headwinds are still strong. This means that the tough time is not going to vanish in a jiffy. There could be more negative surprises over the next few months. The only hope is that monsoon has been good so far. So, there is a case for lower food price inflation in case of good kharif crop.

Another factor that could prolong the current rally is of course crude oil. Global equity markets will continue to get a boost if it falls further or stays below $120 per barrel. Individual stocks and sectors will remain in the limelight. And, though the technical and F&O indicators are showing positive signs, one should keep booking some profits at every rise.

FIIs were net sellers of Rs1.42bn (provisional) in the cash segment on Friday and the local funds pumped in Rs162.9mn. In the F&O segment, the foreign funds were net sellers of Rs7.73bn. On Thursday, FIIs were net buyers of Rs190mn in the cash segment. Mutual funds were net sellers of Rs220mn.

Equity shares of Vishal Information Technologies Ltd. will be listed on the bourses today. The IPO was subscribed 1.19 times.

US stock indices closed at six-week high on Friday, as a renewed strength in the dollar sent crude oil prices to a three-month lows, offsetting the latest bad news in the financial sector in the form of a large loss for Fannie Mae.

The Dow Jones Industrial Average rose more than 300 points for a second day last week to close at 11,734.32, up 302.89 points or 2.7%. It was up 3.6% on the week. The S&P 500 gained 30.27 points or 2.4% to finish at 1,296.33, leaving it up 2.8% on the week.

The technology-laden Nasdaq Composite index climbed 58.37 points or 2.5% to shut shop at 2,414.10, a weekly gain of 4.5%.

US light crude oil for September delivery slumped $4.82 to settle at $115.20 per barrel on the New York Mercantile Exchange, hitting three-month lows. Prices fell as the dollar rallied to a five-month high against the euro and worries about a Turkish supply disruption eased.

Oil prices have slipped more than 20% since peaking above $147 in July. A further drop in oil prices would be a plus for stocks. But, the housing and credit crisis, sluggish corporate earnings and slow economic growth will continue to drag on stocks.

The dollar rallied versus the euro after the European Central Bank's disappointing outlook on economic growth. The dollar advanced against the yen as well.

Fannie Mae swung to a loss of $2.3bn, or $2.54 per share, due to big reserves for credit losses in the April-June quarter, versus a per-share profit of $1.86 a year ago. Analysts had forecast a loss of 68 cents per share.

The mortgage finance giant also slashed its quarterly dividend and said it will cut its annual operating costs by 10%. Fannie Mae shares slumped 9% in active trade. Fannie's CEO warned of steeper credit market losses ahead, echoing the grim outlook of Freddie Mac.

The rally in the dollar pressured crude oil and a variety of other commodities, which are traded in dollars. COMEX gold for October delivery fell $13.10 to settle at $860.70 an ounce. Silver, platinum and aluminum fell, too.

In the bond market, Treasury prices declined, raising the yield on the benchmark 10-year note to 3.95% from 3.92% late on Thursday.

In Europe, the FTSE 100 in London gained 0.2% at 5489 while the DAX in Frankfurt rose 0.3% at 6561 and the CAC 40 in Paris advanced 0.8% at 4491.

In the emerging markets, the Bovespa in Brazil was down 0.8% at 56,584 while the IPC index in Mexico was up 0.5% at 27,132. The RTS index in Russia tumbled 6.5% to 1722 as military hostilities continued with Georgia. The ISE National 30 in Turkey was down nearly 2% at 50,265.

The uptrend may continue

Market which started off the day on a flat note immediately fell into the negative terrain. From there on it remained weak through out the trading session until buying resumed in the last hour of the trading session. The Banking, Capital Goods and the Metal stocks were in demand which lifted the BSE benchmark Sensex and the NSE Nifty to close above the 15k and the 4,500 levels.

Finally, the benchmark Sensex gained 50 points to close at 15,167 and Nifty was added 6 points to close at 4,529.

Shares of Sterlite Industries surged by over 4% to Rs639 after the company announced that it secured court’s approval for mining Bauxite in Orrisa. The scrip touched an intra-day high of Rs644 and a low of Rs612 and recorded volumes of over 7,00,000 shares on BSE.

Shares of Deep Industries rallied by over 7% to Rs144 after the company announced that it secured a contract worth Rs103mn from Chennai Petroleum for compression of natural gas at Kamalapuram for five years. The scrip touched an intra-day high of Rs146 and a low of Rs132 and recorded volumes of over 1,00,000 shares on BSE.

Allahabad Bank gained by 1.5% to Rs65. The company announced that the board of directors of the bank approved upward revision in BPLR from existing rate of 13.5% to 14% with immediate effect.

However, the above change in BPLR will not be passed on to the existing Housing Loan, Personal Loan, Education and Car / Auto Loan customers. Moreover the above change in BPLR will also be not applicable to the new housing loans up to Rs30 lacs. The scrip touched an intra-day high of Rs65 and a low of Rs62 and recorded volumes of over 1,00,000 shares on BSE.

Sugar stocks extended losses and slipped from days high after government deferred its decision to end curbs on domestic sugar sales. Renuka Sugar was down by 1%, Balrampur Chini slipped 1%, Bajaj Hindusthan slipped 2%.

Shares of Shanti Gears rallied by over 9% to Rs73 after reports stated that Hansen Transmission International owned by Suzlon Energy is in discussion with the company for acquiring between 50-100% stake at around 30% premium to the current market price. If the deal goes through then Hansen Transmission will have to make an open offer for additional 20% of Shanti Gears. The scrip touched an intra-day high of Rs80.8 and a low of Rs71 and recorded volumes of over 5,00,000 shares on BSE.

House of Pearl fell sharply from its high and lost over 6.5% to Rs113. The company announced that Lerros Fashions India Pvt Ltd, a JV of the company with LERROS Moden Gmbh, Germany, has launched its first store in India. The scrip has touched an intra-day high of Rs130 and a low of Rs112 and recorded volumes of over 2,00,000 shares on BSE.

Looking at the pull back in the last hour of Friday’s trading session; Indian bourses may continue its uptrend. However, weak global cues and crude oil prices would prove to be a trend dictator.

Supreme Court okays forest clearance for Posco, Sterlite projects.(BL)
M&M plans to list its newly-formed two wheeler arm on stock markets.(TOI)
Tata Steel may sell some low profit yielding assets of Corus.(ET)
Dr Reddy’s withdraws a proposed issue of 8.41mn share warrants on a preferential basis to promoters.(BL)
Walt Disney has invested Rs1bn for a 15% stake in UTV Global Broadcasting, the broadcasting arm of UTV Software Communications.(BS)
Jaiprakash Associates to invest Rs30bn to build new cement plants.(BL)
BHEL announces it has got an Rs4bn order for setting up a hydro power plant in Rwanda.(FE)
Power Grid Corp. board approves investment proposals worth Rs 94bn.(BL)
Oriental Bank of Commerce said it would soon seek new licenses from the RBI for opening 100 new branches in the country.(FE)
BIG TV, the ADAG group’s soon to-be-launched DTH venture has secured the DTH rights of the Indian Premiere League for US$31.6mn.(BS)
Rashtriya Ispat Nigam unveils Rs50bn modernization plan.(TOI)
Bank of Rajasthan to raise Rs2.5bn by way of PE placements for funding expansions.(BL)
Allied Digital is in the final stages of buying an infrastructure management services capability in the UK.(DNA)
Infosys Technologies to spend Rs12bn over the next ten years for its new facility at Pocharam, near Hyderabad, being constructed in a 450-acre special economic zone. (BS)
Andhra Bank is likely to approach markets to raise tier II capital within a week.(BL)
Hero Honda and Srei Infratructure Finance have acquired NSE shares from IFCI and SCHIL for Rs3,500 per share.(ET)
Ministries of rural development and human resources yet to pay Rs220bn to Food Corporation of India for supplying food grains for mid-day meal and employment schemes.(Mint)
Mercator Lines enters the booming offshore segment by contracting its first offshore oil drilling rig to Greatship India.(DNA)
Indian Oil planning acquisition of 100acres of unused land for Haldia refinery up gradation.(BL)
BSE has invited its two strategic investors Deutsche Boerse and Singapore Exchange to join its board of directors.(FE)
Tata Teleservices to invest Rs80bn over the next 24 months to expand its telecom networks.(ET)
Reliance Communications expected to start nationwide commercial operations of its DTH service from August 15.(TOI)
L&T proposes to raise Rs24bn through securities.(BL)
ONGC Videsh, Essar, Oil India amongst others short listed by Algeria to bid for oil blocks on offer in its latest licensing round.(FE)
K Raghavendra Rao, one of the promoters and MD of Orchid Chemicals and Pharmaceuticals, may initiate talks to buy back its 14.7% stake that is now with Rexcel, a unit pharma major Ranbaxy.(BS)
Lakshmi Mittal is believed to have shown interest in buying low cost carrier SpiceJet.(DNA)
NTPC signs MoU with NHPC, PFC and TCS for a JV company to set up a national power exchange.(BL)
Vodafone explores legal action against Essar setting up a wireless telephony company.(ET)
BSE drops its plan to pick up a stake in the Ahmedabad based National Multi Commodity Exchange.(BL)

Economy Front page

At least six major thermal power stations across the country report that they have run out of coal stocks.(BL)
Private developers need to buy 70% of the land at prevailing market prices with government acquiring the rest as per new policy frameworks for SEZs.(ET)
Consumer durables, FMCG companies considering raising further prices hikes to cushion themselves from high input costs.(TOI)
Steel companies have agreed to hold prices at current levels.(FE)
Government may levy user development fee from September on the new airports at Hyderabad and Bangalore. (ET)
Government announces new import price parity linked subsidy policy for production of additional urea by domestic manufacturers over and above their current rated capacities.(BL)
In the month to July 25, bank credit was lower by Rs66bn on account of a fall in food credit.(Mint)
The committee on financial position of oil companies has proposed fuel price increases.(FE)
Growth in advance corporate tax collection in the first four months of FY09 fell to 18% YoY.(ET)
Railway to introduce specially designed wagons to carry automobiles and charge freight as per number of wagons. (ET)
Cabinet defers a decision to decontrol the sugar industry by amending the Sugar Control and Regulation Order.(FE)
RBI says FIIs may be allowed to take long position in the interest rate futures market.(FE)