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Wednesday, December 10, 2008

Smart start, stay cautious


Be slow to form convictions, but once formed they must be defended against the heaviest odds.

After a stimulating start on Monday, the bulls failed to hold on to their gains. We expect something similar today. Though US markets ended in the red, the Indian indices could be off to a smart start. The Asian cues are positive for the time being. Use the gains to lighten and shuffle your positions as the gains could get pared unless global markets boost local sentiment. Conviction, however, continues to evade the market players.

Asian stocks rose for a fourth day as optimism that stimulus plans will boost the global economy lifted commodity producers and automakers. The auto bailout bill in the US is still pending, which probably hurt Wall Street.

The World Bank say Global gross domestic product is likely to increase by 0.9% in 2009, the weakest rate since 1970. The US economy remains a sore point and as some traders point out people have run out of reasons to initiate some buying. Canada, declared itself in recession on Tuesday. In Asia, Japan’s economy sank deeper into recession in Q3. The MSCI Asia Pacific Index has fallen 47% this year.

FIIs were net buyers in Index Future by Rs925cr with increase in open interest by 27,983 contracts (6.2%). In Single Stock Future, they have gone short to the tune of Rs171cr with increase in open interest by 31,186 contracts (3.5%). In the Index Option segment, they were net sellers by Rs340cr. FIIs were net sellers in cash segment by Rs350cr (Provisional). DIIs were net sellers in cash segment by Rs617cr (Provisional).

The Dow Jones fell 240 points or 2.7%. The Standard & Poor's 500 (SPX) index lost 2.3% and the Nasdaq composite fell 1.6%.

U.S. light crude oil for January delivery fell $1.64 to end at $42.07 a barrel.

Suzlon could see some weakness on downgrades by a foreign brokerage.

MTNL could add some weight as it is set to launch 3G services.

Automakers say they have passed on the benefit of 4% cut in excise duty to customers by reducing prices by 3-3.5%. This however is unlikely to trigger accelerated sales. Reports say auto companies are likely to take a hit of Rs10bn on unsold vehicles post 4% excise duty cut.

Construction companies should have some news to cheer with the Government approving 21 highway projects worth ~Rs283bn to be executed in the form of government-private partnership.

India Infrastructure Finance Company Ltd (IIFCL) says it will raise another Rs100bn through tax-free bonds to refinance bank loans to infrastructure projects by March.

The real estate companies’ woes could continue with reports that the government may restrict state-owned banks to offer interest rates to 7-8% on housing loans up to Rs2mn.

SEBI has allowed companies to issue non-convertible debentures along with warrants – which can be converted into shares to Qualified Institutional Buyers.

Cement companies could be hurt on the bourses too today. While fuel rates may have gone down on the road, Indian Railways has hiked the freight rates for cement, coal and coke by up to 8% per ton.

To boost the tourism sector growth, the Government is considering proposals like abolition of the 12.5% service tax on tour packages, reduction in development charges for adding more rooms in the existing hotels and convincing the states to have a 4% uniform luxury tax across the country.

The BSE benchmark index witnessed wild swings on Monday, erasing early gains on the back of profit booking. Further on, with Tuesday being a holiday, traders exited their long positions. The Sensex finally ended adding 197 points, at 9,162, and the NSE Nifty index gained 69 points to close at 2,787.

Shares of Karuturi Global surged higher after the company announced that it concluded a new contract for supply of 50mn roses, an increase of 28% over 36mn roses supplied in the previous year, from Edeka, one of the largest super markets network in Germany.

This order comes at an increased price ranging from 20% to 33% above that of the price received this year. This order will be executed through its various production facilities.

The stock rose over 4.8% to Rs11.7 and touched an intra-day high of Rs11.8 and a low of Rs11.4 and recorded volumes of over 6,00,000 shares on BSE.

RPL gained by over 3% to Rs74.5 after reports stated that the company may commission its new refinery by March and may start producing some products by next month. The scrip touched an intra-day high of Rs78 and a low of Rs73 and recorded volumes of over 72,00,000 shares on BSE.

Dr Reddy's Labs gained by 1.2% to Rs481 after reports stated that the company is considering settling Sanofi-Aventis dispute out of court.

Also reports stated that the company remains in litigation for two patents in the US, while one patent has been dismissed from the case. The scrip touched an intra-day high of Rs492 and a low of Rs477 and recorded volumes of over 17,000 shares on BSE.

Shares of J Kumar ended flat at Rs66.4. The company announced that it received a confirmation of order to construct 16 Skywalk's from Mumbai Metropolitan Regulatory Development Authority (MMRDA) & Maharashtra State Road Development Corporation (MSRDC) out of which J Kumar lnfraprojects Ltd has received work order for Rs5.59.40bn. The scrip touched an intra-day high of Rs74 and a low of Rs66 and has recorded volumes of over 3,00,000 shares on BSE.