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Monday, May 18, 2009

Bulls to chant victory mantra


Victory has a thousand fathers, but defeat is an orphan.

Cong-ratulations to the UPA. Prepare for a major blast off today, notwithstanding the weakness in Asian markets. Nothing less than an upper circuit in the main indices is what we expect. If it doesn’t happen traders and investors will get more time to play around. The stunning triumph of the Congress in the Lok Sabha polls could not have come at a more opportune time. The economic turnaround could actually be accelerated now.

A lot of money that was waiting to be deployed will now make its way into the market. The icing on the cake is that we will have a much stronger, stable and cohesive regime which doesn’t have to bother about the pulls and pressures of coalition politics.

However, don’t lose sight of the global factors. Our own economy remains sluggish. Inflation at consumer level is still quite high, and the fiscal situation is in a mess. There could be a short-term rally in the run up to the budget. However, expectations will have to be realistic. There are bound to be some hiccups along the way including this week.

Key Results Today: Dr. Reddy's, Essar Oil, Essar Shipping, HT Media, Punj Lloyd and Sobha Developers.

FIIs were net buyers in the cash segment on Friday at Rs9.84bn while the local institutions poured in Rs4.32bn. In the F&O segment, the foreign funds were net sellers at Rs2.88bn. On Thursday, FIIs were net sellers at Rs3.46bn in the cash segment. Mutual Funds were net sellers at Rs598mn on the same day.

US stocks fell on Friday, as investors reacted to economic news and word of General Motors' dealership closings. The Dow Jones lost 63 points, or 0.8% to 8268.64 while the S&P 500 index shed 10 points, or 1.1% to 882.88. The Nasdaq Composite index dropped 9 points or 0.5% to 1680.14.

On the week though, all the three key US indices ended in the red. The Dow Jones fell 3.6%, its first weekly drop in three weeks. The S&P 500 lost 5%, also its first weekly loss in three weeks, and the Nasdaq dived 3.4%, representing its first weekly loss in 10 weeks.

Still, the S&P 500 index and the Dow are up 31% and 26%, respectively, from their 12-year lows set March 9.

In currency trading, the dollar gained versus the euro and fell against the yen.

US light crude oil for June delivery fell $2.28 to settle at US$56.34 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery rose $2.90 to settle at $931.30 an ounce.

There was some relatively good news Friday. US industrial production and New York-area manufacturing activity contracted less than economists expected. And a Reuters/ University of Michigan index of consumer sentiment rose to an eight-month high this month. But traders saw in the data little reason to bid up stocks.

Not all the news was positive though. The Treasury Department agreed to extend billions in bailout funds to six big life insurers. The move is good for the insurers but also suggests their problems pose a serious risk to the financial system.

Hartford Financial Services Group said it was eligible for $3.4 billion from the Troubled Asset Relief Program, or TARP, and Lincoln National said it has been initially approved for a $2.5-billion injection. Shares of Hartford fell 1%, and Lincoln declined 0.7%.

GM dropped 5.2% after it began telling 1,100 dealers that their franchise pacts would not be renewed.

Energy stocks slumped as oil slid $2.28 to $56.34 a barrel. Schlumberger lost 3.5%. Devon Energy sank 5.7%.

A growing sense of economic optimism has lifted US shares since the March 9, multi-year lows that many market pros think represent a bear market bottom. But last week brought more bad news than good in the form of weaker-than-expected reports on retail sales, housing and weekly jobless claims.

In addition, Chrysler said it was cutting around 25% of its dealerships and GM announced that it was cutting the first 1,100 of what is expected to be a 40% cut of its dealerships. GM remains on the brink of bankruptcy as it struggles to gain concessions from creditors and its union by the end of the month.

The week ahead brings uncertainty as investors sort through reports on housing, leading economic indicators, jobless claims and a slew of profit reports from retailers.

Across the Atlantic, Barclays led the banking sector higher in Europe on Friday, though losses from drugmakers and food producers kept gains for the broader market in check. The pan-European Dow Jones Stoxx 600 index rose 0.6% to 202.89, with banks the strongest performers. But the index was still down about 3% for the week.

The French CAC-40 index gained 0.4% to 3,169.05. But the German DAX 30 index lost 0.2% to 4,731.50 and London's UK FTSE 100 index declined 0.3% to 4,348.11.

It was the second straight day of losses for the Indian markets. The sharp slide could be attributed to a sell off witnessed in the US and the Asian markets.

Finally, the Sensex slipped by 146 points or 1.2% to close at 11,872 after touching a high of 11,936 and a low of 11,695. The index had opened at 11,744 against the previous close of 12,020.

The NSE Nifty lost 42 points or 1% to shut shop at 3,593. On the other hand, the Small-Cap and Mid-Cap shares posted marginal gains with the corresponding BSE indices gaining by 0.7% and 0.38%, respectively.

Inflation again slipped lower, India’s Inflation for the week ended May 02, 2009 stood at 0.48% as compared to 0.7% for the previous week ended April 25, 2009 and 8.73% during the corresponding week May 03, 2008 of the previous year.

Shares of Maharashtra Seamless gained by 5% to Rs203. According to reports, the company has deferred its plans to set up two separate steel plants by almost two years. The scrip touched an intra-day high of Rs210 and a low of Rs187 and recorded volumes of over 0.1mn shares on BSE.

Shares of Godrej Consumer surged by over 4.5% to Rs147 after reports stated that the company may consider a price hike in September following strong demand. The scrip touched an intra-day high of Rs148 and a low of Rs139 and recorded volumes of over 63,000 shares on BSE.

Shares of Piramal Life Science edged lower by 0.7% to Rs51. The company announced that it received government approval for combination trail of Cancer. The scrip touched an intra-day high of Rs54 and a low of Rs51 and recorded volumes of over 10,000 shares on BSE.

DLF announced that it plans to raise about Rs100bn in over 2-3 years selling its non-core businesses and some land parcels.

The company also said that it plans to list DLF Assets Pvt over 18-24 months and halve its debt by end of fiscal year in March. The stock was ended at Rs249 gaining over 7% after hitting an intra-day high of Rs252 and a low of Rs222 and recorded volumes of over 9.2nm shares on BSE.

Shares of the shipping companies ended with smart gains as the Baltic dry freight index surged 3.7% hitting 2009 high of 2,332 points.

Stocks like SCI surged by over 2.6% to Rs95, GE Shipping rose over 6% to Rs245, ABG Shipyard rallied over 7% to Rs154, MLL advanced by 7% to Rs43 and Bharti shipyard surged over 10% to Rs114.

Shares of Britannia advanced by 2% to Rs1600 after reports stated that the company has taken full control of the Bangalore based bakery foods retailer Daily Bread. The scrip touched an intra-day high of Rs1622 and a low of Rs1564 and recorded volumes of over 2,000 shares on BSE.

All eyes would be on the election results s drama is what we expect on the political front. With the grueling month-long election over, political parties have kicked off post-poll efforts to lure potential partners in crime. This will give rise to speculation, uncertainty and of course increased volatility in the markets.