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Tuesday, September 15, 2009

Casual after casualties!


…And when we fall back into our safety zone, we become complacent.

Complacency can be fatal, especially for the bulls who seem to be in some kind of safety zone for a while. One year since the implosion of Lehman Brothers, things appear to be getting better. But, any casualness or haste could renew fears of a double-dip recession. Great Depression was prolonged due to premature monetary tightening. Hopefully, governments and central banks would have learnt well from history.

The G20 Summit later this month aims to take stock of the situation. There is a clamour for stringent financial regulations to avoid a repeat of the meltdown. Whether that materialises or not remains to be seen. Some are also calling for ending the bonus binge for top bankers to curb their gambling impulses.

We expect a cautious opening due to lack of clear trend in the global markets. The market may not make decisive move upwards over the next few days. The bulls have not been tested really, which leaves them vulnerable to some pull-back. A big crash is not an immediate fear; so don’t panic. Stock specific activity will continue to hog the limelight.

FIIs were net sellers of Rs444mn in the cash segment on Monday on a provisional basis while the local funds pulled out Rs61.1mn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net sellers at Rs4.05bn. On Friday, FIIs were net buyers of Rs3.3bn in the cash segment. With this, their net investments in Indian stocks this year have crossed $8.8bn. Mutual Funds were net sellers of Rs4.3bn on Friday.

US stocks ended modestly up on Monday as investors ignored the renewed trade spat with China, sending the Standard & Poor’s 500 Index to its highest level in almost a year. Gains in utility, financial and industrial shares helped the market overcome an early slump.

The Dow Jones Industrial Average gained 21 points, or 0.2%, to 9,626.80. The S&P 500 index rose 6 points, or 0.6%, to 1,049.34. The Nasdaq Composite index advanced 11 points, or 0.5%, to 2,091.78.

US stocks took a breather on Friday after a five-session winning streak that left the major indexes at the highest levels in nearly a year. Higher commodity prices have supported the recent advance, boosting the underlying stocks. Gains in technology and financial shares added those gains. But oil services, technology and financial shares struggled on Monday.

The US and China, its largest trading partner, are facing a growing rift. Late on Friday, President Barack Obama, responding to complaints from labor unions, said that the US would impose tariffs of up to 35% on tires from China. On Sunday, China said that it would begin the process of imposing tariffs on US cars and chicken meat. On Monday, China asked the World Trade Organization (WTO) to get involved. The conflict precedes the Group of 20 meeting of leaders of the largest and fastest-growing economies in the US next week.

The trade spat and slide in global markets gave a boost to the US dollar, which has been sliding versus other major currencies lately.

President Obama visited Wall Street and talked about financial services reforms on the eve of the one-year anniversary of the collapse of Lehman Brothers. Obama said that the US economy is returning to normal, but that it will take time. He also said that Wall Street must take steps to rebuild its relationship with the public and make sure that it doesn't engage again in the kind of behavior that led to the crisis.

Tuesday is the anniversary of the collapse of Lehman Brothers and buyout of Merrill Lynch by Bank of America. Those events led to the seizure of the global financial markets and the worst economic recession since the Great Depression. On that day, the Dow plunged 504 points.

Eli Lilly said its cutting around 5,500 jobs as part of a bigger plan to save $1 billion by 2011. Shares ended modestly higher.

Sprint shares rallied 11% on published reports that Deutsche Telekom, the owner of T-Mobile USA, is interesting in acquiring the US based phone carrier.

The stronger dollar dragged on dollar-traded commodities Monday, with oil and gold prices retreating.

US light crude oil for October delivery fell 43 cents to settle at $68.86 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery fell $5.30 to settle at $1,001.10 an ounce, remaining above the key $1,000 level.

Treasury prices fell, raising the yield on the benchmark 10-year note to 3.38% from 3.35% late on Friday.

Tuesday brings the August retail sales report from the Commerce Department and, the Producer Price index (PPI), a measure of wholesale inflation, and the Empire State manufacturing index.

European shares fell on Monday for the first time in eight sessions, with miners under some pressure. After gaining for seven sessions and rising 3.4% to close at an 11-month high last week, the pan-European Dow Jones Stoxx 600 index declined 0.3% to 240.93. It finished well off earlier lows, however.

The French CAC-40 index lost 0.1% to 3,730.61, while Germany's DAX index shed 0.1% to 5,620.24 while the UK's FTSE 100 index reversed earlier losses to close up 0.2% to 5,018.85.

The Indian equity markets ended in the red for the first time in six trading sessions on Monday. After, 850 points or 5% rally the BSE Sensex was unable to carry on the momentum further as alternate bouts of buying and selling kept the benchmark indices in a narrow range.

Although, stock specific action was witnessed, stocks like Spice Tele and Bharat Forge were among the top gainers while Apollo Hospital and GVK Power heavily offloaded.

The BSE Sensex slipped 50 points or 0.3% at 16,214 after touching a high of 16,252 and a low of 16,119. The index opened at 16,185 against the previous close of 16,264. The NSE Nifty fell 21 points to shut shop at 4,808.

Cues from the international markets also dampened the sentiment on Dalal Street. In Asia, the Nikkei in Japan slipped by 2.3% at 10,202 while Australia's S&P/ASX ended lower by 1.4% at 4,531. The Hang Seng index in Hong Kong declined 1% at 20,932. However, Shanghai SE Composite in China gained by 1.2% at 3,026.

In Europe, stocks were in the red. The FTSE in the UK was down 0.8%, The DAX in Germany was down 1% and the CAC 40 index in France was down 1%.

Coming back to India, among the BSE sectoral indices, the Consumer Durables index was the top loser, shedding 1%, followed by the Realty index that was down 0.8%. The BSE Teck index down 0.6% and the BSE Capital Goods index was down 0.5%.

However, BSE Auto index was up 1%, BSE PSU index was up 1% and BSE Bankex index up 0.5%. The BSE Mid-Cap index was flat and the BSE Small-Cap index gained by 0.5%.

Among the 30-components of Sensex, 16 stocks ended in the red and 14 ended in the positive terrain. Among the major losers were Sterlite, Hindalco, Grasim, RCom, ONGC and DLF.

On the other hand, Tata Steel, Tata Motors, SBI, HUL and M&M were among the major gainers.

Outside the frontline indices, the big loses in the broader market were Apollo Hospital, GVK Power, GE Ship, Jubilant Org and GMDC. On the other hand, gainers included Spice Tele, Bharat Forge, Bhushan Steel, MMTC and IOB.

Shares of HDIL lost 3.5% to Rs302 after the company announced that the Income tax Department had conducted a raid on the company office premises and promoters residences on 10th & 11th September 2009. During the course of raid, HDIL has agreed to offer ~Rs3.5bn as income to be booked in remaining quarters of financial year 2009-10.

Income of Rs3.5bn as calculated by Income Tax Department are based on initial entries in books of accounts mostly relating to current financial year i.e. 2009-10, which Company would have irrespectively booked during the current financial year on completion of transaction and taxes paid as per provisions of Income tax Act.

Further, the Company would also clarified that, according to the Company there is no undisclosed income, tax evasion, levy of penalty etc for any previous years or current year as reported in various newspaper and media. There will not be any substantial change to tax liability or revision in income booked of earlier accounting years.

Shares of Jet Airways gained by 2.5% to Rs263 after the company announced that it has resumed flights and full normalcy is expected. The airliner has also decided to cut economy ticket prices by a flat 50% on its flagship airline for travel up to September 18, stated reports.

Reports also stated that the company plans to raise capital through the sale of shares to institutions within the next 2-3 months.

Reliance Industries announced that the Hon'ble High Court of Judicature at Bombay has sanctioned the Scheme of Amalgamation of Reliance Petroleum Ltd with Reliance Industries Ltd.

The Hon'ble High Court of Gujarat at Ahmedabad has also sanctioned the Scheme.

The High Court Orders have been filed with the respective offices of the Registrar of Companies and the Scheme has become effective on September 11, 2009 with appointed date being April 01, 2008 and consequently RPL stands dissolved without winding-up.

Shares of Reliance Industries edged higher by 0.3% to end at Rs2146. The stock opened at Rs2125 and made an intra-day high of Rs2159 and a low of Rs2113. Total traded volumes stood at 0.7mn shares.

While, RPL ended with marginal gains, the stock was up 0.8% to Rs132. The stock opened at Rs130 and made an intra-day high of Rs133 and a low of Rs129. Total traded volumes stood at 1.1mn shares.

Shares of Ciba India shot up by over 6% to Rs263 after the board of directors approved the Scheme of Amalgamation of the Company, its wholly owned subsidiary namely Diamond Dye-Chem Ltd and Ciba affiliate Company namely Ciba Research (India) Pvt. Ltd., being the Transferor Companies with BASF India Ltd, the transferee Company.

The appointed date for this purpose has been fixed as February 01, 2010. The share exchange ratio has been determined by independent valuers viz., Ernst & Young Pvt. Ltd. and Deloitte Touche Tohmatsu India Pvt. Ltd.

The exchange ratio has been determined at 90 equity shares of Rs10/- each fully paid-up of BASF India Ltd, for every 100 equity shares of Rs10/- each fully paid-up of Ciba India Ltd, AND 18 equity shares of Rs10/- each fully paid-up of BASF India Ltd, for every 100 (One Hundred) equity shares of Rs10/- each fully paid-up of Ciba Research (India) Pvt. Ltd.

Meanwhile, shares of BASF Index also advanced over 6% to end at Rs310. The stock opened at Rs287 and made an intra-day high of Rs337 and a low of Rs287. Total traded volumes stood at 0.13mn shares.

Shares of Suven Life Science were locked at 5% upper circuit at Rs31.55 after the company announced that it secured two US patents on NCEs. The patents are valid until 2022, 2024. The stock opened at Rs28.85 and made an intra-day high of Rs31.55 and a low of Rs28.85. Total traded volumes stood at 0.12mn shares on BSE.

Shares of Yes Bank gained by 1.5% to Rs177 after the company announced that it raised US$20mn in subordinated debt from France’s Proparco. The bank also plans to raise Rs5bn selling debt by March 2010. The stock opened at Rs176 and made an intra-day high of Rs178 and a low of Rs173. Total traded volumes stood at 0.88mn shares.

NMDC announced that its sales fell 22% in the five months ended August 31, 2009 after Maoist rebels sabotaged pipelines used to transport iron-ore slurry to customers, Chairman Rana Som said.

Sales declined to 9.27 million metric tons from 11.84 million tons in the year-earlier period, Som said. Production declined 9% to 9.54 million tons, he said.

Shares of NMDC ended flat at Rs358. The stock opened at Rs364 and made an intra-day high of Rs367 and a low of Rs354. Total traded volumes stood at 75,000 shares.

Compton Greaves, a unit of Avantha Power & Infrastructure, is reportedly interested in bidding for Areva SA’s transmission and distribution unit and has sought information on the sale.

Shares of Crompton Greaves advanced by 0.5% to Rs306. The stock opened at Rs305 and made an intra-day high of Rs307 and a low of Rs297. Total traded volumes stood at 93,000 shares.