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Friday, April 10, 2009

Bullion metals drop

Gold and silver both lose as traders un optimist

After three consecutive days of gains, bullion metal ended lower on Thursday, 09 April, 2009. Prices fell as US stocks rallied today buoyed by good earnings forecast by Wells Fargo bank. This decreased the appeal of the precious metal.

Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa.

On Thursday, Comex Gold for April delivery fell $2.6 (0.3%) to close at $882.2 an ounce on the New York Mercantile Exchange. For the week, gold ended lower by 1.5%. Year to date, gold prices are lower by 0.7%.

For the month of March, gold fell 2.1%, down for the first month in five. But the metal gained 4.3% in the first quarter. Before March, for the month of February, gold ended higher by 7.4%. For January, 2009, gold had gained 3.9%.

On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (15.5%) since then.

On Thursday, Comex silver futures for May delivery ended almost unchanged at $12.33 an ounce. Year to date, silver has climbed 9.2% this year. For 2008, silver had lost 24%.

Today morning, Wells Fargo announced that in its first quarter earnings, it expects to earn $0.55 per share for the quarter against an expected $0.24 per share. Leadership from banks and other financial stocks helped bring about broad-based buying in each of the major indices.

In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.

Crude shoots up

Prices rise as Wells Fargo's result boost sentiments

Good earning forecast from Well Fargo lifted oil prices on Thursday, 09 April, 2009. Prices rose as traders became optimist that current recession has bottomed out and demand for energy will only increase in the coming months.

On Thursday, crude-oil futures for light sweet crude for May delivery closed at $52.24/barrel (higher by $2.86 or 5.8%) on the New York Mercantile Exchange. During intra day trading, it rose to a high of $54. For the week, crude ended lower by 0.5%.

Crude ended March trading up 10.9%. It rallied 11.3% in the first quarter. For the month of February, crude prices had ended higher by 1.5%.

Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 68% since then. Year to date, in 2009, crude prices are higher by 14.6%. On a yearly basis, crude prices are lower by 50%.

Today morning, Wells Fargo announced that in its first quarter earnings, it expects to earn $0.55 per share for the quarter against an expected $0.24 per share. Leadership from banks and other financial stocks helped bring about broad-based buying in each of the major indices.

The EIA reported yesterday that crude inventories rose 1.7 million barrels in the week ended 3 April, 2009. Market was expecting a build up to the tune of 2 million barrels. Stockpiles in the U.S., the world's biggest oil consumer, still stood at the highest level in 16 years.

The EIA also reported that gasoline inventories rose 600,000 barrels while distillate stockpiles, which include diesel and heating oil, declined by 3.4 million barrels during the week under review. U.S. refineries operated at 81.8% of their operable capacity last week, up slightly from a week ago. Meanwhile, the EIA also reported petroleum demand over the last four-week period fell 4.4% from a year ago.

Also at the Nymex on Thursday, May reformulated gasoline rose 4.14 cents, or 2.9%, to $1.481 a gallon and May heating oil gained 3.06 cents, or 2.2%, to $1.4288 a gallon.

May natural-gas futures fell 2 cents, or 0.6%, to $3.61 per million British thermal units.

Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

L&T wins order worth Rs6.05bn from water & steel sectors

Larsen and Toubro (L&T) has bagged orders worth Rs6.05bn from the Water and Steel sectors in the last quarter of FY09. The company has secured three orders aggregating Rs4.16bn from the Water Sector and another order of Rs1.89bn from the Steel Sector.

The company bagged a Rs 1.65bn order from the Rural Water Supply & Sanitation Department, Government of Andhra Pradesh, for supply of potable water to 152 inhabitations in the Ananthapur district of the state. The project is to be completed in 15 months.

L&T has also won a Rs1.33bn EPC contract from Delhi Jal Board for design & laying of MS pipeline from the Dwaraka Water Treatment Plant to various areas of Dwaraka, Nazafgarh, Daulatpur, Ujwa and IGI airport (Package 3). The project is to be completed in 21 months.

The company has also secured a Rs1.18bn order from Utkal Alumina International Ltd for design & construction of raw water intake structure, raw water transmission pipeline & reservoir works at their Alumina Plant at Kayagada District, Orissa, to be completed in 17 months.

In the steel sector, the company has won an order of Rs1.89bn from SAIL-IISCO Steel Plant for Civil Works for Rolling Mill, BOF, CCP LDCP Complex, Lime Dolomite Plant at Burnpur, West Bengal, to be completed in 12 months.

Weekly Stock Ideas - Apr 10 2009

Buy India Cements

Buy Aptech

Buy Reliance Capital

Buy Aban

Buy IVRCL Infra

Weekly Newsletter - Apr 10 2009

It's raining gains and holidays. As if the recent truncated weeks were not enough, the exchanges have announced another holiday on April 30 on account of elections. May 1 will of course be closed on account of Maharashtra Day. This means that the settlement will be advanced to April 29, which is Wednesday. Now that's a week later. For the coming week we have earnings even as the Lok Sabha elections get underway. Infosys results and more importantly the management tone for the current fiscal year will be closely followed. The global cues will of course continue to provide cues though overconfident bulls tend to turn things their way these days without any fundamental reason. Though, the market could continue the recent ascent don't forget to keep your seat-belts on. In case you can't steer through a rough ride, go easy on your accelerator.

India is a "flawed democracy"

This designation includes neighbouring states such as Sri Lanka, Thailand, the Philippines, Indonesia and Malaysia, as well as another of the so-called BRIC emerging market giants-Brazil

The vibrant state of India’s democracy is currently being highlighted by preparations for the forthcoming general election-the world's largest democratic exercise. But is India a full democracy? The Economist Intelligence Unit's 2008 Democracy index-based on 60 indicators which measure electoral process and pluralism; civil liberties; the functioning of government; political participation; and political culture-ranks India 35th out of 167 countries, putting it among the 50 countries considered "flawed democracies". This designation includes neighbouring states such as Sri Lanka, Thailand, the Philippines, Indonesia and Malaysia, as well as another of the so-called BRIC emerging market giants-Brazil. However, India is well placed within this category, ranking above all of these nations. With an overall score of 7.8 out of 10, it is just shy of the score needed to be categorised as a full democracy.

"While India’s democracy, in technical terms, is flawed, the country is very close to joining the elite club of full democracies. India’s young citizenry needs to engage with politics more actively and constructively in order to create a favourable democratic culture in the country," says Manoj Vohra, Director of Research with the Economist Intelligence Unit. "India is already well ahead of most emerging economies."

India's relatively strong position owes much to its extremely high scores in the electoral process and pluralism and civil liberties categories; its status as the world's largest democracy, and the country's vibrant free press and pluralistic society have long been justifiably celebrated. In these areas India outscores even some long-established democracies that fall into the designation of "full democracies", including the US and the UK.

Political culture is still relatively weak

However, India fares much worse in the political participation and political culture categories. The existence of the "argumentative Indian" may facilitate public debate, but this does not necessarily translate into a high level of political participation. Voter turnout in the most recent general election, in May 2004, was 58%, but this figure masks extremely wide interstate variations, ranging from 35% in Jammu and Kashmir to 92% in the small north-eastern state of Nagaland. Within political culture, the increasing reliance on unwieldy and sometimes uncooperative coalitions often hinders rather than advances economic reforms, and this works against the country's overall score. India's government functioning score is relatively strong, but it is brought down by lingering issues about corruption and government accountability.

The economic downturn will have a negligible impact on democracy

India is currently experiencing an economic slowdown, but the global economic crisis has had a much smaller effect on India than on most other countries. As a result, there is unlikely to be any direct impact on the functioning of democracy. Given that large swathes of the population, mostly in rural areas, derived relatively little benefit from the economic boom of the past few years, they are now also unlikely to feel much pain as a result of the downturn.

"Other issues, such as consumer price inflation and national security, would have been far more likely to prompt an increase in social unrest than a broad-based cyclical economic downturn," says Vohra.

A brief note on defining and measuring democracy
There is no consensus on how to measure democracy, and definitions of democracy are contested. Having free and fair competitive elections, and satisfying related aspects of political freedom, are the sine qua non of all definitions. However, the Economist Intelligence Unit’s index is based on the view that measures of democracy that reflect the state of political freedoms and civil liberties are not "thick" enough: they do not encompass sufficiently some crucial features that determine the quality and substance of democracy. Thus, the Economist Intelligence Unit’s democracy index also includes measures of political participation, political culture and functioning of government, which are, at best, marginalised by other measures.

The index of democracy covers 167 countries and territories. The index, on a 0-10 scale, is based on the ratings for 60 indicators grouped into five categories: electoral process and pluralism; civil liberties; the functioning of government; political participation; and political culture. The five categories are interrelated, and form a coherent conceptual whole. Each category has a rating on a 0-10 scale, and the overall index of democracy is the simple average of the five category indices.

The category indices are based on the sum of the indicator scores in the category, converted to a 0 to 10 scale. Adjustments to the category scores are made if countries fall short in the following critical areas for democracy:

* Whether national elections are free and fair
* The security of voters
* The influence of foreign powers on government
* The capability of the civil service to implement policies

The index values are used to place countries within one of four types of regime:

1. Full democracies-scores of 8-10
2. Flawed democracies-score of 6-7.9
3. Hybrid regimes-scores of 4-5.9
4. Authoritarian regimes-scores below 4

Govt unveils largest auction of oil & gas blocks

The Government launched the biggest auction of oil & gas exploration blocks even as global energy producers cut investments in the face of falling prices and the worst economic slump since the World War II. The Centre is offering 70 areas for exploration of oil and natural gas, Petroleum Secretary R.S. Pandey said in New Delhi. These include 24 deep-water blocks, 28 shallow-water blocks and 18 onland blocks. The Petroleum Ministry has also offered 10 coal-bed methane (CBM) blocks for exploration in the fourth round of offering such blocks, Pandey said. Bids for the 70 fields would close on Aug. 10, he said. The auction this year will be held in two phases, with the second part to be scheduled after the Government assesses the response to the first, Pandey said. Thereafter, the Government will evaluate the bids, make awards, finalize and sign the contracts under CBM-IV and Production Sharing Contracts under NELP-VIII within 4 months.

The Government has so far awarded 212 oil and gas blocks, under its New Exploration Licensing Policy (NELP) introduced in 1999. About US$10bn has been invested in exploration from 1999 onward until Dec. 31, Pandey said. Asia's third-largest energy consumer, attracted bids for 45 of the 57 areas offered in the previous auction last year, when crude climbed to a record. After seven rounds of NELP, the area under exploration has increased more than four times to 48% of Indian Sedimentary Basin area from 11% before implementation of NELP. Under three rounds of CBM, contracts for 23 CBM exploration blocks have been signed. More than 6 Trillion Cubic Feet (TCF) reserves have already been established in 4 CBM blocks.

Worldwide spending on oil and gas exploration may drop 12% in 2009 to US$400bn, Barclays Capital said. But, the Centre is hoping that global energy producers will be encouraged by the start of production this month from the biggest gas field operated by Reliance Industries Ltd. That will boost interest in the auction, Pandey said on April 2. Promotional road shows for NELP-VIII and CBM-IV have been planned at Mumbai (20th April), Perth (27-28th April), Brisbane (29th April), London (4 -5th May), Houston (7-8th May) and Calgary (14-15th May), and Investors’ Meet at Washington (11-12th May).

Feb industrial production shrinks 1.2% yoy

India's industrial production shrank by 1.2% in February, as the global financial turmoil and economic meltdown offset efforts by the Government and the Reserve Bank of India (RBI) to bolster the local economy, data released by the Centre revealed. The Index of Industrial Production (IIP) for February stood at 272.8, which translates into a contraction of 1.2% as against January's revised growth of 0.4% and a healthy 9.5% expansion in the same month last year, the Ministry of Statistics & Programme Implementation said.

Industrial production was expected to come in at (-)1-2%. December's contraction was left unchanged at (-)0.6%. January's figure was revised from a provisional decline of 0.5% while that of December was revised last month, from a preliminary prediction of a 2% slump.

The Indices of industrial production for Mining, Manufacturing and Electricity sub-sectors for February stood at 180.6, 292.7, and 212.7 respectively, with the corresponding growth rate of (-) 1.6%, (-) 1.4% and 0.7% compared to 0.4%, 0.3% and 1.8% in January. The growth rate for the three components of IIP stood at 7.9%, 9.6% and 9.8%, respectively.

Industrial output during the first 11 months of the current financial year is at 2.8% versus 8.8% in the corresponding period of last year. The cumulative growth during April-February 2008-09 in the three sub-sectors is 2.4%, 2.8% and 2.4% respectively versus 5.2%, 9.3%, 6.6%, respectively in the year-ago period.

As many as eight out of the 17 industry groups showed a positive growth during February compared to the corresponding month of the previous fiscal year. The industry group ‘Machinery and Equipment’ showed the highest growth of 15.6%, followed by 12.6% in ‘Other Manufacturing Industries’ and 6.3% in ‘Beverages, Tobacco and Related Products’. On the other hand, the industry group ‘Metal Products and Parts’ showed a negative growth of 31.3% followed by 28.1% in ‘Food Products‘ and 16.5% in ‘Wood and Wood Products’.

The sectoral growth rate in Basic Goods, Capital Goods and Intermediate Goods in February stood at (-)0.4%, 10.4% and (-)5.4%, respectively as against 7.3%, 10.7% and 8.5% in February 2008. Consumer Durables and Consumer Non-durables recorded a growth rate of 5.7% and (-)5.5% respectively in February, with the overall growth in Consumer Goods b

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Weekly Wrap - Apr 9 2009

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