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Monday, March 08, 2010

Trespassing 5100!


The only way most people recognize their limits is by trespassing on them.

A bright Monday morning is in the offing as the bulls seem to be in a mood to trespass 5100 comfortably and not be prosecuted. Friday’s smart gains in the US following an encouraging jobs report and higher Asian markets will do the needful as far as opening gains are concerned. European stock benchmarks have also posted healthy gains.

Remaining comfortable above 5100 remains a challenge; but given the momentum in recent times flirting with 5200 seems on the cards shortly. On the downside, 5000 remains a good short-term support.

Overall sentiment has improved slightly post the better than expected Budget. However, in the near term, the market could face some resistance at higher levels. Valuations are not cheap and uncertainties persist on the external front.

On the macro front, things are shaping up well, but much will hinge on how the monsoon unfolds. Concerns over inflation and its fallout on the monetary policy will continue to play on investors’ minds.

Among the factors that could add to the positive sentiment today is the announcement that SEBI has decided, in principle to allow the Stock Exchanges to introduce physical settlement of equity derivatives. However, it has not set any specific timeline for launching the same. The capital market regulator also permitted the Stock Exchanges to introduce equity derivatives contracts with tenures up to 5 years, besides allowing them to introduce derivative contracts on volatility indexes with a suitable track record.

L&T would be in focus as the engineering major will announce further plans for expansion in the power space. Essar Steel could be in the spotlight after the group said it has bought Trinity Coal Corp., the Indian company’s first overseas coal mine acquisition.

FIIs were net buyers in the cash segment on Friday at Rs9.13bn on a provisional basis while the local funds were net sellers of Rs6.61bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net buyers of Rs1.58bn. On Wednesday, FIIs were net buyers of Rs6.92bn in the cash segment. Mutual Funds were net sellers at Rs3.51bn on the same day.

US stocks flared up on Friday, as investors welcomed an encouraging monthly jobs report that helped rekindle hopes of a sustained recovery from the worst recession since the Great Depression days.

A government report showed fewer job cuts by American companies even as the unemployment rate held steady, prompting many investors to bet that the world's largest economic recovery is gaining traction.

The jobs report came on the heels of recent readings on manufacturing, service-sector activity, and retail sales that also showed improvement.

The Dow Jones Industrial Average gained 122 points, or 1.2%, to end at 10,566.20. The S&P 500 index rose 16 points, or 1.4%, to 1,138.69. Both ended at the highest levels since Jan. 20.

The Nasdaq Composite index gained 34 points, or 1.5%, closing at 2326.35, the highest point since Sept. 3, 2008.

Volume improved compared to the previous two sessions, though it still fell shy of the 2010 daily average around 5bn shares. Composite turnover in New York Stock Exchange-listed companies hit 4.3bn shares.

The dollar fell versus the euro and gained versus the yen.

The US Dollar Index, which measures the greenback versus a basket of six overseas denominations, was flat. The cost of one euro rose to US$1.3609, up from US$1.3591 late on Thursday.

Commodity prices also benefited from optimism about the economy, with traders betting on increased demand.

US light crude oil for April delivery rose US$1.29 to settle at US$81.50 a barrel on the New York Mercantile Exchange.

COMEX gold for May delivery rose US$2.10 to settle at US$1,135.20 per ounce.

Treasury prices tumbled, raising the yield on the 10-year note to 3.68% from 3.60% late on Thursday.

US stocks opened higher and built on those gains through the session, with 28 of 30 Dow components rising.

Wall Street ended higher for the week as well, with all three major benchmarks posting gains for the third of the last four weeks. It was a second-straight week of gains for the indexes. The Dow added 2.3% for the week, the S&P 500 gained 3.1%, and the Nasdaq climbed 3.9%.

Some of the lingering worries regarding the health of the US economy were addressed last week following a number of in-line or better-than-expected reports on manufacturing, inflation and the labor market.

Coming to the day's important economic data, US employers cut a net total of 36,000 jobs last month, after jobs fell by 26,000 in January, the government reported. That was short of the expected 68,000 jobs lost, according to a consensus of economists.

The unemployment rate, generated by a separate survey, held steady at 9.7%, versus forecasts for a rise to 9.8%.

It was not immediately clear what kind of impact the severe storms on the East Coast last month had on the results. East Coast blizzards forced temporary closings of some businesses with cities, including Baltimore and Philadelphia, witnessing record seasonal snowfall.

Wednesday's report on private-sector employment from payroll services firm ADP and Thursday's weekly jobless claims report also bolstered optimism that the labour market is on the mend. The US needs employment growth to sustain a recovery from a recession that has cost 8.4 million jobs since Dec. 2007.

Shares of Monster Worldwide Inc and other staffing and job-search companies gained on Friday's jobs report. Monster jumped 3.8% while Robert Half International climbed 4% and Manpower Inc. rose 3.8%.

Separately, the House opted to amend a US$15bn Senate job creation bill before passing it, delaying its passage until at least next week. The bill must now go back to the Senate for approval before President Obama can sign it into law.

Another report showed that borrowing by consumers unexpectedly climbed in January.

In corporate news, Apple shares gained almost 4% after the company said that it would release its much-anticipated iPad tablet computer April 3.

Broadband services firm RCN has agreed to be taken private by ABRY Partners, in a deal worth USUS$536mn in cash plus the assumption of debt. Shares of RCN rallied 23% in unusually active Nasdaq trading.

Biotech InterMune rallied 59% in unusually active Nasdaq trading on bets that pirfenidone, the company's treatment for lung scarring, could get FDA approval.

An FDA panel gave the drug a mixed review, saying there was not enough substantial evidence of the effectiveness of the drug to approve it. However, some investors were expecting an even more negative review and shares surged.

European shares jumped on Friday, extending a winning streak to six sessions after a government report in the US painted a better-than-expected picture of the jobs market in the world's largest economy.

After trading with mild gains for much of the session, the Stoxx Europe 600 index extended its rise post the US jobs data to finish the session up 1.7% at 257.22.

Banks were at the forefront of the advance. Irish lenders were particularly strong.

The French CAC-40 index rose 2.1% to 3,910.42, the UK's FTSE 100 index gained 1.3% to 5,599.76 and the German DAX index added 1.4% to 5,877.36.

German industrial orders also climbed, rising a stronger-than-forecast 4.3% in January. Automakers moved up after the data. Miners also gained in Europe.

The Greek parliament approved a €4.8bn (US$6.5bn) austerity package, seen as a prelude to any European Union (EU) aid for Greece, while thousands of union members protested the measures on the streets outside.

Greek Prime Minister George Papandreou is embarking on a five-day tour of foreign capitals to persuade fellow EU leaders to back Greece as it faces one of its worst economic crises in its modern history.

Meanwhile, a survey showed that Greeks are divided over the austerity measures unveiled this week, signaling waning support for the government's deficit-cutting efforts.

Under EU and financial markets pressure, Greece has announced a new package, including bonus cuts for civil servants, a pension freeze and tax hikes to reduce its huge fiscal deficit.

German Chancellor Angela Merkel said on Friday that Greece has not requested financial support to deal with its debt crisis, according to media reports.


Indian markets ended in the red for the first time after the Union Budget as bulls took a breather after a three day rally.

Markets were choppy and indecisive throughout the day as traders and investors preferred to book some profits around the 5100 levels. After reclaiming the 17,000 levels in the previous trading session, the BSE Sensex was also unable to hold on to the crucial levels. Weak global cues and rising food inflation further dampened the sentiment

India’s Food Inflation rose to 17.87% in the week ended February 20, 2010 as compared to 17.58% in the previous week. Primary Articles inflation declined marginally to 15% in the week ended February 20, 2010 as against 15.84% in the previous week. Non-Food Articles inflation rose to 13.77% as against 12.78% in the previous week.

The BSE Sensex marginally slipped 44 points to end at 16,955 after touching a high of 17,025 and a low of 16,888. The Nifty edged lower by 8 points to end at 5,080.

Equity markets in Asia ended in the red. The Nikkei in Japan fell 1%, while Australia's S&P/ASX ended higher by 0.4%. The Shanghai SE Composite gained 2.3% and Hang Seng index in Hong Kong slipped 1.4%.

In Europe, stocks were trading in the red. The DAX in Germany was down 0.3% and the CAC 40 index in France was down 0.2%. The FTSE in the UK was down 0.2%.

Coming back to India, among the BSE sectoral indices, the IT index was the top loser, losing 1%, followed by the Teck index that was down 0.7% and the BSE Oil& Gas index was down 0.6%.

On the other hand, BSE Realty index gained 2.5%, BSE Consumer Durables index up 1.6% and BSE Metal index added 1.5%. Even the BSE Mid-Cap index gained 0.8% while the BSE Small-Cap index was up 0.8%.

Among the 30-components of Sensex, 15 stocks ended in the positive terrain and 15 ended in the red. Tata Steel, L&T, HIL, SBI and Reliance Infra were among the top gainers.

On the other hand, among the major losers were Infosys, Reliance Industries, ICICI Bank and TCS.

Outside the frontline indices, the big gainers in the broader market were Sintex Ind, Moser Baer, LIC Housing, Gujarat NRE and Bhushan Steel. On the other hand, losers included OBC, Mphasis, Bajaj Holdings and Pantaloon Retail.

Shares of Fame India advanced by 3% to end at Rs88 as Inox Leisure is reportedly planning to hike the open offer price for Fame India to attract minority shareholders and prevent a determined bid by Reliance MediaWorks.

However, Inox’s promoters may not have to decide on a revised open offer immediately, because the rival bids are being examined by SEBI, added reports.

The priority is to counter an attempt by Reliance MediaWorks to persuade SEBI to overturn the original transaction which started it all, the purchase by Inox of 43% in Fame from its promoters, the Shroff family.

Shares of Inox Leisure gained by 1% to end at Rs73.35. The scrip opened at Rs73 it touched an intra-day high of Rs75 and a low of Rs73 and recorded volumes of over 0.27mn shares on BSE.

Shares of Tata Power ended flat at Rs1333. ~0.9%, or 2.25mn shares, change hands in a single block on the BSE. The deal was at an average price of Rs1336 on BSE.

The scrip opened at Rs1335 it touched an intra-day high of Rs1345 and a low of Rs1311 and recorded volumes of over 2.3mn shares on BSE.

Strides Arcolab announced that it has entered into an understanding with Aspen to acquire the facility in Campos, Brazil with related products and IPs. This move comes as a part of Strides Arcolab’s strategy to focus on its Core Specialty injectable business. The consideration for the facility is approximately US$75mn. The acquisition would be completed subject to obtaining regulatory approvals as may be required.

Shares of Strides Arcolab edged higher by 0.5% to end at Rs324. The stock opened at Rs324 it touched an intra-day high of Rs329 and a low of Rs320 and recorded volumes of over 0.4mn shares on BSE.

Shares of Amtek Auto plunged by over 7% to end at Rs169 after ~3% of its equity shares changed hands in multiple transactions. The scrip opened at Rs184 it touched an intra-day high of Rs184 and a low of Rs165 and recorded volumes of over 15mn shares on NSE.

Government plans to offer up to 50% of NMDC Ltd.’s share sale to large investors and will determine the price band in which it will offer the company’s shares latest by March 9, 2010.

The stock edged higher by 0.4% to end at Rs435. The scrip opened at Rs436 it touched an intra-day high of Rs446 and a low of Rs432 and recorded volumes of over 0.4mn shares on BSE.

Fertilizer stocks witnessed renewed buying interest; the government decided to increase urea prices and allow companies to set rates of other nutrients.

Urea will cost 10% more, or Rs5,310 per ton, and prices of nutrients nitrogen, phosphorus, potash and sulfur will be linked to global levels starting April 1, 2010 Information and Broadcasting Minister Ambika Soni was quoted as saying.

Zuari Industries, Tata Chemicals, RCF, Chambal Fert and Nagarjuna Fert were among the major gainers.

Shares of Maytas Infra flared-up by over 19% to end at Rs189 after the company which was taken over by IL&FS has reportedly reached a repayment settlement with one of its lenders HDFC Bank.

Under the agreement, Maytas will now pay only 50% of the outstanding loan of Rs1bn as on January 2009, stated reports.

Sulzer Ltd., Switzerland (Parent Company), an 80% shareholder of the Sulzer India has Intended to acquire the remaining 20% equity shares of the company through an offer.

The company also has Intended to voluntarily delist the equity shares of the company from all the stock exchanges in India where the securities of the Company are listed i.e. Bombay Stock Exchange (BSE).

Shares of Sulzer India hit 20% upper circuit to end at Rs1036.40. The scrip opened at Rs865 it touched an intra-day high of Rs1036.40 and a low of Rs865 and has recorded volumes of over 15,000 shares on BSE.