Sunday, October 03, 2010
Gold prices - both spot and futures - touched new all-time highs in New York, as persistent worries about the health of the key economies such as the US, Euro-zone and Japan continued to drive investors to safe havens like precious metals. Silver traded near a 30-year high and platinum rose to the highest level in more than four months. The dollar headed for a third weekly drop against the euro amid speculation that the Federal Reserve will take additional steps to shore up the faltering US recovery. Gold futures for December delivery added as much 0.7% on Friday, to US$1,319.30 an ounce on the Comex in New York. Bullion for immediate delivery in London reached US$1,317.42. Spot gold prices rose 5.3% in the third quarter, the eighth quarterly gain in a row and the best streak since 1979.
Crude oil rose for three consecutive days and was set for its biggest weekly gain since April, buoyed by encouraging economic data on the US and Chinese economies. Oil also rose after OPEC member Ecuador declared a state of emergency after what it called a "coup attempt". Crude oil for November delivery climbed as much as US$1.18, or 1.5%, to US$81.15 a barrel on the New York Mercantile Exchange, the highest price since Aug. 10. It was at US$80.90 at 1:09 p.m. London time. Brent crude for November settlement was up US$1.06, or 1.3%, at US$83.17 a barrel. Oil futures gained 11% in September and 5.7% in the third quarter. This week, the market is up 5.8%, the most since the five days ended April 2.
The dollar was headed for a second weekly decline versus the yen amid speculation that the Federal Reserve will take additional steps to shore up a sluggish US economy. The euro maintained a three-day gain versus the dollar, which fell to the lowest level since March versus the common currency. The US currency is down 1.2% against the yen and 1.6% versus the euro this week. Asian currencies were set for a fifth weekly advance versus the greenback, the longest winning streak since March, after data showed that China’s manufacturing activity improved. The dollar touched US$1.3764 against the euro, the weakest level since March 17. The US currency fell to 83.16 yen, the lowest level since Japan intervened in foreign-exchange markets on Sept. 15. The euro rose against the yen.
After a shaky start to the week, the markets eventually ended with strong gains, thereby extending gains for the fifth straight week. The Sensex touched a high of 20,475, and finally settled with a gain of 400 points at 20,445. The index is now 750-odd points away from its all-time peak of 21,207.
A bill moved in the Senate by the Democrats to bring jobs back to America by granting payroll tax breaks to participating companies was defeated on Tuesday by 53 to 45 votes The measure - A bill to amend the Internal Revenue Code of 1986 to create American jobs and to prevent the offshoring of such jobs overseas - was put to vote on Tuesday and defeated in a vote predictably along party lines. The Business Roundtable, a pressure group comprising the US's top CEOs, who account for US$6 trillion in revenues and employ 12 million people, wrote a letter to the senate arguing for the move to be dropped. The development comes a week after a NASSCOM delegation, comprising representatives of top IT companies such as Infosys, Wipro and TCS visited the US and lobbied with the key Congressmen and corporations. "We welcome the move. The anti-offshoring bill was more of an electoral rhetoric. We had met the Congressmen, key Government officials and American industry last week and expressed our concerns against the protectionist measures," NASSCOM Vice-President Ameet Nivsarkar said. US
President Barack Obama is pushing to end the tax breaks for companies, which ship jobs overseas saying they should go to firms who create jobs in America. The Obama administration has also recently hiked fee for professional visas.
State Bank of India (SBI) revised upwards deposit rates by 25-75 basis points (bps) across various maturities, effective from October 1. But, the country's largest bank left the base rate unchanged at 7.50% p.a. As per the RBI norms, banks have to review their base rates every quarter. This is the first quarterly review of the base rates since it was introduced in July this year. For 91-180 days term deposits, SBI has increased the interest rate by 75 bps to 5.5%. Fixed deposits with maturity period between 1 year and 554 days has been raised by 25 bps to 7%. Interest rate on deposits for 555 days would be 7.5%. Interest rate on term deposits of between 556 days and 1,000 days, under different slabs, has been increased by 50 bps, up to 7.75%, SBI said.
Current account deficit in the April to June quarter widened to US$13.7bn from US$4.5bn in the year earlier, the RBI said. The deficit widened compared to the nearly US$13bn reported in the January to March quarter, which too was a record. The trade deficit for the first quarter of FY11 was higher at US$34.2bn compared with US$25.6bn in the year-earlier period. The merchandise deficit was also higher than the US$31.5bn reported in the January-March quarter. Strong overseas capital inflows helped keep the overall Balance of Payments (BoP) to remain in a surplus at US$3.74bn, compared with US$2.1bn in the January to March quarter and a surplus of about US$100mn in the year-ago period.
Manufacturing activity in India slowed in September after being steady for the past two months, as new orders and output declined, according to a private survey done by HSBC Holdings Plc and Markit Economics. The monthly purchasing managers' index (PMI), based on a survey of 500 companies, slowed to 55.1 in September from 57.2 in August, HSBC-Markit said in a statement. This was the lowest reading since November last year. A reading over 50 indicates expansion while anything below that threshold denotes contraction. This was the 18th consecutive month India's manufacturing PMI has remained above the 50 mark.
India’s economy is set to expand by 8.5% in the fiscal year to March 2011 (FY2010) but persistently high inflation and a rising rupee could undermine future strong growth, says the Asian Development Bank (ADB) in a major new report. The Asian Development Outlook 2010 Update (ADO Update), raised its gross domestic product (GDP) growth figure for FY2010 to 8.5% from ADB’s April projection of 8.2%, while retaining its FY2011 estimate at 8.7%. Growth is being supported by robust investment, increased capital inflows, and stronger industrial output, buoyed by rising consumer demand. The current account deficit forecast was also adjusted to 2.7% of GDP in FY2010, from 1.5% previously to reflect a sharp pickup in trade flows, with exports projected to grow by 18% in FY2010, and imports by around 20%. At the same time, ADB raised its forecast for annual average inflation in FY2010 to 7.5%, up from 5% in April, warning that high food prices remain a near-term concern.
The markets are euphoric and nobody really wants to listen to anything which suggests a slide. Analyzing Nifty on the long term charts, a sharp correction has been seen after Nifty hits seven consecutive record highs on the quarterly charts. The intensity of the correction forces the Nifty to break the low of its previous white candle.
The bulls are having a blast these days and may continue to reign supreme for a while as long as the FIIs keep their money tap open. The Sensex and the Nifty had their best monthly gains since May and rose for the seventh straight quarter, the longest winning streak in two decades. Volume and turnover have been very robust as well, which underlines the strength in the current rally. The momentum may stay with the bulls in India if the external conditions don't deteriorate further as there are no major threats to the domestic story. The latest quarterly earnings will start in a few days and as usual there will be positive as well as negative surprises. But, the market is likely to take them in its stride and move ahead.
India’s rising stock market and a booming economy that’s expanding by 8.5% have boosted the net worth of India’s richest people, according to the latest Forbes’ India Rich List. The combined net worth of India’s 100 richest people is US$300bn, up from US$276bn last year. This year, there are 69 billionaires on the India Rich List, 17 more than last year. Mukesh Ambani, head of Reliance Industries, has topped the latest Forbes’ India Rich List with a net worth of US$27bn, for the third consecutive time. Steel magnate Lakshmi Mittal, remains at No. 2 with a net worth of US$26.1bn. However both are less well off than they were a year ago. Moving up to third position this year is IT outsourcer Wipro’s Azim Premji. His wealth increased to US$17.6bn from US$14.9bn last year amid an improving outlook for the sector. Also improving on their previous ranking to No. 4 are brothers Shashi and Ravi Ruia with US$15bn, more than their last year’s net worth of US$13.6bn. The IPO of their Essar Energy in May, which raised US$1.85bn, was the largest ever listing in London by an Indian company.
The Lucknow bench of the Allahabad High Court ruled that the disputed land in Ayodhya be divided into three parts and be given to the Sunni Wakf Board, Nirmohi Akhara and the group representing 'Ram Lalla'. The land should be divided equally among the three parties. However, the three-judge bench said that the Ayodhya land is essentially the Ram Janmashtami and that the part under the Central Dome is the birth place of the Lord Rama. The bench comprising of Justice Sibghat Ullah Khan, Justice Sudhir Agrawal and Justice Dharam Veer Sharma delivered the verdict in Lucknow. The High Court ruled that the land on which the idol of Lord Rama was installed belonged to the Hindus and should go to them. But, there will be status quo on the Ayodhya land for three months. The title suits of Sunni WAKF Board and the Nirmohi Akhara have been rejected. The Babri Committee and the Hindu Mahasabha are planning to move the Supreme Court against the Allahabad High Court's judgement.
Investors can skip the IPO of Commercial Engineers and Body Builders (CEBBCO). The company manufactures vehicle bodies for commercial vehicles, components for railway wagons, coaches and locomotives and also refurbishes railway wagons. It plans to raise Rs 150.5-153 crore through a fresh issue, predominantly for setting up a combined wagon and EMU (Electric Multiple Unit) coach manufacturing facility with a production capacity of about 1,200 wagons and 150 EMU coaches per annum. A small part of the issue proceeds will also be used for prepayment of loans.
Investors with a long-term perspective can take exposure to the stock of Cox and Kings (C&K), a leading travel and tours operator in the country. Improving trends in inbound and outbound travel, besides C&K's entrenched presence in domestic as well as major global markets, suggest growth potential.
Investors with a medium-term perspective may buy the stock of value retailer Kewal Kiran Clothing (KKCL) given its brand strength, offerings across segments, balanced geographic presence and superior margins.