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MID-SESSION Recovery gathers steam
A recovery in Chinese shares triggered a strong intraday rebound on the domestic bourses in early afternoon trade. US index futures also cut losses. Index heavyweight Reliance Industries (RIL) trimmed losses in volatile trade. The market breadth was weak. Capital goods stocks rose. But, auto and consumer durables stocks fell. The BSE 30-share Sensex was down 45.97 points or 0.23%, up close to 170 points from the day's low and off close to 100 points from the day's high.
Year-end profit taking by foreign funds may continue to weigh on the domestic bourses in the near term. The market has come off soon after hitting a record closing high early this month.
Intraday volatility was high as traders rolled over positions in the derivatives segment from the near-month November 2010 series to December 2010 ahead of the expiry of the November 2010 contracts on Thursday, 25 November 2010. The market slipped into the red after a firm start as Chinese stocks fell on rate-hike worries. The market trimmed losses after hitting a fresh intraday low in morning trade. The key benchmark indices came off lows after hitting fresh intraday lows in mid-morning trade. The intraday recovery gathered steam in early afternoon trade as Chinese stocks and US index futures came off lows.
NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was up 0.14% at 20.65. The index had lost 2.41% to 20.62 on Thursday, 18 November 2010. The index had risen 4.34% to 21.13 on Tuesday, 16 November 2010. The index had lost 6.38% to 20.25 on Monday, 15 November 2010, a day after Friday's (12 November 2010) sharp surge. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days.
Chinese stocks recovered from initial losses triggered by reports Beijing might raise interest rates as early as Friday, 19 November 2010, to cool inflation. The key benchmark indices in China and Hong Kong fell by between 0.22% to 0.6%. The key benchmark indices in Indonesia, Japan, South Korea and Taiwan were up by between 0.27% to 0.68%. Singapore's Straits Times fell 0.14%.
US shares surged on Thursday, 18 November 2010, as a closely watched gauge of US jobless benefits hit a two-year low last week and factory activity in the country's Mid-Atlantic region accelerated in November, suggesting the economy's recovery was gaining speed. News that Ireland is closer to accepting financial assistance from the European Union and Great Britain also aided sentiment. Concerns about Ireland's mounting debt had dragged down shares in recent days.
Trading in US index futures indicated that the Dow could fall 6 points at the opening bell on Friday, 19 November 2010. US index futures cut initial losses.
Closer home, Prime Minister Manmohan Singh has been forced to explain to the Supreme Court his failure to probe a huge telecoms scam, in a widening scandal. Solicitor general Gopal Subramanium, representing Singh, will appear before the court by Saturday. Telecoms Minister Andimuthu Raja was sacked at the weekend over accusations he sold telecoms licenses too cheaply, potentially losing the state up to $31 billion in revenues, according to a government audit. On Tuesday, the Supreme Court took the rare step of publicly criticising Singh's slowness in deciding if Raja could be charged and investigated.
On the macro front, the wholesale price index rose 8.58% in October 2010, a touch slower than 8.62% increase in September 2010, data released by the government Monday, 15 November 2010, showed. The annual reading for August 2010 was upwardly revised to 8.82% from 8.5%.
The food price index rose 10.30% while the fuel price index climbed 10.57% in the year to 6 November 2010, government data on Thursday showed. In the prior week, annual food and fuel inflation stood at 12.30% and 10.67% respectively. The primary articles price index was up 13.30% in the latest week compared with an annual rise of 14.87% a week earlier.
Industrial output in September 2010 rose at a much slower-than-expected 4.4% in September 2010 from 8.2% a year ago, government data released on Friday, 12 November 2010, showed. The September IIP data is the lowest in 15 months. Meanwhile, the index of industrial production for August was revised upwards from 5.6% to 6.9%.
The Reserve Bank of India (RBI) at its second quarterly monetary policy review on 2 November 2010 hiked its lending and borrowing rates by a quarter point each, as expected, to tackle inflationary pressures. The central bank signaled a pause in its policy tightening drive that began in October 2009. Based purely on current growth and inflation trends, the Reserve Bank of India (RBI) believes that the likelihood of further rate actions in the immediate future is relatively low, RBI governor D Subbarao said in a monetary policy statement. "However, in an uncertain world, we need to be prepared to respond appropriately to shocks that may emanate from either the global or domestic environment," he added.
The RBI said it will continue to closely monitor both global and domestic macroeconomic conditions. "We will take action as warranted with a view to mitigating any potentially disruptive effects of lumpy and volatile capital flows and sharp movements in domestic liquidity conditions, consistent with the broad objectives of price and output stability", the policy statement said. The Reserve Bank of India (RBI) next reviews monetary policy on 16 December 2010.
Foreign funds have made heavy purchases of Indian stocks this year. Net equity inflow in 2010 stands at $28.64 billion, above last year's $17.45 billion. The annual inflows are at record levels this year.
While global liquidity remains ample, a section of the market is worried that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 80000 crore from equity and debt issue over the next three to six months. Steel Authority of India and Indian Oil Corp are some of the other state-run firms that are planning large share sales in coming months. The $1.7 billion follow-on public offer of state-run Power Grid Corporation received strong response. The issue was subscribed 14.88 times.
Meanwhile, share sales by the Indian government in state run firms Manganese Ore India (MOIL) and Shipping Corporation of India are likely to hit the market by end-November, while an offer by Hindustan Copper is likely in December, Disinvestment Secretary Sumit Bose said.
Chairman of the prime minister's Economic Advisory Council C. Rangarajan, last week, said that the Indian economy has the capacity to absorb capital inflows of up to $70 billion annually without government intervention. "The quantitative easing by the US Federal Reserve may have implications in terms of capital inflows, but as I had indicated earlier, India's current-account deficit will be around 3% of gross domestic product" this fiscal year, C. Rangarajan said.
On the corporate front, the Q2 September 2010 corporate results have been encouraging. The combined net profit of a total of 3414 firms surged 45.2% to Rs 104408 crore on 19.8% growth in sales to Rs 934573 crore in Q2 September 2010 over Q2 September 2009.
At 12:20 IST, the BSE 30-share Sensex was down 45.97 points or 0.23% to 19,884.57. The Sensex rose 52.11 points at the day's high of 19,982.75 in early trade. The Sensex fell 214.42 points at the day's low of 19,716.22 in mid-morning trade.
The S&P CNX Nifty was down 24.45 points or 0.41% to 5,974.35.
The BSE Mid-Cap index fell 0.42% and the BSE Small-Cap index fell 0.1%.
The market breadth, indicating the health of the market, was weak, in contrast with a positive breadth in early trade. On BSE, 1753 shares fell while 1053 shares rose. A total of 80 shares remained unchanged.
From 30 share Sensex pack, 24 fell and rest rose. Reliance Communications, Reliance Infrastructure, HDFC, Hindalco Industries and DLF fell by between 1.35% to 1.77%.
Index heavyweight Reliance Industries (RIL) fell 0.93% to Rs 1022.95, extending recent losses. However, the stock came off the day's low of Rs 1016.20.
Some capital goods stocks rose on bargain hunting. BEML, Larsen & Toubro, Praj Industries and SKF India rose by between 0.29% to 1.41%.
Auto stocks fell on profit taking. Tata Motors, India's largest auto maker by sales, fell 0.74%. The company's global sales rose 18% to 86,705 units in October 2010 over October 2009. Sales growth was led by 20% and 17% growth in the commercial and passenger vehicle segments, respectively. Sales of luxury brands Jaguar and Land Rover (JLR) posted 12% growth to 18,845 units in October 2010 over October 2009. While Jaguar sales declined by 19% to 3,219 units, Land Rover sales continued to see a strong traction, growing by 22% to 15,626 units.
India's top small car maker by sales Maruti Suzuki India fell 1.57%. The company's total sales rose 39.2% to 1.18 lakh vehicles in October 2010 over October 2009.
Bajaj Auto fell 0.72%. The company reported 32% surge in total sales to a 3.7 lakh units in October 2010 over October 2009. The company clocked record motorcycle and commercial vehicle sales in October 2010.
India's largest tractor maker by sales Mahindra & Mahindra fell 2.76%. The stock hit record high of Rs 826.40 on Thursday, 11 November 2010. The company's auto sales rose 34% to 34,495 units in October 2010 as against 25,670 units during October 2009.
But, India's largest bike maker by sales Hero Honda Motors rose rose 0.27%, extending Thursday's 5.46% surge. The company reported its highest ever monthly sales at 5,05,553 units in October 2010, registering a jump of 42.75% over the same month last year.
Car sales in India rose an annual 37.9% in October, an industry body said last week. Firms sold 1,82,992 cars in the month, data from the Society of Indian Automobile Manufacturers (SIAM) showed. Sales of trucks and buses, a barometer of economic activity, rose 18.17% to 50,835 units in October, SIAM said.
Consumer durables stocks fell on profit taking. Blue Star, Lloyd Electric, Rajesh Exports and Videocon Industries fell by between 0.06% to 6.32%.
Bharti Airtel jumped 4.34%, extending Thursday's 3.77% gains. The company added 3 million users in October 2010.
LGS Global rose 0.89%, extending gains for the second day, after the company secured a contract from Ariba Inc, for integrating Ariba products to an SAP based ERP solutions.
Tulsi Extrusions jumped 6.06%, after the company's board approved bonus issue in the ratio of 1:10.
MID-SESSION All sectoral indices on BSE in the red
MID-SESSION
All sectoral indices on BSE in the red
The key benchmark indices cut losses after falling sharply to hit fresh intraday lows in mid-morning trade. Banking and consumer durables stocks led the fall. Index heavyweight Reliance Industries extended initial losses. But, PSU OMCs rose as crude oil prices declined. Most Asian stocks rose while US index futures jumped. Market breadth turned weak in contrast with strong breadth in early trade. All the sectoral indices on BSE were in the red. BSE Mid-Cap index and BSE Small-Cap indices underperformed the Sensex. Reliance Communications slumped close to 10%.
The BSE 30-share Sensex was down 147.30 points or 0.73% off close to 350 points from the day's high and up close to 100 points from the day's low. BSE Sensex fell below the psychological 20000 mark after moving in and out of that level earlier in the day. S&P CNX Nifty fell below the 6000 mark after regaining that level in early trade.
The market pared gains after a firm start. It slipped into the red to hit fresh intraday lows in morning trade. It cut losses after falling sharply to hit fresh intraday lows in mid-morning trade.
In macro news, the government will unveil data on some wholesale price indices for the year through 6 November 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST.
Asian stock markets were higher Thursday as European officials sought a way to fix the region's debt crisis and China appeared poised to cool rising food costs with price controls rather than interest rate hikes. The key benchmark indices in China, Hong Kong, Japan, Taiwan and South Korea rose by between 0.22% to 1.73%.But, the key benchmark indices in Singapore and Indonesia fell by between 0.36% to 0.41%.
In New York Wednesday, stocks ended mixed as concerns that Ireland will need outside help to repay its debts were coupled with a steep drop in housing construction in the U.S. In the U.S., construction of new homes fell 11.7% in October, the Commerce Department reported.
Britain, which is not part of the 16-nation bloc that uses the euro, offered Wednesday to provide additional support to Ireland beyond what it gets from the European Union or the International Monetary Fund.
Trading in US index futures indicated that the Dow could gain 63 points at the opening bell on Thursday, 18 November 2010.
Back home, India's exports in October 2010 rose an annual 21.3% to $18 billion, while imports for the month grew 6.8% on the year to $27.7 billion, Trade Secretary Rahul Khullar said on Monday, 15 November 2010. Khullar said exports could touch $200 billion in the fiscal year that ends in March 2011 (FY 2011). He also said that the trade deficit will not top $135 billion. The trade deficit had widened to a 23-month high of $13.06 billion in August 2010 and Khullar had said the deficit could touch $135 billion for FY 2011, higher than his earlier forecast of $120 billion. The government is targeting close to 15% export growth in the current fiscal.
The wholesale price index rose 8.58% in October 2010, a touch slower than 8.62% increase in September 2010, data released by the government Monday, 15 November 2010, showed. The annual reading for August 2010 was upwardly revised to 8.82% from 8.5%.
Industrial output in September 2010 rose at a much slower-than-expected 4.4% in September 2010 from 8.2% a year ago, government data released on Friday, 12 November 2010, showed. The September IIP data is the lowest in 15 months. Meanwhile, the index of industrial production for August was revised upwards from 5.6% to 6.9%.
The Reserve Bank of India (RBI) at its second quarterly monetary policy review on 2 November 2010 hiked its lending and borrowing rates by a quarter point each, as expected, to tackle inflationary pressures. The central bank signaled a pause in its policy tightening drive that began in October 2009. Based purely on current growth and inflation trends, the Reserve Bank of India (RBI) believes that the likelihood of further rate actions in the immediate future is relatively low, RBI governor D Subbarao said in a monetary policy statement. "However, in an uncertain world, we need to be prepared to respond appropriately to shocks that may emanate from either the global or domestic environment," he added.
The RBI said it will continue to closely monitor both global and domestic macroeconomic conditions. "We will take action as warranted with a view to mitigating any potentially disruptive effects of lumpy and volatile capital flows and sharp movements in domestic liquidity conditions, consistent with the broad objectives of price and output stability", the policy statement said. The Reserve Bank of India (RBI) next reviews monetary policy on 16 December 2010.
Foreign funds have made heavy purchases of Indian stocks this year. Net equity inflow in 2010 stands at $28.53 billion, above last year's $17.45 billion. The annual inflows are at record levels this year.
While global liquidity remains ample, a section of the market is worried that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 80000 crore from equity and debt issue over the next three to six months. Steel Authority of India and Indian Oil Corp are some of the other state-run firms that are planning large share sales in coming months. The $1.7 billion follow-on public offer of state-run Power Grid Corporation received strong response. The issue was subscribed 14.88 times.
Meanwhile, share sales by the Indian government in state run firms Manganese Ore India (MOIL) and Shipping Corporation of India are likely to hit the market by end-November, while an offer by Hindustan Copper is likely in December, Disinvestment Secretary Sumit Bose said.
Chairman of the prime minister's Economic Advisory Council C. Rangarajan, last week, said that the Indian economy has the capacity to absorb capital inflows of up to $70 billion annually without government intervention. "The quantitative easing by the US Federal Reserve may have implications in terms of capital inflows, but as I had indicated earlier, India's current-account deficit will be around 3% of gross domestic product" this fiscal year, C. Rangarajan said.
On the corporate front, the Q2 September 2010 corporate results have been encouraging. The combined net profit of a total of 3338 firms surged 45.3% to Rs 104426 crore on 19.8% growth in sales to Rs 933659 crore in Q2 September 2010 over Q2 September 2009.
At 11:20 IST, the BSE 30-share Sensex was down 147.30 points or 0.73% to 19,719.32. The Sensex jumped 191.30 points at the day's high of 20,056.44 in early trade. The Sensex fell 249.63 points at the day's low of 19615.51 in mid-morning trade.
The S&P CNX Nifty was down 51.75 points or 0.86% to 5,936.95.
The BSE Mid-Cap index fell 1.18%. The BSE Small-Cap index fell 2.37%. Both the indices underperformed the Sensex.
The market breadth, indicating the health of the market, turned weak in contrast with strong breadth in early trade. On BSE, 2209 shares fell while 515 shares rose. A total of 80 shares remained unchanged.
From 30 share Sensex pack, 20 fell and rest rose.
Index heavyweight Reliance Industries (RIL) fell 0.66%. The stock fell for the seventh straight day.
India's second largest mobile services provider by sales Reliance Communications slumped 8.78% and was the top loser from the Sensex pack. Reliance Communications on Tuesday strongly denied having any stake in Swan Telecom, among the companies that India's official auditor claims had benefited in the issue of 2G spectrum in 2008 during the tenure of then communications minister A. Raja.
In the report tabled Tuesday, the Comptroller and Auditor General of India (CAG) said Raja had even ignored Prime Minister Manmohan Singh's advice and allotted radio frequency to new telecom players at low prices, resulting in a revenue loss of anywhere up to Rs.1.76 lakh crore (nearly $40 billion) to the nation.
Shares of oil marketing companies rose after the crude oil prices declined more than 2% on the New York Mercantile Exchange on Wednesday, 17 November 2010. Hindustan Petroleum Corporation (HPCL) (up 0.17%), Bharat Petroleum Corporation (BPCL) (up 1.02%) and Indian Oil Corporation (IOC) (up 0.67%) edged higher. Lower crude oil prices will decrease under-recoveries of state-run oil firms on domestic sale of diesel, LPG and kerosene at controlled prices. The government recently freed pricing of petrol. Light, sweet crude oil declined $1.90 or 2.31%, to $80.44 a barrel on the New York Mercantile Exchange on Wednesday, 17 November 2010 on China rate worry and on strong dollar.
Bank stocks fell sharply on concerns over their exposure to the microfinance institutions. India's largest bank by branch network and net profit State Bank of India (SBI) fell 3.43%, with the stock falling for the second straight day. The bank reported lower than expected Q2 result last week. On a consolidated basis, SBI's net profit fell 22.52% to Rs 2363.95 crore on 14.57% increase in total income to Rs 37925.44 crore in Q2 September 2010 over Q2 September 2009. As State Bank of Indore was merged with SBI with effect from 26 August 2010, the Q2 September 2010 are not comparable with the corresponding period of the previous year. The bank announced Q2 result after market hours on 8 November 2010.
India's second largest private sector bank by net profit HDFC Bank fell 1.57%, with the stock falling for the second straight day. India's largest private sector bank by net profit ICICI Bank fell 1.71% with the stock falling for the second straight day.
SKS Microfinance dropped 20% on Thursday after the microfinance company warned that an ordinance enacted on 15 October 2010 by Andhra Pradesh government on collections could have an impact on its profitability.
Consumer durables stocks fell on profit taking. Blue Star, Titan Industries, Lloyd Electric and Videocon Industries fell by between 1.56% to 5.11%.
VA Tech Wabag advanced 1.24%, after the company secured an order worth around Rs 250 crore from Indian Oil Corporation to set up an effluent treatment plant at Paradip Refinery.
5 MID TERM BUYS
MNM
Recommendation: Buy
MARKET PRICE: Rs 1067.45
TARGET PRICE: Rs 1184
M&M has gone from strength to strength during the quarter. Its market share in overall tractor sales stands at over 40%. It is also expected to benefit from the government's thrust on the rural economy. Tractors volume growth is seen 6-8% in 2HFY10 and 6-8% CAGR over next 2-3 years.
UNION BANK
Recommendation: Buy
MARKET PRICE: Rs 283.80
TARGET PRICE: Rs 324
UNION BANKhas a balance sheet size of over Rs 1 lakh crore. Earnings estimates upgraded by 2% for FY10 and by 4% for FY11. The stock trades at 1.1 times FY11E book value and 4.7 times FY11E earning per share. RoA and RoE will remain at over 1.2% and 25%, respectively, in the next two years.
DECCAN CHRONICLE
Recommendation: Buy
MARKET PRICE: Rs 150.90
TARGET PRICE: Rs 188
DECCAN CHRONICLE (DCHL) is a print media focused company based in Hyderabad. DCHL intends to sell part or its entire stake in its IPL venture, The Deccan Charger Sporting Venture. The team's recent win in the IPL2 will enable the company to get better valuation.
We estimate PAT growth of 44.7% YoY to Rs 65.5 crore in 2QFY10.
PHOENIX MILLS
Recommendation: Buy
MARKET PRICE: Rs 192.80
TARGET PRICE: Rs 220
Phoenix mills has emerged as the leader for large scale, mixed format retailed developments. PML is a low-risk play on the domestic consumption story, without retail specific risks. We estimate PML's revenues and net profit to grow at a CAGR of 58% and 51% respectively, over FY09-12.
SHRIRAM TRANSPORT
Recommendation: Buy
MARKET PRICE: Rs 434.35
TARGET PRICE: Rs 504
We are surprised by the high amount of cash on the balance sheet over last three consecutive quarters. We believe SHTF is consciously keeping higher cash levels on balance sheet learning lessons from the liquidity crunch in 3QFY09 and expected disbursement growth in 2HFY10.
We expect STFC to report EPS of Rs. 37 in FY10 & Rs 49 in FY11.
