Friday, February 13, 2009

Indian Markets close with Positive bias


Mirroring their Asian counterparts, the Indian indices began the day on a weak note. After a brief rise towards noon, persistent selling activity led the indices to fall steadily and end the day well below the dotted line. The Sensex closed lower by around 150 points, while the Nifty closed lower by around 35 points. Stocks from the mid-cap and small-cap indices ended marginally higher. While stocks from the realty and auto sectors led the gainers, IT and energy stocks led the pack of losers. Rupee closed at 48.81 against the US dollar. The Asian markets too ended on a negative note today. The European indices are currently trading in the red.


Siemens has bagged a sizable order from SAIL to provide extra high voltage power distribution package for a steel plant. This is a turnkey order with a value of about Rs 2 bn. The scope of work for this order includes design and engineering, supply, civil work, erection, testing and commissioning of gas insulated switch gears, switchyards and transmission line and substation automation systems for individual substations. This order will help Siemens further strengthen its relationship with SAIL. It may be noted that all SAIL plants are equipped with a range of gas insulated switchgears from Siemens. The stock of Siemens ended higher by 2%.


The government has waived off customs duty on newsprint and uncoated paper used for printing of newspapers and light weight coated paper used for printing magazines to provide relief to print media industry. This comes on the back of the newspaper and magazine publishing sector taking a big hit on profitability due to a sharp rise in international prices of newsprint and light weight coated paper, in the face of dwindling advertising revenues. Further, the depreciating rupee also added to the woes. Newsprint forms nearly 48% of the total costs for the newspaper companies. The stock of Jagran Prakashan closed higher by 2% while its peer HT Media ended the day lower by 3%.


Inflation declined by 0.68% to 4.39% during the week ended January 31, 2009 from 5.07% a week ago, mainly on account of a reduction in prices of fuel and some food articles. Incidentally inflation stood at 4.74% a year ago. The inflation level is now within the tolerance level of the RBI.


IIP casts a shadow


The markets continued to trade in the negative territory on account of persistent selling witnessed during the previous two hours of trade. Stocks from the software, pharma and energy sectors are leading the pack of losers, while select stocks from the auto, construction and power sectors are trading higher. The overall decline to advance ratio is poised at 1.5:1 on the BSE.


The BSE Sensex and NSE Nifty are trading lower, down by 150 points and 50 points respectively. However, the BSE Midcap and Smallcap indices are trading in the green, up by 0.3% and 0.8% respectively. The rupee is trading at 48.73 to the dollar.


The Index of Industrial Production (IIP) numbers are out. IIP for December 2008 has fell by 2% as against a growth of 8.6% during the same period last year. This was mainly on account of the current economic slowdown. The manufacturing sector registered a negative growth of 2.5% in December 2008 as against a rise of 8.6% during the same period last year. Mining output and electricity generation grew only by 1% and 1.6% as against a growth of 5% and 3.8% respectively. Consumer durables production fell by around 12.8%.


Energy stocks are trading mixed. ONGC and BPCL are trading lower, while HPCL is trading higher. As per a leading business daily, ONGC expects its bottomline to decline by around 30% in FY10 on a YoY basis on account of the fall in crude oil prices. The company believes that oil prices will remain between US$ 50 and US$ 70 per barrel during FY10. It may be noted that the crude oil prices fell from US$ 146 per barrel in July 2008 to around US$ 40 in January 2009. The company has earned average net realisations of US$ 47 per barrel in the last 3 years.


12:30 pm

Wockhardt receives US FDA nod


The markets continued to languish in the red on account of sustained selling activity witnessed during the previous two hours of trade. Stocks from the software and metals sectors are leading the pack of losers, while select stocks from the construction, power and telecom sectors are trading higher. The overall advance to decline ratio is poised at 1.8: 1 on the BSE.


The BSE Sensex and NSE Nifty are trading lower, down by 85 points and 25 points respectively. However, the BSE Midcap and Smallcap indices are trading in the green, up by 1% and 1.5% respectively. The rupee is trading at 48.71 to the dollar.


Pharma stocks are trading firm led by Piramal Healthcare and Panacea Biotec. Wockhardt has received US FDA approval for marketing ‘Divalproex Sodium’ 250 mg in the US. The approval for marketing 500 mg tablets of the same drug is awaiting US FDA’s final approval. ‘Divalproex ER’ is the generic name for the brand ‘Depakote ER’, marketed in the US by Abbott Laboratories. The product is used for treating various kinds of epileptic seizures, bipolar disorders and migraine. As per IMS, total market for ‘Divalproex ER’ tablets in the US is US$ 910 m of which the 250 mg strength is US$ 114 m. This is a positive development for Wockhardt as it will augment the company’s revenues from the highly competitive US generics market.


Telecom stocks are trading mixed. While Reliance Communications is trading firm, Tata Communications is trading lower. Tata Communications has announced an investment of US$ 430 m in the Asia Pacific region. The company will invest in the development of Tata Communications Exchange, which will meet the outsourcing demand from global corporations to emerging markets. The company is also building a new cable network in the Asian Pacific region to increase data and voice reliability. The investment is part of Tata Communication’s objective of enhancing its global infrastructure with an investment of US$ 2 bn over the next three years.


10:30 am

NTPC to form nuclear JV


Mirroring its Asian peers the Indian markets begun the day’s proceeding on a weak note. While buying is being witnessed in the stocks from the realty, consumer durable and power sectors, energy and software stocks are at the receiving end. The overall market breadth is positive with gainers outnumbering losers by a ratio of almost 1.6 to 1 on the BSE. As regards global markets, the US and European markets ended in the green yesterday. The Asian markets are currently trading in the red.


The BSE Sensex and NSE Nifty are trading lower, down by 80 points and 20 points respectively. The BSE Midcap and Smallcap indices are trading in the green, up by 0.6% and 0.4% respectively. The rupee is trading at 48.71 to the dollar.


As per a leading business daily, NTPC is expected to sign a joint venture (JV) agreement with Nuclear Power Corporation of India Ltd (NPCIL) on February 14, 2009. As per the deal, NPCIL will hold the majority 51% equity in this venture, while NTPC will hold the remaining 49% equity. The proposed JV has already been approved by the boards of both the companies and endorsed by Department of Atomic Energy (DAE) and Atomic Energy Commission (AEC). The JV will set up a 2000 MW nuclear power plant. This would require an investment about Rs 140 bn to Rs 160 bn. At present, NPCIL is the only agency generating nuclear power in country with a capacity of about 4120 MW. This move is in line with NTPC’s plan to have capacity of 75,000 MW by 2017. The stock is currently trading in the red.


Auto stocks are trading firm led by Bajaj Auto and Escorts. As per a leading business daily, Tata Motors has entered into an agreement with Corporation Bank for financing purchases made from the Tata group firm. The bank has lowered their car loan rates and now offers loan up to 85% on road price, for tenure ranging up to 7 years at 11.75% interest per annum. This car loan facility will be available at all branches of the bank across the country. The current interest rate on automobile loans is around 100 to 120 basis points higher. Amidst tough economic scenario this alliance will help Tata Motors attract consumers to buy automobiles on loan. This in turn will help the company boost its sales.



Buffett’s next disclosure


See what Buffett’s been buying

As much as Warren Buffett would like to stick to his words of having an investment horizon of ‘forever’, the man heralded as the ‘Oracle of Omaha’ must disclose his holdings in Berkshire Hathaway and the performance of the same on a quarterly basis to the US Securities & Exchange Commission (SEC). Buffett is known to have evaluated companies based on their stability, competitive advantage and an enduring moat that protects excellent returns on invested capital. The man, who makes most of the investment decisions at Omaha-based Berkshire, is required to tell the regulators about changes to the firm’s equity portfolio every three months. The latest report, for the quarter ended December 31 2008, is scheduled to be filed by the end of this week. It will include purchases and sales made during the worst quarter for the S&P 500 in more than two decades.


While in the first two filings during the nine months of this fiscal Berkshire reported that it spent US$ 9.5 bn on buying shares, the latest quarter found Buffett discovering other interesting opportunities for Berkshire amidst the economic turmoil. Berkshire’s stock price has declined 36% in the past year and its profits have fallen in four consecutive quarters. But Buffett stands undeterred. In fact, he is also reportedly investing his own money into US stocks as prices decline amid the worst financial crisis in 75 years. Having said that, his latest deals seem to have yielded even more favourable terms as Buffett agreed to buy preferred shares in companies that would pay him dividends ranging from 12% to 15%. Are you still surprised at his reticence?


Satyam could have new owner in as early as 10 days

The government-appointed Satyam Computer’s board is slated to lay down the final road map for bringing the fraud-hit firm back on rails in the next 10 days. The company’s board has in the meanwhile claimed that it is in a position to pay employee salaries for the month of February mainly from receivables and temporary bank funding to the tune of Rs 6 bn. It has, however, been clarified that the prospective suitor will have to buy the company as a whole entity to avoid cherry-picking of its businesses.


Home and car loans are pass√©…

While banks may complain of demand for mortgage loans and auto loans having dried up, they have found a surge in borrowers from unexpected quarters. The economic recession and downturn in the job markets have had a significant impact on the educational loan portfolio of banks. Lack of lucrative job opportunities and loss of jobs have led to a surge in demand for educational funding.


Although in the organised sector itself, close to 0.5 m people having lost their jobs in the last three months (as per the Labour Bureau), banks are not anticipating any build up of non-performing assets (NPAs) in the segment given its past history of good repayment rates. In fact, with sufficient liquidity on their books and growth in demand for other categories of retail loans at 3-year lows (less than 15% YoY) banks are expecting growth in the range of 30% to 35% from this basket over the next few months.

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