Saturday, June 27, 2009

Closing Bell 23 Jun 2009

Closing Bell 23 Jun 2009

Though the markets made good a part of their losses during the final hours of trade, they ended the day in the red. The BSE-Sensex ended lower by around 50 points, while the NSE-Nifty closed lower by about 9 points. The overall decline to advance ratio was poised at 0.8 to 1 on the BSE. Barring select stocks from the oil and gas and power sector, selling activity was witnessed in stocks across sectors with the pack led by banking, metal, fmcg and consumer durable spaces.

Most of the other Asian markets ended the day deep in the red today. The European indices are currently trading in the green. Rupee was trading weaker at 48.68 against the US dollar at the time of writing.

According to a leading business daily, India’s third largest software-services company, Wipro is confident about weathering the global downturn on account of a robust deal pipeline and order book for the current year. The company’s management believes that there have been signs of revival in customer activity and a significant number of talks are underway. Nevertheless, the management maintains its concerns over the impact of proposed protectionist measures in the US. The stock of the company, along with other companies from the IT arena, closed the day in the red.

Telecom stocks ended the day on a weak note led by Tata Communications and Bharti Airtel. As per a leading business daily, Bharti Airtel and RCOM have joined in the discussions along with the French firm Vivendi to buy Kuwait based Zain group’s African business. The deal is believed to be valued at around US$ 12 bn. It may be noted that Bharti Airtel is already in talks with South African telecom major MTN for a proposed merger between them. In recent times, foreign players are scouting to establish their presence in the emerging markets of Africa as this market is not as highly penetrated as the developed markets.

As reported by a leading daily, the World Bank has projected that India, growing at 8%, will become the fastest growing economy in the world by 2010. Second on the list will be China with a GDP growth rate of 7.7%. The two countries belong to the pack of developing economies which are expected to grow at 4.4% by 2010. Excluding these two nations, the GDP for the developing world is expected to shrink by 1.6%. Despite some signs of green-shoots here and there, the bank has maintained its uncertainty about the prospects of the global economy in general.

Markets in Motion

Bajaj Auto upbeat on sales

Alternate bouts of buying and selling activity led the indices to move around in a volatile manner during the previous two hours of trade. The BSE-Sensex index is trading lower by around 40 points while the NSE-Nifty index is trading marginally lower. Currently, stocks from the energy and power spaces are trading firm while those from the realty and metal sectors are leading the pack of losers. The overall decline to advance ratio is poised at 2.2 to 1 on the BSE.

The BSE-Midcap and BSE-Smallcap are also trading weak, down by around 0.8% and 1.3% respectively. The Rupee is trading at 48.84 to the Dollar.

Power stocks are trading mixed. While Power Grid and NTPC are trading higher, PTC is trading lower. As per a leading business daily, Power Grid plans to raise around Rs 30 bn through a follow-on public offer (FPO) by the end of FY10 or early FY11. The company plans to dilute around 13.5% of its equity through the FPO. It may be noted that the government plans to double the transmission capacity in the country to 38,650 MW by 2012, on which it will spend around Rs 1.4 trillion. Power Grid currently accounts for more than 45% of the power transmission capacity of the country. It had planned a capex of around Rs 550 bn during the 11th five year plan to capitalise on the huge opportunities in transmission sector. The company also plans to enter Africa, Central and West Asia. With the proposed FPO, the company would be able to raise additional debt of Rs 90 bn.

As per a leading business daily, India’s second largest motorbike maker, Bajaj Auto expects to sell between 175,000 and 200,000 motorcycles per month from the second half of FY10 on account of the launch of two new models. The company plans to launch one model in July 2009, while the other would be launched towards the end of 2009. It may be noted that Bajaj Auto accounts for around 20% of the total domestic motorcycle market. It sold around 106,373 motorcycles per month during FY09. The company expects to achieve higher sales as well as increase its market share during the current fiscal with the two new launches.Currently, stock of Bajaj Auto is trading lower along with its peer Hero Honda.

Though still trading deep in the red, the Indian markets recovered during the previous two hours of trade. Buying activity in sectors like energy and auto has led to this revival. However, stocks from the realty, metals, and banking sectors are still trading deep in the negative. The overall decline to advance ratio is poised at 2.9 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty are trading weak, down by around 140 points and 40 points respectively. The BSE-Midcap and BSE-Smallcap indices are also trading lower, down by around 1.7% and 2.0% respectively. The rupee is trading at 48.93 to the dollar.

As per a leading business daily, ONGC has discovered oil and gas reserves in three new blocks. One is at the KG basin off the eastern coast of India and contains the gas reserve. The gas discovery from the field is believed to be as rich as Reliance’s D6 block. Though the details of gas reserves from this field have not been divulged, it is believed to have an estimated reserve of around 10 trillion cubic feet. The company has notified these discoveries to the Directorate General of Hydrocarbons (DGH) for approvals. Post a positive signal from the DGH, it will take ONGC around 3 to 4 years to begin production from these fields. This is positive development for ONGC as its last major findings was long back in the 1980s at the Mumbai coast and the reserves from the same do not stand as lucrative now. The stock, along with its peer Reliance Industries is trading firm currently.

Steel stocks are trading weak led by JSW Steel, Tata Steel and SAIL. As per a leading business daily, SAIL plans to reduce its work force by around 15% (around 20,000 employees). The reduction will come by not replacing the retiring employees going forward. Despite the expansion for increasing the capacity to 26 m tonnes per annum (mtpa) by 2011, the company plans to rationalise staff costs to match with global standards. The company already reduced its work force by around 6,000 to 7,000 employees during the last year and plans to slash around 6,000 jobs during the current fiscal. It may be noted that SAIL’s staff costs are higher at around 19% of total sales (as per FY09 numbers), while the same for Tata Steel stand at around 14%.

In line with its global peers, the Indian indices too have opened the day's proceedings on a lower note. The overall decline to advance ratio stood at of 1.6 to 1 on the NSE. Barring select banking and auto stocks, selling is being witnessed across stocks on the Nifty. As regards global markets, the World Bank's weak outlook on global growth and a selloff in commodity prices led the US and the European markets to end in the negative yesterday. The World Bank yesterday predicted that the global economy will shrink 2.9% this year, a deeper fall than the 1.7% contraction it had predicted in March 2009. The Asian markets are also trading in the red currently.

The BSE Sensex is trading lower by around 235 points. The NSE Nifty is down 55 points. The BSE Midcap and the BSE Smallcap indices are also down by more than 1% each. The rupee is trading at 48.73 to the dollar.

As per a leading business daily, Hindustan Unilever (HUL) is deploying its entire portfolio to regain lost market share and drive growth rather than focusing on fewer bigger brands as done earlier. The company has hiked trade margins and has offered incremental margins of 4-5% to bigger distributors with attractive freebies. HUL is also making higher investments in advertising and promotions on smaller soap brands such as Rexona, Breeze or Hamam. It has also reduced prices of detergent brands such as Wheel or Surf to take on growing competition from price-competitive national and regional brands. The move comes on back of HUL losing its market share to competition from established players, regional ones, and newer entrants. During the last quarter, the management had indicated a decline in volumes due to downtrading and had indicated focusing on volume growth. FMCG stocks are trading down currently.

NTPC is close to signing a deal with Reliance Industries (RIL) for gas from the D6 block at US$ 4.2 per mBtu. The deal covers all the power major's gas stations, except Kawas and Gandha. According to the gas utilisation and allocation policy, an empowered group of ministers (EGoM) had approved allocation of 16.7 million standard cubic metres per day (mscmd) of gas from RIL's D6 block for the power sector. Of this, NTPC was allocated 2.7 mscmd. The gas supply deal for NTPC's Kawas and Gandhar projects is currently under dispute. The case is currently being heard by the Bombay High Court. The deal would aid NTPC in its expansion plans. The company has outlined an aggressive generation capacity addition plan for the eleventh five-year plan (2007-12), which will take its cumulative capacity to 46,000 MW by the end of FY12 from the current 30,144 MW. While NTPC is trading marginally up, RIL is witnessing selling pressure.