Market Analysis 25-02-09

Market Commentary 25-02-09

Indian market today ended the day in positive zone on significant buying led by announcement of third stimulus package by the government on 24th February and rate cut expectations. The stimulus includes 2% cut in service tax rates to 10% and reduction in excise duty from 10% to 8%. Along with this firm cues from the global markets also contributed to the northward journey. Though, market came off of the day’s high during final trading hours as few key stocks pared gains. Market was exhibiting a bit of volatility ahead of expiry of month derivative contract on 26th Feb 2009. 

The domestic market today opened on pleasant note supported by positive global markets. The US markets on Tuesday gained momentum after a six-session of losing streak after Federal Reserve chairman Ben Bernanke calmed the increasing fears of bank nationalization plan by the Obama administration. In the domestic arena, second stimulus package for the economy announced on 24th Feb, also lifted the domestic bourses. Further, benchmark indices continued to trade on positive zone on strong buying over the ground. However, during the last trading hours market was not able to hold the momentum as pace of gaining ground restricted and market came off the days’ high. BSE Sensex ended around 8,900 mark and NSE Nifty closed above 2,750 level. From the sectoral front, most of the indices ended in green. Besides, Auto, IT, Teck, Metal, Metal, Oil & Gas, Power and Bank stocks contributed to most of the buying. Midcap and Smallcap stocks also followed the same trend. However, Reality and Capital Goods stocks remained out of favour during the trading session.

Among the Sensex pack 23 stocks ended in green territory and 7 in red. The market breadth indicating the overall health of the market remained positive as 1228 stocks closed in green while 1188 stocks closed in red and 107 stocks remained unchanged in BSE.

The BSE Sensex closed higher by 80.50 points at 8,902.56 and NSE Nifty ended up by 28.6 points at 2,762.5. Broader market indices were in green as BSE Mid Caps and Small Caps ended with gains of 14.53 points and 18.58 points at 2,756.98 and 3,134.69 respectively. The BSE Sensex touched intraday high of 8,995.04 and intraday low of 8,879.72. 

Gainers from the BSE Sensex pack are M&M Ltd (7.90%), Tata Motors (5.87%), Reliance Infra (3.6%), Sterlite Industries (3.20%), TCS Ltd (2.85%), Infosys Tech (2.72%) and Wipro Ltd (2.47%).

Losers from the BSE Sensex pack are Ranbaxy Lab (3.54%), HDFC (2.68%), L&T Ltd (2.08%), DLF Ltd (1.75%) and HUL (1.75%).

On 24th February, the Finance Minister Pranab Mukherjee announced the much-awaited third stimulus package. The stimulus has offered across-the-board cut in excise and service tax rates to save and support the domestic economy. The stimulus includes 2% cut in service tax rates to 10%. The minister announced that on goods that attract 10% excise duty will now be charged at 8%. However, excise rates on items that attract 8% and 4% excise duty will not be changed. Further the excise duty on bulk cement has been fixed at 8% or Rs 230 per tonne. The customs duty on Naphtha will continue beyond March 31, 2009.

According to Goldman Sachs, the combined fiscal deficit of India at around 11% of GDP is now among the highest in the world. The deficit is unlikely to come down in the next few years. Also, global rating agencies like Moody''s, Fitch and S&P have warned that India''s rating may be downgraded. Policymakers insisted that rising deficit is expected to continue, given the government''s increased spending is likely to continue.

On the global markets front the Asian markets which opened before the Indian market, closed higher on the back of overnight gains in the US markets. Shanghai Composite, Nikkei 225, Hang Seng, Seoul Composite and Straits Times index ended up by 5.92, 206.56, 192.66, 2.35 and 3.2 points at 2,206.57, 13,005.08, 7,461.22, 1,6146.79 and 1,067.08 respectively. 

European markets which opened after the Indian market are also trading up. In London FTSE 100 is trading higher by 55.68 points at 3,872.12 and in Frankfurt the DAX index is trading up by 70.39 points at 3,966.14.

The BSE Auto index ended up by (3%) or 76.34 points at 2,622.38 on reduction in excise duty to 8% from 10%. Gainers are M&M Ltd (7.90%), Amtek Auto (6.57%), Tata Motors (5.87%), Bharat Forge (3.57%) and Bajaj Auto (3.47%).

The BSE IT index ended higher by (2.52%) or 51.27 points to close at 2,086.93 on US President Barak Obama''s efforts to set in motion the US economy. Mphasis Ltd (6.77%), TCS Ltd (2.85%), Infosys Tech (2.72%), Wipro Ltd (2.47%) and Oracle Fin (1.97%) ended in positive territory.

The BSE Teck index gained (1.56%) or 26.79 points to close at 1,739.95. Mphasis Ltd (6.77%), Adlabs Films (4.47%), TCS Ltd (2.85%), IOL Netcom (2.75%) and Infosys Tech (2.72%) ended in green.

The BSE Metal stocks gained (1.28%) or 58.57 points to close at 4,642.64 mainly on reports that steel prices are set to come down by up to Rs 600 a tonne following the government cutting excise duty from 10% to 8%. Main gainers are Nalco (4.14%), Jindal Steel (3.70%), Hindalco (2.43%), Welspan Gujarat SR (2.01%) and Sterlite In (1.37%).

The BSE Oil & Gas index closed with increase of (1.03%) or 62.03 points at 6,087.30 as benefited from lower service tax on exploration & production activities which currently stands at 12.36%. Scrips that gained are Cairn Ind (3.22%), ONGC Ltd (2.37%) and Reliance (1.01%).

The BSE Reality index lost (0.39%) or 5.60 points at 1,447.29. Main losers are Anant Raj (4.99%), Mahindra Life (2.77%), DLF Ltd (1.75%) and Housing Dev (0.99%).

Suzlon Energy Ltd closed up by 2.22% as Suzlon Energy Australia Pty Ltd., a step-down wholly owned subsidiary of Suzlon Energy Ltd has entered into an agreement with AGL Energy Ltd for supply of 54 units of Suzlons S88-2.1 MW wind turbine generators translating to 113.4 MW capacity in Australia in 2009.

Hindustan Dorr Oliver Ltd gained 19.40%. The company has informed that the Company has bagged a prestigious order for Uranium Ore Processing Plant from Uranium Corporation of India Ltd (UCIL) worth Rs 441 crores for their Greenfiled Ore Mining and Processing facility of capacity 3000 MTPD coming up at Tumalapalle in Andhra Pradesh on LSTK basis.

Satyam Computer gained 2.62%. The company has got the approval from SEBI for issuing preferential shares to a strategic investor at a price, which can be lower than what rules allowed till now.

Ashok Leyland gained 3.26%, due to likely cut in truck prices following a cut in excise duty may boost sagging demand.

DLF dropped 1.75%. The company has reduced the prices for the flats by up to Rs 13 lakh at its new residential project in Chennai and this is the third city, after Bangalore and Hyderabad, where the price reduction have been announced in the last few weeks. In the coming days, Gurgaon, Panchkula and Kochin may also see similar project launc  

 

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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.

 

Pre-Open

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 passé…

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.

Source : Equitymaster.com