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Nov 21, '09
 THE WEEK THAT WAS

A mixed week for markets worldwide.

Continuing with the positive run over the past two weeks, the Indian markets ended on a firm note during the week ending 20th November, 2009. Closing just above the 17,000 points mark on Friday, India's benchmark index, the BSE-Sensex recorded a week on week gain of about 1%. In fact, this weekly gain was possible due to the strong buying activity witnessed during the second half of Friday's trading. This sudden strong buying activity was supposedly on the back of the deputy chief of India's Planning Commission, Mr. Montek Singh Ahluwalia indicating that the government has no intentions of imposing a tax to curb the inflow of foreign funds.



















Moving on to global markets, China, Brazil and Singapore were the top performers this week. While China ended higher by about 4%, Brazil and Singapore ended higher by about 2% and 1% respectively. Amongst the top losers were Japan and France, which ended lower by about 3% and 2% respectively. UK and Hong Kong, on the other hand, ended lower by about 0.5% each. The US markets ended the week on a positive note, with the Dow ending higher by about 0.5%.



















Coming to the performance of BSE indices, metal stocks continued to steal the show as they were the top gainers this week as well. The BSE-Metal Index ended higher by about 4% this week. Stocks from the auto and IT space followed suit, with the BSE-Auto and BSE-IT indices ending higher by about2% each. Stocks from the realty and power sectors were amongst the top underperformers this week. While the BSE-Realty Index ended lower by about 0.5%, the BSE-Power Index ended the week on a flat note. Stocks from the engineering space ended the week on a flat note as well.

Moving on to institutional activity during the week, the foreign institutional investors (FIIs) seemed to be on a shopping spree as they invested nearly Rs 21 bn (net figure) during the week. The domestic mutual funds, in contrast, seemed to go in for profit booking this week as they sold investments worth Rs 8 bn (net figure; barring Friday as data was not available at the time of writing). It must be noted that foreign investors have so far bought more than US$ 15 bn of Indian equities in 2009, after selling US$ 13 bn worth of the same in 2008.

Let us take a look at the key corporate developments that took place this week. Telecom major, Bharti Airtel was in the news this week on the back of it launching a new plan that would reduce mobile roaming charges by about 60%. This however, did not seem to go well with the investors as a lot of uncertainty is looming over the ongoing price wars between the Indian telecom companies. It is likely that the company may have gone in for such a move on the back of it trying to compete with the newer players who initiated the local call tariff wars. In addition, Bharti has also been lagging smaller rivals in monthly subscriber additions. It is possible that this move is aimed at ramping up its monthly subscriber additions. These lower charges will also impact the company's profitability to a certain extent.

In other telecom news, the Telecom Regulator of India or TRAI has cleared mobile number portability, a process which allows mobile phone users to retain their numbers while switching service providers. The charges for the same, which are to be borne by the customers, will be a fee of only Rs 19. While subscribers in Delhi, Mumbai, Kolkata and category 'A' circles (such as Maharashtra, Karnataka, Tamil Nadu, Gujarat and Andhra Pradesh) will be allowed number portability from the new year, the rest of the country will have the facility from March 2010.

Shipping stocks were in demand this week on the back of the surge in freight rates in recent times. With the Baltic Dry Index gaining by about 110% over the past two months, the prospects of shipping majors are expected to improve in the coming future. This surge in freight rates is mainly on the back of an increase in import of iron ore and food grains by China. It must be noted that at current levels, the Baltic Dry Index is at its 14-month high. Amongst stocks forming part of the BSE- 'A' Group, shipping major, G.E. Shipping was amongst the top five gainers this week.

The stock of wind turbine maker, Suzlon energy ended the week higher by about 9%. This was on the back of the company successfully selling a 35.2% stake in its subsidiary Hansen Transmissions. This has allowed Suzlon to raise about Rs 17 bn via this stake sale. Post this sale, Suzlon's stake in Hansen will stand at 26%. As per the management, it will continue its existing relationship with Hansen which is a strategic supplier for the company. Significantly, all other things including the supply pact and Suzlon's representation on the board of Hansen will remain unchanged. The funds raised via this stake sale will go towards easing the liquidity position of the company and reducing the debt on the company's books which stood at Rs 165 bn on a consolidated basis.

Recording a weekly gain of 14%, pharmaceutical major Glenmark Pharma was the top gainer amongst stocks forming part of the BSE 'A' Group. This was on the back of the company signing two major agreements with US based Medicis Pharmaceutical Corporation. As part of these agreements, Glenmark will co-develop a dermatological product with Medicis, for which it will receive US$ 5 m as one-time payment. Further, Glenmark Generics (the company's generics subsidiary) has also agreed to settle all pending patent issues with Medicis for two of its products. As per reports, Medicis will conduct phase-III clinical trials (spread over 3 years) of Glenmark's patented new drug delivery system for the treatment of acne. Glenmark will be receiving milestone payments at the end of each stage of drug development. And if the product is commercialised in US, it will also get royalty for the same. This is a positive for Glenmark given that it has witnessed some setbacks in its R&D programme in the past one year.

Coming to economic news, during the week the Centre for Monitoring Indian Economy (CMIE) revised upwards, its FY10 GDP growth guidance for the Indian economy to 6.2%, from 6% earlier. The upward revision in the GDP projection supposedly comes on the back of a better performance of the economy in the first half of the fiscal. Interestingly, CMIE had raised the GDP growth forecast to 6% in October from 5.8% announced in September. So this revision comes close on the heels of the last one.

Now, while the CMIE may be of the view that the situation of the economy is improving, the economists, whom the RBI surveys think otherwise. As per the survey, the GDP growth is estimated slightly lower at 6%. It may be noted that the economists surveyed by the RBI have lowered their estimates from 6.5% earlier. The main reason attributed for the same is the weak agriculture output. As for the industrial growth, growth estimates have been revised upwards from 4.8% to 6.3%, while for the services sector, there has been a slight downward revision from 8.3% to 8.1%.




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Nov 21, '09
 DERIVATIVES:THE WEEK THAT WAS

Markets will exhibit extreme volatility as we enter into the expiry week; but F&O indication suggest extreme bullishness with fresh long build-up in the December series so early.

Aggressive short covering in the November series nifty and stock future during the beginning of the current week resulted in excellent start for the underlying during the beginning of the current week. However as the week progressed, there was visible activity in the December series index and stock futures. Fresh short built-up was witnessed in the nifty future as well as some of the stock futures early. Besides there were aggressive call writing of 5000 and 5100 strikes November call on the previous two days. The market opened the week with no major domestic or international triggers besides the international market activity. Thus the movement was expected to be horizontal as was witnessed during the past 4 days. However on Friday sighting firm opening by the European market the domestic index surged higher to recover the days loses and post higher. Finally the S&P Nifty closed at 5052.45 on Friday rising 63.45 points higher as compared to the previous closing. The nifty future closed at a huge premium of 13.80 points at 5066.25 on Friday. The volumes were significantly higher at Rs 98015.39 crore understandably due to significant interest in the December series as well. The average volume in the futures and option (F&O) segment during the week ended 20th November 2009 was Rs 74819.73 crore. The dramatic recovery of the index during the second half on Friday can be mainly attributed to the huge short covering in the nifty as well as the stock futures in the current series with simultaneous fresh long positions being built in the December series.

For e.g. Nifty November future shed 14.48 lakh shares in open interest (OI) on Friday with simultaneous fresh addition of 21.76 lakh shares in December series. The Nifty November future OI stood at 2.24 crore shares whereas that of December series stood at 80.06 lakh shares. Similar trend was witnessed in some of the front-line index futures also.

Reliance December series added 2.73 lakh shares in OI to take the total OI to 11.1 lakh shares. Tata Motors November series shed 3.73 lakh shares whereas December series added 1.96 lakh shares. Same was the scenario in almost all of the frontline stock futures.

Other major front-line stock futures viz- Infosys, ICICI Bank, DLF and Maruti added significant long OI in the December series as the current months shorts were covered.

Overall the market wide OI on Friday stood at 190.70 crore shares, thus gaining by 5.85 crore shares as compared to the previous trading day. Index future added just 6 lakh shares in OI whereas the major addition was witnessed by the stock futures, which added 4.84 crore shares.

In the nifty option there was fresh put writing of 4900, 5000 and 5100 strikes in the current series whereas there was aggressive covering of the call wrote earlier signifying bullish trend. Especially the 5000 strike call shed 15.42 lakh shares OI. Besides 5100 strike call also witnessed unwinding of 7.28 lakh shares in OI.

The 4900, 5000 and 5100 strike puts added 3.16 lakh shares, 9.87 lakh shares and 7.18 lakh shares in OI to take the total OI of these strikes to 57.95 lakh shares, 53.08 lakh shares and 24.37 lakh shares respectively. The 5000 strike call OI stood at 30.37 lakh shares, while that of 4900 and 5100 strikes stood at 22.92 lakh shares and 40.89 lakh shares respectively.

As we enter into the expiry week the trend looks positive although the markets will exhibit extreme volatility, which is usual during the expiry week. F&O indication suggests extreme bullishness. The fresh long build-up in the December series so early, though unusual is very positive.




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Nov 20, '09
 Market Commentary

Sensex regains 17,000 mark as RIL jumps.

The key benchmark indices extended gains to hit fresh intraday highs at the fag end of the trading session on firm European stocks. Comments by the deputy chairman of the government's planning commission that the government is not considering imposing a tax to curb an influx in overseas funds also helped ease worries of likely measures from policymaker to stem inflows. The BSE 30-share Sensex was provisionally up 246.60 points or 1.47%, up close to 395 points from the day's low.

The BSE Sensex regained psychological 17000 mark. The S&P CNX Nifty regained the psychological 5,000 mark after falling below that level on Thursday, 19 November 2009. Metal, banking and IT stocks jumped. Index heavyweight Reliance Industries (RIL) vaulted.

Intraday volatility was high. The market cut losses in early after a weak start triggered by lower Asian stocks and overnight fall in US stocks. The market once again slipped into the red after moving into positive zone for a brief period in morning trade. The market recovered from lower level in mid-morning trade. However, the intraday recovered proved short-lived. The market lost ground later. The Sensex hit a fresh intraday low in afternoon trade. A solid intraday rebound was witnessed later as European stocks rose. The market extended gains in late trade.

Plan panel deputy chairman Montek Singh Ahluwalia said in an interview to a news agency on Friday, 20 November 2009 that he does not see capital flows creating asset bubble. He also doesn't see possibility of the government imposing tax to curb capital flows. Ahluwalia said foreign funds are needed for developing infrastructure such as road projects and are unlikely to create asset price bubbles.

Bubbles only happen if you can't use the money productively, Ahluwalia said. We should be able to use the money productively, he said. On Wednesday, 18 November 2009, Finance Minister Pranab Mukherjee said India would have the tools to deal with an influx of foreign capital inflows if they become disruptive, but they are not a concern yet.

Fears that policymakers may consider measures to curb excessive capital inflows had spooked equities on Thursday, 19 November 2009. A latest move by Brazil to try to contain the appreciation of its currency triggered such concerns. Brazil took another step on Wednesday, 18 November 2009, to try to contain the appreciation of its currency, unveiling a 1.5% tax on certain trades involving American Depositary Receipts issued by Brazilian companies. The Brazilian government, last month, implemented a 2% financial tax on foreign inflows into stocks and fixed income investments.

Among other overseas markets, South Korea announced measures on Thursday aimed to tightening controls over currency liquidity to make the banking system less vulnerable to the capital flight. The Financial Services Commission said it will limit the size of forward foreign exchange transactions that South Korean companies can enter into, to a total value of not more than 125% of the underlying transactions they are hedging against, which could mean less-than-expected selling of dollar-forwards by exporters in the future. Taiwan has already banned foreigners from investing in time deposits

A global glut of liquidity has pushed stock markets across the globe sharply higher since March this year. Governments and central banks around the world have injected trillions of dollars in the past one year or so to pull the world out of a most severe recession since the 1930s Great Depression.

The industry body Assocham on Tuesday, 17 November 2009, suggested that foreign institutional investors (FIIs) should be charged a tax of 2% of their money pumped into the stock market to prevent further rise of the rupee and also an asset-bubble. At a quarterly policy review late last month, the Reserve Bank of India (RBI) said there were signs excess liquidity is seeping into asset prices.

Imposing the tax would help the RBI to manage rupee at reasonable levels to safeguard and support Indian exporters, hit hard by rising input cost and appreciating rupee, Assocham said. The rupee has appreciated over 5% against the US dollar in the last six months. Indian stocks have risen sharply this year on robust inflow from foreign funds. Foreign funds have bought stocks worth Rs 73786.80 crore so far in calender 2009.

Meanwhile, Prime minister Manmohan Singh leaves for a landmark visit to Washington on Saturday. Though there are no big-ticket items on the agenda, it is being pitched as an important event in the diplomatic calendar of both countries.

In overseas news, the Bank of Japan (BoJ) Governor Masaaki Shirakawa said there was no change in the BoJ's stance on maintaining very low interest rates to support the economy. The Boj at a regular policy meeting on interest rates today, 20 November 2009, unanimously left its overnight call-rate target at 0.1% as widely expected. The BoJ also offered an upbeat outlook on the nation's overall economy, saying that financial conditions continue to show signs of improvement, exports and production continue to increase, and the decline in corporate-capital outlays appears to be ending.

But although economic downside risks have diminished somewhat, the bank said a self-sustaining domestic-demand recovery was still not assured, and that it will maintain its accommodative policies and provide steady support to help the economy recover. Analysts expect the BoJ to maintain its extremely accommodative policy at least through the end of 2010.

Closer home, equities may remain volatile over the next few days as traders rollover positions in the derivative segment from November 2009 series to December 2009 series ahead of the expiry of the near month November 2009 contracts on Thursday, 26 November 2009.

The business confidence in India has reportedly surpassed the level that prevailed before the financial crisis seized economic growth prospects, according to the latest NCAER (National Council of Applied Economic Research)-MasterCard Worldwide Index of Business Confidence. The Business Confidence Index (BCI) reported a sharp rise of 21%, with a rating of 143.7 points in October 2009, compared with 118.6 points in July 2009. BCI ratings in April 2009 were at their lowest, at 81.6 points, after the global financial crisis hit world economies.

While the business confidence index continued on the upward trajectory, the political confidence index released by NCAER showed a slight dip from the previous quarter. As it was at its all-time high in the previous quarter, since its inception in October 2004, the marginal downward correction is on expected lines.

Asia is leading the global economy out of the deepest downturn in decades but the recovery will be marred by high unemployment and huge government debt across the industrialised countries, the Organisation for Economic Co-operation and Development (OECD) said on Thursday.

Central banks and governments in major Western economies should prepare for a gradual upwards shift in ultra-low interest rates and for fiscal consolidation once recovery is stronger, but they will only need to move in late 2010 at the earliest given that inflation is so low, it said in its Economic Outlook. The Paris-based Organisation for Economic Co-operation and Development raised its global growth forecast for 2010 to 3.4% from the 2.3% it was predicting as recently as June, after an estimated contraction of 1.7 % in 2009.

In the twice-yearly report, the OECD lowered its estimates of the scale of this year's recession and substantially raised most of its forecasts for growth in 2010, when it said the economy would remain dependent on government life-support. India, which likewise weathered the crisis with growth of an estimated 6.1 % in 2009, could expect 7.3% growth in 2010 and a bit more in 2011 it said.

The winter session of Parliament on Thursday got off to a stormy start with an aggressive Opposition disrupting Lok Sabha proceedings on the issue of a `bitter' harvest of sugarcane in the wake of inadequate support price. However, Prime minister Manmohan Singh said the government will amend sugarcane pricing ordinance in farmers' interest. The government has agreed to change a new sugarcane pricing rule, Railways Minister Mamata Banerjee said after a meeting of senior government ministers on Friday, 20 November 2009.

Meanwhile, the bill to reform the insurance sector is unlikely to be cleared by the parliament's winter session, a finance ministry official said on Thursday. The government has set reform of the insurance sector as a priority for the winter parliament session that began on 19 November 2009. The bill, which was stalled in the last parliament, proposes raising the foreign investment limit in insurance companies from 26 % to 49%. The government also wants to open up the pension sector to private and foreign firms and give equal voting rights to foreigners in private-sector banks, which are currently limited to 10% irrespective of their actual holding.

Meanwhile, the initial public offer of Cox and Kings, a global tour operator, was subscribed 3.59 times at 15:00 IST, on the last day of the bidding for the issue on Friday, 20 November 2009.

European shares on Friday rebounded from the previous session's sharp falls and snapped a three-day losing run, aided by gains in commodity stocks on firmer raw material prices but Fiat fell on a UBS downgrade. The key benchmark indices in France, Germany and UK were up by between 0.67% to 0.77%.

Asian stocks were trading mixed on Friday after Merrill Lynch & Co. cut its outlook on the global semiconductor industry and commodities retreated. The key benchmark indices in China, Hong Kong, Japan, and Taiwan fell by between 0.37% to 0.99%. But some markets were in green. The key benchmark indices in South Korea, Indonesia and Singapore were up by between 0.01% to 0.63%.

Japan's deputy prime minister Naoto Kan Friday said the nation's economy is in a deflationary phase and that the government will convey its view to the central bank.

Bank of Japan Governor Masaaki Shirakawa said on Friday there is no big gap in the views of the central bank and the government that the country is experiencing sustained price falls.

Trading in US index futures indicated Dow could indicated a steady opening of US stocks on Friday, 20 November 2009 after Thursday's steep slide.

Senior US Federal Reserve officials said on Thursday inflation is not an immediate threat as a weak economic recovery and a grim outlook for jobs keep price pressures in check. The sanguine nature of the central bankers' views on inflation reaffirmed investor expectations near-term rate hikes are not in the cards. Charles Plosser, head of the Federal Reserve Bank of Philadelphia and Richard Fisher, his counterpart at the Dallas Fed, said the US recovery was underway but noted risks to growth remain.

US markets lost ground on Thursday as semiconductors dragged tech shares lower after a brokerage's bearish view of the industry and doubts about the strength of the economic recovery cut the appetite for risk. The Dow plunged 93.87 points, or 0.9%, to 10,332.44. The S&P 500 index was down 14.90 points, or 1.3%, to 1,094.90, while the Nasdaq Composite index fell 36.32 points, or 1.7%, to 2,156.82.

The US economic news was mixed. Jobless claims were unchanged last week but the prior week was revised up by 3,000 claims. Continuing claims came in at 5.61 million. There was some disappointing news on the housing front - mortgage delinquencies rose to 9.64% of all loans outstanding in the third quarter and foreclosures jumped to 4.47% to a total of 14.41%, another new record.

Leading indicators rose 0.3% in October 2009, slightly lower than expected. And the Philadephia Fed branch said its gauge of regional manufacturing activity rose to 16.7 in November 2009 from 11.5 in October 2009, beating expectations.

As per provisional figures, the BSE 30-share Sensex was up 246.60 points or 1.47% to 17032.25. The Sensex fell 149.90 points at the day's low of 16,635.75 in afternoon trade. The Sensex rose 255.74 points at the day's high of 17041.79 at the fag end of the trading session.

The S&P CNX Nifty was up 70.95 points or 1.42% to 5059.95 as per provisional figures.

The market breadth, indicating the overall health of the market was positive. On BSE, 1458 shares advanced as compared with 1230 that declined. A total of 99 shares remained unchanged. The breadth moved alternatively between negative and positive zone throughout the day.

From the 30 share Sensex pack, 26 rose and rest fell.

The BSE Mid-Cap index rose 1.22% and the BSE Small-cap index rose 0.41%.

BSE clocked a turnover of Rs 5371 crore, higher than Rs 5092.15 crore on Thursday, 19 November 2009.

Energy major Reliance Industries (RIL) rose 2.41% to Rs 2132.15. The stock came off the day's low of Rs 2051. Reliance Natural Resources (RNRL) told the Supreme Court on Thursday that Reliance Industries had the full marketing freedom for Krishna-Godavari gas and accused it of influencing oil ministry officials in getting the price hiked for state-run NTPC.

The company also sought to drive home the point that the government's contract with RIL was to share the production of gas from Krishna-Godavari basin with the option to take such a share either in cash or kind. The court is hearing the dispute over the supply of 28 million units of gas for 17 years at $2.34 per unit to Anil Ambani-led RNRL from the gas fields off the Andhra Pradesh coast, awarded to Mukesh Ambani's RIL. The price, tenure and quantity were based on a family re-organisation pact of 2005, but RIL subsequently said it could only sell the gas for $4.20 per unit, as this was the price, the company claimed, fixed by the government.

Meanwhile RIL plans an aggressive exploration campaign, investments in petrochemicals and overseas acquisitions as India's top company by market capitalisation prepares itself for the next phase of growth. The company will work towards attaining global scale for its conventional energy platform petrochemicals, refining and oil and gas exploration and invest in its new businesses such as retailing and alternative energy, chairman Mukesh Ambani said at the company's annual meeting of shareholders on 17 November 2009.

RIL has set 27 November 2009 as the record date for a liberal 1:1 bonus share issue.

IT stocks reversed early losses triggered by a US brokerage downgrade on health of the global chips industry. India's second largest software company by sales Infosys rose 0.6% to Rs 2423.90even as its ADR fell 2.11% on Thursday. The stock came of the day's low of Rs 2382. Infosys BPO, the business processing outsourcing subsidiary of Infosys Technologies, last week, announced the signing of a definitive agreement to acquire all of the outstanding interests of McCamish Systems LLC, a premier business process solutions provider, based in Atlanta, Georgia in the United States.

The acquisition is expected to be completed later this year subject to the satisfaction of certain closing conditions. The upfront consideration for the deal is $38 million with up to an additional $20 million payable to the sellers if McCamish Systems achieves certain financial targets in the future. The announcement was made on 12 November 2009.

India's largest software company by sales Tata Consultancy Services (TCS) rose 2.27% to Rs 695. The stock came off the day's low of Rs 670.20. The company recently secured a 150 million pounds software implementation contract for 15 years from Cardiff city council, UK.

India's third largest software company by sales Wipro rose 1.03% to Rs 652.05. The stock came off the day's low of Rs 630.40. Wipro subsidiary Infocrossing signed a five-year deal with the US-based Cliffs Natural Resources Inc, an international mining and natural resources firm, to provide IT infrastructure services, the global software major said Thursday.

Wipro, sees robust deal pipeline on the back of improving IT demand worldwide, Suresh Vaswani, joint chief executive said on 10 November 2009. The company said on 5 November 2009 it had agreed to buy some personal care businesses of Yardley for about $45.5 million, adding to its consumer goods business. Wipro said it had signed an agreement with UK-based Lornamead group, which owns the Yardley brand, for the businesses in Asia, the Middle East, Australasia and some African markets.

Banking shares reversed early losses. Hopes of consolidation among PSU banks boosted shares of state-run banks. Union Bank, Bank of Baroda and Punjab National Bank, Bank of India and Canara Bnank rose by between 1.73% to 4.66%.

As per reports, Union Bank, Bank of Baroda and Punjab National Bank are keen on acquiring Corporation Bank whereas Canara Bank and Punjab National have shown interest in acquiring Dena Bank. As per reports, chiefs of Punjab National Bank, Canara Bank, Union Bank of India, Bank of India and Bank of Baroda met Finance Ministry official on Wednesday, 18 November 2009, to discuss the pros and cons of consolidation among banks in India.

India's largest bank by net profit State Bank of India (SBI) rose 2.74% to Rs 2343. The stock came off the day's low of Rs 2242. State Bank of India said on 9 November 2009 said it had entered into an agreement with T. Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company. State Bank currently holds 25% in each of the companies and after the sale its holding would be reduced to 18.5%, it said in a statement.

SBI announced on Friday 6 November 2009 it has revised downwards interest rates on deposits by 25-50 basis points for a few maturities effective from 9 November 2009. The bank's consolidated net profit rose 28.29% to Rs 3,133.16 crore on 22% rise in consolidated income to Rs 33,101.65 crore in Q2 September 2009 over Q2 September 2008. The results were announced on 31 October 2009.

India's second largest private sector bank by net profit HDFC Bank rose 2.21% to Rs 1757.55 even as its ADR fell 2.75% on Thursday. The stock came off the day's low of Rs 1710.10.

India's largest private sector bank by net profit ICICI Bank fell rose 1.21% to Rs 896.30 even as its ADR fell 4.51% on Thursday. The stock came off the day's low of Rs 859.The bank's net profit rose 2.6% to Rs 1040.13 crore on a 12.7% decline in total income to Rs 8480.73 crore in Q2 September 2009 over Q2 September 2008. The result was announced during trading hours on 30 October 2009.

India's largest dedicated home loan lender Housing Development Finance Corporation (HDFC) rose 2.45%. The lender announced on 13 November 2009 it has agreed to acquire approximately 41% in the fully diluted equity share capital of Credila Financial Services from DSP Merrill Lynch Capital.

Prime Minister Manmohan Singh said on 8 November 2009, financial reforms, such as building up a domestic bond market and expanding foreign investment in sectors like insurance, would be pushed forward.

Meanwhile, the Reserve Bank of India Deputy Governor Usha Thorat said on Monday 16 November 2009 the central bank will soon issue guidelines on provisioning for bad loans by banks.

Banks and co-operatives have reportedly disbursed farm loans to the tune of Rs 1.38 lakh crore in the first half of 2009-10, meeting over 42% of the target set by the government for the whole financial year.

Metal stocks rose on gains in commodity prices on the London Metal Exchange on Friday. National Aluminum Company and Hindalco Industries rose by between 1.48% to 3.47%.

Steel Authority of India (Sail) rose 3.24%. The government said on Thursday it is considering a 20% stake sale in steel major Sail, proceeds of which would partly fund the company's Rs 70000 crore expansion projects.

India's largest steel maker by sales Tata Steel rose 2.66% after company said it issued $ 546.9 million in new convertible bonds in exchange for $ 493 million of securities as part of a plan to reduce costs and ease repayment obligations.

The company had said earlier this month the new foreign currency convertible bonds will have a yield-to-maturity of 4.5% and will mature in November 2014.

But, JSW Steel fell 0.16%. Japan's JFE Steel, the world's sixth-largest steelmaker, said on Thursday it will team up with JSW Steel on automotive steel production in India.

Demand for steel remains strong from auto, rural construction and infrastructure sectors. Also demand for construction grade steel has improved post monsoon season, and has resulted into higher sales.

India's largest drug maker by sales Ranbaxy Laboratories rose 1.23% after the company received US Food & Drug Administration approval for Acetaminophen tablets in 650 miligram strengh for over the counter sales.

Gammon Infrastructure Projects spurted 8.11% after the company received a Rs 850-crore order from the National Highways Authority of India for upgradation work in Bihar.

Other Stories:
1. Market trims losses in late trade; breadth weak (19-Nov 15:50 Hrs IST)
2. RIL, L&T lead decline (18-Nov 15:42 Hrs IST)
3. L&T, bank stocks lead strong intraday rebound (17-Nov 15:46 Hrs IST)
4. Market surges as dollar weakens (16-Nov 15:50 Hrs IST)
5. Maruti, Hero Honda in top gear (13-Nov 15:51 Hrs IST)
6. Rate sensitive stocks lead decline (12-Nov 15:43 Hrs IST)
7. Nifty regains 5,000 mark (11-Nov 15:51 Hrs IST)
8. Telecom stocks tumble in choppy market (10-Nov 15:45 Hrs IST)
9. Equities rally as G20 pledges to keep stimulus measures in place (9-Nov 15:48 Hrs IST)
10.Small-cap, mid-cap indices outperform Sensex (6-Nov 15:45 Hrs IST)




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Nov 19, '09
 Market Commentary

Market trims losses in late trade; breadth weak.

Volatility ruled the roost as stocks lost ground with the sentiment hit by Brazil's latest move to curb capital inflows. Decline in European shares and lower US index futures also weighed on sentiment. The BSE 30-share Sensex was down 226.30 points or 1.33%, off close to 230 points from the day's high and up close to 60 points from the day's low. Index heavyweight Reliance Industries edged lower.

The Sensex fell below 17,000 mark after regaining that level in opening trade. The Sensex had settled below that psychological level on Wednesday, 18 November 2009. The S&P CNX Nifty fell below the key 5,000 mark. Metal, auto, banking, realty and IT stocks declined. The market breadth was weak in contrast to a strong breadth in early trade.

Intraday volatility on the bourses was high. The market recovered from lower level in morning trade after Finance Secretary Ashok Chawla said high capital inflows is not a cause for concern as of now. However, the intraday rebound proved short-lived. The market cut losses after hitting a fresh intraday low in late trade.

Equities may remain volatile over the next few days as traders rollover positions in the derivative segment from November 2009 series to December 2009 series ahead of the expiry of the near month November 2009 contracts on 26 November 2009.

The market sentiment was hurt by Brazil's latest move to curb capital inflows. Brazil took another step on Wednesday to try to contain the appreciation of its currency, unveiling a 1.5% tax on certain trades involving American Depositary Receipts issued by Brazilian companies. The Brazilian government, last month, implemented a 2% financial tax on foreign inflows into stocks and fixed income investments.

Among other overseas markets, South Korea announced measures on Thursday aimed to tightening controls over currency liquidity to make the banking system less vulnerable to the capital flight. The Financial Services Commission said it will limit the size of forward foreign exchange transactions that South Korean companies can enter into, to a total value of not more than 125% of the underlying transactions they are hedging against, which could mean less-than-expected selling of dollar-forwards by exporters in the future. Taiwan has already banned foreigners from investing in time deposits.

Closer home, Chawla said today there is no proposal to put quota on external commercial borrowings even as he said that the government is closely monitoring capital inflows. Earlier, a newspaper report suggested that the government is taking its first significant step to ward off a surge in foreign capital inflows that may threaten the stability of the financial system by drawing up new rules that will make overseas loans costlier for companies. Indian stocks have risen sharply this year on robust inflow from foreign funds. Reports had suggested that the government was considering auctioning of corporate entitlements to borrow abroad, a move that could make such borrowing costlier.

A global glut of liquidity has pushed up stock markets across the globe since March this year. Governments and central banks around the world have injected trillions of dollars in the past one year or so to pull the world out of a most severe recession since the 1930s Great Depression

On Wednesday, Finance Minister Pranab Mukherjee said India would have the tools to deal with an influx of foreign capital inflows if they become disruptive, but they are not a concern yet.

The industry body Assocham on Tuesday, 17 November 2009, suggested that foreign institutional investors (FIIs) should be charged a tax of 2% of their money pumped into the stock market to prevent further rise of the rupee and also an asset-bubble. At a quarterly policy review late last month, the Reserve Bank of India (RBI) said there were signs excess liquidity is seeping into asset prices.

Imposing the tax would help the RBI to manage rupee at reasonable levels to safeguard and support Indian exporters, hit hard by rising input cost and appreciating rupee, Assocham said. The rupee has appreciated over 5% against the US dollar in the last six months.

Meanwhile, the latest data showed that the food price index jumped 14.55% in the 12 months to 7 November 2009. The primary article index was up 9.94% whereas the fuel index was down 1.51%. The finance minister on Wednesday said the government might import rice, if the summer-sown crop output was inadequate. The annual wholesale inflation rose 1.34 % in October 2009 from a year earlier, compared with 0.5 % in September 2009 and 11.06 % a year ago.

The Organisation of Economic Co-operation and Development (OECD) today, 19 November 2009, raised India's 2010 GDP growth forecast to 7.3% from 7.2% earlier. OECD sees 7.6% growth in India's GDP in 2011.

The government has set reform of the insurance sector as a priority for the winter parliament session that begins today, 19 November 2009. The bill, which was stalled in the last parliament, proposes raising the foreign investment limit in insurance companies from 26 % to 49%. The government also wants to open up the pension sector to private and foreign firms and give equal voting rights to foreigners in private-sector banks, which are currently limited to 10% irrespective of their actual holding.

Prime Minister Manmohan Singh said recently India is ready to increase the pace of reform, and the government has flagged stake sales in state run firms and tax changes to help to plug a large budget deficit.

The government kicked off the discussion process towards consolidation in the banking sector at a meeting with senior bankers on Wednesday. The finance ministry has been urging banks since the last few years to start the process of mergers and acquisition on a voluntary basis, but none of the state-run banks have shown any initiative on this.

Meanwhile, the initial public offer of Cox and Kings, a global tour operator, was fully subscribed by 15:00 IST on the second day of the bidding for the issue today, 19 November 2009.

In a bid to speed up the process of fund mobilisation and listing, the Securities and Exchange Board of India (Sebi) is reportedly working towards bringing down the time frame for listing of an IPO on the stock exchange to seven days from the current 20 days.

In overseas news, the Paris-based Organization for Economic Cooperation and Development on Thursday said a recovery across its 30-member area is picking up steam thanks to stimulus measures and other interventions. In its semi-annual Economic Outlook, the OECD said it now expects US gross domestic product to shrink 2.5% in 2009, followed by growth of 2.5% in 2010. In June, the OECD forecast a 2.8% fall this year and growth of 0.9% in 2010.

Japan is forecast to contract 5.3% this year, compared to an earlier forecast for a 6.8% decline. Next year, Japan is expected to grow by 1.8%, compared to an earlier forecast of 0.7%. The euro zone is now forecast to shrink 4% this year, compared to a previous forecast for a 4.8% fall. In 2010, the euro zone is seen expanding by 0.9%, compared to the OECD's previous call for flat economic growth

European shares were lower on Thursday for the third consecutive session, with food producers leading the losers after Danone cut its sales growth target. The key benchmark indices in France, Germany and UK fell by between 0.34% to 0.64%.

British retail sales rose slightly less than expected in October 2009, while the public finances deteriorated more sharply than thought over the month, the Office for National Statistics said on Thursday. The ONS said sales rose 0.4 % last month, slightly below forecasts for a rise of 0.5%. The ONS said public sector net debt as a percentage of GDP came in at 59.2% in October 2009, the highest since records began in 1974/75.

Asian stocks were trading mixed on Thursday with equities witnessing a consolidation phase after strong gains this year . The key benchmark indices on Taiwan, Hong Kong and Japan fell by between 0.09% to 0.86%. The key benchmark indices in South Korea, Singapore and China rose by between 0.5% to 1.03%.

Trading in US index futures indicated Dow could fall 53 points at the opening bell on Thursday, 19 November 2009.

US stocks fell on Wednesday on worrisome outlooks from major software makers and as a surprise drop in new home construction last month prompted concern about the strength of an economic recovery. The Dow was down 11.11 points, or 0.1%, to 10,426.31. The S&P 500 index slipped 0.52 points, or 0.1%, to 1,109.80, while the Nasdaq fell 10.64 points, or 0.5%, to 2,193.14.

Housing starts unexpectedly fell 10.6% in October 2009 to the lowest level in six months, weighed down by a sharp decline in construction activity for both single-family and multi-family dwellings. The consumer price index rose 0.3%, indicating that inflation may not be quite as benign as some economists have indicated.

As per provisional figures, the BSE 30-share Sensex was down 226.30 points or 1.33% to 16772.48. The Sensex opened with an upward gap of 6.20 points at 17,004.98, which was also the day's high. The Sensex fell 286.45 points at the day's low of 16,712.33 in late trade.

The S&P CNX Nifty was down 66.95 points or 1.32% to 4,987.75 as per provisional figures.

The market breadth, indicating the overall health of the market was negative compared to a strong breadth in early trade. On BSE, 1040 shares advanced as compared with 1676 that declined. A total of 79 shares remained unchanged.

From the 30 share Sensex pack, 27 fell and rest rose.

The BSE Mid-Cap index fell 1.67% and the BSE Small-cap index fell 1.08%.

BSE clocked a turnover of Rs 5057 crore, lower than 5264.49 crore on Wednesday, 18 November 2009.

Energy major Reliance Industries (RIL) fell 1.2% to Rs 2077.20. The stock came off the day's high of Rs 2110.90. The company plans an aggressive exploration campaign, investments in petrochemicals and overseas acquisitions as India's top company by market capitalisation prepares itself for the next phase of growth. The company will work towards attaining global scale for its conventional energy platform petrochemicals, refining and oil and gas exploration and invest in its new businesses such as retailing and alternative energy, chairman Mukesh Ambani said at the company's annual meeting of shareholders on Tuesday.

Meanwhile, RIL has set 27 November 2009 as the record date for a liberal 1:1 bonus share issue.

The government on Monday 16 November 2009 announced additional allocation of 51.6 million metric standard cubic metres per day (mmscmd) of natural gas from RIL's Krishna Godavari D6 field. Nearly 70% of this has been to the power sector. The move, finalised at the meeting of the ministry of petroleum and natural gas on 27 October 2009, takes the total allocation to 91.6 mmscmd from the current 40 mmscmd.

RIL on 10 November 2009 announced its first oil discovery in its exploration block in the Cambay Basin off Gujarat. Reliance holds 100% participating interest in the block. This block was awarded to Reliance under the fifth round of the New Exploration Licensing Policy.

Rate sensitive realty shares fell after the RBI, late last month, raised the provisioning requirements for loans to commercial real estate from 0.4% to 1% at a regular monetary policy review. Indiabulls Real Estate, Unitech, DLF fell by between 3.51% to 5.97%.

The latest RBI move will result in increase in borrowing costs for realty firms which depend heavily on borrowing. In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets (NPAs), the central bank said in its quarterly policy review.

IT stocks fell on profit taking. India's second largest software company by sales Infosys fell 1.42% as its ADR fell 0.99% on Wednesday. Infosys BPO, the business processing outsourcing subsidiary of Infosys Technologies, last week, announced the signing of a definitive agreement to acquire all of the outstanding interests of McCamish Systems LLC, a premier business process solutions provider, based in Atlanta, Georgia in the United States.

The acquisition is expected to be completed later this year subject to the satisfaction of certain closing conditions. The upfront consideration for the deal is $38 million with up to an additional $20 million payable to the sellers if McCamish Systems achieves certain financial targets in the future. The announcement was made on 12 November 2009.

India's largest software company by sales Tata Consultancy Services (TCS) fell 0.95%. The company recently secured a 150 million pounds software implementation contract for 15 years from Cardiff city council, UK.

India's third largest software company by sales Wipro fell 0.1% even as its ADR rose 0.49% on Wednesday. Wipro, sees robust deal pipeline on the back of improving IT demand worldwide, Suresh Vaswani, joint chief executive said on Tuesday 10 November 2009. The company said on 5 November 2009 it had agreed to buy some personal care businesses of Yardley for about $45.5 million, adding to its consumer goods business. Wipro said it had signed an agreement with UK-based Lornamead group, which owns the Yardley brand, for the businesses in Asia, the Middle East, Australasia and some African markets.

Banking shares fell on profit taking. India's largest bank by net profit State Bank of India (SBI) fell 2.09%. State Bank of India said on 9 November 2009 said it had entered into an agreement with T. Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company. State Bank currently holds 25% in each of the companies and after the sale its holding would be reduced to 18.5%, it said in a statement.

SBI announced on Friday 6 November 2009 it has revised downwards interest rates on deposits by 25-50 basis points for a few maturities effective from 9 November 2009. The bank's consolidated net profit rose 28.29% to Rs 3,133.16 crore on 22% rise in consolidated income to Rs 33,101.65 crore in Q2 September 2009 over Q2 September 2008. The results were announced on 31 October 2009.

India's largest private sector bank by net profit ICICI Bank fell 1.97% as its ADR fell 2.22% on Wednesday. The bank's net profit rose 2.6% to Rs 1040.13 crore on a 12.7% decline in total income to Rs 8480.73 crore in Q2 September 2009 over Q2 September 2008. The result was announced during trading hours on 30 October 2009.

India's second largest private sector bank by net profit HDFC Bank fell 1.35% as its ADR fell 1.92% on Wednesday.

But, India's largest dedicated home loan lender Housing Development Finance Corporation (HDFC) rose 0.53%. The lender announced on 13 November 2009 it has agreed to acquire approximately 41% in the fully diluted equity share capital of Credila Financial Services from DSP Merrill Lynch Capital.

Prime Minister Manmohan Singh said on 8 November 2009, financial reforms, such as building up a domestic bond market and expanding foreign investment in sectors like insurance, would be pushed forward.

Meanwhile, the Reserve Bank of India Deputy Governor Usha Thorat said on Monday 16 November 2009 the central bank will soon issue guidelines on provisioning for bad loans by banks.

Rate sensitive auto stocks fell on profit taking. Low interest rates and attractive benefits offered by companies pushed up auto sales in October 2009.

India's largest tractor maker by sales Mahindra & Mahindra fell 1.44%. The company's overall sales climbed 32% in October this year to 18,410 units against 13,935 units in the same month last year.

India's largest small car marker by sales Maruti Suzuki India fell 0.49%. The company's total sales grew 32.4% to 85415 units in October 2009, compared with 64490 units posted in the same month a year ago.

India's largest bike marker by sales Hero Honda Motors fell 2.01%. The company reported a marginal increase in October sales at 354,156 units as against 352,449 units in the same month last year.

India's largest commercial vehicle maker by sales Tata Motors fell 1.64%. Tata Motors has reportedly raised Rs 264 crore so far through the revised fixed deposit scheme which it launched in August this year. The company is authorised to raise Rs 1,300 crore from the revised scheme. Meanwhile, Jaguar Land Rover received as much as 170 million pounds ($286 million) as a five-year working capital facility from General Electric Co.'s GE Capital division, the lender said on 16 November 2009. Tata Motors the owner of Jaguar Land Rover, is hopeful of turning around the unprofitable luxury unit as it cuts costs to battle a slump in sales during the global recession.

But, India's second largest bike marker by sales Bajaj Auto rose 0.34%. Carlos Ghosn, chief executive of French car maker Renault and Japan's Nissan Motor Co, said, last week, that an agreement had been signed with Bajaj Auto for a low-cost car which would come to India in 2012.

Car sales in India rose an annual 34% to 132,615 units in October 2009, boosted by festival demand and easier availability of loans, an industry body said on Wednesday 11 November 2009. Sales of trucks and buses, a gauge of economic activity, rose 52% to 42,562 units in October 2009, the data showed.

Metal stocks reversed early gains on profit taking. The gauge of six metals traded on the London Metal Exchange, rose 0.8% on Wednesday, 18 November 2009. Sterlite Industries, and Hindalco Industries fell by between 2.46% to 3.46%.

Steel Authority of India (Sail) fell 0.64%. As per recent reports the company has won a battle with ArcelorMittal for Chiria mines in Jharkhand. The steel minister on 16 November 2009 said the cabinet will soon consider selling part of government's stake in Steel Authority of Steel. Meanwhile, Sail chairman on Monday said the company has cut flat product prices by Rs 500 per tonne.

Tata Steel, the world's eighth largest steelmaker by output, fell 1.76%. Tata conglomerate is looking around the world for a successor to Ratan Tata, the 71-year old chairman of the sprawling salt-to-steel group said on Wednesday. Local and foreign candidates were being looked at to head the group, which includes Tata Motors, Tata Steel, Tata Consultancy Services and Tata Power among its 27 listed companies Tata Steel is reportedly raising its annual iron ore production by 55% to 17 million tonnes in India over the next two years. The expansion is expected to cost about Rs 1100 crore.

Tata Steel, recently approved a new convertible bonds offer in exchange for an existing $875 million securities to reduce costs and ease repayment obligations. The company said on 6 November 2009 steel sales at its Indian operations rose 38% to 462,000 tonnes in October 2009 over October 2008.

JSW Steel fell 0.65% after Japan's JFE Steel, the world's sixth-largest steelmaker, said on Thursday it will team up with JSW Steel on automotive steel production in India.

Demand for steel remains strong from auto, rural construction and infrastructure sectors. Also demand for construction grade steel has improved post monsoon season, and has resulted into higher sales.




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Nov 18, '09
 Market Commentary

Sensex falls below 17,000.

Volatility ruled the roost in late trade as the key benchmark indices edged lower as investors took home cash after recent sharp spurt in share prices. The BSE 30-share Sensex was down 76.10 points or 0.45%, off close to 125 points from the day's high. The Sensex provisionally settled below 17,000 mark after alternatively moving above and below that level during the day.

Metal stocks rose. But capital goods and banking stocks fell. Index heavyweight Reliance Industries dropped after setting record date for a liberal 1:1 bonus issue. Another index heavyweight L&T also fell.

Intraday volatility was high. The market recovered soon after an initial slide. The Sensex and the 50-unit S&P CNX Nifty pared gains after hitting one-month highs in mid-morning trade. The market once again slipped into the red later. The market cut losses in early afternoon trade after Finance Minster Pranab Mukherjee said the current higher capital inflows are not a matter of concern. The market moved between positive and negative zone later. The market hit a fresh intraday low in late trade. Volatility was high at the fag end of the trading session.

Profit taking weighed on the domestic bourses. From a recent low of 15,404.94 on 3 November 2009, the Sensex had jumped 1,645.71 points or 10.68% in a short period of time to 17,050.65 on 17 November 2009.

Mukherjee said on Wednesday the country is monitoring foreign capital inflows and the current higher inflows are not a matter of concern. Indian stocks have risen sharply this year on robust inflow from foreign funds.

The industry body Assocham on Tuesday, 17 November 2009, suggested that foreign institutional investors (FIIs) should be charged a tax of 2% of their money pumped into the stock market to prevent further rise of the rupee and also an asset-bubble. At a quarterly policy review late last month, the RBI said there were signs excess liquidity is seeping into asset prices.

Imposing the tax would help the RBI to manage rupee at reasonable levels to safeguard and support Indian exporters, hit hard by rising input cost and appreciating rupee, Assocham said. The rupee has appreciated over 5% against the US dollar in the last six months.

Meanwhile, Federal Reserve Chairman Ben Bernanke surprised investors on Monday 16 November 2009 when he said the central bank was attentive to implications of changes in the value of the dollar, although he reiterated that interest rates would remain exceptionally low for an extended period.

On Tuesday, 17 November 2009, other top Federal Reserve officials struck differing notes on the likely pace of the US economic recovery. Jeffrey Lacker, the president of the Richmond Federal Reserve Bank said economic recovery in the US is solidly under way. He expects the economy to grow at a reasonable pace in 2010 as the housing sector recovers and consumers and businesses resume spending. Lacker, an outspoken anti-inflation hawk, said that if officials want to keep inflation in check, they cannot be "paralyzed by patches of lingering weakness, which could persist well into the recovery."

Two other senior Fed officials, Cleveland Fed President Sandra Pianalto and San Francisco Fed chief Janet Yellen, stressed that the economic recovery will be sluggish. Yellen, however, told a panel in Hong Kong that the Fed knows it cannot maintain its easy money policy for too long once the economy has healed.

Lacker warned that the risk consumers and businesses lose confidence in inflation stability is greatest in the early years of an economic recovery. The Fed's actions to pump money into the system to spur recovery heightens this danger, he said.

The Fed took another small step on Tuesday to wind down its emergency support as financial markets improve. It shortened the maturity of the emergency loans it makes to banks at its discount window, which it had lengthened during the crisis.

Closer home, inflation based on the wholesale price index accelerated in October 2009 from a month earlier on costlier minerals and fuels. On Saturday 14 November 2009, the government switched to using monthly inflation data for all commodities with 1993/94 as the base year, from the earlier practice of announcing weekly price movement. The wholesale price index was up 1.34% in October 2009 from a year earlier, compared with 0.5% rise in September 2009 and 11.06% jump a year ago. Food prices, however, declined by 1% from the previous month's level, while minerals and industrial fuels were each costlier by 3%.

Mukherjee today said the government may import rice if there is a shortfall in the summer-sown crop output.

Industrial output grew 9.1% in September 2009 from a year earlier, helped by stimulus and festival demand, and adding to the debate on the timing of exit policy. However, Finance minister Pranab Mukherjee said on Monday stimulus packages to perk up the economy during the slowdown are unlikely to be withdrawn in the current financial year and the exit when it happens will be a gradual one.

Economists and analysts surveyed by the Reserve Bank of India (RBI) revised downwards India's gross domestic product projection to 6% for 2009/10 from 6.5% in the previous round of survey, the RBI released the results of the ninth round of survey on Monday 16 November 2009.

The RBI in its mid-term monetary policy review last month kept its GDP projection for the current fiscal unchanged at 6% but had increased inflation target to 6.5% by end-March 2010 from 5%. The government is scheduled to announce the July-September GDP growth number on 30 November 2009.

Meanwhile, the initial public offer of Cox and Kings, a global tour operator, was subscribed 58% at 15:00 IST on the first day of bidding today. The price band has fixed at Rs 316-330 per share and the issue will close for subscription on 20 November 2009. Face value per share is Rs 10.

European shares bounced back on Wednesday to trade near their highest level in more than 13 months, with investors waiting for macro-economic numbers from the United States and minutes from the Bank of England. The key benchmark indices in France, Germany and UK were up by between 0.22% to 0.51%.

Asian stocks were trading mixed on Wednesday. The key benchmark indices in China, South Korea and Taiwan rose by between 0.43% to 1.13%. The key benchmark indices in Hong Kong, Japan and Singapore fell by between 0.32% to 0.72%.

China needs to be alert to the danger of asset bubbles, but headline inflation is unlikely to be a risk for some time, Fan Gang, a member of the People's Bank of China's monetary policy committee, said. Speaking at a forum in Hong Kong on Wednesday, Fan said Chinese gross domestic product could expand between 8% and 9% in 2010. Growth this year would be above the government's target of 8%, he added.

Chinese Premier Wen Jiabao told US President Barack Obama in a meeting on Wednesday that China wants to balance its trade relationship with the United States and does not seek a surplus. The comments published on China's foreign ministry website made no reference to Wen mentioning China's yuan policy to Obama, but did indicate that Obama had brought up currency reform as one step that China should take to mitigate trade imbalances.

US stocks rose to fresh 13-month highs on Tuesday as upbeat broker views on improving prospects for two Dow components offset disappointing holiday spending outlooks from Target and Home Depot. The Dow Jones industrial average was up 30.46 points, or 0.29%, to end at 10,437.42. The Standard & Poor's 500 Index gained 1.02 points, or 0.09% to finish at 1,110.32. The Nasdaq Composite Index rose 5.93 points, or 0.27% to close at 2,203.78.

In economic data from the US, producer prices rose 0.3% in October, with the core rate dropping 0.6%. And industrial production climbed 0.1% in October 2009. This was less than the 0.4% gain expected.

As per provisional figures, the BSE 30-share Sensex was down 76.10 points or 0.45% to 16974.55. At the day's high of 17,098.79, the Sensex rose 48.14 points in mid-morning trade, its highest since 21 October 2009. The Sensex fell 92.24 points at the day's low of 16,958.41 in late trade.

The S&P CNX Nifty was down 10.35 points or 0.2% to 5051.90 as per provisional figures. It hit a high of 5079.30 in intraday trade, its highest since 21 October 2009.

The market breadth, indicating the overall health of the market was strong. On BSE, 1551 shares advanced as compared with 1194 that declined. A total of 73 shares remained unchanged.

From the 30 share Sensex pack, 19 fell and rest rose.

The BSE Mid-Cap index rose 0.27% and the BSE Small-cap index rose 0.76%.

BSE clocked a turnover of Rs 5234 crore, higher than Rs 4835.65 crore on Tuesday,17 November 2009.

Energy major Reliance Industries (RIL) fell 1.69%. The company plans an aggressive exploration campaign, investments in petrochemicals and overseas acquisitions as India's top company by market capitalisation prepares itself for the next phase of growth. The company will work towards attaining global scale for its conventional energy platform petrochemicals, refining and oil and gas exploration and invest in its new businesses such as retailing and alternative energy, chairman Mukesh Ambani said at the company's annual meeting of shareholders on Tuesday.

Meanwhile, RIL has set 27 November 2009 as the record date for a liberal 1:1 bonus share issue.

The government on Monday 16 November 2009 announced additional allocation of 51.6 million metric standard cubic metres per day (mmscmd) of natural gas from RIL's Krishna Godavari D6 field. Nearly 70% of this has been to the power sector. The move, finalised at the meeting of the ministry of petroleum and natural gas on 27 October 2009, takes the total allocation to 91.6 mmscmd from the current 40 mmscmd.

RIL on Tuesday 10 November 2009 announced its first oil discovery in its exploration block in the Cambay Basin off Gujarat. Reliance holds 100% participating interest in the block. This block was awarded to Reliance under the fifth round of the New Exploration Licensing Policy.

Metal stocks rose on strong domestic demand. National Aluminium Company rose 0.3%. The company recently hiked the prices of aluminium products by Rs 1000 a tonne reflecting the recent uptrend in prices on the London Metal Exchange. Sterlite Industries rose 0.49%.

Steel Authority of India (Sail) rose 0.27% on reports the company has won a battle with ArcelorMittal for Chiria mines in Jharkhand. The steel minister on 16 November 2009 said the cabinet will soon consider selling part of government's stake in Steel Authority of Steel. Meanwhile, Sail chairman on Monday said the company has cut flat product prices by Rs 500 per tonne.

Tata Steel, the world's eighth largest steelmaker by output, rose 1.66%. Tata conglomerate is looking around the world for a successor to Ratan Tata, the 71-year old chairman of the sprawling salt-to-steel group said on Wednesday. Local and foreign candidates were being looked at to head the group, which includes Tata Motors, Tata Steel, Tata Consultancy Services and Tata Power among its 27 listed companies Tata Steel is reportedly raising its annual iron ore production by 55% to 17 million tonnes in India over the next two years. The expansion is expected to cost about Rs 1100 crore.

Tata Steel, recently approved a new convertible bonds offer in exchange for an existing $875 million securities to reduce costs and ease repayment obligations. The company said on 6 November 2009 steel sales at its Indian operations rose 38% to 462,000 tonnes in October 2009 over October 2008.

Demand for steel remains strong from auto, rural construction and infrastructure sectors. Also demand for construction grade steel has improved post monsoon season, and has resulted into higher sales.

India's largest engineering and construction firm by sales Larsen & Toubro fell 1.67%. The company after market hours on Tuesday said Gilbarco Inc. has bought its petroleum dispensing pump business.

India's largest power equipment maker by sales Bharat Heavy Electricals fell 0.41%. The company said on Wednesday it has signed a joint-venture to build a 1,600 megawatt (MW) thermal power plant in the central state of Madhya Pradesh. The power plant at Khandwa will be equipped with supercritical technology, which helps lower coal consumption and leads to lower emissions.

Banking shares fell on profit taking. India's largest bank by net profit State Bank of India (SBI) fell 1.02%. State Bank of India said on 9 November 2009 said it had entered into an agreement with T. Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company. State Bank currently holds 25% in each of the companies and after the sale its holding would be reduced to 18.5%, it said in a statement.

SBI announced after market hours on Friday 6 November 2009 it has revised downwards interest rates on deposits by 25-50 basis points for a few maturities effective from 9 November 2009. The bank's consolidated net profit rose 28.29% to Rs 3,133.16 crore on 22% rise in consolidated income to Rs 33,101.65 crore in Q2 September 2009 over Q2 September 2008. The results were announced on 31 October 2009.

India's largest private sector bank by net profit ICICI Bank fell 1.63% as its ADR fell 0.23% on Tuesday. The bank's net profit rose 2.6% to Rs 1040.13 crore on a 12.7% decline in total income to Rs 8480.73 crore in Q2 September 2009 over Q2 September 2008. The result was announced during trading hours on 30 October 2009.

India's second largest private sector bank by net profit HDFC Bank fell 0.24%.

India's largest dedicated home loan lender Housing Development Finance Corporation (HDFC) fell 0.68%. The lender announced after market hours on Friday 13 November 2009 it has agreed to acquire approximately 41% in the fully diluted equity share capital of Credila Financial Services from DSP Merrill Lynch Capital.

Prime Minister Manmohan Singh said on 8 November 2009, financial reforms, such as building up a domestic bond market and expanding foreign investment in sectors like insurance, would be pushed forward.

As per reports, the government plans to introduce two key bills in parliament by December 2009. It plans to introduce bills proposing the raising of foreign stake limits in insurers to 49% from the present 26% and opening up the pension sector to private and foreign firms.

Meanwhile, the Reserve Bank of India Deputy Governor Usha Thorat said on Monday 16 November 2009 the central bank will soon issue guidelines on provisioning for bad loans by banks.

IT stocks fell on profit taking. India's largest software company by sales Tata Consultancy Services (TCS) fell 0.88%. The company recently secured a 150 million pounds software implementation contract for 15 years from Cardiff city council, UK.

India's third largest software company by sales Wipro fell 0.1% even as its ADR rose 0.99% on Tuesday. Wipro, sees robust deal pipeline on the back of improving IT demand worldwide, Suresh Vaswani, joint chief executive said on Tuesday 10 November 2009. The company said on 5 November 2009 it had agreed to buy some personal care businesses of Yardley for about $45.5 million, adding to its consumer goods business. Wipro said it had signed an agreement with UK-based Lornamead group, which owns the Yardley brand, for the businesses in Asia, the Middle East, Australasia and some African markets.

But, India's second largest software company by sales Infosys rose 1.47% as its ADR rose 1.27% on Tuesday. Infosys BPO, the business processing outsourcing subsidiary of Infosys Technologies, last week, announced the signing of a definitive agreement to acquire all of the outstanding interests of McCamish Systems LLC, a premier business process solutions provider, based in Atlanta, Georgia in the United States.

The acquisition is expected to be completed later this year subject to the satisfaction of certain closing conditions. The upfront consideration for the deal is $38 million with up to an additional $20 million payable to the sellers if McCamish Systems achieves certain financial targets in the future. The announcement was made before market hours on Thursday 12 November 2009.

Lloyd Electric & Engineering rose 3.03%, after Czech Republic subsidiary of the company signed a pact with Czech-based Janka Radotin a.s. for acquisition of assets with trademarks and brands.

Exide Industries dropped 3.77% on equity dilution worries after the company's board of directors approved issue of 5 crore shares to institutional investors.




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Nov 18, '09
 Small Caps Jump to Most Expensive Levels Since 1996

The S&P SmallCap 600 Index that is trading at around 34 times its companies' earnings from the past year. This is around 57% more than the S&P 500 Index of the large cap US stocks, and signifies the sort of bubble that's built up in small caps there.

While small cap stocks in India aren't trading at such expensive levels, average valuations have actually become slightly uncomfortable. Take for the instance the BSE-Smallcap index, which is currently trading at around 16 times trailing 12-months earnings, as compared to 6 times that it was trading at the start of this year. As compared to this, the BSE-100 index of large companies is currently trading at nearly 21 times, as compared to 14 times in January 2009.

View on small caps is that of cautious optimism. While it has certainly gotten difficult to find very compelling small-cap buys these days, one still gets to knock at the doors of some large wealth creating long term opportunities but only after a prolonged search.

If you're going to invest in small-cap stocks that will create tremendous wealth over the long run, please avoid the tips and hot stock advice that you get at social gatherings, or from your friend or broker. Also, contrary to popular perception, you don't need to take great risk to invest in the best small cap companies. You only need to train yourself to look for disciplined, conservatively run small businesses that can stand the test of time in the long run.

The sharp surge in small cap stocks since March 2009 can easily be explained by the expansion in P/E multiples of these stocks. As the chart below shows, the P/E of BSE-Smallcap index has risen by 177% since March. This is almost double than the 85% surge seen in the P/E of large cap stocks represented by the BSE-Sensex.






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Nov 18, '09
 Gold Continues To Soar

Nouriel Roubini may not like it but the fact remains that the yellow metal Gold has got into this habit of breaking new highs almost every day. Last heard, it set a record high on Tuesday to settle at US$ 1,102 per ounce. The latest surge has taken the total returns from gold this year to 23%, a number that an investor in any part of the world would be proud of. However, the 23% returns could be true for investors who would like to pay for their gold in dollars. And India is certainly not one of them. Since an Indian investor would pay in rupees, the rupee dollar rate also gets added into the equation. Considering that rupee has appreciated some 4%-5% against the dollar this year, returns from gold for an Indian investor this year has been lower to that extent.

But that should not deter an Indian investor from investing in the commodity. The case for gold will remain intact as long as the world's reserve currency, the US dollar continues to remain weak. And there seems to be no respite in the near term on this front. It is believed that the value of any asset depends on the underlying collateral. Hence, if the US dollar is an asset then the US economy becomes the underlying collateral and this collateral is definitely not in the best of shape. It is already knee deep in debt courtesy the twin deficits and its misery is only likely to increase in the future. Hence, the odds of the US dollar cracking further are high. While no one can predict the timing and the extent of the dollar's decline, it would be prudent that an insurance against this fall is sought. As Warren Buffett says, "Predicting rain does not count, building ark does". The ark in this case is most likely to be gold. While an investor in India may not be as badly hurt as his US counterpart on account of the fall of the dollar, it would do no harm to his portfolio if he has an asset that has very good chances of appreciating over the long-term.




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Nov 18, '09
 STOCK ALERT

RIL may advance on setting record date for bonus issue.

Reliance Industries (RIL) has fixed 27 November 2009 as the record date for the liberal 1:1 bonus share issue. The announcement was made after market hours on Tuesday, 17 November 2009.

Meanwhile the RIL-RNRL KG D6 gas row intensified further in the Supreme Court with Reliance Natural Resources (RNRL's) counsel and the government counsel engaging in a war of words. RNRL Counsel Ram Jethmalani picked up the ante and told the government counsel Mohan Parasaran that he ran away from the Bombay High Court when Jethmalani wanted to cross-examine all the submissions made by the government. But in the end he said that he has no problem that the government is made a party to the case but only based on the records of the Bombay High Court. He went on to say that if the government is made a party to this case, they must be submitted to discovery, inspection and cross examination.

Tata Motors has reportedly raised Rs 264 crore so far through the revised fixed deposit scheme which it launched in August this year. The company is authorised to raise Rs 1,300 crore from the revised scheme.

As per reports Pfizer Inc.'s top executives are scheduled to meet the senior management of Wockhardt in the last week of November in Mumbai for acquiring a part of the businesses of Wockhardt. The two companies have been in talks for several months after the financially stretched Wockhardt spelt out its decision to sell some of its non-core assets in 2008.

Gilbarco Inc, a US-based fuel control service provider, said it would acquire the petroleum dispensing pump business of Larsen & Toubro (L&T), as part of a plan to increase its presence in the local metering business. The announcement was madeafter market hours on Tuesday, 17 November 2009. However the financial details of the transaction were not disclosed.

Mahindra Satyam on Tuesday rejected claims worth Rs 1,230 crore made by 37 companies linked to the company's former promoter B Ramalinga Raju in a filing to the stock exchange terming them legally untenable. Satyam received letters from these 37 companies reclaiming the money a day after Raju confessed to the Rs 7,000-crore fraud.

Reports citing SAIL chairman and managing director S K Roongta said that the Jharkhand government was willing to renew leases for the Chiria mines to meet the public sector unit's current needs. Jharkhand government has provided a written confirmation, approving 810MT of mineable iron ore reserves, reports added.

The Foreign Investment Promotion Board (FIPB) on Tuesday referred to the Cabinet Committee on Economic Affairs (CCEA) a proposal by private carrier Jet Airways to raise about Rs 2,000 crore from foreign investors . Jet had planned to raise the funds through the qualified institutional placement (QIP) route from foreign institutional investors to meet the cash flow requirements.

Previous Stories:
* Bonus record date fuels RIL (Hot Pursuit 18-Nov 09:57)
* Record date for Reliance Industries issue of bonus shares announced (Market Beat - Reports 17-Nov 17:21)
* Reliance Industries (Analyst Meet / AGM - AGM 17-Nov 16:25)
* RIL slips on profit booking after surging 18% in 9 days (Hot Pursuit 17-Nov 14:35)
* RIL may dazzle on bourses on initial survey for diamonds in MP (Market Commentary - Stock Alert 11-Nov 09:32)
* Oil discovery by RIL in Cambay Basin (Corporate News 10-Nov 11:04)
* New oil find fuels Reliance Industries (Hot Pursuit 10-Nov 10:30)
* Buzz of large overseas acquisition fuels RIL (Hot Pursuit 9-Nov 10:05)
* Acquisition buzz may boost RIL shares (Market Commentary - Stock Alert 9-Nov 09:23)
* A likely delay in court verdict on gas dispute weighs on RIL (Hot Pursuit 5-Nov 12:48)




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Nov 17, '09
 Market Commentary

L&T, bank stocks lead strong intraday rebound.

The key benchmark indices provisionally closed flat after staging strong intraday rebound in late trade. Recovery in European stocks from lower level triggered the strong rebound on the domestic bourses. The BSE 30-share Sensex was down 2.17 points or 0.01%, up close to 145 points from the day's low and off close to 45 points from the day's high. The Sensex provisionally closed above the 17,000 mark after falling below that psychologically important level in intraday trade today, 17 November 2009. Index heavyweight Reliance Industries and ICICI Bank cut intraday losses. Another index heavyweight Larsen & Toubro reversed intraday losses.

Intraday volatility was on the bourses was high. After initial gains, the market soon slipped into the red on lower Asian stocks. It moved into positive zone again later. It once again moved into the red later. The market extended losses in mid-morning trade. It cut losses after hitting fresh day's low in early afternoon trade. The recovery from lower level proved short-lived. The Sensex hit a fresh intraday low in mid-afternoon trade. A strong rebound pushed the Sensex into the green in late trade as European stocks and US index futures trimmed losses.

Realty stocks fell. But IT stocks galloped. Banking stocks reversed intraday losses. The market breadth was negative.

The market has risen sharply over the past few days. From a recent low of 15,404.94 on 3 November 2009, the Sensex had jumped 1,627.57 points or 10.56% in a short period of time to 17,032.51 on Monday 16 November 2009.

Federal Reserve Chairman Ben Bernanke on Monday, 16 November 2009, said the US central bank was likely to keep interest rates at low levels for an extended period of time.

Finance minister Pranab Mukherjee said on Monday stimulus packages to perk up the economy during the slowdown are unlikely to be withdrawn in the current financial year and the exit when it happens will be a gradual one.

Economists and analysts surveyed by the Reserve Bank of India (RBI) revised downwards India's gross domestic product projection to 6% for 2009/10 from 6.5% in the previous round of survey.

The forecasters also assigned a highest 34.3% chance for inflation to be within 6-6.9% in 2009/10, the survey showed. The RBI released the results of the ninth round of survey on Monday, adding that the result in no way reflects the views of the central bank. The study also showed that the economists expect the July to September 2009 GDP growth at 6.2% and for October to December 2009 and January to March 2010 at 5.7% and 6.7% respectively.

The RBI in its mid-term monetary policy review last month kept its GDP projection for the current fiscal unchanged at 6% but had increased inflation target to 6.5% by end-March 2010 from 5%. The government is scheduled to announce the Jul-September GDP growth number on 30 November 2009. The forecasters expect headline inflation to be at 4% in October to December 2009 and at 6.8% the following quarter. Over the next five years, GDP is expected to grow at 7.5%, unchanged from the previous round of survey, RBI said. But inflation forecast over the next five years, was revised upwards to 5.5% from 5.3% in the previous survey.

Inflation based on the wholesale price index accelerated in October 2009 from a month earlier on costlier minerals and fuels. On Saturday 14 November 2009, the government switched to using monthly inflation data for all commodities with 1993/94 as the base year, from the earlier practice of announcing weekly price movement. The wholesale price index was up 1.34% in October 2009 from a year earlier, compared with 0.5% rise in September 2009 and 11.06% jump a year ago. Food prices, however, declined by 1% from the previous month's level, while minerals and industrial fuels were each costlier by 3%.

Industrial output grew 9.1% in September 2009 from a year earlier, helped by stimulus and festival demand, and adding to the debate on the timing of exit policy.

European shares moved off lows on Tuesday, 17 November 2009, helped by gains from selected financial firms. Key benchmark indices in France, Germany and UK were down by between 0.11% to 0.26%.

Most Asian stocks fell as Bernanke warned that significant economic challenges remain. The key benchmark indices in Hong Kong, Japan, South Korea, Taiwan and Singapore fell by between 0.13% to 0.76%.

But China's Shanghai Composite rose 0.24%. Chinese President Hu Jintao said on Tuesday that he had agreed with US President Barack Obama to increase international cooperation, after "frank, constructive and fruitful" talks in Beijing. There are signs of revival, but still no firm recovery in the international financial situation, Hu said, adding that the two sides had reiterated commitments to increase dialogue on macroeconomic issues and resolve economic and trade frictions. The two countries achieved "broad consensus" Hu said, and agreed to fight protectionism and to try to ward off future financial and economic crises.

Obama said on Tuesday he was pleased with China's commitment on moving towards a more market oriented exchange rate.

US stocks ended higher on Monday after Bernanke reinforced expectations that interest rates would stay low to spur growth. But markets ended off their highs after banking analyst Meredith Whitney said the recent market rally is not rooted in fundamentals and the US economy is likely to fall back into a recession next year. The Dow Jones industrial average rose 136.64 points, or 1.33%, to end at 10,407.11. The Standard & Poor's 500 Index was up 15.81 points, or 1.45%, at 1,109.29. The Nasdaq Composite Index was up 29.97 points, or 1.38 % at 2,197.85.

Bernanke said it's not obvious that asset prices in the US are out of line with underlying values. Bernanke said in his speech that the headwinds of reduced bank lending and a weak labor market will probably restrain the pace of the US economic recovery, warranting continued low borrowing costs. Bernanke also said the Fed is attentive to changes in the dollar's value and will help ensure that the dollar is strong.

In economic data, retail sales rose 1.4% in October amid a jump in auto sales. Another report showed that the empire state manufacturing index fell to 23.51 from 34.57.

As per provisional figures, the BSE 30-share Sensex was down 2.17 points or 0.01% to 17030.34. At the day's high of 17,080.17, the Sensex rose 47.66 points in early trade. The Sensex fell 149.53 points at the day's low of 16882.98 in mid-afternoon trade.


The S&P CNX Nifty was down 4.90 points or 0.1% to 5053.15 as per provisional figures. It hit a high of 5074 at the onset of the trading session, its highest since 21 October 2009.

The market breadth, indicating the overall health of the market was negative. On BSE, 1312 shares advanced as compared with 1388 that declined. A total of 88 shares remained unchanged. The breadth was positive in early trade.

From the 30 share Sensex pack, 14 fell and rest rose.

The BSE Mid-Cap index fell 0.2%. The BSE Small-cap index rose 0.14%.

BSE clocked a turnover of Rs 4779 crore higher than Rs 4400.38 crore on Monday, 16 November 2009.

Energy major Reliance Industries (RIL) fell 1.02% to Rs 2125.80. Nevertheless, the stock came off the day's low of Rs 2106. Reliance Industries (RIL) chairman Mukesh Ambani said today the company plans aggressive exploration campaign over 3 years. Exploration and production business will give the company a much higher growth trajectory in the coming years, he said. Ambani said the company plans global growth by acquisition of energy platforms.

The government on Monday announced additional allocation of 51.6 million metric standard cubic metres per day (mmscmd) of natural gas from RIL's Krishna Godavari D6 field. Nearly 70% of this has been to the power sector. The move, finalised at the meeting of the ministry of petroleum and natural gas on 27 October 2009, takes the total allocation to 91.6 mmscmd from the current 40 mmscmd.

RIL on Tuesday 10 November 2009 announced its first oil discovery in its exploration block in the Cambay Basin off Gujarat. Reliance holds 100% participating interest in the block. This block was awarded to Reliance under the fifth round of the New Exploration Licensing Policy.

Banking shares reversed early losses on hopes of financial sector reforms. India's largest bank by net profit State Bank of India (SBI) rose 0.21%. State Bank of India said on 9 November 2009 said it had entered into an agreement with T. Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company. State Bank currently holds 25% in each of the companies and after the sale its holding would be reduced to 18.5%, it said in a statement.

SBI announced after market hours on Friday 6 November 2009 it has revised downwards interest rates on deposits by 25-50 basis points for a few maturities effective from 9 November 2009. The bank's consolidated net profit rose 28.29% to Rs 3,133.16 crore on 22% rise in consolidated income to Rs 33,101.65 crore in Q2 September 2009 over Q2 September 2008. The results were announced on 31 October 2009.

India's second largest private sector bank by net profit HDFC Bank rose 1.39% as its ADR rose 3.35% on Monday.

India's largest private sector bank by net profit ICICI Bank fell 0.19% to Rs 917.15 even as its ADR rose 2.31% on Monday 16 November 2009. The sock came off the day's low of Rs 900.20. The bank's net profit rose 2.6% to Rs 1040.13 crore on a 12.7% decline in total income to Rs 8480.73 crore in Q2 September 2009 over Q2 September 2008. The result was announced during trading hours on 30 October 2009.

India's largest dedicated home loan lender Housing Development Finance Corporation (HDFC) fell 0.11%. The lender announced after market hours on Friday 13 November 2009 it has agreed to acquire approximately 41% in the fully diluted equity share capital of Credila Financial Services from DSP Merrill Lynch Capital.

Prime Minister Manmohan Singh said on 8 November 2009, financial reforms, such as building up a domestic bond market and expanding foreign investment in sectors like insurance, would be pushed forward.

As per reports, the government plans to introduce two key bills in parliament by December 2009. It plans to introduce bills proposing the raising of foreign stake limits in insurers to 49% from the present 26% and opening up the pension sector to private and foreign firms.

Meanwhile, the Reserve Bank of India Deputy Governor Usha Thorat said on Monday the central bank will soon issue guidelines on provisioning for bad loans by banks.

India's largest engineering and construction firm by sales Larsen & Toubro rose 0.28% to Rs 1654.20. The stock came off the day's low of Rs 1637.05. Larsen and Toubro (L&T) on Monday reportedly submitted the lowest bid for the 1,320 megawatt Rajpura thermal power project. L&T's bid was Rs 2.89 per unit, followed by that of Welspun Urja India at Rs 2.94 per unit as levelised tariff.

Meanwhile, the company made a profit of Rs 86.14 crore by paring a third of its stake in software firm Mahindra Satyam last week. Larsen and Toubro (L&T) on Friday, 13 November 2009 sold 2.72 crore shares in Mahindra Satyam in two bulk deals at an average price of Rs 113.65 on BSE in opening trade.

Rate sensitive realty shares fell after the RBI, late last month, raised the provisioning requirements for loans to commercial real estate from 0.4% to 1% at a regular monetary policy review. Omaxe, Unitech, DLF, Indiabulls Real Estate, Parsvnath Developers fell by between 0.08% to 2.15%.

The latest RBI move will result in increase in borrowing costs for realty firms which depend heavily on borrowing. In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets (NPAs), the central bank said in its quarterly policy review.

IT stocks rose on gains in American depository receipts overnight in US. India's second largest software company by sales Infosys rose 2.01% as its ADR rose 2.31% on Monday. Infosys BPO, the business processing outsourcing subsidiary of Infosys Technologies, last week, announced the signing of a definitive agreement to acquire all of the outstanding interests of McCamish Systems LLC, a premier business process solutions provider, based in Atlanta, Georgia in the United States.

The acquisition is expected to be completed later this year subject to the satisfaction of certain closing conditions. The upfront consideration for the deal is $38 million with up to an additional $20 million payable to the sellers if McCamish Systems achieves certain financial targets in the future. The announcement was made before market hours on Thursday 12 November 2009.

India's largest software company by sales Tata Consultancy Services (TCS) rose 3.35%. The company recently secured a 150 million pounds software implementation contract for 15 years from Cardiff city council, UK.

India's third largest software company by sales Wipro rose 0.68% as its ADR rose 1.76% on Monday. Wipro, sees robust deal pipeline on the back of improving IT demand worldwide, Suresh Vaswani, joint chief executive said on Tuesday 10 November 2009. The company said on 5 November 2009 it had agreed to buy some personal care businesses of Yardley for about $45.5 million, adding to its consumer goods business. Wipro said it had signed an agreement with UK-based Lornamead group, which owns the Yardley brand, for the businesses in Asia, the Middle East, Australasia and some African markets.

Goa Carbon gained 2.86%, after one of the promoters hiked his stake in the firm.

Glenmark Pharmaceuticals surged 4.80%, extending Monday's advance, after its US subsidiary settled all pending litigation with the Arizona-Based Medicis Pharmaceutical.




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Nov 16, '09
 Market Commentary

Market surges as dollar weakens.

The key benchmark indices pared gains in late trade as index heavyweights Reliance Industries and Larsen Toubro came off the day's highs. The BSE 30-share Sensex was provisionally up 161.05 points or 0.96%, off close to 75 points from the day's high. The BSE Sensex today, 16 November 2009, crossed the psychological 17,000 mark and S&P CNX Nifty breached the key 5,000 mark. Both the indices hit their highest level since late October 2009.

Weakness in the US dollar aided the rally on the domestic bourses. Banking, realty, metal and auto stocks rose. But IT stocks fell. The market breadth was strong.

The dollar slipped against major rivals on Monday, 16 November 2009, pressured by stepped-up rhetoric from China, better-than-expected Japanese growth data and rising gold futures. The dollar index, which measures the greenback against six major currencies, was recently down 0.5% at 74.93.

The dollar was also under pressure after China's chief banking regulator on Sunday, 15 November 2009. criticized loose US monetary policy as leading to increased speculation. The yen, meanwhile, got a lift from better-than-expected Japanese gross domestic product data.

The dollar index has tumbled from a three-year high reached in March 2009, on speculation the Fed will be slow in raising borrowing costs. With short-term interest rates very low, global traders have turned to borrowing funds cheaply in the US and then reinvesting the proceeds in equities and commodities, looking to lock in higher returns and benefiting from further erosion in the dollar. These so called US dollar carry trades have kept putting pressure on the dollar as investors short the currency to invest elsewhere.

There has been a solid surge in inflows in emerging markets equity funds this year. But a strong rebound in dollar, if any, may result in unwinding of the so called US dollar carry trades positions by traders/institutions. This may hit emerging markets equities hard.

Closer home, Cabinet Secretary KM Chandrasekhar today said food prices will moderate as supply constraints ease. He said the government is monitoring sugar prices and it will take more action to contain prices if needed.

There are no fears of government borrowing crowding out private borrowing in India, finance minister Pranab Mukherjee said at an industry conference on Monday.

The economy could expand between 6 and 7% in the year to March 2010 despite a bad monsoon, Mukherjee said on Saturday as data showed accelerating inflation in October. Speaking in the Sri Lankan capital Colombo, Mukherjee said there were risks to an early global economic recovery and signs asset price bubbles were re-emerging.

Inflation based on the wholesale price index accelerated in October 2009 from a month earlier on costlier minerals and fuels. On Saturday, the government switched to using monthly inflation data for all commodities with 1993/94 as the base year, from the earlier practice of announcing weekly price movement. The wholesale price index was up 1.34 % in October 2009 from a year earlier, compared with 0.5 % rise in September 2009 and 11.06 % jump a year ago. Food prices, however, declined by 1 % from the previous month's level, while minerals and industrial fuels were each costlier by 3%.

At its policy review last month, the Reserve Bank of India (RBI) lifted its inflation forecast to 6.5% for the end of 2009/10 fiscal year in March, but left policy rates unchanged. The RBI also laid the groundwork for a rise in interest rates by tightening credit to the commercial property sector and removed some of the emergency liquidity support steps that were extended to protect the economy from the global downturn.

Industrial output grew 9.1% in September 2009 from a year earlier, helped by stimulus and festival demand, and adding to the debate on the timing of exit policy. The RBI forecast the economy would expand 6% in 2009/10, below 6.5 % predicted by the prime minister's economic panel. It grew 6.7% last year, slowing sharply from 9% or more between 2005/06 and 2007/08.

Meanwhile, the government aims to sell shares of about 60 state-run firms in the coming years, with offers for NTPC and Rural Electrification Corp expected by end-March 2010, disinvestment Secretary Sunil Mitra said on Friday 1 November 2009. He also said the finance ministry was in talks with other ministries to launch public offers of Steel Authority of India, miner NMDC, Coal India and telecoms firm BSNL.

The cabinet will soon consider selling part of government's stake in Steel Authority of India and NMDC, Steel Minister Virbhadra Singh told reporters on Monday.

The cabinet recently approved a long-pending divestment policy that mandates at least 10% public holding in state-run firms and use the proceeds for social schemes until March 2012, to cut its fiscal deficit.

European shares advanced for the fourth straight session on Monday, with commodity stocks leading the gainers as raw material prices benefited from a weaker US dollar, but retailer H&M fell after weak October sales. The key benchmark indices in France, Germany and UK were up by between 0.94% to 1.58%.

New passenger car registrations in Europe rose 11.2% to 1.26 million in October 2009 year-on-year, driven by growth in the Western European markets, the European Automobile Manufacturers' Association said Monday.

Asian stocks gained on Monday after upbeat reports from US retailers underpinned confidence the global economy is recovering. The key benchmark indices in Hong Kong, South Korea, Singapore and Taiwan rose by between 1.3% to 1.73%.

China's Shanghai Composite Index jumped 2.74%, aided by economic data showing foreign direct investment (FDI) into China climbed for a third straight month. FDI rose 5.7% to $7.1 billion in October 2009, after rising 18.9% on year in September 2009, the state-run Xinhua news agency reported, citing data from the Ministry of Commerce. In the first ten months of the year foreign domestic investment totaled $70.87 billion, down 12.6% from a year earlier.

Data released last week showed China's industrial production and retail sales accelerated at faster than expected pace, although consumer and producer prices were generally softer than expected

China's economy is expected to grow by about 8.5 % next year while inflation will remain modest at about 2.5 %, indicating that monetary policy should remain appropriately loose to solidify the basis of the recovery, a key government think-tank said on Monday. The State Information Centre added that the risks of rapid credit growth could be contained and that a tightening of monetary policy would have only limited effectiveness in curbing asset price bubbles, in a report carried by the official China Securities Journal.

US President Barack Obama said on Monday that Washington was not trying to contain China's rise but said trade between the two giants needed to be more balanced. Addressing students at a town hall-style meeting in Shanghai on the first full day of his first trip to China, Obama said the notion that Washington and Beijing must be adversaries was not pre-destined.

Japan's Nikkei rose 0.21%. Japan's economy expanded at the fastest pace in more than two years in the third quarter, led by a rebound in domestic demand that may ease concern of a return to recession next year. Gross domestic product rose at an annual 4.8% pace, after a 2.7% gain in the second quarter, Cabinet Office figures showed today in Tokyo.

Meanwhile, Japanese Trade Minister Masayuki Naoshima apologized for speaking about price sensitive third-quarter GDP data to oil industry executives on Monday ahead of its official release in an embarrassment for a government that took power two months ago.

US stocks rose on Friday, setting up a second straight week of gains, as upbeat retail news reinforced hopes for strong sales in the key holiday season. The Dow Jones Industrial Average roseor 73 points or 0.71%, to close at 10,270. The Nasdaq gained about 18 points or 0.87% at 2176, and the S&P 500 was up 6.24 points or 0.57% at 1093.

Obama said on Sunday the world economy was on a path to recovery but warned that failure to re-balance the global economic system would lead to further crises. Obama was addressing Asia Pacific leaders in Singapore.

Leaders of the 21-member Asia Pacific Economic Cooperation forum pledged on Sunday to conclude Doha global trade talks in 2010 and to reject protectionism, but dropped earlier draft references to "market-oriented exchange rates" and to emissions cuts.

Kansas City Fed President Thomas Hoenig said on Monday that the US economy still faced significant weaknesses and he urged policymakers to allow large financial institutions to fail if needed. Hoenig was speaking at a central bank event in Abu Dhabi, the capital of the United Arab Emirates.

As per the provisional figures, the BSE 30-share Sensex was up 161.05 points or 0.96% to 17,009.88. At the day's high of 17083.20, the Sensex rose 234.37 points in mid-afternoon trade, its highest level since 21 October 2009. The Sensex rose 44.28 points at the day's low of 16893.11 in early trade.

The S&P CNX Nifty was up 52.60 points or 1.05% to 5051.55 as per the provisional figures. It hit a high of 5073.20, its highest since 21 October 2009.

The market breadth, indicating the overall health of the market was strong. On BSE, 1700 shares advanced as compared with 1042 that declined. A total of 95 shares remained unchanged.

From the 30 share Sensex pack; 25 rose and rest fell.

The BSE Mid-Cap index rose 1.04% and the BSE Small-cap index rose 1.19%.

BSE clocked a turnover of Rs 4377 crore, lower than Rs 5312.04 crore on Friday, 13 November 2009.

Energy major Reliance Industries (RIL) rose 1.35% to Rs 2145. But the stock came off the day's day's high of Rs 2158.80. RIL may reportedly join global oil majors in search of shale gas. RIL has been studying the breakthroughs and the new technologies that are being used in producing shale gas that is now a huge rage in the US, reports suggest.

Reliance Industries (RIL) on Friday offered to withdraw affidavits filed by seven of its directors, claiming they were unaware of the contents of the memorandum of understanding (MoU) signed between members of the Ambani family in 2005 for supply of gas from the Krishna-Godavari basin, only if Reliance Natural Resources (RNRL) agreed to withdraw an assertion in its affidavit that the RIL board had seen and approved the MoU. RIL and RNRL are currently fighting the gas price dispute in the supreme court.

RIL on 10 November 2009 said reports of a meeting between the billionaire Ambani brothers to settle a gas-pricing dispute were baseless. RIL said in a statement the matter would be decided by the Supreme Court, which is currently hearing the case.

RIL on Tuesday 10 November 2009 announced its first oil discovery in its exploration block in the Cambay Basin off Gujarat. Reliance holds 100% participating interest in the block. This block was awarded to Reliance under the fifth round of the New Exploration Licensing Policy.

India's largest engineering and construction firm by sales Larsen & Toubro rose 0.21% to Rs 1647. The stock came off the day's high of Rs 1669. The company made a profit of Rs 86.14 crore by paring a third of its stake in software firm Mahindra Satyam. Larsen and Toubro (L&T) on Friday, 13 November 2009 sold 2.72 crore shares in Mahindra Satyam in two bulk deals at an average price of Rs 113.65 on BSE in opening trade.

Metal stocks rose as a gauge of six metals traded on the London Metal Exchange, rose 0.27% on Friday, 13 November 2009. Sterlite Industries rose 3.19% even on reports a Texas judge has issued final approval of Grupo Mexico's plan to regain control of copper miner Asarco, ending a lengthy takeover battle with rival suitor Sterlite Industries. The ruling will return control of Asarco to Americas Mining Corporation, a Grupo Mexico subsidiary. The deal is expected to close by mid-December

National Aluminium Company rose 0.85%. The company recently hiked the prices of aluminium products by Rs 1000 a tonne reflecting the recent uptrend in prices on the London Metal Exchange.

Hindustan Zinc and Hindalco Industries rose by between 2.18% to 4.12%.

Bur NMDC fell 0.61% after the steel minister said disinvestment process in the state-run firm will begin in the current financial year.

Steel Authority of India (Sail) rose 0.91% after the steel minister said the cabinet will soon consider selling part of government's stake in Steel Authority of Steel. Meanwhile, Sail chairman today said the company has cut flat product prices by Rs 500 per tonne.

Tata Steel, the world's eighth largest steelmaker by output, rose 2.65%. The company said on Thursday 12 November 2009 it approved a new convertible bonds offer in exchange for an existing $875 million securities to reduce costs and ease repayment obligations. The company said on 6 November 2009 steel sales at its Indian operations rose 38% to 462,000 tonnes in October 2009 over October 2008.

Demand for steel remains strong from auto, rural construction and infrastructure sectors. Also demand for construction grade steel has improved post monsoon season, and has resulted into higher sales.

Rate sensitive auto stocks rose as low interest rates and attractive benefits offered by companies pushed up sales in October 2009.

India's largest small car marker by sales Maruti Suzuki India rose 5.45%. The company's total sales grew 32.4% to 85415 units in October 2009, compared with 64490 units posted in the same month a year ago.

India's largest truck marker by sales Tata Motors rose 2.32%. Its UK unit Jaguar Land Rover is reportedly expected to announce on Monday that it has secured a 170-million-pound ($282.5 million) working capital facility from GE Capital.

India's second largest bike marker by sales Bajaj Auto rose 3.57%. Carlos Ghosn, chief executive of French car maker Renault and Japan's Nissan Motor Co, said on Tuesday an agreement had been signed with Bajaj Auto for a low-cost car which would come to India in 2012.

India's largest bike marker by sales Hero Honda Motors rose 3.82%. The company reported a marginal increase in October sales at 354,156 units as against 352,449 units in the same month last year.

India's largest tractor maker by sales Mahindra & Mahindra 1.79%. The company's overall sales climbed 32% in October this year to 18,410 units against 13,935 units in the same month last year.

Car sales in India rose an annual 34% to 132,615 units in October 2009, boosted by festival demand and easier availability of loans, an industry body said on Wednesday 11 November 2009. Sales of trucks and buses, a gauge of economic activity, rose 52% to 42,562 units in October 2009, the data showed.

Rate sensitive realty shares rose on bargain hunting after a recent steep fall. Omaxe, Unitech, Indiabulls real Estate, DLF, Parsvnath Developers rose by between 1.19% to 4.54%.

Ansal Properties & Infrastructure surged 9.01% after the company's board approved allotment of 96.27 lakh equity shares to Mauritius-based IPRO Funds, a foreign fund, under preferential allotment.

Realty stocks corrected recently after the RBI, late last month, raised the provisioning requirements for loans to commercial real estate from 0.4% to 1% at a regular monetary policy review. The latest RBI move will result in increase in borrowing costs for realty firms which depend heavily on borrowing. In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets (NPAs), the central bank said in its quarterly policy review.

Banking shares rose on hopes of financial sector reforms. India's largest private sector bank by net profit ICICI Bank rose 1.04%. Its ADR rose 0.86% on Friday 13 November 2009. The bank's net profit rose 2.6% to Rs 1040.13 crore on a 12.7% decline in total income to Rs 8480.73 crore in Q2 September 2009 over Q2 September 2008. The result was announced during trading hours on 30 October 2009.

India's largest bank by net profit State Bank of India (SBI) rose 2%. State Bank of India said on 9 November 2009 said it had entered into an agreement with T. Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company. State Bank currently holds 25% in each of the companies and after the sale its holding would be reduced to 18.5%, it said in a statement.

SBI announced after market hours on Friday 6 November 2009 it has revised downwards interest rates on deposits by 25-50 basis points for a few maturities effective from 9 November 2009. The bank's consolidated net profit rose 28.29% to Rs 3,133.16 crore on 22% rise in consolidated income to Rs 33,101.65 crore in Q2 September 2009 over Q2 September 2008. The results were announced on 31 October 2009.

But, India's second largest private sector bank by net profit HDFC Bank was flat even as its ADR rose 2.82% on Friday.

India's largest dedicated home loan lender Housing Development Finance Corporation (HDFC) was flat at Rs 2760. The lender announced after market hours on Friday 13 November 2009 it has agreed to acquire approximately 41% in the fully diluted equity share capital of Credila Financial Services from DSP Merrill Lynch Capital.

Prime Minister Manmohan Singh said on Sunday, 8 November 2009, financial reforms, such as building up a domestic bond market and expanding foreign investment in sectors like insurance, would be pushed forward.

As per reports, the government plans to introduce two key bills in parliament by December 2009. It plans to introduce bills proposing the raising of foreign stake limits in insurers to 49% from the present 26% and opening up the pension sector to private and foreign firms.

IT stocks fell on reports a new tax rule in the European Union (EU) will put a renewed squeeze on profit margins of companies such as Tata Consultancy Services, Infosys and Wipro. Starting 1 January 2010 the 27-nation bloc plans to impose value-added tax (VAT) on services delivered from non-EU nations such as India. A strong rupee also weighed on IT stocks.

India's second largest software company by sales Infosys fell 0.34% even as its ADR rose 2.85% on Friday. Infosys BPO, the business processing outsourcing subsidiary of Infosys Technologies, on Thursday announced the signing of a definitive agreement to acquire all of the outstanding interests of McCamish Systems LLC, a premier business process solutions provider, based in Atlanta, Georgia in the United States.

The acquisition is expected to be completed later this year subject to the satisfaction of certain closing conditions. The upfront consideration for the deal is $38 million with up to an additional $20 million payable to the sellers if McCamish Systems achieves certain financial targets in the future. The announcement was made before market hours on Thursday 12 November 2009.

India's largest software company by sales Tata Consultancy Services (TCS) fell 0.63%. The company recently secured a 150 million pounds software implementation contract for 15 years from Cardiff city council, UK.

Bur, India's third largest software company by sales Wipro rose 0.55% as its ADR rose 2.11% on Friday. Wipro, sees robust deal pipeline on the back of improving IT demand worldwide, Suresh Vaswani, joint chief executive said on Tuesday 10 November 2009. The company said on 5 November 2009 it had agreed to buy some personal care businesses of Yardley for about $45.5 million, adding to its consumer goods business. Wipro said it had signed an agreement with UK-based Lornamead group, which owns the Yardley brand, for the businesses in Asia, the Middle East, Australasia and some African markets.

Indian rupee rose on Monday, boosted by gains in regional stock markets and tracking broad weakness in the dollar. The partially convertible rupee was at 46.19/20, stronger than Friday's close of 46.31/32. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports.

UltraTech Cement, a unit of conglomerate Aditya Birla Group, rose 1.49% paring gains after more than 8% jump in early trade after it absorbed sister unit Samruddhi Cement, to form the country's biggest cement firm. The move, flagged in October 2009, was approved by the boards of both companies on Sunday. In October, the group said it will hive off the cement business of flagship firm Grasim Industries into unit Samruddhi in a cashless transaction and later merge it with group firm UltraTech. Samruddhi shareholders will receive four shares of UltraTech for every seven held in Samruddhi. UltraTech will also issue 14.95 crore new shares, boosting its capital to Rs 274 crore. Shares of Grasim Industries rose 2.07%.

GVK Power & Infrastructure jumped 3.29% on reports the company will complete the acquisition of a 13.5% stake of its South African partner Bidvest in Mumbai International Airport.

Other Stories:
1. Maruti, Hero Honda in top gear (13-Nov 15:51 Hrs IST)
2. Rate sensitive stocks lead decline (12-Nov 15:43 Hrs IST)
3. Nifty regains 5,000 mark (11-Nov 15:51 Hrs IST)
4. Telecom stocks tumble in choppy market (10-Nov 15:45 Hrs IST)
5. Equities rally as G20 pledges to keep stimulus measures in place (9-Nov 15:48 Hrs IST)
6. Small-cap, mid-cap indices outperform Sensex (6-Nov 15:45 Hrs IST)
7. Sensex regains 16,000 as Govt plans to list profit making PSUs (5-Nov 15:51 Hrs IST)
8. Sensex provisionally jumps over 500 points on firm global stocks (4-Nov 15:47 Hrs IST)
9. Sensex tumbles over 500 points in late sell-off (3-Nov 15:40 Hrs IST)
10.Sensex off 480 points from the day's high; telecom stocks hammered (30-Oct 15:42 Hrs IST)




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