Market Outlook 14th July 2009

Intraday Calls 14th Jul 2009
+ve Sector & Scripts : IT, HclTech

BUY TCS-397 for a target 408-415+ stop loss 393
BUY HclTech-182 for a target 188-193+ stop loss 179

BUY Cipla-267 for a target 273-277+ stop loss 263
BUY Cairn-217 for a target 223-227+ stop loss 214

BUY Grasim-2448 above 2468 for a target 2510-2517+ stop loss 2550

 

NIFTY FUTURES LEVELS

RESISTANCE

3979

4012

4044

4055

4086

SUPPORT

3955

3946

3938

3915

3904

3873

Buy MANGALAM TIMBER,Buy CIPLA

NIFTY FUTURES (F & O): 
 Above 3979 level, expect short covering up to 4010-4012 zone and thereafter expect a jump up to
4042-4044 zone by non-stop.

Support at 3955 level. Below this level, selling may continue up to 3946-3948 zone and thereafter

slide may continue up to 3938 level by non-stop.

Multiple Support Zones at 3904-3906 zone & at 3915-3917 zone. Below these zones, expect panic up to 3873-3875 zone by non-stop.

On Positive Side, supply expected at around 4053-4055 zone. Should not be allowed to cross 4084-4086 zone at

any cost.
 
Short-Term Investors:  
Bullish Trend. 3 closes above 4270 level, it can zoom up to 4830 level by non-stop.
Already SL triggered. 3 closes below 4270 level, it can tumble up to 3990 level by non-stop.

3 closes below 3990 level, it can tumble up to 3710 level by non-stop.
 
BSE SENSEX:  
Lower opening expected. Profit Booking should start. 

Short-Term Investors:
Short-Term trend is Bearish and target at around 12478 level on down side.
Maintain a Stop Loss at 14931 level for your short positions too.

Already SL triggered.

 POSITIONAL  BUY:
Buy MANGALAM TIMBER (NSE Cash) 
Recovery to start.

Mild sell-off up to 22 level can be used to buy. If recovery starts, then it may continue up to 24 level for time being. 

If crosses & sustains at above 25 level then uptrend may continue.

Keep a Stop Loss at 20 level for your long positions too.
 
Buy CIPLA LTD (NSE Cash) 
Profit Booking expected and have caution.

Mild sell-off up to 265 level is possible. If uptrend continues, then it may continue up to 273 level for time being. 

If unable to cross 278 level then expect profit booking too.

If does not break 260 level, then traders can buy this stock.
 

Strong & Weak  futures  
This is list of 10 strong futures:

Tulip, Colpal, Dabur, Cipla, ITC, Gail, Patni, Grasim, GT Off Shore & Edu Comp.

And this is list of 10 Weak futures:
JP Hydro, Essar Oil, Orchid Chem, Ispat Ind, Suzlon, Praj Ind, Aban, Nagar Fert, Adlabs Film & Bajaj Hind. 
 Nifty is in Down Trend.

 

FII DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	13-Jul-2009	1360.52	1919.75	-559.23

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	13-Jul-2009	1555.53	813.27	+742.26

 

SPOT LEVELS TODAY

	3974.05	( -0.75 %)	-29.85
		1	2	3
Resistance		4096.97	4190.03	4250.12
Support		3943.82	3883.73	3790.67

	13400.32		( -0.77 %)	-103.90
			1	2	3
Resistance			13794.81	14085.40	14273.61
Support			13316.01	13127.80	12837.21

 
Global Cues & Rupee  
The Dow Jones Industrial Average closed at 8,331.68. Up by 185.16 points.
The Broader S&P 500 closed at 901.05. Up by 21.92 points.

The Nasdaq Composite Index closed at 1,793.21. Up by 37.18 points.

The rupee at 49.12/49.13 per dollar on yesterday, weaker than from its previous close of 49.01/02.
 
 Interesting findings on web:
A few kind words about Goldman Sachs sent financial shares soaring and yanked the entire stock market out of a slumber. Rising bank stocks propelled indexes to their biggest one-day gain in six weeks Monday after influential banking analyst Meredith Whitney raised her rating on Goldman Sachs Group Inc. The bank reports earnings on Tuesday. Whitney said also on CNBC that hard-hit Bank of America Corp. looks inexpensive given the assets on its books.

Analyst Meredith Whitney told CNBC television she had upgraded her recommendation to `buy' for US bank Goldman Sachs, and said bank shares could rally 15 per cent.

Stocks on Wall Street have kicked off the week on a positive note as investors welcomed a retreat in energy prices and snapped up bank stocks ahead of a wave of earnings reports.

The financial sector was helped by a 5.5% gain in Goldman Sachs, which kicks off the wave of bank reports later today. Blue chips Intel and Johnson & Johnson, also due to report, were up 2.4% and 1.4%, respectively.

Stocks have been in a rut in recent weeks due to worries about the economy, chart-based selling and weak volumes. The Dow is on a four-week losing streak.

Financials rallied, with the KBW Bank index rising 6.5% after Meredith Whitney Advisory Group upgraded Goldman Sachs(GS Quote) to buy. Bank of America(BAC Quote) and JPMorgan Chase(JPM Quote) rose 8.3% and 6.4%, respectively, on the Dow.

Elsewhere in the financial sector, ailing CIT Group plummeted 11.76 percent to 1.35 dollars after confirming it was in talks with US authorities to try to avoid bankruptcy.

Two U.S. manufacturers filed for bankruptcy on Monday with combined debts of about $600 million, both victims of the economic recession and frozen credit markets.

Crude futures slipped 5USc to $US59.84 a barrel in New York as plentiful petroleum stockpiles remained a drag on the market.

In London, Brent crude on the ICE Futures exchange fell 54USc to $US59.98 a barrel.

Gold futures reversed earlier gains, falling on the heels of last week's drop as tumbling oil prices reduced the metal's appeal as a hedge against inflation.

The dollar pared earlier losses against the euro. A stronger dollar tends to put downward pressures on dollar-denominated gold prices.

August gold fell $US3.40, or 0.4%, to $US909.10 an ounce in New York.

The euro recovered earlier losses against the dollar as US stocks strengthened.

The euro was up at $US1.3969 while the dollar was up at ¥92.63.

The euro was also stronger at ¥129.40 while the UK pound rose to $1.6172.

Asia:

Posco yesterday reported its lowest quarterly operating profit in at least nine years as South Korea's largest steelmaker continues to feel the impact of lower demand and falling prices amid the global economic slowdown.

However, the steelmaker presented an upbeat outlook for the second half, predicting that earnings would improve on the back of stronger demand and lower material costs.

"We see the Chinese steel demand increase accelerating in the second half, driven by economic recovery," the company said.

South Korea's Posco (005490.SE) isn't planning to raise domestic product prices this year, but may raise export prices in the third quarter depending on market conditions, the company's chief financial officer said Monday.

The Bank of Japan bought Y28.88 billion worth of bank-held stocks as of July 10, the central bank's latest account data showed Tuesday.

That was up from Y25.74 billion as of June 30.

In a move to help Japan's troubled banking sector, the central bank decided in February to buy Y1 trillion worth of bank-owned shares in companies with ratings of BBB- or better.

The BOJ said it will keep buying the shares until April 2010.

Aided by the overnight surge on Wall Street and a stronger U.S. dollar, the Japanese stock market opened on a firm note on Tuesday. Stocks across the board moved higher with those

from non-ferrous metals, iron & steel and financial sectors leading the charge.

The Japanese benchmark index Nikkei 225, which opened nearly 83 points or 1.36% up at 9,173, is currently trading at 9,244, up 193.67 points or 2.16% over its previous close. On Monday, the Nikkei had dropped 236.95 points or 2.55% to close at 9,050.33, extending its losses to a ninth successive session.

Steel stocks JFE Holdings, Pacific Metals, Nippon Steel, Sumitomo Metal Industries and Kobe Steel are currently up by 3%-5%. Oil and gas developer Inpex Corp. is up by around 2.5%. Other oil stocks Nippon Mining Holdings and Showa Shell Sekiyu K.K. are also trading firm.

Among non-ferrous metals, Sumitomo Metal Mining, SUMCO, Toyo Seikan Kaisha, Sumitomo Electric Industries, Fujikura, Furukawa Electric, DOWA Holdings, Toho Zinc, Mitsui Mining, Furukawa, Nippon Light Metal and Mitsubishi Materials are all trading sharply higher today.

In the automobile space, Toyota Motor, Honda Motor, Suzuki Motor, Nissan Motor, Mazda Motor, Isuzu Motors and Hino Motors are up by 2%-6%.

Asian stocks bounced on Tuesday as a rally in U.S. financial shares helped Japan break a 10-session losing streak, while also reversing a little of the recent safe-haven rush into the yen.

Helping was upbeat news from Singapore, as economic growth in the trade hub climbed 20.4 percent annualized in the three months to June, putting an end to four quarters of contraction.

Analysts said other export-dependent Asian economies were also expected to see improved second quarters, but questioned whether improvements can be sustained amid still weak consumer demand in the region's major Western markets.

Unease ahead of key data on U.S. retail sales and a slew of U.S. corporate earnings including banking giant goldman Sachs (GS.N), was enough to keep commodity prices subdued and oil pinned around $60 a barrel.

"Market sentiment has improved slightly compared to a few days ago, but we still need to see the actual numbers of U.S. results," said Mitsuru Sahara, chief manager at Bank of Tokyo-Mitsubishi UFJ.

Shares of Komatsu were up 6.3% in early trading despite reports that the construction machinery maker's quarterly operating profit dropped 94% from last year as demand in the U.S. and Europe fell off.

One reason for the lift: cost cutting and a boom in Chinese orders helped the firm become profitable again in recent months. All Nippon Airways gained 1.1% after the financially troubled firm said it will raise $1.5 billion by selling shares.

At least one Asian economy is bucking the recession. Singapore's government said its economy grew 20.4% in the second quarter of 2009. That beat analysts' forecast of 16.4% growth. The government said booming

drug production ended a year of recession, though the government maintains the economy will shrink overall this year.

Automakers rose after the Nikkei business daily said major Japanese carmakers such as Nissan Motor Co ( NSANY - news - people ) and Honda Motor ( HMC - news - people ) are raising production capacity in China as brisk local demand helps prop up their earnings at a time when sales virtually everywhere else are in a steep slump.

Nissan jumped 5.9 percent to 538 yen after the Nikkei reported that the automaker will boost production capacity in China by 20 percent. Honda rose 2.5 percent to 2,430 yen and Toyota Motor Corp ( TM - news - people ) climbed 2.4 percent to 3,460 yen.

China's Ministry of Finance announced Monday that the country's fiscal revenue in June rose 19.6 percent year on year to 686.75 billion yuan (100.5 billion U.S. dollars).

However, in the first half of this year, fiscal revenue fell 2.4 percent to 3.398 trillion yuan, said the ministry in a statement on its website.

The growth rate last month was 14.8 percentage points higher than the growth rate in May. Fiscal revenue fell 9.9 percent in the first four months this year from a year earlier to 2.05 trillion yuan due to shrinking business profits hit by the global economic slowdown and active fiscal policies including tax cuts to buoy domestic economic growth.

The ministry attributed the revenue rise in June to the stabilization of overall economic performance, growing business profits and the increase in the cigarette tax.

The government announced on June 20 the tax on cigarette cartons costing 70 yuan or more would rise to 56 percent from 45 percent, and the tax on cigarette cartons costing less than 70 yuan would rise from 30 to 36 percent.

Sales tax revenues rose 63.1 percent year on year in June, with business tax revenues edging up 6.4 percent, but the ministry did not specify the figures.

In June, China's fiscal expenditure increased 21.5 percent to 640.56 billion yuan from a year earlier. From January to June, the figure stood at 2.89 trillion yuan, up 26.3 percent from the same period last year.

The government unveiled a 4-trillion-yuan stimulus package in November last year to be spent over the next two years to shore up the world's third largest economy, with 1.18 trillion yuan from the central government.

Fiscal revenue includes taxes as well as administrative fees and other government income, such as fines and income from state-owned assets. 
 
INVESTMENT VIEW!
Suzlon-Pretty Wind Farms, But Zero Profits

Investors must ask, what are they paying Rs 80 for? The company remains in deep losses and is only using GOI led FX relaxations to show profits....if Suzlon financials are getting impacted by FX conversion in the short term where is the guarantee these are reversible losses to allow a change in accounting policy for FY09.
 

That the corporate is in a credit crisis is apparent from the Rs 300 crore Suzlon raised from LIC, possibly to fund operational losses---- vide an issue of 12.50% Secured Redeemable Non-Convertible Debentures (NCDs).

 

As a result of change in the accounting policy, the net loss before tax for the quarter and year is lower by Rs 402.52 crore in the standalone financial results and net profit before tax for the quarter and year is higher by Rs 405.04 crore in consolidated financial results. These include the following:

 

The Company has amortized the foreign exchange loss as per amended AS - 11 retrospectively and accordingly there is gain of Rs 303.15 crore for the quarter.

 

WTG / Blade restoration & retrofit costs arising out of events like blade failures in Overseas Markets and disruption of WTGs in Dhule and, including their consequential generation / availability provisions. These amounts aggregate Rs 103.74 crore (Rs 182.41 crore) for the quarter ended March 31, 2009 and Rs.411.10 crore (Rs.266.61 crore) for the year ended March 31, 2009.

 

The Company has not provided for the proportionate premium on redemption of Zero Coupon Convertible Bonds, due 2012, since the Company believes that the same is contingent in nature. The proportionate premium as at March 31, 2009 is approximately Rs.226.11 crore (Rs.101.08 crore).

 

The Backdrop:

 

On June 6, 2008, the Company, through its subsidiary acquired further 30% stake of REpower Systems AG ('REpower') held by Areva. Consequently, REpower has become a subsidiary of the Company with effect from June 6, 2008. Accordingly, the consolidated financial results for the year ended March 31, 2009 are to that extent not comparable with the consolidated financial results of March 31, 2008.

 

Further, pursuant to an agreement dated December 15, 2008 with the Martifer Group to acquire its 22.4% stake in REpower, the Company, through its subsidiary has paid first tranche of Euro 65 Million in December 2008, thereby increasing its holding in REpower to 73.65% as on March 31, 2009. Post balance sheet date, the Company through its subsidiary has acquired additional stake of 17.07% and increased its holding in REpower to 90.72%.

 

In financial year 2007-2008, the financial statements of REpower had been consolidated using equity method of accounting with a three-month time lag to that of the Company and accordingly, the financial statements of REpower for the period June 1, 2007 to December 31, 2007 have been consolidated in the financial statements of the Company for the year ended March 31, 2008. Appropriate entries have been effected in the consolidated financial statements of the Company for the year ended March 31, 2009, wherein the aforesaid three-month time lag on consolidation of REpower financials as at March 31, 2008 has been adjusted.

2. In respect of long-term foreign currency monetary items, the Company earlier followed a policy of recording all exchange differences to the profit and loss account. In line with notification of the Companies (Accounting Standards) Amendment Rules 2006 issued by Ministry of Corporate Affairs on March 31, 2009 amending Accounting Standard – 11 (AS - 11) 'The Effects of Changes in Foreign Exchange Rates (revised 2003)´, the Company has chosen to exercise the option under para 46 inserted in AS - 11 by the notification.

 

Accordingly with retrospective effect from April 01, 2007, exchange differences on all long term foreign currency monetary items have been amortized over future periods not exceeding March 31, 2011 / adjusted to fixed assets as prescribed by the notification.

 

As a result of change in the accounting policy, the net loss before tax for the quarter and year is lower by Rs 402.52 crore in the standalone financial results and net profit before tax for the quarter and year is higher by Rs 405.04 crore in consolidated financial results.

3. Exceptional items referred to above include the following:

a. The Company has treated the Zero Coupon Convertible Bonds as monetary liability and accordingly restated the liability based on the exchange rate prevailing as at the end of the respective quarter. The Company has amortized the foreign exchange loss as per amended AS - 11 retrospectively and accordingly there is gain of Rs 303.15 crore for the quarter.

b. WTG / Blade restoration & retrofit costs arising out of events like blade failures in Overseas Markets and disruption of WTGs in Dhule and, including their consequential generation / availability provisions. These amounts aggregate Rs 103.74 crore (Rs 182.41 crore) for the quarter ended March 31, 2009 and Rs.411.10 crore (Rs.266.61 crore) for the year ended March 31, 2009.

c. Mark-to-market losses of Rs.128.68 crore (Rs.23.00 crore) for the quarter and Rs.330.71 crore (Rs.23.00 crore) during the year in the standalone financial results and Rs.139.24 crore (Rs.23 crore) for the quarter and Rs.353.54 crore (Rs.23 crore) during the year in the consolidated financial results. The same is in respect of foreign exchange forward / option contracts, taken for hedging purposes.

4. On June 11, 2007 and October 10, 2007, the Company made an issue of USD 300 Million (Rs.1,223.70 crore) and USD 200 Million (Rs.786.20 crore) Zero Coupon Convertible Bonds due 2012, respectively convertible into equity shares. However, in May 2009 and June 2009, the Company has done a restructuring of the Zero Coupon Convertible Bonds, by virtue of which bondholders have been exercised the following options provided to them:

- buy back of the bonds @ 54.55% of the face value

- exchange of new bonds in place of old bonds in the ratio of 3:5

- payment of consent fee to bondholders who agree for relaxation of covenants

The restructuring does not have any impact on the standalone or consolidated results for the quarter and year ended March 31, 2009.

5. The Company has not provided for the proportionate premium on redemption of Zero Coupon Convertible Bonds, due 2012, since the Company believes that the same is contingent in nature. The proportionate premium as at March 31, 2009 is approximately Rs.226.11 crore (Rs.101.08 crore). The auditors have without qualifying their opinion, given a matter of emphasis on non-provision of the proportionate premium in their audit report for the year ended March 31, 2009

The Company has share premium of Rs 3,465.18 crores, which is adequate to cover the cost of proportionate premium, in case the contingency materialises.

6. On January 26, 2009, AE-Rotor Holding B.V. ("AERH"), a wholly owned subsidiary of the Company has sold 67,010,421 shares (10% equity) in Hansen Transmissions International NV ("Hansen") to funds managed by Ecofin Limited ("Ecofin"), a London based specialized investment firm. Following this disposal, the Suzlon Group has a voting and economic interest in Hansen of approximately 61.28%.

7. The Company has raised Rs.300 crore in December 2008 from The Life Insurance Corporation of India (LIC) vide an issue of 12.50% Secured Redeemable Non-Convertible Debentures (NCDs). These NCDs are listed on the National Stock Exchange of India Ltd.

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
--
Arvind Parekh
+ 91 98432 32381