Market Outlook 31st July 2009

 

NIFTY FUTURES LEVEL

Resistance

4591

4628

4664

Support

4563

4545

4507

4470

4434

4397

Buy PATNI COMPUTER,TAJGVK

 

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

DCHL, Patni, MPHASIS, GSPL, Tata Motors, Rolta, Jindal Saw, RECL, Bharat Forg & Maruti.

And this is list of 10 Weak futures:

EKC, SunPharma, ABB, Reliance, RPL, BRFL, IVRCL Infra & National Aluminium.
 Nifty is in Up Trend.  

 

Interday calls for 31st JUL 2009
Buy Ansalinfra-63 for a target 68-71 stop loss 60.25
Buy Ambujacem-103 for a target 109-112 stop loss 100
Buy BPCL-486 for a target 505 stop loss 480

Positional calls
Buy Ashokley-36 for a target 40-45 stop loss 34
Buy Coreprotec-139 for a target 149-156-167 stop loss 133
Buy Munjalshow-57 for a target 67-71 stop loss 53

NIFTY FUTURES (F & O):  
Rally may continue up to 4589-4591 zone for time being.

Support at 4545 & 4563 levels. Below these levels, expect profit booking up to 4507-4509 zone and thereafter slide may continue up to 4470-4472 zone by non-stop.

Break below 4434-4436 zone, it can tumble up to 4397-4399 zone by non-stop.

On Positive Side, cross above 4626-4628 zone can take it up to 4662-4664 zone by non-stop. Supply expected at around this zone and have caution.
 
Short-Term Investors: 
 Bullish Trend. 3 closes above 3910 level, it can zoom up to 4596 level by non-stop.
3 closes above 4596 level, it can zoom up to 4940 level by non-stop.
 
BSE SENSEX:  
Higher opening expected. Profit Booking should start. 

Short-Term Investors:  
Short-Term trend is Bullish and target at around 16459 level on upper side.
Maintain a Stop Loss at 15379 level for your long positions too.

3 closes below 15379 level, it can tumble up to 14300 level by non-stop.

 

POSITIONAL BUY:
Buy PATNI COMPUTER SYSTEMS (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 322 level can be used to buy. If uptrend continues, then it may continue up to 351 level for time being. 

If crosses & sustains at above 374 level then uptrend may continue.

Keep a Stop Loss at 298 level for your long positions too.
 
Buy TAJ GVK HOTELS (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 114 level can be used to buy. If uptrend continues, then it may continue up to 129 level for time being. 

If crosses & sustains at above 137 level then uptrend may continue.

Keep a Stop Loss at 106 level for your long positions too.

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	30-Jul-2009	4759.84	4393.03	+366.81

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	30-Jul-2009	1962.92	2249.59	-286.67

 SPOT LEVELS TODAY

	4571.45	( 1.28 %)	57.95
		1	2	3
Resistance		4611.03	4650.62	4718.88
Support		4503.18	4434.92	4395.33

	15387.96		( 1.41 %)	214.50
			1	2	3
Resistance			15510.09	15632.21	15854.52
Support			15165.66	14943.35	14821.23

Global Cues & Rupee  
The Dow Jones Industrial Average closed at 9,154.46. Up by 83.74 points.
The Broader S&P 500 closed at 986.75. Up by 11.60 points.

The Nasdaq Composite Index closed at 1,984.30. Up by 16.54 points.

The partially convertible rupee INR=IN closed at 48.35/36 per dollar on yesterday, stronger than its previous close of 48.42/43.
 
 Interesting findings on web:
U.S. stocks rose and the Standard & Poor's 500 Index approached a nine-month high.

Motorola and Dow joined the hit parade of better-than-expected earnings reports Thursday, fueling a broad stock market surge that pushed most major indexes to their highest closes of the year.

The S&P 500 added 1.2 percent to 986.75 at 4:08 p.m. in New York, the highest close since Nov. 4. The index moved above 990 intraday for the first time since November.

The S&P hasn't crossed above 1000 on either an intraday or a closing basis since Nov. 5.

The Dow Jones Industrial Average rose 83.74 points, or 0.9 percent, to 9,154.46. Marking its highest close since Nov. 4.

The index is up 8.4% and in line for its best monthly percent increase since October 2002.

U.S. stocks trimmed some of their strong gains in the final minutes of trade on Thursday, with weakness in healthcare and technology stocks weighing on an otherwise broad advance.

The technology-focused Nasdaq Composite Index gained 16.54, or 0.84%, to 1984.30, marking its highest close since Oct. 1.

The surge left the benchmark index for U.S. equities trading at about 16.7 times its companies' profits over the past 12 months, the highest level since September, according to Bloomberg data.

All 10 industry groups in the S&P 500 advanced today.

Motorola rallied 9.4 percent, the most since November, as job cuts helped the biggest U.S. mobile-phone maker report a smaller loss than analysts projected.

MasterCard added 3 percent on earnings that topped the average forecast by 11 percent.

Visa Inc., which runs the No. 1 credit-card network, gained 0.6 percent to $67.21 after it also topped projections with more consumers paying bills with credit, charge and debit cards. 

Better-than-estimated results from Dow Chemical Co. and higher metals prices helped propel a measure of raw-material companies up 3 percent, the steepest gain among the 10 main industry groups in the S&P 500.

Dow, the largest U.S. chemical maker, jumped 6.2 percent to $21.53, while Alcoa Inc. gained 4.1 percent to $11.46 as copper, aluminum, nickel and zinc prices advanced. Barrick Gold Corp. increased 3 percent after the company beat analysts' earnings forecasts.

General Electric Co. advanced 6.9 percent for its steepest gain since April on speculation new banking rules will let the company keep its finance unit.

Akamai Technologies Inc.fell the most in the S&P 500, plunging 19 percent to $16.51. The provider of software that makes Web sites load faster reported profit and sales trailed expectations.

The Labor Department's weekly jobless data bolstered expectations firings are slowing as the economy stabilizes. Applications for jobless benefits rose by 25,000 to 584,000 in the week ended July 25, compared with more than 600,000 claims every week last month. The total number of people collecting unemployment benefits decreased for a third week.

About three out of every four companies in the S&P 500 that released results since June 17 have exceeded analysts' second- quarter profit estimates, according to data compiled by Bloomberg. The data shows they've beaten forecasts by an average 9 percent, even as earnings tumbled 31 percent.

Treasuries

Treasuries rose after the highest seven-year note yields in more than a month bolstered demand at the government's auction of a record $28 billion of the securities. The debt drew a yield of 3.369 percent, below the median forecast of 3.394 percent in survey of eight of the Federal Reserve's primary dealers.

The sale follows record auctions of two- and five-year notes the past two days that attracted lower-than-forecast interest from investors.

What to expect:

Heavily watched report on second-quarter gross domestic product due out first thing Friday morning.

U.S. gross domestic product contracted at a 1.5 percent annual rate in the second quarter, following a 5.5 percent drop in the first three months of 2009, according to the median forecast of 77 economists surveyed by Bloomberg News. The Commerce Department report is due at 8:30 a.m. in Washington.

The government's advance report on second-quarter GDP will offer a sense of how the economy entered the third quarter and will give the U.S. governemnt securities market its early focus on Friday.

A Reuters poll of economists resulted in a median forecast of a 1.5 percent contraction in the U.S. economy in the second quarter, on a seasonally adjusted annualized basis.

That would represent less damage than the 5.5 percent contraction recorded for the first quarter and would reflect the widely held view that the economy is weak, but that its decline has slowed enough to justify talk of stabilization.

The GDP report will be released to a U.S. Treasuries market that has just come off a week of auctions. But despite $115 billion in new coupon supply, including a $6 billion sale of Treasury Inflation-Protected Securities, benchmark Treasury yields mid-afternoon Thursday, after the last of the week's auctions, were slightly easier than they were Friday,Analysts said a Q2 GDP report showing that GDP contracted 1.5 percent, as forecast, could elicit little reaction from the Treasury market.

A weaker-than-expected Q2 GDP reading could inspire some buying of Treasuries, while a less weak-than expected number could spur some selling.

Few economists are making a case for a positive Q2 GDP reading. Of the 72 economists polled last week by Reuters, only three had a plus sign in front of their forecasts.

GDP is reported at 8:30 a.m. Friday, as is the employment cost index. The Chicago Purchasing managers index is released at 9:45 a.m. Key earnings Friday morning include Chevron, Allergan, American Electric Power, ITT, Weyerhaeuser, Parker Drilling, AutoNation, Constellation Energy, and Calpine.

Late Thursday, President Obama said he expects Friday's report to show a contraction, but he added that the nation has "stepped away from the precipice."

Obama told reporters he had not seen the GDP report but expects it to reflect that the economic struggle continues. But he said there are reasons to remain upbeat.

Oil, Gold & Currencies:

Crude oil rose more than $US3 a barrel as stocks advanced on increased optimism that the economic decline will ease.

Crude oil for September delivery rose $US3.09, or 4.9%, to $US66.44 a barrel in New York. The contract is heading for the biggest gain since April 22.

Gold futures rose nearly 1%, gaining for the first session in three, as rebounding crude-oil futures heightened the metal's appeal as a hedge against potential inflation.

The dollar weakened against most of its major rivals, also pushing up dollar-denominated gold prices.

Gold for August delivery rose 0.8%, or $US7.70, to end at $US934.90 an ounce in New York. Gold had fallen 2.7% over the previous two sessions.

The dollar and yen fell against most of their major counterparts after a US government report showed a third weekly reduction in the number of people collecting jobless benefits, boosting demand for higher yields.

Sterling rose versus the dollar as UK house prices advanced for a third month and global stocks rallied.

The yen declined 0.9% to ¥134.71 per euro while the dollar slid 0.2% to $US1.4075 versus the euro. The US currency gained 0.8% to ¥95.71 and the pound strengthened 0.7% to $US1.65.

Dollar Trades Near One Week Low as U.S. GDP Slide Is Slowing.

Asia:

On the economic front, Japan's statistics bureau said the unemployment rate surged to 5.4% in June compared to 5.2% in May.

Tokyo's Nikkei 225 advanced 1.31% to 10,298.41 after Sony Corp posted a lower than expected first-quarter loss while Seoul's Kospi Index was up 0.22%.

The Japanese benchmark index Nikkei rose sharply on Friday and hit its highest intra-day levels since early October 2008 as stocks surged higher on better-than-expected earnings, a weaker yen and a bright close on Wall Street overnight.

Japan's Nikkei average rose 1.4 percent and hit a 10-month high on Friday, with sentiment increasingly positive after a slew of solid earnings that saw Sony Corp (6758.T) post a smaller than expected loss. Property shares climbed after Mitsui Fudosan Co (8801.T) reported a 32 percent rise in quarterly profit, with fellow developer Mitsubishi Estate (8802.T) surging 5 percent ahead of its earnings announcement later on Friday.

Japanese core consumer prices fell a record 1.7 percent in the year to June, with weak consumer demand for goods playing an increasing part in pushing the country deeper into its second spell of deflation this decade.

It was the fourth straight month of decline, matching a median market forecast and accelerating from a 1.1 percent drop in May in another sign the world's second-largest economy is stuck in the doldrums with rising job losses and falling wages hurting household spending.

The unemployment rate hit a six-year high and job availability sank to a record low, suggesting consumers are unlikely to loosen their purse strings any time soon.

So-called core-core inflation, which strips out both energy and food prices and is similar to underlying inflation gauges used in Europe and North America, fell 0.7 percent from a year earlier after a 0.5 percent drop in May. 

HSI 20600.99 +366.91 +1.81% (08.30 AM IST)

Hong Kong shares extended their rise early Friday after U.S. stocks endged higher and the Shanghai market advanced further, with banking giant HSBC Holdings Plc and property issues pacing gains. The Hang Seng Index rose 1.7% to 20,573.18, and the Hang Seng China Enterprises Index rose 1.6% to 12,183.32. HSBC /quotes/comstock/22h!e:5 (HK:5 76.25, +2.55, +3.46%) /quotes/comstock/13*!hbc/quotes/nls/hbc (HBC 49.35, +2.30, +4.89%) jumped 3.1%, with Henderson Land Development Co. /quotes/comstock/22h!e:12 (HK:12 50.40, +2.00, +4.13%) /quotes/comstock/11i!hldcy (HLDC.Y 6.25, +0.14, +2.29%) rising 3.1% and Sun Hung Kai Properties /quotes/comstock/22h!e:16 (HK:16 118.20, +4.40, +3.87%) /quotes/comstock/11i!suhjy (SUHJ.Y 14.71, +0.51, +3.59%) up 4.2%. On mainland China, the Shanghai Composite rose 1.1% to 3,357.12.

Hong Kong stocks rose on Friday morning, with the benchmark Hang Seng Index opening 312 points higher at 20,546.

The Hang Seng China Enterprise Index, which tracks the overall performance of 43 mainland Chinese state-owned enterprises on the Hong Kong Stock Exchange, opened 203 points higher at 12,194.

Sinopec<600028><0386><SNP>, the largest refiner in Asia by capacity, increased 2.23% from the previous closing to HK$6.89.

PetroChina<601857><0857><PTR>, the country's largest oil producer, rose 1.77% and opened at HK$9.22.

WALL STREET BANKS' BONUS BONANZA

NEARLY 5,000 bankers at the top nine US lenders were paid bonuses of more than $1m in 2008, despite their employers receiving $175bn (£106bn) in taxpayer-backed bailout funds, it was revealed yesterday.

New York attorney general Andrew Cuomo found that  staff at the banks, all of which received funds via the Troubled Asset Relief Programme (Tarp), were awarded a total of $32.6bn in 2008.

In a report entitled "The 'heads I win, tails you lose' bank bonus culture", Cuomo said there was "no clear rhyme or reason to the way banks compensate and reward employees".

Wall Street giants Citigroup and Merrill Lynch paid out nearly $9bn in bonuses between them, despite suffering combined losses of $54bn and taking state aid totalling $55bn.

At JPMorgan Chase, which took $25bn in Tarp funding, an astonishing 1,626 of the company's 225,000-strong workforce received bonuses of more than $1m.

The top four recipients alone were awarded $74.8m, with the total bonus pool reaching $8.69bn, $5.9bn of which was paid in cash. Ten bankers received bonuses of $10m or more, 29 made $8m, 84 received $5m, 130 made $4m and over 200 received bonuses of $3m or more.

Goldman Sachs, which took $10bn from Tarp, paid six employees more than $10m, 21 took home more than $8m, 78 made $5m or more and 95 grabbed a bonus of more than $4m.

Merrill Lynch, which was bought in a $50bn deal by Bank of America at the end of last year, was one of the most extravagant with its top earners, doling out $121m to its four highest-paid employees. Fourteen bankers earned a bonus of more than $10m, while 20 received $8m or more and 53 were handed at least $5m.

Merrill's new parent company Bank of America was less generous, awarding its four top executives $64.01m. Four individuals received bonuses of $10m or more, 8 of $8m, 10 of $5m or more, 28 of $3m or more, and 65 of $2m or more.

Citigroup however, which received the largest Tarp injection of $45bn, paid bonuses of more than $1m to 124 employees, with three individuals handed more than $10m, 13 given more than $8m and a further 44 awarded more than $5m.

Morgan Stanley handed out the largest pay packets  as a percentage of revenue, allocating 72 per cent of its second-quarter revenue in 2009 to compensation.

The bank put aside $3.9bn for compensation for the quarter, during  which it booked net revenues of $5.4bn.

In a document accompanying the data, Cuomo said: "Even a cursory examination of the data suggests that in these challenging economic times, compensation for bank employees has become unmoored from the banks' financial performance".

Cuomo singled out comments from one senior executive, who suggested that "employees should share in the upside when overall performance is strong and they should all share in the downside when overall performance is weak."

History Shows Hot July Could Mean Gains in August

A hot July for stocks has set the stage for a rally that should run right into August.

"The market is overbought, but it's a good overbought," said Andrew Burkly, technical analyst at Brown Brothers Harriman.

The Dow is up 8.4 percent for the month, and is on track, at this level, to close out its best monthly performance since October, 2002 and the best July since 1989. The S&P 500 is up 7.3 percent, its best July since 1997.

The five-month rally that started in March is setting records of its own. The S&P is up 34 percent, its biggest five-month streak since 1938. The Nasdaq, up 8.1 percent in July, has gained 44 percent for its best five months since the tech rally of 2000.

Most of the time, July is good for stocks. Since 1896, the Dow has been up 61 percent of the time with an average gain of 4.5 percent.

And when July is a positive month for stocks, most of the time August is also higher. For the Dow, August was higher 64 percent of the time following a positive July, but the gains were more tempered, averaging just 1.6 percent.

This July, the market's gains have been driven by corporate earnings news and hope the economy is on the road to recovery. For the quarter so far, 75 percent of the S&P 500 companies have topped Wall Street expectations.

The big headline for markets Friday is second quarter GDP, expected to be slightly negative at -1.5 after last quarter's 5.5 percent decline. GDP could drive Friday's action, and according to Deutsche Bank chief U.S. economist Joseph LaVorgna, it will set the tone for the second half of this year and 2010. Many economists expect GDP to turn positive in the third quarter, but they expect a muted recovery, as the consumer continues to hold back on spending.

Increasingly, economists are pointing to a pickup in industrial production, inventory rebuilding and a slight improvement in housing to help the economy in the second half. In fact, auto sales could be one (perhaps temporary) bright spot. Ford Motor Thursday said it has seen a sharp increase in sales from the "cash for clunkers" program, and that it was having a strong month even before the program started.

But the program was so successful, sources told CNBC's John Harwood Thursday evening that the nearly $1 billion program ran out of money and would have to be suspended. It's unclear if it will be reinstated.

Reflation Trade

Stock investors are pouring money into sectors that are part of the "recovery" trade. For instance, materials stocks were up 3 percent Thursday, and are up 12.3 percent for the month. Industrials were 2.3 percent higher, and were up 8.8 percent for the month.

LaVorgna, in a note, said this GDP report has important implications for the mix of growth for the rest of the year. It is important because it will contain comprehensive revisions. "If it turns out the economy was even weaker in the past than what was first reported, the possibility of a larger second half recovery increases and therefore we could lift our forecast a bit.," he said.

LaVorgna also said he now believes his 2010 forecast is too low at growth of 2 percent and he is upping it to possibly positive 3 to 3.5 percent.
 

 

INVESTMENT VIEW
Jaiprakash Associates-Q1 2009 Mysterious Numbers 
 
While Revenues are up nearly Rs 1000 crore on a QoQ basis, PBT has gone up by a mere Rs 70 crore.
 

Interest costs have trebled to Rs 228 crore.

 

Profit after Interest Income but before Tax includes a profit of Rs 374 crore made on sale of 2.75 crore shares held by beneficiary trusts of JP.

 

Since when does the profit of beneficiary trusts becomes an income for JPA and not of the Trusts in question?

 

Tax at Rs 60 crore is a mere 10 per cent effectively, much lower than the 15 per cent MAT for FY10 and substantially lower than the 35.9 per cent full taxation rate for corporates for FY10.

 

The latest Budget has already clarified that Sec 80IA benefits are not available to Builders and Construction firms from FY2000. Is the company still claiming these benefits and hence lowering tax rates or the depreciation claim on the Cement capacities added are so large as to reduce Tax to pitiful.

 

The Q1 results do not reflect a correct and maintainable EPS of Rs 3.50 for the quarter. Even on annualised earnings of Rs 14, the JP Associates stock fetches a PE of 18.
 

(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