Market Outlook for 21st Aug 2009

INTRADAY calls for 21st Aug 2009

+ve Script : Voltamp, Purva
BUY ABirlanuvo-980 for 1001-1017 with sl 972
BUY Maruthi-1370 for 1410 with sl 1350
BUY 3IInfo-84 for 89-92 with sl 82

Expected Breakout
BUY ABB-691 above 700 for 740 with sl 690

Positional
BUY Infotech-281 for 340 with sl 265
BUY ALBK-90 for 100 with sl 86.50
BUY IDEA-81 for 90 with sl 78
BUY Skumars-49 for 55-58 with sl 46

 

Strong & Weak  futures  
This is list of 10 strong futures: Purva, Bhushan Steel, FSL, Patni,  Aurobindo Pharma, Jindal Saw, Polaris Software, Tulip, Aditya Birla Nuvo & Oracle Fin Serv. And this is list of 10 Weak futures: Chambal Fert, ACC Ltd, RCom, Suzlon, Nagarjuna Fert, India Cements, Rel.Capital, Dabut India, Bank Of India & Essar Oil.

Nifty is in downtrend
 
 INVESTMENT BUY:
Buy MAHA SEAMLESS (NSE Cash) 
Uptrend may continue.

Mild sell-off up to 277 level can be used to buy. If uptrend continues, then it may continue up to 288 level for time being. 

If crosses & sustains at above 295 level then uptrend may continue.

Keep a Stop Loss at 270 level for your long positions too.
 
Buy CEAT LTD (NSE Cash) 
Uptrend may continue.

Mild sell-off up to 139 level can be used to buy. If uptrend continues, then it may continue up to 146 level for time being. 

If crosses & sustains at above 150 level then uptrend may continue.

Keep a Stop Loss at 134 level for your long positions too.
 
 

NIFTY FUTURES (F & O): 
 Rally may continue up to 4482 level for time being.

Support at 4430 & 4446 levels. Below these levels, expect profit booking up to 4404-4406 zone and thereafter slide may continue up to 4380-4382 zone by non-stop.

Buy if touches 4340-4342 zone. Stop Loss at 4316-4318 zone.

On Positive Side, cross above 4506-4508 zone, can take it up to 4530-4532 zone by non-stop. If crosses & sustains this zone then uptrend may continue.
 
Short-Term Investors:
 
Bearish Trend. 3 closes below 4623.80 level, it can tumble up to 4092.20 level by non-stop. 
BSE SENSEX:
 
Higher opening expected. Uptrend should continue. 
Short-Term Investors:
 
Short-Term trend is Bearish and target at around 14235 level on down side.
Maintain a Stop Loss at 15973 level for your short positions too.
 
Global Cues & Rupee
 
The Dow Jones Industrial Average closed at 9,350.05. Up by 70.89 points.
The Broader S&P 500 closed at 1,007.37. Up by 10.91 points.

The Nasdaq Composite Index closed at 1,989.22. Up by 19.98 points.

The partially convertible rupee INR=IN closed at 48.71/72 per dollar on yesterday, stronger than its Tuesday's close of 48.78/79.

 

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	20-Aug-2009	1766.64	2204.83	-438.19

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	20-Aug-2009	1343.26	853.84	489.42

 
 Interesting findings on web:
Wall St gains on factory data, China; banks rally.

The Dow Jones industrial average .DJI gained 70.89 points, or 0.76 percent, to end at 9,350.05. The Standard & Poor's 500 Index .SPX rose 10.91 points, or 1.09 percent, to finish at 1,007.37,bringing it above the 1,000-level for the first day in four. The Nasdaq Composite Index .IXIC climbed 19.98 points, or 1.01 percent, to close at 1,989.22.

U.S. stocks end at highest levels this week.

The S&P Financial Index .GSPF was up 2.60 percent, widely outperforming other sectors, and the KBW Bank index .BKX gained 2.87 percent.

The U.S. stock market has been echoing the movement of Chinese equities, at least in trading before the opening bell this week. But some analysts say the recent fixation on China's stock market is overblown.

"Intermarket relationships around the world have never been stronger. So when the benchmark Chinese index pulls back 20% in two weeks, the world should take notice," wrote Richard Ross, global technical strategist at Auerbach Grayson, in a note.

Recent gains in U.S. stocks and commodities, coupled with the U.S. dollar's descent, indicate that "while China may be the life of the party, they are not the only belle at the ball," Ross said.

"I would think in the pre-market there is a little bit of correlation because people are looking for a directional indication," said William Byrne, director of trading at Conifer Securities.

"Valuations in Asia, and China specifically, got out of hand in the last year. But, as overvalued as things are, you still have to keep your eye on what is going on in China," said Byrne.

Frames of reference

Recent moves in both the U.S. and Chinese markets should be put in perspective, analysts said.

"While market gains were certainly justified, given the vast improvement in the financial markets and economic landscape, Chinese valuations are now simply too high relative to those of the S&P 500 and need to correct," said Jack Ablin, chief investment officer at Harris Private Bank.

"There are myriad of factors in which emerging-markets investors can take comfort. China's valuation, unfortunately, is not one of them," he added.

Geoffrey Dennis, a research analyst at Citigroup Global Markets, disagreed: " China was due a pullback, but the fundamental case for lower stock prices is weak."

Citi economists see the July pause in China's economic-growth momentum to be temporary, and have just raised their GDP forecasts from 8.2% to 8.7% for 2009, and from 8.8% to 9.8% for 2010, according to Dennis.

Chinese authorities are looking to avoid an equity bubble, he said, dismissing worries that China's monetary policy makers would move to tighten liquidity.

"Monetary and fiscal policy should remain supportive of the economy, and ultimately higher share prices," Dennis concluded.

Investors welcome signs of optimism in the day's economic news, with bank and tech issues leading the way.

U.S. stocks rose for a third straight session on Thursday with financial stocks leading gains after U.S. manufacturing data and a rebound in Chinese stocks reassured investors.

A worse-than-expected jobless claims report unnerved investors in the early going, but the surprise rise in manufacturing reversed any losses, giving the market support for the rest of the session.

The positive manufacturing data from the Federal Reserve Bank of Philadelphia offset the market's disappointment that weekly jobless claims increased for a second week.

The Philadelphia Fed index, a regional reading on manufacturing, climbed to plus 4.2 in August from negative 7.5 in July. Economists expected it to improve to negative 2. Any reading that is positive implies expansion in the sector.

Also on the upside, the Conference Board said its index of leading economic indicators (LEI) rose 0.6% in July after rising a revised 0.8% in June. LEI was expected to have risen 0.7%.

But the number of Americans filing new claims for unemployment rose last week versus forecasts for a drop. The Department of Labor reported 576,000 new claims last week from a revised 561,000 in the previous week. Forecasts were for claims to drop to 550,000, according to a Briefing.com survey of economists.

"Just the fact that the more important jobless claims were overshadowed by the manufacturing data and rebound overseas shows how much optimism there is in the market now," said Dan Faretta, a senior market strategist at Lind-Waldock in Chicago.

A report from the Mortgage Bankers Association said 13% of Americans are either late on their mortgage payments or in foreclosure, a record-high number.

Financial stocks contributed the most to the market's rise, with Citigroup (C.N) up 8.5 percent at $4.48 after veteran bank analyst Richard Bove said some investors are betting the stock's price will triple in three years.

Financial shares were buoyant, with the KBW Bank (BKX) index gaining 2.9%. Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) were among the stocks boosting the index.

Bank of America [BAC  17.14    0.39  (+2.33%)   ] and JPMorgan [JPM  42.42    1.01  (+2.44%)   ] gained more than 2 percent.

AIG Inc (AIG.N) surged 21.3 percent to $32.30 after newly appointed Chief Executive Robert Benmosche said the bailed-out insurer may be able to repay its federal debts and boost value for shareholders, according to Bloomberg.

The U.S. earnings picture was mixed as packaged food makers H.J. Heinz Co (HNZ.N) and Hormel Foods Corp (HRL.N) both beat Wall Street's estimates while retailer Sears Holding Corp (SHLD.O) reported an unexpected loss, sending its stock down 11.9 percent to $65.00 on Nasdaq.

Shares of Heinz, known for its ketchup, rose 2 percent to $38.71, while Hormel, the maker of Spam processed meat, gained 0.5 percent to $37.44.

The coffee chain Starbucks edged up 0.5 percent after it announced higher prices for some premium drinks. Shares of fast-food chains like McDonald's, Burger King and Yum Brands, which owns Taco Bell, also rose.

After the bell, investors will get quarterly numbers from retailer Gap [GPS  18.85    0.24  (+1.29%)   ] and software publisher Intuit [INTU  30.85    0.17  (+0.55%).

Factory activity in the U.S. Mid-Atlantic region turned positive in August, breaking a 10-month run of contraction, helped by a jump in new orders, a survey by the Philadelphia Federal Reserve Bank showed.

But initial claims for state unemployment insurance benefits rose 15,000, according to the Labor Department. Economists polled by Reuters had forecast a drop in new claims.

Goldman Sachs added Google Inc (GOOG.O) to its Americas Conviction Buy list and raised its price target on the stock, sending the shares up 3.7 percent to $460.41 on Nasdaq.

"A lot of what we've seen over the last five or six weeks has been the result of investor anxiety about not having jumped in ahead of the upturn," said Tom Hepner, vice president and financial advisor for Ruggie Wealth Management. "But I think the market, on an S&P 500 earnings basis, is ahead of itself."

He said that absent a big rise in revenue growth in the second half of the year --which doesn't seem to be brewing -- the market is wildly overvalued relative to corporate profit forecasts.

Stocks are likely to "crab sideways" over the next few weeks, before suffering a setback in the fall, he said.

And several reports say the White House will trim its budget deficit forecast for the current fiscal year next week—cutting the projected shortfall by about $262 billion to $1.58 trillion.  However, that would still be a record. 

The lower number would come from the erasure of a contingency fund that had been set aside for more Wall Street bailouts, which will now apparently not be needed.

'Cash for clunkers' program to end Monday

"Cash for clunkers," the $3 billion federal program aimed at enticing motorists to trade in old gas-guzzlers for new, more energy-efficient automobiles, will end Monday, administration officials announced Thursday.

After Hours

Salesforce.com raises outlook; Brocade shares fall

A spike in Salesforce.com Inc. shares during Thursday's late-trading session was spurred in part by a hike in the company's forecasts for the full year while a revenue shortfall at Brocade Communications Systems Inc. put pressure on the networking-gear maker's shares.

Shares of Salesforce /quotes/comstock/13*!crm/quotes/nls/crm (CRM 50.02, +3.84, +8.32%) jumped 8.3% to $49.99. The business-software provider raised its 2010 outlook, and now expects earnings of 60 cents to 61 cents on revenue of $1.27 billion to $1.28 billion. Analysts polled by FactSet Research currently expect earnings of 60 cents and revenue of $1.27 billion.

For the second-quarter, net earnings rose to $21.2 million, or 17 cents a share, from $10 million or 8 cents a share for the year-earlier period. Revenue was $316.1 million, up from $263.1 million. Analysts had expected Salesforce to report earnings of 15 cents a share, on revenue of $312.9 million, according to a poll of analysts conducted by FactSet Research.

Brocade Communications Systems Inc. /quotes/comstock/15*!brcd/quotes/nls/brcd (BRCD 7.60, -0.45, -5.59%) shares slumped 6% to $7.60. The company said fiscal third-quarter revenue came in at $493.3 million, up from $365.7 million a year ago, but shy of the forecast for $503.7 million.

Excluding one-time items, Brocade would have reported earnings of 12 cents a share for the latest quarter. Analysts polled by FactSet Research expected earnings of 10 cents a share. It swung to a third-quarter net loss of $21 million, or 5 cents a share. 

Shares of Intuit Inc. /quotes/comstock/15*!intu/quotes/nls/intu (INTU 29.85, -1.00, -3.24%) struggled as well, dropping 3% to $29.94 as the company's loss forecast for its fiscal first quarter was wider that Wall Street's expectation.

The company expects to lose 24 cents and 28 cents a share, or 15 cents to 19 cents a share, excluding one-time items, on revenue of $479 million and $493 million. Analysts surveyed by Thomson Reuters are currently looking for a per-share loss of 8 cents on $489 million in sales.

Intuit, which provides tax preparation and small business software, posted a fiscal fourth-quarter loss of $70.7 million, or 22 cents a share, on revenue of $475.8 million. Excluding one-time items, Intuit would have lost 10 cents a share. Analysts surveyed by Thomson Reuters had forecast a loss of 12 cents a share on $470 million in sales.

Markets watch for policy clues as central bankers gather

As central bankers meet for their annual pow-wow in Jackson Hole, Wyoming, bond and currency analysts say they're listening for comments on how and when ultra-loose monetary polices will end.

Oil,Gold & Currencies:

U.S. light crude oil for September delivery fell 89 cents to settle at $72.94 a barrel on the New York Mercantile Exchange, after rising nearly 5% Wednesday.

In a development that may or may not impact oil trading, Hurricane Bill has been downgraded to a Category 3 storm, although hurricane watchers say it does have the potential for an upgrade back to Category 4.

COMEX gold for December delivery fell $2.10 to settle at $942.70 an ounce.

In currency trading, the dollar fell versus the euro and gained against the Japanese yen.

Yen Heads for 2nd Weekly Gain Versus Dollar, Euro; Stocks Fall

The yen headed for a second weekly gain against the dollar and euro as Asian stocks dropped, boosting demand for Japan's currency as a refuge.

Japan's currency rose against all 16 major counterparts as Japan's Nikkei 225 Stock Average fell 0.7 percent and the MSCI Asia Pacific Index of regional shares lost 0.2 percent. Higher- yielding currencies declined versus the yen after Moody's Investors Service said today that Australian state and territory budgets are under pressure from declining revenues while spending remains relatively high.

"Recent optimism in the market is going through a correction, as stocks decline," said Osamu Takashima, chief foreign exchange analyst at Bank of Tokyo Mitsubishi UFJ Ltd., a unit of Japan's biggest publicly traded bank. "That's probably the reason why the yen is appreciating."

The yen gained to 93.92 per dollar as of 10:21 a.m. in Tokyo from 94.19 in New York yesterday. Japan's currency rose to 133.84 per euro from 134.26. The dollar was at $1.4251 per euro from $1.4254. The Australia's dollar fell to 77.83 yen from 78.31. The New Zealand dollar dropped to 63.47 yen from 63.78.

The yen typically strengthens in times of financial turmoil as Japan's trade surplus makes the currency attractive as it means the nation does not have to rely on overseas lenders.

Bonds:

Treasury prices gained, lowering the yield on the benchmark 10-year note to 3.42% from 3.45% Wednesday. Treasury prices and yields move in opposite directions.

What to expect:

FRIDAY: Existing-home sales; Earnings from JM Smucker.

Friday brings reports on July existing home sales and July state-by-state employment.

On Friday, investors will listen to remarks from Federal Reserve Chairman Ben Bernanke, scheduled to speak to a gathering in Jackson Hole, Wyoming, on the lessons learned from the financial crisis and efforts to aid the economic recovery.

Asia:

Nikkei 225 08/21 - 11:00 10,250.31     -133.10 ( - 1.28%). (08.33 AM IST).

Japan's Nikkei average slipped on Friday, dragged lower by Toyota Motor (7203.T) and slumping auto shares ahead of the end of a U.S. rebate programme, with investors nervous about moves in Chinese shares.

Japanese stock edged down on Friday, with exporters such as Toyota Motor retreating along with shipping firms.

The benchmark Nikkei [JP;N225  10250.31    -133.1006  (-1.28%)   ] slumped in morning trading.

Japan Airlines rose 1.2 percent after the Nkkei business daily said it and shipping firm Nippon Yusen panned to integrate their air cargo businesses next April.

Fujitsu Ltd. (6702) shares gained ground Friday morning, spurred by the company's announcement upgrading its group net profit outlook for the year ending March 2010 to 95 billion yen.

Shares in Toyota Motor Corp. (7203) fell as much as 130 yen down to 3,970 yen Friday morning, the day after the U.S. Department of Transportation said it will end its "cash for clunkers" program on Aug. 24.

Nintendo Co. (7974) shares traded lower Friday morning on an overnight fall on Wall Street and the yen's appreciation.

But Seoul's Kospi [KR;KSPI  1587.04    10.65  (+0.68%)   ] opened higher after gains overnight on Wall Street, with Samsung Electronics rising after news a U.S. antitrust investigation involving the company had ended.

And Australia's S&P/ASX 200 [AU;XJO  4307.6    -69.90  (-1.6%)   ] fell, led lower by Westpac Banking, after it reported a rise in bad debts, and Telstra after a major shareholder said it had sold a large chunk of its stake in the telecommunications group.

HSI 20374.67 +45.81 +0.23% (08.37 AM IST).

Hang Seng Index opens 40 points lower on Fri

Hong Kong stocks fell on Friday morning, with the benchmark Hang Seng Index opening 40 points lower at 20,288.

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 16 points higher at 11,535.

Sinopec<600028><0386><SNP>, grew 0.87% from the previous closing to HK$6.96, while PetroChina<601857><0857><PTR>, fell 0.34% and opened at HK$8.66.

Chinese stocks open 0.22% lower on Fri

Chinese stocks opened slightly lower on Friday morning.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 2,905.05 points, down 0.22% or 6.53 points from the previous closing.

The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 0.4% or 46.04 points lower at 11,602.31 points.

SSE Composite  2943.40  + 1.09.(08.47 AM IST). 

Stocks on Bursa Malaysia were mixed in trading as lack of fresh catalysts kept investors on the sidelines.

The benchmark index FTSE Bursa Malaysia KLCI (FBM KLCI) rose almost 2 points to 1,165.4. Losers led gainers 205 to 174 while 177 counters were unchanged.

Regional bourses are also trading sideways with the Shanghai Composite Index up 1.3%, Hang Seng Index rose 0.4%, Kospi gained 0.6%, Taiex added 0.9% and Straits Times Index improved marginally by 0.02% while Nikkei 225 was down 1.3%.

Bernanke's Tough Task: Taking Away Emergency Aid

When the financial system was teetering, Federal Reserve Chairman Ben Bernanke flooded it with trillions of dollars to save the banks and free up credit for consumers and businesses.

Looming in the future is a high-risk challenge for the economy's rescuer-in-chief: He will have to mop up that money without disrupting a nascent recovery.

And timing is vital. Act too fast, and Bernanke risks choking off lending to businesses and everyday Americans. Wait too long, and he risks setting off crippling inflation.

"We are in such an unusual situation," said Lyle Gramley, a Fed member in the early 1980s and now chief economic strategist at Soleil Securities Corp. "The Fed will have a more difficult set of decisions to make."

Assuming he manages to help usher in a sustained recovery, Bernanke, like his predecessors, will eventually face still another challenge: He will be under enormous political pressure to keep interest rates low, even though that could speed inflation.

But the Fed chief will face no task with quite the peril of withdrawing the trillions the Fed has pumped into the financial system in ways that had never been envisioned.

That money helped prop up shaky banks. It also was intended to unlock lending to people and companies, a key component of any recovery but one that so far has had only spotty success.

When, precisely, to pull back the money is an issue sure to surface as Bernanke, his counterparts in other countries, academics and economists meet over the next couple of days at an annual Fed conference in Jackson Hole, Wyo.

Some analysts think it could take four or five years for the Fed to withdraw the money entirely and shrink a balance sheet that is now about $2 trillion, more than double what it was when the financial crisis struck.

Already, the Fed has taken baby steps. Earlier this month, it signaled it won't extend past October a $300 billion government debt-buying program. That program is intended to lower consumer and corporate loan rates.

And this week the Fed extended a separate program designed to increase lending and help the commercial real estate market. So far, about $40 billion in loans has been extended to investors -- a small fraction of the $200 billion made available in the program's first phase. And Americans still have trouble getting loans.

The Fed also has said it will allow one program intended to support money market mutual funds -- one that hasn't even been used -- to expire Oct. 30. And it reduced the maximum it will lend to banks under two other programs.

But the biggest decisions lie ahead.

One will be deciding when and how to unload $1.25 trillion in Fannie Mae and Freddie Mac mortgage-backed securities without sending mortgage rates surging. Another delicate matter is when the Fed should start selling some of its $300 billion in Treasury debt.

In fighting the recession and financial crisis, Bernanke unleashed some of the most aggressive actions in the history of the central bank, which was created in 1913 after a series of bank panics.

He slashed interest rates to record lows near zero. He provided low-cost loans for banks and bought debt so companies would have short-term "commercial paper" loans available to pay for salaries and supplies.

The Fed also bought mortgage-backed securities and government bonds to drive down interest rates on mortgages and other consumer debt. Bernanke also moved to support the mutual fund industry.

Congress, the White House and statehouses across America will probably exert intense pressure on the Fed to keep the money flowing and the emergency aid programs operating.

"There's no question the Fed has the capacity to reel in the stimulus. It is the politics that trouble me," says Allan Meltzer, a professor at Carnegie-Mellon University and author of a history of the central bank.

Keeping the easy money in place too long could feed high inflation by encouraging overborrowing and overspending. Surging inflation could then derail a recovery by robbing Americans of buying power and shrinking the value of their investments.

But pulling the plug too soon could set back a recovery. If, for instance, the Fed dumped its mortgage securities and interest rates shot up, homeowners and the housing industry would take a further pounding.

Whenever it does sell those holdings, the Fed will have to pace the sales so they don't jolt the market but rather cause a smooth, gradual rise in mortgage rates.

To prevent inflation from surging, many economists also think the Fed will have to start raising its key bank lending rate next summer. Unemployment, now 9.4 percent, will probably still be high, perhaps in the double digits.

Higher interest rates could hurt Americans not long before they vote in midterm congressional elections next year. But often, there's no alternative.

Bernanke's predecessor Paul Volcker was credited with ending 1970s "stagflation," a toxic mix of stagnant economic activity and inflation, by ratcheting up interest rates to their highest levels since the Civil War.

Those high rates helped produce the recession that drove unemployment to its postwar high of 10.8 percent. Protesting farmers drove tractors into Washington, surrounding the Fed's stately headquarters. Angry homebuilders delivered two-by-fours to the Fed.

Sen. Jim Bunning, R-Ky., asked Bernanke last month whether he had the will, as Volcker had, to tighten interest rates even if the economy is weak. The Fed chief said he was prepared to make unpopular moves if they are in the best interest of the economy. 

A skeptical Bunning replied, "I wish you good luck." 

For Volatile US Stock Market, September May Be Real Test

The sun and fun of summertime—and the 8 percent gain in stock prices—is set to give way to the more intense time of September.

The beginning of autumn is traditionally a time when volume comes back into the market and hard-core investors get down to business.

"In September it's back-to-school not just for students but investors, too," says Lawrence Creatura, portfolio manager and equity market strategist at Federated Clover Capital Advisors of Rochester, N.Y. "After a summer at half-speed a lot of people look at the data with a more critical eye, and what they see can sometimes be sobering."

For bullish investors, the past five months have been a day at the beach. Stock prices have jumped about 50 percent off the mid-March lows, and the momentum has continued through the summer, though August has been a bit slower than the preceding months.

But volume has been beyond anemic.

Total dollar volume in July 2009 was 30 percent less than the previous two years and about 75 percent less than in 2006. Days of advancing volume have beaten those with declining volume by a 10 to 1 count, suggesting a skewed picture and a sellers' strike rather than a true rush of buyers.

Thursday's narrow stock gains, for instance, came even as the market posted more than 50 new highs against just one new low.

Analysts trying to discern whether the rally is real hope more volume in September can help create increased certainty about the market's direction. The month will feature an options expiration that some analysts believe will yield significant information about investor sentiment.

"We've rallied big on very light volume," Joe Kinahan, strategist of Thinkorswim, told CNBC. "We should start to see a truer picture of what people are really thinking about the economy as they gear up to year end. ... The September expiration, the next one, will give us a truer picture of the economy."

Primary on investors' agenda are two items: Stabilization of housing and jobs, as well as a move beyond what analysts call the "second derivative," or the economy not merely showing an easing of negativity but real progress.

Should both events come together—and there's a considerable level of confidence at least that the worst has passed—the return from summer vacation could be a happy one for the markets.

"You come into September and you get some pronouncements for Q3 earnings and oftentime that's the moment where the bloom comes off the rose," Creatura says. "We see improvement for the second-half story."

The expectation of economic improvement is the good news for the post-summer crowd.

The bad news is that the bears will have history on their side.

September is the worst month for stocks, with the Standard & Poor's 500 down 1.3 percent since 1928. And October is often, as Creatura describes it, "between a hurricane and a root canal."

That has some advisors expecting more volatility in the coming months, after a summertime in which the Chicago Board Options Exchange's Volatility Index [VIX  25.09    -1.17  (-4.46%)   ] beat a hasty retreat from its historic highs.

More good news, though: That could set up nicely for investors who are paying attention.

"I'm not saying the market is going to have a big pullback, but this is the time of the year to be on the lookout for" big price swings, says Peter Miralles, president of Atlanta Wealth Consultants. "At this point it's just a buying opportunity."

Miralles sees another new trend emerging as summer gives way: The small-cap leadership that traditionally vanquishes a bear market, and has lived up to form this year, will give way to mid- and large-cap leadership as the market bulls ahead.

"The volume will resolve itself down the road," he says. "The economy is stabilizing. I think everybody knows that."

Yet the market faces stumbling blocks along the way.

Analysts continue to wait for a healthy correction that would send the major averages backtracking about 10 percent. The strong level of market confidence that has prevented the correction from taking place is being seen as a contrarian bearish sign.

That has led to a variety of warnings from market pros for investors to stay cautious and play at least some defense. After turning heavily toward safety as the market slumped into March, investors went from holding 45 percent cash then to 25 percent cash by July; stock and stock funds holdings went from 41 percent in March to 51 percent in July, according to data from the American Association of Individual Investors.

"I do believe a correction here is quite possible and might be healthy, especially if it brings back some of the skepticism and pessimism that helped launch the rally off the March lows," Liz Ann Sonders, chief investment strategist at Charles Schwab, wrote in an analysis. "But, no one needs to be a hero in the meantime."

Indeed, there remains the possibility that if the market doesn't get the news it wants in September but still isn't prepared for a selloff, the month could be a wash.

"September may be shaping up as a nothing month, where you have a balance of forces," says Richard Sparks, senior analyst at Schaeffer's Investment Research in Cincinnati. "It seems that you've almost got a scenario where the bulls and bears are in equal states of confusion as to what might happen with stocks and with the economy."

Despite his fairly bullish stance, Creatura says he is "as disoriented as the next guy" when it comes to anticipating market moves.

Safe moves at this point, he says, include investments in energy, particularly natural gas, and health care, especially contract research organizations.

Other investors will be playing it even safer, as analysts look to see just what September portends for the longer-term stocks outlook.

"We hit the bottom in March. Fear was rampant and I think people are feeling more confident now," says Jill Hollup, director of investments at Lowenberg Wealth Management Group in Austin, Texas. "But they're not going to forget what happened in 2008 anytime soon."

China Third-Quarter GDP Seen up 8.5%, No Inflation

China's gross domestic product will grow about 8.5 percent in the third quarter from a year earlier, picking up from the second quarter's 7.9 percent pace, a government think-tank said on Friday.

The bullish forecast comes against a background of anxiety in world markets that Chinese growth might falter as a boom in fiscal spending and bank lending peters out.

The State Information Centre (SIC) said growth in bank credit would "normalize" in coming months but warned that any abrupt slowdown in lending would leave many state-backed projects unfinished and result in a new crop of non-performing loans.

New lending will rebound to about 500 billion yuan ($73 billion) in August after shrinking to 356 billion yuan in July, the official China Securities Journal reported.

In a report carried in the same paper, the SIC said China would stick to its "proactive" fiscal policy and "appropriately loose" monetary stance in the second half of the year.

"China's CPI has been falling for many months and it's a fact that mild deflation exists, so there is no basis for China to alter its monetary policy," the think-tank, which comes under China's economic planning agency, said.

It forecast that the consumer price index (CPI) would fall 1.3 percent this quarter from a year earlier and the producer price index would decline 7.9 percent due to the high base of comparison in 2008.

The SIC said the Chinese economy has bottomed out but is still growing below potential, mainly due to weak exports.

Exports would fall 20 percent in the third quarter, compared with a year earlier, with imports dropping 12.7 percent, the think-tank forecast.

Capital spending would remain a key driver for the world's third-largest economy, and urban fixed-asset investment was likely to rise 32 percent in the third quarter, it said.

Strong investment is exacerbating many deeply rooted problems, including over-capacity, the think-tank said. It listed steel and cement as sectors with serious over-capacity.

"It is extremely bad for China's future industrial restructuring and upgrading," the SIC said.

It said property investment could potentially replace government spending as the next key driver of growth.  

State Council urges more support for SME development

China will provide more favorable policies and financial support to encourage the development of small and medium-sized enterprises, said Chinese Premier Wen Jiabao at a regular meeting of the State Council.

The government will further improve its policy and law system in a bid to create a more open and fair environment for SMEs, said the State Council in a statement released after the meeting.

More measures will be taken to help SMEs tackle financing problems. The government will subsidize financial institutions to support them in granting loans to SMEs, especially in sectors such as technological innovation, industrial structure optimization and employment.

Meanwhile, the government will accelerate the establishment of the Growth Enterprise Market, so as to help raise fund for the SMEs.

The government will support qualified SMEs to participate in the country's subsidized purchasing program of home appliances, agricultural machinery and automobiles in rural areas as well as the auto, home appliance replacement program.

The sound development of the SMEs is significant to the country's economic recovery as well as the stable economic growth and social stability, said the State Council, adding that China will consider increasing tax support and direct government funding for them.

Guangzhou R&F Property H1 net profit plunges 90%.

879 listed firms' net profit down 18% in H1.

Waigaoqiao sees net profit up 2.9% in H1.

China Int'l Marine Containers' net profit down 19.49% in H1.

Invesco cuts stake in Chenming Paper to 4.97%.

Trina Solar Q2 profit hits US$18.9 mln.

Sinofert posts RMB 828-mln loss in H1.

China Mobile posts lower Q2 profit.

Yu, China Economist With 'Impact,' Says Yuan Sales Should Slow  

Yu Yongding, the Chinese economist whose calls for liberalizing the yuan heralded its 21 percent gain since 2005, said the government should reduce sales aimed at keeping the currency weak so it can someday float freely. 
 
INVESTMENT VIEW
GSPL: On the threshold of strong growth phase
  
Gujarat State Petronet Ltd (GSPL) has had a spectacular 1Q FY10 with earnings rising 147% YoY. We expect GSPL's FY10E earnings to jump 123% YoY driven by 108% YoY volume growth. We expect its 3 year EPS CAGR in FY09-FY12E to be 53%, driven by transmission volume CAGR of 45%, rising pipeline utilization  rate and stable tariff. GSPL is thus finally on the threshold of a strong growth phase. The main driver of this growth is the gas production from the KG D6 block of Reliance Industries (RIL), which is expected to double Indian gas output.
 

GSPL's 1Q FY10 earnings jumped by 147% YoY driven by 41% YoY rise in gas transmission volumes and 25% YoY rise in tariff. The main driver of GSPL's volume growth is start of KG D6 gas production from April 2009. GSPL has a contract with RIL to transport 11mmscmd (may scale up to 14-20mmscmd) of gas to Jamnagar. It currently transports only 5mmscmd. It also transports D6 gas to other consumers. GSPL's volumes have already doubled from FY09 levels to 30mmscmd now and should be 40mmscmd by 4Q. FY10E EPS is set to jump 123% YoY driven by 108% YoY rise in volumes to 31mmscmd and despite 16% YoY lower tariff. Upside to tariff assumption cannot be ruled out. We expect FY11- FY12E EPS growth at 26-28% YoY driven by 13-29% YoY volume growth.

We see strong growth opportunities for GSPL as gas supply in India surges and government encourages a national gas grid. GSPL has filed expression of interest with the regulator for the Rs45bn Mehsana-Bhatinda-Srinagar pipeline. Clarity on whether GSPL gets this project is likely by end-FY10E.
 

(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.)
 

 

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Arvind Parekh
+ 91 98432 32381