Market Outlook 2nd Sep 2009

INTRADAY CALLS for 2nd SEP 2009

BUY Indiaglyco-100 arround 97-95 for 104-106+ with sl 93
BUY DELTACorp-54 arround 52-51 for 60-62+ with sl 49

BUY Bajajautofin-222 arround 218-215 for 235-244+ with sl 210
SHORT BHEL-2263 for 2235-2224+ with sl 2280

 

SEBI unearths Rs 1,000 crore scam at Austral Coke
SEBI Says
-IT Department found bogus transactions worth Rs 1,000 crore
-Have found prima facie evidence of corporate fraud
-Alert: IT Dept raided Austral Coke premises on June 23
-Rs 142 crore IPO funds diverted via bogus transactions
-Bars Austral Coke from raising fresh capital
-Alert: Company's September 3 board meet planned to discuss Rs 970 crore QIP (qualified institutional placement)
Austral Coke says IT Dept yet to revert to company's response; to present its case before SEBI on September 9

stocks that are in news today:
Bharti-MTN deal gets approval of South Africa Labour Unions
Maytas Infra open offer at Rs 112.80/share ((CMP Rs 118.40)); opens on October 24, closes November 12
Ambuja Cements August cement sales at 1.43 million tonnes versus 1.42 million tonnes: NW18
Ranbaxy says company gets government order for supplying Tamiflu generic: NW18
Farm Official says June-August monsoon rain 23% below normal
Jet-Sahara case unlikely to be heard at Bombay HC today: Sources
Asian Paints to divest entire stake in subsidiary Berger Paints (China)
Garware Offshore takes delivery of anchor handling vehicle in Singapore
Carborundum Universal restructures China JV, to split into diamonds & abrasives business

ketan lakhani: Rasoi sells property at Kolkata for Rs 85 crore
1.07 crore PSL shares to hit the market today ((QIP issue))
Ex-bonus: Tilaknagar Industries @ 2:1

Globus Spirits IPO closes today, subscribed 0.23 times till now

Jindal Cotex IPO subscribed 2.2 times ((closed yesterday))

 

 

NIFTY FUTURES LEVELS

SUPPORT

4603

4586

4546

4528

4471

RESISTANCE

4633

4644

4702

4759

4778

4834

Buy DHANALAKSHMI BANK;TRANSPORT CORPN OF INDIA

 

 

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

Aban Off shore, India Bulls Retail, Bhushan Steel, Tata Motors, DCHL, ICSA, Unitech Ltd, Ansal Infra, Tech Mahindra & Shree Renuka.

And this is list of 10 Weak futures:

Tata Steel, Sesa Goa Ltd, Sail Ltd, ACC Ltd, JSW Steel, India Cements, Power Grid, BEL, MTNL & HCC.
 Nifty is in Up trend

 

NIFTY FUTURES (F & O):  
Below 4603-4605 zone, selling may continue up to 4586 level and thereafter slide may continue up to 4546-4548 zone by non-stop.

Hurdles at 4633 & 4644 levels. Above these levels, expect short covering up to 4700-4702 zone and thereafter expect a jump up to 4757-4759 zone by non-stop.

Sell if touches 4776-4778 zone. Stop Loss at 4832-4834 zone.

On Negative Side, break below 4528-4530 zone can create panic up to 4471-4473 zone. If breaks and sustains this zone then downtrend may continue.
 
Short-Term Investors:
Bearish Trend. 3 closes below 4623.80 level, it can tumble up to 4092.20 level by non-stop.
SL triggered. 3 closes above 4623.80 level, expect short covering up to 4889.60 level by non-stop.
 
BSE SENSEX:  
Lower opening expected. Recovery should start. 
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.

 

POSITIONAL BUY:
Buy DHANALAKSHMI BANK (NSE Cash) 
Uptrend may continue.

Mild sell-off up to 129 level can be used to buy. If uptrend continues, then it may continue up to 136 level for time being. 

If crosses & sustains at above 142 level then uptrend may continue.

Keep a Stop Loss at 123 level for your long positions too.
 
Buy TRANSPORT CORPN OF INDIA (NSE Cash) 
Uptrend may continue.
 
Mild sell-off up to 80 level can be used to buy. If uptrend continues, then it may continue up to 86 level for time being. 

If crosses & sustains at above 89 level then uptrend may continue.

Keep a Stop Loss at 77 level for your long positions too.
  
FUNDS DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	01-Sep-2009	2444.21	3080.15	-635.94

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	01-Sep-2009	1759.07	1392.18	366.89

Global Cues & Rupee 
 The Dow Jones Industrial Average closed at 9,310.60. Down by 185.68 points.
The Broader S&P 500 closed at 998.04. Down by 22.58 points.

The Nasdaq Composite Index closed at 1,968.89. Down by 40.17 points.

The partially convertible rupee INR=IN closed at 49.05/06 per dollar on yesterday, weaker than Monday's close of 48.83/84.
 
 Interesting findings on web:
Stocks plunge on worries that the market gains have raced ahead of any economic recovery.

Markets tumbled Tuesday, as investors retreated at the start of what is typically a rough month, betting that the six-month stock advance has raced ahead of the economic recovery.

After the best August in nine years, traders on the New York Stock Exchange are wondering whether the Dow Jones index has leapt too far ahead of the real US economy.

Sell-offs in the banking sector pulled down the Dow Jones Industrial Average and the Standard & Poor's 500 on Tuesday, the third day of decline for the two stock indices.

Leading decliners Bank of America, American Express and JPMorgan Chase cut 185.68 points, or 1.96%, from the Dow, which closed at 9,310.60 points.Its worst drop in two weeks. The S&P 500 went below the 1,000 level falling 22.58, or 2.21%, to 998.04. Its steepest fall since August 17 and the first close under 1000 since August 19. 1.8%.

The Nasdaq Composite also shed 40.17 or 2 percent to close at 1,969. It's first close under 2000 in two weeks.

In other trading, the Russell 2000 index of smaller companies fell 14.01, or 2.5 percent, to 558.06.

Even some bullish analysts had long been calling for a pause or a correction after stocks' summer surge. They pointed to an economy that is still weak, the longest win streak since 2007 for the Dow and the 3,000-point climb off the March lows.

Seasonal factors are also dragging on the markets. While the blue chips climbed 3.5% last month -- their best August since 2000 -- the S&P 500 has made headway in September just 43% of the time since 1950, according to Miller Tabak's Dan Greenhaus.

"There is clearly something to the seasonal weakness and with a 50% rally in the books for equities, September is clearly worrying some," Greenhaus wrote in a note.

"It's not that the market is going back to the March lows but there's no question it got ahead of itself," NYSE trader Ted Weisberg of Seaport Securities told FOX Business.

So it wasn't surprising that, after the Dow was up 60 points in response to a seemingly better-than-expected reading on manufacturing, something like a rumor about a possible bank failure could take the market down.

"Some time midmorning, rumors came out that a large bank could be in trouble," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "That's all it takes to spook this market."

The rumors were never substantiated.

A plunge in Chinese shares continued to weigh on Wall Street a day after the Shanghai Composite capped off its worst monthly decline in 15 years.

"As the China market has come unglued a little bit, that's placed a concern about our market valuations -- justified or not," said James.

Dan Deming, a trader with Strutland Equities in Chicago, said it didn't appear much had changed in the market since then, but investors have grown more nervous as stocks have pushed higher and that was enough to tip off heavy selling.

"It's really more psychological right now than anything. The first day of September — the market shows some weakness and then it just kind of starts to feed on itself," he said. "Everybody is kind of looking over their shoulder."

Deming referred to the fact that many investors had some fear of what might happen in September, which historically has been the worst month for stocks. Many analysts said the change in calendar was one of many factors that created a critical mass of sorts for the market and fueled Tuesday's drop.

Banks and insurance companies were among the most notable losers amid the fears of bank failures, but they also had been pumped up the most in the rally that lifted the market more than 50 percent since hitting 12-year lows in March. With the government reporting last week that 400 banks were in trouble during the second quarter, investors' anxiety about the health of the financial industry was heightened and so rumors that investors might shrug off in less fractious times became powerful enough to cause sustained losses.

Many of the summer's big bank sector winners led the declines Tuesday.

Dow component Bank of America (BAC, Fortune 500) slipped 6.4% in active NYSE trading. BofA was the biggest Dow gainer in the June through August period, rising 56%.

Dow component American Express (AXP, Fortune 500) lost 5.4% Tuesday. Over the last three months, AmEx has gained 36% and was the second-best Dow performer.

Dow component JPMorgan Chase (JPM, Fortune 500) lost 4.1% after rising 17% this summer.

Wells Fargo, the San Francisco-based bank that received $US25 billion in government bailout funds, slid the most in two weeks.

Suntrust Bank [STI  21.73    -1.64  (-7.02%)   ] off 7 percent and Regions Financial [RF  5.54    -0.32  (-5.46%)   ] down 5.5 percent as well.

Among other movers, Citigroup (C, Fortune 500) lost 9% after rising 34% in the summer. Regional bank Fifth Third Bancorp (FITB, Fortune 500) lost 6.2% after rising 59% this summer.

The KBW Bank (BKX) index fell 5.8% after rising 20% over the summer.

Eighty-four banks have failed already this year and today's Wall Street Journal reported the Federal Deposit Insurance Corporation (FDIC), which guarantees deposits, has 416 banks on its problem list. That is an increase of 109 troubled banks from three months earlier.

The newspaper also wrote in its editorial that the FDIC has a mere $10.5 billion in reserves to guarantee $4.5 trillion in bank deposits.

The paper says American taxpayers had better get ready for another bailout - this time for deposit insurance.

Some of the sector's weakest performers were the ones that have run up the most over the past few months, including bailed-out insurer American International Group (AIG: 36.05, -9.008, -19.99%), and commercial lender CIT Group (CIT: 1.45, -0.23, -13.69%).

"I think we've had a nice run and it's time for a bit of a pullback," said Tom Schrader, managing director at Stifel Nicolaus. "I wouldn't be surprised if we moved back to the 880 level (on the S&P 500) before moving back up."

A drop to the 880 level would constitute a slide of about 12% from the current levels.

Investors nitpicked through the morning's better-than-expected reports on housing and manufacturing but found little reason to jump back into the fray.

"I think the 'whisper number' for [the manufacturing report] was higher and once people digested that, the market swung in the other direction," said Schrader.

Schrader said that investors were also reacting to the "calendar influence," amid a variety of reports about the tendency for September to be a weak month on Wall Street. September is typically the biggest percentage loser of the month for the Dow, S&P 500 and Nasdaq composite, according to the "Stock Trader's Almanac."

"The reports this morning were positive, but investors are basically saying that stocks have had a good run up and now it's time to take some profits," chimed in Phil Orlando, chief equity market strategist at Federated Investors.

Stocks have essentially been on the rise since March, as investors have welcomed extraordinary fiscal and monetary stimulus and signs that corporate profits and the economy have stabilized. The major gauges ended last week at the highest levels in 9 to 10 months. Financial shares took a beating Tuesday after enjoying a nice ride through the late summer, fueled largely by speculation and momentum.

But with the S&P up 52% from the March 9 lows, market participants are now looking for concrete evidence that the economy is recovering. The morning's reports were positive, but perhaps not as positive as the most optimistic forecasts.

The Institute for Supply Management's manufacturing index for August showed growth in the sector for the first time since January 2008. The index rose to 52.9 from 48.9 previously. Economists surveyed by Briefing.com thought it would rise to 50.5.

The Institute of Supply Management reported its highest manufacturing index since June 2007, to above 50 points. This indicates expansion in the sector and new orders jumped to their highest level since December 2004.

It was a sign, according to President Barack Obama who was not going to let the positive news go unremarked, that economic recovery is underway.

"For the first time in 18 months our manufacturing sector has expanded and it means these companies are starting to invest more and produce more and it is a sign that we're on the path to economic recovery," he said.

But many stock analysts fear that investors have been way too optimistic in factoring an economic recovery into share prices.

So while the administration is grabbing at any positive economic figure, the stock market is the opposite, turning its back on good news as traders grow nervous about a September sell off.

Investment manager Doug Kass says the market will go into a decline.

"I think the market now is clearly exhibiting a new pattern," he said.

"We're experiencing selling or non plus reactions to the good news. Most investors should now consider reducing overall invested positions as the reward-versus-risk is less than exceptional."

But a decline is no surprise to Bill Greiner of Scout Investment advisers.

He says there were only two rallies in the past century that were bigger than the one we've just been through. One came in 1932 and the other in 1933. Both ended in price plunges.

"If you look back in history, first of all over the past 100-year period of time, there's only been two six-month periods that have been stronger than the six months we just finished from March until the end of August," he said.

"Those last two didn't end particularly peacefully and I don't think this one will either."

Pending home sales rose for the sixth straight month, jumping 3.2% in July, to the highest point in nearly two years, according to a report from the National Association of Realtors released Tuesday morning. The index rose 3.6% in June. Economists surveyed by Briefing.com thought sales would rise 1.5% in July.

The news initially buoyed home builder stocks like Lennar (LEN: 14.4, -0.7, -4.64%) and Pulte Homes (PHM: 12.29, -0.48, -3.76%) but those gains proved fleeting.

Construction spending fell 0.2% in July versus forecasts for an unchanged reading. Spending rose a revised 0.1% in June.

Analysts said both the manufacturing and housing reports got a boost from government stimulus efforts, including the Cash for Clunkers program that has since expired, which means the recovery in those industries may not continue at the same pace.

"In both cases it seems headlines overstate details by a touch," said Tom di Galoma, head of U.S. rates trading at Guggenheim Capital Markets LLC. "People reviewed the numbers and said this type of demand is just not sustainable."

"While there is nothing negative about the data, I think it's more market sentiment driving stocks' direction," said Michael James, senior equities trader at Wedbush Morgan Securities. "There are far more people looking to sell stocks than buy stocks, which is a change in sentiment from the last several weeks."

Investors were also uneasy ahead of Friday's employment report from the government, which could reveal more bad news about the job market, one of the worst remaining problem areas in the U.S. economy.

The decline in oil prices dragged on heavily-weighted energy stocks including Dow components Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500).

Conglomerates like 3M (MMM: 70.33, -1.71, -2.37%) and General Electric (GE: 13.33, -0.56, -4.03%) initially rallied on the news but ended sharply lower.

The government's popular Cash for Clunkers program gave a boost to sales in August, major automakers said. Although a plunge in sales in the last week of the month, following the program's end, suggests the impact will not be far reaching.

In August, Ford Motor (F, Fortune 500) reported that sales jumped 17% versus a year ago, its best monthly gain in 4 years. However, the advance was short of expectations for a rise of 22%, according to analysts surveyed by Edmunds.com.

Ford Motor (F: 7.21, -0.4, -5.26%) saw its shares tumble nearly 5% despite reporting a 17% jump in August sales.

Toyota, which had the most Clunker sales of any automaker, said August sales rose 6%, its first year-over-year gain in 16 months.

General Motors (GM, Fortune 500) and Chrysler Group both reported year-over-year declines in August on sales that improved from July.

Online auctioneer eBay (EBAY, Fortune 500) said it will sell a large stake in its Skype Internet phone business to a group of investors for $2.75 billion.

Of the 30 stocks that make up the Dow industrials, only Wal-Mart Stores Inc. rose. Wal-Mart Stores Inc. rose 10 cents to $50.97.

Five stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 7 billion shares compared with a light 5.3 billion Monday.

The Chicago Board Options Exchange's Volatility Index, known as the market's fear index, surged 12.1 percent, its biggest jump since Aug. 17. The VIX stands at 29.2 and is down 27 percent in 2009 and its historical average is 18-20. It hit a record 89.5 in October at the height of the financial crisis.

While the pullback in stocks Tuesday was significant, even with the drop, stocks have risen so much that only one of the roughly 3,100 stocks traded on the NYSE hit a new annual low. And, 53 carved new highs.

Bank of America (BAC: 16.45, -1.16, -6.59%) is in negotiations with the U.S. to repay about $20 billion in exceptional aid the bank received when it nearly backed away from buying Merrill Lynch, The Wall Street Journal reported. The bank is also reportedly in talks to pay up to $500 million to escape a loss-sharing agreement on $118 billion of assets. The talks could result in BofA no longer being subject to oversight from the White House's "pay czar."

EBay (EBAY: 21.68, -0.46, -2.08%) inked a $1.9 billion deal to sell a 65% stake in online calling service Skype to a group of private investors, led by private equity firm Silver Lake Partners, venture capital firm Andreessen Horowitz and British venture capital firm Index Ventures. The deal, which values Skype at $2.75 billion, is expected to close in the fourth quarter of 2009 and comes after Google (GOOG: 456.1, -5.57, -1.21%) reportedly passed on buying the service.

CIT Group (CIT: 1.45, -0.23, -13.69%) fell sharply after the struggling commercial lender said in a regulatory filing it won't be able to make a Sept. 15 interest payment on its debt due in 2067. CIT said that it must "use commercially reasonable efforts" to execute an alternative way of paying the bond payment, and if the company cannot handle the alternative, it must "mandatorily defer interest on the notes."

Acadia (ACAD: 2, -3.84, -65.75%) lost two-thirds of its market value after the drug maker and its partner Biovail (BVF: 12.33, -0.4, -3.14%) said their Parkinson's psychosis drug failed to meet its primary goal. The drug, pimavanserin, missed the primary endpoint of antipsychotic efficacy during a Phase III trial but met the key secondary goal of motoric tolerability.

News Corp. (NWS: 12.28, -0.36, -2.85%) is considering making its first major investment in the Middle East by taking a 20% stake in Rotana Media from Saudi Prince Alwaleed bin Talal, Dow Jones Newswires reported. News Corp. is the parent of both FOX Business and Dow Jones.

American International Group (AIG: 36.05, -9.008, -19.99%) lost another 21% of its quickly-eroding market cap. The bailed-out insurer was downgraded to "underperform" from "market perform" by Sanford Bernstein, which put a $10 price target on AIG. "AIG's current stock price gives virtually no weight to the possibility that the common equity is worth zero," an analyst wrote.

Metabasis Therapeutics (MBRX: 0.42, -0.0501, -10.66%) said its CEO Mark Erion is leaving the small biotech company at the end of next month to join drug giant Merck (MRK: 31.762, -0.658, -2.03%). Metabasis, which recently terminated R&D efforts, said Chairman David Hale has been appointed executive chairman.

Gander Mountain (GMTN: 4.49, -1.13, -20.11%) saw its shares plummet 26% after the outdoor-gear provider disclosed a wider-than-expected quarterly loss of 30 cents per share and warned of a challenging retail environment for the rest of the year. Gander, which sells hunting, fishing, camping and other outdoor gear, said is sales slipped 1.8% to $248.4 million.

MetLife plummeted 5.5% after analysts said the insurers' shares had risen too far, too fast.

Yahoo [YHOO  14.16    -0.45  (-3.08%)   ] shares lost 2.9 percent following news that investor Carl Icahn cuts his stake in the company to 4.48 percent from 5.45 percent.

Research In Motion [RIMM  73.55    0.49  (+0.67%)   ] eked out a gain, climbing 0.7 percent.

Oil,Gold & Currencies:

U.S. light crude oil for October delivery fell $1.91 to settle at $68.05 a barrel on the New York Mercantile Exchange. Oil prices have been slipping since hitting a ten-month high just below $75 a barrel late last month.

COMEX gold for December delivery rose $3.50 to settle at $957 an ounce.

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

The yen traded near a seven-week high against the euro as concern U.S. financial institutions will incur more losses spurred a sell-off in stocks and renewed demand for the relative safety of Japan's currency.

The yen was close to its strongest level versus the dollar in more than a month after Asian shares slumped and CIT Group Inc. deferred interest payments on subordinated bonds because efforts to cover the payments have been unsuccessful. The Australian dollar climbed from near a one-week low against the greenback after a government report showed economic growth unexpectedly accelerated in the second quarter.

"There are lingering worries about the health of the U.S. banking sector," said Toshihiko Sakai, head of trading for foreign exchange and financial products at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. "The bias is for the yen and the dollar to be bought."

The yen traded at 132.20 per euro as of 10:55 a.m. in Tokyo from 132.19 in New York yesterday, after earlier reaching 131.46, the highest level since July 15. Japan's currency was at 92.97 per dollar from 92.92.

The euro bought $1.4217 from $1.4224 in New York yesterday, when it touched $1.4178, the weakest level since Aug. 19. The Australian dollar climbed to 83.16 U.S. cents after earlier falling to 82.41 cents, the lowest level since Aug. 27.

Asian Stocks Decline

The Nikkei 225 Stock Average slid 2.6 percent and the MSCI Asia Pacific Index fell 1.7 percent, the most since Aug. 17. The Standard & Poor's 500 Index sank 2.2 percent yesterday. MSCI's Asian index has rallied 59 percent from a more than five-year low on March 9.

"Markets worry that they may have run up too much too fast," Philip Wee, senior currency economist in Singapore at DBS Group Holdings Ltd., wrote in a research note today. "Risk aversion returned. Expect the dollar to head higher on lower Asian stocks."

CIT said in a regulatory filing it was forced to delay payments on subordinated bonds due 2067 because efforts to execute a so-called alternative payment mechanism have been unsuccessful. The U.S. lender got $3 billion in financing from creditors in July to avoid collapse.

U.S. banks on the West Coast still face credit deterioration and higher loan losses, said analysts at RBC Capital Markets.

Capital Concerns

"Many of these banks may still not have enough capital and reserves" to cushion against writedowns from worsening real estate market, analysts Joe Morford and David King wrote in a research report.

The yen tends to gain in financial turmoil as Japan's trade surplus reduces reliance on foreign capital, while the dollar benefits from its status as the world's main reserve currency.

Australia's dollar rose and the yen curbed its gains after the Bureau of Statistics said today in Sydney the nation's gross domestic product expanded 0.6 percent in the second quarter from the previous three months, when it grew 0.4 percent.

The median estimate of 20 economists surveyed by Bloomberg News was for a 0.2 percent expansion.

Australia's economy has been "stronger than expected" amid resilient consumer spending, exports and business investment, central bank Governor Glenn Stevens said yesterday after keeping the benchmark interest rate at 3 percent for a fifth month. GDP may expand further in coming quarters as the government spends A$22 billion ($18 billion) on roads, railways and schools.

The euro traded near a two-week low versus the dollar after German Finance Minister Peer Steinbrueck said yesterday financing conditions may deteriorate.

Steinbrueck also said insolvencies in Europe's biggest economy may rise in the fourth quarter of this year into the first quarter of 2010.

Bonds:

Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.37% from 3.40% late Monday. Treasury prices and yields move in opposite directions.

What to expect:

WEDNESDAY: Weekly mortgage applications; Challenger and ADP jobs reports; factory orders; weekly crude inventories; Fed minutes

THURSDAY: Chain-store sales; weekly jobless claims; ISM services index

FRIDAY: August jobs report

Two readings on the labor market are due Wednesday in the lead up to Friday's big August jobs report.

Payroll services firm ADP is expected to report that employers in the private-sector cut 246,000 jobs from their payrolls in August after cutting 371,000 in July.

Additionally, Challenger, Gray & Christmas, an outplacement firm, will report on the number of announced job cuts in August.

A July reading on factory orders is also due in the morning from the Commerce Department. Other reports include the minutes from the last Federal Reserve policy meeting, the weekly crude oil inventories report and the July reading on factory orders.

More turbulence could be in store for the markets later this week as traders brace for retailers' same-store sales reports on Thursday and the crucial monthly jobs report on Friday.

Asia:

Asian stocks fell, giving the MSCI Asia Pacific Index its biggest drop in two weeks, as Seven & I Holdings Co. cut its full-year profit forecast and commodity prices declined.

Seven & I, Japan's largest retailer, dropped 3.8 percent in Tokyo. BHP Billiton Ltd., the world's largest mining company, lost 2 percent in Sydney after oil and copper prices slumped in New York. Elpida Memory Inc., Japan's biggest memory-chip maker, tumbled 17 percent on plans to sell shares.

The MSCI Asia Pacific Index dropped 1.6 percent to 112.10 as of 11:39 a.m. in Tokyo, the most since Aug. 17. The gauge has risen 59 percent from a more than five-year low on March 9 on speculation the global economy is recovering. That's taken the average price of stocks on the index to 1.5 times book value, close to an 11-month high.

"We remain cautious on the market," said Pearlyn Wong, Singapore-based investment analyst at Bank Julius Baer Co., which manages $350 billion. "Much of the recovery story has been priced in. Investors are probably wondering what is going to happen once the stimulus measures end."

Japan's Nikkei 225 Stock Average declined 2.6 percent. Mitsubishi UFJ Financial Group Inc. slipped 2.9 percent as concern lenders will report more losses dragged U.S. financial shares lower yesterday.

Hong Kong's Hang Seng Index lost 1.6 percent. Australia's S&P/ASX 200 Index sank 1.9 percent even as a government report showed the country's economy grew faster in the second quarter.

Banks Decline

All major stock indexes in the region declined except in China and Taiwan. The Shanghai Composite Index added 0.4 percent. PetroChina Co. and China Petroleum & Chemical Corp. added more than 1 percent after the government raised fuel prices.

Futures on the S&P 500 Index added 0.1 percent. The gauge slid 2.2 percent yesterday, the most since Aug. 17. The KBW Bank Index of 24 U.S. financial companies fell 5.8 percent as analysts at RBC Capital Markets said U.S. banks on the West Coast still face credit deterioration and higher loan losses.

Mitsubishi UFJ, Japan's largest publicly traded bank, dropped 2.9 percent to 578 yen. Westpac Banking Corp., Australia's largest bank by market value, sank 2.9 percent to A$24.14.

The drops in U.S. equities and commodities "will prompt investors to sell related stocks," said Hiroichi Nishi, an equities manager at Tokyo-based Nikko Cordial Securities Inc. "As the global economy recovers, there are many investors who want to buy on dips."

Lower Forecast

Seven & I declined 3.8 percent to 2,145 yen after cutting its full-year net income target by 11 percent. Aeon Co., Japan's second-largest retailer, slumped 5.5 percent to 920 yen. Uny Co., which runs department stores, slid 5.6 percent to 748 yen.

"There are signs of recovery in certain sectors of the domestic economy, but an overall recovery seems unlikely," Seven & I said in a filing with the Tokyo stock exchange. "Consumer sentiment remains weak."

Maruzen Co. tumbled 7.2 percent to 103 yen. The bookstore operator posted a 340 million yen ($3.7 million) loss for the six months ended July 31, missing its forecast of a 10 million yen profit because of weak sales, according to a preliminary earnings statement.

BHP Billiton lost 2 percent to A$36.53. Rio Tinto Group Ltd., the world's third-largest mining company, fell 2.4 percent to A$55.96. Inpex Corp., Japan's largest oil explorer, slumped 4.1 percent to 732,000 yen.

Commodity Prices Decline

Crude oil fell 2.7 percent to $68.05 a barrel in New York yesterday, the lowest settlement since Aug. 17. A gauge of six metals in London dropped 3.6 percent, the most since July 8.

In Tokyo, Elpida slumped 17 percent to 1,282 yen after saying the company will sell as much as 78.5 billion yen ($841 million) of new shares at a 7.2 percent discount to yesterday's closing price.

In Shanghai, PetroChina, the nation's biggest oil producer, advanced 2.1 percent to 13.17 yuan. China Petroleum & Chemical, Asia's biggest refiner, added 1.1 percent to 11.43 yuan.

China will raise fuel prices by 300 yuan ($44) a ton, or as much as 6.3 percent, today to reflect gains in crude oil and offset higher raw material costs, the National Development and Reform Commission said on its website. 

Nikkei 225 10,253.18     -276.88 ( - 2.63%).(08.19 AM IST).

Japan's Nikkei average slid 2.6 percent on Wednesday, dragged down by exporters such as Canon Inc (7751.T) on a stronger yen and after uncertainty over the health of the U.S. financial sector hit Wall Street.

The benchmark Nikkei .N225 shed 276.88 points to 10,253.18. It inched up 0.4 percent the previous day, bringing its gains from its March lows to nearly 50 percent.

The broader Topix declined 2.2 percent to 947.13.

Tokyo stocks tumbled over 2 percent Wednesday morning after concern about the U.S. financial sector's health sent Wall Street plummeting overnight and a stronger yen weighed on Japanese exporters.

Elpida Memory Inc. (6665) shares opened Wednesday ask-only, before trading limit-down at 1,237 yen, down 300 yen from Tuesday.

Rohm Co. (6963) shares fell back Wednesday morning along with other high-tech stocks, which are being dumped in reaction to an overnight retreat in the Nasdaq Composite Index. 

HSI 19521.14 -351.16 -1.77%.(08.21 AM IST).

Hong Kong stocks dropped sharply Wednesday in the wake of an overnight fall on Wall Street and in spite of gains in Shanghai, with market heavyweights HSBC Holdings Plc. and China Mobile Ltd. pacing the fall. The Hang Seng Index dropped 1.9% to 19,490.67 in early trades, and the Hang Seng China Enterprises Index slid 1.5% to 11,169.99. HSBC /quotes/comstock/22h!e:5 (HK:5 81.05, -2.35, -2.82%) /quotes/comstock/13*!hbc/quotes/nls/hbc (HBC 52.34, -1.58, -2.93%) lost 3.1%, and China Mobile /quotes/comstock/13*!chl/quotes/nls/chl (CHL 48.10, -0.11, -0.23%) /quotes/comstock/22h!e:941 (HK:941 75.10, -1.10, -1.44%) dropped 1.8%. Shares of China Petroleum & Chemical Corp. /quotes/comstock/22h!e:386 (HK:386 6.61, +0.07, +1.07%) /quotes/comstock/13*!snp/quotes/nls/snp (SNP 84.32, +0.71, +0.85%) rose 0.3% after China announced an increase in fuel prices, though PetroChina /quotes/comstock/22h!e:857 (HK:857 8.57, -0.09, -1.04%) /quotes/comstock/13*!ptr/quotes/nls/ptr (PTR 108.01, -1.14, -1.04%) dropped 1.3%. China's Shanghai Composite added 1% to 2,709.97 in early morning action.  

SSE Composite  2713.43  + 1.11.(08.23 AM IST).

Chinese stocks advanced in early trading Wednesday, shrugging off weakness in regional markets and on Wall Street overnight, with refiners rising after the National Development and Reform Commission announced an increase in motor fuel prices. The Shanghai Composite rose 0.2% to 2,689.52. Shares of China Petroleum & Chemical Corp., or Sinopec /quotes/comstock/13*!snp/quotes/nls/snp (SNP 84.32, +0.71, +0.85%) , rose 1.4% and PetroChina /quotes/comstock/13*!ptr/quotes/nls/ptr (PTR 108.01, -1.14, -1.04%) gained 2.3% after the NDRC announced an increase of 4.6% in gasoline prices and a 5.2% hike in diesel prices.

Chinese equities opened lower on Wednesday morning with the benchmark Shanghai Composite Index sliding 0.09 percent, or 2.39 points, to open at 2,681.33.

The Shenzhen Component Index lost 1.04 percent, or 110.89 points, to open at 10,503.39.

Sinopec, China's leading oil refiner, gained 2.39 percent to 11.58 yuan (1.7 U.S. dollars) per share at the opening, with PetroChina edging up 1.56 percent to 13.06 yuan per share, as the country raised the prices of gasoline and diesel by 300 yuan a tonne, or about 4 percent, starting from Sept. 2.

Chinese stocks open nearly flat on Wed

Chinese stocks opened nearly flat on Wednesday morning.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 2,681.33 points, down 0.09% or 2.39 points from the previous closing.

The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 1.04% or 110.89 points lower at 10,503.39 points.

China Railway units win contracts worth RMB 13.92 bln.

China Unicom, Chunghwa Telecom to set up mainland JV.

Silicon Valley Bank opens representative office in Shanghai.

CNTA relaxes requirements for foreign-invested travel agencies.

BBMG allocates RMB 2 bln to buy land in H2.

CNOOC inks deal with Qatar Petroleum.

Sinopharm to kick off Hong Kong roadshow on Fri.

PetroChina to buy US$1.7-bln oil sands stake from Athabasca.

China to Hike Fuel Prices 4-5%, 4th Time in '09

China will raise retail fuel prices by about 4-5 percent from Wednesday to a near-record high to track a basket of global crude prices that moved up nearly 10 percent since Beijing's last price change just over a month ago.

The increase in retail prices for gasoline and diesel by 300 yuan a tonne was announced by an official from the National Development and Reform Commission on state television and marks the fourth hike this year.

The announcement confirmed an earlier Reuters report.

The rise, a surprise to many in the markets who had been expecting Beijing to hold off until after the National Day holiday on Oct 1, shows that the government is serious about sticking to its market-based fuel pricing system that closely tracks global crude costs.

The increase was at the lower end of an earlier forecast for a hike of 6-8percent, as global crude [US@CL.1  68.61    0.56  (+0.82%)   ] fell almost 4 percent on Monday before climbing back to near $70.40 a barrel on Tuesday.

The share price of top state refiner Sinopec fell by the daily limit of 10 percent in Shanghai on Monday after a media report that China might reduce the frequency of oil price changes.

"I suspect more increases are needed in October given the higher cost of crude oil to be shipped in by then," said Qiu Xiaofeng, an analyst with China Merchants Securities.

After the rise, China's average retail price for 90-octane gasoline stood at about $3.12 a gallon, some 19.5 percent above average pump prices for U.S. regular unleaded motor fuel.

Xu Kunlin, a senior official in charge of oil pricing at the NDRC, a powerful central planning agency, told state television that China had already postponed the rise by one week because it must look at more than just global oil prices.

"The domestic economy, market demand and supply and some other factors also require consideration," he said.

China also raised jet fuel prices by 300 yuan per tonne.

High Production, High Stocks to Persist

Analysts say that the rise, the first since July 29, will further shore up profit margins for state refiners and prompt them to produce at high rates despite increasing stocks.

Refined fuel stocks held by China's top two oil firms rose 7.5 percent in July, the third monthly rise in a row, as sales declined for the first time since at least February while refiners increased their output to a record high of 7.8 million barrels per day in the month.

"Oil firms' enthusiasm is not dampened by the weak domestic sales. Instead, they are encouraged to produce at a robust rate thanks to the price rise and they can export their extra production," a state refining official said.

Sinopec last week reported record first-half earnings that were more than four-times higher than year-ago levels alongside a hefty $8.6 per barrel margin.

"High production will also keep China's apparent oil demand at a high level," the official added.

Stripping out changes in stocks, China's implied oil demand rose 3.5 percent in July from a year earlier, the fourth consecutive rise.

Under a price system since Jan. 2009, the Chinese government has said it may adjust gasoline and diesel prices when the moving average of global crude sways more than 4 percent.

The government has said that the prices it sets operate only as guidance and that oil firms can set their own prices, provided that they do not exceed the government's ceiling.

Roubini: China Won't Drive World Out Of Recession

In a Fast Money exclusive, widely followed market maven Nouriel Roubini reveals his latest market musings.

As you may know Roubini, who is a professor of economics at NYU, is considered a sage by some investors after he accurately predicted the housing crisis, deep recession and more. His gloomy prognostications have also earned him the nickname Dr. Doom.

Find out what Roubini says could drag us into a double dip recession -– and why China is too small to be the main engine of global growth.

Fast Money: What is the biggest threat to the recovery?

Roubini: The debt ratios of banks and (individuals) are very high; (Individuals) have barely started saving. So what we've done is socialize these private losses and now we have a massive releveraging of the public sector with large and unsustainable budget deficits.

(The deficits) are leading to accumulation of public debt -  over $10 trillion over next 10 years. (That massive amount) of debt may lead to another crisis. 

Fast Money Insisghts

I agree that we see bank failures going forward, says Guy Adami. And if that happens I expect it could spook the market. I also think the market has seen its high for a while.

Roubini: China Is Not Big Enough To Drive Worldwide Economic Recovery

Fast Money: Can China lead the world out of recession?

Roubini: I don't believe China can be the main locomotive of global growth – China GDP is only $3 trillion – the US is $15 trillion. Chinese total consumption is $1 trillion – the US is $10 trillion.

So China is too small to be the main locomotive of engine of global growth, and there are excesses right now in China – like froth in the real estate and the stock market. And there is now the beginning of a correction. And if there was a sharp slowdown in China, that's going to be again negative for the global economy.

Fast Money Insights

I agree with what Roubini is saying, reveals Tim Seymour. China alone can not do it. But also, I would not underestimate the strength of emerging markets.

I don't think we're looking for China to be the locomotive, adds Pete Najarian. We're just looking for a little push.

V Defies Economic Pessimists Seeing L, U, W: Brendan Moynihan

What shape will the U.S. economic recovery take: L, U, V, W, square root or maybe even Riemann's zeta function?

Many economists and pundits, trying to explain why "it's different this time," are groping for new metaphors to explain their forecast for how the U.S. economy will emerge from recession.

Economists long ago gave us descriptions of L-shape recoveries (never happened), U-shape (also never happened) and the W-shape (happened once, for reasons explained below). The triple-U recently made it into the lexicon. And Societe Generale's Albert Edwards served up the Armenian letter K in a June 4 report.

Commentators unwilling to be constrained by the letters of the Roman alphabet turned to symbols, in May giving us the character for "bank" (it resembles a sickle) used in the Pitman shorthand system for taking dictation. In an interview on Bloomberg Scarlet Fu on July 7, Hans-Guenter Redeker, global head of foreign-exchange strategy at BNP Paribas SA, said the recovery will look like a "square root." Bank of America Merrill Lynch, in an Aug. 17 report titled "The Shape of Things to Come" also used that symbol.

At the rate they are going, they'll soon be using Riemann's zeta function shape (a sort of spiral). Meanwhile, key economic indicators are defying them all with a V-shaped trajectory that typifies economic recoveries in the U.S.

Defying History

The new metaphors project stagnant growth for the next several years, breaking with all precedent in post-World War II recoveries. Business cycles differ in nuance, but all of them are cycles. And history shows that the deeper the decline, the stronger the V-shaped rebound.

The last time the gross domestic product contracted more than the 6.4 percent registered in the first quarter of 2009 was the 10.4 percent contraction in the second quarter of 1980, when President Jimmy Carter told Americans to cut up their credit cards. They did, en masse, and many mailed the clippings to the White House as evidence of their support.

The famous "double dip," or W-shape recovery of 1980 and 1981 happened because the Federal Reserve, under the leadership of Paul Volcker, raised interest rates, lowered them, then raised them again. Soaring interest rates (mortgage rates rose as high as 18 percent) sapped demand for homes, and homebuilders mailed two-by-fours to the White House to show their disapproval of the Fed's handling of the economy.

'Different This Time?'

The Fed at the time was still trying to figure out how to conduct monetary policy, having just removed regulated interest- rate ceilings and deciding to target the money supply instead of interest rates.

The median forecast for third-quarter U.S. GDP is 2.2 percent, according to Bloomberg surveys. By comparison, since 1945 the average annualized real U.S. growth in the first two quarters of a recovery is 7.1 percent. Again, the pessimists say "it's different this time."

They cite unemployment and the housing market as the principal reasons for anemic growth in coming quarters and years.

Unemployment is a lagging indicator of economic activity and is making its own V-shape rebound right now, reinforced by continuing jobless claims, which already have that trajectory. The housing market is showing signs of life. The S&P/Case- Shiller home-price index, which tracks 20 metropolitan areas, rose in 18 cities during June, and new single-family home sales are flashing the typical V-shape recovery.

Metaphoric Blunder

For a group that collectively failed to predict the financial crisis or the depth of the economic contraction, economists' recovery metaphors for why "it's different this time" are suspect. As for the handful who may have predicted the events of the past two years, they are unable to envision a recovery. Winston Churchill once said a fanatic is someone who can't change his mind and won't change the subject.

Let's hope the metaphor-hunting economists don't stumble upon Wallace Stevens's poem "Motive of Metaphor," which ends with the letter X. 
 
 

INVESTMENT VIEW
Pidilite-Waterproofing Solutions 
If we all agree that India is a infrastructure play, then Pidilite is the biggest play on the segment with it's dominant role in the Bonding and Waterproofing segment
 

Pidilite is the market leader in adhesives and sealants, construction chemicals, hobby colours and polymer emulsions in India. Its brand name Fevicol has become synonymous with adhesives to millions in India and is ranked amongst the most trusted brands in India.

 

The Company's product range includes Adhesives and Sealants, Construction and Paint Chemicals, Automotive Chemicals, Art Materials, Industrial Adhesives, Industrial

and Textile Resins and Organic Pigments and Preparations.

 

Since its inception in 1959, Pidilite Industries Limited has been a pioneer and two-third of the company's sales come from products and segments it has pioneered in India.

 

Operates in 3 Business Segments – Consumer & Bazaar Products (73% of sales), Specialty Industrial Chemicals (27% of sales) and Others (Vinyl acetate monomer- 5% of sales).

 

Consumer & Bazaar Products include Adhesives & Sealants, Construction/Paint Chemicals and Art Materials; Specialty Industrial Chemicals include Industrial Resins, Industrial Adhesives, Organic Pigments & Preparations and Others (VAM).

 

In FY09, Consumer & Bazaar Products segment contributed to 73% of total sales and grew by 13.6%. Of this Adhesives and Sealants grew by 10.8% and contributed 50% to the total sales of the company. Specialty Industrial Chemicals segment contributed 22% to the total sales and grew by 13.8%.

 

Management attributed slowdown in growth in FY09 due to economic slowdown and huge destocking by dealers due to liquidity crunch.

 

Market leader: It is the leader in most of the segments it operates with a 70% market share in flagship brand, Fevicol (which constitutes about 27% of total revenues of the group).

 

Strong brands: It has popular brands like Fevicol, M-seal, Dr Fixit, and Fevicryl. Fevicol is synonymous with adhesives in India and serves an extensive range of consumer, craftsmen, engineering and industrial consumers. M-Seal is India's leading sealant brand for sealing, joining & repairing applications for both consumer & craftsmen market.

 

Pidilite offers a wide range of constructions chemicals under the Dr. Fixit brand name. The extensive product range is used for waterproofing and repair for both new & old constructions. Dr. Fixit is market leader in retail market of construction chemicals and the products are available in all leading cement, hardware, tile and paint shops.

 

Strong distribution network: Company has a reach to 0.45 mn retailers (up from 0.3 mn 10 years back) and over 25000 wholesale stockist which gives it a very strong distribution.

 

Key Growth drivers:

 

Construction Chemicals to pick up significantly as construction activity picks up. Management expects Dr. Fixit to be as large as Fevicol in the future.

 

Q2FY10 is expected to be good on the back of advance sales due to Diwali (3rd week of October). Management expects sales to pick up at least a month before festival season.

(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