Market Outlook 22nd Oct 2009

NIFTY FUTURE LEVELS
SUPPORT
5070
5046
5022
4998
RESISTANCE
5081
5084
5110
5134
5158
5182
Buy CHEMCEL BIO TECH;PRITISH NANDY CO 

 

Strong & Weak  futures  

This is list of 10 strong futures:

Polaris, Yes Bank, Canara Bank, Andhra Bank, Indusind Bank, Bajaj Hind, HDIL, Dena Bank, Jindal Steel & Jindal Saw.

And this is list of 10 Weak futures:

RCom, Idea, Bharti Airtel, Grasim, TV-18, MTNL, Ambuja Cement, DishTV, Hind Petro & India Cement.

Nifty is in Up trend

 

NIFTY FUTURES (F & O):  
Below 5070 level, selling may continue up to 5046-5048 zone by non-stop.

Hurdles at 5081 & 5084 levels. Above these levels, expect short covering up to 5108-5110 zone and thereafter expect a jump up to 5132-5134 zone by non-stop.

Cross above 5156-5158 zone, can take it up to 5180-5182 zone by non-stop. Supply expected at around this zone and have caution.

On Negative Side, rebound expected at around 5022-5024 zone. Stop Loss at 4998-5000 zone.
 
Short-Term Investors:  
Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop. 

BSE SENSEX:  
Lower opening expected. Recovery should happen. 

Short-Term Investors:  
Short-Term trend is Bullish and target at around 17671.82 level on upper side.
Maintain a Stop Loss at 16613.22 level for your long positions too.

SL Triggered.
 

INVESTMENT BUY:
Buy CHEMCEL BIO TECH (BSE Code:533026) 
Buy with a Stop Loss of 10.80. 

Above 12.90, it will zoom.
 
Buy PRITISH NANDY CO (BSE Code:532387) 
Buy with a Stop Loss of 35.35. 

Above 37.20, it will zoom.
 

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	21-Oct-2009	2729.21	3241.02	-511.81

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	21-Oct-2009	1366.28	1657.19	-290.91

 

Global Cues & Rupee 
 The Dow Jones Industrial Average closed at 9,949.36. Down by 92.12 points.
The Broader S&P 500 closed at 1,081.40. Down by 9.66 points.

The Nasdaq Composite Index closed at 2,150.73. Down by 12.74 points.

The partially convertible rupee INR=IN ended at 46.485/495 per dollar on yesterday, below its Tuesday's close of 46.11/12.
 

Interesting findings on web:
The Dow Jones industrial average fell 92.12, or 0.9 percent, to 9,949.36.

The broader Standard & Poor's 500 index fell 9.66, or 0.9 percent, to 1,081.40.

The Nasdaq composite index fell 12.74, or 0.6 percent, to 2,150.73.

RUSSELL605.11-8.30-1.35%

TRAN3940.93-104.18-2.58%

UTIL382.430.51+0.13%

S&P 100500.24-4.28-0.85%

S&P 400701.43-7.50-1.06%

NYSE7107.21-51.06-0.71%

NAS 1001753.56-2.63-0.15%

Stocks finished lower after well-known banking analyst Dick Bove downgraded his rating on Wells Fargo.

Wells Fargo, the largest U.S. home lender this year, slid 5.1 percent after Bove of Rochdale Securities cut the shares to "sell" and said earnings were boosted by mortgage-servicing fees rather than improving business trends. Wal-Mart Stores Inc., the world's largest retailer, tumbled 2.1 percent after saying it expects a "tough" holiday shopping season. The Standard & Poor's 500 Index reversed a 0.9 percent advance as nine of 10 industry groups retreated, led by financials.

"Wells Fargo's downgrade spooked investors," said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages about $2 billion in San Antonio. "Investors are concerned because that's one of the biggest in the industry and most of the recent news has been positive so far. So that could be an indication of problems ahead for other big names."

Wells Fargo slumped 5.1 percent to $28.90, erasing a gain of as much as 2.2 percent. Bove said servicing fees on mortgages lifted profits by 15 cents a share, while a 2.2 percent lower tax rate gave a 2-cent boost. Wells Fargo reported third-quarter earnings of 61 cents a share, excluding some items, beating the average analyst estimate of 39 cents.

Bove said the "most disturbing" thing about Wells Fargo's results is that loan losses seem to be accelerating. Assets no longer collecting interest climbed 28 percent to $23.5 billion from the second quarter, Wells Fargo said, while the reserve to cover future loan losses grew by $1 billion from the second quarter to $24.5 billion.

"It's definitely had an effect on the market," said Tim Smalls, head of U.S. trading at Execution LLC in Greenwich, Connecticut. Bove "has a very good following and very long track record of consistency," he said.

Bove said recently that Goldman Sachs was the best-managed company in the sector but Citigroup was the most attractive stock.

Financial shares in the S&P 500 slumped 1.9 percent after Morgan Stanley's results helped lift the group as much as 1.3 percent earlier. JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. each lost at least 2.9 percent.

Morgan Stanley rallied as much as 7.6 percent before trimming gains, leaving the stock up 4.8 percent at $34.08. The sixth-largest U.S. bank by assets reported its first profit in a year, surpassing analysts' estimates on higher investment- banking fees. 

Wal-Mart dropped 2.1 percent to $50.63. The world's largest retailer expects customers to delay holiday purchases, said John Fleming, chief merchandising officer. Walmart plans to reduce prices as the season advances in areas including home, food and gifts, Fleming told analysts today at a conference in Rogers, Arkansas.

Boeing Co., the second-largest maker of commercial aircraft, fell 2.4 percent to $50.63 after booking $3.5 billion in charges for the delayed 787 Dreamliner and 747-8 jumbo jet programs. Its largest-ever net loss of $1.56 billion, or $2.23 a share, exceeded the $2.10-a-share average estimate of 18 analysts in a survey.

Merck & Co. had the steepest decline in the Dow average, falling 3.1 percent to $32.68. The pharmaceutical company's Gardasil vaccine, used to protect girls from a virus linked to cervical cancer, shouldn't be given routinely to boys, a U.S. advisory panel said.

Genzyme Corp. declined 6.2 percent to $51.43. The world's largest maker of drugs for rare genetic disorders reported third-quarter profit excluding some items of 31 cents a share, missing the average analyst estimate by 28 percent. Genzyme also lowered its full-year forecast of earnings to $2.26 a share, down from $2.35 to $2.90 a share on July 22.

Allegheny Technologies Inc. had the biggest drop in the S&P 500, falling 8.4 percent to $34.81. The specialty-metals producer that supplies titanium to Boeing reported third-quarter profit and sales that fell short of analysts' estimates as customers kept their metal inventories low during the recession.

Yahoo rose 2.9 percent to $17.66. Third-quarter profit excluding some expenses was 15 cents a share, beating the average prediction of 13 cents by analysts in a Bloomberg survey. Sales, excluding fees passed on to partner sites, were $1.13 billion, exceeding projections.

SanDisk Corp. soared 9.5 percent to $23.53. The biggest maker of flash-memory cards used in digital cameras and mobile phones forecast fourth-quarter sales that beat analysts' estimates as chip prices rebounded.

Apple Inc., maker of the iPhone mobile phone, iPod music players and MacIntosh computers, rose 3.1 percent to a record $204.92. The gains added to a 4.7 percent advance yesterday after Apple posted earnings and sales that topped analysts' estimates.

Eli Lilly [LLY  33.665    -1.575  (-4.47%)   ] beat expectations on both earnings and sales of prescription drugs and raised its outlook. But shares fell 4.5 percent as the company didn't raise the fourth-quarter outlook by as much as they beat in the third.

Elan [ELN  6.35    -0.11  (-1.7%)   ] fell, even after the drug maker raised its earnings guidance for the year.

The double dose of good news from tech had buoyed the Nasdaq for much of the day but the index eventually succumbed to the selling pressure.

This followed similar outlooks from Intel [INTC  19.86    -0.32  (-1.59%)   ] and Texas Instruments [TXN  22.985    -0.675  (-2.85%)   ], citing signs of improvement in business spending.

And Dell [DELL  15.15    -0.20  (-1.3%)   ] says PC sales should start to get a boost from Windows 7 starting in mid-2010.

Sun Microsystems [JAVA  8.73    -0.28  (-3.11%)   ] said it's cutting 3,000 jobs ahead of the planned takeover by Oracle [ORCL  22.03    -0.16  (-0.72%)   ]. Sun shares lost more than 3 percent.

Freeport-McMoRan shares [FCX  79.95    1.32  (+1.68%)   ] rose 1.4 percent after the gold and copper miner reported its profit soared in the third quarter, helped by higher metals prices and volume. Though revenue slipped.

On the M&A front, General Electric [GE  15.53    -0.05  (-0.32%)   ] and Comcast [CMCSA  15.11    -0.25  (-1.63%)   ] said they were continuing discussions about a possible deal but that there was no timetable for completion. GE shares slipped.

US Bancorp [USB  24.47    0.67  (+2.82%)   ] is considering acquiring FBOP, which owns eight banks and could be put up for sale by the Federal Deposit Insurance Corp, according to a report in the Wall Street Journal.

Morgan Stanley may hand over its Crescent Real Estate Equities unit to Barclays Capital, the Journal reported.

And Geely Automotive's talks to buy Volvo from Ford Motor [F  7.80    0.09  (+1.17%)   ] have reportedly stalled.

Shares of Gentex surged 18% on Wednesday after its third-quarter earnings beat analyst expectations. Baird analyst David Leiker maintained a Neutral rating and said the results showed the company is more profitable at lower volumes that previously thought. "We believe the company has the potential for double-digit revenue growth (plus-or-minus production) over the longer term from growing penetration, which is currently in the low-20% range, and improving mix from better feature adoption," he wrote in a research note. The Zeeland, Mich.-based company makes automatic-dimming rearview mirrors and commercial fire-protection products.

So far, 122 companies, or nearly one-fourth of the S&P 500, have reported results. Profits are currently on track to have fallen 20.9% versus a year earlier, according to the latest from Thomson Reuters. Revenue is expected to have dropped 10.4% from a year ago.

The Dow 30's results are expected to be weaker, Thomson said, with profits due to slide just short of 30% versus a year ago.

In economic news, the Fed said economic conditions either stabilized or improved in most of the country, according the Fed's "beige book" report, based on reports from its regional branches. Though it also showed consumer spending remains weak.

This morning, the Mortgage Bankers Association reported another drop in home-loan applications as interest rates continue to edge higher.

All 50 states and the District of Columbia reported big jumps in unemployment rates in September versus a year ago, according to state-by-state data released Wednesday. Fifteen states reported jobless rates above 10% in September, with Michigan's unemployment topping the list at 15.3%.

Strong

industrial REITs; agricultural products; electronic equipment; autoparts; personal products; coal and consumable fuel; diversified metals and miners; independent power producers

Weak

employment services; advertising; broadcasting; building products; airlines; diversified banks; department stores; food retailers; diversified chemicals; hotels

VIX22.221.32+6.32.

Oil,Gold & Currencies:

U.S. light crude oil for December delivery rose $2.25 to settle at $81.37 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $5.90 to settle at $1,064.50 an ounce.

The euro jumped to a 14-month high against the dollar, extending its recent run against the U.S. currency. The dollar inched higher versus the yen.

The dollar traded near a 14-month low versus euro as evidence of a global economic recovery damped demand for the U.S. currency as a safe haven.

The euro rose against 10 of its 16 major counterparts before reports forecast to show an index of U.S. leading indicators gained and German business confidence improved. The yen traded near a two-month low versus the euro after a report showed Japan's exports fell at a slower pace in September, encouraging investors to seek higher-yielding assets overseas.

"People still feel safe in selling the dollar as the economy recovers," said Toshiya Yamauchi, manager of the foreign-exchange margin-trading department at Ueda Harlow Ltd. in Tokyo. "Higher-yielding currencies, including the euro will benefit from this risk trade."

The dollar traded at $1.5018 per euro at 10:18 a.m. in Tokyo from $1.5016 in New York yesterday when it touched $1.5046, the weakest level since August 2008. The U.S. currency fetched $1.6626 per pound from $1.6608 yesterday when it slipped to as low as $1.6637, the weakest level since Sept. 15.

The greenback was at 91.03 yen from 90.97 yen. The euro traded at 136.71 yen from 136.61 yen.

The Conference Board's index of leading economic indicators increased 0.8 percent in September, according to the median forecast of 60 analysts in a Bloomberg survey. A sixth consecutive gain in the index would mark the best performance since 2004. The report from the New York-based group is scheduled for release at 10 a.m. in New York.

Ifo Index

Adding to signs that the economic recovery is gaining traction, the Ifo institute's business climate index, based on a survey of 7,000 executives, climbed to 92 in October from 91.3 the previous month, according to a separate survey. The Munich- based institute will release the report tomorrow.

European Central Bank council member Erkki Liikanen said on Finland's YLE Radio Suomi this week the 16-nation euro area economy is no longer weakening.

"The euro-zone's economy appears to be recovering more quickly than we're seeing in the U.S. and Japan," said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. "The euro will likely gain further."

ECB Policy

Traders maintained bets the ECB will keep its benchmark interest rate at 1 percent until the end of the first quarter next year. The implied yield on the three-month Euribor futures contract for March 2010 delivery was 1.07 percent yesterday, little changed from Oct. 20.

The yen slid for an 11th day against the euro, its longest losing run since December 2004, after a Finance Ministry report showed Japan's shipments abroad fell 30.7 percent in September from a year ago, compared with a 36 percent drop in August.

"In Asia, it does seem that the pace of deceleration in exports is slowing, which is encouraging," said Thomas Harr, a senior currency strategist at Standard Chartered Plc in Singapore. "The yen will tend to underperform other major currencies except for the dollar when risk appetite is pretty strong."

Japanese exporters are benefiting from a global trade rebound that's being driven by interest-rate cuts and more than $2 trillion in government spending.　Today's export numbers were part of an improvement in shipments across Asia that suggests world trade is picking up, led by demand from China.

China's factory output probably climbed 13.2 percent in September from a year earlier following a 12.3 percent gain in the previous month, according to a Bloomberg News survey of economists before the data release today. The world's third- largest economy grew 9.0 percent in the third quarter following a 7.9 percent gain in the second, according to a separate Bloomberg News survey before the data release today.

Bonds:

Treasury prices rallied, lowering the yield on the 10-year note to 3.41% from 3.34% late Tuesday. Treasury prices and yields move in opposite directions.

What to expect:

THURSDAY: Weekly jobless claims; leading indicators; Fed's Rosengren, Lockhart and Dudley speak; Earnings from AT&T, Bristol-Myers, McDonald's, Merck, MMM, Travelers, UPS, Schering-Plough, Xerox, Amazon, AmEx, Braodcom and Capital One

FRIDAY: Fed chief Bernanke speaks; existing-home sales; Fed's Kohn speaks; Earnings from Microsoft, Honeywell and Ingersoll-Rand

Feinberg to Order 50% Cuts in Compensation for Bailed-Out Firms

China's Economy Expands 8.9%, Fastest Pace in a Year on Stimulus, Lending

Galleon Will Liquidate Hedge Funds, Is Said to Get Approaches About Assets

Japan Exports Drop at Slowest Pace This Year on Chinese Stimulus Spending

Toyota, Honda, Nissan May Increase Overseas Production Amid Stronger Yen

House Panel Approves Derivatives Bill to Regulate $592 Trillion Industry

Iran Says It's Ready to Accept Deal for U.S., Russian Shipments of Uranium

Stimulus Spending Has Saved One Million Jobs: Pelosi

Microsoft befriends Twitter in Google search duel

Locals raise bid for Philadelphia papers to $87M

Ex-manager testifies in slaughterhouse trial

Production of swine flu vaccine is way behind

QLogic earnings fall 41%

FDA requests additional studies for Amgen drug

Pactiv posts higher profit, raises outlook

Visa names John Partridge president

Panel: Auto dealers exempted from consumer agency

Copper hits 13-month highs on weak dollar, BHP

Windows 7 may help kickstart delayed corporate spend

Facebook to Add Music Sales

BofA Agrees to Sell First Republic

Amgen Profit Rises 23% on Higher Margins

Pay Czar to Slash Compensation

F5 Rallies On Beat-And-Raise FY Q4

Equinix To Buy Switch & Data For $689 Million In Cash And Stock

Citrix Q3 Results Inch Past Estimates; Shrs Slip

Novellus Q3 Tops Estimates; But Stock Slides

VMware: Q3 Revs, EPS Beat; Q4 Rev View Tops Ests

San Diego group buys Moana Vista

Brigham Exploration Company Prices Offering of 16,000,000 Shares of Common Stock at $10.50 per Share

Cape Bancorp, Inc. Reports Third Quarter 2009 Results

Harvest Energy Trust Agrees to C$4.1 Billion Sale to Korea National Oil Corporation

DOCOMO Capital and Mobile Internet Capital Invest in Stoke

Fed Beige Book Says Economy Making 'Modest' Gains

Federal Reserve district banks identified commercial real estate as the weakest part of the economy, while most saw "stabilization or modest improvements" in areas including housing and manufacturing.

All 12 district banks reported a weak or declining commercial real estate market, the central bank said today in its Beige Book business survey, published two weeks before officials meet to set monetary policy. The banks observed "little or no" price pressures, while demand for bank loans was "weak or declining" and many districts reported a "further erosion of credit quality."

The survey indicates that the economy, while gaining momentum, has yet to overcome weaknesses in banking and employment. Unemployment rose last month in 23 U.S. states, the Labor Department said today, while earlier reports showed declines in wholesale prices and lower-than-forecast housing starts, giving central bankers more reason to hold the main interest rate at a record low to stoke a recovery.

"The Beige Book was more pessimistic than what I expected," said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. "Economic improvements are modest at best with significant downside in terms of banking and bank loans. The Beige Book says the Fed is nowhere near ready to raise rates for any reason."

Today's report cited continued "weak or mixed" labor markets. Unemployment rose to a 26-year high of 9.8 percent in September and is forecast by economists to hit 10 percent by the end of the year.

'Small, Scattered'

"Reports of gains in economic activity generally outnumber declines, but virtually every reference to improvement was qualified as either small or scattered," the Fed said today.

Stocks erased early gains after analyst Dick Bove downgraded Wells Fargo & Co., the largest U.S. home lender this year. The Standard & Poor's 500 Index lost 0.9 percent to 1,081.4 at 4:07 p.m. in New York after earlier climbing above its highest close of the year.

Treasuries fell, with 10-year notes snapping three days of gains. The 10-year note yield rose four basis points, or 0.04 percentage points, to 3.39 percent at 4:21 p.m. in New York.

The jobless rate hit records in Nevada, Rhode Island and Florida, the Labor Department said today in Washington.

The Fed report reflects information collected through Oct. 13 and summarized by staffers at the Richmond Fed.

Comments from Fed district bank presidents today reflected the mixed picture in the report.

'Tough Slog'

Dallas Fed President Richard Fisher said "bad numbers are getting less worse." Growth next year will be a "tough slog" and "significantly below potential," he said in an interview with The Toronto-based BNN television network.

"I am pretty confident we are going to see positive growth in the first half of 2010," Jeffrey Lacker, who heads the Richmond Fed, told reporters at a conference.

Economic growth will average 2.8 percent in the second half of this year, according to a Bloomberg News survey of economists this month. The world's largest economy shrank at a 0.7 percent annual rate from April through June, the best performance in more than a year, according to government figures.

Fed policy makers have been warning that commercial real estate remains a weak spot, even as the nation emerges from the worst recession since the 1930s.

Loan Defaults

Defaults on commercial real estate loans totaled $110 billion, or 6 percent of all such loans, in the second quarter, about 11 times the level in the fourth quarter of 2006. Defaults may rise to $170 billion by the fourth quarter of 2010, according to Foresight Analytics LLC, a real-estate market consulting firm.

"Demand drivers for all asset classes of commercial real estate stink right now," said Allen Greer, managing member of Greer Advisors LLC in Los Angeles and a former Bank of America Corp. official. "With no jobs, you have no demand. I don't see businesses spending. I see no end in sight for the lack of job growth."

Declining real-estate values caused by rising vacancies, falling rental rates and weak sales are contributing to losses, Comptroller of the Currency John Dugan, the regulator of national banks, told Congress on Oct. 14.

The Richmond Fed's Lacker said that troubled commercial real-estate loans are a "manageable" problem for the U.S. banking industry and don't require a government solution.

A bright spot in the Beige Book survey was its assessment of manufacturing. Most of the Fed banks reported stronger activity in September over August, with the New York, Richmond, Minneapolis and Kansas City district banks all noting a pick-up in production, the survey said.

Production Gains

Industrial production rose for a third straight month in September, rising a better-than-forecast 0.7 percent, a Fed report showed last week.

Caterpillar Inc., the world's largest maker of bulldozers and excavators, this week posted third-quarter earnings that beat analysts' estimates and issued a full-year forecast that exceeded the highest prediction.

"We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s," Jim Owens, chief executive officer of the Peoria, Illinois, company, said in a statement. "We are seeing encouraging signs that indicate a recovery may be under way."

The Federal Open Market Committee next meets in Washington Nov. 3-4. At their prior meeting last month, officials said the economy had "picked up," while maintaining their pledge to keep the target interest rate exceptionally low for an "extended period."

The Fed lowered its main interest rate almost to zero in December while switching to asset purchases and credit programs as its main policy tools. Investors expect the central bank to begin raising rates next year, according to trading in futures contracts.

Asia:

Asian stocks fell as concern about rising loan losses at banks fueled speculation that an equity rally since March had outpaced earnings prospects.

Sumitomo Mitsui Financial Group Inc., Japan's second- largest bank by market value, lost 3 percent. U.S. bank shares tumbled yesterday after analyst Dick Bove downgraded Wells Fargo & Co. on concern loan losses may be accelerating. BHP Billiton Ltd., the world's largest mining company, rose 0.8 percent after oil topped $80 per barrel yesterday and metals rallied.

The MSCI Asia Pacific Index lost 0.6 percent to 119.81 as of 11:15 a.m. in Tokyo. The gauge has climbed 70 percent from a five-year low on March 9 on signs the global economy is recovering from the worst slowdown since World War II.

"Investors have become too optimistic," said Tomokatsu Mori, chief fund manager at Fukoku Capital Management Inc., which manages about $11 billion. "There's simply too much production capacity out there that's not going to be coming back on-line, and without that happening the economy can't spring back to life. How can stocks go up if that's the case?"

Japan's Nikkei 225 Stock Average slumped 1.2 percent as a government report showed the country's exports slumped 30.7 percent in September. South Korea's Kospi Index declined 0.5 percent, while New Zealand's NZX 50 Index lost 0.8 percent.

China's Shanghai Composite Index was little changed following economic data released this morning. Gross domestic product grew 8.9 percent in the third quarter from a year earlier, less than the 9 percent gain expected by economists in a Bloomberg News survey. Separate reports showed industrial production and retail sales grew at a faster pace in September.

China Economic Data

Futures on the Standard & Poor's 500 Index lost 0.1 percent. The gauge sank 0.9 percent yesterday, the most since Oct. 1 even after Wells Fargo posted a record quarterly profit. Bove, an analyst at Rochdale Securities, cut the stock to "sell" and said accelerating loan losses were "disturbing."

The MSCI Asia Pacific Index has surged 35 percent this year, outpacing gains by the S&P 500 and Europe's Dow Jones Stoxx 600 Index. Companies in the Asian benchmark trade at 1.6 times book value, near the highest level since September 2008.

Sumitomo Mitsui slumped 3 percent to 3,210 yen. Mitsubishi UFJ Financial Group Inc., Japan's biggest publicly traded bank, dropped 2.9 percent to 473 yen.

BHP gained 0.8 percent to A$40.15 and Rio Tinto Group, the world's No. 3 mining company, rose 1 percent to A$67.25.

Crude oil climbed 2.8 percent to $81.37 a barrel in New York, the highest settlement since Oct. 9, 2008. The London Metals Index, a measure of six metals including copper and zinc, surged 3.2 percent yesterday as the dollar weakened against currencies such as the euro.

Nikkei 225 10,210.78     -122.61 ( - 1.19%). (08.53 AM IST)

Japan's Nikkei average fell 1.2 percent on Thursday, with stocks hit across the board after a warning from a banking analyst prompted a sell-off in U.S. financial shares.

Amid caution ahead of the upcoming Japanese earnings season, exporters such as Kyocera Corp (6971.T) as well as banking stocks shed recent gains.

Japan Airlines Corp (JAL) (9205.T) dropped after a newspaper reported that the company's net loss may balloon to as much as about $5.5 billion for the year ending in March, while KDDI Corp (9433.T) slid after a brokerage downgrade.

"The stock market is taking a breather. Earnings reports have been in line or above expectations, but the stock market has already factored that in and climbed to high levels," said Kenichi Hirano, operating officer at Tachibana Securities.

"We'll have to be careful that positive factors might not be reflected in stock moves 100 percent from now on."

In moderate trade, the benchmark Nikkei .N225 slipped 122.61 points to 10,210.78. It hit a three-week closing high on Tuesday.

The broader Topix fell 1.3 percent to 901.68.

Japan's earnings season will swing into full gear next week.

"The market lacks energy and there are few reasons to buy Japanese stocks, particularly because the new government's policies have yielded little results so far," said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities.

"But at the same time, falls should be limited as the global economy is on track for a recovery and global stocks are on an upward trend. Investors also want to see how Japanese earnings will pan out."

U.S. stocks fell on Wednesday as Wells Fargo (WFC.N) slid after Rochdale Research analyst Richard Bove cut his rating on the stock saying loan losses were mounting, though it was among several banks posting quarterly earnings above Wall Street's forecasts.

Kyocera slipped 1.5 percent to 8,010 yen, while Advantest Corp (6857.T) fell 1.7 percent to 2,365 yen and Tokyo Electron Ltd (8035.T) shed 0.9 percent to 5,630 yen.

Banking stocks fell, with Japan's top lender Mitsubishi UFJ Financial Group (8306.T) skidding 3.1 percent to 472 yen.

JAL shares fell 2.4 percent to 123 yen. The Yomiuri newspaper said the struggling carrier plans to book hefty restructuring charges, which would likely lead to a bigger loss.

The Nikkei business daily also reported that a government-appointed task force crafting a revival plan for JAL has asked the Development Bank of Japan to provide more than 50 billion yen ($550 million) in debt waivers and debt-for-equity swaps.

KDDI fell 3 percent to 489,000 yen after Citigroup Global Markets Japan cut its rating on Japan's No. 2 phone operator to "hold/medium risk" from "buy/medium risk" and lowered its target price to 550,000 yen from 650,000 yen.

Analyst Hiroshi Yamashina said he saw little in the way of share price catalysts.

But retailer Uny (8270.T) gained 2.3 percent to 669 yen after the company said trading house Itochu (8001.T) is planning to take a stake in it as part of a business tie-up.

The Nikkei business daily said Itochu plans to spend about 4 billion yen to acquire a 3 percent stake from the market. Uny said it plans a news conference later in the day.

Some 982 million shares changed hands on the Tokyo exchange's first section, roughly in line with last week's morning average of 956 million.

Declining stocks outnumbered advancing ones by more than 6 to 1.

HSI 22080.31 -237.8 -1.07%. (08.56 AM IST)

Hong Kong's stock market declined in early trade Thursday, with investors chewing over Chinese economic data showing growth of 8.9% on year for the third quarter. Hong Kong's Hang Seng Index was down 0.5% at 22,209.5 after 15 minutes of trade, with the mainland-Chinese-focused Hang Seng China Enterprises Index down 0.4% at 12,950.7. Telecoms were among the loss leaders, with China Unicom Ltd. /quotes/comstock/22h!e:762 (HK:762 10.76, -0.22, -2.00%) /quotes/comstock/13*!chu/quotes/nls/chu (CHU 14.02, -0.03, -0.21%) down 1.5%, and China Telecom Corp. /quotes/comstock/22h!e:728 (HK:728 3.62, -0.10, -2.69%) /quotes/comstock/13*!cha/quotes/nls/cha (CHA 47.91, -0.88, -1.80%) losing 2.7%. Energy shares improved, however, amid rising crude-oil futures, with PetroChina Co. /quotes/comstock/22h!e:857 (HK:857 10.08, -0.10, -0.98%) /quotes/comstock/13*!ptr/quotes/nls/ptr (PTR 131.39, -0.56, -0.42%) and Cnooc Ltd. /quotes/comstock/22h!e:883 (HK:883 12.18, -0.02, -0.16%) /quotes/comstock/13*!ceo/quotes/nls/ceo (CEO 156.57, -2.34, -1.47%) both edging up 0.2%. On the mainland, however, the Shanghai Composite turned positive after the data release, rising 0.1%. Among top gainers there was Aluminum Corp. of China /quotes/comstock/28c!e:601600 (CN:601600 14.44, -0.02, -0.14%) , up 1.6%. 

Chinese stocks open nearly flat on Thu

Chinese stocks opened nearly flat on Thursday morning.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 3,068 points, down 0.06% or 1.91 points from the previous closing.

The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 0.17% or 21.75 points lower at 12,670.97 points.

China's retail sales up 15.1% in Jan¬-Sep (22 Oct) 

China's value-added industrial output up 8.7% in Jan-Sep (22 Oct) 

China's PPI down 6.5% in Jan-Sep (22 Oct) 

China's CPI down 1.1% in Jan-Sep (22 Oct) 

China's GDP up 7.7% in Jan-Sep (22 Oct) 

New World Dev't to redevelop flagship commercial complex in HK (22 Oct) 

Capital Group raises stake in China Shenhua Energy (22 Oct) 

UBS raises stake in Sino Prosper to 5.59% (22 Oct) 

Jingtou Yintai to raise RMB 1.43 bln for Changsha project (22 Oct) 

Yahoo not to sell assets in Yahoo Japan, Alibaba.com: CFO (22 Oct) 

FMR raises stake in Sino Gold to 5.14% (22 Oct) 

Yum Brands to raise stake in Little Sheep (22 Oct) 

Chinese stocks open nearly flat on Thu (22 Oct) 

CNOOC receives 1st LNG delivery from Qatar (22 Oct) 

VisionChina Media renews 3-year contract with Hangzhou (22 Oct) 

JPMorgan cuts shareholding in Air China to 4.92% (22 Oct) 

BOC Int'l launches private bank in HK (22 Oct) 

SOHO China's Sanlitun project reaps RMB 6.74 bln as of Oct 19 (22 Oct) 

BOE starts construction of 8G TFT-LCD plant in Beijing (22 Oct) 

Intel adds US$75 mln to Chengdu plant (22 Oct)  
 
INVESTMENT VIEW
Ruchi Soya-Agri Wildcard
  
 Ruchi Soya's numbers for the quarter Q1FY10 were significantly ahead of estimates with revenues growing 11% at Rs31bn, EBITDA growth of 8% at Rs1.17bn and PAT growth of 18% at Rs502m.

The surprise were the EBITDA margins at 3.8% (at the same levels of Q1FY09, albeit lower edible oil prices) driven by stable edible oil price movement and partly on account of

opportunistic trading activities.

While manufacturing business accounted for just 60% of the revenues (90% of the revenues in Q1FY09), revenues from trading activities have increased from 10% of the revenues to 40% of the revenues (4x increase in trading activities).

Though edible oil prices continue to remained lower by 25% on yoy basis, prices were higher by 20-25% on qoq basis and more importantly the prices are trending upward.

With limited soya availability during the quarter, favourable parity for imported palm oil and upward moving price trend favourable for trading operations, there is substantial change in composition of sales in favour of palm oil refining and trading.

Edible oil portfolio during the quarter grew by 44% at Rs25.5bn, whereas vanaspati revenues were down by 25% at Rs2.2bn and seed extraction revenues are down by 57% at Rs2.4bn.

Higher refining capacity utilization (90%+) and favourable price movement has resulted in EBIT margin expansion of 28bp at 3.12% (245bp improvement on qoq basis).

While parity continues to be unfavourable in seed extraction business (margin erosion of 140bp at 4%), stable seed prices and increasing soya prices during the quarter have helped seed extraction business come back in positive zone (EBIT loss of Rs92m in Q4FY09).

In anticipation of increase in customs duty during Union Budget, edible oil players had increased palm oil inventory. However, as the customs duty remained unchanged, there is correction in edible oil prices since then – 10% since June 2009 and ~20% since May 2009.

The stock remains a wildcard, despite it's dramatic run-up in the summers.

(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