Market Outlook 27th Oct 2009

INTRADAY calls for 27th Oct 2009
Because of the Global cues, expected some GAP down in market above
20-30 points in NIFTY, So avoid immediate buying.  Better to wait and
watch.  Small traders should avoid today's trading.

+ve Script & Sector : SUGAR Birlacorp
BUY CIPLA-296 @ 290 for 296-300+ with sl 286
BUY HDFC-2773 @ 2755 for 2780-2800+ with sl 2740
SHORT YesBank-247 for 241-236+ with sl 251

SHORT PNB-846 for 836-827+ with sl 851
SHORT Sesagoa-315 for 306-298+ with sl 320
SHORT DLF-429 for 417-409+ with sl  438

 

 NIFTY FUTURES (F & O):
 
Below 4963-4965 zone, selling may continue up to 4955 level and thereafter slide may continue up to 4934-4936 zone by non-stop.

Hurdles at 4988 & 4994 levels. Above these levels, expect short covering up to 5024-5026 zone and thereafter expect a jump up to 5053-5055 zone by non-stop.

Sell if touches 5063-5065 zone. Stop Loss at 5092-5094 zone.

On Negative Side, break below 4924-4926 zone can create panic up to 4895-4897 zone by non-stop. If breaks & sustains this zone then downtrend may continue.
 
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. Selling should continue. 
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. 3 closes below 16613.22 level, it can tumble up to 16083.92 level by non-stop.

 

POSITONAL BUY:
Buy INDO AMINES (BSE Cash & BSE Code:524648) 
Buy with a Stop Loss of 15.24. Above 17.54, it will zoom.

Today: May hold on gains.

1 Week: Bullish, as per current market conditions.

1 Month: Bearish, surprisingly going up.

3 Months: Bullish, as per current market conditions.

1 Year: Bullish, as per current market conditions.
 
Buy BELL CERAMICS (BSE Cash & BSE Code:515035) 
Buy with a Stop Loss of 8.06. Above 10.38, it will zoom.

Today: May hold on gains.

1 Week: Bearish, surprisingly going up.

1 Month: Bearish, surprisingly going up.

3 Months: Bearish, surprisingly going up.

1 Year: Bullish, as per current market conditions.
 
 
Global Cues & Rupee 
 The Dow Jones Industrial Average closed at 9,867.96. Down by 104.22 points.
The Broader S&P 500 closed at 1,066.95. Down by 12.65 points.

The Nasdaq Composite Index closed at 2,141.85. Down by 12.62 points.

The partially convertible rupee INR=IN ended at 46.645/655 per dollar on yesterday, below Friday's close of 46.50/51.
 

 

Strong & Weak  futures

This is list of 10 strong futures:

Bajaj Hind, Yes Bank, Balrampur Chini, Asian Paints, Indusind Bank, Colpal, Andhra Bank, Dabur, Hind Zinc & Allahabad Bank.  

And this is list of 10 Weak futures:

Punj Lloyd, Idea, RCom, Aban Off shore, Grasim, Unitech, JP Hydro, Bharti Airtel, Suzlon & Hind Petro.

Nifty is in Up trend

 

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	26-Oct-2009	2108.28	2111.02	-2.74

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	26-Oct-2009	1381.17	1552.33	-171.16

 

SPOT LEVELS

	4970.90	( -0.52 %)	-26.15
		1	2	3
Resistance		5015.98	5061.07	5088.38
Support		4943.58	4916.27	4871.18

	16740.50		( -0.42 %)	-70.31
			1	2	3
Resistance			16884.23	17027.95	17117.03
Support			16651.43	16562.35	16418.63

 Interesting findings on web:
US sharemarkets fell on Monday, with 27 out of 30 Dow companies led lower by a sell-off of financial stocks.

U.S. stocks fell for a second straight session on Monday as investors ditched home builders and financials on fears lawmakers may let a federal home buyer tax credit expire, while commodity shares succumbed to pressure from the higher U.S. dollar.

Stocks initially started on firmer footing, with indexes up more than 1 percent shortly after the open, but the bounce quickly faded as the U.S. dollar rebounded and investors fretted about the financial sector's prospects.

The tax credit has become a hot button issue and Wall Street sold off after an incorrect media headline said research firm, ISI Group, had written the tax credit probably would not be extended when it expires Nov. 30.

The research report, however, was similar to news on Friday that Senator Majority Leader Harry Reid wanted to phase out the tax credit over time, and not let it expire. Reid said on Monday the Senate could vote as soon as Tuesday to extend the tax break.

"It's a tough sell now to Congress to say we need another extension of the home buyer tax credit when supposedly we are out of the recession, according to economists, and housing is doing well again," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. "If they are talking more of a phase-out than an extension, that certainly will hurt the market."

Without the home buyer credit, investors worry that the struggling housing market might lose a crucial incentive that has spurred hopes of stabilization in recent months.

The Dow Jones industrial average fell 104.22, or 1.1 percent, to 9,867.96.

The Standard & Poor's 500 index fell 12.65, or 1.2 percent, to 1,066.95.

The Nasdaq composite index fell 12.62, or 0.6 percent, to 2,141.85.

RUSSELL593.68-7.18-1.19%

TRAN3773.4-31.55-0.83%

UTIL372.71-4.72-1.25%

S&P 100494.21-5.79-1.16%

S&P 400693.57-7.76-1.11%

NYSE6960.09-106.71-1.51%

NAS 1001746.75-6.88 

For the year:

The Dow is up 1,091.57, or 12.4 percent.

The S&P is up 163.70, or 18.1 percent.

The Nasdaq is up 564.82, or 35.8 percent.

U.S. stocks slid, erasing an early rally, on concern lawmakers will phase out a tax credit for homebuyers and Bank of America Corp. will have to sell shares to pay back its government bailout. The dollar rebounded from a 14- month low against the euro and oil wiped out an early advance.

All 12 shares in a gauge of homebuilders dropped as senators discussed reducing an $8,000 tax credit for first-time buyers. Bank of America sank 5.1 percent on speculation the government will force the bank to raise more capital, while Fifth Third Bancorp, SunTrust Banks Inc. and U.S. Bancorp lost at least 3.2 percent on downgrades from analyst Dick Bove. Treasuries fell, with 10-year yields touching a two-month high.

The U.S. dollar rallied from a 14-month low against the euro as falling stock and commodity prices dampened risk appetite, prompting investors to lock in recent gains in other currencies.

"Plenty of news for traders to sell on," said James Paulsen, who helps oversee $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. "We've still got a rise in loan losses. Some banks will probably have to raise further capital. And on the tax-credit front, we already know we won't have that forever. But after a nice stock market run, a lot of players wanted to have a pause."

Robert Doll, chief investment officer of equities at BlackRock Inc., said in an interview with CNBC that he expects some "digestion" in the market after recent gains. He also suggested health-care stocks may be a "defensive" strategy for investors, particularly those in oil services.

"We've already had a good move," said Richard Sichel, chief investment of officer at Philadelphia Trust Co. in Philadelphia, which manages $1.3 billion. "Some investors are taking a wait-and-see attitude. Certain companies have been richly rewarded as corporate earnings beat expectations."

The S&P 500 is about 40 percent overvalued and headed for a decline as central banks pull back on securities purchases that pushed up asset prices, according to economist Andrew Smithers. Asset purchases have doubled the size of the Federal Reserve's balance sheet to $2.1 trillion since the start of the current financial crisis.

In his March 2000 book "Valuing Wall Street," co-authored with economist Stephen Wright, Smithers argued that U.S. equities were overvalued and should be sold. The S&P 500 then plunged 49 percent over 2 1/2 years.

"We've seen the bottom in terms of prices with respect to stocks," Brian G. Belski, chief investment strategist at Oppenheimer & Co. Inc, told Bloomberg Television. "We've seen it in earnings and now the economy will turn as a result."

Some encouraging news on the economic front: A new survey by the National Association for Business Economics showed U.S. companies expect to hire more people and invest more during the next six months — the most optimistic NABE survey in a year.

Later this week, we'll get the first look at third-quarter GDP — economists expect to see the e economy grew 3.3 percent.

"The market got a little overextended through mid-month and some people are waiting for an opportunity to jump back in," Campagna said. "Meanwhile, the short-term guys want to cash out, so you're seeing some weakness.

Just shy of 140 components of the S&P 500 are due to report quarterly results this week. With 206 companies, or 41% of the S&P 500 having already reported, profits are currently on track to have fallen 18.3% from a year ago, according to Thomson Reuters.

So far, results have been soundly above forecasts, with 81% of companies topping expectations, 7% meeting and 12% missing.

The three biggest percentage decliners on the Dow were Bank of America, Alcoa and Boeing.

JPMorgan (JPM.N), down 3.1 percent at $43.82, was among the top drags, along with Bank of America (BAC.N), down 5.1 percent at $15.40. The S&P financial index .GSPF slipped 2.5 percent, while the Dow Jones U.S. home construction index .DJUSHB declined 3.4 percent.

U.S.-traded shares of ING [ING  14.14    -3.23  (-18.6%)   ] tumbled 19 percent following news that the Dutch financial giant will split in two. The move will strip the company of much of its global profile and return it to its roots of being a small European lender. As part of the split, ING will have to sell its U.S. online-banking unit, ING Direct. This is the latest example of sweeping change imposed on firms that took government bailout money. 

Analysts said the ING news raised concern that similar measures may be imposed on U.S. banks that accepted bailout funds.

Financials also came under pressure from the news that Dutch banking, insurance and asset management company ING (ING.AS)(ING.N) will split in two as part of a plan to pay back government bailout funds and return to its retail savings bank roots.

That plan might set a precedent for some of the U.S. institutions that received federal government bailout funds, said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.

"If the banks are going to focus on mainly repaying the government, they are not going to lend, they are going to cut back on mortgages, and make it even stricter to get a mortgage," he said. "It's the domino effect and that hurts the home builders."

Banks fell 3.3 percent collectively, the steepest decline in the S&P 500 among 24 industries, after Bove downgraded Fifth Third Bancorp, SunTrust and U.S. Bancorp on concern loan losses will remain high.

Fifth Third, Ohio's largest lender, retreated 7.9 percent to $9.52. SunTrust, the seventh-largest U.S. bank, lost 5.4 percent to $19.85, while Minneapolis-based U.S. Bancorp dropped 3.2 percent to $24.15.

"The government apparently wants the bank to raise $45 billion in the market from a new capital offering before it will let the bank redeem the TARP preferreds," Bove wrote in a note dated Oct. 23, referring to the preferred stock purchased by the government as part of the Troubled Asset Relief Program. "Selling more stock would meaningfully harm Bank of America's shareholders. If the bank did what the government wants it would have to sell 3 billion shares or increase its share base by 35 percent."

Bank of America pared an earlier slide of as much as 7.1 percent after Citigroup Inc. added the stock to its "top picks" list, saying it is "very attractive" after the sell- off.

Federal Deposit Insurance Corp. Chairman Sheila Bair said that banks continue to face "serious challenges." Bair also said tapping a Treasury Department credit line to replenish funds depleted by a surge of bank failures would harm her agency and the banking industry. She made the comments today during a speech at an American Bankers Association convention in Chicago.

A gauge of 12 homebuilders in S&P indexes slumped 3.4 percent, led by declines of at least 3.8 percent in Pulte Homes Inc. and D.R. Horton Inc. Senate leaders are negotiating to extend and gradually reduce the housing tax credit through 2010, Senator Bill Nelson said. The credit was set to expire at the end of November.

"The phase out is worse than a straight extension and probably worse for housing than the consensus," ISI Group Inc. analysts said in a note.

Among home builders' shares, luxury home builder Toll Brothers (TOL.N) slumped 4.2 percent to $18.36 and those of No. 3 U.S. homebuilder Lennar Corp (LEN.N) shed 4 percent to $13.57. Beazer Home (BZH.N), the ninth-largest U.S. home builder, declined 4.4 percent to $4.83.

The news also took a toll on homebuilders: Hovnanian [HOV  4.08    -0.22  (-5.12%)   ] lost more than 5 percent.

The dollar's rise pressured commodity prices, which hurt shares of natural resource companies. Chevron Corp (CVX.N), due to post quarterly results this week, ended down 1.6 percent at $75.45.

On the bright side, RadioShack Corp (RSH.N) soared to a 13-month high after the electronics chain reported quarterly revenue above Wall Street's forecasts. The stock shot up 15.9 percent to $18.15.

Monsanto Co. fell 6 percent to $70.69, its biggest drop since May. Goldman Sachs Group Inc. lowered its earnings estimates for the world's largest seed producer, citing company discounts on corn-seed prices.

Producers of raw materials and energy dropped 2.5 percent and 1.5 percent, respectively, after the dollar rose, curbing demand from investors who buy commodities as a hedge against inflation. Copper prices retreated from the highest level in almost 13 months, while crude oil dropped 2.3 percent, the most in a month, to below $79 a barrel. Gold fell after gaining for four straight weeks.

Newmont Mining Corp., the largest U.S. gold producer, dropped 3.5 percent to $43.34. Freeport-McMoRan Copper & Gold Inc., the world's largest publicly traded copper producer, declined 2.3 percent to $79.48. ConocoPhillips, the second- largest U.S. refiner, lost 2.4 percent to $50.74.

Shares of Entergy Corp., Hornbeck Offshore Services, McMoRan Exploration Co. and Superior Energy ended the day lower. Shares of Gulf Island Fabrication and Pool Corp. climbed.

Newspaper shares slumped after the Audit Bureau of Circulations said that four of the top five U.S. newspapers, including the New York Times, the Washington Post and Gannett Co.'s USA Today, posted average weekday circulation declines. The Wall Street Journal's circulation rose.

Among the few gainers on the Dow were Microsoft [MSFT  28.70    0.68  (+2.43%)   ], which rose after a slew of analyst upgrades, American Express [AXP  34.88    0.30  (+0.87%)   ] and Intel [INTC  19.83    0.05  (+0.25%)   ].

RadioShack shares [RSH  18.19    2.53  (+16.16%)   ] shot up 16 percent after the electronics retailer, which has struggled in recent years, beat revenue expectations as its push into the cell-phone market paid off.

Caterpillar [CAT  57.08    -0.52  (-0.9%)   ] announced plans to rehire more than 500 laid off employees by the end of the year. Still, shares fell 0.9 percent.

Verizon [VZ  28.66    -0.19  (-0.66%)   ] narrowly beat earnings estimates and added more subscribers than analysts had expected. Its shares skidded 0.7 percent.

Corning [GLW  15.50    -0.15  (-0.96%)   ] beat earnings expectations and forecast 15 percent growth in the market for glass for flat-screen TVs. Its shares dropped 0.9 percent.

Novatel Wireless [NVTL  12.36    1.27  (+11.45%)   ] shares jumped 12 percent after Barron's said the stock could move toward $20 due to sales from a new Wi-Fi network device.

Terradata [TDC  28.99    0.66  (+2.33%)   ] shares gained 2.3 percent after Barron's said the company could hit $52 if revenue growth hits expectations.

Capmark Financial, one of the country's largest commercial real estate lenders, filed for bankruptcy protection Sunday, reflecting the major problems in the business property sector.

The CBOE Volatility Index .VIX ended up 9.2 percent, its biggest one-day percentage gain in a month. During the session, the VIX rose as much as 11.6 percent, which marked its biggest intraday percentage jump in nearly two months.

Oil,Gold & Currencies:

U.S. light crude oil for December delivery fell $1.82 to settle at $78.68 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery fell $13.60 to settle at $1,042.80 an ounce.

The dollar gained versus the euro, after falling to a 14-month low last week. The dollar gained versus the yen as well.

The dollar traded near a one-week high versus the euro on concern U.S. bank losses will derail the global economic recovery, sapping demand for high-yield assets.

The dollar rose against 11 of its 16 major counterparts on speculation U.S. lawmakers will phase out a tax credit for homebuyers and Bank of America Corp. will sell shares to pay back its government bailout. New Zealand's dollar fell for a fourth day after Prime Minister John Key said the kiwi's gains were damping inflation concerns, backing expectations the Reserve Bank of New Zealand will hold off raising interest rates.

"There are lingering downside risks to the U.S. housing sector and banking industry," said Mitsuru Saito, chief economist in Tokyo at Tokai Tokyo Securities Co. "We may need to carefully reassess the sustainability of a rally in risk assets funded by the dollar."

The dollar traded at $1.4868 per euro at 11:02 a.m. in Tokyo from $1.4876 yesterday in New York. The greenback reached $1.5063 yesterday, the weakest level since August 2008. The dollar was at 92.02 yen from 92.19 yen yesterday, after earlier today reaching 92.32 yen, the strongest level since Sept. 21. The euro was at 136.84 yen from 137.10 yen.

New Zealand's dollar fetched 74.65 U.S. cents from 74.77 in New York yesterday when it dropped as low as 74.53, the least since Oct. 20.

The Nikkei 225 Stock Average fell 1.3 percent and the MSCI Asia Pacific Index of regional shares declined 1.2 percent today. The Standard & Poor's 500 Index slid 1.2 percent in New York yesterday.

Stocks Tumble

U.S. stocks fell after Senator Bill Nelson said senate leaders are negotiating to extend and gradually reduce the housing tax credit through 2010. The credit was set to expire at the end of November.

Bank shares fell 3.3 percent collectively, the steepest decline in the S&P 500 among 24 industries, after Rochdale Securities LLC　analyst Dick Bove downgraded Fifth Third Bancorp, SunTrust Banks Inc. and U.S. Bancorp on concern loan losses will remain high.

Federal Deposit Insurance Corp. Chairman Sheila Bair said yesterday that banks continue to face "serious challenges."

Bair also said tapping a Treasury Department credit line to replenish funds depleted by a surge of bank failures would harm her agency and the banking industry. She made the comments yesterday in a speech at an American Bankers Association convention in Chicago.

Exporter Selling

The yen rose against all 16 most-active currencies on speculation Japanese companies are bringing back earnings on overseas assets before the end of the month.

Large Japanese manufacturers expected the yen to average 94.50 per dollar in the 12 months to March 2010, according to the Bank of Japan's quarterly Tankan survey released Oct. 1. The forecast in the previous report was for a rate of 94.85.

"There's talk that exporters are buying the yen," said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. "This is causing the dollar-yen to dip."

Toyota Motor Corp. and Honda Motor Co., Japan's two biggest automakers, may increase overseas production as a stronger yen makes exports less competitive. Japanese carmakers have lost U.S. market share to Korea's Hyundai Motor Co. after the yen rose to a 13-year high against the dollar in January.

"We must think about producing overseas what is now being produced in Japan,'" Toyota's Executive Vice President Takeshi Uchiyamada said at the Tokyo Motor Show yesterday. The yen may "have a big impact on Japanese production," Honda's President Takanobu Ito said.

Fed's Policy

The dollar earlier traded near a five-week high against the yen after the Wall Street Journal this week said Fed officials are likely to discuss next week how and when to signal the possibility of higher U.S. rates.

At the previous meeting on Sept. 23, the Fed's policy making Open Market Committee agreed to keep the benchmark rate in a range of zero to 0.25 percent. In a statement following the gathering they said economic conditions will warrant keeping the rate low "for an extended period."

"Yields in the U.S., particularly in the long end, are rising as the Wall Street Journal reported the Fed may change the 'for an extended period' phrase in the statement at the November meeting," said Yuji Saito, head of the foreign- exchange group in Tokyo at Societe Generale SA, France's third- largest bank. "This is being perceived as the first step toward an exit strategy, and is likely to lead to dollar-buying."

Yields Rise

Fed policy makers are contemplating the best way to let the market know that a period of record-low rates will draw to an end, the Wall Street Journal said on Oct. 24, without naming a source. The issue may be "on the table" when the Federal Open Market Committee meets Nov. 3-4.

The yield on the 10-year Treasury note increased eight basis points, or 0.08 percentage point, to 3.57 percent in New York yesterday, according to BGCantor Market Data. The yield touched 3.58 percent, the highest level since Aug. 24.

Federal Reserve will raise the policy rate by to 0.5 percentage points in the second quarter 2010, while the Bank of Japan is forecast to maintain interest rates on hold at least until the first quarter 2011, according to a Bloomberg News survey of economists.

Kiwi Falls

New Zealand's dollar, known as the kiwi, fell to the lowest level in almost one week against the U.S. dollar after Prime Minister Key said the very high exchange rate is "helping offset any imported inflation concerns."

"I would personally be surprised if they raise rates in 2009," Key said.

The New Zealand dollar rose to a 15-month high of 76.35 U.S. cents last week.

The Reserve Bank of New Zealand, which acts independently of the government, will announce its next rates decision on Oct. 29. Consumer prices rose 1.3 percent in the third quarter, within the bank's 1 percent to 3 percent targeted band. Key, a former foreign exchange trader with Merrill Lynch & Co., said the country's base rate is already "well above" most of its trading partners.

"People will be a little wary of the RBNZ on Thursday and just how excited interest-rate markets have become about the prospects for an early RBNZ tightening," said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. "The New Zealand dollar is being sold on higher risk aversion and a broadly stronger U.S. dollar."

Benchmark interest rates are 2.5 percent in New Zealand and 3.25 percent in Australia, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations' higher-yielding assets and driving up their currencies.

Bonds:

Treasury prices tumbled, raising the yield on the 10-year note to 3.54% from 3.48% late Friday. Treasury prices and yields move in opposite directions.

What to expect:

TUESDAY: Case-Shiller home-price index; Conference Board consumer confidence; Ruth Madoff hearing; Earnings from BP, Visa and US Steel

WEDNESDAY: Weekly mortgage applications; durable-goods orders; new-home sales; weekly crude inventories; executive-compensation hearing; Earnings from ConocoPhillips, GlaxoSmithKline and General Dynamics

THURSDAY: 80th anniversary of 1929 market crash; Weekly jobless claims; first look at Q3 GDP; Larry Summers speaks in NYC; Earnings from AstraZeneca, ExxonMobil, P&G, Aetna, Kellogg, Motorola and Sprint Nextel

FRIDAY: Personal income and spending; consumer sentiment; Earnings from Chevron

Senate May Vote to Extend Tax Credit for Home Buyers

Senate's Health-Care Bill To Include Public Option: Reid

Australia Business Confidence Jumps in Third Quarter

Obama tells troops he will not rush Afghan decision

Iran hints at acceptance of atom deal with powers

Chinese military backs closer U.S. ties

Blaming Israel, Palestinians say no talks soon

Karzai dismisses election rival's ultimatum

Sri Lanka to Probe Rights Abuses Against Tamils in Last Weeks of Civil War

US Data Show Recession Ending, But Recovery Patchy

Regional economic reports on Monday suggested the U.S economy has clambered back to levels associated with the end of recession, but recovery will be patchy and may prove fleeting.

Economic activity and manufacturing data for the U.S. Mid West and Texas hinted the impact of the global financial crisis is slowly abating as the economy emerges from the longest recession in 70 years. 

However, an index of national economic activity slipped on a monthly basis and a Texas manufacturing output index fell.

"Those kind of reports tend to support the argument that this recovery will be more uneven and less V-shaped, but with the caveat that these are somewhat narrow regional surveys," said Kevin Flanagan, fixed-income strategist for global wealth management with Morgan Stanley in Purchase, New York.

The indices preceded gross domestic product results on Thursday, the broadest measure of economic health, likely to confirm widely-held views the United States returned to growth in the third quarter. The data is a key focus in markets.

"This week, the most important report is Thursday's GDP release...which is expected to show one of the more robust readings we have seen in the last fewyears and will give rise to the notion statistically speaking that the Great Recession has ended," Flanagan said.

According to the median forecast of economists polled by Reuters, the U.S. economy grew 3.3 percent in the third quarter after shrinking 0.7 percent in the second quarter.

Market participants will also be watching to see if the Federal Reserve changes its language on quantitative easing measures and future interest rate decisions in response to the shifting economic conditions at the central bank's two day, Nov 3-4 policy-setting meeting next week.

Monday's Chicago Federal Reserve report showed its three month moving average of economic activity has neared levels seen at the end of previous recessions.

The average, which smooths out monthly volatility, firmed to minus 0.63 in September from August's revised figure of minus 0.96, previously reported at minus 1.09.

The Chicago Fed said in the past four recessions, the three-month average's rise back above minus 0.70 has coincided closely with the end of the recession.

Yet other data showed the manufacturing rebound is patchy and uneven.

The Chicago Fed said its Midwest Manufacturing Index rose in September, as auto sector production rebounded.

However, vehicle making may decline as the effect of the government's recently ended "cash-for-clunkers" buying incentive program fades, some analysts expect.

The index rose to a seasonally adjusted 82.3 in September from a revised 81.6 in August. However, compared with a year earlier, Midwest output was down 15.7 percent, steeper than the 7.2-percent national decline.

The Dallas Federal Reserve's Texas manufacturing output index fell to a reading of minus 8.0 in October from minus 0.5 in September.

Some more indications that the housing market may be temporarily forming a bottom are expected on Tuesday, with the release of Case/Shiller home price data. However, economists worry that a tax incentive for first-time home buyers has been a major factor spurring sales and that its expiry next month may lead to a second leg down in housing's more than three year decline.

Credit Markets to Suffer if Fed Ends Programs: PIMCO's Gross

Bill Gross, the influential manager who runs top bond fund PIMCO, warned on Monday that the prospect of an end to the Federal Reserve's debt buyback programs could add selling pressure to several credit markets, including U.S. Treasuries.

Asked about the risk that a recovering U.S. economy hurts Treasury investors, he said "there's not a heightened sense of concern, but there is some concern."

"It's obvious that the programs in the United States, the Federal Reserve buyback programs ... those purchases and that purchasing power will cease within the next three to four months," Gross told CBC News Network.

"So, to the extent that that's gone, then perhaps the upward influence in terms of those longer-term Treasuries will be felt more strongly in the next several quarters."

Gross, co-chief investment officer of Pacific Investment Management Co., also said a primary thesis at the firm is that emerging economies will grow faster than the United States.

"The emerging world, whether it's in Asia, Australia or other associated countries, will do much better from the standpoint of growth, and that's where money should eventually move to. It moves there because of higher profits and it moves there actually because of higher real interest rates," he said.

"The real interest rate in Brazil is 7 or 8 percent as opposed to zero to 1 pct here in the United States, so capital should migrate to emerging and high growth portions of the world and that's one of the ways that investors make money."

The high-profile bond fund manager also said he saw little threat of inflation in the United States, given the fallout of the global financial crisis.

"There's substantial excess capacity not just in terms of production but certainly in terms of employment," he said.

"That excess capacity will reduce the potential for inflation. We see inflation at zero to 1 percent for a number of years going forward."

PIMCO, a unit of German insurer Allianz, had $841.8 billion in assets under management as of June 30.

Asia:

Asian stocks declined, led by financial and commodity companies, as Hong Kong enacted measures to curtail property speculation and raw-material prices slumped.

Sun Hung Kai Properties Ltd. sank 3.4 percent in Hong Kong after the city tightened down-payment requirements for luxury homes. Mitsubishi Corp., a trading company that gets 39 percent of its sales from commodities, slumped 4.7 percent. LG Innotek Co., a maker of mobile-phone components, lost 8 percent in Seoul after Credit Suisse Group AG downgraded the stock.

The MSCI Asia Pacific Index dropped 1.5 percent to 118.01 as of 11:56 a.m. in Tokyo, set for the biggest slump since Oct. 2. The gauge has climbed 67 percent from a five-year low on March 9 amid signs the global economy is bouncing back from its worst slump since World War II.

"There is doubt as to whether the current outlook for profit growth next year can justify current valuations," said Hideo Arimura, a senior fund manager at Mizuho Asset Management Co., which oversees the equivalent of $35 billion in Tokyo.

Japan's Nikkei 225 Stock Average declined 1.5 percent. Consumer lenders Aiful Corp. and Promise Co. lost more than 5 percent after an industry group said about 50 percent of customers may be rejected for additional loans.

Australia's S&P/ASX 200 Index declined 1.2 percent. James Hardie Industries NV, the No. 1 seller of home siding in the U.S., fell 4 percent as U.S. senators discussed cutting a tax credit for homebuyers. The Kospi Index lost 1 percent in Seoul.

Hong Kong Property

Futures on the Standard & Poor's 500 Index lost 0.2 percent. The U.S. gauge declined 1.2 percent yesterday, led by financial companies after Richard Bove, a Rochdale Securities LLC analyst, said the government will force Bank of America to raise more capital before repaying the Troubled Asset Relief Program.

Sun Hung Kai Properties, Hong Kong's No. 1 property developer by market value, dropped 3.4 percent to HK$118.20. Cheung Kong (Holdings) Ltd., the second biggest, slid 2.8 percent to HK$102.60.

Down payments for homes priced above HK$20 million ($2.58 million) will be raised to 40 percent from 30 percent, Hong Kong Monetary Authority Chief Executive Norman Chan said.

Mitsubishi, Japan's biggest trading house, dropped 4.7 percent to 1,977 yen. Woodside Petroleum Ltd. retreated 2.5 percent to A$49.57 in Sydney. BHP Billiton Ltd., the world's biggest mining company, fell 1.8 percent to A$39.02.

Oil, Copper

Crude oil for December delivery lost 2.3 percent to $78.68 a barrel in New York yesterday, the biggest drop since Sept. 24. Copper futures fell 0.8 percent, declining from the highest level in almost 13 months.

LG Innotek dropped 8 percent to 115,500 won, set for the lowest close in three weeks. Credit Suisse cut its rating on the stock to "underperform" from "neutral."

The MSCI Asia Pacific Index has risen 32 percent this year, set for the biggest annual gain since 2003. Stocks in the benchmark are valued at 23 times estimated earnings for this year, higher than 17 times for the S&P 500 and 15 times for Europe's Dow Jones Stoxx 600 Index, according to Bloomberg data.

Japanese consumer lenders fell after the Japan Financial Services Association said yesterday that half of the companies' borrowers may be rejected for additional loans as new regulations providing a ceiling on loans are implemented.

Aiful declined 6.3 percent to 134 yen in Tokyo, while rival Promise slipped 5.8 percent to 580 yen. Acom Co. slid 7.7 percent to 1,183 yen, adding to yesterday's 4 percent drop, after the company said on Oct. 23 that first-half earnings were 85 percent lower than its forecast.

James Hardie retreated 4 percent to A$7.02 in Sydney, set for the steepest drop in three weeks. Shares of U.S. homebuilders slumped yesterday as senate leaders negotiated to extend and gradually reduce the housing tax credit through 2010.

Nikkei 225 10,210.85     -151.77 ( - 1.46%). (08.31 AM IST).

HSI 22222.79 -366.94 -1.62% . (08.32 AM IST)

SSE Composite 3109.57 3065.16 3086.09 3050.29 -1.43. (08.33 AM IST).

Singapore, Hong Kong Aim to Succeed Where Bernanke Failed on Asset Bubbles

Takenaka Says Hatoyama's Government Is Pushing Japan's Economy `Backwards' 

PetroChina's Ningbo Daxie oil dock goes into operation (27 Oct) 

China's copper concentrate imports surge 22% in Sep (27 Oct) 

COFCO Group to issue RMB 5 bln in bills on Nov 2 (27 Oct) 

CIC agrees to invest US$500 mln in SouthGobi (27 Oct) 

Chinese stocks open 0.76% lower on Tue (27 Oct) 

China Mobile launches 1st Chinese telecom charity (27 Oct) 

Baidu Q3 net income up 41.7% (27 Oct) 

China Shenhua Energy forecasts 18% net profit growth for 2009 (27 Oct

U.S. automaker GM gets federal grant to convert engine heat
 

INVESTMENT VIEW
Sugar: Getting Sweeter

Indian state enables off-season refining of raws
 
 
 
* Allows mills to build coal-fired power plants
* Enables mills to operate even after crushing season

* Policy to help improve sugar supplies in the country

India's top cane-growing state of Uttar Pradesh has approved a new policy that will help mills build coal-fired power plants and process raw sugar even after the crushing season ends. This will improve the profitability of mills and boost supplies in the world's top consumer of sugar, which imported 5 million tonnes in 2008/09 after exporting a similar amount the previous year. It is expected to import more in the new season.

Mills in the state operate only in the November-March crushing season using power generated from bagasse, the residue after juice is extracted from cane.

Sugar mills in the power-starved state do not process raw sugar after March as power supply from the state grid is costly. The policy permits new coal-fired plants to be attached to mills and sell half the power produced during the lean season privately.

 

Setting up a dedicated power station was not viable so far as the cyclical nature of the sugar industry would leave mills with surplus power in some years, which they were not allowed to sell freely. The new policy will increase the viability of mills. Millers welcomed the move, as it will help mills to process raw sugar in the off-season.

 

Industry officials said mills would need at least a few months to fit new equipment in their bagasse-based power plants to be able to use conventional fuels such as coal. Mills will have to upgrade their machinery like boilers and turbines to take up power generation through conventional fuel. But that said, key players in State from Bajaj Hindusthan, Balrarampur, Dhampur, Upper Ganges and Oudh Sugar..all would benefit in the coming years.

(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