Market Outlook for 28th Oct 2009

intraday calls today

BUY WIPRO-605 @ 595 for 609-612+ with sl 590

SHORT BajajHind-211 for 206-204+ with sl 215

 

stocks that are in news today:
-Sesa Goa says not received any communication from SFIO
-Welspun India board approves fund raising up to $50 m
-Birla Cotsyn board approves ADR / GDR / FCCB issue up to $25 million
-Glenmark subsidiary Glenmark Generics launches 4 products in UK
-Sasken to acquire product portfolio of Ingenient Technologies
-GMR Energy drags Ministry of Power, REC, PFC to Delhi HC: PTI
-JK Lakshmi Cement board approves stock split from Rs 10 to Rs 5
-Lanco Infratech board approves stock split from Rs 10 to Re 1
-Kingfisher comes out of NSE F&O curb
-Ex-dividend: TCS @ Rs 2
-Board meets: Walchandnagar Industries on QIP issue

 

Strong & Weak  futures  

This is list of 10 strong futures:

Balrampur Chini, OFSS, Asian Paints, Mphasis, Dr Reddy, Yes Bank, Tcs, Polaris, Dabur & ITC.

And this is list of 10 Weak futures:

Punj Lloyd, RCom, Idea, Unitech, Bharti Airtel, GTL Infra, TV-18, JP Hydro, Suzlon & Aban Off shore.

Nifty is in Down trend  

 

NIFTY FUTURES:

Above 4879 level, expect short covering up to 4927-4929 zone and thereafter expect a jump up to 4974-4976 zone
by non-stop.

Support at 4839 level. Below this level, selling may continue up to 4828 level by non-stop.

Below 4779-4781 zone, expect panic up to 4731-4733 zone by non-stop.

On Positive Side, cross above 5053-5055 zone can take it up to 5100-5102 zone. Supply expected at around this zone
and have caution.

Short-Term Investors:

Bearish Trend. 3 closes below 5053.80 level, it can tumble up to 4622.20 level by non-stop.

 

NIFTY FUTURES (F & O):  
Sell with a SL of 4918.10. Target at 4789.40. 
Short-Term Investors:
 
1 Week: Bearish with a SL of 4918.10. Target at 4671.20.
1 Month: Bearish with a SL of 6289.00. Target at 4620.00.

3 Months: Bearish with a SL of 5080.00. Target at 2951.00.

1 Year: Bullish with a SL of 2575.00. Target at 6201.65.
 
BSE SENSEX:  
Sell with a SL of 16613.22. Target at 16023.98. 

Short-Term Investors:  
1 Week: Bearish with a SL of 16606.95. Target at 15720.73.
1 Month: Bearish with a SL of 18381.96. Target at 14937.03.

3 Months: Bearish with a SL of 17361.47. Target at 12425.52.

1 Year: Bullish with a SL of 15197.60. Target at 18289.88.
 

 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	27-Oct-2009	3372.85	3921.62	-548.77

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	27-Oct-2009	2122.23	1980.67	141.56

 

SPOT LEVELS

	4846.70	( -2.50 %)	-124.20
		1	2	3
Resistance		4935.00	5023.30	5076.05
Support		4793.95	4741.20	4652.90

	16353.40		( -2.31 %)	-387.10
			1	2	3
Resistance			16597.83	16842.25	16985.42
Support			16210.24	16067.07	15822.65

INVESTMENT BUY:
Buy LOTUS CHOCOLATE (BSE Cash & BSE Code:523475) 
Buy with a Stop Loss of 26.10. Above 36.30, 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.
 
Buy INDO AMINES (BSE Cash & BSE Code:524648) 
Buy with a Stop Loss of 16.39. 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.

 

Interesting findings on web:
The Nasdaq slumped and the Dow managed a slim gain Tuesday, as investors weighed a selloff in tech, a rally in energy and a surprise drop in consumer confidence.

Tech weakness drags on Nasdaq, but IBM share buyback saves the Dow.

Most U.S. stocks fell for a third day as stronger-than-forecast demand in a Treasury auction and an unexpected drop in consumer confidence spurred concern investors are questioning the strength of the economic recovery.

The Dow Jones industrial average .DJI gained 14.21 points, or 0.14 percent, to 9,882.17. The Standard & Poor's 500 Index .SPX fell 3.54 points, or 0.33 percent, to 1,063.41. The Nasdaq Composite Index .IXIC declined 25.76 points, or 1.20 percent, to 2,116.09.

RUSSELL586.99-6.69-1.13%

TRAN3704.32-69.08-1.83%

UTIL370.4-2.31-0.62%

S&P 100494.16-0.05-0.01%

S&P 400685.81-7.76-1.12%

NYSE6932.04-28.05-0.4%

NAS 1001722.46-24.29-1.39%

A better-than-expected housing market report and a strong response to the government's latest debt auction were also in the mix.

"In the last few days, the market hasn't been looking very friendly, but the overall picture hasn't changed much," said Will Hepburn, president at Hepburn Capital Management. "The upward momentum is still significant."

Hepburn said that there's still plenty of fuel to keep the advance going. He cited the improving economic and corporate news, the massive amounts of government stimulus and the trillions sitting in money-market funds in cash or low-yielding bonds.

He noted that although the S&P 500 is up 57% from the March bottom, when it hit a 12-year low, the broad average is still down 32% from its all-time high of October 2007.

The stock market has become overheated since rebounding off its March lows and is due for a correction, said David Rosenberg of Gluskin Sheff. Rosenberg used to be the chief economist at Merrill Lynch.

The market "is overvalued by at least 20 percent," Rosenberg said on CNBC this morning. "But it comes down to what your view in corporate earnings (is) going to be. By the time you're up 60 percent from any egregiously oversold low, you've already got the earnings recovery."

Some encouraging news on the housing front: The S&P/Case-Shiller home-price index rose for a fourth straight month, beating expectations. Still, homebuilders didn't get a boost amid worries about waning consumer confidence and as the first-time homebuyers' tax credit hangs in the balance.

"The Treasury auction took some wind off the stock market," said Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York. "It reflects some rising risk aversion and belief the Fed will remain on hold because the economy is still looking very iffy. People are concerned about the sustainability of the economic improvement. The market might be heading for a correction phase."

Jeremy Grantham, the chief investment strategist at Boston- based Grantham Mayo Van Otterloo & Co., said stocks will "drop painfully from current levels" in the coming year amid disappointing economic data and profits as margins shrink. The S&P 500 fell 1.2 percent to 1,066.95 yesterday, higher than Grantham's estimate for its so-called fair value at 860.

Pacific Investment Management Co.'s Bill Gross said the six-month rally in riskier assets is likely at its pinnacle, with U.S. economic growth to lag behind historical averages.

"Investors must recognize that if assets appreciate with nominal gross domestic product, a 4-5 percent return is about all they can expect even with abnormally low policy rates," Gross, a founder and co-chief investment officer of the world's biggest manager of bond funds, wrote on Pimco's Web site. "Rage, rage, against this conclusion if you wish, but the six- month rally in risk assets -- while still continuously supported by Fed and Treasury policy makers -- is likely at its pinnacle."

Trading got started Tuesday with a surprise drop in consumer confidence figures released by the Conference Board. The effects of a "jobless recovery" seemed to be on display: though businesses are rebuilding inventories and investing in the future, unemployment remains at record highs and consumers are afraid to splurge.

Consumer sentiment took a plunge in October, according to a Conference Board report released after the start of trading. The Consumer Confidence index fell to 47.7 in October from a revised 53.4 in September, reflecting the impact of rising joblessness and shrinking household wealth. Economists surveyed by Briefing.com thought the index would rise to 53.5.

The part of the index that measures how consumers rate the present economic situation fell to 20.7 in October from 23 in September. It was the lowest level since February 1983, when it stood at 17.5.

"For this recovery to have sustainability, we need to see a healthy consumer," said Keith Wirtz, chief investment officer at Fifth Third Asset Management Inc., which oversees $18.6 billion in Cincinnati. "Any statistic that is consumer-centric will weigh on the market."

"People want to take some profits. The consumer confidence numbers weren't great," said Stephen Carl, principal and head of U.S. equity trading at The Williams Capital Group LP in New York. "We had a good run with the Dow topping around 10,000 over the last week. Many people feel the market could be overvalued."

With 230 companies, or 46%, of the S&P 500 having already reported results, profits are on track to have fallen 18.1% from a year ago, according to the latest from Thomson Reuters.

Results have largely topped forecasts, with 80% of companies beating earnings' estimates, 6% meeting expectations and 13% missing forecasts.Weakness in banks, techs, retailers and transportation stocks dragged down the Nasdaq and limited the rest of the market from moving much. Cisco (CSCO, Fortune 500), Dell (DELL, Fortune 500), Amazon.com (AMZN, Fortune 500) and Yahoo (YHOO, Fortune 500) were among the Nasdaq's biggest decliners.

A rally in heavily weighted Dow components Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500), DuPont (DD, Fortune 500) and American Express (AXP, Fortune 500) kept the blue-chip measure afloat.

The dollar and commodity prices remained in focus Tuesday. But investors also looked to the economic news ahead of Thursday's highly anticipated gross domestic product report.

Energy was the strongest sector on the day, as investors reacted to a smattering of financial reports and the impact of the U.S. dollar.

European oil behemoth BP (BP) reported weaker quarterly earnings and revenue due to lower oil prices, but the results topped analysts' estimates. BP's U.S.-traded shares rose 4%.

Valero Energy (VLO, Fortune 500), the largest U.S. oil refiner, reported a bigger-than-expected quarterly loss Tuesday, with fuel demand suffering amid the sluggish economy. Shares fell 4.3%.

Nonetheless, a variety of energy stocks rallied, including Dow components Chevron and Exxon Mobil.

Cabot Oil & Gas Corp. gained the most in the S&P 500, adding 9.8 percent to $42.05. The independent oil and gas company was upgraded to "overweight" from "neutral" at JPMorgan Chase & Co. after third-quarter profit topped some analysts' estimates.

Raw commodity prices were higher as well, despite a mixed dollar. Typically a weak dollar boosts dollar-traded commodity prices and a strong dollar pressures prices.

Wal-Mart ( WMT - news - people ) managed to eke out a .1% gain while Target ( TGT - news - people ), Amazon.com ( AMZN - news - people ) and Macy's ( M - news - people ) were all down for the day.

IBM ( IBM - news - people ) rallied, then fell back some, after the tech firm said it would boost share buybacks by $5 billion.

"Buybacks are a sign of strength in corporate balance sheets," said Michael Levine, a money manager at New York-based OppenheimerFunds Inc., which oversees about $165 billion. "It's a good sign. Obviously there are exceptions, but in general, corporate cash flows and balance sheets are in good shape."

Consumer discretionary stocks took a hit from the report: Wynn Resorts, clothing retailer VF Corp. and Starbucks were among the sector's biggest decliners.

Among the biggest decliners on the Nasdaq were Chinese portal Baidu [BIDU  383.66    -49.31  (-11.39%)   ] and Apple [AAPL  197.37    -5.11  (-2.52%)   ] as investors locked in profits — and as Baidu's disappointing outlook weighed on the sector. U.S. rival Google [GOOG  548.29    -5.92  (-1.07%)   ] also declined.

American Express [AXP  35.97    1.09  (+3.13%)   ] was once again the biggest gainer on the Dow, up over 3 percent. The stock is on a tear: It's up over 70 percent from its March low. Last week, the credit-card provider beat earnings expectations, helped by cost-cutting, stabilizing consumer spending and a decline in the percentage of unpaid accounts.

After the bell today, rival Visa [V  73.99    1.21  (+1.66%)   ] also topped forecasts, raised its dividend and announced a stock-buyback plan.

In today's earnings news, TD Ameritrade and US Steel were among companies reporting earnings that beat analyst expectations.

US Steel posted a loss of $2.11 a share that was considerably less than the $2.87 that analysts expected. TD Ameritrade posted a $0.26 profit on record organic growth.

U.S.-traded shares of Honda gained nearly 5 percent after the Japanese auto maker nearly tripled its yearly profit forecast.

Ford [STI  19.19    -0.66  (-3.32%)   ] shares fell nearly 2 percent after UAW workers at its Kansas City assembly plant rejected tentative contract changes designed to bring Ford's costs in line with those at GM and Chrysler.

Alcoa Inc., Walt Disney Co. and Hewlett-Packard Co. lost at least 1.1 percent after the Conference Board's gauge of sentiment trailed estimates and its measure of employment availability slumped to a 26-year low.

Johnson Controls Inc. led a gauge of carmakers and components companies down 2.9 percent for the biggest decline among 24 industries.

The world's largest maker of auto seats reported a 16 percent drop in quarterly revenue in its structural controls unit as construction slowed and owners deferred repairs. The company said 2010 earnings will be $1.35 to $1.45 a share. Analysts surveyed by Bloomberg estimate profit of $1.51 a share on average. Johnson Controls fell 4.8 percent to $25.03.

Limited Brands Inc. led consumer discretionary stocks down 1.7 percent. The owner of the Victoria's Secret chain said it expects percentage declines in sales at store open at least one year will be "in the negative low-to-mid single digits" this month. The company had expected sales to be "roughly flat." Limited Brands slumped 8.1 percent to $17.91.

Verizon Communications Inc. added 2 percent to $29.20. The second-largest U.S. phone company was raised to "outperform" at Wells Fargo & Co., which said "wireline margins troughed in Q3 and should be a driver of upside going forward."

Volatility is also returning to the market: The CBOE volatility index, widely considered the best gauge of fear in the market, ticked higher to near 25.

Oil,Gold & Currencies:

U.S. light crude oil for December delivery rose 87 cents to settle at $79.55 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery fell $7.40 to settle at $1,035.40 an ounce.

The dollar gained versus the euro, after falling to a 14-month low last week. But the greenback fell versus the yen.

The yen gained against major counterparts on speculation the global economic recovery will slow, reducing demand for higher-yielding assets.

The euro fell to a one-week low against the Japanese currency before reports this week forecast to show German consumer prices and unemployment worsened, backing the case for the European Central Bank to keep interest rates low. Australia's dollar dropped versus the yen after a report showed inflation slowed, easing pressure on the central bank to accelerate interest-rate increases.

"As the market shifts attention to the sustainability or the strength of a recovery from a cyclical upturn, the mood of euphoria may wane," said Masahide Tanaka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan's second- largest bank.

The yen rose to 135.47 per euro as of 11:27 a.m. in Tokyo from 135.89 in New York yesterday, after earlier reaching 135.26, the highest level since Oct. 21. Japan's currency fetched 91.43 per dollar from 91.80. The dollar traded at $1.4819 per euro from $1.4804 yesterday, when it touched $1.4770, the strongest level since Oct. 13.

Australia's currency dropped to 91.40 U.S. cents from 91.66 cents yesterday when it touched 91.22 cents, the least since Oct. 19. It was at 83.57 yen from 84.14 yen yesterday after reaching 83.39 yen, the lowest since Oct. 19.

German Prices

The jobless rate in Germany, Europe's biggest economy, probably rose to 8.3 percent in October from 8.2 percent in the previous month, according to a Bloomberg News survey of economists before the report's release tomorrow.

The nation's consumer price index, calculated using a harmonized European Union method, fell 0.1 percent in October from a year earlier after slipping 0.5 percent in September, a separate survey showed. The Federal Statistics Office in Wiesbaden will release the report later today.

"We expect German CPI to remain weak," Brian Kim, a currency strategist in Stamford, Connecticut, at UBS AG, wrote in a research note yesterday. "We continue to target the euro- dollar back at $1.45 in one month as sentiment is clearly showing signs of strain."

The ECB will maintain its benchmark interest rate at 1 percent through the second quarter of 2010, a Bloomberg survey showed. The central bank next meets on Nov. 5.

Australia's consumer prices advanced 1 percent from the second quarter, when it gained 0.5 percent, the Bureau of Statistics said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.9 percent increase. Prices gained 1.3 percent from a year earlier.

Unsustainable Rally

"The market was going into this thinking the risks were to the upside in terms of the consensus forecasts," said Robert Rennie, currency research head in Sydney at Westpac Banking Corp. "This isn't a strong enough piece of data to see the Australian dollar gain. We are in a short-term corrective phase."

The yen rose against all 16 of the most-active currencies on concern a rally in stocks and commodities can't be sustained.

The six-month run-up in shares and raw materials is probably at its peak as U.S. growth lags behind historical averages, according to Bill Gross at Newport Beach, California- based Pacific Investment Management Co.

Gross, a founder and co-chief investment officer of the world's biggest manager of bond funds, has predicted a "new normal" in the global economy that will include heightened government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy.

"What has happened is that our 'paper asset' economy has driven not only stock prices, but all asset prices higher than the economic growth required to justify them," Gross wrote yesterday on Pimco's Web site.

Japan Retail

The Standard & Poor's 500 Index slipped 0.3 percent to 1,063.41 yesterday in New York. The Nikkei 225 Stock Average fell 0.7 percent today, while the MSCI Asia Pacific Index of regional shares lost 0.3 percent.

Adding to signs the recovery will be slow, Japan's retail sales fell for a 13th month in September, the Trade Ministry said today in Tokyo. Sales slid 1.4 percent from a year earlier.

The dollar fell against the Japanese currency after the Wall Street Journal reported, citing people familiar with the situation, that the U.S. Treasury Department and GMAC Financial Services Inc. are talking about a third round of taxpayer support for the lender.

GMAC Support

"This development may renew worries over the health of the U.S. financial sector," Takashi Kudo, director of foreign- exchange sales at NTTSmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp., said about the GMAC report. "This could add to the argument for the Fed to keep borrowing costs low, and would likely be negative for the dollar and positive for the yen."

The infusion would range from $2.8 billion to $5.6 billion and be in the form of preferred stock that may increase the government's stake from its current 34 percent if converted to common equity, the Journal said.

The dollar reached 92.32 yen yesterday, the weakest level since Sept. 21 on speculation that Federal Reserves will change rhetoric on the duration of credit easing when policymakers meet next week.

Bonds:

Treasury prices rallied, lowering the yield on the 10-year note to 3.47% from 3.55% late Monday. Treasury prices and yields move in opposite directions.

What to expect:

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

Obama financial reforms advance in Congress

Karzai's brother said to be on CIA payroll: report

Senate healthcare bill draws skeptics, opponents

Pay czar says authority should not be expanded

U.S. calls for lasting military dialogue with China

Worst of Global Crisis Over: Australian Central Banker

Former AMD CEO is a Galleon Source: Sources

Intense gunfire, explosion heard in central Kabul

Biggest Banks Would Bear Bulk of Future Bailout Costs Under House Plan

Hong Kong Developers Seek Cheaper Land as Government Wants to Curb Prices

Nomura's Watanabe May Resume Dividends as Trading Drives Profit Recovery

Financial regulation fight is a "just war": Geithner

Treasury Secretary Timothy Geithner on Tuesday told a packed room of Wall Street dealers and bankers they could not look America in the eye and argue that financial regulation is fine as it is.

Geithner said the financial system was tragically fragile after experiencing the worst crisis since the 1930s, and the government must respond by adding new regulation as well as improving on current ones.

"It's a war of necessity, not a war of choice," he said at the Securities Industry and Financial Markets Association annual meeting in New York. "And it's a just war."

Geithner made the comments at the SIFMA event, where executives including JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon warned that overregulation could taint the financial sector's ability to aid economic growth. He said that Americans and Congress were behind the U.S.'s efforts, which will strike a balance between innovation and stability.

He also said that the financial industry is showing a strong interest in reform, overall.

"Of course, you will see people fight to preserve what will be in their short-term interests" but it's important that those efforts do not derail reform, he said.

Among reforms underway is a strategy that would make it easier for the government to seize control of institutions deemed "too big to fail" if they present risks to the financial system and the economy. The government would be able to oust managers, wipe out shareholders and restructure a firm's debt, an Obama administration official said on Monday.

JPMorgan's Dimon earlier on Tuesday reiterated his support for a resolution mechanism and systemic risk regulator that could deal with companies that become "too big to fail."

Consumer protection and financial stability are the two biggest areas targeted for major reforms that will go toward winning back confidence of investors and the American public, Geithner said. That will add to the economic stabilization and a broadening of the growth recovery already underway.

"We saw just a colossal loss of confidence ... and we need to fix that," he said.

SECOND STIMULUS PLAN?

With the economy in the early stages of recovery it is important that the government does not make the mistake of doing too little in terms of stimulus, he said. There are strong arguments for extending some government programs geared at lifting the U.S. economy out of recession, he said.

But he added that it was too early to speculate about a second stimulus package because about half of the current economic support program has yet to take effect.

"The Congress is now looking at a range of choices of whether we should extend unemployment benefits" and other "targeted" economic programs, he said.

"There's going to be a good case for extending many of those," he said, in response to a question about chances for additional economic stimulus programs.

Geithner said the financial sector and credit markets have improved dramatically but the overall picture is still "mixed". While large banks have been able to access capital needed to shore up their positions, small and regional banks continue to face challenges, he said.

Asked about the U.S. dollar, which has weakened against other major currencies this year, Geithner said it would remain the world's main reserve currency for a long time as the nation takes the right measures to support the economy.

"I think the dollar will remain the principal reserve currency for a long period of time," he said.

Fed Unlikely to Shift Thinking on Interest Rates

With America still in a defensive crouch after a crushing recession and financial meltdown, the U.S. Federal Reserve is unlikely to soften its promise of rock bottom interest rates soon.

Nascent signs of recovery have been stacking up and financial markets will be watching next week's Fed policy-setting meeting for any hint the central bank is moving closer to withdrawing its extensive support for the economy.

But with unemployment expected to go above 10 percent and factory capacity use near post-World War Two lows, there is doubt whether the economy can stand on its own feet after generous government spending programs and tax breaks dry up.

"The difficult conditions in labor markets and the consequent implications for household incomes are important reasons for my expectation that the recovery in overall economic activity moving into next year will be restrained," Fed Vice Chairman Donald Kohn said two weeks ago.

The Fed chopped interest rates to near zero in December. On top of that it has flooded the financial system with hundreds of billions of dollars to pull the economy out of the worst financial crisis and most painful recession in decades.

Initially, it said it anticipated exceptionally low interest rates for "some time." In March, it deepened that commitment to "an extended period" — a pledge it has repeated in every Federal Open Market Committee statement since then.

"The committee ... continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period," the policy panel said after its last meeting on Sept. 22-23.

The phrase is a critical piece of a statement that officials could dial back to prepare markets for tighter money.

However, officials are still nervous about the recovery and appear likely to conclude at their meeting on Tuesday and Wednesday that tinkering now would send a premature signal.

"If you do discuss it now, the genie's out of the bottle in terms of expectations, the market would start pricing in expectations of a sooner tightening," said former Fed economist Antulio Bomfim, now with forecasting firm Macroeconomic Advisers. "The hurdle is high enough for even approaching the topic in the meeting, much less making a formal decision for changing the language."

Buying Time

Indeed, a Financial Times story on Friday saying officials were considering softening the pledge fueled speculation that a rate hike was closer at hand than previously thought.

By Monday, interest-rate futures prices implied a rate increase would come in the second quarter of 2010, with borrowing costs hitting 1.25 percent by the year end, although those bets started to come off a bit Tuesday. Previously, the first hike was seen coming in the third quarter.

While shifting the language would give more flexibility to the Fed's policy-making, top brass have yet to offer any public signal that they plan to alter the rate pledge, a step they would likely take to prepare the markets for any shift.

Fed Chairman Ben Bernanke said on Oct. 8 that "accommodative policies" would be warranted for an extended period, while Vice Chairman Donald Kohn reminded an audience of the commitment to "unusually low levels of interest rates" for an extended period in his Oct. 13 speech.

The language means that to heal the economy of its grave wounds, policy-makers will keep interest rates low even as an economic recovery builds, analysts said.

"This is meant to ward off the view that as soon as growth picks up, the Fed is going to tighten," said Dean Maki, a former Fed economist who is now chief U.S. economist at Barclays Capital.

Weak Recovery

Both Bernanke and Kohn have said in recent weeks they expect the U.S. recovery to be tepid. A number of Fed officials have said they will be ready to pull back support for the economy when the time is right, but that just because they are talking about it doesn't mean they're about to do it.

The New York Fed last week sought to tamp down market anticipation of tightening moves by issuing a statement saying that trial runs of a tool to help the central bank raise interest rates were a test of its capacities, not a signal that a tightening was set to begin.

Also, minutes of the Fed's September meeting showed some policy-makers were sufficiently nervous about the recovery to consider expanding purchases of longer-term securities to provide an additional prop.

To be sure, softening the pledge language would give the Fed a freer hand should economic conditions brighten faster than expected. And with interest rates near zero, an increase of one or two percentage points would still keep rates in accommodative territory.

"The question is whether that flexibility is worth confusing the market," Barclay's Maki said.

In the past, the Fed has left ample room between the end of a recession and rate hikes, moving only well after unemployment had peaked.

When the last recession ended in November 2001, the first rate hike was not until June 2004 — 31 months later. In the previous recession, the Fed raised rates in February 1994, 35 months after the recession ended in March 1991.

Asia:

Most Asian stocks fell, led by technology companies as Toshiba Corp. reported a loss and Canon Inc. posted lower earnings. Automakers gained after Honda Motor Co. tripled its full-year profit forecast.

Toshiba, Japan's biggest memory chipmaker, sank 4.4 percent, while Canon, the world's largest camera maker, lost 3.9 percent. BlueScope Steel Ltd. dropped 2.9 percent in Sydney as rising Chinese steel inventories added to evidence of oversupply. Honda, Japan's second-largest carmaker, surged 3.9 percent, and Toyota Motor Corp. added 0.6 percent in Tokyo.

Two stocks declined for each one that advanced on the MSCI Asia Pacific Index, which lost 0.2 percent to 117.68 as of 10:27 a.m. in Tokyo. The gauge has surged 67 percent from a more than five-year low on March 9 amid signs stimulus measures around the world are reviving the global economy.

"The market's in a bit of a wait-and-see mode," said Prasad Patkar, who helps manage about $1.3 billion at Platypus Asset Management in Sydney. "In this stage of the recovery, valuations always looked stretched. The market is forward- looking and expecting an earnings recovery to come through."

The rally since March has driven the average price of stocks in the MSCI Asia Pacific Index to 1.6 times book value, up from 1.04 times at this year's low.

Japan's Nikkei 225 Stock Average lost 0.7 percent, while South Korea's Kospi Index fell 1.3 percent. Australia's S&P/ASX 200 Index dropped 0.4 percent, while New Zealand's NZX 50 Index climbed 0.5 percent.

Among stocks that advanced, Astellas Pharma Inc. gained 2.4 percent in Tokyo after agreeing to pay for global rights to develop and sell an experimental drug for prostate cancer.

Futures on the U.S. Standard & Poor's 500 Index added 0.1 percent. The measure dropped 0.3 percent yesterday as a gauge of confidence among the country's consumers unexpectedly fell.

Nikkei 225 10,144.55     -67.91 ( - 0.66%). (08.38 AM IST)

HSI 21841.93 -327.66 -1.48% . (08.39 AM IST)

SSE Composite 3021.46 2993.73 3038.06 2988.47 -0.92. (08.39 AM IST).

Rupee:

The partially convertible rupee INR=IN ended weaker at 46.88/90 per dollar on Tuesday from a previous close of 46.645/655.
 
MARKET BUZZ:
 
(May not be useful for day-traders.)

Mcleod Russell: Tea Money
 
 
 

The meeting reinforces confidence in our view that tea prices will remain firm through FY11 with an upward bias due to i) aggravating shortage situation given fall in production, ii) demand growing faster than supply and iii) lack of a new area coming under tea plantation. We reiterate Buy with an unchanged PO of INR 250. 25% upside.

 

Key takeaways from the management interaction

 

1. New supply is difficult to come by as land availability for new tea plantations in main tea growing countries i.e. India, Kenya and Sri Lanka is limited. Even if new area comes under plantation, it will take ~5years for sizeable yields.

 

2. Surge in tea price is not only due to lower production in tea growing countries but also is a response to under investment in tea due to static tea price scenario over a decade.

 

3. Company believes tea prices can rise further 10-15% in FY11. Company has sold 38mn kg tea this year at an average rate of INR140/kg. Our estimates are based on avg. tea prices at INR134.7/kg for FY10 and a 3% rise in FY11.

 

4. Wage contracts for the company will be up for renewal in Dec 2009 but is not a concern. These are four year contracts which decide per year rise in wages. Company expects INR2 to 2.5/kg increase in wages.

 

5. Company will look at new acquisitions and debt repayment through strong free cash flows generated going ahead.

(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