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NIFTY FUTURE
RESISTANCE
4805
4817
4847
4877
4907
SUPPORT
4780
4765
4753
4723
4713
4683
INTRADAY calls for 9th Nov 2009
+ve Sectors & Scripts : IT, Bank, Fertilizers, Tulip, PNB, Rolta,
Voltas
Buy HDFC-2701 around 2765 for 2725-2739+ with sl 2650
Buy OFSS-2194 around 2180 for 2305-2332+ with sl 2155
Buy Sesagoa-312 around 307 for 329-332+ with sl 300
Positional
Buy UTVSoft-442 for 492-499+ with sl 424
Buy HCC-134 for 153-156+ with sl 128
Expected Breakout
Buy Titan-1300 above 1319 for 1450-1469+ with sl 1300
Buy GDL-132 above 138 for 165-170+ with sl 132
Breakout
Buy Ranbaxy-414 for 450-459+ with sl 401
Buy Mphasis-722 for 798--803+ with sl 705
tocks that are in news today:-Bajaj Hindusthan, Balrampur Chini deal not over yet, Bajaj seeking funds from ICICI & SBI Bank worth Rs 1500 crore, may also raise funds via NCD – DNA -RIL close to acquiring troubled petro major LyondellBasell – ET-Jubiliant to exit non-core business by March 2010, to fetch company around Rs 150 crore-Birla rejig top deck at Novelis, ropes in Phil Martens as new COO – ET -Emami to foray into Cement business, to invest Rs 1,750 crore in 3 years – BS -Daiichi Sankyo moves SC over SAT order for open offer in Zenotech at Rs 160/share -ONGC may be allowed to sell C-series field gas at $4.75/mmbtu versus $5.5/mbtu - BL -The Finance Ministry has imposed 20% safeguard duty on all soda ash imports from China: HBL -
ketan lakhani: Alkali Manufacturers’ Association of India (AMAI) — on behalf of Tata Chemicals Ltd, Gujarat Heavy Chemicals Ltd, Saurashtra Chemicals Ltd, DCW Ltd and Nirma Ltd — had filed the petition seeking a safeguard duty on soda ash imports from China.-Tata Motors to shut Pune plant for 3 days due to disruption of supply of auto parts – BS -Kanoria Chemicals 25MW power plant shut for 2 months for repair and restoration -Sical logistics receives notice from the Tamil Nadu Commercial Tax Department to the extent of Rs 6 crore towards interest liability payable-Dhampur Sugar to declare strandalone and consolidated annual results today -IVR Prime board meet today to approve scheme of amalgamation of IVR Strategic Resources and Services Ltd and IVRCL Water Infrastructures Ltd with IVR Prime
Strong & Weak futures
This is list of 10 strong futures:
Ashok Ley, Yes Bank, PTC, Patni, Mphasis, DCHL, Crompton Greaves, Dr Reddy, McDowell-N & Ranbaxy.
And this is list of 10 Weak futures:
EKC, RCom, GMR Infra, Idea, Tata Comm, Suzlon, MLL, ICSA, India Cement & Purva.
Nifty is in Down trend
NIFTY FUTURES (F & O):
Above 4805 level, rally may continue up to 4815-4817 zone and thereafter expect a jump up to
4845-4847 zone by non-stop.
Support at 4765 & 4780 levels. Below these levels, expect profit booking up to 4753-4755 zone and thereafter slide may continue up to 4723-4725 zone by non-stop.
Buy if touches 4713-4715 zone. Stop Loss at 4683-4685 zone.
On Positive Side, cross above 4875-4877 zone can take it up to 4905-4907 zone by non-stop. If crosses & sustains this zone, then uptrend may continue.
Short-Term Investors:
1 Week: Bullish with a SL of 4671.20. Target at 4918.10.
1 Month: Bullish with a SL of 4620.00. Target at 6289.00.
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:
Buy with a SL of 15957.06. Target at 16583.56.
Short-Term Investors:
1 Week: Bullish with a SL of 15720.73. Target at 16606.95.
1 Month: Bullish with a SL of 14937.03. Target at 18381.96.
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.
POSITIONAL BUY:
Buy VELAN HOTELS (BSE Cash & BSE Code: 526755)
Buy with a Stop Loss of 22.48. Above 25.64, it will zoom.
Today: May hold on gains.
1 Week: Bullish, as per current market conditions.
1 Month: Bullish, as per current market conditions.
3 Months: Bearish, surprisingly going up.
1 Year: Bullish, as per current market conditions.
Buy BRAWN PHARMACEUT (BSE Cash & BSE Code: 530207)
Buy with a Stop Loss of 10.60. Above 18.80, it will zoom.
Today: May hold on gains.
1 Week: Bullish, as per current market conditions.
1 Month: Bullish, as per current market conditions.
3 Months: Bullish, surprisingly going down.
1 Year: Bullish, surprisingly going down.
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 | 06-Nov-2009 | 3390.14 | 2803.12 | +587.02 |
| DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| DII | 06-Nov-2009 | 1347.32 | 1110.7 | +236.62 |
SPOT LEVELS
 | 4796.15 | ( 0.64 %) | 30.60 |  |
| 1 | 2 | 3 | ||
| Resistance | 4833.28 | 4870.42 | 4904.63 | |
| Support | 4761.93 | 4727.72 | 4690.58 | |
 | 16158.28 | ( 0.59 %) | 94.38 | | |
| 1 | 2 | 3 | |||
| Resistance | 16269.70 | 16381.11 | 16478.37 | ||
| Support | 16061.03 | 15963.77 | 15852.36 | ||
Index Outlook: Sensex wavers around 16,000
Market was at its whimsical best last week. Stock prices appeared to be rolling down a deep chasm last Tuesday but just when most market participants were convinced that the downtrend was going to be long-drawn and painful, stock prices reversed higher, once again trapping short-sellers.
The week ahead could flow along similar lines as bears try to wrest control from the slightly nervous bulls.
Intraday volatility was also extremely high as prices swung both ways exasperating the trading fraternity. Volume was subdued in the cash segment while it was quite brisk on the derivative side. Stocks received support from both foreign and domestic institutional investors last week. Open interest has crept above Rs 90,000 crore again but increase in short positions can help to cushion declines.
Momentum indicators in the weekly chart continue to point southward. The 10-week rate of change oscillator is perched on the zero line. Decline in to negative zone will denote that a protracted medium term down-trend would follow.
Oscillators in the daily chart have reversed higher but they continue in the bearish region implying that near term outlook remains cloudy. Sensex also remains below its 50-day moving average positioned at 16450.
The short-term trend in Sensex is down since the peak of 17,493 but one leg of this down-move was completed last Tuesday at 15,330.
The pull-back witnessed in the later part of last week has not progressed enough to signal that the correction has ended. There are multiple wave counts at this point and we would like to see the movement next week before determining the medium term trajectory for the index. Movement next week can flow along either of these paths,
If Sensex makes no headway next week and reverses below 16,300, then a decline to 14,940 or 14,120 can be expected in the near term.
If the index moves up to 16,700 but is unable to move beyond this level, a sideways move between 15,300 and 16,700 can ensue for a few more sessions.
Short-term outlook will turn overtly bullish on a move above 16,700 paving the way for the rally to progress to 17,500 or even 18,000.
Our preferred view is that the index attempts to move to 16,700 and then spends some time consolidating sideways. Investors however need to stay cautious as long as Sensex trades below 16,700.
If there is a sharp decline, Sensex will find support in the zone between 14,700 and 15,000 in the near term.
Nifty (4,796.1)
Nifty declined to 4,538 in the first session of the week before staging a rally to close 84 points higher.
The index has closed above the key 4,700 level after testing our first downward target of 4,581 briefly. A five-wave move was completed at last week's low. But it is not yet clear if this is the end of the correction from 5,182 peak or if this down-trend will have legs that take it lower. Some guidelines for next week's trading are,
If the index struggles to move above 4,800, it would imply that there can be a decline 4,540 or 4,450 in the near term. Target on a decline below 4,450 is 4,190.
A pull-back rally that halts around 5,000 will result in a sideways move between 4,500 and 5,000 for a few more sessions.
Strong move beyond 5,000 would imply that the worst is over and the index is headed towards 5,300.
Our preferred view in the second one in which the index moves between 4,500 and 5,000 for a few more sessions. The medium term view will stay negative unless there is a close above 5,000.
Global CuesGlobal benchmarks stabilized last week and pulled back to close the week in the green. It is however not yet clear if the correction that began around October 20 is complete or if this is a minor pull-back in a larger down-trend.
CBOE VIX fell sharply to close 24 per cent lower from the peak of 31.8 recorded on Monday implying that trading sentiment has once more swung towards optimism.
It is the show of resilience in the Dow that is very surprising.
This index dropped less than 5 per cent in the recent correction and is already close to its recent peak, having retraced all the lost territory.
As long as this index stays above 9,600, the possibility of another lunge towards 10,500 levels remains open. Corresponding target for S&P 500 is 1,160.
Pivotals: Reliance Industries (Rs 1,956.7)
RIL declined towards our first medium-term target in the first trading session of the week but the 200 day moving average positioned there helped to arrest the slide.
As indicated last week, the third leg of the down-move from Rs 2,490 peak has the targets of Rs 1,827 and Rs 1,532.
Since the first target has already been achieved, a rebound is possible here. But if the stock is unable to move beyond Rs 2,000 next week, it will imply a decline to the next medium-term target of Rs 1,532.
The short-term trend in the stock is up but it will face resistance at Rs 2,000, Rs 2,050 and Rs 2,100.
A rally above Rs 2,100 is required to make the medium-term view neutral again.
Fresh shorts can be initiated on a failure to close above Rs 2,000.
SBI (Rs 2,204.2)
SBI vacillated in the range between Rs 2,050 and Rs 2,250 before closing the week on a flat note.
The hammer pattern in the weekly candlestick chart as well as minor up-move in the daily oscillator charts denote that the stock can move higher to Rs 2,285 or Rs 2,335 in the week ahead.
Reversal from either of these levels will drag the stock lower to the medium-term support at Rs 1,900.
Traders can hold their longs with a stop at Rs 2,080.
Fresh purchases should be avoided on a close below this level since the next short-term target for the stock is Rs 1,880.
Tata Steel (Rs 499.7)
Tata Steel too attempted to claw back from the low of Rs 434 recorded on Wednesday. This short-term uptrend will face resistance at Rs 529 next week.
Failure to move above this level will imply an impending move lower to the medium term support zone between Rs 405 and Rs 420.
The medium-term trend in the stock appears to have reversed from the Rs 585 peak.
A rebound from these levels can make the stock consolidate in the band between Rs 400 and Rs 600 for a few more weeks.
Such a consolidation will be conducive for an extension of the intermediate-term uptrend that began from March lows.
Infosys (Rs 2,217.8)
Infosys too trudged sideways in a narrow band last week.
The medium-term trend in the stock remains downward and unless it records a strong close above Rs 2,320, the possibility of the stock declining towards Rs 1,936 or Rs 1,906 over the medium-term remains open.
Fresh purchases from a trading perspective are therefore recommended only on a close above Rs 2,320.
The stock could remain in this narrow band between Rs 2,130 and Rs 2,250 for a few more sessions. Traders can avoid this counter as long as the stock is glued to this range.
ONGC (Rs 1,159.2)
ONGC recouped most of the losses made on Tuesday in the subsequent sessions and closed the week with a mild Rs 26 gain. Key resistance for the week ahead is at Rs 1,210.
Failure to move above this level will denote an impending decline to Rs 1,025. Medium-term view will turn neutral once the stock records a close above Rs 1,210.
Maruti Suzuki (Rs 1,473.3)Maruti rebounded strongly last week to close 5 per cent higher. Short-term resistances exist at Rs 1,520, Rs 1,560 and Rs 1,600. Move beyond Rs 1,600 is required to mitigate the negative medium-term view. Key medium-term supports are Rs 1,368 and Rs 1,250.
Index Strategy: Bear put spread strategy
We suggest traders to set a bear put spread for the week, using Nifty Nov put options with strikes 4,900 and 4,600. Both strikes have seen a significant build up in open interest, suggesting that these could be the interim resistance and support for the index.
The put spread will entail an initial debit of Rs 119/ share; Rs 173 outflow for the long put sans the Rs 54 inflow for the short put.
The initial debit, which is cost of setting the spread, would also be the maximum loss you can make.
Do note that you can time both the legs of the transaction depending on how the market opens on Monday.
The spreadMaximum profit potential: The maximum profit for this spread will occur when Nifty moves below the strike price of the sold option, i.e. 4,600 on expiry. The maximum profit potential will be limited to the difference between the two strikes minus the net debit paid or the cost of setting the spread. In this case, the maximum profit will be Rs 181.
Maximum loss potential: When your spread is totally out of money i.e. when Nifty value is higher than the 4,900, the maximum loss that you can suffer will be limited to the net debit paid, Rs 119.
Overall, by setting the spread you would be taking a maximum risk of Rs 119 to earn a maximum profit of Rs 181.
Exit strategiesVolatile that markets are, it is advisable that you make an exit at the first profit opportunity itself, especially since the strategy affords only limited returns. So, if the index appears to be trending down, you can consider a premature closure of the short option (provided price points are beneficial). Alternately, you can also cut losses if the Nifty trends up beyond 5,000. Traders can also hedge their upside risk by purchasing Nifty Nov 5,000 put (closed at Rs 40) as technical indicators also point at a possibility of a pullback rally beyond 5,000. Note that the additional transaction would however increase your overall cost.
Will new trading hours help investors?
An investor wishing to buy or sell a stock will get additional time to do so with more price points.
The recent move by the Securities and Exchange Board of India (SEBI) to allow stock exchanges to extend trading by two-and-a-half hours from 9 am to 5 pm has elicited groans from some quarters and applause from others. Though the move is not adequate to address the issues raised by SEBI's discussion paper on this subject, it will be beneficial to the investor community.
The primary reason for increasing the trading hours, cited by SEBI in its discussion paper, was to allow domestic stock prices to assimilate information flow originating in other countries and to adjust accordingly.
The current market hours on the bourses, from 10 am to 3.30 pm, already straddle trading hours in some Asian and European exchanges. Increasing the trading session by one hour in the morning and by an hour and a half in the afternoon does not materially enhance this overlap.
It is also an established fact that the movement of the US equity market and the economic data emanating out of US are the prime movers of global equity prices.
The proposed market close of 5 pm is still at least two and half hours before the opening of the US stock exchanges, giving stocks on Indian exchanges little opportunity to adjust to developments taking place in US.
Competition
The other argument in the discussion paper pertains to increased competition among international exchanges and allowing participants to execute trades in India that would otherwise have been executed overseas.
The allusion here is clearly to trading of Nifty futures on the Singapore Stock Exchange (SGX Nifty). Trading volumes in these instruments saw a spike following the restrictions imposed on overseas derivative instruments (ODI), or participatory notes, in October 2007 in India. But the fact that volumes in SGX Nifty increased manifold after the ODI restriction shows that the trading is mainly driven by entities that do not wish to register with the Indian regulators.
It is difficult to perceive how increasing market timings will make such entities shift their trading to domestic exchanges.
What is more, volumes in the SGX Nifty have seen a sharp decline since the middle of 2008 as hedge funds faced severe redemption pressures and had to cut back on their activity or close it altogether.
The monthly volume in October 2009 was only 42 per cent of its peak volume. SGX Nifty can hardly be termed a threat to domestic exchanges. Also, the new market timings do not span the entire trading duration of the SGX Nifty.
The plus points
The proposed increase in trading sessions is, however, not an entire wash-out and does have some beneficial facets for investors and traders. Investor wishing to buy or sell a stock on any day will get additional time to do so with more price points. Longer session would lead to reduced stress levels and could throw up more lucrative prices as the session progresses.
The longer hours and greater overlap with Asian and European markets would allow Indian stock prices to react to news flow from these countries to some extent in the extended time, leading to lower volatility.
The exchanges and the broking community stand to benefit from this measure as day-trading volumes can be expected to go up, with longer trading hours.
A day-trader who has squared off one trade would be tempted to initiate another trade if the sessions were longer. Since it is the traders who contribute to liquidity on the bourses, this would give a fillip to liquidity on the bourses, leading to better price discovery.
Much talk has ensued about intermediaries being displeased with this move. But since many of them already offer commodity trading platforms that extend up to 11.30 at night, not too many adjustments will be needed on this front.
Serious traders who trade 24x5 in the foreign exchange market, commodity market and so on, may even be puzzled by the debate on this minor tweaking.
Though the increase in market timings is a step in the right direction, it is inadequate as it does not give Indian equities the window to assimilate information flow from the US — a key global market driver.
SEBI could have left the cash market timings as they are now, from 10 am to 3.30 pm, but increased derivative trading hours up to 11.30 pm to coincide with commodity market timings.
As trading is an optional activity for most, traders could restrict trading hours according to their convenience. Giving a break of an hour is also an option that the regulator can consider.
The inordinate delay between publishing the discussion paper and giving the order for implementing the change, and not making the responses to the discussion paper available to public are other issues the regulator needs to address.
Fisher's scuttlebuttA strong ability to defend established markets against new competitors is essential for sound investment.
When it comes to effective long term investing, the quantitative aspects of a business are a great filter, however the intangible qualitative traits go a long way in deciding how the results turn out. Philip Fisher's scuttlebutt technique is one that views a stock as a puzzle with pieces put together through questions on various qualitative aspects of a business. His approach points to the necessity for a strong marketing arm in a desirable investment candidate. Size is a major impediment to growth. The bigger a company gets, the harder it becomes for a new product release to have a major impact on sales growth.
This is the point where effective marketing plays a big role in deciding fortunes. For instance, agrochemicals major Rallis India has managed to fend off competition from several multinationals, with an extensive distribution network and a well-trained sales team that reaches out to the last mile in the rural areas. There are no metrics for an investor to measure an organisation's sales and marketing capability. However, the marketing team's work and feedback are crucial to keep consumers in the loop and to improve, develop and sell existing and new products and services.
Communicating to consumerA company investing good time and money into building a knowledgeable sales team will be well rewarded for it. Communicating to the consumer the merits of a new product is crucial to its success. For instance, Cadbury India's advertising campaigns in the 1990s worked to build very important 'mindshare,' which continues to benefit the product even today.
These apart, the idiosyncrasies of individual businesses, such as patents, intangible assets, unusual finance expenses, cutting-edge technology, and so on, require special consideration to gauge their impact on the corporate's bottomline. Being prepared for possible surprises makes it easier to face them when they do come along. A management keeping a tight leash on expenses by monitoring costs gains a vital edge through margins, which are crucial to tide over bad times and increased competition. The operations aspect aside, one should always consider the effect of equity dilution through convertibles or additional fund-raising on their investments. A desirable investment should have appreciated to an extent where dilution is unlikely to hurt long-term returns for shareholders.
Traits to look forIn addition to providing a qualitative framework, Fisher provides simple tips for investors looking to build a portfolio:
Avoid companies with a very limited track record.
Annual reports should be complemented with research based on the 'scuttlebutt' technique.
A high price or P/E does not disqualify a company from being a good investment.
Diversification cannot protect you from reckless bets.
Avoid aping the crowd in making investment decisions; general market weakness provide opportunities to buy quality companies at reasonable prices.
To summarise Fisher's investment thought in his own words "Technology is just one avenue to industry leadership. Developing a consumer 'franchise' is another. Service excellence is still another. Whatever the case, a strong ability to defend established markets against new competitors is essential for a sound investment."
Silver delivers higher returns than gold| SHINING BRIGHT. |
Silver has outperformed the yellow metal in terms of return on investments despite gold hitting new peaks in the recent months.
Spot gold prices in the last six months have moved up 12 per cent to Rs 15,965/10 gm in October, while silver has jumped 24 per cent to Rs 25,999 a kg in the same period.
Similarly, in the last one year, gold has given a return of 35 per cent while silver delivered 54 per cent to investors.
In the three months ended October, silver registered a gain of 16 per cent while gold gave a return of eight per cent.
Consumption patternSilver has significant industrial demand unlike gold which depends mainly on jewellery and investments that had turned weak after the recent global economic meltdown, said Mr G. Harish, Vice-President (Research), JRG Wealth Management.
Besides, silver had fallen sharply compared to gold during the last year, he added.
Gold prices in the international markets dipped 30 per cent to $681 an ounce in October last from $986 an ounce in July last. In the same period, silver plunged 56 per cent.
Gold prices in the international markets track the dollar movement against the euro and react to inflationary concerns, but silver relies on the demand-supply equation, said Mr Sushil Sinha, Head of Sales, Karvy Commodities.
In India, gold prices are of late reflecting the international prices after adjusting for rupee value against the dollar.
In fact, in the last few months gold prices have not risen as much as they had in the international market, mainly due to the dollar trading weak against the rupee, he added.
Though silver has delivered better returns than gold, there are few options for retail investors to tap the benefits.
As far as gold is concerned, retail investors can invest as low as Rs 10 a month through post office's Gold Pass Book scheme.
Post offices also sell gold coins of 0.5 grams to eight grams. Gold exchange traded funds (ETF) operated by mutual fund houses are also available.
Few retail avenuesHowever, when it comes to silver, investors have to either buy from the spot market or take position in the commodity futures market. Online commodity exchanges offer silver in five kg, 30 kg and 100 kg lots.
"Silver ETFs, which are quite popular in the international markets, are yet to take off in India. Investor interest in silver will grow once we have more avenues," said an analyst.
Interesting findings on web:
U.S. stocks gained, overcoming the first unemployment rate exceeding 10 percent since 1983, as analyst upgrades of General Electric Co. and Macy's Inc. helped spur optimism that the economy is recovering. Gold reached a record above $1,100 an ounce.
Stocks ended a volatile session higher Friday, on bets that the unemployment rate's spike to a 26-year high means the worst for the labor market has already happened.
The Dow Jones industrial average .DJI gained 17.46 points, or 0.17 percent, to end at 10,023.42. The Standard & Poor's 500 Index .SPX rose 2.67 points, or 0.25 percent, to 1,069.30. The Nasdaq Composite Index .IXIC added 7.12 points, or 0.34 percent, to close at 2,112.44.
RUSSELL580.35-0.80-0.14%
TRAN3852.4741.18+1.08%
UTIL369.93-0.11-0.03%
S&P 100496.191.56+0.32%
S&P 400681.35-1.02-0.15%
NYSE6958.298.15+0.12%
NAS 1001730.769.67+0.56%
"Big-cap stocks are the ones with leverage issues, but they seem to have picked up a lot of interest from investors of late," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.
"We're certainly seeing continued evidence of economic improvement -- except on the employment side -- but even there, perhaps we may have seen about the worst."
Analyst upgrades of Dow component General Electric and Nasdaq heavy-hitter Amazon.com and sliding oil prices were also in the mix.
Payrolls fell by 190,000 workers last month, compared with a 175,000 drop anticipated by the median forecast of economists surveyed by Bloomberg News, the Labor Department said. The S&P 500 dropped when the U.S. stock market opened following the bigger-than-estimated decrease in October payrolls and the unemployment rate jumping to a 26-year high of 10.2 percent.
The move above 10 percent on unemployment initially rattled the market but David Joy, chief market strategist at RiverSource Investors, said he doesn't see it as a setback for the recovery.
"I read it as a relatively constructive number, because the trend continues to improve. The headline number of course will keep consumer confidence under pressure, but I'm not that hopeful that the consumer is going to make a big contribution to this recovery anyway," he said on CNBC this morning. "I do think we're in the early stages of a global recovery, but I think it's going to be led by the business community, not by the consumer, and so this does nothing to change that point of view."
"Stocks rising in the face of the unemployment data is a recognition that we're probably close to the peak in that number," said Mark Bronzo, a money manager at Security Global Investors, which oversees $21 billion in Irvington, New York. "It's a bad number, but people are thinking it may not get a lot worse."
An increase in temporary workers "is oftentimes looked at as the canary in the coal mine in this data series," said Kevin Caron, a market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co., which manages about $98 billion in client assets. "It's obviously easier to hire and fire temporary workers on short-term notice than retain full-staffed, fully employed workers."
"The spike in the unemployment rate was a shock to the market," said Phil Orlando, chief equity market strategist at Federated Investors. "But once investors looked at it and digested it, they were able to take a more measured response."
He said while the unemployment rate jump was surprising, the number of non-farm payrolls cut -- combined with Thursday's weekly jobless claims report -- suggest the pace of layoffs is slowing.
Earnings have exceeded the average analyst estimate for 83 percent of the S&P 500 companies that have reported third- quarter results since Oct. 7, according to data compiled by Bloomberg. That would mark the highest full-quarter proportion in data going back to 1993.
GE gained the most in the Dow Jones Industrial Average, surging 6.2 percent as analysts said risks to its finance unit have diminished. Macy's fell 6.4 percent after JPMorgan Chase & Co. said the second-biggest U.S. department store chain probably beat analysts' third-quarter profit estimates.
GE rose 6.2 percent, the most since Sept. 16, to $15.33. Analysts from Sanford C. Bernstein & Co. and Oppenheimer & Co. raised their ratings and share-price estimates for the owner of NBC Universal and GE Capital.
"The risk/reward balance has improved enough to warrant a more positive stance," Bernstein's Steven Winoker wrote in a note to clients.
Macy's led a measure of retailers in the S&P 500 to a 1.7 percent advance, the second-best performance among 24 industries. JPMorgan analysts boosted the company's rating to "overweight" from "neutral."
AIG (AIG, Fortune 500), the insurance behemoth bailed out by the U.S. government, reported its second straight quarterly profit after seven quarters of losses.
Results were better than expected, but the company's main insurance businesses posted weaker revenue, sending shares tumbling by almost 10% Friday. AIG stock had rallied Thursday ahead of the results.
Amazon.com Inc. added 4.6 percent to $126.20. The largest Internet retailer was raised to "outperform" from "market perform" at Sanford C. Bernstein, which also raised its price estimate for the company to $160 a share. Amazon will see "revenue re-acceleration," improved operating margins and increased free cash flow, analysts led by Jeffrey Lindsay wrote in a note today.
Lowe's Cos. rose 4.3 percent to $20.94 and Home Depot Inc. added 1.8 percent to $26.08 after both companies were raised to "buy" from "underperform" at Bank of America Corp.
American International Group Inc. tumbled 9.7 percent to $35.48, driving financial stocks to the steepest decline among 10 industries in the S&P 500. The insurer bailed out by the U.S. government posted sales declines at its property-casualty and life insurance divisions.
International Game Technology rose the most in the S&P 500, adding 8.7 percent to $20.18. The world's biggest maker of slot machines posted profit excluding some items of 20 cents a share in the fiscal fourth quarter, beating the average analyst estimate by 23 percent, according to Bloomberg data.
Energy stocks in the S&P 500 lost 0.2 percent as oil and natural gas dropped. Gas for December delivery lost 3.9 percent to $4.595 per million British thermal units.
"Energy demand is going to be muted with lower industrial activity and consumers driving less, etc., etc.," said Jeffrey Schappe, who helps manage $17 billion as chief investment officer at BB&T Asset Management Inc. in Raleigh, North Carolina.
Sunoco Inc. led declines in energy stocks, dropping 9.4 percent to $28.21 for the second-biggest drop in the S&P 500. The largest refiner in the U.S. northeast reported a third- quarter loss after slumping fuel demand prompted the company to cut rates on processing units, idle a refinery and scale back its pension program. Tesoro Corp. lost 5 percent to $13.97.
Dynegy Inc., the Houston-based power producer that climbed the most since Aug. 10 yesterday, fell 5.9 percent to $1.93.
Nvidia Corp. added 7.3 percent to $13.16. The maker of graphics chips reported third-quarter profit excluding some items of 19 cents a share, beating the 10-cent average of analyst estimates compiled by Bloomberg.
Starbucks (SBUX, Fortune 500) posted weaker quarterly results that beat expectations in a report released late Thursday. The coffee retailer also boosted its outlook for 2010 profit, after having cut costs and shuttered hundreds of stores in the last year. Shares gained 7.2%.
Fannie Mae (FNM, Fortune 500) reported an almost $19 billion quarterly loss on bad loans. The biggest U.S. mortgage lender also said it would need more help from the Treasury. Shares fell 7.1%.
Insurers Travelers [TRV 51.90 1.26 (+2.49%) ] and XL Capital [XL 17.22 0.63 (+3.8%) ] got a boost after Goldman Sachs upgraded the stocks to "buy" from "neutral."
The KBW Insurance index .KIX added 1 percent.
The S&P Retail index .RLX advanced 1.7 percent.
State Street [STT 41.45 -1.36 (-3.18%) ] fell 3.2 percent after the bank said it set aside an additional $250 million to cover losses from investors who lost money on risky mortgages.
All ten key S&P sectors finshed the week higher, led by industrials, materials and consumer discretionary.
The Chicago Board Options Exchange, a measure of stock- market volatility known as Wall Street's fear gauge, dropped for a fifth straight day. The VIX, as the benchmark for U.S. stock options is known, lost 4.9 percent to 24.19 as investors paid less for protection against declines in equities.
Oil,Gold & Currencies:
U.S. light crude oil for December delivery fell $2.19 to settle at $77.43 a barrel on the New York Mercantile Exchange, a decline of more than 3%.
COMEX gold for December delivery climbed $6.40 to settle at $1,095.70 an ounce after hitting an all-time high of $1101.90 during the session.
The dollar gained versus the euro and fell versus the yen.
The dollar fell against the euro after the Group of 20 governments agreed to keep stimulus measures and remained silent on the greenback's decline this year, boosting demand for higher-yielding assets.
The U.S. currency dropped against 12 of its 16 major counterparts as the International Monetary Fund said traders are probably using the dollar to fund so-called carry trades around the world and it may still be overvalued. New Zealand's dollar gained as Auckland-based Fonterra Cooperative Group Ltd., the world's biggest dairy exporter, raised its forecast for milk prices by 19 percent amid growing global demand.
"Risk appetite remains intact overall," said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo. "The Federal Reserve is likely to be among the last to exit. That means the dollar will stay under pressure to be sold in exchange for higher-yielding currencies."
The dollar fell to $1.4886 per euro as of 10:55 a.m. in Tokyo from $1.4847 in New York on Nov. 6. It dropped to as low as $1.4907, approaching its weakest since Oct. 27. The U.S. currency traded at 90.08 yen from 89.88 yen. The yen weakened to 134.10 per euro from 133.45.
Alistair Darling, hosting in the U.K. a meeting of finance ministers from G-20 nations, said his colleagues decided to keep supporting their economies.
"We agreed to maintain support for the recovery until it is assured," Darling said Nov. 7. "We are not out of the woods yet."
U.S. Dollar
The dollar also weakened after the IMF said in a report published on Nov. 7 that while the dollar "has moved closer to medium-run equilibrium," and it is still "on the strong side."
The Federal Reserve last week repeated its intention to leave borrowing costs "exceptionally low" for "an extended period" as long as inflation expectations are stable and unemployment fails to decline.
"The dollar was hurt by the IMF's observation," John Kyriakopoulos, head of currency strategy in Sydney at National Australia Bank Ltd., wrote in a research note. "With the Fed implying it will keep rates very low until the unemployment rate starts falling, traders continued to pare expectations for rate hikes in 2010, which is weighing on the dollar."
The U.S. currency has dropped against 15 of all 16 major counterparts in the past six months as investors increased carry trades, where they borrow in countries with low interest rates to invest in higher-yielding assets.
Interest Rates
Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. compare with 3.5 percent in Australia and 2.5 percent in New Zealand, making the yen and dollar favored targets for investors seeking to fund carry trades.
The greenback may fall further as economists forecast the trade deficit in the U.S. probably widened in September. Reflecting growing demand for foreign oil and automobiles.
The gap between imports and exports increased to $31.8 billion from $30.7 billion the prior month, according to the median of 60 estimates in a Bloomberg News survey ahead of the Commerce Department's Nov. 13 report.
Chinese Premier Wen Jiabao called on the U.S. to keep its deficit at an "appropriate size," saying that it would be conducive to stability and global economic recovery, Reuters reported today.
Investor Confidence
Gains in the euro were tempered before a report forecast to show German investor confidence fell for a second month, backing the case for the European Central Bank to keep rates low.
The ZEW Center for European Economic Research in Mannheim will say its index of investor and analyst expectations dropped to 55 in November from 56 in October, according to a Bloomberg survey of economists. The gauge, which aims to predict developments six months ahead, is scheduled for release tomorrow.
"While stimulus measures have created the green shoots of recovery, investors are still cautious," said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. "This view is limiting risk taking."
New Zealand's currency advanced after Fonterra said today it will probably pay its 10,500 farmer-shareholders NZ$6.05 ($4.39) for each kilogram of milk supplied in the year to May 31. That would be the second-highest since Fonterra paid a record NZ$7.90 a kilogram in the year ended May 2008.
Milk Prices
Fonterra accounts for about 40 percent of the global trade in butter, milk powder and cheese and sells products in more than 140 countries.
"Dairy prices are one of the fundamental drivers of the New Zealand dollar so with that on board we'll see more support for the kiwi this week," said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. "The market still has a hike in there by March next year, which is quite a bit sooner than what the Reserve Bank outlined in their most recent statement. This is further fuel to the fire."
The New Zealand currency rose 1.2 percent to 73.39 U.S. cents. It gained 1.4 percent to 66.09 yen.
Bonds:
Treasury prices rose, lowering the yield on the 10-year note to 3.51% from 3.52% Thursday. Treasury prices and yields move in opposite directions.
What to expect:
MONDAY: Deadline for Kraft-Cadbury takeover bid; Banks' deadline for capital-raising plans; 20th anniversary of Berlin wall coming down; Three-year note auction; Earnings from Liberty Media, Electronic Arts
TUESDAY: Obama in Asia; Geithner in Japan; Foreclosure-prevention summit; Fed's Lockhart, Yellen & Fisher speak; 10-year auction
WEDNESDAY: Veterans' Day (offices, bond market closed); Bill Gates speaks; Forbes most powerful people list; weekly mortgage applications; Earnings from Macy's, Applied Materials
THURSDAY: FDA meeting on Internet advertising starts; Buffett/Gates/CNBC Town Hall meeting; Geithner at APEC meeting in Singapore; weekly jobless claims; weekly crude inventories; Treasury budget; Earnings fro mWal-Mart, Disney
FRIDAY: NY Fed conference on financial intermediation; international trade; import/export prices; consumer sentiment; Nicholas Cosmo court appearance; Fed's Evans speaks; Earnings from JCPenney, Abercrombie
Other Headlines:
Axa Asia Pacific Rejects Unsolicited $10 Billion Proposal from AMP, AXA SA
Sands China Said to Raise as Much as $3.4 Billion in Hong Kong Share Sale
Euro Pares Gain Against Yen on Signs Global Economic Recovery May Be Slow
China Minsheng Said to Seek as Much as $4 Billion in Hong Kong Stock Sale
India May Lead G20 in Exit From Fiscal Stimulus as Singh Signals Wind Back
Promise's Kubo May Shut Half Branches as Japan Caps Consumer Lending Rates
Dollar is Funding Global `Carry Trade,' May be Overvalued, IMF Reports
House Passes $1 Trillion Legislation to Overhaul U.S. Health-Care System
Netanyahu Arrives in Washington With Middle East Peace Effort in Disarray
JPMorgan's Dimon Hires His Father for Bear Stearns Brokerage
Healthcare measure faces tough path in Senate
IMF exploring insurance levy on banks
More troops needed for Afghanistan: U.S. General Casey
China hopes U.S. keeps deficit to appropriate size
World leaders line up to mark fall of Berlin Wall
Hurricane Ida aims for Gulf of Mexico oil fields
Iraq passes election law paving way for January poll
House backs anti-abortion amendment
BoA Board in Civil War Over Lewis' Succesor
GE, Comcast set $30 billion value for NBC: report
Siemens reported in talks with China on power-grid deal
Starhub gets deal to offer iPhone in Singapore
China's Wen urges U.S. to keep deficit at 'appropriate size'
Japan Tops China Buying Treasuries as Lost Decade Survivors Debunking Pond
China May Curb Leverage in Real-Estate Purchases, Shanghai Official Says
G-20 Splits on Tobin Tax, Signals Banks Must Foot Bill of Future Bailouts
Japan Plans to Triple Afghan Aid to $1 Billion as Mission Ends, Ogata Says
Geithner: need stimulus, not financial transactions tax
Treasury Secretary Timothy Geithner on Saturday stressed the necessity of keeping global economic stimulus in place until recovery is assured and opposed the utility of a tax on financial transactions as a way to dampen risky bank behavior.
Speaking at the conclusion of a two-day meeting of Group of 20 finance minister and central bankers, Geithner said there was broad agreement that "growth remains the dominant policy imperative across our economies."
He said high U.S. unemployment, which hit a 26-1/2-year high at 10.2 percent of the civilian workforce in October, highlighted a "very tough economic environment" that will a period of sustained growth to correct.
Earlier, British Prime Minister Gordon Brown had suggested that the G20 should levy on banks -- blamed for the excessive risk-taking that led the world into a now-easing financial crisis -- and used the proceeds to fund future bailouts.
Geithner played down that idea, noting that the Obama administration was already pushing an overhaul of financial market rules in Congress that would ensure that banks pay the costs of their failures in future from their own pocket.
"A day-by-day financial transaction tax is not something we are prepared to support," Geithner said in an interview with Sky News. In his concluding press conference, Geithner was asked repeatedly to say why he opposed such a tax on banks and indicated he doubted its effectiveness.
"This idea (of a bank transaction tax) has been around for a long time...I think frankly the experiences are mixed," he said, expressing an American view that there was no widespread backing for such a tax.
Canadian Finance Minister Jim Flaherty was similarly skeptical.
"It's one of the ideas that's on the table, but is not particularly attractive to me as finance minister of Canada. We have been a government that has been reducing taxes," Flaherty said.
ON DANGEROUS GROUND
Geithner's key message was that recovery still remains on perilous ground and that it was too soon to discuss the timing for removing the massive fiscal and monetary stimulus that countries around the world have poured into their economies.
"Government policy has to provide a bridge to growth led by the private sector," he said. "We're now in the middle span of that bridge."
That meant policymakers must move cautiously in trying to bring down huge budget deficits without choking off chances for growth led by consumer spending and business investment.
"If we put the brakes on too quickly we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater," Geithner said.
"It's too early to start to lean against recovery."
The G20 includes key emerging-market countries like China, Brazil and South Korea as well as rich industrial nations and Geithner was asked about complaints among some members that China's policy of managing its yuan currency's value narrowly was hurting efforts to rebalance global growth.
He conceded a more flexible Chinese currency would be "helpful" but continued the Obama administration's practice of cooling the rhetoric toward Beijing over its currency.
The U.S. Treasury chief returned to Washington on Saturday night but leaves again on Monday for a visit to Tokyo next Tuesday and Wednesday followed by a stop in Singapore where he will attend a session of the Asia Pacific Economic Cooperation forum for one day next Thursday.
Week Ahead: Stocks Search for Catalyst in Quiet Week
Stocks could side step temporarily as investors look for the next catalyst that will break the market out of its current range.
A last blast of third quarter earnings news is expected this week, including from consumer-driven companies like Disney [DIS 28.56 -0.44 (-1.52%) ] and major retailers, like Wal-Mart [WMT 51.25 -0.03 (-0.06%) ], Nordstrom [JWN 33.93 0.01 (+0.03%) ] and Macy's [M 19.18 1.16 (+6.44%) ]. The economic calendar is relatively light, but a group of Fed speakers could get some attention. There is also $81 billion in Treasury note auctions scheduled in a holiday-shortened week for the bond market.
Stocks shook off a two-week losing streak in the past week, with the Dow gaining 3.2 percent to 10,023. The S&P 500 was up 3.2 percent to 1069. The dollar was weaker against a basket of currencies and down 0.9 percent against the euro to a level of $1.4845 per euro. Oil was up 0.8 percent for the week to $77.65, but gold was the standout, finishing the week at a record $1095.10 per troy ounce, a gain of 5.3 per cent.
Traders say they expect intra-day volatility to continue, but the stock market is calmer than it was at the start of the week. For one, Wednesday's Fed statement reassured investors that the Fed would hold rates at extreme lows for some time, maintaining a positive environment for equities for now. They also point to the market's ability Friday to make small gains after the October employment report showed a surprise jump in unemployment to 10.2 percent.
"I think we're going higher," said Andrew Burkly, technical strategist at Brown Brothers Harriman. "We took our rating down a couple of weeks ago, and said we think we'd see between 1130 and 1040 (on the S&P 500). We tested the low end of that banner at 1040 and we're on our way back up."
Burkly and other analysts said the market is hyper sensitive to economic news. "The big battle right now is that people are just concerned about how sustainable the recovery is going to be," he said. "...Trading is definitely going to be pretty volatile. It's a pretty wide range we're using. I think we're going to sees that back and forth a couple times over the next couple of months."
PNC's Bill Stone said he remains "cautiously optimistic," but he agrees its the data that will drive the market for now as investors search for signs the recovery is sound. "What are the markets watching for? ... Indications the consumer might be coming back, and the second one is jobs."
"We still believe as this "less down is the new up" employment trend continues, we will finally see positive employment growth in the first quarter of next year. This should support our case for the sustained economic recovery and stock prices," he said in a quick note after Friday's jobs report.
Raymond James chief investment strategist Jeffrey Saut said he was hoping the market would have pulled back further to provide a buying opportunity. "I do think we're going to be higher. I do think earnings are going to keep coming in better than most people think, and the carrot before the horse for underinvested portfolio managers is going to be those earnings," he said. Saut has a target of 1200 to 1250 on the S&P, the level it was at before Lehman failed in September, 2008.
Saut said one of his favorite indicators is showing a positive trend for stocks. "The number of stocks above their 50-day moving average went from 90 percent in September to 32 percent. Even without having any big correction, you have corrected some of the excesses," he said.
'Merry Thriftmas'
One big measure of consumer health will the holiday shopping season, and Stone said it may be better than Wall Street is forecasting. "Expectations were so low for the holidays, so I guess I feel pretty good about it because there's plenty of opportunity to beat it," he said.
October's chain store sales, reported by retailers in the past week portrayed a mixed picture with some high end retailers, like Nordstrom and Saks performing better than expected while some chains at the lower end missed.
Saut said he sees signs of life in the consumer but he thinks the consumer will be price sensitive this holiday season. "I see people out eating and doing things. I do think a theme of this Christmas is going to be 'Thrift-mas.' which is one of the reasons we own TJX and have been buying some Wal-mart," he said.
"The high end is coming back because the stock market is coming back," he said.
Earnings Central
Retailers will get a lot of attention in the coming week, as several major chains report third quarter earnings and will hopefully signal what they are seeing for the holiday season. Macy's reports Wednesday; Wal-mart, Kohl's, Nordstrom and Urban Outfitters report Thursday, and J.C. Penney and Abercrombie and Fitch report Friday. Another high profile retailer, Dollar General, the biggest discount chain, is expected to go public in the coming week in one of the biggest IPOs of the year. Its $750 million IPO is expected to price Thursday.
In other earnings news, Liberty Media Entertainment, Liberty Media Interactive, Allianz, Dish Network, American Water Works, Tesoro, CGI , Rockwell Automation, Windstream, and Nippon Telegraph report Monday morning. Electronic Arts, Fluor, MBIA, Priceline.com and McDermott International report after Monday's closing bell.
Tuesday's reports include Tyco, Vodafone and Atmos Energy. Applied Materials and Computer Sciences report after Wednesday's bell. Disney, Encana, Alliant Tech, AmBev, and URS report Thursday.
Dollar Dilemma
The momentum of the 'risk trade' has been one of the big factors impacting the stock market in recent months, so stock traders pay close attention to the dollar's every move. The risk trade has thrived as the Fed's low interest rate policy weakens the dollar. As the dollar weakens, investors pour money into risk assets, like stocks and commodities.
Brian Dolan of Forex.com said currency traders will be focused on the G-20 gathering of finance ministers in St. Andrews, Scotland this weekend, the APEC meeting in Asia later in the week and the comments from members of the Fed in between. President Barack Obama and Treasury Secretary Tim Geithner both visit Japan this week, ahead of the Asian Pacific Economic Cooperative meeting in Singapore next weekend.
"You also have the Eurozone finance ministers meeting Monday and Tuesday," said Dolan.
He said the dollar could strengthen in the coming week, which could mean stocks sell off. "There's still a massive short dollar position. You're going to get some verbal support for the dollar and verbal concerns about the euro's strength," Dolan said.
"I'm looking at a multi week top forming in the risk assets and a bottom forming in the dollar, and this week a correction in that," said Dolan.
Bonds
For the Treasury market, the focus is on auctions in the coming week. On Monday, $40 billion in 3-year notes will be auctioned. Tuesday will see $25 billion in 10-years, and $16 billion in 30-years are auctioned Thursday. The bond market is closed for Veteran's Day Wednesday. the 10-year lost 31/32 points in the past week, to 100-31/32, raising it yield to 3.507 percent. The 2-year gained slightly though, and its yield slipped to 0.857 percent.
"The duration has sold off 10s and 30s," said CRT strategist David Ader on Friday. "The short front end has traded better. We have 10 and 30 auctions next week. We have a Fed that provided some relief."
Ader said besides the auctions, the Fed speakers on Tuesday will be interesting. "We've got Yellen, who is an extreme dove; Fisher, who is an extreme hawk and Lockhart who is out in the middle," he said. Fed Gov. Daniel Tarullo also speaks on financial regulation Monday in New York and on resolution authority on Tuesday.
On Tuesday, San Francisco Fed President Janet Yellen; Atlanta Fed President Dennis Lockhart, and Dallas Fed President Richard Fisher all speak on the economy. The Boston Fed's Eric Rosengren speaks in London that day.
Chicago Fed President Charles Evans speaks on asset bubbles in Paris, while New York Fed President William Dudley speaks in Princeton on Friday.
Econorama
Weekly jobless claims are reported Thursday before the bell, and the federal budget is issued in the afternoon that day. International trade and import prices are reported Friday, as is consumer sentiment for November. The NFIB small business survey is released on Tuesday.
IMF Signals Record-Low U.S. Rates Funding Global 'Carry Trade'
The International Monetary Fund signalled record low U.S. interest rates are funding global "carry trades" and the dollar is still overvalued as concerns mount that new financial imbalances are forming.
"There are indications that the U.S. dollar is now serving as the funding currency for carry trades," the IMF said in a report published on Nov. 7. "These trades may be contributing to upward pressure on the euro and some emerging-economy currencies." While the dollar "has moved closer to medium-run equilibrium," it is still "on the strong side."
With investors able to borrow at near-zero rates in the U.S., some economists are concerned that markets may become distorted as traders plow those funds into riskier assets. Nouriel Roubini, the economist who forecast the financial crisis in 2006, said Nov. 4 that investors are milking the "mother of all carry trades."
"U.S. interest rates look to remain near zero through the first half of 2010 at the very least, which provides traders plenty of time to continue with carry trades," said Boris Schlossberg, director of currency research at the online currency trader GFT Forex in New York. "Labor-market conditions are still very challenging in the U.S., and the rest of the world is improving faster. The dollar remains the weakest link."
Dollar's Slide
The dollar has dropped about 13 percent against a basket of currencies from its major trading partners in the past seven months. Meanwhile, the MSCI All-Countries World Index of global equities has gained about two-thirds since March and sugar has soared 90 percent this year.
U.S. Federal Reserve policymakers, at the end of a two-day policy meeting on Nov. 4, reiterated their intention to keep interest rates "exceptionally low" for "an extended period."
Speculation that the Fed will keep rates on hold into next year was further fueled by U.S. Labor Department figures on Nov. 6 that showed the nation's unemployment rate jumped to 10.2 percent in October, exceeding 10 percent for the first time since 1983.
In a carry trade, investors borrow in countries with low interest rates to invest in higher-yielding assets. Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. compare with 7 percent in South Africa and 2.5 percent in New Zealand, making the yen and dollar favored targets for investors seeking to fund carry trades.
Marc Chandler, global head of currency strategy for Brown Brothers Harriman & Co. in New York, said the dollar carry trade is likely to continue in coming months, and he expects the U.S. currency will decline further.
Risk Appetite
"The key wildcard to dollar carry trades is whether people continue to show an appetite for risk," Chandler said. "That'll weigh on the dollar."
The euro's exchange rate "is on the strong side of its equilibrium," the Washington-based IMF said.
The fund, which published the report as officials from the Group of 20 nations gathered in St. Andrews, Scotland, also said that China's yuan is "significantly undervalued."
The Chinese currency "has depreciated in real effective terms in tandem with the U.S. dollar and remains significantly undervalued from a medium-term perspective," the IMF said.
China has kept the exchange rate at about 6.83 to the dollar since July 2008, after letting the currency strengthen 21 percent in the previous three years. Appreciation was halted to help sustain exports amid a global recession.
Chinese central bank Governor Zhou Xiaochuan told Bloomberg News on Nov. 6 that "the pressure from the international community to allow yuan appreciation is not that big," deflecting calls from Europe and Japan to let it rise.
Since President Barack Obama took office this year, "the U.S. hasn't been as vocal" about the Chinese currency as it was previously, Brown Brothers' Chandler said.
Asia:
Most Asian stocks climbed, led by financial companies after a takeover bid in Australia's insurance industry. Japanese shares declined after the yen rose to the strongest in a week, hurting overseas sales for exporters.
Axa Asia Pacific Holdings Ltd. soared 29 percent after rejecting an unsolicited offer from its French parent Axa SA and Australian asset manager AMP Ltd. Olympus Corp., the world's biggest maker of endoscopes, slumped 3.9 percent as the company's first-half operating profit dropped 11 percent, partially due to the strong yen. Nissan Motor Co., which gets about three-quarters of its sales abroad, lost 2.6 percent.
The MSCI Asia Pacific Index advanced 0.2 percent to 116.56 as of 9:26 a.m. in Tokyo, with about four stocks rising for every three that fell. In New York on Nov. 6, the Standard & Poor's 500 Index climbed 0.3 percent, as a report showing unemployment exceeded 10 percent prompted speculation the Federal Reserve will maintain a loose monetary policy.
"The employment data is positive for the stock market as that means monetary relaxation will continue," said Tomochika Kitaoka, chief strategist in Tokyo at Mizuho Financial Group Inc. "Doubts will be eliminated that Japanese companies will post higher profits this fiscal year."
Japan's Nikkei 225 Stock Average fell 0.3 percent to 9,674.99. Australia's S&P/ASX 200 Index rallied 1.4 percent, buoyed by Commonwealth Bank of Australia's report of A$1.4 billion ($1.3 billion) in first-quarter profit.
U.S. Unemployment
U.S. stock futures were little-changed. The S&P 500 climbed on Nov. 6 after ratings of General Electric Co. and Macy's Inc. were lifted. The unemployment rate in the U.S. jumped to 10.2 percent in October, the highest level since 1983, a Labor Department report showed.
The MSCI Asia Pacific Index has climbed 65 percent from a more than five-year low on March 9, outpacing gains by the S&P 500 and Europe's Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P and 15 times for the Stoxx.
Olympus lost 3.9 percent to 2,745 yen. Nissan declined 2.6 percent to 639 yen.
The yen rallied to as high as 89.62 versus the dollar on Nov. 6 following the unemployment report. That compared with 90.64 at the close of stock trading in Tokyo that day.
Nikkei 225 9,797.75 +8.40 ( +0.09%). (08.12 AM IST)
HSI 22110.49 +280.77 +1.29%. (08.13 AM IST)
SSE Composite 3164.04 3174.37 3174.46 3146.94 + 0.33. (08.16 AM IST)
Rupee:
The partially convertible rupee INR=IN ended at 46.81/82 per dollar on Friday, stronger than Thursday's close of 47.0150/0250.
INDIA:
Indian stocks rose, extending the benchmark index's longest string of gains in five weeks, after the government approved a plan to sell more shares in state- controlled companies, helping it raise funds to boost spending.
MMTC Ltd., India's biggest state-owned trading company, surged 20 percent, the most in 10 months. Rico Auto Industries Ltd., an auto component maker that supplies General Motors Co. and Ford Motor Co., climbed 5.1 percent after workers ended a 45-day strike.
The Bombay Stock Exchange's Sensitive Index, or Sensex, rose 94.38, or 0.6 percent, to 16,158.28. The measure this week gained 1.7 percent, snapping two weeks of losses. The S&P CNX Nifty Index on the National Stock Exchange rose 0.6 percent to 4,796.15. The BSE 200 Index added 1.1 percent to 2,011.08.
MMTC soared 20 percent to 36,146.85 rupees, the most since Dec. 17. State Trading Corp., the No. 2, leapt 15 percent to 353.6 rupees. NMDC Ltd., India's largest iron-ore producer, climbed 10 percent to 338 rupees. Hindustan Copper Ltd., India's biggest copper miner, 99.59 percent state-owned, gained 10 percent to 256.35 rupees. Rashtriya Chemicals & Fertilizers Ltd., 92.5 percent government-owned, added 12 percent to 73.5 rupees.
The government owns 99.33 percent in MMTC and 91.02 percent in State Trading, while it holds 98.38 percent in NMDC, according to filings to the Bombay Stock Exchange. The government will use the money raised from the sale of shares of state companies for social spending, Home Minister Palaniappan Chidambaram told reporters in New Delhi yesterday.
India's fiscal deficit reached 6 percent of gross domestic product in the year ended March 31, surpassing the 2.5 percent government target. The key Sensitive stock index has more than doubled from this year's lowest level, in March.
Prime Minister Manmohan Singh won a resounding re-election in May, reducing his dependence on allies such as the communist parties that opposed asset sales and increased foreign investment during his first term. A coalition without communist parties allows Singh to sell state assets and accept more overseas funds into insurance and banking.
Rico Auto gained 5.1 percent to 22.8 rupees. The company will resume deliveries to GM and Ford after workers agreed to end a strike late yesterday, Surendra Singh Chaudhary, senior vice president in charge of human resources, said by phone today. About 2,200 workers stopped work at the company's factory at Gurgaon near New Delhi, demanding that 16 of their colleagues who were suspended be reinstated.
Idea Cellular Ltd. (IDEA IN) lost 5.6 percent to 50.5 rupees. The price estimate of the mobile phone services operator was cut to 43 rupees from 71 rupees at Morgan Stanley. The brokerage kept the rating unchanged at "underweight".
IFCI Ltd. (IFCI IN) gained 2.5 percent to 51.2 rupees. India short-listed Boston Consulting Group Inc., Ernst & Young LLP and McKinsey & Co. to advise the government on selling a stake in the state-controlled project financier, the Press Trust of India said yesterday, without citing anyone.
Tata Chemicals Ltd. (TTCH IN), the world's second-largest soda ash producer, gained 5.2 percent to 278 rupees after India imposed a 20 percent duty on soda ash imported from China. GHCL Ltd. (GHCL IN) gained 14 percent to 43.1 rupees, Nirma Ltd. (NIRMA IN), the nation's No. 2 detergent maker, rose 6.7 percent to 184.6 rupees, and DCW Ltd. (DCW IN) added 4.7 percent to 21.25 rupees.
Benchmarks continued their winning streak for the third straight day.
Second rung stocks were in the thick of trade and outperformed the main indices.
The BSE Midcap Index was up 2.27 per cent and BSE Smallcap Index moved 2.24 per cent higher.
Amongst the sectoral indices, BSE PSU Index surged 3.91 per cent, BSE Realty Index was up 2.81 per cent, BSE Metal Index moved 2.03 per cent higher and BSE Bankex gained 1.75 per cent. BSE FMCG Index was up 1.75 per cent.
Jaiprakash Associates (4.76%), Tata Steel (3.08%), State Bank of India (3.06%), Sterlite Industries (2.21%) and Larsen & Toubro (2.17%) were amongst the Sensex gainers.
Losers included, Tata Power (-3.84%), Hindustan Unilever (-2.12%), Hero Honda (-1.98%), ITC (-1.53%) and Tata Motors (-1.06%).
Market breadth was positive on the BSE with 1,944 advances and 780 declines.
Rise 0.6 pct on day; up 1.6 pct on week.
Tata Steel rallies 3.1 pct as India sales up in Oct .
Indian shares climbed 0.6 percent on Friday and helped post their first weekly rise in three.
Tata Steel (TISC.BO: Quote, Profile, Research), the world's No. 8 steelmaker, firmed 3.1 percent to 499.70 rupees, after steel sales at its Indian operations rose an annual 38 percent in October.
Banks were bolstered after Standard & Poor's said on Thursday they would gain more than they would lose from tighter loan provisioning requirements. Top lender State Bank of India (SBI.BO: Quote, Profile, Research) rose 3.1 percent, its biggest rise in three weeks, to 2,204.20 rupees and while rival ICICI Bank (ICBK.BO: Quote, Profile, Research) added 0.5 percent to 848.75 rupees. India's central bank had said on Oct. 27 banks must increase the minimum provision ratio for bad debts to 70 percent by September 2010. State Bank and ICICI are still down 4.4 percent and 4.7 percent since Oct. 26. S&P said the changes would boost banks' provisioning cushions and bring coverage ratios in line with their major Asian peers.
Nineteen of its components gained. The benchmark has risen 4.9 percent in the past three days, after sliding 8.4 percent over six sessions. The index is up around 67 percent from the end of 2008, with foreign funds moving more than $14 billion into Indian equities this year.
Energy giant Reliance Industries (RELI.BO: Quote, Profile, Research) closed 0.9 percent higher at 1,956.75 rupees, continuing its recovery. The stock fell abut 20 percent in 10 sessions from Oct. 20, hitting a 3-½ month low on Tuesday, but has since risen more than 7 percent.
The sector index for public sector companies rose 3.9 percent, after the government on Thursday mandated more sales of shares by state firms and changed the rules on how it can use the proceeds, as it seeks to boost revenues and rein in a widening budget deficit.
State-run NMDC (NMDC.BO: Quote, Profile, Research) hit its upper limit of 10 percent while Steel Authority of India (SAIL.BO: Quote, Profile, Research) and Shipping Corp of India (SCI.BO: Quote, Profile, Research) rose 1.3 percent and 2.5 percent respectively. Engineering and construction firm Larsen & Toubro (LART.BO: Quote, Profile, Research) rose 2.2 percent to 1,575.70 rupees, after 4.2 million shares changed hands in a block deal at 1,566.30 rupees.
Tata Chemicals (TTCH.BO: Quote, Profile, Research) rose 5.3 percent to 278.15 rupees, after a senior company official said the chemical maker expects its fertiliser plant in the northern state of Uttar Pradesh to start commercial production by mid 2010.
Trucks and bus maker Ashok Leyland (ASOK.BO: Quote, Profile, Research) extended gains and rose 3.9 percent to 51.20 rupees after it said earlier this week its October sales rose 57 percent.
The top losers in the oil & gas space were Hindustan Oil (down 7.6%), Chennai Petroleum (down 5.5%), Jindal Drilling (down 2.9%), Reliance Industries (down 2.1%) and Essar Oil (down 1.4%).
The BSE Capital Goods Index (up 1%): The top gainers in the capital goods space were BEL (up 15.2%), Usha Martin (up 14%), BEML (up 9.6%), Dredging Corp (up 9.2%) and Jyoti Structures (up 8%).
The top losers were Alstom Projects (down 5.6%), Aban Offshore (down 3.9%), ABB (down 2.1%), Gammon India (down 1.9%) and Siemens (down 1.6%).
The Cement Sector: The top losers in the cement space were India Cements (down 8.4%), Mangalam Cement (down 5.1%), Madras Cements (down 4.9%), Prism Cement (down 4.4%) and Dalmia Cement (down 4.1%),
The top gainers were JK Cements (up 9.9%), Binani Indus (up 5.2%), Shree Cement (up 4.6%), Grasim (up 1.8%) and Birla Corp (up 0.1%).
A report released by IIFL during the week stated, "Cement prices in south and west regions have been falling steeply over the past two weeks, as the increase in supply is outstripping that in demand. At present, cement is cheapest in Hyderabad, at Rs123–145 per 50kg bag—down 18% in the past two weeks and 45% from the peak price reached in April 2009—the sharpest price fall in the past 15 years. According to dealers, price cuts have become a daily occurrence in the southern markets. In Gujarat, price declines have accelerated as supplies originally intended for exports have been diverted to the domestic market, given dwindling demand from the Middle East. Prices in the north have dropped by 2-3% in the past two weeks as supplies to the central region have reduced".
The Telecom Sector: The top gainers in the telecom space were Gemini Comm (up 25.3%), MTNL (up 2.7%) and Shyam Telecom (up 1.7%).
The top losers were Idea (down 9.2%), Tata Communication (down 6.9%), RCom (down 6.1%), WWIL (down 4.4%) and TTML (down 2%).
Bharti Airtel advanced 2.6% during the week. According to a reports released by IIFL during the week stated, "A revenue decline of 1% QoQ, strong cost management (30bp increase in EBITDA%), FX loss of Rs0.7bn; a reduction in tower capex guidance ($1bn to $0.7bn), Rs2.2bn tax write back and PAT drop of 7.8% QoQ to Rs23.2bn characterised 2QFY10. Management commented that they would not match prices, but Bharti has just released a 1p/s (on-net) and 1.2p/s (off net), following a recent Rs0.5/min on-net and Rs0.6/min off-net plan. These plans make no distinction between local and STD calls (per minute plan is for pre-paid with voucher of Rs77 for 1yr validity). We model Rs0.55/min RPM for FY10, 580bn mobile min in FY10 (little elasticity assumed) and trim EPS by 12%-18%. We re-iterate REDUCE rating with a TP of Rs312".
The Realty Sector (up 4.4%): The top gainers in the real estate space were HDIL (up 9.2%), Unitech (up 7.6%), Parsvnath (up 7.4%), Mahindra Lifespace (up 6.7%) and Peninsula Land (up 4.3%).
The top losers were Sobha Developers (down 8.2%), Omaxe Ltd (down 4.2%), Anant Raj Indus (down 1.4%) and Ansal Properties (down 0.2%).
The Metals sector (up 4.1%): The top gainers in the metals were Tata Steel (up 6.9%), Bhushan Steel (up 6.8%), JSW Steel (up 6.3%), Sunflag Iron (up 4.3%) and Lloyds Metals (up 3.2%).
The top losers in Metal were Ispat Industries (down 18.9%), Adhunik Metaliks (down 15.9%), Tata Sponge Iron (down 14.5%), Bhushan Steel (down 13.8%), Sunflag Iron (down 11.9%),
SAIL fell 1% during the week. IIFL in its report released during the week stated, "SAIL's 2QFY10 PAT at Rs16.6bn (down 17% YoY and up 25% QoQ) was ahead of our estimate (Rs15.7bn) but in line with consensus.
• The positive surprise came from write-back of employee cost provisions.
• SAIL's employee cost is unsustainably low and we expect it to increase by ~50% from this quarter's level.
• SAIL has the highest conversion cost among Indian companies, on account of its bloated employee base and inferior product mix.
• Support from cash balance cannot be taken for granted, as we expect SAIL to turn net-debt in FY11 once full payment of the increased wages as per Sixth Pay Commission has been made and capex has increased.
• At its current price, the stock is trading at PE of ~14x on FY11ii—at a significant premium to its historical trading band. We retain SELL".
Among the Sensex pack 19 stocks ended in positive territory while 11 stocks in negative territory. The market breadth indicating the overall health of the market remained strong as 1,944 stocks closed in green while 780 stocks closed in red and 63 stocks remained unchanged in BSE.
BSE REALTY indexwas at 3,993.68 up by 109.18 points or by (2.81%) The main gainers were Phoenix Mill up by (9.73%) at Rs.178.75, Anant Raj In up by (9.18%) at Rs.134.35, Parsvnath up by (6.05%) at Rs.112.15, Housing Dev up by (5.36%) at Rs.359.9, Orbitco up by (5%) at Rs.266.9.
BSE METAL index was at 14,507.50 up by 289.25 points or by (2.03%) The main gainers were Nmdc Ltd up by (10%) at Rs.338.4, Jai Corp Lim up by (9.98%) at Rs.180.65, Welsp Guj Sr up by (4.75%) at Rs.276.6, Sesa Goa Ltd up by (4.73%) at Rs.312.1, Gujara Nre C up by (3.74%) at Rs.61.
BSE BANKEX index was at 9,690.49 up by 166.65 points or by (1.75%) The main gainers were Yes Bank up by (6.01%) at Rs.253.9, Kotak Bank up by (5.98%) at Rs.760.6, Indus Ind Bk up by (5.33%) at Rs.127.35, Indian Overs up by (4.45%) at Rs.109.15, Bank Of India up by (3.46%) at Rs.365.8.
BSE CG index was at 12,985.81 up by 216.46 points or by (1.7%) The main gainers were Reliance Industrial Infrastruc up by (13.97%) at Rs.947.2, Usha Martin up by (12.02%) at Rs.71.3, Gammon Indi up by (7.94%) at Rs.235.05, Suzlonenergy up by (6%) at Rs.66.25, Beml Ltd up by (4.25%) at Rs.1022.9.
BSE AUTO index was at 6,518.39 down by 4.12 points or by (0.06%) The main losers were Herohonda M down by (1.98%) at Rs.1529.9, Tata Motors down by (1.06%) at Rs.569.55, Marutisuzuki down by (1.04%) at Rs.1473.35, Bajaj Auto down by (0.61%) at Rs.1452.85.
BSE PSU index was at 8,794.80 up by 331.03 points or by (3.91%) The main gainers were M M T C Ltd. up by (20%) at Rs.36146.85, St Trad Corp up by (14.84%) at Rs.354, Dredg Corp I up by (12.18%) at Rs.507.85, Rashtriya Chemicals & Fertiliz up by (11.76%) at Rs.73.65, Hind.Copper up by (10%) at Rs.256.35.
BSE OIL&GAS index was at 9,629.82 up by 76.75 points or by (0.8%) The main gainers were Aban Offsho up by (2.83%) at Rs.1279.35, Hindustan Petroleum Corp. Ltd. up by (1.35%) at Rs.352.15, Ril Nat Res up by (1.13%) at Rs.71.45, Bharat Petroleum Corporation L up by (1.01%) at Rs.510.25, Reliance up by (0.87%) at Rs.1956.75.
BSE IT index was at 4,453.45 up by 12.55 points or by (0.28%) The main gainers were Mphasis Ltd up by (6.92%) at Rs.723.85, Financ Techn up by (6.22%) at Rs.1346.75, Oracle Fin up by (6.06%) at Rs.2185.65, Aptech Ltd up by (4.77%) at Rs.183.3, Niit Ltd up by (2.87%) at Rs.60.85.
Infosys closed lower by 0.24% at Rs. 2,217.80. The company announced that it has teamed up with Oracle through the ''''BPO Powered by Oracle program'''', and is launching a comprehensive managed services platform for multifunction HR through its Infosys Business Platforms offering.
Sun Pharmaceutical surged 1.78% to close at Rs. 1,404.70. The company announced that USFDA has granted approval for an Abbreviated New Drug Application (ANDA) of its subsidiary for generic Acular ®, Ketorolac Trome
PSU stocks have flared up following Prime Minister Manmohan Singh approving divestment in PSUs t raise funds for social welfare. The Cabinet Committee on Economic Affairs' decision that all listed and profitable PSUs would have to maintain a minimum of 10% public shareholding has triggered hectic buying in the PSU space. The PSU index ended stronger by nearly 4%.
Realty, metal, bank and capital goods stocks were the other prominent gainers today. Select pharma, power and information technology stocks edged higher, while auto and FMCG stocks ended mostly subdued.
Jaiprakash Associates, the top gainer in the Sensex today, ended stronger by around 4.75%. Tata Steel moved up by over 3%. State Bank of India also ended up by over 3%. Sterlite Industries (2.25%), Larsen & Toubro (2.2%), DLF (2.15%), HDFC (1.95%), Sun Pharmaceuticals (1.8%) and Mahindra & Mahindra (1.05%) also closed with sharp gains.
Index heavyweight Reliance Industries (0.9%) ended well off the day's high. HDFC Bank, ICICI Bank, ONGC and Hindalco closed with modest gains.
Suzlon Energy (6.6%) had another good outing. Ranbaxy Laboratories ended with a gain of 4.2%. Punjab National Bank, Axis Bank, Unitech, HCL Technologies, SAIL, GAIL India and BPCL also closed with notable gains.
Tata Power shed 3.8%. Hindustan Unilever and Hero Honda ended lower by around 2%. ITC, Tata Motors, Maruti Suzuki and ACC lost 1% - 1.5%. Tata Consultancy Services, Infosys Technologies, Grasim Industries and Reliance Communications also closed on a weak note.
Nifty stock Idea Cellular ended 5.2% down. Ambuja Cements declined 2.35% to Rs 83.70. Reliance Capital, ABB, Cipla and Jindal Steel also ended in the negative territory.
Shares of state run MMTC (20%), State Trading Corporation (14.85%), Dredging Corporation (12.2%), Rashtriya Chemicals & Fertilizers (11.8%), Hindustan Copper (10%), NMDC (10%), Engineers India (8.25%),and NHPC (6%) ended with big gains. Neyveli Lignite Corporation and BEML also closed with sharp gains.
Scores of midcap and smallcap stocks rallied sharply on sustained buying support today. As a result, the market breadth was strong right through the session. Out of 2787 stocks traded on BSE, as many as 1944 stocks closed with gains. 780 stocks declined and 63 stocks ended flat.
Last Week Internals:
The Foreign Institutional Investors (FIIs) sold worth Rs11.46bn during the week. On the other hand, the Domestic Institutions were net buyers to the tune of Rs9.28bn during the week.
The top gainers: The top gainers in Sensex were ICICI Bank (up 10%), Reliance Capital (up 7.8%), Tata Steel (up 6.9%), Maruti Suzuki (up 6.7%) and Ranbaxy Labs (up 5.9%).
The Top Losers: The top losers in Sensex were Tata Power (down 9.4%), Ambuja Cements (down 5%), Wipro (down 5.2%), ITC (down 4%) and Hindustan Unilever (down 3.7%).
The BSE IT Index (up 0.5%): The top gainers in the IT sector were Financial Tech (up 16%), Mphasis (up 8.3%), Oracle Financial (up 5.3%) and Mahindra Satyam (up 3.2%).
The top losers were Sasken Communication (down 5.2%), Wipro (down 4.2%), TCS (down 1.9%) and HCL Tech (down 1.7%).
Patni Computer surged over 10.8% during the week after reports stated that L&T Infotech is planning to acquire the company.
Wipro was down by 5% during the week. The company acquired the business of Yardley in Asia, West Asia, Australia and certain African markets from UK-based Lornamead Group for Rs2.1bn.
According to a report released during the week, "Robust earnings upgrades (5-13% for FY10/11 for top 4 vendors) and stronger signs of a recovery (Wipro guided for 4.5% QoQ revenue growth for 3QFY10 at top end) sum up the review for the quarter. EBITDA margins continued to improve (50-150bps QoQ) on tight hiring and volume growth. That said, we believe most players' margins have peaked in 2QFY10. Going forward, wage hikes and rupee appreciation remain the key risks, in our view. The demand environment has not recovered fully (Lloyds and RBS are set for a further US$51bn bailout and CIT has filed for bankruptcy), but we believe business conditions are conducive to strong growth in FY11, as: 1) IT spending has been low for over a year now; 2) deal pipelines are increasing; and 3) project rampdowns from badly affected industries like technology and telecom have also largely stabilised. Wipro and TCS remain our top picks among large caps.
The BSE Consumer Index: The top gainers in the consumer durables space were Mirc Electronics (up 3.2%), Su-Raj Diamonds (up 2.4%) and Blue Star (up 1.4%).
The top losers were Videocon Industries (down 7.6%) and Samtel Color (down 2.6%).
The BSE Healthcare Index (up 3.3%): The top gainers in the Pharma sector were Torrent Pharma (up 21.4%), Zandu Pharma (up 10.5%), Wockhardt (up 10.2%) and Lupin (up 7.3%).
The top losers were Dishman Pharma (down 10.3%), Natco Pharma (down 6.5%), Glaxosmithkline (down 2.5%), Orchid Chem (down 1.7%) and Morepen Labs (down 0.7%).
The BSE Banking Index (up 4%): The top gainers in the banking space were Yes Bank (up 8.8%), OBC (up 7%), Allahabad Bank (up 6.7%) and Kotak Mahindra Bank (up 6.6%).
The top losers were Federal Bank (down 6.8%) and Union Bank of India (down 1.7%).
ICICI Bank was the top gainer during the week. The stock surged 10%. IIFL in a report released during the week stated, "ICICI Bank's 2QFY10 results show some positive sequential developments as CASA improved, operating expenses fell and NPLs too declined. However, these improvements are unlikely to result in a sustained re-rating of the stock. While CASA improved sequentially, NIM expansion of 10bps QoQ was below that witnessed at other banks. With loans down 14%YoY, we expect interest income to remain weak in the 2H. Provision charges will remain high in the foreseeable future so as to raise NPL coverage to the minimum required 70%. While ICICI is on the right path by shedding unprofitable assets and refocusing on building the deposit franchise, the medium term profit outlook remains impaired. We expect ROE to remain in single digits over the next 2 years. ICICI remains expensive on PE and PEG terms, while appearing cheap on P/Bx term.
SBI ended flat during the week. A report released by IIFL during the week stated, "SBI's 2QFY10 standalone net profit growth was relatively weak at 10%YoY while consolidated profits grew by 18%YoY. Associate banks' profits grew by 46%YoY. NII was up 12%QoQ driven largely by 25bps QoQ NIM expansion. ROE of 15.7% and ROA of 0.95% for 1HFY10 are respectable, but relatively weak compared to the peer group. Tier-I CAR remains comfortable at 9.8% and capital raising is unlikely to be required in the near future. Long standing concerns on low NPL coverage and low ROE remain. The stock has out performed both the Sensex and Bankex over the past three months and now trades at 1.5x FY11ii consolidated P/B.
The BSE Auto Index (up 3.3%): The top gainer in the auto space was Ashok Leyland. The stock rose over 16.5% during the week after the company reported a jump of 57% in its commercial vehicle sales at 5,333 units in October as compared to the same month in 2008.
Maruti Suzuki was up over 6.7% during the week after the company reported a 32.45% jump in total sales at 85,415 units in October compared to the same period last year.
Eicher Motors advanced 6% during the week after the company's commercial vehicles sales rose 71% in October. It sold 2,024 trucks and buses in the month, compared with 1,183 units in the year-ago period.
M&M gained 4.8% after the company's utility vehicle sales grow 32% in October.
Bajaj Auto gained 4.1% during the week after the company's motorcycle sales rose 52% in October 2009.
The top losers were Swaraj Mazda (down 2.3%) and Hindustan Motors (down 0.5%).
Hero Honda was down 1% during the week after the company reported a marginal increase in October sales at 354,156 units as against 352,449 units in the same month last year.
The BSE Oil & Gas Index (up 2.1%): The top gainers were GSPL (up 8.3%), MRPL (up 4.9%), Shiv-Vani Oil (up 2%) and HPCL (up 1.6%).
Cairn India advanced 2.5% during the week, a report released by IIFL during the week stated, "Cairn India's flagship Rajasthan block is well set to reach production of 175kbpd by CY2011. Pricing for Rajasthan crude—benchmarked to Bonny Light, with appropriate discounts—would benefit from narrow light-heavy spreads on OPEC production discipline. Cairn's balance sheet is adequately funded to execute the Rajasthan project, with operating cash flows supporting exploration activities. While uncertainties remain on Rajasthan cess and offtake of peak crude volumes from Rajasthan, Cairn's pipeline provides access to 75% of India's crude refining capacity.
Cairn's strong leverage to crude, along with strong operating cash, makes it attractive, in our view. Cairn's current stock price is 6.8x its stable cash flow per share.
India will "wind" down fiscal stimulus from 2010 as growth in Asia's third-largest economy recovers to more than 7 percent, Prime Minister Manmohan Singh said today.
"There are clear signs of an upturn in the economy," Singh told the World Economic Forum's India Economic Summit in New Delhi. "Like other countries we resorted to a significant stimulus and we will take appropriate action next year to wind this down."
Singh's comments came after the U.S., Japan, Australia and other Group of 20 nations said it's too early to withdraw fiscal steps designed to support global recovery. India's central bank last month began to tighten monetary policy amid concerns that an inflation flare-up may hit the pockets of close to 800 million Indians who live on less than $2 a day.
"The developed countries seem to be very cohesive in thinking that stimulus should continue," Rana Kapoor, chief executive officer at Mumbai-based Yes Bank Ltd. said in an interview with Bloomberg News today. "Every nation needs to watch out for country-specific conditions and take actions best suited for them, and that's what India is doing."
India is among the first G20 member to tighten policy as the central bank forecasts inflation to accelerate to 6.5 percent by March 31 from 1.51 percent. Asset prices have been climbing as well, evidenced by the 68 percent rise in the key Sensitive index on the Bombay Stock Exchange.
'Calibrated Way'
The Reserve Bank of India on Oct. 27 ordered lenders to keep more cash in government bonds, raising the statutory liquidity ratio to 25 percent from 24 percent. Governor Duvvuri Subbarao said it was appropriate for the central bank to exit monetary stimulus in a "calibrated way."
India may consider rolling back fiscal stimulus early in the year starting April 1, Montek Singh Ahluwalia, deputy chairman of the Planning Commission, said in New Delhi today. This would help the government reduce a budget deficit estimated to reach a 16-year high of 6.8 percent of gross domestic product this year.
Singh said India's economy may grow 6.5 percent in the year ending March 31, constrained by weak monsoon rains that hurt crop production. With better rainfall in the four-month season starting June 2010, the economy may expand over 7 percent in the year commencing April 1, he said.
Global Recovery
"The worst is behind us though the path of global recovery will be long and uncertain," Singh said. "India has been able to face the global economic downturn better than most other countries in the world."
The world economy may shrink 1.1 percent in 2009, according to the International Monetary Fund. IMF Managing Director Dominique Strauss-Kahn warned Oct. 23 of the risk of a double- dip recession if countries implement exit strategies too soon.
U.S. Treasury Secretary Timothy Geithner told reporters after a meeting of G20 finance ministers in Scotland yesterday that "it's too early" to "lean against the recovery." Government should continue stimulus programs until the recovery is assured, he said.
Japanese Finance Minister Yoshihiko Noda said it's too soon to start unwinding measures, saying the recovery in his country "still lacks sustainability." Australian Treasurer Wayne Swan said today government stimulus shouldn't yet be retracted as winding up the program would threaten jobs and economic recovery.
Countries should withdraw economic stimulus too late rather than too early because the global recovery is likely to be "sluggish" and inflation will stay low, the IMF said in a report prepared for this weekend's meeting of G20 officials in St. Andrews, Scotland.
"World demand will pick up only slowly," Singh said today. "Our strategy therefore must aim at sustaining a high rate of growth on the strength of strong domestic demand."
Fin sector reforms next on agenda
After unveiling a bold PSU sell off plan, Prime Minister Manmohan Singh today said his government is better placed now to unleash financial sector reforms, but the fiscal stimulus will be phased out next year.
"We are also better placed than any time in the recent past to push the reform process forward... We need to ensure that financial system can provide the finance needed for our development... This opens up a broad agenda for reforms," he said inaugurating the India Economic Summit here.
Addressing the global CEOs and domestic industry, the Prime Minister said that the government would make a gradual but a steady progress in the financial sector reforms.
The government would build a political consensus for passage of legislations required for reforms in the insurance and pension sector.
He, however, announced that the government will take steps to gradually withdraw the financial sops given last year in the wake of the global financial crisis.
"Like other countries, we resorted to a significant stimulus and we will take appropriate action next year to wind this down," Singh said.
His assertion coincides with the meeting of the G-20 Finance Ministers in Scotland which has on its agenda the exit strategy for global stimulus.
Seeking higher level of FDI, the Prime Minister said the policy would simplify the procedures further. "Our policy will be guided by the desire to make India even more attractive for FDI," he said.
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MARKET BUZZ:
(May not be useful for day-traders.)
VST Industries-Value Play
BSE 509966; CMP Rs 489.75, FH FY10 EPS Rs 27
Cash in Hand Rs 240 crore
Market Cap Rs 600 crore approximately
Promoter/Institutional ownership-90 per cent
Cigarette producer VST has had a superb first half performance for FY10, with Revenues at Rs 560 crore (Rs 447 crore), a growth of 25 per cent and after tax profits at Rs 41 crore (Rs 22 crore) a growth of 86 per cent. Consequently non-annualised first half EPS has risen to Rs 27 (Rs 14), which is a stunning earnings growth considering FY09 profits of Rs 62 crore and an EPS of Rs 40. If current trends persist, VST should report FY10 EPS close to Rs 52 giving the stock a very moderate price target of Rs 600 in the short term. If VST gets the same PE as industry monolith ITC, the VST stock could trade upwards of Rs 1000 by March 2010.
What investors need to keep in mind is the massive amounts of cash that VST holds. On a Equity of Rs 15 crore and a market cap of Rs 600 crore, the cash holdings represented by investment debt oriented mutual funds exceeds Rs 200 crore or more than 30 per cent of the current market cap lies in cash. Secondly, the Reserves stand at Rs 260 crore giving the scrip a Book Value of Rs 183.
Thirdly, and most importantly nearly 90 per cent of the stock is held by Promoters Rothmans International, and ITC controlled investment companies Russell Credit and Bright Investments and another substantive chunk with Domestic Long Only FIs. A very nominal proportion of about 4-5 per cent of the Equity is held sparsely amongst a large number of small investors.
Thus both on value and growth VST is a Buy. Most importantly, VST has integrated it's operations with a large body of tobacco farmers with 10 year contracts, in the States of Karnataka and Andhra..both being semi-arid states suitable for growing high quality virginia and burley tobaccos that employ over 4 mn individuals.
Growth inspite of the GOI efforts
It has been the GOI policy to scuttle growth of the tobacco industry for as long as investors can remember, and yet inspite of frequent changes in the Excise structure, both ITC and VST-the industry leaders have been able to grow turnover and increase profits. This massive shift in profitability has come from moving consumers up the value chain, from non filter to filter tips and from micro segment to long cigarettes.
Investors would recall that excise duty rates were increased by an unprecedented two and a half times in the Budget of 2008, to five times in respect of non-filter segments where VST has a sizeable presence, while leaving the rates for the filter tipped cigarettes untouched. This resulted in a total upheaval in the traditional pricing pattern of cigarettes in the price sensitive lower price segments, whereby micro cigarettes became equated to regular size filter tipped and regular plain cigarettes to long-size filter cigarettes.
VST has been able to capture market share in new geographies through new brands, to the extent of 80% of the affected plains and micro segments. It is pertinent to note that the industry, where some of the competitors have been better represented in terms of filter volumes, was also affected and during the financial year the industry ended with a marginal negative growth.
As against which VST has been able to build a substantial base in the filter segment and on date the percentage of representation by filter segment in the total portfolio is over 92% and if a comparison is made on percentage terms, the gain in filter segments has been to the extent of virtually 100%.
The Indian cigarette industry is now virtually filterised and in the case of VST, filterisation has increased steeply and now represents 92% by volume.
Charminar launched in filter format was able to garner substantial volumes.
Moments and Charms Virginia Filter were two brands which stood out improving the volume base.
Moments was able to garner substantial volumes in relatively new markets of south/north.
VST is also working on launches of several value-for-money brands in price segments that offer opportunities.
VST has established special tobaccos for niche markets, which, are being produced by the large farmer base of the Company. This has helped in optimizing the turnover and profit and also helped in economic uplift of the backward regions.
VST has entered into long term (10 years) tie ups with potential customers for Oriental Tobacco development and marketing. Already it has completed 3 years of commercial operations, and now looks forward to continued export growth for next 3 years.
VST has established markets with premium customers for Air Cured Burley in new areas apart from regular Air Cured Burley and Fire Cured tobacco exports, which will ensure steady export growth in the years to come.
VST continues to retain the premier status in Sun/Air/Fire cured tobaccos. There is however increased incidence of freelancers getting into development areas due to spurt in demand for Sun/Air/Fire cured tobaccos.
VST's farmers continue to grow tobacco with lowest pesticide residue levels and well within international standards.
(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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