Market Outlook 23rd July 2009

 

Intraday Calls 23rd Jul 2009

Buy Maruthi-1214 for a target 1255-70 stop loss 1200

Buy Voltas-135 for a target 143-149 stop loss 132

Buy BATA-166 for a target 175 stop loss 163

Positional Calls

Buy GujSidcem-20 for a target 23-26 stop loss 19

Buy Parsvanth-100 for a target 125 stop loss 95

 

 

Stocks with +ve Bias:  Aurobindo Pharma (sl 575), sterlite (sl 586), Sail (sl 159) Unitech & Moser Baer  (SL 78)

Stocks for Investment: IDBI, Balrampur chini , Bajaj Holdings, Emco

 

NIFTY FUTURES LEVELS

SUPPORT

4398

4378

4330

4308

4240

RESISTANCE

4414

4443

4513

4581

4604

4672

Buy BIRLA,ING VYSYA BANK  

 

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

DCHL, Sesa Goa, Punj Lloyd, Yes Bank, GSPL, Wipro, Aurobindo Pharma, Jindal Steel, HCL Tech & MPHASIS.

And this is list of 10 Weak futures:

Pantaloon, Chambal Fert, Suzlon, PYC, Orchid Chem, GTL Infra, R Com, FSL & Praj Industries.
 Nifty is in Up Trend.

 

NIFTY FUTURES (F & O): 
 Below 4398-4400 zone, selling may continue up to 4378 level and thereafter slide may continue up to 4330-4332 zone by non-stop.

Hurdles at 4415 & 4443 levels. Above these levels, expect short covering up to 4511-4513 zone and thereafter expect a jump up to 4579-4581 zone by non-stop.

Sell if touches 4602-4604 zone. Stop Loss at 4670-4672 zone.

On Negative Side, break below 4308-4310 zone can take it up to 4240-4242 zone. If breaks and sustains this zone then downtrend may continue.
 
Short-Term Investors:
Bullish Trend. 3 closes above 3906 level, it can zoom up to 4600 level by non-stop. 

BSE SENSEX:  
Lower opening expected. Recovery should start. 

Short-Term Investors:
Short-Term trend is Bullish and target at around 15379 level on upper side.
Maintain a Stop Loss at 13220 level for your long positions too.
 

POSITIONAL BUY:
Buy BIRLA CORP (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 266 level can be used to buy. If uptrend continues, then it may continue up to 279 level for time being. 

If crosses & sustains at above 287 level then uptrend may continue.

Keep a Stop Loss at 258 level for your long positions too.
 
Buy ING VYSYA BANK (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 200 level can be used to buy. If uptrend continues, then it may continue up to 208 level for time being. 

If crosses & sustains at above 216 level then uptrend may continue.

Keep a Stop Loss at 192 level for your long positions too.
 

FII DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	22-Jul-2009	2811.89	2745.05	+66.84

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	22-Jul-2009	1314.55	1539.13	-224.58

Global Cues & Rupee
The Dow Jones Industrial Average closed at 8,881.26. Down by 34.68 points.
The Broader S&P 500 closed at 954.07. Down by 0.51 points.

The Nasdaq Composite Index closed at 1,926.38. Up by 10.18 points.

The partially convertible rupee closed at 48.52/53 per dollar on yesterday, weaker than Tuesday's close of 48.42/43.
 
 Interesting findings on web:
The Dow Jones industrial average declined, halting a seven-day winning streak.

The S&P 500 briefly hit a 2009 intraday high of 959.83. But both the S&P and the Dow industrials were reined by disappointing results from banks, including Wells Fargo & Co <WFC.N, down 3.6 percent at $24.45.

According to Standard & Poor's, two thirds of the S&P 500 companies that already reported earnings have beaten expectations. Stocks have gained roughly 8% in the last seven trading days, even after the rally paused Wednesday.

Strong profits from NVR Inc (NVR.N) sparked a run-up in home builders' stocks. The Dow Jones U.S. home construction index .DJUSHB shot up 5.2 percent. NVR's stock jumped 5.4 percent to $584.17.

Starbucks surged $2.70, or 18.4 percent, to $17.39 after the coffee chain shut stores, laid off workers and cut other costs to produce fiscal third-quarter results that topped expectations.

Bank of New York Mellon (BK.N) slid 6.2 percent to $27.32 after the world's largest trust bank posted a 43 percent drop in second-quarter profit.

Allegheny Technologies lost 6.29, or 18%, to 28.50, the S&P 500's largest percentage decliner. The metals processor swung to a second-quarter loss on much lower-than-expected revenue and said it will just break even in the current quarter, not post a profit of 24 cents a share as analysts were expecting.

Genzyme lost 4.70, or 8.4%, to 51.21 on the Nasdaq. The biotech concern's second-quarter profit more than doubled on 5% revenue growth, but an anticipated revision to its 2009 earnings came in below already lowered Wall Street estimates.

Aircraft maker Boeing ( BA - news - people ) saw profit rise 17% last quarter, besting Wall Street's estimates.

Beset by production delays on its new 787 Dreamliner, the Chicago firm said it will revise its full-year forecast and update its plans for the 787. Sales increased a bit to $17.2 billion in the second quarter, aided by its work for the military. Shares lost $1.03, or 2.4%, to $41.99.

In pharmaceuticals, Eli Lilly & Co. ( LLY - news - people ) and Pfizer ( PFE - news - people ) beat analyst guesses for quarterly profits and both firms upped their forecasts for the full year. Eli Lilly said earnings increased 21% from a year ago, but its shares fell 1.9%, while Pfizer was up 1.1% despite a 19% decline in earnings from 2008.

Giant bank Wells Fargo ( WFC - news - people ) reported that quarterly profit increased by 47% as its purchase of Wachovia boosts business in the Eastern U.S., but investors soured on the firm's rising number of bad loans. Wells Fargo shares dropped 90 cents, or 3.6%, to $24.45.

Morgan Stanley ( MS - news - people ) lost $1.2 billion in the quarter, more red ink than investors expected, even as the firm repaid its government TARP loans. Analysts expect a rocky finish to 2009, but predict the firm will return to profitability in 2010. Shares of Morgan Stanley gained 2 cents, or 0.1%, to $27.58.

Also on the climb is Linear Technology. The California-based chip maker beat market expectations with its fiscal fourth quarter earnings per share of 25 cents.

Fellow computer chip maker Advanced Micro Devices (AMD) continues to struggle in its fight against industry giant Intel,however. AMD posted its third consecutive quarter of declining sales and also disappointed the market with a larger than expected second quarter loss.

Drug maker Pfizer was wanted after announcing a slide in profits that was not as severe as analysts had been expecting.

Housebuilders KB Home and DR Horton got a lift from the Federal Housing Finance Agency which said house prices rose 0.9% in May from April's levels, although the figure was still down 5.6% from a year earlier.

The Nasdaq rose on Wednesday for the 11th straight day. As Apple and Yahoo helped the Nasdaq Composite Index.

Their advance helped extend the Nasdaq's winning streak -- now the longest such stretch since September 1996.

Apple (Nasdaq) rose $5.23, or 3.5%, to $156.74, its highest close since last September. After robust sales of laptops and iPhones pushed its profit and revenue above what analysts had expected.

Wireless chip and technology supplier Qualcomm Inc (QCOM.O) on Wednesday issued a revenue target for the current quarter that was below Wall Street expectations.

Qualcomm also said it expects South Korean regulators to hit it with a "substantial" fine due to charges of anti-competitive business practices there.

Qualcomm's shares fell to $46.10 in after-hours trading from $48.45 at the close on Nasdaq.

Trading was slow before Thursday's reports on weekly initial jobless claims and existing home sales. 

Wall Street's biggest banks are setting aside billions of dollars more to pay their executives and other employees just months after these firms were rescued with a taxpayer bailout, renewing questions about compensation practices in the aftermath of the financial crisis.

But Wall Street is on track to pay its employees as much as, or even more than, in the pre-crisis days. So far this year, the top six U.S. banks have set aside $74 billion to pay their employees, up from $60 billion in the corresponding period last year.

MORGAN Stanley reported a worse-than-expected second quarter loss yesterday on the back of charges linked to its government bailout and tightening credit spreads.

The Wall Street bank slumped to a loss of $1.26bn (£770m), or $1.10 a share, during the three months to the end of June, as it incurred an $850m charge on the $10bn it took from the US government's Troubled Asset Relief Programme (Tarp).

Without one-off charges, the bank's loss was $159m.

A $734m decline in the value of its real estate investments also dented Morgan Stanley's bottom line.

Revenues fell from $6.1bn in the second quarter of 2008 to $5.4bn as the bank was hit by a $2.3bn reduction in revenues due to the negative impact of debt-related credit spreads.

Integration costs relating to Smith Barney, the brokerage joint venture the bank bought into with Citigroup, totalled $245m.

Chief executive John Mack said he was unhappy with the performance in fixed income, an area in which rivals Goldman Sachs and JPMorgan Chase have booked huge profits.

"We are not satisfied with our performance in... key areas of fixed income trading and in asset management, and we are taking steps to deliver better results in those businesses," he said in a statement.

But he said the bank would have made a profit if not for the one-off repayment of Tarp and the cost of tightening spreads on its own debt.

And Mack said that a $6.9bn stock sale during the quarter would help drive the bank to a healthy tier one capital ratio at year end of 15.8 per cent.

Despite the losses, the bank put aside $3.9bn to pay staff, up from $3.1bn during the same period last year.

Federal Reserve Chairman Ben Bernanke reiterated in testimony to the Senate Banking Committee on Wednesday that the U.S. economic outlook is improving, but that supportive policies would be necessary for a while to prevent rising joblessness from sapping the recovery.

Federal Reserve Chairman Ben Bernanke wrapped up his semiannual two-day testimony to Congress on the nation's monetary policy with an appearance before the Senate Banking Committee Wednesday. Bernanke said unemployment was the most pressing issue threatening the U.S. economy, and he assured lawmakers that the central bank could handle multiple new roles as a regulator.

Meantime, Federal Reserve Chairman Ben Bernanke was back on Capitol Hill on Wednesday. Bernanke told the Senate Banking Committee that the central bank must remain independent.

He said that any audits could alarm financial markets and push borrowing costs higher.

Economy: One day after telling a House panel that the economy was starting to stabilize but that housing and labor markets remain strained, Bernanke mostly repeated his testimony before the Senate Banking Committee on Wednesday.

Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.55% from 3.49% Tuesday. Treasury prices and yields move in opposite directions.

The dollar was mixed, while gold prices rose.

Light, sweet crude fell 21 cents to settle at $65.40 a barrel on the New York Mercantile Exchange.

US President Barack Obama on Wednesday said the US financial system has stabilized, but warned Wall Street not to return to the risky practices that brought it to the brink of collapse last year.

"One of the success stories of the past six months is that we really have seen a stabilization of the financial system," Obama said at a White House press conference. "People are no longer talking about the financial system falling off a cliff."

But with many US banks reporting surprising quarterly profits last week, Obama said he was concerned the Wall Street "culture" that provoked the global financial crisis was still in place.

"It's a good thing if (banks) are profitable again," Obama said. "But what we haven't seen I think is the kind of change in behaviour and practices that ensure that we don't find ourselves in the same fix again."

Obama did not give specifics about what practices banks were now repeating. But he touted his proposed overhaul of the financial regulatory system as the only means to keep US banks from continuing the mistakes of the past.

US banks have been blamed for taking careless risks in the housing market over the past decade. Many offered loans to homeowners that could not afford them, while not maintaining enough reserves to guard against a housing market crash that began in 2006.

There has also been public outrage over millions of dollars in bonuses paid to executives at banks that were forced to turn to a government bail-out in October to survive the financial crisis. Many banks have now paid those loans back.

Obama said he hoped to give shareholders a greater say in the salaries and bonuses of executives. He also suggested he could back a plan to charge banks a fee for making riskier loans - a means of protecting taxpayers from footing the bill.

"If we don't pass financial regulatory reform, banks are going to go back to the same things that they were doing before," Obama said.

The Treasury Department earlier Wednesday sent the bulk of its proposal for regulatory reform to Congress.

The administration wants to create a "council" of regulators to monitor risks to the entire financial system.

Obama also hopes to get new powers to step into major banks before they collapse and give the US central bank more authority to keep tabs on the country's largest financial institutions. 

U.S. President Barack Obama on Wednesday appealed for national support to his healthcare reform that has been hit by strong opposition from Congress, industries and the public.

"Even as we rescue this economy from a full-blown crisis, we must rebuild it stronger than before," said the president at a national TV press conference. "And health insurance reform is central to that effort."

Noting that the healthcare reform "fits into our broader economic strategy," Obama warned that if the United States cannot control costs on healthcare, it will not be able to control its deficit.

"If we do not reform health care, your premiums and out-of-pocket costs will continue to skyrocket. If we do not act, 14,000 Americans will continue to lose their health insurance every single day."

In recent weeks, Obama has stepped up his efforts to push forward his healthcare reform at Congress, healthcare industries and communities despite concerns on tax raise and other backfire effects that the reform might cause.

According to Obama's plan, the reform is aimed at curbing rapidly rising costs and expanding health insurance coverage to the 46 million uninsured Americans.

Obama admitted at the press conference that he realized "all the charges and criticisms being thrown around in Washington," and many Americans' doubts on their benefit from the reform.

Besides the 47 million Americans who have no health insurance, the reform is also "about every American who has ever feared that they may lose their coverage if they become too sick, or lose their job, or change their job."

"It's about every small business that has been forced to lay off employees or cut back on their coverage because it became too expensive," he said. "And it's about the fact that the biggest driving force behind our federal deficit is the skyrocketing cost of Medicare and Medicaid."

The healthcare reform has become a hard sale at Congress recently as many Republicans and even some conservative Democratic lawmakers were hesitating to lend their support to the bill.

However, Obama emphasized some agreements he has reached with Congress, including the agreement that the reform will provide Americans with more security and more stability, prevent insurance companies from dropping their coverage if they get too sick, and limit the amount insurance companies can force them to pay for their medical costs.

He also warned of the possibility of the reform becoming "the game of politics," citing some Republican strategists' remarks to "go for the kill" of the bill.

Obama has set a timetable for Congress to vote on the healthcare reform bill before its August recess. However, the bill, which has been approved by two key panels in the House, has not yet been set for vote by the whole floor.

The United States is the only major industrialized nation without a comprehensive national health care plan. Most Americans rely on private health insurance partly funded by their employers, but they lose the insurance should they become unemployed.

Official statistics showed that U.S. healthcare now consumes 2.2 trillion US dollars a year, nearly 7,471 dollars per person, which equals 16 percent of GDP with a projected rise to 25 percent by 2025. 

President Barack Obama on Wednesday reiterated that the U.S. troops will completely withdraw from Iraq by the end of 2011 as scheduled, and that the United States supports Iraq's political reconciliation process.

Asia:

The 225-issue Nikkei Stock Average gained 12.81 points, or 0.13 percent, from Wednesday to 9,735.97. The broader Topix index of all First Section issues on the Tokyo Stock Exchange was up 0.88 point, or 0.10 percent, to 907.46.

Gainers were led by rubber products, nonferrous metals, and glass and ceramics issues. Major decliners included mining, insurance and real estate issues.

Amid a lack of strong trading cues, stocks started on a weak note with some investors taking profits from the Nikkei's 7.4 percent rise on a six-day winning streak through Wednesday. The weak dollar, staying below Japanese exporters' average assumed rate of around 95 yen, also weighed on the market, brokers said.

Meanwhile, the downside found support as "hopes for an economic recovery remains strong" and some investors bought on the anticipation of a further rise in the near term, said Fumiyuki Nakanishi, chief equity strategist at SMBC Friend Securities Co.

"The market is likely to be stuck around (the Nikkei's) 9,700 for the rest of the day, hemmed in a narrow range of about 50 points,"Nakanishi said.

Many market players stayed on the sidelines as they await a slew of key Japanese second-quarter corporate earnings results, starting with telecommunications operator KDDI Corp. later Thursday, for a clearer outlook on economic prospects, the brokers said.

Hong Kong shares opened higher Thursday, with resource shares helping lead the advance. In early trading, the benchmark Hang Seng Index was up 1.28%, while the Hang Seng China Enterprises Index was up 1.51%. China Petroleum & Chemical Corp., better known as Sinopec /quotes/comstock/22h!e:386 (HK:386 6.86, +0.23, +3.47%) rose 4.8% after Nomura said the Chinese energy major's first-half net profit could rise more than three-fold, according to a research note cited by Dow Jones Newswires. Cnooc Ltd. /quotes/comstock/22h!e:883 (HK:883 10.22, +0.14, +1.39%) rose 1.4%, while PetroChina Co. /quotes/comstock/22h!e:857 (HK:857 8.94, +0.14, +1.59%) was up 1.4%. Jiangxi Copper /quotes/comstock/22h!e:358 (HK:358 15.56, +0.70, +4.71%) also got a 2.6% boost.

INVESTMENT VIEW

Abbott Labs: If Only It Drew More On The Parent's Pipeline

BSE 500488; CMP Rs 489.45  
Abbott Labs Indian operations can hardly be faulted. Each and every product launched by Novartis under the new product patent regime has been challenged by local drug-mixers read generic copiers. With it's drug eluting stents and the multi-billion rheumatoid arthritis drug Humira, Abbott could well be a Rs 750 stock..The sufferers are of course, the domestic investors and the domestic sick, which are denied treatment due to cagey laws.
 

Abbott Laboratories management has suggested that by 2012 sales of Humira will reach $9 billion, up from half that in 2008. Analysts at Credit Suisse describe themselves as "skeptical."

 

Credit Suisse is worried that increasing competition, particularly newly released Simponi, will slow Humira's growth. "While the company may be able to obtain their $9-$10 billion sales expectation for 2012, this will only be possible if the company executes flawlessly," reads a July 10 report.

 

Humira represents a huge portion of Abbot's revenue growth potential. Credit Suisse says Humira will account for 20% of growth over the next five years at a minimum and could add up to as much as 67% of growth unless Abbott comes up with a new blockbuster. Further, warns Credit Suisse, Abott's other big drugs like Vicodin PR and its cholesterol suite aren't growing quickly enough to cover any Humira slowdown.

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
 
--
Arvind Parekh
+ 91 98432 32381

Market Outlook 22nd July 2009

NIFTY FUTURES LEVELS

RESISTANCE

4501

4529

4555

4564

4590

SUPPORT

4470

4463

4444

4417

4391

Buy MPHASIS,UNION BANK

 

NIFTY FUTURES (F & O):  
Above 4501 level, expect short covering up to 4527-4529 zone and thereafter expect a jump up to 4553-4555 zone by non-stop.

Support at 4470-4472 zone. Below this zone, selling may continue up to 4463 level and thereafter slide may continue up to 4444-4446 zone by non-stop.

Below 4417-4419 zone, expect panic up to 4391-4393 zone by non-stop.

On Positive Side, cross above 4562-4564 zone can take it up to 4588-4590 zone. Supply expected at around this zone and have caution.
 
Short-Term Investors: 
 Bullish Trend. 3 closes above 3906 level, it can zoom up to 4600 level by non-stop. 

BSE SENSEX:  
Higher opening expected. Recovery should start. 
Short-Term Investors:
 
Short-Term trend is Bullish and target at around 15379 level on upper side.
Maintain a Stop Loss at 13220 level for your long positions too.
  
POSITIONAL BUY:
Buy MPHASIS (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 420 level can be used to buy. If uptrend continues, then it may continue up to 430 level for time being. 

If crosses & sustains at above 438 level then uptrend may continue.

Keep a Stop Loss at 412 level for your long positions too.
 
Buy UNION BANK (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 254 level can be used to buy. If uptrend continues, then it may continue up to 260 level for time being. 

If crosses & sustains at above 265 level then uptrend may continue.

Keep a Stop Loss at 248 level for your long positions too.
 

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

HCL Tech, sesa Goa, Wipro, DCHl, Grasim, Tech Mahindra, Maruti, Punj Lloys, Voltas & MPHASIS. .

And this is list of 10 Weak futures:

Suzlon, Orchid Chem, pantaloon, Moser Bear, Bargarjuna Fert, Sintex, Chambal Fert, RCom, GTL Infra, Sterlin Bio.
 Nifty is in Up Trend.

 

FII DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	21-Jul-2009	2392.5	2643.36	-250.86

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	21-Jul-2009	1216.88	1224.32	-7.44

 

SPOT LEVELS TODAY

	4469.10	( -0.74 %)	-33.15
		1	2	3
Resistance		4516.53	4563.97	4603.93
Support		4429.13	4389.17	4341.73

	15062.49		( -0.85 %)	-128.52
			1	2	3
Resistance			15212.51	15362.52	15490.84
Support			14934.18	14805.86	14655.85

Global Cues & Rupee  
The Dow Jones Industrial Average closed at 8,915.94. Up by 67.79 points.
The Broader S&P 500 closed at 954.58. Up by 3.45 points.

The Nasdaq Composite Index closed at 1,916.20. Up by 6.91 points.

The partially convertible rupee ended at 48.42/43 per dollar on yesterday, weaker than 48.21/22 at close on Monday.
 
 Interesting findings on web:
Dow Logs 7th Straight Gain.

It was the Nasdaq's 10th straight gain — its longest streak in 12 years.

The Dow Jones Industrial Index rallied to close in positive territory as a solid profit from Caterpillar eclipsed unease about the company's outlook for the current quarter, while both the Nasdaq and the S&P 500 clung to tiny gains.

In early trading, investors were encouraged by another round of strong profit reports from major bellwethers that included drug maker Merck & Co, but that optimism was met with a dose of reality when heavy equipment maker Caterpillar said it expected a "challenging" third quarter.

Shares in Caterpillar closed up 7.72 per cent at $39.48 gave the biggest boost to the Dow, but were off the day's high following cautious comments.

U.S. stocks rose, extending the Dow Jones Industrial Average's longest rally in two years as Federal Reserve Chairman Ben S. Bernanke said there are signs the economy is stabilizing. Treasuries climbed the most in two weeks and the dollar gained.

Cautious comments on the economic outlook by Ben Bernanke, Federal Reserve Chairman, also weighed on stocks. The Fed Chairman, delivering his twice-yearly testimony to the US Congress, said that American unemployment was set to remain high into the year after next. This could sap fragile consumer confidence and undermine what was likely in any case to be a fragile and anaemic recovery, he warned.

Bernanke found himself defending the Fed's ability to act as the broad overseer of financial regulation, in the first stop of his semiannual two-day tour of Congress. The central bank chief also argued that an exit strategy is in place for the Fed to dial back the various facilities it created, when the crisis was at its deepest, to pump liquidity into the U.S. financial system and has sustained in an effort to restart economic growth.

Even while describing exit strategies, Bernanke noted that the Fed expects to keep its benchmark federal funds rate at its historically low levels of 0.25% or lower for an extended period of time. Traders in the fixed-income market were scooping up longer-dated Treasury bonds during Bernanke's question-and-answer session with lawmakers, sending the yield on the 10-year note down to 3.49%, from 3.61% Monday.

Results from DuPont, the chemical maker and Merck & Co, the drug company, came in ahead of Wall Street forecasts.

Coca-Cola Co (KO) fell $0.68. The company in with second quarter results, $0.92 in earnings, down from $1.10 last year. The company also had a shortfall in revenues and it sees third quarter income dropping 12 to 14 percent from last year.

Another Dow stock, United Technologies (UTX) off $1. Second quarter earnings fell to $1.05 from $1.32 last year, but that was a penny better than expected, but revenues were down 17 percent.

Merck (MRK) still another Dow stock, off $1 -- up $1.71. Second quarter earnings, $0.83, down from $0.86 last year, but that was $0.06 better than the Street was expecting and the company's upbeat about its upcoming merger with Schering-Plough.

And then Dupont Co (DD) a penny loss. The company had second quarter earnings excluding items of $0.61. That was $0.08 above the Street estimate.

Monsanto (MON) had a good day, up $3.52. The company received U.S. and Canadian approval for its Smartstax corn seed technology and that could put it on the market by as early as next year.

Freeport-McMoran Copper & Gold (FCX) up $1.17. Second quarter earnings fell to $1.38 from $2.25 and that was due largely to lower copper prices in the period, but the Wall Street estimate wasn't $1.38. It was for only $0.72, hence the stock higher.

China today launched an unprecedented plan to offer hefty subsidies to independent solar power projects and that had the whole sector strong. LDT, LDK Solar Co (LDK) I should say, Suntech Power (STP), Trina Solar ltd (TSL) and Yingli Green Energy (YGE) all doing well, better than $1 gains.

Apple (AAPL) topped the active list and actually closed down $1.40, but after those spectacular third quarter earnings, the stock went to $158 a share in after hours.

Cisco Systems (CSCO) $0.44 gain.

Microsoft (MSFT) $0.30 rise there.

Google (GOOG) fell $2.27.

Intel (INTC) showed no change on the day.

Human Genome (HGSI) up another $1.33 after jumping over $9 or 270 percent yesterday on news the company's lupus treatment is effective. Today UBS financial issued a "buy" and the Bernstein research has a $17 a share target.

Finally, Yahoo! ( YHOO - news - people ) posted a second-quarter profit of 10 cents a share. This marks the first quarterly earnings increase since the beginning of 2008. Tougher cost controls imposed by its recently hired chief executive Carol Bartz seemed to help offset further erosion in its advertisingsale.

Banks stumbled after Regions Financial Corp., Comerica Inc. and Zions Bancorp posted second-quarter losses that stirred worries about rising loan defaults, a persistent concern for banks as unemployment approaches 10 percent.

Technology shares could drive trading on Wednesday. Chipmaker Advanced Micro Devices Inc. slid in after-hours trading after posting a wider-than-expected loss after the bell.

Jack Ablin, chief investment officer at Harris bank in Chicago, said: "This is the most solid evidence that we have seen that conditions are improving."

After the close, the focus turned to the technology sector, with traders awaiting earnings from Yahoo! ( YHOO - news - people ) and Apple ( AAPL - news - people ). Shares of Yahoo! lost 1.5% during the day; Apple trimmed its decline in the final hour to finish unchanged.

While earnings have faltered at other electronics companies, unexpectedly strong sales of Macintosh computers and a surge in iPhone purchases pushed Apple's profit up 15 percent in the third quarter, the company said Tuesday.

"We're making our most innovative products ever and our customers are responding," Steven P. Jobs, the chief executive, said in a statement.

Apple recorded its best nonholiday quarter ever when other electronics makers were hurting because of a downturn in consumer spending. According to various estimates, PC shipments for the industry fell 3 to 5 percent over the last three months. But Apple said it sold 2.6 million Macs in the quarter, up about 18 percent from the 2.2 million it sold in the previous quarter, which ended March 28.

Apple said Mac sales were helped in June by updates to its line of MacBook Pro laptops, which got new features like longer battery life and a price reduction of $300, or 25 percent, from the previously least expensive Pro model. Timothy D. Cook, Apple's chief operating officer, said the company saw an "acceleration of sales" after the introduction, which he said had led to some inventory shortages.

About half of Mac buyers in Apple's own retail stores had never owned a Mac before, said Mr. Cook.

Shaw Wu, an analyst at Kaufman Brothers, said that Macintosh computers were "resonating with increasing number of customers, as it is arguably the best platform for what people do today, which includes Web surfing and creating and managing content."

Apple also benefited from the June introduction of a new smartphone, the iPhone 3GS. Apple sold 5.2 million phones in the quarter, up from 3.79 million in the April quarter. The 3GS includes new features like the ability to record video, send picture messages and dial with voice commands. Apple previously said it sold more than one million 3GS handsets in the first three days of the product's availability.

Apple also lowered the price of the old iPhone 3G to $99 in an effort to increase its market share in the expanding market for smartphones, although the company would not say how well it was selling.

The company's overall gross profit margin grew to 36.3 percent, from 34.8 percent in the year-ago quarter.

In the only dark spot for the company, sales of the iPod dropped to 10.2 million, from 11 million a year ago, a decline of 7 percent. Analysts said the slump reflected a saturation of the market for MP3 music players as well as the migration of people to phones that play music.

Mr. Cook noted that the company had predicted and planned for the decline, and that sales of the iPod Touch — which looks similar to the iPhone and can also access applications from the company's online iTunes store — had jumped 130 percent over the last year.

Mr. Cook took the opportunity of a conference call with media and Wall Street analysts to again criticize the low-cost, pared-down computers known as netbooks, which had provided one of the few bright spots in the computer industry. He said that many netbook buyers became disappointed and that the devices were "very slow, they have software technology that is old, they don't have a robust computing experience, they lack horsepower, they have small displays and cramped keyboards."

Though analysts wonder whether Apple could introduce its own low-cost computer — or at least some kind of economical tablet reading device — Mr. Cook said Apple would only deliver a product "that is very innovative and that is something we are very proud of."

Apple reported that its net income grew to $1.23 billion, or $1.35 a share, up from $1.07 billion, or $1.19 a share, in the quarter a year ago.

Revenue rose to $8.34 billion, from $7.46 billion last year. That exceeded even some of the optimistic expectations of analysts, who projected Apple to announce revenue of $8.16 billion and a profit of $1.16 a share, according to a survey conducted by Thomson Reuters.

Apple shares were up almost $7 in after-hours trading, after closing at $151.51 in the regular session Tuesday. Wall Street is impressed with Apple's growing traction with affluent urban and suburban consumers unaffected by the recession. Analysts are also increasingly confident in how the company will fare without Mr. Jobs, who had a liver transplant in the spring but has recently returned to work.

Mr. Jobs was not present on the earnings call with analysts, as some had hoped.

The last six months "have been a resounding endorsement" of Apple's management team, led by Mr. Cook, said Gene Munster, an analyst with Piper Jaffray.

"This basically shows that in six months of running the company, Tim Cook has basically pulled it off in a terrible economy."

Apple's chief operating officer Tim Cook stood by his previous assertion that Apple's not in the market to make a netbook when pressed repeatedly by analysts during Tuesday's conference call to discuss Apple's third-quarter results. At the same time, he noted that Apple's recent laptop price cuts have helped move inventory.

With everyone from HP to Asus manufacturing mini-notebook computers--known as netbooks--many industry pundits and analysts expect that it's only a matter of time before Apple competes in this segment of the market. Cook doesn't see it happening any time soon, however--a statement he's made before during past quarterly analyst calls.

"Our goal is not to build the most computers, it's to build the best," Cook told an analyst with RBC Capital--a pithy comment he's used before when asked about Apple selling netbooks or low-priced computers. "At this point, we don't see the way to build a great product for this $399, $499, this kind of price point unit."

Pressed by a Morgan Stanley analyst for more details on a possible Apple netbook or iPhone-based tablet computer, Cook said, "I never want to discount anything in the future, and never want to specifically discuss new products."

But Cook said that customers who buy such hardware are often disappointed with their purchases, and that Apple is focused on products with the best value.

"We're only going to play in things where we can deliver things that are very innovative that we're proud of," said Cook.

And Cook and Apple have reason to be happy with the company's laptop business. Apple sold 1.75 million notebooks during the quarter, up 13 percent from the 1.553 million it sold last year during the same quarter. The strong laptop sales were boosted in part by an overhaul of the company's laptop lineup at WWDC in June that included price drops.

Cook conceded that the average selling price (ASP) of Macs did fall somewhat in the quarter, but added that, "now you can buy a MacBook Pro for $800 less than last year," and that customers are happy with that strategy and pricing.

Overall, consumer sales were strong, and Cook said that compared to projections from market research firms, Apple was "7 to 9 points ahead of the market," and thrilled with those numbers.

Internet search engine Yahoo has seen revenues in the quarter to 30 June fall 13%, citing the challenging economic environment.

Revenues for the three-month period dropped to $1.57bn (£953m) from $1.79bn in the same period a year earlier.

Meanwhile profit for the quarter edged up to $141m from $131.

Yahoo shares fell 4% in after-hours trade after saying income this quarter would range between $55m to $65m, from $76m in the second quarter.

Ross Sandler, an analyst with RBC Markets said: "Everybody expected conservative guidance. It's more conservative than even most people had expected. There aren't great estimates out there."

Yahoo chief executive Carol Bartz said "We established a clear, simple vision to be the centre of people's lives online, and we're backing that vision with important initiatives to create 'wow' experiences for our users".

Yahoo earned $141.4m, or 10 cents per share, in the quarter ending in June, up $131.2m, or 9 cents per share, in the same period in 2008.

The results come as the firm unveils its redesigned front page, to make it easier to users to access content.

The move is aimed at boosting its position as the main portal to the web. Deal?

Laxmi Poruri, an analyst with Primary Global Research, was more upbeat: "The revenue was a little bit under what people wanted but earnings per share was better than expected."

"This is definitely a sign that they're trying to be more efficient. What's really holding (the stock) up is an imminent deal that people are expecting with Microsoft."

Last year a tie-up between the firms collapsed after Microsoft's $47.5bn takeover bid for Yahoo collapsed.

And Yahoo's attempt to form an alliance with Google came to nothing following regulatory examination.

But in recent days, there has been renewed speculation that a deal between Microsoft and Yahoo is imminent.

Investor Carl Icahn, who holds around 5% of Yahoo, recently voiced his backing for such a deal.

What to expect today?

WEDNESDAY: Weekly mortgage applications; weekly crude inventories; Earnings from Boeing, Glaxo, Morgan Stanley, Pepsi, Pfizer, Wells Fargo, Bank of NY Mellon; Delta; KeyCorp; SunTrust, US Bancorp, Qualcomm, eBay and Sandisk.

Asia:

Tokyo stocks edged up Wednesday but gains were limited as investors remained cautious ahead of a series of corporate earnings reports and an August general election. The benchmark Nikkei 225 Stock Average rose 15.67 points, or 0.16 per cent, in morning trading to 9,667.69 after the index surged more than 2 per cent the previous day.

Japanese property developer shares slumped amid concern the economy won't stage a quick recovery, offsetting gains by makers of semiconductor materials after Shin-Etsu Chemical Co. said it is seeking to boost prices.

Tokyo Tatemono Co. lost 2.8 percent after the property developer's president told the Nikkei on July 20 he doesn't expect a sharp economic rebound in Japan.

Hong Kong stocks rose on Wednesday morning, with the benchmark Hang Seng Index opening 59 points higher at 19,560.

The Hang Seng China Enterprise Index, which tracks the overall performance of 43 mainland Chinese state-owned enterprises on the Hong Kong Stock Exchange, opened 92 points higher at 11,684.

China Life Insurance<601628><2628><LFC> rose 1.05% from the previous closing to HK$33.75. Ping An Insurance<601318><2318> climbed 0.53% and opened at HK$66.5.

On currency markets at 9 am (0000 GMT), the dollar traded at 93.50-55 yen, down from Tuesday's 5 pm quote of 94.07-10 yen.

The euro was quoted at 1.4197-4202 dollars, down from late Tuesday's quote of 1.4212-15 dollars, and at 132.80-85 yen, down from 133.72-76 yen.

Ford Motor Co. /quotes/comstock/13*!f/quotes/nls/f (F 6.18, -0.02, -0.32%) chalked up a 14% on-year rise in vehicle sales in China from the same period last year, according to the state-run China Daily. Total sales for the six months were 197,212 units, the report said. Changan Ford Mazda -- a tie-up with Chongqing Changan Auto Co. and Mazda Motor Corp. /quotes/comstock/!7261 (JP:7261 240.00, +8.00, +3.45%) /quotes/comstock/11i!mzdaf (MZDAF 2.15, -0.25, -10.42%) sold 140,386 cars in the first six months, up 20% from a year earlier, it said.

September Nymex crude oil futures were down 71 cents at $64.90 per barrel on Globex, after a surprise gain in U.S. crude inventories in API data late Tuesday.

Spot gold was at $946.95 per troy ounce, down $2.05 from the New York close.

China State Construction Engineering Corp plans to raise as much as 50.2 billion yuan ($7.35 billion) in the world's biggest initial public offering since March 2008.

China's largest housing contractor will sell as many as 12 billion shares at 3.96 yuan to 4.18 yuan each, according to a filing to the Shanghai Stock Exchange. The sale of a 40-percent stake values China Construction at as much as 125.5 billion yuan.

China Construction's IPO is almost 28 times larger than the second-biggest sale on the Chinese mainland this year, testing a rally that's pushed the benchmark Shanghai Composite 80 percent higher since Dec 31. The company, led by Chairman Sun Wenjie, plans to use proceeds to expand in residential construction, as a surge in bank lending drives a pickup in the housing market.

"The market won't have any problem holding up the China Construction sale," Yu Yang, a strategist at Guotai Junan Securities Co, said before the filing. "There's so much money around after the relatively loose monetary policy."

The IPO values China Construction at as much as 51.3 times 2008 profit, the company said.

China Construction's profit fell 44 percent in 2008 to 4.92 billion yuan because of the slowing property market, rising raw material prices and higher tax payments. The company and its advisors are predicting a recovery this year, as the government's 4-trillion yuan stimulus package begins to revive the world's third-largest economy.

For China's securities regulator, which began approving IPOs last month after halting sales in September last year following a stock market rout, China Construction will provide a test of investors' ability to digest new equity.

China Construction's offering is the biggest in China since PetroChina Co raised 66.8 billion yuan in October 2007. Worldwide, it is the largest IPO since Visa Inc collected more than $19 billion in March last year.

On concern that new share sales will draw liquidity away from existing equities and this year's rally has outpaced prospects for earnings growth, China stocks fell the most in more than five weeks.

The Shanghai Composite Index yesterday lost 53.71, or 1.6 percent, to 3213.21 points.

The company owns about 34.3 million sq m of land reserves and plans to use them to expand in real estate development, according to its prospectus. China Construction plans to use as much as 8 billion yuan of the IPO proceeds for 24 commercial housing projects requiring a total investment of 15.8 billion yuan.

China's investors opened the most accounts to trade stocks in 18 months, lured by the world's second-best performing benchmark index and a rebound in the nation's economic growth.

Investors opened 484,799 new stock accounts last week, the most since the five days ended Jan. 25, 2008, data from the nation's clearing house showed today.

"The prospect of making quick bucks in the stock market is luring retail investors," Liu Xiangning, a Shenzhen-based strategist at United Securities Co., said by telephone.

The Shanghai Composite Index has rallied 78 percent this year as banks tripled new loans to 7.37 trillion yuan ($1.1 trillion) in the first half from a year earlier and the government implemented a stimulus package. Gross domestic product grew 7.9 percent in the second quarter, the statistics bureau said July 16, as the nation became the first of the major economies to rebound from the global recession.

China will sustain growth because it can cut interest rates or trim income taxes to spur consumer spending, Invesco Asia Ltd. fund manager Samantha Ho said in an interview yesterday in New York. Ho manages $3 billion in Chinese equities. 
 
INVESTMENT VIEW
Electrosteel Casting-BUY  
Private miners like Electrosteel Castings which have opened iron ore, thermal and metallurgical grade coal mines in Orissa and Jharkhand will be key beneficiaries of lowered raw material costs. The Q1 results show an extra-ordinary performance.   

Thermal Coal-Structurally Improving  

Imports by the Indian State Electricity Board continue to increase as local coal production cannot keep pace with demand. The first of the ultra mega power plant projects using imported coal is ahead of construction schedule. Plant capacity will be 4GW due on-stream in 2012-13, requiring 11-12Mtpy of Indonesian coal. 

 Demand. The markets for high moisture low calorific value coal are mainly in India and China. If import demand in these regions does not expand as expected, Indonesian coal will struggle to find growth markets elsewhere. 

 Investment Flows Are Back 
Investors in commodity markets are back with a bang. Actually, investments proved extremely robust through the downturn and are now increasing once more.   

A number of characteristics of commodity markets have attracted renewed investor interest: 

A switch to hard assets. Commodities are defensive in an environment of systemic risk in finance markets. 

 

The reflation trade. Although deflation remains the central concern of markets, there is an increasing view that inflation may be the inevitable consequence of the massive fiscal stimulus measure, and that the inflation threat may not be that far into the future.   

One line of statistical support is the explosive growth in money supply, often a lead indicator of inflation.   

A weakening USD. Investment in bullion increased strongly in recent months despite relative USD strength. The main consideration here has been risk of competitive exchange rate devaluation and a broad based loss of confidence in all paper based currencies rather than USD strength per see.   

Now however it would appear that more traditional drivers are asserting themselves, and increased investment into a wider range of commodities is being attracted by a weakening USD. There is a strong trend relation between base metal prices and the USD, although it occasionally breaks down in the short term.   

Trough cycle prices. In early 2009 prices for most commodities declined to our trough cycle targets, implying that fundamental price support from costs and margins would prevent further sustained downward pressure on prices. 

This at a time when there was persisting downside risk in other asset classes. 

Improving global economic and demand outlook. The second derivative of global growth is improving signaling improving prospects for positive demand growth.   

Evidence   
Investment flows into commodity index products have turned strongly positive. This largely reflects investments by long only funds.

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)

 --
Arvind Parekh
+ 91 98432 32381

Market Outlook for 21st July 2009

Intraday Calls 21st Jul 2009
Buy Cairn-246 @ 240 for a target 246-252 stop loss 235
Buy ACC-844 @ 835 for a target 856 stop loss 827
Buy KotakBank-673 for a target 690 stop loss 667 

 

NIFTY FUTURES LEVELS

RESISTANCE

4528

4572

4614

SUPPORT

4500

4480

4436

4394

4325

4283

Buy ALLAHABAD BANK,HCL TECHNOLOGIES

 

Stocks that are in news today:
From Agencies: Indiabulls Financial Services sells shares worth $200 million to institutions at Rs 171/share
Ranbaxy gets okay to make, market Ran-Amlodipine in Canada
US SEC seeks India's permission to probe Satyam: PTI
Spinnaker Cap looking to sell 25% stake in Sanghi Industries – Mint

 

NIFTY FUTURES (F & O):  
Rally may continue up to 4528 level for time being.

Support at 4480 & 4500 levels. Below these levels, expect profit booking up to 4436-4438 zone and thereafter slide may continue up to 4394-4396 zone by non-stop.

Buy if touches 4325-4327 zone. Stop Loss at 4283-4285 zone.

On Positive Side, cross above 4570-4572 zone can take it up to 4612-4614 zone. If crosses and sustains this zone then uptrend may continue.
 
Short-Term Investors:  
Bullish Trend. 3 closes above 3906 level, it can zoom up to 4600 level by non-stop. 

BSE SENSEX:  
Higher opening expected. Uptrend should continue. 

Short-Term Investors: 
 Short-Term trend is Bullish and target at around 15379 level on upper side.
Maintain a Stop Loss at 13220 level for your long positions too.
 

POSITIONAL  BUY:
Buy ALLAHABAD BANK (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 82 level can be used to buy. If uptrend continues, then it may continue up to 88 level for time being. 

If crosses & sustains at above 93 level then

uptrend may continue.

Keep a Stop Loss at 77 level for your long positions too.
 
Buy HCL TECHNOLOGIES (NSE Cash) 

Uptrend to continue.

Mild sell-off up to 228 level can be used to buy. If uptrend continues, then it may continue up to 245 level for time being. 

If crosses & sustains at above 256 level then

uptrend may continue.

Keep a Stop Loss at 217 level for your long positions too.
  

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

Sesa Goa,HCL Tech,DCHL,Polaris, Wipro,TechM,Indusind Bank,Grasim,Yes Bank and Hero Honda.

And this is list of 10 Weak futures:

Orchid Chem,Nagarjuna Fert, Sintex Indus, Bajaj Hind, Suzlon, KSOILS, Pantaloon, GTL INFRA, Chambal Fert and Moser Baer
 Nifty is in Up Trend.

 

FII DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	20-Jul-2009	2498.66	1935.46	+563.2

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	20-Jul-2009	1473.82	1321.97	+151.85

 

SPOT LEVELS TODAY

	4502.25	( 2.91 %)	127.30
		1	2	3
Resistance		4549.07	4595.88	4681.47
Support		4416.67	4331.08	4284.27

	15191.01		( 3.03 %)	446.09
			1	2	3
Resistance			15315.52	15440.04	15670.71
Support			14960.33	14729.66	14605.14

Global Cues & Rupee  
The Dow Jones Industrial Average closed at 8,848.15. Up by 104.21 points.
The Broader S&P 500 closed at 951.13. Up by 10.75 points.

The Nasdaq Composite Index closed at 1,909.29. Up by 22.68 points.

The partially convertible rupee closed at 48.21/22 per dollar on yesterday, stronger than Friday's close of 48.73/74.
 
 Interesting findings on web:
Stocks jumped again Monday, giving the Dow Jones industrials their sixth straight advance, as investors gotmore robust earnings news from big companies and data that suggests the economy is closer to a recovery.

A 100-point gain pushed the Dow back into the black for the year, while the Standard & Poor's 500 climbed to its highest finish since November.

Wall Street's best-known index ended at its highest level since Jan. 6. The last time the Dow was this high stocks were just about to endure a steep drop that left the blue chips at a 12-year low on March 9.

The Dow is up 35 percent from its March low but still down 37.5 percent from its record of 14,164.53 in October 2007.

The S&P 500 index rose 10.75, or 1.1 percent, to 951.13, its best finish since Nov. 5. November's lows last year came after months of brutal selling as the financial crisis intensified in the fall with the collapse of Lehman Brothers.

Investors had hoped the November lows would be the bottom of the market's retreat but stocks slid further by March.

The Nasdaq composite index rose 22.68, or 1.2 percent, to 1,909.29, its ninth straight advance. The index is at its highest mark since Oct. 3, during the most furious selling of the credit crisis.

With the bulk of earnings reports still to come, the market has yet to hear from some key industries including retailing. If those results are disappointing, it could force investors to rethink their most recent rally. Several factors are still hanging over the market including record-high unemployment and a damaged housing market.

Goldman Sachs said that it believed that the S&P 500 would enjoy its best second-half rally since 1982, and boosted its forecast for the index, predicting a 15 per cent jump from its closing level 919.32 on June 30, to 1,060 on December 31.

Shares in Johnson Controls , the car-parts maker that has had to restructure following the bankruptcies of major carmakers, jumped after the company announced its first quarterly profit since last autumn. Cost cuts helped the company make up for disappointing demand and its shares climbed 7.25 per cent to $23.08.

Alcoa , the aluminium maker, which is particularly sensitive to growth, rose 3.72 per cent to $10.60, while Halliburton , the oilfield services company edged 4.44 per cent higher to $22.33 after it announced revenue and profits ahead of estimates.

In the financial sector M&T Bank rose 4.9 per cent to $57.11 after the company's earnings beat expectations and Rene Jones, the chief financial officer said credit costs remained in line with the bank's expectations and "continue to remain favourable" compared with the industry. But other banks fared less well - Citigroup and Bank of America both lost a chunk of last week's impressive gains as investors digested mixed analysts reports following their earnings last week, which beat estimates only after large one-off gains.

Citigroup gave up 7.62 per cent to $2.79 and Bank of America fell 5.04 per cent to $12.24.

Shares in Human Genome Sciences soared 276 per cent to $12.51 after it said that a trial showed that its experimental drug to cure lupus helped half the patients tested. This would be the first new treatment in decades for the disease, for which there is no cure.

Bank of America ( BAC - news - people ) lost 5% after an analyst at Fox-Pitt Kelton lowered his rating on the firm and cut his profit estimates. Citigroup ( C - news - people ) shares lost 8% in regular trading after announcing plans to issue $2.5 billion worth of 30-year bonds.

Bank of America-Merrill Lynch upped Caterpillar Inc (CAT.N) to "buy," saying the second quarter could mark a bottom for the construction sector.

Credit Suisse upgraded Cisco Systems (CSCO.O) to "outperform," writing that field checks indicated improving business trends throughout the quarter.

Morgan Stanley lifted Walt Disney Co (DIS.N) to "overweight" from "equal-weight" as part of a larger call on the media sector, which the firm upgraded to "attractive."

Also in company news, Human Genome Sciences Inc (HGSI.O) soared 221.7 percent to $10.68 after its experimental lupus drug was successful in a late-stage clinical trial.

Halliburton (HAL.N), Johnson Controls (JCI.N), Eaton (ETN.N) and Hasbro (HAS.N) were among the companies that advanced on quarterly results that impressed investors.

CIT in private deal to avoid bankruptcy -source.

Caterpillar, Cisco and Disney all upgraded by analysts.

Nasdaq touches intraday high for 2009.

Companies scheduled to report quarterly results after the close include Texas Instruments Inc (TXN.N), Legg Mason Inc (LM.N) and Zions Bancorp.

Despite warning of significant risk of a "double-dip" recession, Goldman Sachs raised its year-end target for the S&P 500 to 1,060 from 940 -- a boost of 12 percent from current levels.

On Monday, an index gauging the U.S. economy's prospects increased for a third straight month in June, suggesting the recession was drawing to a close, the Conference Board said.

The index of leading economic indicators gained 0.7 percent in June, exceeding economists' forecasts, and following May's revised increase of 1.3 percent.

CIT Group soared 79 percent. The lender said after the close of trading it reached a funding agreement with bondholders.

CIT Group, which provides financing to nearly 1 million small businesses, agreed to a $3 billion loan for 2.5 years from a group of its bondholders as it seeks to restructure its debt and avoid bankruptcy.

CIT, founded in 1908, is a lender to around 1 million mostly small and midsize businesses ranging from restaurants and private schools to clothing makers. It also leases railcars, aircraft and equipment, and it has a large business providing, cash to manufacturers and collecting on their invoices.

For years, CIT funded its activities largely by selling bonds - only to find itself in trouble when credit markets frozeup a year or so ago.

CIT Group Inc secured a $3 billion loan facility from its bondholders on Monday and said it plans a comprehensive restructuring of its liabilities, but gave few details.

With the emergency loan, the 101-year-old lender to small and mid-sized businesses warded off a threat of imminent bankruptcy, but many experts questioned its ability to survive in the current form.

An even busier week of earnings reports will further shape investors' view of the economy. Reports are due Tuesday from industrial equipment maker Caterpillar Inc. and drug maker Merck & Co.

Oil prices rose 42 cents to settle at $63.98 a barrel. Gold rose, while the dollar was mixed.

Bond prices rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.60 percent from 3.66 percent late Friday.

Federal Reserve Chairman Ben S. Bernanke may outline his strategy tomorrow for exiting history's biggest monetary expansion in testimony to Congress.

Treasuries rose, pushing yields down from the highest levels in almost four weeks, amid speculation Bernanke may ease inflation concerns. The dollar dropped to a six-week low against the euro.

Ten-year note yields fell the most in six days before the central bank chairman's semiannual economic report to lawmakers at 10 a.m. tomorrow in Washington.

"The focus of Treasuries is on Bernanke's testimony," said Kevin Giddis, head of fixed-income sales, trading and research at the brokerage Morgan Keegan Inc. in Memphis, Tennessee. "We are caught in a summertime range trade. The general feeling is that he will say things are getting better, but make no mention of when the economy will do a full turn."

Crude oil rose for a fourth day. The commodity advanced after a measure of economic indicators signaled that the worst of the recession is over. The Conference Board's gauge of the outlook for the next three to six months increased 0.7 percent, more than forecast, and climbed three straight months for the first time since 2004.

Gold climbed to a five-week high as a weaker dollar and higher oil prices boosted the metal's appeal as an alternative investment and a hedge against inflation.

Gold futures for August delivery gained $11.30, or 1.2 percent, to $948.80 an ounce on the New York Mercantile Exchange's Comex division.Earlier, the price reached $955.40, the highest for a most-active contract since June 12.

"Gold is moving up today due to the lower U.S. dollar," said Lannie Cohen, the president of Capitol Commodity Services Inc. in Indianapolis.

President Barack Obama said on Monday that Wall Street banks had failed to show remorse for the "wild risks" that triggered a financial meltdown and helped to push the United States into recession.

Asia:

Japanese stocks advanced after Goldman Sachs Group Inc. lifted its estimate for the Standard & Poor's 500 Index on improving earnings and as raw materials prices rose.

Nikkei buoyed by U.S. stock gains, economic optimism

Deal to rescue CIT group relieves financial system worry.

Eyes on Japan election, but stock impact limited for now.

Resistance strong near 25-day moving average around 9,600.

Japanese cabinet members signed off on Prime Minister Taro Aso's plan to dissolve parliament's lower house on Tuesday for an election expected on Aug. 30.

Market analysts said investors were watching political developments, but that they were unlikely to be a strong trading factor for the day, although a slight jump could come after parliament is actually dissolved.

"Now we will have 40 days of a political vacuum, and overseas investors may not like this very much. They tend to be scared off by political instability," said Noritsugu Hirakawa, a strategist at Okasan Securities.

All members of the Bank of Japan's policy board agreed last month that economic conditions in Japan had stopped worsening, with the policy makers beginning to discuss the end of special liquidity measures, according to minutes of the board's June 15-16 meeting, released Tuesday.

Among the companies whose shares are expected to see active trade in Tuesday's session are Apple Inc., Coca-Cola Co., Starbucks Corp. and Yahoo Inc.

Hang Seng Index declines 0.6% to 19,381.01

The number of unemployed in Hong Kong has hit a near four-year high with worse expected as graduating students start to seek work. The unemployment rate climbed to 5.4 per cent between April and June, up from 5.3 per cent in the first quarter and the highest level since November 2005, the Census and Statistics Department said.

About 203,000 people were out of work in the second quarter while the number of those employed fell by 8,700 to 3.51 million, the department said.

"Given the current economic situation and the entry of fresh graduates and school leavers into the labour market in the coming months, the unemployment rate is expected to face upward pressure in the near term," Labour and Welfare Secretary Matthew Cheung Kin-chung said.

New home prices in 36 medium- and large-sized Chinese cities rose 6.3 percent in June from a year earlier as bank lending tripled in the first half.

The average price of new homes rose to 6,554 yuan (US$959) per square meter, the National Development and Reform Commission said on its Web site Monday.

New home prices in June rose 1.1 percent from May, China's top economic planning agency said.

The increase in new bank loans to 7.37 trillion yuan in the first half helped spur demand for property and boosted prices, said Bohai Securities Co.

analyst Zhou Hu. Housing prices in 70 major Chinese cities rose in June for the first time in seven months, the government said July 10.

"China's property market is recovering and prices should continue to rise in the third quarter," said Zhou, who recommends buying shares of China Vanke Co. and Poly Real Estate Group Co., the country's biggest developers by market value.

Nationwide property sales in June rose 32 percent by floor space and 53 percent by value from a year earlier, the National Bureau of Statistics said July 10. Investments in property development in the first half increased 9.9 percent, the agency said.

Vanke, China's biggest developer by market value, said July 4 that its first-half property sales rose 28 percent from a year earlier to 30.8 billion yuan. Poly Real Estate said its first- half sales rose 168 percent to 21.1 billion yuan.

The China Banking Regulatory Commission Sunday ordered lenders to raise reserves against non-performing loans. The regulator's Shanghai branch also told the city's lenders to obey mortgage rules that require down payments of no less than 40 percent of the price.
 

INVESTMENT VIEW
Sujana Towers Ltd

Sujana Towers Ltd has informed BSE that as per the authorization given by the Board of Directors of the Company at their meeting held on April 29, 2009, the Management Committee of the Board of Directors of the Company at their meeting held on July 07, 2009 have transacted the following business:

1. Approved the resolution to issue further equity shares and convertible warrants of the Company to promoters and others aggregating to Rs 44.00 Crores (including premium and after conversion of warrants) by way of Preferential Allotment.

2. Approved the resolution to take decision for passing the special resolution by the members of the Company by postal ballot for raising of equity share capital by way of issuing further equity shares/warrants of the Company to the promoters and others under preferential allotment.

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)

--
Arvind Parekh
+ 91 98432 32381

Market Outlook 20th July 2009

Intraday Calls 20th Jul 2009
+ve sector , scripts : FMCG, IT, Automobile, Nucleus

HCL-Tech-215 for a target 223 stop loss 211
BUY M&M-778 for a target 807, 814-819 stop loss 679
BUY Kesoramind-313 for a target 345 stop loss 305

BUY ITC-229 for a target 238-242 stop loss 223
BUY Shiv-vani-310 for a target 325 stop loss 303
BUY HCL-Tech-215 for a target 231 stop loss 211
Expected Breakout
BUY Infy-1866 above 1890 for a target 2120 stop loss 1840
Investment -
BUY NMDC-389 stop loss 360 

 

NIFTY FUTURES LEVELS

RESISTANCE

4409

4465

4519

SUPPORT

4371

4354

4298

4244

4155

4101

BUY SATYAM,STERLITE TECH

 

NIFTY FUTURES (F & O):  
Rally may continue up to 4409 level for time being.

Support at 4354 & 4371 levels. Below these levels, expect profit booking up to 4298-4300 zone and thereafter slide may continue up to 4244-4246 zone by non-stop.

Buy if touches 4155-4157 zone. Stop Loss at 4101-4103 zone. 

On Positive Side, cross above 4463-4465 zone can take it up to 4517-4519 zone. If crosses and sustains above this zone then uptrend may continue.
 
Short-Term Investors:  
Bullish Trend. 3 closes above 3906 level, it can zoom up to 4600 level by non-stop. 

BSE SENSEX:  
Higher opening expected. Uptrend should continue. 

Short-Term Investors:  
Short-Term trend is Bullish and target at around 15379 level on upper side.
Maintain a Stop Loss at 13220 level for your long positions too.
 
POSITIONAL  BUY:
Buy SATYAM COMPUTER (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 88 level can be used to buy. If uptrend continues, then it may continue up to 92 level for time being. 

If crosses & sustains at above 95 level then uptrend may continue.

Keep a Stop Loss at 85 level for your long positions too.
 
Buy STERLITE TECHNOLOGIES (NSE Cash) 
 Uptrend to continue.

Mild sell-off up to 190 level can be used to buy. If uptrend continues, then it may continue up to 198 level for time being. 

If crosses & sustains at above 203 level then uptrend may continue.

Keep a Stop Loss at 186 level for your long positions too.
 

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

Sesa Goa, HCL Tech, Hero Honda, GSPL, Grasim, ZEEL, ITC, Wipro, REC LTD, Edu Comp.

 

And this is list of 10 Weak futures:

 Purva, Sintex, Bajaj Hind, Orchid Chem, Nagar Fert, Prajind, GTL Infra, Mosear Bear, Pantaloonr & Essar Oil. 
Nifty is in Up Trend.

 

Global Cues & Rupee 
The Dow Jones Industrial Average closed at 8,743.94. Up by 32.12 points.
The Broader S&P 500 closed at 940.38. Down by 0.36 points.

The Nasdaq Composite Index closed at 1,886.61. Up by 1.58 points.

We did't get Rupee Updates.
 
 Interesting findings on web:
Investors are betting that the stock market has restarted its spring rally.

Stocks ended little changed Friday but held onto an enormous gain for the week. Investors are looking to another flood of corporate earnings reports next week to provide more signs that the economy is healing.

Homebuilders' shares climbed after an upbeat reading on the housing market. Construction of new homes and apartments jumped 3.6 percent in June to the highest level in seven months, beating economists' estimates. Building permits climbed 8.7 percent, also beating forecasts.

The Dow Jones Industrial Average with its five-session upsweep its best string of gains all year. The Nasdaq has now risen for eight consecutive sessions, the longest run in more than four years. (Its highest close since Oct. 3.)

U.S. stocks edged down with banks leading the decliners and home builders the gainers. Bank of America set aside higher reserves to account of rising losses in mortgage and personal loans. IBM surged on earnings. Commodities rallied after housing starts rebounded.

Google slipped 12.35, or 2.8%, to 430.25 on the Nasdaq. The Internet-search giant's second-quarter results showed growth continued to slow, signaling the online advertising market remains in a slump. 

Yahoo (Nasdaq) gained 65 cents, or 4%, to 16.84. The Internet-search company's talks with Microsoft about a Web-search partnership have accelerated and a deal appears imminent, The Wall Street Journal reported. Microsoft was off 15 cents to 24.29 on the Nasdaq.

The first wave of quarterly corporate earnings reports arrived stronger than expected, soothing investor fears of another economic crisis and helping push the Dow Jones Industrial Average to its strongest weekly gain since March.

The Dow ended the week up 7.3% at 8743.94, taking just five days to recover almost all the 7.4% decline of the previous four weeks, as investors took heart from blowout earnings by Goldman Sachs Group Inc. and positive comments from J.P. Morgan Chase & Co. and Intel Corp.

Even less-than-stellar reports from Bank of America Corp., Citigroup Inc. and General Electric Co. failed to halt the Dow's advance.

Stocks finished flat on Friday after a week of solid bank earnings, improving economic data and encouraging forecasts from the tech sector.

Financial stocks mostly fell, weighing on the broader market. Investors have been encouraged by strong profits from large banks, but there are still signs that the recession's grip hasn't eased as much as hoped, such as higher loan defaults.

For the week, all three indexes posted solid gains of 7%.

Only about 11% of major companies have reported second-quarter results so far. Plenty of surprises may await as more than half make their announcements in the coming two weeks.

But up to now, 71% of those reporting have beaten analysts' expectations. While forecasts were quite low, that is notably stronger than the 61% that typically surpass estimates, according to Thomson Reuters. And several big companies, including International Business Machines, J.P. Morgan and Intel, have made relatively upbeat comments about the future.

The Dow, which is made up of 30 blue-chip stocks including Bank of America, Intel, IBM, J.P. Morgan and GE, closed Friday up 32.12 at 8743.94. It remains down 38% from its 2007 record close.

Although the profit news has been better than expected, it still isn't especially good, and investors aren't exactly celebrating. Analysts still forecast that all 10 of the major industry groups represented in the Standard & Poor's 500-stock index, from finance to technology to energy, will post second-quarter declinesin profit compared to one year ago. They continue to forecast a profit decline for the S&P 500 companies overall for all of 2009.

A report just out from Goldman Sachs warns that it could take years for economic demand to get back to normal.

"We find that under reasonable parameters of supply and demand growth, it will take at least two years, and probably more like three to five years, to eliminate spare capacity in the manufacturing sector," said the report from Goldman economist Andrew Tilton. "In the labor market, the unemployment rate is likely to remain above the current concept of 'normal' for an even longer period."

That would be bad news in an economy more than two-thirds dependent on consumer demand.

At Harris Private Bank in Chicago, Chief Investment Officer Jack Ablin says he is preparing to move about 5% of the $60 billion his firm manages into stocks from bonds.

Today his portfolio is made up of 60% stocks and 40% bonds, and Mr. Ablin plans to make the shift toward stocks in a bet on a gradual economic recovery.

Key Private Bank in Cleveland is mulling a similar shift. "We think the rally will continue through the end of the year," said Bruce McCain, who helps oversee about $20 billion as head of the investment strategy team there.

The tech sector rallied Friday to close in the black for the eighth session in a row, as the Nasdaq Composite Index wrapped up the week with a 7.4% gain.

The Nasdaq (RIXF) rose 0.1% to close at 1,887. The index is now up 19.6% so far this year.

Another improved reading on the housing market counteracted any negative feelings in the market Friday, as the Commerce Department recorded 582,000 new housing starts in June, the best reading since November 2008, and revised May's figure to 562,000, a jump of 30,000.

Lender CIT Group ( CIT - news - people ) is scrambling to avoid bankruptcy, and reports Friday said it was in talks with a number of firms, including JPMorgan Chase ( JPM - news - people ) and Goldman Sachs ( GS - news - people ), about short-term financing that would keep it from filing Chapter 11. Speculation that the firm would get an eleventh-hour reprieve sent its shares up 70.7%.

In energy, crude oil jumped 2.5% to more than $63 a barrel to finish a week of strong gains.

Reporting this week:

Corporate heavyweights reporting this week should sharpen investors' view of the economy. Reports on the April-June quarter are expected from American Express Co., aerospace manufacturer Boeing Co., industrial equipment maker Caterpillar Inc. and drug maker Merck & Co. Key consumer companies Amazon.com Inc., Apple Inc., Coca-Cola Co., eBay Inc., PepsiCo Inc. and Starbucks Corp. are also due to report.

Investors also will look to Capitol Hill for direction on the economy. Federal Reserve Chairman Ben Bernanke makes his semiannual report to Congress Tuesday and Wednesday.

Investors will turn their attention to household names such as American Express Co, Apple Inc, Boeing Co, Caterpillar Inc, Coca-Cola Co, DuPont Co, McDonald's Corp, Microsoft Corp and diversified manufacturer 3M Co to see what the earnings of these dominant corporations say about the economy's health.

In the coming week, 143 companies in the Standard & Poor's 500 Index will report earnings. Results from big manufacturers will give investors the broadest picture yet of the earnings season. So far, banks and technology companies have set the tone. 

Report-Card Season
It's report-card season on Wall Street, when corporations release a flood of second-quarter earnings reports that provide a window into the companies' recent performance.

But during these difficult economic times, investors and analysts are also wondering: What's next?

That's where earnings outlooks come into play. These forecasts, generally released around the time of companies' earnings reports, set expectations for the future and offer some sense of where each company is headed.

But they're not always easy to decipher. Companies may give overly vague outlooks, or purposely set predictions low, hoping they can cheer — and make investors happy — when earnings come in "higher than expected."

Here are some questions and answers on how to wade through this torrent of forward-looking information.

Q: What do companies release in earnings forecasts?

A: Companies tend to issue two types of outlooks — short-term forecasts about the coming quarter, and longer-range ones for the next year. Some companies get down to specifics,predicting future per-share earnings, for instance. Others don't.

Given the topsy-turvy economy, it's likely these days that executives will resort to broad statements, such as that "things are looking better," rather than providing actual numbers, said Douglas J. Skinner, a professor of accounting at the University of Chicago's Booth School of Business.

By providing few specifics, executives can't be held accountable, Skinner said.

"No one can really pin them down later on if things don't look that great," he said.

Q: What will these outlooks tell us about the recession?

A: It's hard to come to any conclusions about an economic recovery by merely looking at one company's forecast. But investors may be able to make sense of it all by cobbling together predictions from a range of companies.

If most companies issue dour expectations, for example, that could suggest a bumpy road to recovery. If they tend to look positively into the future, that's considered good news for the market — and, perhaps, the overall economy.

Q: We've seen companies report good earnings but poor outlooks, and their stocks fall. Why do so many investors shrug off the earnings?

A: A stock is priced based on a company's ability to generate earnings in the future.

"The market is always looking forward," said Brian Bush, portfolio manager with Stephens Capital Management. "So investors are going to focus more on what companies are saying... than necessarily focusing on this quarter that they're reporting."

Q: Do companies purposely try to set forecasts low?

A: Generally, yes. There's nothing worse for an executive than predicting strong earnings growth and not being able to deliver. Besides legal ramifications — like the risk of a lawsuit if a company is seen as hiding bad news — lower-than-expected earnings could cost executives their jobs or affect their compensation, Skinner said.

So companies tend to issue rather cautious outlooks. If a corporation expects to earn $1.50 per share in the next quarter, it may set its outlook at $1.40 per share, just for some breathing room.

From the company's perspective, it's far better to surprise investors with positive results than with negative ones. That's why, increasingly, companies are tight-lipped about the future, said Scott Bleier, president of Createcapital.com, a research advisory service. Some companies don't even offer a forecast at all.

Q: Doesn't the market take this tendency toward low expectations into account?

A: You'd think so, but company stocks can still jump after reporting better-than-expected results, suggesting that the market places plenty of stock in forecasts — even if they're set cautiously low.

Q: Have any recent forecasts moved the market?

A: Yes. Chipmaker Intel Corp. released strong third-quarter sales predictions Tuesday that lifted investor confidence and gave the market a serious boost Wednesday. The Santa Clara, Calif.-based company said it expects to earn $8.5 billion in revenue, plus or minus $400 million — far more than the $7.8 billion analysts had originally projected.

On the other hand, the nation's banks — a big focus of the week because of their strong earnings — steered clear of specific guidance about the future and commented broadly about such issues as the future of consumer spending and credit card delinquencies.

Q: Is there other information in an earnings report that may reflect how a company will fare in the future?

A: Yes, but it all depends on the industry.

In the technology sector, analysts will be looking at companies' capital spending to gauge their confidence in the industry. If companies start pumping cash into areas such as research and development, that's a sign that they're optimistic about the future and working to invest in the business.

In sectors like banking, where service is key, statistics on the number of employees and total compensation takes much of the focus, said Pierre Jinghong Liang, associated professor of accounting at Carnegie Mellon's Tepper School of Business.

The bottom line, though: Don't expect earnings outlooks to serve as a crystal ball into a company's future.

Even after earnings season ends, many questions will remain about the economy and consumer spending, said Bush of Stephens Capital. And those are key factors in companies' future performance.

"I think the jury's still going to be out," he said. "I think the debate will continue well into the fall."

Asia:

Japanese financial markets were closed for a national holiday.

Hong Kong shares rose for a fifth session Monday on commodity and financial stocks, with the Hang Seng Index reclaiming the 19,000-point level for the first time in more than a month. The benchmark index gained 1.8% in early action to 19,148.31, while the Hang Seng China Enterprises Index, or H-share index, rose 2.2% to 11,387.12. Market heavyweight HSBC Holdings /quotes/comstock/22h!e:5 (HK:5 69.30, +0.95, +1.39%) [s:HBC] advanced 1.8%, and China Life Insurance Co. /quotes/comstock/13*!lfc/quotes/nls/lfc (LFC 60.27, +0.02, +0.03%) /quotes/comstock/22h!e:2628 (HK:2628 31.80, +1.00, +3.25%) rose 3.1%. Aluminum Corp. of China, or Chalco /quotes/comstock/13*!ach/quotes/nls/ach (ACH 25.00, +0.78, +3.22%) /quotes/comstock/22h!e:2600 (HK:2600 7.90, +0.21, +2.74%) , gained 3.8%. In the energy sector, Cnooc Ltd. /quotes/comstock/22h!e:883 (HK:883 9.96, +0.17, +1.74%) /quotes/comstock/13*!ceo/quotes/nls/ceo (CEO 127.81, +2.00, +1.59%) gained 1.8% after its joint venture with a group company of China Petroleum & Chemical Corp., or Sinopec /quotes/comstock/22h!e:386 (HK:386 6.44, +0.10, +1.58%) quotes/comstock/13*!snp/quotes/nls/snp (SNP 83.00, +0.85, +1.03%) , agreed to buy a 20% stake in an Angola oil field for $1.3 billion. Sinopec stock added 2.2%

Shanghai copper rose over 3 percent on Monday to a nine-month high, tracking London copper's gains in the previous session and boosted by an improved economic outlook and a weaker dollar. A surprise jump in new U.S. home starts and permits in Junesuggested the battered housing sector was beginning to stablise, leading to optimism on recovery in the world's largest economy.

Shanghai's banking regulator yesterday emphasized the importance of the 40 percent down-payment rule for second homes in a bid to prevent real estate speculation.

Chinese economy:

The stronger-than-expected rebound of the Chinese economy has proved the power of investment as a key growth engine.

However, policymakers should keep in mind that there is a limit to such an investment-driven recovery. The emphasis should be more on a consumer-led recovery.

Almost single-handedly so far, an investment boom has put the country back on track to hit its growth target of 8 percent this year.

Latest statistics show that fixed asset investment soared by 33.5 percent year on year in the first six months, contributing 6.2 percentage points to the country's 7.1 percent headline real GDP growth for the first six months. In other words, investment accounted for about 90 percent of the growth while consumption and export together added only 0.9 percentage points.

Clearly, investment is playing an overwhelmingly important role in helping China to weather the global slump. At a moment when shrinking external demand has made export -- the long-term growth engine -- a drag on the economy, stronger investmentgrowth has picked up the slack caused by fall in exports to developed economies. As a result, growth of the world's third largest economy rebounded.

The release of such inspiring growth figures last week has, as expected, brought an end to domestic debates on whether the Chinese economy would see a V-shaped recovery. But, at same time, the issue of sustainability has been raised, and appropriately so, by many people.

Some observers warned that turning off the tap of fixed-asset investment would risk undermining the ongoing recovery, which is yet to be consolidated. Others insisted that it is dangerous for policymakers to further increase liquidity supply regardless of looming asset bubbles to stoke the investment boom.

Both arguments have their merit.

Obviously, Chinese policymakers have to weigh the huge potential of investment as a growth engine against the difficulties of sustaining an investment-led recovery.

Yet, for a lasting recovery, attention should no longer be fixated on overuse of investment to counter the economic crisis. It is time to set in motion a consumer-led recovery.

Unlike many developed countries that are set to endure a classic consumer-led recession, China faces a great opportunity to boost domestic consumption into an increasingly important long-term growth engine.

Though a 15-percent increase in retail sales may not be as eye-catching as the one-third surge of fixed-asset investment in the first half year, it does represent a rise of 3.7 percentage points in the growth of real domestic consumption in spite of falling prices and a gloomy global economy. Continuous income growth must have contributed to a broadbased rise in consumer spending.

Real urban household disposable income expanded by 11.2 percent in the first half year while real rural household cash income rose 8.1 percent during the period.

More important, fiscal subsidies and tax cuts for purchases of home appliances and cars have not only saved many domestic producers but also caught most automakers unprepared. Pent-up demand for new cars has beat all forecasts to make China the world's largest car market so far this year.

What is the potential of Chinese consumers?

An interesting report by the US-based consulting firm McKinsey predicted that the number of wealthy Chinese consumers -- people in households earning more than US$36,500 annually, which gives them the spending power of a US household making roughly US$100,000 a year - will likely increase by 16 percent annually in five to seven years, despite the global downturn. And these wealthy Chinese households, numbered 1.6 million in 2008, represented only the top 1 percent of earners in China's cities.

Compared with the 1.3 billion Chinese population, this is just the tip of the iceberg.

But if the government can swiftly tilt fiscal policies more in favor of increasing household income and improving social infrastructure, domestic consumption can be made to serve as a new thrust to propel balanced and sustainable growth. 
 
INVESTMENT VIEW
Transmission Towers  
PGCIL likely to open tenders for projects awaiting commissioning in FY11-key beneficiaries will be KEC, Jyoti, Kalpatru and Sujana Towers. 

Power Grid Corporation of India (PGCIL) awarded contracts worth INR 27.5 bn for transmission towers, sub-stations, and rural electrification projects in H1FY09. Assuming an average execution period of 22 months for transmission projects, orders for projects expected to be on stream in FY11 are likely to be placed soon.   

PGCIL is scheduled to open bids for eight transmission packages and seven sub-station projects. Consequently, the industry expects order inflows in excess of Rs 35 bn.   

Orders from state electricity boards (SEB) and international geographies, however, are likely to slow down, due to the uncertain global macro environment.   

Operating margins of players with fixed-price contracts to improve in FY10. Orders secured in Q1FY09 and Q2FY09 on fixed-price basis are likely to result in higher margins in FY10, given the steep decline in commodity prices (especially steel) since Q1FY09.   

Kalpataru Power Transmission (KPP) secured key fixed price orders from the international geography in H1FY09. Hence, we believe, its operating margins are likely to be higher in FY10 compared with FY09.   

Jyoti Structures (JYS) has higher proportion of variable-price contracts; hence, the decline in steel prices is unlikely to have a significant positive impact on it. Further, competition is likely to moderate due to more stringent pre-qualification norms on critical projects likely to be awarded henceforth.   

Interest costs for coverage universe to be lower in FY10   

The government has undertaken several initiatives to ease liquidity in the system and thereby moderate interest rates. Hence, interest costs are likely to be lower by atleast 300 bps in FY10 compared with FY09 for transmission tower companies.   

The benefit is unlikely to trickle down in the near term. In our coverage universe, JYS has the highest sensitivity to interest rate movements, primarily on account of it's higher off balance exposure than peers.   

Outlook and valuations: Improving visibility, but not enough   

Slowdown in order accretion and higher raw material prices were major concerns for the power transmission EPC sector from H2FY08 to H1FY09. Order accretion concerns were partly addressed in H2FY09, and will get impetus post the general budget announcement on July 6, 2009.    

However, liquidity issues, delay in associated generation projects may elongate execution cycles. On the positive side, margin pressures are likely to ease in FY10, given the decline in commodity prices and moderation in competition.   

Margin improvement in FY10 could be greater for companies with higher fixed-price contracts. Improved market sentiment has allowed the EPC concerns to now fetch PE multiples twice of what they had been getting just 4 months ago. This expansion in PE multiples is likely to continue as improved bottom line for Transmission Tower players become evident from Q3 FY10.   

Consequently, the entire sector is likely to get re-rated further with some sectoral gainers getting double digit PE multiples on expected earnings for FY11. There is possibility of gains to the tune of 50 per cent in all four stocks aforementioned by December 2009.

(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.)

 

Weekly Index Outlook — Valiant fight back by the bulls
 

Sensex (14,744.9)

Sensex that was staring down a crevasse towards the end of the previous week was pulled back by some brilliant rearguard action by the bulls. Statements emanating from the Government on intended disinvestment and financial sector reforms fortified the bulls and the ubiquitous short-sellers who once again had to back-track, helped stock prices head higher. Similar rebound in equity markets worldwide also contributed to the 1,240 points surge in Sensex last week.

The mood towards the end of last week was the exact reverse of that prevailing at the end of the Budget week. While the Sensex was threatening to breakdown in to a major down-move then, it appears to be on the verge of another strong up-move now. Volumes were extremely low in the first two sessions but it perked up towards the end of the week as stock prices continued to move higher.

Institutional investors, both domestic and foreign were net buyers through last week.

The reversal last week has resulted in a strong piercing pattern in the weekly candlestick chart of Sensex. This surge has also helped the index close above the 50 and 21-day moving averages. These are signals that that the recovery could continue. However, the daily oscillators are still trading in the neutral zone.

The 10-day rate of change oscillator is in the negative zone just below the zero line, while the 14-day relative strength is at 58.

These readings imply that last week's surge has negated the bearish implications of the post-Budget decline but this short-term up-move has to progress a little more to instil confidence about its sustainability.

Weekly oscillators have also not turned unduly bullish though they continue in the bullish zone.

When Sensex recorded the low of 13,219 last week, it retraced 31.5 per cent of the rally from 8,047.

The correction from 15,600 peak also consumed one-third of the time taken by the rally from 8,047 to 15,600. This meets the minimum retracement requirement for the correction both in terms of magnitude as well as time. In other words, the correction from 15,600 could have ended at 13,219.

The question that arises now is what will be the medium term trajectory for the Sensex from here? As is usually the case when indices are in a range, we are faced with multiple counts.

It would be best to see the movement over the coming week to decide on the right count. These are few of the likely trajectories,

Strong move past 15,000 would take the index to the resistance zone between 15,600 and 15,800. Reversal from this zone will result in a range-bound move between 13,000 and 15,800 for a few more months.

Break-out above 15,800 would take Sensex to 16,200 or beyond.

Failure to move beyond 15,000 early next week will bring the bears out of their lairs and they would drag the index down to 13,300 or 12,730. This would imply that the correction would have legs.

The preferred view is the first one of a range-bound move over the next few weeks that continues to give traders a torrid time as the monsoon uncertainty and earnings season plays out.

Sensex is poised close to the key short-term resistance zone between 14,600 and 15,000. A reversal from here can take the index down to 13,830 or 13,200 over the short-term. A strong close above 15,000 will give the next target of 15,440 and 15,600 to the Sensex.

Nifty (4,374.9)
 

Nifty declined to the low of 3,918 before rebounding to the peak of 4,390. The index is testing the key short-term resistance at 4,390. A strong close above this level will take the index to 4,592 or 4,693 over the short-term.

But reversal on Monday will result in a decline to 4,100 or 3,920 once again.

Nifty has also retraced 36 per cent of the up-move from the March lows when it recorded the trough of 3,918 last week. Resumption of the intermediate-term uptrend will, however, be confirmed only on a close beyond 4,693 that will give the next medium-term targets of 4,741 and 5,100.

But a reversal from 4,693 will result in a sideways move between 3,900 and 4,700 for a few more months.

Global Cues

Bulls started partying with renewed vigour last week sending most global indices 4 to 8 per cent higher. Commodities were not excluded from this celebration. Reuters CRB Index closed 4 per cent higher, while Nymex crude prices recovered from a low of $58.3 a barrel to close at $63.5.

Asian indices were largely subdued last week. But since the correction over June had been relatively shallow in many Asian indices, some such as Jakarta Composite, Straits Times Index and KLSE Composite Index recorded new 2009 highs last week.

It was however the spectacular 7 per cent rally in the Dow that set the tone for the rest of the indices to follow.

The losses recorded in the last three weeks were wiped out in just one week indicating a strong bullish undercurrent in the market. This index completed 33 per cent retracement of the up-move from the March lows when it recorded the intra-week low of 8,087 on Monday.

That meets the minimum retracement criteria from the second leg. If the third leg of the move from March took off last week, it will have the minimum target of 9,575. But another pause around 8,878 will result in the index fluctuating in a range between 8,000 and 9,000 for a few more months.

It also needs to be watched if the Dow holds above the zone between 8,300 and 8,500 where the 21, 50 and 200 day moving averages are currently forming a compression. Corresponding upper target for the third leg in S&P 500 is 1,045.

Reliance (Rs 1,933.4)

RIL reversed from the low of Rs 1,718 to move to the short-term resistance at Rs 1,970 indicated last week. The stock is in a medium-term down-trend since May 19 and will face strong resistance at Rs 2,018 and Rs 2,200 in its quest to reverse this trend. The 50-day moving average at Rs 2,070 is also a resistance that short-term traders need to watch out for.

The short-term trend in RIL is however up. The stock is currently halting just below its key short-term resistance at Rs 1,960. If this level is crossed, the stock can rally to Rs 2,020 or Rs 2,070 over the short-term. Fresh long positions are advised only on a close above Rs 1,960. Short-term supports for the stock would be at Rs 1,875 and Rs 1,815.

State Bank of India (Rs 1,674.6)

SBI moved in line with our expectation, reversing from the support at Rs 1,500 to move towards the second target at Rs 1,690. We stay with the view that Rs 1690 is a key trend-deciding level for this stock. A downward reversal from here can pull SBI lower to Rs 1,419 or Rs 1,300 while strong close above this level will mean that the up-trend from the March low of Rs 894 can resume to take the stock higher to Rs 1,900 again.

Short-term traders can hold the stock with a stop at Rs 1,570. Move above Rs 1,690 will take the stock to Rs 1,730 or Rs 1,780 in the near-term.

Tata Steel (Rs 392.7)

Tata Steel too recorded strong gains in the last four sessions that helped it close well above its 200-day moving average at Rs 350. The stock completed 47 per cent retracement of the up-move from the March low when it formed the low of Rs 330 on Monday. It is, however, too soon to judge if the correction is complete. Strong close beyond Rs 435 is required to signal the resumption of the intermediate up trend.

The ongoing short-term up-trend will face resistance at Rs 396 and Rs 435. Fresh long positions are advised only if the stock closes above Rs 396 on Monday.

Infosys (Rs 1,867)

It was a strong 8 per cent rally in Infosys last week that disproved our assumption of a medium term reversal in the stock. Close above the previous peak at Rs 1,854 implies that the stock can now move higher to the intermediate term resistance zone between Rs 1,900 and Rs 2,000. Short-term investors can hold the stock with a stop at Rs 1,785. Next short-term support is at Rs 1,728.

The medium-term trend will stay positive as long as Infosys trades above Rs 1,700.

ONGC (Rs 1,041.5)

ONGC reversed from the support at Rs 980 and is currently in a short-term uptrend. As explained last week, if this support holds, it would imply strength from a medium-term perspective with a possible move higher to Rs 1,200 or to the former peak at Rs 1,386 over the medium-term. Medium-term investors can hold the stock with a stop at Rs 960.

Nifty future may trade sideways

Thanks to positive global cues coupled with strong performance by the Indian IT and banking majors, the Nifty future witnessed a sharp recovery.

It closed at 4,381.5 against the previous week's close of 3,993.2, posting a 9.7 per cent weekly gain.

In the process, the future also moved into premium over the spot that ended Friday at 4,374.95 points. Importantly, the strong rally this time around was backed by high trading volumes. That said, a good part of the gains came on the back of a fall in open interest; as against an open interest of 2.25 crore shares last week, it was lower at 2.14 crore shares the current week.

Follow-up

Last week we had presented two strategies — going short on Nifty futures with stop-loss at 4,200 and buying Nifty 4,000 put.

As the market moved against our position, and also a bit too soon at that, these strategies may have backfired terribly.

Outlook

The strong resurgence in Nifty future helped it cross the crucial hurdle at 4,350. The next resistance appears around 4,585 levels, breaching which Nifty future could touch 4,800. It however has minor resistance in between at 4,635 and 4,750 levels.

The immediate support level appears at 4,065.

A move below this level could weaken the Nifty future to 3,650, the chances for which appears rather bleak now.

In between 3,850 could also act as a minor support level if Nifty future breaks 4,065 level.

As the Nifty future had a sharp run-up last week, we expect it to move sideways in the coming week.

Option monitor

Put writers seem to be making most of the recovery. Almost all the put contracts ranging from 3,600 to 4,500 saw the emergence of writers, indicating that traders may be getting convinced that the market may not fall significantly from hereon.

Among the puts, the highest number of accumulation happened at 4,000-strike (71.14 lakh shares) and 3,800-strike (54.44 lakh shares), indicating that these could act as a strong support level for Nifty future.

In comparison, calls shed open interest, indicating that writers may have scampered for cover as the Nifty scaled gains.

Volatility index

Volatility index ended the week on a flat note. The volatility index closed at 35.89 against last week's 35.83.

 

Recommendation

Traders can consider the following two strategies.

1) Consider going long on Nifty future keeping the stop-loss at 4,065. The stop-loss has been given lower intentionally as the Nifty may also see sharp volatility during the week. If the Nifty future opens on a strong note, traders may have to adjust the stop-loss suitably so as to protect profit. Exit can be made at 4,550, 4,635 and at 4,800 levels.

2) Traders can also consider a short straddle strategy using 4,400-strike. The maximum profit in this strategy is limited to the amount of premium collected by writing the options. The premium of Nifty 4,400 call closed at Rs 92 while that of put stood at Rs 112. The short straddle, however, is a risky strategy since it involves writing options.

FII trend

The cumulative FII position as a percentage of the total gross market position on the derivative segment as on July 9 slipped to 31.87 per cent (33.69 per cent). FIIs were net buyers throughout the week. They increased their index futures holding to Rs 8,490.59 crore (Rs 7,405.02 crore) and stock futures to Rs 19,065.46 crore (Rs 16,867.64 crore). They now hold index options worth Rs 25,237.23 crore.

 

 FII DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	17-Jul-2009	2786.83	2644.68	+142.15

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	17-Jul-2009	1709.76	1174.4	+535.36

 

SPOT LEVELS FOR 20TH JULY

	4374.95	( 3.39 %)	143.55
		1	2	3
Resistance		4433.52	4492.08	4593.77
Support		4273.27	4171.58	4113.02

	14744.92		( 3.47 %)	494.67
			1	2	3
Resistance			14921.89	15098.85	15397.01
Support			14446.77	14148.61	13971.65

 Reliance BIG listing on cards

Mumbai, July 18 Mr Anil Ambani, Chairman of Reliance ADAG, plans to list his group's media and entertainment arm, Reliance BIG Entertainment.

"We are just making our beginning. We have kept our options open for raising funds and will evaluate them as we go along," he said in a conference call from New York.

More deals

Reliance ADAG has formalised partnership with Hollywood studio DreamWorks for film production with an initial funding of Rs 4,042 crore ($825 million).

"This will include $325 million through equity placement, $150 million through Disney and the remaining through debt financing from a syndication of banks," said Mr Ambani.

As part of the deal, DreamWorks will make five-six films a year for global audiences with the first to begin production this year.

Walt Disney will handle the marketing and distribution of the studio's films globally, while Reliance BIG Entertainment will be the India distributor.

Mr Amitabh Jhunjhunwala, Mr Steven Spielberg and Ms Stacey Snider will also be part of the Reliance ADAG board.

"Considering the business situation, this is one of the largest outlays in film production in recent times. Revenues from Indian films account for only one per cent of the US market and this will change," said Mr Ambani.

Mr Spielberg, who has produced and directed movies like Jurassic Park and ET , said, "Initially, the new venture will focus on commercial and action movies before experimenting with art films."

Projects

DreamWorks Studios is already working on films such as Tintin and has approached Clint Eastwood for another movie.

It had acquired a whole lot of projects from Paramount during the separation. An announcement of the initial films to go before cameras will be made at a later date, said Mr Spielberg.

This is not Mr Ambani's sole venture in Hollywood.

BIG Pictures, owned by Reliance BIG Entertainment, plans to produce movies with Nicolas Cage's Saturn Productions, Jim Carrey's JC 23 Entertainment, George Clooney's Smokehouse Productions, Chris Columbus' 1492 Pictures, Tom Hank's Playtone Productions, Brad Pitt's Plan B Entertainment, Jay Roach's Everyman Pictures, Brett Ratner's Rat Entertainment and Julia Roberts' Red Om Films.

 Momentum indicator 

Moving average convergence and divergence (MACD) is a trend following (lagging) momentum indicator which is dynamic and premeditated to identify trend changes. Developed by Gerald Appel in the 1960s, MACD shows the correlation between a fast and slow exponential moving average (EMA) of closing price. Gerald Appel recommended 12 and 26 days as standard periods. This indicator is calculated by subtracting the 26-day EMA (which is slow moving) from the 12-day EMA (which is fast moving). The formula is as follows:

MACD = EMA (12) of price - EMA (26) of price

A signal line or trigger line is plotted on the MACD chart to give buy and sell signals. This signal line is formed by smoothing MACD with another exponential moving average line. The standard period for signal line is nine days.

Signal = EMA (9) of MACD. The MACD and its signal lines fluctuates above and below a zero line, that is from the positive to the negative territory, similar to the price rate of change (ROC) indicator.

The daily chart of Andhra Bank illustrates moving average convergence and divergence oscillator that is plotted below the price. In the MACD plot, the thick red line is the MACD line and red dotted line is the signal line. When the MACD line rises above the signal line, the indicator provides a bullish signal, which implies that the price of the stock is on the verge of experiencing an upward momentum. In June 2008, November 2008 and March 2009, MACD indicator in Andhra bank signalled buy. On the other hand, the MACD declining below the signal line that is a negative signal, which indicates that it is time to take profit or to initiate sell. In May 2008, September 2008 and January 2009 the MACD signalled sell. It would be prudent to wait for an established cross above the signal line before initiating a position.

Divergence

Divergence between the MACD and the price chart also provide signals to investors about the right point for buying or selling a stock. When the stock price makes lower lows while the MACD plots higher lows in the negative territory, a positive divergence is formed. Likewise, when the stock price continues to rise forming higher peaks, while MACD peaks out and begins form lower peaks in the positive territory, it is a negative divergence and a sell signal. In early December 2008 and early January 2009, the MACD oscillator in Andhra Bank chart signalled caution to bulls by forming a negative divergence. When the MACD line rises significantly from the signal line in the positive territory, the gap widens between the two lines. This indicates that the stock is overbought and is likely to revisit normal levels. Similarly, when the MACD line declines significantly from the signal line in the negative territory, as the gap widens between the two lines. The stock may then revisit normal levels.

MACD is generally not suggested for ranging market or sideway conditions. Second, this oscillator is slower in giving buy or sell signals when compared to ROC or RSI oscillators.

 

--
Arvind Parekh
+ 91 98432 32381

--
Arvind Parekh
+ 91 98432 32381