Market Outlook for 12th Aug 2009

 spot levels today

	4471.35	( 0.76 %)	33.70
		1	2	3
Resistance		4521.80	4572.25	4633.70
Support		4409.90	4348.45	4298.00

	15074.59		( 0.43 %)	64.82
			1	2	3
Resistance			15240.75	15406.91	15595.17
Support			14886.33	14698.07	14531.91

INTRADAY calls for 12th Aug 2009

Positional
Buy FCSsoft-51 @ 48 for a target 60-65 stop loss 45
Buy GVKPIL-46 @ 44 for a target 50-55 stop loss 41
Buy Orbitcorp-192 @above 197 for a target 207 stop loss 192

 

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

Bharat Forge,Patni,Cummins India,Shree Renuka,Tata Motors,FSL,HCL Tech,Mphasis,Jindal Saw & GT OFFshore.

And this is list of 10 Weak futures:

Suzlon,Chambal Fert,Divi'S Lab,Indn Hotels,Nagarjun Fertil,Patel Engineering,Hero Honda.Pantaloon Retail ,Educomp & MLL
Nifty is sideways
 

RIL-NTPC gas dispute: from agencies
-RIL files caveat in SC ahead of NTPC appeal
-NTPC expected to move SC against Bombay HC ruling in July
-Bombay HC allowed RIL to amend plea in gas dispute with NTPC

Mint Exclusive
-NTPC, NHPC, PGCIL and PFC to sell entire stake in PTC
-4 PSU promoters together hold 16.32% stake in PTC
-Move prompted as PTC competes in utilities space
-Final decision on stake sale requires cabinet approval

 

UCO Bank - Exclusive: Sources Say
-UCO Bank's General Insurance Venture to consist of banks' consortium
-3-4 mid-sized domestic banks to hold 74% stake in venture
-Foreign partner to hold 26% in UCO Bank's General Insurance Venture

 

NIFTY FUTURES (F & O):
Below 4447 level, expect profit booking up to 4401-4403 zone and thereafter slide may continue up to 4357-4359 zone by non-stop.

Hurdle at 4474 level. Above this level, buying may continue up to 4481-4483 zone and thereafter expect a jump up to 4496 level by non-stop.

Multiple Resistance Zones at 4525-4527 zone & at 4540-4542 zone. Sell at around these zones. Stop Loss at 4583-4585 zone.

On Negative Side, break below 4342-4344 zone can create panic up to 4298-4300 zone. If breaks & sustains this zone then downtrend may continue.
 
Short-Term Investors:
Bullish Trend. 3 closes above 4473 level, it can zoom up to 4988 level by non-stop.
Stop Loss Triggered. 3 closes below 4473 level, it can tumble up to 4215 level by non-stop.
 
BSE SENSEX:  
Lower opening expected. Profit Booking should start. 

Short-Term Investors:
Short-Term trend is Bearish and target at around 14235 level on down side.
Maintain a Stop Loss at 15973 level for your short positions too.

 

POSITIONAL BUY:
Buy NDTV LTD (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 172 level can be used to buy. If uptrend continues, then it may continue up to 187 level for time being. 

If crosses & sustains at above 197 level then uptrend may continue.

Keep a Stop Loss at 162 level for your long positions too.
 
Buy CUMMINS (I) (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 312 level can be used to buy. If uptrend continues, then it may continue up to 329 level for time being. 

If crosses & sustains at above 339 level then uptrend may continue.

Keep a Stop Loss at 302 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	11-Aug-2009	2191.36	2368.83	-177.47

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	11-Aug-2009	1451.61	822.74	+628.87

 Global Cues & Rupee  
The Dow Jones Industrial Average closed at 9,241.45. Down by 96.50 points.
The Broader S&P 500 closed at 994.35. Down by 12.75 points.

The Nasdaq Composite Index closed at 1,969.73. Down by 22.51 points.

The partially convertible rupee INR=IN closed at 47.97/98 per dollar on yesterday, below its previous close of 47.82/83.
 
 Interesting findings on web:
Stocks slumped Tuesday, with a pummeling in bank shares and jitters ahead of a Federal Reserve announcement giving investors a reason to retreat.

The Dow Jones Industrial Average fell 96.5 points, or 1.03 per cent, to 9241.45.

The tech-heavy Nasdaq composite points fell 22.51 points, or 1.13 per cent, to 1969.73 and the broad-market Standard & Poor's 500 index retreated 12.75 points, or 1.27 per cent, to 994.35.

"I think there's some apprehension ahead of the Fed," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "We know they're going to leave rates alone, but there's some question about what they'll say."

The banking sector retreated after CIT Group (CIT, Fortune 500) delayed its quarterly filing, reviving bankruptcy fears, and several analysts sounded an alarm on the sector. Influential analyst Richard X. Bove of Rochdale Securities said that bank stocks are trading on "fumes" and that investors should take some short-term profits. JPMorgan Chase downgraded bond insurer MBIA (MBI), according to published reports.

After opening with narrow losses, stocks moved swiftly lower in New York Tuesday thanks to a reading that showed wholesale inventories dropped more than expected.

The Commerce Department's June reading showed businesses reduced inventories at the wholesale level by 1.7%, a deeper cut than analysts expected.

A 0.4% rise in sales marked the first back-to-back increase this year, but it couldn't lift the sagging market.

Another bright spot came in the second-quarter productivity reading from the Labor Department, which jumped 6.4%, but even that figure came with red flags. Employers aggressively cut hours, reining in labor costs, which helped boost productivity and pretty up second-quarter earning reports. The strategy is an effective one in the midst of recession, but not a sustainable solution for long-term bottom line growth, and Tuesday's data further depressed any lingering hope for a better employment picture before the year is out.

The NFIB said its small business confidence index fell in July for the second straight month, dropping 1.3 points to 86.5. Dunkelberg said the number is consistent with negative growth in gross domestic product, depsite the predictions of many economists who see GDP turning positive this year.

Amid Tuesday's losses, Wall Street also had an eye on the Federal Reserve, which opened a two-day monetary policy meeting. Traders are anxious to see if the central bank will embrace signals that the economy is in recovery and hint at possible rate hikes early next year.

Ahead of the Fed meeting, the Commerce Department releases the June trade gap. The trade gap is expected to have widened to $28.5 billion from $26 billion in May, a 10-year low.

Stock declines were broad based, with 26 of 30 Dow issues falling.

Stocks continued to slide Tuesday as bank stocks dragged on the broader market following a weak prognosis from a well-known banking analyst.

Financial stocks, which have gained 25 percent in the past month, skidded after Rochdale Securities analyst Dick Bove recommended taking short-term

profits in the sector, saying bank stocks were running on "fumes" and not reality in their recent run-up. He said bank earnings won't improve in the third or even the fourth quarter. Still, he says the sector is attractive long-term.

Citigroup [C  3.69    -0.25  (-6.35%)   ] and Wells Fargo both dropped more than 6 percent.

Citigroup ( C - news - people ) published its second-quarter TARP progress report, announcing it approved $6 billion in new initiatives to extend credit to consumers and businesses during the period. At the close of the quarter, Citi had put $15.1 billion to work, out of the $50.8 billion in TARP capital it allocated to such programs. Shares of Citi were down 27 cents, or 6.9%, to $3.67.

AIG shares [AIG  24.92    -3.78  (-13.17%)   ] fell another 13 percent and Bank of America [BAC  15.85    -0.83  (-4.98%)   ] lost 5 percent following a story in the Wall Street Journal today about the SEC's plan to ramp up its enforcement actions to convey a "sense of urgency."

Piling on to the pressure on the banking sector, Miller Tabak cut its price targets on Zions Bancorp [ZION  16.428    -1.502  (-8.38%)   ] and Regions Financial [RF  4.76    -0.21  (-4.23%)   ]. Those stocks shed 8.4 percent and 4.2 percent, respectively.

CIT Group shares [CIT  1.20    -0.28  (-18.92%)   ] tumbled 19 percent after the company said it would file for bankruptcy protection if it failed to complete its debt tender or arrange other financing.

CIT Group ( CIT - news - people ) has delayed a second-quarter filing to its regulators, as it works on a tender offer to bondholders designed to stave off bankruptcy. The lender already received a $3 billion emergency loan from a group of debt holders, and said it is reviewing assets that it may be able to sell.

Shares of Freddie Mac [FRE  1.56    -0.13  (-7.69%)   ], the battered government-sponsored mortgage agency, skidded 7.7 percent a day after the company reported its first quarterly profit in two years. Shares of its sister agency, Fannie Mae [FNM  1.07    0.07  (+7%)   ], jumped 7 percent.

At the same time, regional banks like Huntington Bancshares (HBAN: 4.45, -0.32, -6.71%) tumbled after Miller Tabak cut its price targets on Zions Bancorp (ZION: 16.48, -1.45, -8.09%) and Regions Financial (RF: 4.79, -0.2, -4.01%).

The market was also buzzing about an op-ed in the Wall Street Journal today about Ginnie Mae, the Government National Mortgage Association, and the fact that much of its lending is essentially subprime.

Target shares [TGT  42.20    0.22  (+0.52%)   ] rose 0.5 percent after activist hedge-fund manager William Ackman converted most of his options in the retailer into common stock to become more of a long-term investor.

Several other retail stocks also rose, including Wal-Mart, Macy's and Gap.

More moving-and-shaking news out of the auto sector: General Motors executives said the all-electric Chevrolet Volt — expected to hit showrooms late in 2010 — will get 230 miles per gallon.

Dow financial issues American Express (AXP, Fortune 500), Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Travelers Companies (TRV, Fortune 500) all declined. The KBW Bank (BKX) index lost 4.4%.

Among other financial sector movers, CIT Group (CIT, Fortune 500) slumped after saying it will delay filing its quarterly report as it continues to try to restructure its debt and avoid filing for bankruptcy protection.

IBM (IBM, Fortune 500), Cisco Systems (CSCO, Fortune 500), Chevron (CVX, Fortune 500), Caterpillar (CAT, Fortune 500), Walt Disney (DIS, Fortune 500) and General Electric (GE, Fortune 500) were the Dow's other big decliners.

In corporate news, hedge fund Pershing Square Capital revealed it cut its stake in retailer Target ( TGT - news - people ) nearly in half. Pershing, run by William Ackman, disclosed a 4.4% holding in the discount retailer, down from 7.8% as of May 26. Ackman has pushed for a series of changes at Target, which gained 45 cents, or 1.1%, to $42.43 Tuesday.

General Motors ( GMGMQ.PK - news - people ) made a splash Tuesday, estimating that its forthcoming electric-powered Chevy Volt could get up to 230 miles to the gallon in city driving. The automaker's Chief Executive Fritz Henderson also said GM is on track to report positive cash flow in 2010 and return to profitability in 2011.

Applied Materials (AMAT, Fortune 500) is likely to be active Wednesday. After the close Tuesday, the chipmaker reported a quarterly loss versus a profit a year ago on weaker revenue. However, the results were better than what analysts were expecting and shares gained 3% in extended-hours trading.

Corning (GLW: 16, -0.37, -2.26%) said the 6.4-magnitude earthquake that struck central Japan on Monday disrupted production at a Japanese factory, forcing the company to cut its production outlook for LCD screens. The glass maker said it now sees third-quarter volume falling 5% to 10% from a year ago.

Tellabs (TLAB: 6.15, 0.25, 4.24%) jumped to a 52-week high after the company announced plans to buy back up to $200 million of its stock. Tellabs, which has no debt, said late Monday it will use some of its $1.2 billion in cash and equivalents for the program, starting as early as Aug 13.

The gold market is watching the U.S. dollar as the Federal Open Market Committee meets, because any hints on interest rate hikes or announcement on the Federal Reserve's Treasury-buying program could bolster the greenback and weaken the metal's price.

The two-day FOMC meeting began Tuesday, with an interest-rate decision expected around 2:15 p.m. EDT (1815 GMT) Wednesday.

Few anticipate the Fed will move interest rates in the short term, said Adam Klopfenstein, senior market strategist at Lind-Waldock, a division of MF Global.

Nevertheless, he said, a shift is afoot in dollar buying, with participants moving from buying the dollar as a safe haven to buying the currency in anticipation of interest rate hikes over the next few years.

"Any talk about higher rates is going to support the dollar," said Frank Lesh, broker and futures analyst with FuturePath Trading. "We all know rates are going up. It's a question of when and how fast."

Lesh thinks it will be next year before interest rates start rising.

Fed decisions are key for the dollar, and consequently for gold, because the metal acts as an inflation and currency hedge, meaning it is often bought in times of dollar weakness and sold in times of dollar strength. A stronger greenback also tends to pressure dollar-denominated commodities, such as gold, by making them more expensive in other currencies, damping demand.

Another possible support for the dollar may come if the Fed announces it won't renew its Treasury-buying program.

That could be dollar supportive because those Treasury purchases are viewed by some as inflationary, and it might be taken as a sign of economic improvement if the buying is seen as no longer needed, Lesh said.

"I think they're going to let this program end in September," Lesh said, but he emphasized that doesn't mean the Fed will necessarily make that announcement Wednesday.

Klopfenstein said the dollar may even head lower in the short term if the Fed statement doesn't contain what participants are expecting.

If the FOMC announces that it won't extend the Treasury-buying program, that would be positive for the dollar, a Barclays Capital research note said.

Barclays expects gold's gains to be capped by a falling euro against the dollar.

"Prices continue to take their cue from currency movements and external markets," Barclays said.

Treasury prices were higher, even as the government prepares to issue $75 billion worth of new debt this week. The latest round of bond auctions starts with Tuesday's $37 billion offering of three-year notes. The benchmark ten-year note had a yield of 3.70%, down from 3.80% Monday.

Economy:

U.S. productivity in the second quarter jumped at the fastest pace in six years, the government said Tuesday. Productivity -- which measures how much workers produce per hour worked -- rose 6.4% versus forecasts for a rise of 5.5%. Productivity rose 0.3% in the first quarter.

Oil and gold:

U.S. light crude oil for September delivery fell $1.15 to settle at $69.45 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose 70 cents to settle at $947.60 an ounce.

Bonds:

Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.67% from 3.77% late Monday. Treasury prices and yields move in opposite directions.

The government is offering $75 billion this week as part of its ongoing efforts to reduce the deficit and fuel its recovery efforts.

Investors reacted mildly to the conclusion of the first auction Tuesday. Treasury sold $37 billion in three-year notes and saw stronger demand than in other recent auctions.

On Wednesday, the government auction $23 billion in 10-year notes and on Friday it auctions $15 billion in 30-year bonds.

Treasury prices rose Tuesday as investors anxious about the Federal Reserve's assessment of the economy took shelter in government debt.

The government's auction of $37 billion in three-year notes went well, allowing Treasurys to hold their gains. But investors, who were pulling money

out of the stock market and stashing it in government securities, were more focused on what the Fed will say about the economy when it ends a two-day meeting Wednesday.

It's a foregone conclusion that the central bank will hold the federal funds rate at its current level near zero. The question is whether Chairman Ben Bernanke and other Fed officials will be more upbeat about the economy in the statement that accompanies the rate decision — especially after the unemployment rate fell unexpectedly last month to 9.4 percent from 9.5 percent in June.

Stocks fell for a second straight day Tuesday, putting a slight dent in a four-week rally that lifted the Standard & Poor's 500 index 15 percent. As jitters over the Fed meeting sent stocks lower, investors saw a good opportunity in the relative safety of the Treasury market.

In late trading, the benchmark 10-year Treasury note rose 26/32 to 95 17/32, pushing its yield down to 3.67 percent from 3.78 percent late Monday.

A lower yield is good news for consumers because it is tied to rates on mortgages and other loans.

"People are taking advantage of these yield levels to put some money to work," said Carl Lantz, a fixed income strategist at Credit Suisse.

The rise in Treasury prices added to Monday's gains, which came after big losses on Friday in reaction to the unexpected dip in the unemployment rate.

The Treasury's three-year note auction was a success. The auction's bid-to-cover ratio, a measure of demand, was 2.90 percent, compared with 2.62 percent at a similar auction last month and above a recent average of 2.58 percent.

Indirect bids, an indication of foreign buying, hit an all-time high, Lantz said.

"All the statistics look good," he said. "A good auction all around."

The government is selling massive amounts of debt this year to help pay for its bailout of the financial system and jump-start the economy. Investors have been worried that demand would abate amid the surplus, but so far most auctions have been going well. If demand were to consistently fall short, the government would have to raise the interest it pays, which would drive up borrowing costs and potentially hinder the economy's recovery.

In total, the Treasury Department is issuing $75 billion of debt this week. On Wednesday, the government will auction $23 billion in 10-year notes followed by $15 billion in 30-year bonds on Thursday.

The three-year note rose 6/32 to 99 12/32, while its yield fell to 1.72 percent from 1.78 percent.

In other trading, the 30-year bond rose 1 14/32 to 96 27/32, and its yield fell to 4.44 percent from 4.53 percent.

The two-year note rose 4/32 to 99 21/32 and its yield fell to 1.18 percent from 1.25 percent.

The yield on the three-month T-bill was unchanged at 0.17 percent. Its discount rate was 0.18 percent.

The cost of borrowing between banks fell. The British Bankers' Association said the rate on three-month loans in dollars — the London Interbank Offered Rate, or Libor — slipped to 0.45 percent from 0.46 percent.

What to expect:

WEDNESDAY: Weekly mortgage applications; international trade; weekly crude inventories; Treasury 10-year auction; Fed announcement; Earnings from Macy's.

THURSDAY: Retail sales; weekly jobless claims; import/export prices; business inventories; Treasury 30-year auction; Earnings from Wal-Mart, Kohl's and Nordstrom.

FRIDAY: CPI; industrial production; consumer sentiment; Earnings from JCPenney.

Among the stocks expected to see active trading Wednesday are LDK Solar Co. Ltd., Liz Claiborne Inc., Macy's Inc. and Sara Lee Corp.

LDK Solar Co. Ltd. /quotes/comstock/13*!ldk/quotes/nls/ldk (LDK 11.22, +0.18, +1.63%) is expected to post a second-quarter loss of 91 cents a share, according to analysts surveyed by Thomson Reuters.

Liz Claiborne Inc. /quotes/comstock/13*!liz/quotes/nls/liz (LIZ 4.02, +0.01, +0.25%) is projected to post a second-quarter loss of 40 cents a share.

Macy's Inc. /quotes/comstock/13*!m/quotes/nls/m (M 15.44, -0.03, -0.19%) is forecast to post second-quarter earnings of 14 cents a share.

Netease.com Inc. /quotes/comstock/15*!ntes/quotes/nls/ntes (NTES 45.30, +0.29, +0.64%) is expected to post second-quarter earnings of 45 cents a share.

Sara Lee Corp. /quotes/comstock/13*!sle/quotes/nls/sle (SLE 10.85, +0.05, +0.46%) is projected to post fiscal fourth quarter earnings of 24 cents a share.

The Progressive Corp. /quotes/comstock/13*!pgr/quotes/nls/pgr (PGR 15.80, -0.37, -2.29%) is forecast to post second-quarter earnings of 36 cents a share.

U.S. Home Systems /quotes/comstock/15*!ushs/quotes/nls/ushs (USHS 2.97, +0.25, +9.19%) is expected to post a second-quarter loss of 10 cents a share.

After Tuesday's bell, NYSE Euronext's NYSE Group Inc. /quotes/comstock/13*!nyx/quotes/nls/nyx (NYX 28.47, -0.22, -0.77%) said short interest on the New York Stock Exchange fell in the second half of July from the first half, to the lowest level since late February. Short interest fell to 14.03 billion shares from 15.64 billion shares. Short interest on July 31 was equal to 3.67% of total shares outstanding.

Watch List

Nasdaq OMX Group Inc. /quotes/comstock/15*!ndaq/quotes/nls/ndaq (NDAQ 21.89, -0.01, -0.05%) said Tuesday that short interest declined over the most recent period. The exchange had short interest in 6.78 billion shares in 2,903 securities at the end of July 31, compared with 7.14 billion shares in 2,883 securities as of July 15.

Warnaco Group Inc. /quotes/comstock/13*!wrc/quotes/nls/wrc (WRC 37.30, -1.01, -2.64%) said late Tuesday that its second-quarter profit fell to $17.8 million, or 38 cents a share, from $19.4 million, or 41 cents a share, in the year-ago period.

Asia:

Stock markets in Asia were slightly lower in morning trading Wednesday, with a selloff in the US weighing on trading and investors somewhat cautious ahead of a Federal Open Market Committee meeting.

Japan's Nikkei [JP;N225  10502.96    -82.50  (-0.78%)   ] average pulled back from 10-month highs on Wednesday, as concerns over a U.S. economic recovery grew after an unexpectedly large drop in  wholesale inventories and negative comments about the banking  sector from a prominent analyst.

Analysts said investors were locking in profits ahead of the end of the Federal Reserve board meeting and issuance of its policy statement, with attention on whether it unwinds some of the quantitative easing policies currently in place.

Exporters such as Canon fell but Sapporo gained on a report it will buy 20 percent stake  in drinks maker Pokka Corporation as part of a three-way tie-up  with Meiji Holdings.

"There's some concern that the Nikkei has been overbought,  and that put together with inability to read what the Fed might  do is leading to profit-taking," said Takashi Ushio, head of the  investment strategy division at Marusan Securities.

"I wouldn't go so far yet as to call what's happening now an  adjustment, but for the Nikkei to rise past 11,000 we need to see  proof of quite a sharp recovery in earnings," said Ushio.

Japanese wholesale prices fell a record 8.5 percent in July from a year earlier, highlighting growing deflationary pressure in the economy and limiting the Bank of Japan's scope for ending its unorthodox policy measures, but analysts said there was little impact from this on the Nikkei.

Tokyo stocks fell Wednesday morning on renewed jitters over the U.S. economic recovery path, with Japanese exporters weighed down by a stronger yen and financial shares tracking their U.S. peers' decline.

IT Holdings Corp. (3626) shares opened ask-only Wednesday morning, as the company on Tuesday evening downgraded its earnings outlook for the current year through March 2010.

JGC Corp. (1963) shares bounced back Wednesday after a down day on Tuesday, at one point up 76 yen at a year-to-date high of 1,729 yen.

Australian stocks recovered early losses to stand flat after Commonwealth Bank of Australia reversed course as investors took an optimistic view of its earnings results and outlook. The benchmark S&P/ASX 200 [AU;XJO  4328.2    -3.80  (-0.09%)   ] was up slightly.

It earlier posted a 2.3 percent rise in second-half profit, above analyst expectations, although it gave a cautious outlook.

"It's quite a promising result and it's quite promising for the rest of the financial sector," said James Foulsham, head of  trading at CMC Markets.

In Korea, the Kospi [KR;KSPI  1556.33    -22.88  (-1.45%)   ] slid on US weakness, with KB Financial among the big losers.

Singapore Slides, Hong Kong Starts Down

Singapore's Straits Time Index [GB;STI  2576.25    -21.05  (-0.81%)   ] was also down. Shares of Ascendas Real Estate Investment Trust fell sharply after the firm announced that it had made a private placement of 185 million new units at S$1.63 each, analysts said.

The price was at the bottom of the indicative range of S$1.63 and S$1.70, and well below the firm's pre-suspension price of S$1.76.

"People are taking it as a 'sell' signal that the company needs to raise cash as it's not the first time they're dipping into the market," said a trader from a local brokerage.

Hong Kong's Hang Seng index [HK;HSI  20623.04    -451.1719  (-2.14%)   ] started down 2 percent.

HSI 20561 -513.21 -2.44%. (08.32 AM IST).

Hong Kong stocks fell Wednesday from their highest level in nearly a year, as investors locked in profits after recent strong gains in market heavyweights HSBC Holdings Plc. and China Mobile Ltd., as well as Chinese banks. The Hang Seng Index dropped 2% to 20,655.77 in early trade, after ending above 21,000 Tuesday. The Hang Seng China Enteprises Index lost 2% to 11,744.17, also hurt by a decline for stocks in mainland China, where the Shanghai Composite dropped 0.9%. Shares of HSBC /quotes/comstock/22h!e:5 (HK:5 86.08, -0.40, -0.46%) /quotes/comstock/13*!hbc/quotes/nls/hbc (HBC 54.90, +0.53, +0.98%) dropped 3.1%, and China Mobile /quotes/comstock/22h!e:941 (HK:941 91.10, -0.25, -0.27%) /quotes/comstock/13*!chl/quotes/nls/chl (CHL 57.55, -0.01, -0.02%) shrank 2.9%, while Bank of China /quotes/comstock/22h!e:3988 (HK:3988 3.79, +0.05, +1.34%) /quotes/comstock/11i!bachy (BACH.Y 12.10, -0.45, -3.59%) fell 2.4%. 

Hutchison Telecom shares suspended

Hutchison Telecommunications International Ltd. /quotes/comstock/22h!e:2332 (HK:2332 1.98, -0.03, -1.49%) /quotes/comstock/13*!htx/quotes/nls/htx (HTX 3.79, -0.09, -2.35%) said Wednesday its shares have been suspended from trading "pending the release of an announcement regarding a very substantial disposal by the company." The Hong Kong telecom didn't give further details. It was slated to announce earnings later in the day.

Microsoft Corp. has reached an agreement with Nokia Corp. to make a mobile version of Microsoft's Office suite of software that works on Nokia mobile phones, The Wall Street Journal reported late Tuesday, citing a person familiar with the matter. 

Chinese prosecutors have charged four staff members of Anglo-Australian miner Rio Tinto Plc. with corporate espionage and bribery, according to an announcement late Tuesday in state media. 

China imports record crude, iron ore as economy expands

China's imports of oil and iron ore hit a record high in July, customs data showed Tuesday, as the nation's $586 billion stimulus plan continues to push up demand for commodities.

Crude imports jumped 18% from a month ago to 19.63 million metric tons last month, or about 4.64 million barrels a day, according to monthly data released by China's General Administration of Customs. Iron-ore imports rose 5% to 58.08 million metric tons.

China, the world's second-biggest oil consumer and the No. 1 user of iron ore, spent $13.8 billion in the imports of the two commodities. China's strong demand for commodities came also as the country continued to build its strategic reserve for crude, copper and other commodities.

Total oil imports in the first seven months rose to 110.4 million metric tons, up 5.5% from a month ago. Iron-ore imports rose to 355.25 million metric tons, up 31.8% from a year ago.

"This rapid and broad-based growth in commodity imports in July reflects both the strong real demand in China and China's deep pockets," said Ting Lu, an economist at Bank of America Merrill Lynch, in a note.

Merrill Lynch recently raised its forecast for the world's third-largest economy to grow 8.7%, from 8% previously. China last month reported its economy increased by a higher-than-expected 7.9% in the second quarter. See full story on China's economic growth data.

Official data released on Tuesday showed China's industrial production and investments in urban fixed assets increased at a rapid rate in July, keeping alive expectations government policies will continue to support an economic recovery. See related story.

While global oil demand is expected to fall this year for a second year in a raw, China's oil demand is expected to rise by 1.1%, according to the International Energy Agency. The IEA also expects China's oil demand in 2010 to rise by 4.2% to 8.3 million barrels a day.

"Recent data continue to paint a bullish picture for underlying energy demand in China, and one that is clearly improving," said Amrita Sen, an oil analyst at Barclays Capital.

China imports more than half of its oil demand.

In Tuesday trading, crude futures slid 1.9% to $69.23 a barrel on the New York Mercantile Exchange. Oil has rallied about 60% this year.

U.S-listed shares of PetroChina Ltd. /quotes/comstock/13*!ptr/quotes/nls/ptr (PTR 116.09, -1.68, -1.43%) slid 1.4% to $116.17, those of China Petroleum & Chemical Corp. /quotes/comstock/13*!snp/quotes/nls/snp (SNP 86.43, +0.14, +0.17%) fell 1.6% to $86.64.

Japan wholesale prices fall record 8.5%

Wholesale prices in Japan fell a record 8.5% in July from the year-earlier period, the Bank of Japan said Wednesday.

The fall in the preliminary domestic Corporate Goods Price Index outpaced a 6.7% on-year fall in June. However, the July figures marked a 0.4% rise when compared to the month before.

The drop was the fastest on-year decline on record but still came in below an average market forecast for an 8.6% fall, according to a Kyodo news report.

Import prices were down 33.3% on-year in yen terms and down 26.5% on a contract-currency basis, the data said.

Export prices fell 15.3% in yen terms and 6.5% in contract currencies.

Report: Economists Say Recession Over, Want Bernanke to Stay

Economists date the start of the recession to December 2007 -- defining much of Ben Bernanke's term as Federal Reserve chairman -- and a majority in a Wall Street Journal survey agree that the recession is coming to an end.

Is the recession over? Economists polled by the Wall Street Journal say yes, and they suggest that's a big reason why Federal Reserve Chairman Ben Bernanke should stay.

The Journal reports that the experts are overwhelmingly in favor of President Obama asking Bernanke to stay on for another four-year term when his current term ends Jan. 31. Bernanke has been a key figure in the government's efforts to reverse the country's economic meltdown, a role that has earned him some criticism but also praise for handling of the crisis.

Economists date the start of the recession to December 2007 -- defining much of Bernanke's term, which started in early 2006 -- and a majority agree that the recession is coming to an end.

Bernanke "deserves a lot of credit for stabilizing the financial markets," Joseph Carson of AllianceBernstein told the Journal.

Obama said last week that the "worst may be behind us," and the Labor Department on Tuesday seemed to bolster that notion, reporting that productivity surged in the spring by the largest amount in almost six years while labor costs plunged at the fastest pace in nine years.

Productivity is a key ingredient for rising living standards because it means that companies can pay their workers more with the wage increases financed by rising output.

However, in the current recession, companies have been using the productivity gains to bolster their bottom lines in the face of declining sales. Many companies have been reporting second-quarter earnings results that have beaten expectations despite falling sales, due largely to their aggressive cost cutting.

Many economists believe the current recession is on the verge of ending. If the economy starts to grow in the second half of this year, companies are expected to switch from layoffs and trimming workers' hours to boosting employment as demand for their products increases.

As for Bernanke, it seems increasingly likely that he'll get to keep his job.

"Continuity is critical as we emerge from this crisis," Diane Swonk of Mesirow Financial told the Wall Street Journal. "Otherwise, we could slip back in again.

Bernanke is the best suited to undo what has been done when the time comes."

China's July fiscal revenue up 10.2% 

China's Ministry of Finance announced Wednesday that the country's fiscal revenue in July rose 10.2 percent year on year to 669.59 billion yuan (97.96 billion U.S. dollars). 

White House Adviser Summers Predicts Slow Recovery.

Breaking News:

U.S. Marines Mount Assault on Taliban Town

U.S. Marines have mounted a helicopter assault to seize the Taliban-held town of Dahaneh in southern Afghanistan and are fighting gain control of the area ahead of next week's presidential elections.

The assault began before dawn Wednesday, with Marines entering the town as others battled militants in the surrounding mountains.

Associated Press journalists traveling with the first wave say Marines were met with small arms, mortar and rocket propelled grenade fire. Fighting is still under way hours later, with U.S. Marine Harrier jets streaking over the town and dropping flares in a show of force.

Marines have captured several suspects and seized about 66 pounds (30 kilos) of opium.

   

INVESTEMENT VIEW
Are Banks creating A Real Estate Bubble? 

Are they spurring unwanted personal consumption by throwing cheap loans at borrowers?

 
It's a crazy circle. Banks lower interest rates on deposits, find there are no takers for credit. So they go out and reduce rates on personal and car loans, even mortgages. But these sectors are the worst hit by rising numbers of unemployment. So Banks try something else-they go for GOI Treasuries.
 

For 10 year paper they bid 7 per cent, but already 2-3 year deposit rates fetch 7 per cent so there is an asset-liability mismatch if Banks go for long term paper funded by equally costing short term paper. So once more they cut deposit rates and the circle keeps repeating till the situation becomes so bad, that interest rates drop to zero and yet there are no safe customers to whom money can be lent out. So what do you do?

 

Just sit on your haunches and hope for better times. Or atleast this is what commercial banks are doing. Either they get cheap deposits or they get higher yields on 10 year Treasuries. The failure of the recent Bond offering from the Government last week shows the malaise. The GOI will not accept higher yields and Banks will not accept lower yields.

 

The Depositor will suffer and so would investors as Bank returns keep dropping. Anyone with common sense should look around the Globe, even with zero per cent interest rates in Japan, US and Hong Kong the economies are not growing. Infact, Economic Activity is sinking. So zero interest rates is not the answer. The answer lies in Growth, but if the Banks start taking speculative risk on sectors like Real Estate then we have a problem of Banking proportions on our hand.

 

To raise or not to raise?

 

Do the banks want to raise rates? Probably not. Not when they know the fragile state that many of their borrowers will be in once rates really start rising.

The fact is they've got to. With all the debt floating around on the market, and more to come, the competition for debt issues will be even fiercer this time next year.

Banks will have to offer higher levels of interest in order to attract funds. That will have to filter through to their borrowers. There's no question about that.

The ability to move on interest rates has been helped by their little PR coup on bank fees. It's much easier for them to take a small hit in the pocket now on fees knowing full well they'll have an easy excuse to increase interest rates regardless of what the RBI does.

Even until recently the economists at the major banks were still singing from the same hymn sheet - "interest rates will fall further." Most of them were calling for a drop to 2% as they told us not to worry about inflation.

All the while the banks were helping to fuel the hot air keeping the property bubble in the air. They've succeeded in suckering in hundreds of thousands of property buyers on the back of artificially low interest rates. 

Extraordinarily, not a single one of the expert economists at the banks have considered this to be a problem. How could they possibly ignore it?

After all, the low interest rates and government cash bribes have given the property sector a three-in-one boost. A boost that can only result in a bubble.

This triumvirate consists of: people who would have bought into the market now anyway, those that have been delaying a purchase, and those that have brought forward a purchase.

The simple laws of supply and demand tell you that if you're grouping together every potential purchaser from the last five years, today, and the next five years, it has to have an impact on prices.

When demand rises, prices rise. We're not talking a complex scientific formula here.

But still the mainstream media largely ignores it.

The big problem for the banks and the property sector could come as early as next year. With interest rates even 1% higher than today, and no government bribes there will undoubtedly be fewer buyers in the market.

That will be bad news for the banks, especially if home repossessions continue to rise. Think about what it'll be when rates push higher and the cost of servicing loans also increases.

All we can say is that it's a good job the banks are stocking up the cupboards now. We may soon find out whether they've kept enough in reserve to last through the Property Winter of Discontent or not.

(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 11th Aug 2009

NIFTY FUTURES LEVELS

SUPPORT

4376

4316

4256

RESISTANCE

4438

4500

4560

4620

4680

Buy SRF; WIPRO

 

INTRADAY calls for 11th Aug 2009
+ve Script : Mindtree
Buy PATNI-379 for a target 387-396 stop loss 372
Buy Mphasis-504 for a target 520-531 stop loss 497
Buy Cummins-293 for a target 299-306 stop loss 288

Short BOI-321 at 328 for a target 321-317 stop loss 335

Buy EID-parry-332 above 337 for a target 355-363 stop loss 325
Buy Hindoilexp-199 above 203 for a target 209-214 stop loss 198

 

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

Patni,Mphasis,Bharat Forge,GT OFFshore,Aurobindo Pharma,TCS,Shree Renuka,Wipro,Polaris Softwar, & DCB.

And this is list of 10 Weak futures:

Suzlon,Chambal Fert,Divi'S Lab,Nagarjun Fertil,Educomp,IDBI Ltd,R Com,Colpal,Pantaloon Retail & Hero Honda.
Nifty is in Up Trend. 
 
NIFTY FUTURES (F & O):  
Selling may continue up to 4376-4378 zone for time being.

Hurdle at 4436-4438 zone. Above this zone, expect short covering up to 4498-4500 zone and thereafter expect a jump up to 4558-4560 zone by non-stop.

Sell if touches 4618-4620 zone. Stop Loss at 4678-4680 zone.

 

On Negative Side, break below 4316-4318 zone can create panic up to 4256-4258 zone. If breaks & sustains this zone then downtrend may continue.
 
Short-Term Investors:  
Bullish Trend. 3 closes above 4473 level, it can zoom up to 4988 level by non-stop.
Stop Loss Triggered. 3 closes below 4473 level, it can tumble up to 4215 level by non-stop.
 
BSE SENSEX:  
Lower opening expected. Recovery should start. 

Short-Term Investors:  
Short-Term trend is Bearish and target at around 14235 level on down side.
Maintain a Stop Loss at 15973 level for your short positions too.

 

POSITIONAL BUY:
Buy SRF LTD (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 142 level can be used to buy. If uptrend continues, then it may continue up to 150 level for time being. 

If crosses & sustains at above 154 level then uptrend may continue.
Keep a Stop Loss at 137 level for your long positions too.
 
Buy WIPRO LTD (NSE Cash) 

Uptrend to continue.

Mild sell-off up to 511 level can be used to buy. If uptrend continues, then it may continue up to 524 level for time being. 

If crosses & sustains at above 536 level then uptrend may continue.

Keep a Stop Loss at 500 level for your long positions too.
 
Global Cues & Rupee
The Dow Jones Industrial Average closed at 9,337.95. Down by 32.12 points.
The Broader S&P 500 closed at 1,007.10. Down by 3.38 points.

The Nasdaq Composite Index closed at 1,992.24. Down by 8.01 points.

The partially convertible rupee INR=IN closed at 47.82/83 per dollar on yesterday, above its previous close of 47.85/86. 

 

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	10-Aug-2009	2539.36	3179.28	-639.92

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	10-Aug-2009	1188.3	1102.16	+86.14

 

Interesting findings on web:
Stocks slipped Monday as investors pulled back ahead of a two-day Federal Reserve meeting and following a big rally that pushed the Dow and S&P 500 to 9-month highs.

The Dow Jones Industrial Average fell 32.12 points, or 0.34%, to 9337.95, the Standard & Poor's 500 slid 3.38 points, or 0.33%, to 1007.10 and the Nasdaq Composite tumbled 8.01 points, or 0.40%, to 1992.24.

"We are in a mild profit-taking mode after a rally, and we are also nearing September, the historically worst month for stocks," Art Hogan, chief market analyst at Jefferies, told Reuters.

Most of the banking sector followed State Street lower but Citigroup CITIGROUP INCC 3.94  0.09  +2.34%  NYSE Quote  |  Chart  |  News  |  Profile [C  3.94    0.09  (+2.34%)   ] gained more than 2 percent. Bank of America and JPMorgan also advanced after a report showed U.S. banks are poised to make $38.5 billion from customer overdraft fees this year and as they're also likely to benefit from all the new car buying that has resulted from the "Cash for Clunkers" program.

Merck (MRK, Fortune 500) shares gained 1.7% after Goldman Sachs upgraded it to "buy," from "not rated" according to published reports.

McDonald's (MCD, Fortune 500) reported that sales at stores open a year or more, a retail metric known as same-store sales, rose 2.6% in July, raising hopes that it will see a strong third quarter. Shares gained almost 2%.

Freddie Mac (FRE, Fortune 500) shares surged 128% in active trading Monday, one day after the government-run home mortgage lender reported its first quarterly profit in two years. The company, along with Fannie Mae (FNM, Fortune 500), was saved from extinction last year amid the credit market collapse after receiving billions in government aid. Fannie Mae gained 51%.

But a variety of economically sensitive shares fell, including Dow components Alcoa (AA, Fortune 500), DuPont (DD, Fortune 500), 3M (MMM, Fortune 500), Boeing (BA, Fortune 500) and Caterpillar (CAT, Fortune 500). Other Dow losers included Cisco Systems (CSCO, Fortune 500), Travelers (TRV, Fortune 500) and Walt Disney (DIS, Fortune 500).

State Street ( STT - news - people ) shares fell 2.4%, after an SEC filing indicated the asset manager's $625 million reserve for exposure to subprime-related investments may not be sufficient. Apparently the firm is concerned that its reserve may fall short of covering fees and penalties related to litigation and investigations by regulators.

Bankrupt telecom equipment maker Nortel Networks ( NRTLQ - news - people ) announced Chief Executive Mike Zafirovski will step down, and its board will be culled to three members from nine, on the heels of rising losses as it attempts to shed assets.

Microsoft ( MSFT - news - people ) shares lost 0.6%, after the tech heavyweight agreed to sell its Razorfish digital advertising firm to France's Publicis for approximately $530 million in cash and shares. Under the deal, Microsoft commits a minimum amount to spend each year on digital strategy, creative and marketing services from Razorfish.

The insurer American International Group rose 9%.

The materials sector of the S&P fell the most, losing 2.3%, weighed down by Nucor corp. /quotes/comstock/13*!nue/quotes/nls/nue (NUE 47.01, -0.09, -0.19%) and AK Steel Holding /quotes/comstock/13*!aks/quotes/nls/aks (AKS 20.37, +0.06, +0.30%) , both off more than 4%.

Stocks like Macy's (M: 15.21, -0.78, -4.88%) and Aeropostale (ARO: 35.86, -1.64, -4.37%) tumbled after electronics retailer Best Buy (BBY: 37.67, -2.106, -5.29%) was cut from "buy" to "neutral" by Goldman Sachs. The analysts said Best Buy faces increased competition and challenges related to its product mix.

JCPenney, which report earnings later in the week, down more than 3 percent.

EBay (EBAY: 22.49, -0.03, -0.13%) and General Motors unveiled a promotion to sell GM cars and trucks online in California for one month.  GM said consumers will be able to use the eBay micro site, which is set to launch Tuesday, to compare and shop between different dealerships.

Priceline.com (PCLN: 150.24, 18.92, 14.41%) climbed 14% to 52-week highs after the online travel agent said its net income jumped 35% during the second quarter. Lifted by a 12.8% jump in gross bookings, the company beat the Street with an adjusted-profit of $2.02 per share and an 18% jump in revenue to $603.7 million.

Sysco (SYY: 25.03, 0.17, 0.68%) disclosed a 5.6% slide in net income and a steeper-than-expected decline of 6.6% in revenue. The food distributor posted an adjusted-profit of 50 cents a share, topping the Street's view by a penny.

YRC Worldwide (YRCW: 2.69, 0.43, 19.03%) closed up 19% after the International Brotherhood of Teamsters agreed to new concessions in an effort to keep the transportation service provider out of bankruptcy. YRC said the teamsters agreed to an additional 5% wage cut and an 18-month suspension of union pension fund contributions.

Virgin Mobile USA (VM: 4.7, -0.17, -3.49%) beat the Street with a second-quarter profit of 23 cents per share. However, the phone carrier, which is being acquired by Sprint Nextel (S: 3.71, -0.088, -2.32%), said its operating revenue slid 3.8% to $307.6 million, missing estimates.  Virgin said it remains confident in its guidance for both its adjusted earnings and free cash flow for 2009.

Hormel Foods (HRL: 38.23, 2.09, 5.78%) hit a 52-week high after the food processor boosted its full-year guidance, citing better-than-expected sales and lower feed costs. The maker of Spam said it expects to earn $2.36 to $2.42 a share, compared to the Street's view of $2.29.

Dish Network (DISH: 19.3, 0.88, 4.78%) reported an 81% plunge in quarterly profit, but the struggling satellite TV provider posted its first net subscriber gain in five quarters. Dish disclosed EPS of 14 cents and in-line revenue of $2.9 billion.

EchoStar (SATS: 15.97, 1.17, 7.91%), formerly a Dish unit, more than doubled its profit to $1.18 a share. The satellite TV provider's revenue tumbled 21% to $383.1 million.

Elsewhere in tech, Research In Motion RESEARCH IN MOTION LIMITEDRIMM 73.28  -3.81  -4.94%  NASDAQ Quote  |  Chart  |  News  | Profile [RIMM  73.28    -3.81  (-4.94%)   ] shares skidded nearly 5 percent, its third-straight decline, after UBS downgraded its rating on the stock to "neutral" amid worries that Verizon Wireless, one of RIM's largest customers, might launch its own iPhone.

Oil and gold:

U.S. light crude oil for September delivery fell 13 cents to settle at $70.93 a barrel on the New York Mercantile Exchange. Oil prices have been gaining in recent weeks on bets that the global economy is stabilizing.

COMEX gold for December delivery fell $12.60 to settle at $946.90 an ounce.

Bonds:

Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.77% from 3.84% late Friday. Treasury prices and yields move in opposite directions.

The U.S. government is auctioning $75 billion in debt this week as part of its efforts to fuel the economic recovery and manage the budget deficit.

What to expect:

TUESDAY: Two-day Fed meeting begins; wholesale trade; Treasury 3-year auction; Earnings from Applied Materials.

WEDNESDAY: Weekly mortgage applications; international trade; weekly crude inventories; Treasury 10-year auction; Fed announcement; Earnings from Macy's.

THURSDAY: Retail sales; weekly jobless claims; import/export prices; business inventories; Treasury 30-year auction; Earnings from Wal-Mart, Kohl's and Nordstrom.

FRIDAY: CPI; industrial production; consumer sentiment; Earnings from JCPenney.

Tuesday Look Ahead: Watching the Dollar

The Fed starts a two-day meeting Tuesday, and there are just a few economic reports, including productivity and costs at 8:30 a.m., and wholesale trade at 10 a.m. The NFIB's small business survey is reported at 7:30 a.m.

Traders are also watching the Treasury's auction of  $37 billion in 3-year notes at 1 p.m.

The dollar gained for a third day against a basket of currencies. Commodities, especially gold and other metals, moved lower.

"The bears held themselves together. The dollar started to exert its influence," said Art Cashin, director of floor operations at UBS. He said stock market bears though won't have an advantage as they head into Tuesday, and right now it's a toss up as to which direction dominates.

"The stock market benefited greatly from weakness in the dollar. It would seem natural that if it were to rally, it would put pressure on stocks," said Cashin. The dollar staged an interesting intraday reversal Friday after better than expected jobs data, sparking a debate about whether the dollar is now going to trade along with perceived relative strengthening in the U.S. economy instead of against the idea of recovery.

Cashin said it is important to see whether the dollar's rise is more than a short-lived phenomena and how other financial markets relate to it.  As the dollar firmed Monday, stocks and assets that rode higher with it, weakened. The commodities-related materials sector was the worst performer, down 1.6 percent. Second worst was consumer discretionary, down 1.2 percent, followed by a 1.1 percent decline in industrials, another group sensitive to the global reflation trade.

The dollar index was 0.3 percent higher at 79.212. It was also 0.3 percent higher against the euro, at $1.4142. Traders were also watching the Chinese stock market, down for a fourth day and another metric for the global economic recovery.

Bonds traded higher and yields fell along the curve Monday.

Larry Summers, President Obama's chief economic adviser, speaks at noon at a National Bureau of Economic Research event. He is expected to speak for 30 minutes and then take questions for another 30 minutes.

President Obama participates in a town hall on health care in New Hampshire.

General Motors holds an 8 a.m. press briefing.

Frank DiPascali, who helped run Bernard Madoff's investment advisory operation, is expected to plead guilty to fraud and could become a central witness against others in the fraud case.

Asia:

Japan's benchmark Nikkei 225 [JP;N225  10544.93    20.6699  (+0.2%)   ] drifted near a 10-month high to rise 0.2 percent while the broader Topix inched up 0.1 percent. Little impact was expected from a strong earthquake that jolted Tokyo and surrounding areas Tuesday morning, with many factories in the area shut for summer holidays. Exporters like Honda Motor, TDK and Tokyo Electron weighed on the index as the yen gained strength. But Toshiba shares chalked up gains on news it will make Blue-ray disc players by the end of 2009 to end its format war with competitors.

Shares in Daiichi Sankyo Co. (4568) extended their winning streak to seven days Tuesday, buoyed by hopes for the drugmaker's new anti-influenza agent CS-8958, or laninamivir.

Shares in Nippon Shinyaku Co. (4516) gained ground early Tuesday, but quickly pared some gains before the lunch break.

Shares in Chubu Electric Power Co. (9502) lost further ground Tuesday, after a major earthquake earlier that morning halted the firm's Hamaoka nuclear power plant's No. 4 and No.5 reactors in Shizuoka Prefecture.

Japanese stocks bucked a regional downtrend and rose Tuesday morning, as investors awaited the outcome of the Bank of Japan's monthly policy meeting later in the session for clues to the nation's economic recovery.

The central bank is widely expected to keep rates on hold, and it has already extended liquidity-boosting steps at its last meeting. As a result, investors' main focus will be on whether the bank tweaks the language of its cautious statement that the Japanese economy is improving.

"The BOJ is anticipated to leave rates unchanged at 0.1%, and while some economic indicators -- including machine orders, industrial production, and manufacturing PMI -- have shown signs of improvement, the central bank is likely to continue focusing on risks stemming from persistently weak domestic demand and deflation," said Terri Belkas, a currency strategist at DailyFX.com.

Government data on Monday showed Japanese core machinery orders jumped more than forecast, as did the nation's current-account surplus. But going forward, the outlook for orders -- considered a leading indicator of corporate capital spending -- was unclear.

"Japan's economic conditions have stopped worsening. Public investment is increasing, and exports and production are picking up.

Business sentiment, especially of large manufacturing firms, has stopped deteriorating," the BOJ said in a statement after last month's unanimous decision to leave rates on hold.

"On the other hand, business fixed investment is declining sharply," the bank said in the June statement, "mainly reflecting weak corporate profits."

Last month, the BOJ said it would maintain its outright purchases of corporate bonds and commercial paper from financial institutions through year's end, as well as continue extending loans collateralized by securities. These special liquidity-boosting measures had been scheduled to expire in September.

It also slightly trimmed its median forecast for real gross domestic product for the fiscal year ending in March 2011, to a contraction of 3.4%, compared with its previous forecast for a fall of 3.1%. But it raised its outlook for the core consumer price index to a 1.3% drop from 1.5% fall.

The BOJ last cut its target rate for unsecured overnight call money in December, when it reduced it from 0.3%.

Ahead of the policy statement, the U.S. dollar was buying 96.92 yen, down from 97.15 yen in late North American trading on Monday.

BOJ keeps rates on hold, keeps cautious economic view

The Bank of Japan kept interest rates on hold on Tuesday and maintained its cautious view on the economy, as deepening deflation and weak corporate spending threaten its forecast for a modest economic pick-up later this year.

The decision to keep rates on hold at 0.1 percent was made by a unanimous vote, as widely expected.

BOJ Governor Masaaki Shirakawa will hold an embargoed news conference and his comments are expected to come out some time after 4:15 p.m. (0715 GMT).

The BOJ said in a statement that annual falls in consumer prices were accelerating in reaction to last year's spike in oil prices. But the bank repeated that the pace of fall would narrow in the latter half of this fiscal year ending in March 2010.

The BOJ stuck to its view that Japan's economy has stopped worsening and was set for a pick up due to a sharp rebound in industrial output.

The BOJ voted last month to extend by three months the September deadline for its unconventional measures aimed at easing corporate funding strains. Markets have thus expected no new announcement from the central bank on policy measures.

Japan's economy is expected to have grown 1.0 percent in April-June after four straight quarters of contraction, a Reuters poll showed. But economists expect any recovery to be fragile as uncertainty over the global economic outlook keeps companies and households from boosting spending. 

In South Korea, the KOSPI traded flat as investors digested news that the central bank had left interest rates steady at a record low of 2 percent -- a move that was widelyexpected. Meantime, SK Energy tumbled over 2 percent after it delayed plans to build an oil production facility.

Australia's S&P/ASX 200 was off its early lows but the index was still down 0.1 percent. Helping to cushion losses in the market, shares of JB Hi-Fi surged over 6 percent after it reported a 45 percent rise in full-year profit.

Greater China shares were mixed, with the Taiwan Weighted index and Hang Seng both down about 0.3 percent while the Shanghai Composite gained 0.2 percent.

HSI 20772.48 -157.04 -0.75% (08.37 AM IST)

Shares in Hong Kong were little changed in early trading, while those in Shanghai edged slightly higher as investors reacted to a barrage of economic data for July, including consumer and industrial inflation figures that came in broadly as expected, while industrial output and fixed-asset investment grew at a weaker-than-expected pace. Hong Kong's Hang Seng Index was up 0.02% at 20,934.13 in early action, while Shanghai's Composite Index added 0.4% at 3,262.89.

Singapore's Straits Times resumed trade after a long weekend to climb more than 1 percent as investors were pleased with the citystate's final GDP reading showing the economy grew by a seasonally-adjusted 20.7 percent in the second-quarter from the previous three months. This was stronger than an initial estimate of 20.4% growth.

China industrial output slows, retail sales rise

China's industrial output and investments in fixed assets grew at a smaller-than-expected rate in July, while retail sales ticked higher, according to government data released Tuesday. Industrial production expanded 10.8% in July over the year-earlier month, against expectations of a 11.7% increase forecast in a Reuters poll. Urban fixed-asset investment rose 32.9% in the first seven months of the year, falling short of expectations and also slowing from a 33.6% growth in the first half of 2009. But monthly retail sales rose by 15.2%,following a 15% increase in June. Consumer prices dropped 1.8% from the year-earlier period, while producer prices declined 8.2%, in line with expectations.

China's July CPI falls 1.8 %, PPI drops 8.2%

China's consumer price index (CPI), a main gauge of inflation, dipped 1.8 percent in July from a year earlier, the National Bureau of Statistics (NBS) announced Tuesday.

This marked the sixth consecutive month of decline since the index dropped 1.6 percent in February, the first fall since October 2002.

The index was unchanged compared with June, according to the NBS. The CPI fell 1.7 percent in June year on year.

The country's producer price index (PPI), a major measure of inflation at the wholesale level, fell 8.2 percent year on year in July, according to the NBS. It showed a month-on-month increase of 1 percent.

The July decline compared with a 7.8-percent drop in June and 7.2-percent drop in May year on year.

China's imports, exports continue falling in July

China's imports and exports continued falling in July from a year earlier, the General Administration of Customs announced here Tuesday.

Exports dropped 23 percent year on year last month while imports were 14.9 percent lower than a year earlier.

China urban fixed-asset investment up 32.9% in first seven months

China's urban fixed-asset investment rose 32.9 percent in the first seven months of this year from a year earlier, the National Bureau of Statistics announced Tuesday.

China's industrial output up 10.8% in July

China's industrial output accelerated 10.8 percent in July from a year earlier, after gaining 10.7 percent in June the National Bureau of Statistics said at a press conference Tuesday.

China's power output up 4.8% in July

China's power generation expanded 4.8 percent in July from a year earlier, the National Bureau of Statistics (NBS) said Tuesday.

Fed meeting:

This week, the focus is on the Federal Reserve, which concludes its two-day policy meeting Wednesday.

The central bank is expected to hold rates steady at historic lows near zero. Yet, as usual, investors will be focused on what the bank will say in its statement, particularly about the health of the economy, any risk of inflation and what its exit strategy may be after putting so much stimulus into the financial system.

In line with comments from Federal Reserve Chairman Ben Bernanke, the central bank is not really worried about inflation yet. Hepburn said the bankers are not likely to say much about an exit strategy until later in the year.

The consumer will also be in focus this week, with economic reports on inflation, and profit reports from Wal-Mart Stores (WMT, Fortune 500) and other retailers. Wal-Mart shares bucked the sector trend, ticking higher, despite comments from JPMorgan that the retail giant won't see same-store sales growth for the second quarter as summer business was weak.

Wall Street advanced Friday after the government's July jobs report showed unemployment fell for the first time in a year.

Ahead of the meeting, Treasury prices were slightly higher and the dollar was weaker against the yen and stronger against the euro. 

Dow Theory shows buy signal but pullback due

Dow Theory, one of the oldest stock market forecasting methods, has shown a new buy signal: the Dow Jones Transportation Average joined the Dow Jones Industrial Average to close above January highs, according to Bank of America Merrill Lynch. However, the bank's analysts said on Monday that a momentum indicator known as breadth thrust, which focuses on the proportion of advancing to declining stocks, shows a pull-back of 15 to 20 percent this fall when combined with the Dow Theory buy signal.

Last week the broad-based S&P 500 index closed above 1000 for the first time in nine months and is now up around 50 percent since March lows, while the Dow Industrials recently saw their best five-month run since 1938. The run-up has left many investors trying to second guess if and when a correction is due.

"The Dow Jones Industrial Average closed above its January high in late July, and the Dow Jones Transportation Average closed above its January high on Friday," Merrill said in a research note. "According to the Dow Theory, this signals a new primary uptrend and is a bullish indicator for the market."

Dow Theory aims to identify the primary trends in stock markets, lasting from one year to several years. It stipulates that the industrials index must "confirm" a high or a low in the Dow Jones Transportation Average for a trend to last.

Breadth thrust indicates when the market moves from an oversold condition when a gauge of the proportion of advancing stocks moves above a certain level. Merrill's analysis shows that significant corrections have followed strong rallies when a breadth thrust has occurred at the market bottom.

"This analysis, along with the Dow Theory new buy signal, points to a more modest 15 to 20 percent pullback," said Merrill.

Merrill is watching a number of indicators to gauge whether the market is entering an immediate correction. These include investor sentiment gauges, the peaking of buying and rise in selling, loss of leadership in technology, the percentage of stocks above their 200-day moving average, and a peak in China's equity market.

They say stock charts indicate S&P 500 support levels, or levels at which the index should not easily fall below, at 930 to 900 and resistance levels, presenting a barrier to for the index on the way up, at 1055 to 1065.

    
INVESTMENT VIEW

India Real Estate: Few Developers Are Ever Going To Make Money

The recent massive run-up in Real Estate stocks reminds of a fake bull run in Tech stocks post the fall of Year 2000. Few Developers, inspite of targeting 'affordable housing" are ever going to make money in Real Estate. By this logic HDIL, IBREL, Unitech and DLF may all be over-valued showing rosy prospects that do not seem to be the reality.
 

The Indian real estate markets have seen a sharp and meaningful correction in terms of decline in property prices, demand and transaction volumes over the last 2 years. We had highlighted the demand and supply disconnect in our report in August 2007 and how we believed that the real demand lies at the bottom of the pyramid.

 The developers have started to make the right noises since the last two quarters and have announced their affordable housing plans but after looking closely at their present projects it appears that their price product matrix is again skewed towards margins, like it was 2 years back. 

"The con is on" - Affordable is not exactly affordable 
After assessing the current affordable housing projects of various developers, it appears that the con is on again and developers are again quoting unviable selling prices for these projects. A fairly large number of these projects are located in far flung locations which may lack basic amenities and recreational facilities.

 

Moreover, the affordability (in terms of willingness to pay) decreases as one moves away from the centre of the city and hence the price has to be fairly competitive as compared to those flats which are well within the city.

Most of the upcoming affordable housing projects are basically the residential projects planned by the developers on their land on the city outskirts. Some of the affordable housing projects that are currently on offer by major listed real estate developers will see that volume off take will be much lower than what most companies are projecting. 

Looking at an example, say if the agricultural land cost in city outskirts is Rs 250 / sq ft, after land use conversion the cumulative land cost will come to Rs 313 / sq ft. As regards the cost of construction, in the present scenario an affordable housing dwelling may not cost more than Rs 900 / sq ft to the developer as the prices of cement, steel have come down in last 1 year and it will be a "no frills" kind of construction. Even if we add a developer margin of 30% on the total cost, the price per sq ft comes to Rs 1,576 per sq ft.
 

(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 10th Aug 2009

NIFTY FUTURES LEVELS
RESISTANCE
4504
4550
4593
4636
4680
SUPPORT
4471
4453
4410
4366
Buy DHAMPUR SUGAR MI,SAKTHI SUGARS
SGX +88

 

INTRADAY calls for 10th Aug 2009
+ve Scripts : Arvindmill
Buy Nithinfire-328 for a target 355 stop loss 320
Buy NDTV-151 for a target 167 stop loss 147
Buy Biocon-229 for a target 255 stop loss 222

Expected Breakout calls
Buy Fintech-1540 above 1570 for a target 1855 stop loss 1500

Positional calls
Buy BPCL-522 for a target 555-570 stop loss 510
Buy Alphageo-178 for a target 210-237 stop loss 170
Buy ALBK-85 for a target 108 stop loss 80
Buy Nagreeka-102 for a target 135-140 stop loss 95

 

Strong & Weak  futures for 10th Aug 2009
This is list of 10 strong futures:

Bharat Forge,Patni, GT OFFshore,FSL,Jindal Saw,Bharat Petro,Financial Tech,Mphasis,Aurobindo Pharma & DCB 

And this is list of 10 Weak futures:

Divi'S Lab, Suzlon,Ivrcl Infra,Abb Ltd,Patel Engineering,Chambal Fert,Crompton Greaves,Federal Bank,Hero Honda & GMR Infr
Nifty is in Up Trend. 

 

NIFTY FUTURES (F & O):
 
Above 4504 level, expect short covering up to 4548-4550 zone and thereafter expect a jump up to 4591-4593 zone by non-stop.

Support at 4471 level. Below this level, selling may continue up to 4453-4455 zone by non-stop.

Below 4410-4412 zone, expect panic up to 4366-4368 zone.

On Positive Side, cross above 4634-4636 zone can take it up to 4678-4680 zone. Supply expected at around this zone and have caution.
 
Short-Term Investors:
 
Bullish Trend. 3 closes above 4473 level, it can zoom up to 4988 level by non-stop.
Stop Loss Triggered. 3 closes below 4473 level, it can tumble up to 4215 level by non-stop.
 
BSE SENSEX:
 
Higher opening expected. Profit booking should start. 
Short-Term Investors:
 
Short-Term trend is Bearish and target at around 14235 level on down side.
Maintain a Stop Loss at 15973 level for your short positions too.
 
POSITIONAL BUY:
Buy DHAMPUR SUGAR MI (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 75 level can be used to buy. If uptrend continues, then it may continue up to 81 level for time being. 

If crosses & sustains at above 84 level then uptrend may continue.

Keep a Stop Loss at 72 level for your long positions too.
 
Buy SAKTHI SUGARS (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 74 level can be used to buy. If uptrend continues, then it may continue up to 77 level for time being. 

If crosses & sustains at above 78 level then uptrend may continue.

Keep a Stop Loss at 73 level for your long positions too.
 

 
Global Cues & Rupee
 
The Dow Jones Industrial Average closed at 9,370.07. Up by 113.81 points.
The Broader S&P 500 closed at 1,010.48. Up by 13.40 points.

The Nasdaq Composite Index closed at 2,000.25. Up by 27.09 points.

The rupee ended at 47.85/86 per dollar on Friday, weaker than Thursday's close of 47.68/69.
 
 Interesting findings on web:
  Stocks rallied Friday, with the Dow and S&P 500 closing at the highest point in nine months, after the July jobs report showed the smallest number of job cuts in nearly a year, adding to recovery hopes.

The Dow Jones industrial average (INDU) gained 114 points, or 1.2%, according to early tallies. The S&P 500 (SPX) index rose 13 points, or 1.3%. The Nasdaq composite (COMP) added 27 points, or 1.4%.

The economy's most vexing problem, unemployment, is showing the first signs of easing. And Wall Street is celebrating.

All three indexes finished higher for the week. All three indexes closed in positive territory for the fourth week in a row.

S&P 500, Dow industrials close at new '09 highs. The Dow Jones industrial average is trading at its highest level since November, while the Standard & Poor's 500-stock index has climbed to its highest level since October.

Wall Street gains after a smaller-than-expected number of jobs lost and a surprise drop in the unemployment rate.

Major stock indexes jumped more than 1 percent Friday after the government said the nation's unemployment rate unexpectedly fell in July for the first time in 15 months and that employers cut fewer jobs. Bond prices fell, driving yields higher as investors left the safety of Treasurys.

Employers cut 247,000 jobs from their payrolls in July after slashing a revised 443,000 jobs in June. Economists surveyed by Briefing.com thought they would cut 325,000 jobs. It was the lowest level of losses since last August.

"It was the best reading on non-farm payrolls since before Lehman's collapse last September, which was the pivotal event that precipitated the crisis," said Jeff Kleintop, chief market strategist at LPL Financial.

"It all starts and ends with jobs," said James Cox, managing partner at Harris Financial Group in Richmond.

The unemployment rate could still reach 10 percent this year, but it seems less likely to top it, Cox said. And any sign that the recession is ending puts Wall Street on track to return to its pre-financial crisis levels by the end of the year, he said. "I think we're safe up until then, and then we level off and go into a stage of slow growth," he said.

The report seemed to confirm other recent indications that the economy is stabilizing.

"Leading indicators have priced in a recovery for a while, now lagging indicators like unemployment are too," he said.

Although employment is seen as a lagging indicator in any recovery, the steady march higher of the unemployment rate over recent months has added to investor anxiety about the health of the economy.

The unemployment rate, generated by a separate survey, fell to 9.4% in July from 9.5% in June, versus forecasts for a rise to 9.6%.

Ian Shepherdson of High Frequency Economics said the unexpected improvement in the unemployment rate was unlikely to last, given July's number "was due entirely to a 422,000 drop in the labor force."

24 of 30 Dow components rising, led by IBM (IBM, Fortune 500), Boeing (BA, Fortune 500), United Technologies (UTX, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Chevron (CVX, Fortune 500).

American Express' gained about 4.4 percent.

Citigroup rose 5 cents, or 1.3%, to 3.85 after being up as much as 12% to 4.24 during the session. The high marked the shares' first time above 4 in two and a half months. The stock rose all five sessions during the week, for a 21% gain.

Industrials benefited from the upbeat outlook.

Boeing climbed 2.57 percent to 46.69 dollars, DuPont rose 1.14 percent to 32.83 dollars and Caterpillar added 1.36 percent at 47.78 dollars.

Media and theme park operator Walt Disney Co. was the Dow's biggest gainer, up 5.20 percent at 26.69 dollars.

The S&P banking index rose 3.68 percent.

Fannie Mae, the ailing giant mortgage finance lender bailed out by taxpayers, plummeted 16.46 percent to 66 cents. The government-controlled firm reported another huge loss, 14.8 billion dollars in the second quarter, and tapped the US Treasure for an additional 10.7 billion dollars in aid.

Continental Airlines lifted 3.34 percent to 12.39 dollars after announcing a share issue to raise some 170 million dollars.

Chiquita shares [CQB  14.82    2.05  (+16.05%)   ] soared 16 percent after the banana maker topped forecasts, helped by cost-cutting measures, and said its full-year results would be "significantly improved."

Ford [F  8.01    -0.06  (-0.74%)   ] slipped by GM [MTLQQ  0.756  ---  UNCH  (0)   ] rose after the Senate approved another $2 billion for the "Cash For Clunkers" program.

Shares of Crocs ( CROX - news - people ) surged $1.39, 32.6%, to $5.66, making fresh 52-week highs, after the footwear maker said it sees a path toward profitability in 2010.

CBS leapt 2.27, or 27%, to 10.81. Second-quarter profit fell 96% on one-time items as advertising sales remained weak, but the media and entertainment company issued a bullish advertising outlook for the remainder of the year.

Genzyme (Nasdaq) continued its descent, losing 62 cents, or 1.3%, to 48.19 to close at its lowest level in over five years.

Goldman Sachs on Friday added shares to its conviction sell list amid uncertainty surrounding the biotech firm's recent manufacturing problems at a large production facility.

The better-than-expected monthly jobs report was good news for the nation's embattled lodging industry. Marriott International gained 2.82, or 13%, to 25.28; Starwood Hotels & Resorts Worldwide rose 3.55, or 14%, to 29.68; and Host Hotels & Resorts advanced 92 cents, or 9.3%, to 10.86.

D.R. Horton gained 98 cents, or 7.8%, to 13.52. The home builder is the best-positioned in its industry to benefit from the end of the government's $8,000 tax credit for first-time home buyers given its lowest-in-the-industry pricing, Goldman Sachs said in adding shares to its "conviction buy" list.

Hansen Natural (Nasdaq) gained 5.41, or 18%, to 36.09. The all-natural soda and juice maker reported higher sales led by its Monster Energy drink and improved margins.

VeriSign lost 1.90, or 9.2%, to 18.66 on the Nasdaq. The Internet infrastructure services provider reversed a year-earlier loss caused by big restructuring charges, but the earnings fell short of analysts' expectations.

Nvidia rose 59 cents, or 4.5%, to 13.71 on the Nasdaq. The chip maker's second-quarter loss - its fourth in the past five quarters - narrowed on smaller charges, and the company issued a better-than-expected sales outlook.

Affiliated Computer Services dropped 2.40, or 5.1%, to 44.52. The outsourcing and information-services supplier reported solid fiscal fourth-quarter results, but shares fell on concern about margins in fiscal 2010.

AES rose 74 cents, or 5.6%, to 13.88. Second-quarter profit dropped, reflecting a year-earlier one-time gain, but the power giant still topped Wall Street's estimate and lifted its earnings target for the full year.

The Dow, Nasdaq and S&P 500 all hit fresh 2009 highs earlier in the week, following three weeks of gains. Since bottoming March 9 at a 12-year low, the S&P 500 has risen 49.4% as of Friday's close.

AIG (AIG, Fortune 500) reported its first quarterly profit in nearly two years Friday, but the troubled insurer continues to struggle in the aftermath of its near-collapse last fall. AIG still owes taxpayers $87.6 billion.

The stock nearly doubled in the run-up to the profit report. AIG gained another 20.5% Friday.

Generally, corporations have been beating profit expectations by slashing costs, even as their revenue remained weak, analysts said.

Analysts polled by Thomson Reuters had forecast that companies on the S&P 500 would report a 31 percent drop in profitability during the second quarter. Now that most of the companies have reported results, the forecast has been raised to a 28.3 percent drop in quarterly profits.

"Earnings season was good, analysts had set a pretty low bar and companies have been aggressive in cutting costs," said J. Michael Gibbs, director of equity strategy at Morgan Keegan.

But this rally could be reaching its peak, analysts said. A bumpy and slow recovery could send stocks tumbling again, they said.

"I think the market is likely to do fairly well over the next year," said Sam Stovall, chief investment strategist at Standard & Poor's Equity Research. "But in the near term, I am a bit cautious because I think the market will have to digest some of these gains."

Earnings also helped: Of the 427 S&P companies that have reported so far, 73 percent beat expectations, 8 percent met and 19 percent missed.

Two bank failures in Florida raised the number of bank failures to 71 for the year, according to the Federal Deposit Insurance Corp.

Late Friday. Florida regulators closed Community National Bank of Sarasota County in Venice, Fla., and First State Bank of Sarasota, Fla. Stearns Bank, N.A., of St. Cloud, Minn. will assume all the deposits of First State Bank, and assume the deposits of Community National for a 0.25% premium. As of May 31, First State had deposits of about $387 million, and Community National had deposits of $93 million. The failures bring the number of Florida bank failures to six for 2009.

Berkshire Hathaway /quotes/comstock/13*!brk.a (BRK .A 108,100, +1,150, +1.08%) said late Friday that second-quarter net income came in at $3.3 billion, or $2,123 per Class A equivalent share, up 14% from a year earlier when the insurance-focused conglomerate made $2.88 billion, or $1,859 per Class A equivalent share. See more on Berkshire.

Late-traded shares of Citi /quotes/comstock/13*!c/quotes/nls/c (C 3.85, +0.05, +1.32%) led volume movers with more than 11 million shares exchanged. They slipped 0.5% to $3.83. Shares of the financial services provider, which is now owned more than 30% by U.S. taxpayers, had traded above $4 in the regular session and looked poised to mark their first close above that price for the first time since April 16. However, the advances were pared, along with the broader market.

President Obama on Friday signed into law an extension of the auto sales stimulus program that will keep it running through Labor Day.

Oil and gold:

Crude oil fell for a third day as gasoline futures declined on signs of slowing seasonal demand for auto fuel late in the U.S. summer.

Oil declined from a five-week high of $72.84 a barrel on Aug. 7 as the dollar traded near a one-week high against the euro, eroding investor demand for commodities priced in the U.S. currency. Oil prices around $70 are "not bad" and necessary to maintain investment, OPEC President Botelho de Vasconcelos told reporters in the Angolan capital of Luanda yesterday.

COMEX gold for December delivery fell $3.40 to settle at $959.50 an ounce.

Bonds & Currencies:

Treasury prices tumbled, raising the yield on the benchmark 10-year note to 3.85% from 3.74% late Thursday. Treasury prices and yields move in opposite directions.

The dollar traded near a one-week high against the euro on signs the U.S. economy is emerging from recession, boosting the appeal of the nation's assets.

The dollar was close to a seven-week high versus the yen as U.S. employers eliminated fewer jobs last month than economists forecast, adding to evidence the slump in the world's largest economy is abating. The yield advantage of 10-year Treasuries over similar-maturity Japanese bonds widened to 2.44 percentage points, the most since November, making U.S. assets more attractive to Japanese investors.

"Economies around the world are improving, with the U.S. leading the way," said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. "The dollar is likely to be bought and the yen will probably be sold."

The dollar traded at $1.4209 per euro as of 11:25 a.m. in Tokyo from $1.4183 in New York on Aug. 7, when it rose to $1.4155, the highest level since July 31. The U.S. currency declined to 97.25 yen from 97.57 yen. It touched 97.79 yen on Aug. 7, the strongest level since June 16.

The euro fell to 138.21 yen from 138.41 yen on Aug. 7, when it climbed to 138.72 yen, the highest since June 5. Europe's currency traded at 85.05 pence from 84.98 pence. It slipped to 84.56 pence on Aug. 6, the weakest level since June 30.

Exchange-rate movements may be exaggerated by Japan's Obon holidays this week, when Japanese often take week-long vacations to honor ancestors, Ishikawa said.

The gains in the greenback on Aug. 7 marked a return to the view that good U.S. economic news should benefit the currency as traders speculated that the Federal Reserve will boost borrowing costs sooner rather than later.

What to expect:

Next week kicks off with an SEC hearing on Bank of America. We'll have a trickle of a few more earnings, including Applied Materials, Macy's, Wal-Mart and JCPenney. Plus, the government's reading on retail sales, CPI, industrial production, consumer sentiment and the main event: A two-day Fed meeting, starting Tuesday.

Asia:

Asian markets marched higher early Monday after the latest U.S. employment numbers showed signs of a stabilizing job market.

The Nikkei 225 [JP;N225  10559.99    147.9004  (+1.42%)   ] jumped 1.7 percent to hit a 10-month high led by exporters, while the broader Topix climbed 1.7 percent.

Rakuten Inc. (4755) shares were weak Monday morning despite the company's announcement Friday evening that its January-June group net profit expanded 420% on the year to 38.1 billion yen.

Shares in Mitsubishi Chemical Holdings Corp. (4188) shot up Monday, following a Nikkei report the same morning that the firm plans to acquire Mitsubishi Rayon Co. (3404) via a tender offer.

Shares in GS Yuasa Corp. (6674) treaded water Monday.

South Korea's KOSPI gained 0.4 percent early Monday as the U.S. employment figures boosted sentiment. KB Financial and Hyundai Motor were amongst the gainers.

Over in Australia, the S&P/ASX 200 climbed 1.1 percent as earnings season got into full swing. BHP Billiton, CBA and Telstra were among the key reports to watch out for.

Property investor Goodman Group surged after the firm raised US$1.1 billion through a share placement.

Taiwan shares were flat after a typhoon hit the island over the weekend, but TSMC inched higher ahead of its sales report.

In South-east Asia, Malaysia's KLCI was marginally higher while Singapore was closed for the National Day holiday.

HSI 20826.32 +450.95 +2.21% (08.38 AM IST)

Hong Kong shares rebounded early Monday in the wake of a higher opening in Shanghai and pre-weekend gains on Wall Street, with heavyweights HSBC Holdings /quotes/comstock/22h!e:5 (HK:5 85.90, +2.05, +2.45%) /quotes/comstock/13*!hbc/quotes/nls/hbc (HBC 55.50, -0.27, -0.48%) and China Mobile /quotes/comstock/22h!e:941 (HK:941 90.90, +2.40, +2.71%) /quotes/comstock/13*!chl/quotes/nls/chl (CHL 57.40, +1.09, +1.94%) lifted by persistant hopes of a listing in Shanghai. The Hang Seng Index rose 2.2% to 20,824.03 and the Hang Seng China Enterprises Index gained 2.1%, with HSBC up 2.6% and China Mobile climbing 3.1%. China's Shanghai Composite, meanwhile, added 0.4% to 3,273.37.

Hong Kong stocks rose on Monday morning, with the benchmark Hang Seng Index opening 383 points higher at 20,758.

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 204 points higher at 11,816.

Sinopec<600028><0386><SNP>, the largest refiner in Asia by capacity, increased 1.93% from the previous closing to HK$6.86.

PetroChina<601857><0857><PTR>, the country's largest oil producer, rose 1.66% and opened at HK$9.16.

Chinese stocks opened higher on Monday morning.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 3,287.76 points, up 0.83% or 27.07 points from the previous closing.

The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 1.03% or 134.07 points higher at 13,109.32 points.

China's ChangAn Auto Co., Ltd., a leading domestic auto maker, announced Saturday that its sales volume rose more than 82 percent year on year last month. 

China's monetary policy to remain unchanged.

China's central bank "is still committed to a 'moderately loose monetary policy'."

The country's banks have lent nearly 1.08 trillion U.S. dollars in the first half of the year.

The government would give private businesses more access to the market.

Beijing municipal government plans to invest a total of RMB 10.4 billion in power grid projects this year, representing an 18% year-on-year growth, sources reported.

Japan Machinery Orders Jump More Than Expected

Japan's core machinery orders rose a bigger than expected 9.7 percent in June, marking the first gain in four months, but it was unclear whether the rise marked a lasting recovery in capital spending.

Japanese manufacturers forecast a sixth straight quarterly fall in machinery orders in July-September, suggesting they remain wary of expanding their production capacity despite signs of a global economic recovery.

June data showed the biggest rise in more than a year, but the outlook figures suggest capital spending will not contribute much to overall economic growth in the foreseeable future.

With the outlook murky, the Bank of Japan will likely maintain its cautious view on the economy and keep interest rates near zero at least until early 2011, analysts say. No policy change is expected at the bank's two-day rate review that ends on Tuesday.

Manufacturers surveyed by the Cabinet Office forecast that core machinery orders, a highly volatile series seen as an indicator of capital spending in the coming six to nine months, would fall 8.6 percent in July-September from the previous quarter.

Core orders rose 9.7 percent in June, the first gain in four months and the biggest increase since April 2008, Cabinet Office data showed on Monday.

"Despite the rebound in machinery orders in June, manufacturers' forecast for an 8.6 percent fall in July-September suggests the overall trend in orders is still weak as the utilisation rate at factories remains low and corporate profits remain at a low level despite their recovering trend," said Seiji Shiraishi, chief Japan economist at HSBC Securities.

In April-June, core private-sector machinery orders, which exclude those for ships and machinery at electric power firms, fell 4.9 percent from the previous three months.

The yen ticked slightly higher to 97.17 yen per dollar after the data, while the Nikkei share average opened up 1.1 percent and hit its highest in 10 months.

Ten-year JGB futures fell 0.25 point to 137.34.

The numbers suggest the Bank of Japan's view that the economy will improve from the latter half of this year may be a bit too rosy, said Junko Nishioka, chief Japan economist at RBS Securities.

"The stance on capital spending is very cautious due to the weak demand outlook, including foreign demand. I think the Bank of Japan's scenario is relatively positive compared with that of the private sector," she said.

"If final demand continues to be very weak and if it is difficult to see when companies will recover, then it will take a long time for the BOJ to seek an exit strategy, including normalising interest rates. I think the bank will continue its loose policies for a while."

Japanese companies are expected to keep cutting back on capital expenditure to cope with weak demand both at home and abroad, after the global economy suffered its deepest slump in many decades.

Although manufacturers have increased output steadily in recent months thanks to a recovery in exports, they are still running their factories at less than 70 percent of capacity.

The huge slack in the economy shows how little companies need to increase spending on equipment and also suggests they may have to continue cutting jobs to make profits.

Japan's economy is expected to have grown 1.0 percent in April-June after four straight quarters of contraction, a Reuters poll showed. But economists expect any recovery to be fragile as uncertainty over the global economic outlook keep companies and households from boosting spending.

Separate data released by the Bank of Japan showed bank lending rose 2.1 percent in July from a year earlier, slowing further from a record gain in January as credit conditions eased.

Fed Likely to Keep Key Interest Rate at Record Low

With the economy strengthening but still fragile, Federal Reserve policymakers are expected to hold a key lending rate at a record low this week and will weigh whether to extend some programs that were created to ease the financial crisis.

Fed Chairman Ben Bernanke and his colleagues also are likely to signal that while the recession is winding down, the pain isn't over.

Though the unemployment rate dipped to 9.4 percent in July — its first drop in 15 months — economists predict it will start climbing again. Many, including people in the Obama administration and at the Fed, say it could still top 10 percent this year.

For months, consumers have pulled back on spending and borrowing. To try to stimulate economic activity, Fed policymakers are all but certain to keep the target range for its bank lending rate between zero and 0.25 percent at the end of their two-day meeting Wednesday.

That means commercial banks' prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will stay around 3.25 percent, the lowest rate in decades.

Fed policymakers also will probably pledge anew to keep rates there for "an extended period," which economists interpret to mean through the rest of the year and into part of 2010.

"We're doing everything we can to support the economy," Bernanke said recently. "We will try to get through this process. It's going to take some patience."

By holding rates so low, the Fed hopes to induce consumers and businesses to boost spending, even though banks are still being stingy about extending credit.

"The Fed will be guardedly optimistic," said Brian Bethune, economist at IHS Global Insight. "We're seeing initial signs of the economy moving toward recovery ... (but) the underlying fundamentals are still weak."

With numerous signs that the recession is finally ending and financial stresses easing, the Fed will consider whether some rescue programs should continue. Any such decisions, though, might not come at this week's meeting.

One such program, aimed at driving down interest rates on mortgages and other consumer debt, involves buying U.S. Treasurys. The central bank is on track to buy $300 billion worth of Treasury bonds by the fall; it has bought $236 billion so far.

Another program, the Term Asset-Backed Securities Loan Facility, or TALF, is intended to spark lending to consumers and small businesses. It got off to a slow start in March and is slated to shut down at the end of December. Despite this program, many people are still having trouble getting loans, analysts say.

The Fed isn't expected to launch any new revival efforts or change another existing program that aims to push down mortgage rates. In that venture, the Fed is on track to buy $1.25 trillion worth of securities issued by mortgage finance companies Fannie Mae and Freddie Mac by the end of the year. The central bank's recent purchases have averaged $542.8 billion.

In the meantime, the economy has shown clear signs of improvement. Employers cut only 247,000 jobs in July, the fewest in a year, the government said Friday. Wages and workers' hours also nudged up — encouraging signs that companies no longer see the need for drastic cost-cutting. Those developments could deliver a psychological boost to both companies and consumers.

The economy in the second quarter contracted at a pace of just 1 percent, suggesting that the recession, which started in December 2007, is ending.

That dip came after a dizzying free-fall in the first three months of this year. The economy had plunged at an annual rate of 6.4 percent in the first quarter, the worst showing in nearly three decades.

With the economy improving but still weak, inflation should stay low, the Fed says. Given consumers' caution, companies won't have much power to raise prices.

And the weak job market will limit wage growth. Companies aren't going to feel generous about wages and benefits until they are confident a recovery will last.

   
 
MARKET BUZZ:
 
(May not be useful for day-traders.)

PSL-Another Equity For Debt Deal

 
 
 
The poor quality of management apart, PSL is doing what Unitech and Suzlon have already done. Do Rs 300 crore QIP to bail-out of Rs 900 crore of debt. This will give a short term pop to the stock, all said and done.
 

Profits bogged down by high interest cost…

 

After posting Rs 12 bn in revenues during Q4FY09, PSL reported muted top line of Rs 6 bn for Q1FY10. Management informs that the April - September period is generally affected by the monsoons during which most of the EPC activities associated with the laying of line pipes slows down in India. It is pertinent to note that PSL has larger proportion of domestic orders as compared to other pipe manufactures whose order book is loaded with international orders.

 

Revenues for the current quarter were at Rs 6.33 bn as compared to Rs 6.59 bn y-o-y (down 3.9%) and Rs12.1 bn q-o-q (down 47.9 %). PSL had produced 101,604 tonnes of pipes during Q1FY10 as compared to 74,295 tonnes y-o-y (up by 35.6%). Pipe shipments during the current quarter were at 82,207 tonnes as compared to 75,240 tonnes in Q1FY09.

 

The consolidated order backlog as on 30th June 09 stood at Rs 39 bn. As most of the raw material requirements have been tied up, investors can expect stable EBIDTA margins going forward. PSL's order backlog mainly comprises of domestic orders and hence the company is relatively insulated from the vagaries of the export markets.

 

GAIL is expected to release orders for more than 500,000 tonnes of steel pipes in the near future. PSL's ability to erect its own mills enables the company to quickly and efficiently move capacities near to the pipeline projects resulting in significant savings in freight costs.

 

With 11 pipe mills located across multiple locations in India, PSL is poised to garner larger share of the GAIL orders. At the CMP of Rs. 126.80, PSL trades at 4XFY10E earnings. 
 

(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: Monsoon blues hit stocks

Sensex (15,160)

Sensex retreated from the threshold of 16,000 impeded by scattering monsoon clouds and ominous noises emanating from China on clamping down on excessive speculation.

It is a relief that Indian stock prices have stopped their blind hurtle skywards that made Sensex gain over 2,700 points since July 13.

Market participants appeared edgy as the Sensex neared the 16,000 mark and the Nifty closed in on 4,700. Volumes were subdued through the week. Nifty put-call ratio declined below 1 indicating that the shorts have squared their position. Open interest of over Rs 23,000 crore in the stock futures is however a point of concern since it shows increased retail interest in leveraged trading.

The reversal in stock prices last week coincided with reversal of FII flows. With the US and European markets beginning to show momentum, funds could move to developed markets, which have underperformed in the rally since March.

Sensex recorded an intra-week high of 16,002 on Tuesday before reversing to end with 510 point loss. The negative divergence in daily oscillators accentuated last week with the 10-day rate of change oscillator declining in to negative zone and the 14-day relative strength index moving to 51.

This indicates that the current decline can prolong in the short-term. But what is of greater concern is the weakness in the weekly oscillators. These oscillators peaked in the last week of May and have been diverging negatively since then.

Another week of decline will indicate the onset of a medium-term correction in Sensex.

The unsuccessful attempt to move past 16,000 last week implies that the Sensex needs to do some more work before it can surpass this level.

The medium-term trend can now be revised to neutral and the index can be expected to consolidate in a range between 13,000 and 16,000 for a few more weeks.

Retracement of the move from March lows gives us the initial medium-term supports at 13,616 and then at 12,963.

In other words, the gap formed in the post-election push should be a strong medium-term support. Weekly close below 12,963 is needed to make the medium-term view overtly negative. The short-term trend has turned lower from the 16,002 peak. Sensex has immediate supports at 14,939 and 14,800. Short-term investors should, however, exit long positions on a close below 14,800 since the next halt can be at 14,471 or 14,282. Resistances for the week would be 16,002 and 16,217.

Nifty (4,481.4)

The Nifty reversed from the intra-week peak of 4,731 after flirting with the 4,700 mark for three sessions.

We stay with the view that the medium-term range for the Nifty is between 3,900 and 4,700 and a strong break beyond either boundary is required to make the medium-term outlook positive or negative.

Medium-term supports based on retracement levels are 4,073 and 3,894.

The short-term supports for Nifty are at 4,422 and 4,230. Presence of the 21 and 50-day moving averages around the first support makes it a likely area from where bulls can engineer a reversal. Resistances for the week are 4,640, 4,730 and 4,794.

Global Cues

It was a good week for the equity markets in Europe and Americas. Indices of this region ended the week with 2-3 per cent gains.

CBOE VIX came down slightly implying growing complacency among global investors. Asian markets were, however, subdued and some of the Asian indices such as the Hang Seng, PSE Composite, Shanghai Composite, Strait Times Index and Taiwan Weighted Index closed the week with losses.

Shanghai Composite has recorded its largest weekly decline since March, forming an evening star in the weekly chart.

This chart needs to be followed closely over the ensuing weeks since the fate of the Indian and Chinese markets are closely entwined.

The Dow ended the week 2 per cent higher and the first target indicated in our last column was achieved on Friday. The index has strong resistance in the zone between 9,400 and 9,600 and a reversal from here would imply that the long-term view remains negative.

But a break past 9,600 will give the next target of 10,500 for Dow and 1,150 for the S&P 500. — 

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	07-Aug-2009	1925.66	2976.47	-1050.81

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	07-Aug-2009	1726	1311.57	+414.43

 

NIFTY SPOT LEVELS FOR 10th Aug

	4481.40	( -2.27 %)	-104.10
		1	2	3
Resistance		4560.88	4640.37	4688.83
Support		4432.93	4384.47	4304.98

	15160.24		( -2.28 %)	-353.79
			1	2	3
Resistance			15406.79	15653.33	15804.73
Support			15008.85	14857.45	14610.91

Reliance (Rs 1,995.9)
 

RIL moved in line with our expectation to the intra-week peak of Rs 2,123. But the decline from this peak confirms our view that the stock continues in a medium-term down-trend.

As we have been reiterating, resumption of the medium term down-trend can pull the stock down to Rs 1,645 or Rs 1,530 in the medium-term.

The short-term trend in the stock reversed lower since the peak of Rs 2,124. Immediate supports for the stock are at Rs 1,967 and Rs 1,870.

A reversal from either of these levels will mean that the short-term trend remains up and the stock can move up to Rs 2,100 and Rs 2,200 in the near-term.

State Bank of India (Rs 1,741.8)
 

The exuberant start to the week could not take SBI past the resistance between Rs 1,900 and Rs 2,000 that we have been watching over the past few weeks.

The sharp reversal from this zone means that the stock will be stuck in the zone between Rs 1,500 and Rs 2,000 for a few more weeks. The medium-term view will turn negative only on a close below Rs 1,500. Subsequent targets are Rs 1,420 and Rs 1,290.

Short-term trend in the stock is negative and it can decline to Rs 1,650 in the near-term.

Fresh shorts are advised only on a decline below Rs 1,650, next target is at Rs 1,540. Resistances for the week are at Rs 1,885 and Rs 1,935.

Tata Steel (Rs 456.2)
 

Tata Steel was unable to surpass its recent peak of Rs 496 and declined to the intra-week trough of Rs 445 instead. This decline can prolong in the near-term to drag the stock to Rs 431 or Rs 393. Close above the previous peak of Rs 490 is required to make the short-term trend positive again for the stock.

The medium-term trend in the stock is revised to neutral and it can move in the range between Rs 320 and Rs 500 indicated in this column last week.

As we have been reiterating, the stock has strong intermediate resistance at Rs 460 and since the stock is struggling to move beyond this level, investors with a short-term perspective can book some profit at this level.

Infosys (Rs 2,041.9)
 

Infosys sustained above the key support at Rs 2,000 last week. We stay with the view that the stock can have a shy at its previous peak of Rs 2,439 if it sustains above this level. Investors can, therefore, hold the stock as long as it trades above Rs 2,000.

Short-term supports for the stock are at Rs 1,950 and Rs 1,830.

Reversal from the first support where the 21-day moving average is also poised will provide an apt juncture where short-term traders can buy this stock. Target on a rally above Rs 2,100 is Rs 2,140.

ONGC (Rs 1,138)
 

ONGC too was unable to cross the hurdle offered by its recent peak of Rs 1,218 and reversed lower towards the end of the week.

The stock can move lower to Rs 1,100 and Rs 1,060 in the near-term.

If it manages to hold above the first support, it will imply strength and an impending rally above Rs 1,200 soon.

The medium-term trend in the stock is sideways and it can move in the range between Rs 970 and Rs 1,200 in this period. A weekly close below Rs 950 is needed to make the medium-term view negative.

Maruti Suzuki (Rs 1,291.3)
 

It was a breathtaking reversal in MSIL from an intra-week peak of Rs 1,515 and the stock closed 15 per cent below this level. Short-term support is at Rs 1,220 but the stock is likely to revert to the zone between Rs 1,000 and Rs 1,100 over the medium-term.

NHPC IPO: Invest at cut-off

---

NHPC's established record in implementing hydropower projects and its good operating performance are among its pluses.

---

The dam at NHPC's Chamera-I project in Himachal Pradesh.

The NHPC initial public offer (IPO) is ideally suited for long-term investors. Hydroelectric projects, by their nature, have long gestation periods of 5-7 years. On the existing generation capacity and financial profile, the offer appears to be fully priced. Valuations could, however, undergo a change as the company gradually commissions the different projects that are under implementation over the next four years and as the return on equity improves.

Positive features

There are a number of positives to recommend an investment in this IPO not the least of which is the 12 per cent gap between demand and supply of electricity in the country. NHPC's established record in implementing hydropower projects, its good operating performance and the fact that all of its capacity has been tied up with different customers through power purchase agreements are pluses.

Existing capacity of 5,175 megawatt (MW) will almost double in the next four years as new projects totalling 4,292 MW are commissioned. With a further 4,565 MW of projects awaiting government clearances, NHPC is expanding rapidly in an industry that is set to undergo a lot of changes, mostly favourable to the generators.

For instance, some of NHPC's future projects, either in whole or in part, will sell power on a 'merchant basis'. Given the large deficit in availability of power and the active part played by traders such as PTC India, generators such as NHPC can hope for higher realisations.

Given that its fuel cost is next to nil, NHPC sold its power last year at an average price of Rs 2.03 per unit. Though this is an advantage in the merit-order despatch system where the cheapest power is picked up first, it also means that the company is not able to capitalise on the supply shortfall.

NHPC has the advantage of its projects being located on perennial rivers and it has managed a capacity index of 95 per cent on an average. This is a major plus given that the northern grid, where NHPC sells most of its generation, is extremely starved for power.

Not surprisingly, some of its projects such as Chamera II in Himachal Pradesh have managed to earn a handsome sum as fees for meeting excess demand over that projected by the consuming State electricity board.

Equity overhang

That said, NHPC also suffers from some blemishes that could, if not managed well, scar its financial performance and balance-sheet. Thanks to a historical reliance on equity funding through government grants, NHPC carries a huge equity base of Rs 11,182 crore that will increase to Rs 12,300 crore after the public offer now. A large quantum of equity funds is locked up at any given time in ongoing projects and this does not earn any return till the projects are commissioned.

The result is that the company's return on equity is a poor 7 per cent despite it earning an assured return of 14 per cent on its equity till last year (15.5 per cent from this fiscal for the next five years) as per regulatory norms. Peers such as NTPC boast of a return on equity that is double that of NHPC's.

The picture could change for the better in the next few years due to two reasons. First, NHPC has been off government grants since the last two years and its projects are now funded on 70:30 debt:equity with the equity coming from internal accruals. Second, as the projects under construction now start generating returns, the return on equity will gradually improve.

Cost and time overruns

NHPC's projects are implemented in difficult physical terrain that are also often environmentally sensitive and hence require numerous government clearances. Given this, delays in commissioning projects are not uncommon, leading to big cost and time overruns.

For instance, the 2,000 MW Subansiri Lower project in Arunachal Pradesh was originally scheduled to be completed in September 2010 but the company now expects to commission it only by December 2012. The 240 MW Uri II and 160 MW Teesta Low Dam IV projects are also on a delayed schedule. Incidentally, these are among the projects that are proposed to be part-funded from the IPO now.

The increased costs have to be approved by the regulator, failing which the company will have to bear the burden.

Regulatory risk

The central electricity regulator issues a five-year tariff policy that governs NHPC's tariffs. The 2009-2014 policy, while increasing the return on equity to 15.5 per cent from 14 per cent earlier, has changed the method of computation of annual fixed cost recovery in a manner that is adverse to NHPC. Incentives for generation beyond the design energy level have also been capped at Rs 0.80 per unit. Given the large public interest involved in the sector and also the huge demand-supply gap, it is likely that the regulator will play an active role which may not always work to NHPC's interests.

 

Optimally valued

The offer price band of Rs 30-36 does not leave much on the table for investors in the near-term. The price-earning multiple of 30 at the lower end of the price band is almost the same as that of Jai Prakash Hydro and higher than NTPC's PEM of 21 based on historical earnings.

In price-to-book-value (P/BV) terms though, NHPC's offer price compares favourably with the rest. At the offer price band, NHPC has a P/BV of 1.8-2.2 times; JP Hydro's, in comparison, stands at close to four times while NTPC has a P/BV of three.

Given the high institutional interest in the power sector and the company's fundamentals, it is likely that the stock will attract much attention in the market. Investors with a long-term holding strategy can subscribe to this offer.

--
Arvind Parekh
+ 91 98432 32381

--
Arvind Parekh
+ 91 98432 32381