Market Outlook for 8th Oct 2009

INTRADAY calls for 8th Oct 2009

BUY LITL-491 for 508-519+ with sl 485

BUY IBR-279 for 286-293+ with sl 272

BUY BGREnergy-473 for 488-504+ with sl 468

BUY Uniphos-175 for 188+ with sl 171

 

Positional

BUY Cipla-281 for 300+ with sl 275

BUY Welguj-268 for 300+ with sl 260

BUY YesBank-208 for 225+ with sl 200

 

NIFTY FUTURE LEVELS
'SUPPORT
4952
4909
4866
RESISTANCE
4986
5003
5049
5092
5135
5179
Buy UNIMERS;BHANSALI ENGG 

 

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

IOB, Lupin, Pirmal Health, DCHL, Orchid Chem, Canara bank, Sesa Goa, Aurobindo Pharma, Jindal Saw & Yes Bank.

And this is list of 10 Weak futures:

Idea, Bharti Airtel, Rcom, TV-18, MTNL, Suzlon, Grasim, Finance Tech, Unitech & Tulip.
Nifty is in Up trend
 

NIFTY FUTURES (F & O): 
 Selling may continue up to 4952-4954 zone for time being.

Hurdles at 4986 & 5003 levels. Above these levels, expect short covering up to 5047-5049 zone and thereafter expect a jump up to 5090-5092 zone by non-stop.

Cross above 5133-5135 zone, can take it up to 5177-5179 zone by non-stop. Supply expected at around this zone and have caution.

On Negative Side, rebound expected at around 4909-4911 zone. Stop Loss at 4866-4868 zone.
 
Short-Term Investors:  
Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop. 

BSE SENSEX:  
Lower opening expected. Recovery should happen. 
Short-Term Investors:
 
Short-Term trend is Bullish and target at around 17671.82 level on upper side.
Maintain a Stop Loss at 16613.22 level for your long positions too.
 
POSITIONAL BUY:
Buy UNIMERS (BSE Cash) 
Bulls may hold on gains today.

1 Week: Bullish, as per current indications.

1 Month: Bullish, as per current indications.

3 Months: Surprisingly going up, opposite to bearishness.

1 Year: Bullish, as per current indications.
 
Buy BHANSALI ENGG (BSE Cash) 
Surprisingly gone up, and bulls may lose control today.

1 Week: Surprisingly going up, opposite to bearishness.

1 Month: Surprisingly going up, opposite to bearishness.

3 Months: Bullish, as per current indications.

1 Year: Bullish, as per current indications.

 

Global Cues & Rupee  
The Dow Jones Industrial Average closed at 9,725.58. Down by 5.67 points.
The Broader S&P 500 closed at 1,057.58. Up by 2.86 points.

The Nasdaq Composite Index closed at 2,110.33. Up by 6.76 points.

The partially convertible rupee INR=IN closed at 46.66/67 per dollar on yesterday, above its previous close of 46.89/90.

 

Interesting findings on web:
Investors braced for the start of earnings season by pulling out of AT&T, Verizon and other telecommunications companies, but buying banks such as Bank of America in a light-volume session Wednesday.

Stocks seesawed Wednesday, with blue chips weaker and techs a bit higher as a two-day advance petered out amid a mixed dollar, lower oil prices and some jitters at the start of the quarterly financial reporting period.

The Dow Jones industrial average fell 5.67, or 0.1 percent, to 9,725.58.

The Standard & Poor's 500 index rose 2.86, or 0.3 percent, to 1,057.58.

The Nasdaq composite index rose 6.76, or 0.3 percent, to 2,110.33.

RUSSELL602.080.10+0.02%

TRAN3783.864.22+0.11%

UTIL373.79-1.00-0.27%

S&P 100489.81.57+0.32%

S&P 400687.270.29+0.04%

NYSE6912.6512.97+0.19%

NAS 1001710.455.20+0.3%

For the week:

The Dow is up 237.91, or 2.5 percent.

The S&P is up 32.37, or 3.2 percent.

The Nasdaq is up 62.22, or 3.0 percent.

For the year:

The Dow is up 949.19, or 10.8 percent.

The S&P is up 154.33, or 17.1 percent.

The Nasdaq is up 533.30, or 33.8 percent.

"A lot of people are looking for every reason to not believe this rally," said Frank Ingarra Jr., co-portfolio manager of Hennessy Funds. "And while I think it's for real, there is real risk in the short term as this earnings season will have a big impact on what we do this winter."

"Investors are holding tight here," said Eric Ross, director of research at Canaccord Adams. "There are people on both sides of the fence. A lot of people think this market is going to keep running and running and then others that are very nervous."

Many investors are waiting to see how the earnings turn out before they either pile back into stocks in a big way or back out more aggressively. Currently, analysts expect third-quarter profits to have fallen around 24% versus a year ago, with the heaviest percentage losses expected in the materials, energy and industrials' sectors.

Investors are cautious both about earnings and because of the fast pace of the run since the March lows, said Harry Clark, founder and CEO at Clark Capital Management Group.

"I think people are looking at the weakness in the jobs market and the run-up stocks have already seen, and they're a bit nervous," Clark said.

However, he said that the last few days have indicated that any small selloff will be greeted with renewed buying interest. Also, as the end of the year draws nearer, hedge funds and portfolio managers will have to turn more cash into investments. That could give the market a year-end boost.

Investors are aware that October has historically been a tough month, Clark said, citing the 1929 and 1997 crashes and major selloffs in the late '70s. But it can also be a positive month, particularly when it follows a strong September, like it did this year.

Besides, 2009 has been a year that has consistently defied historical trends.

Since bottoming at a 12-year low on March 9, the S&P 500 has gained 56%, and the Dow has gained 49% as of Tuesday's close. After hitting a six-year low, the Nasdaq has gained nearly 68%.

Fred Dickson at DA Davidson & Co said the market has shown resilience in the face of any selling pressure.

"The stock market rally over the last couple of days once again leads us to conclude that institutional investors with lots of cash are continuing to scramble to put money to work in the stock market on small dips," he said.

"The stock market also appeared to be helped by global traders moving money into stocks as a hedge against continuing dollar weakness."

Investors should purchase stocks during declines in the market and "stay bullish" because the rebound in the S&P 500 is "quite moderate" compared with past recoveries from bear markets, wrote a team of Bank of America Corp. (NYSE: BAC) analysts led by chief U.S. equity strategist David Bianco. Over the last seven months, the S&P 500 has recouped about 43 percent of its tumble from a record in October 2007, compared with an average recovery of 65 percent by this point, the analysts wrote.

"This rally hardly seems overdone to us," the analysts wrote. A decline of 5 percent to 10 percent in the S&P 500 "would not be surprising, but we would view such a pullback as a buying opportunity," they wrote.

Techs started to push higher after an analyst upgrade on Cisco. Banks also gained after a couple of upgrades on the sector recently as analysts say stocks valuations are too low for earnings potential.

Boeing (BA, Fortune 500), United Technologies (UTX, Fortune 500), 3M (MMM, Fortune 500) and Travelers Companies (TRV, Fortune 500) were among the biggest decliners on the blue-chip average. They were also among the biggest gainers in the early-week rally.

But a late-session rally in a variety of financial stocks gave the market a boost.

Among the leading financials, Bank of America climbed 35 cents, or 2.1%, to 17.35, and Fifth Third gained 28 cents, or 2.8%, to 10.15.

Commodities companies were also strong again, aided by more gains for metals prices and continued weakness for the dollar. Mining giant Freeport-McMoRan was particularly strong, up 3.17, or 4.6%, to 72.78.

Oil and gas giant ConocoPhillips rose 1.29, or 2.7%, to 49.70, after saying it would trim $10 billion in assets over the next two years, cut expenditures and raise dividends in a bid to shore up its finances and restore confidence among investors.

Telecom giants AT&T and Verizon Communications paced the index lower as the Federal Communications Commission chairman said he intends to proceed with Internet openness rules for cellular carriers. AT&T closed down 56 cents, or 2.1%, to 26.18, while Verizon fell 31 cents, or 1%, to 29.38.

In other trading, shares of Verisk Analytics Inc. shot up 23.7 percent in their market debut, rising $5.22 to $27.22. The insurance data specialist raised $1.9 billion in one of the year's largest initial public offerings.

DuPont [DD  31.76    -0.13  (-0.41%)   ] slipped 0.3 percent after the chemicals maker said it doesn't expect earnings to match 2008 levels until 2012.

Financials gained 1.2 percent after Wells Fargo raised its rating on Bank of America [BAC  17.35    0.35  (+2.06%)   ] to "outperform," the latest in the string of upgrades on the sector.

Bank of America was the second-biggest percentage gainer on the Dow, up 2.1 percent, followed by JPMorgan [JPM  45.71    0.80  (+1.78%)   ], up 1.8 percent.

Citigroup [C  4.64    -0.03  (-0.64%)   ] shed 0.6 percent. The bank is said to be exploring a possible sale of its Phibro commodities unit — that's the one with the star trader due a $100 million pay package.

Cisco [CSCO  23.61    0.26  (+1.11%)   ] gained 1.1 percent after a William Blair analyst upgraded his rating on the stock to "outperform" from "market perform." The analyst said Cisco is winning new deals and generally benefiting from the recovery amid pent-up demand.

Microsoft [MSFT  25.09    -0.02  (-0.08%)   ] finished flat after CEO Steve Ballmer said he doesn't expect the launch of Windows 7 to boost PC sales.

Amazon [AMZN  93.97    3.06  (+3.37%)   ] was the top percentage gainer on the Nasdaq, up 3.4 percent, after the online marketplace lowered the price of its Kindle e-reader, while expanding its marketing overseas.

Google [AMZN  93.97    3.06  (+3.37%)   ] jumped 3.8 percent after the search engine said the worst of the advertising slump was over.

Rumor has it that News Corp. [NWS  13.68    0.09  (+0.66%)   ] chief Rupert Murdoch is in Asia right now, scouting out potential partners for his own e-reader. Shares of News Corp. rose 0.7 percent.

Anheuser-Busch InBev [BUD  46.65    -0.01  (-0.02%)   ] announced that it's selling its theme-parks division, which include SeaWorld and Busch Gardens, to private-equity firm Blackstone Group for at least $2.3 billion.

Avis Budget Group [CAR  12.50    -0.78  (-5.87%)   ] dropped 5.9 percent after the car-rental company warned that a transaction against it could impact earnings. Avis on Tuesday offered $250 million in notes along with a warrant transaction.

And Burger King [BKC  17.47    0.09  (+0.52%)   ] rose 1.2 percent after the fast-food chain announced an extensive revamp of its 12,000 worldwide locations.

Coca-Cola Co. (NYSE: KO) gained 0.9 percent to $54.81. The largest soft-drink maker was raised to "buy" at Deutsche Bank, which cited a "better currency and commodity outlook, stable volumes and improved domestic bottler relations."

Video game publisher Electronic Arts was another NASDAQ stock flying high after it said it sales of FIFA 2010 hit a record 1.7m copies in the first week of release in Europe.

Housebuilders such as Pulte, KB Homes and D R Horton were hit by speculation from Deutsche Bank that US lawmakers may not extend a tax credit to first-time house buyers when the tax break expires in November.

S&P 500 - Risers

Wyndham Worldwide (WYN) $17.47 +7.44%

Freeport Mcmoran B (FCX) $73.00 +4.87%

Estee Lauder Cos Inc. (EL) $38.56 +4.44%

Halliburton Co (HAL) $28.05 +4.43%

Micron Technology (MU) $8.22 +4.18%

Google Inc. (GOOG) $517.60 +3.78%

S&P 500 - Fallers

Pulte Homes Inc. (PHM) $10.06 -3.82%

AT&T Inc. (T) $26.18 -3.57%

Lennar Corp. Class A (LEN) $13.21 -3.44%

Cephalon Inc. (CEPH) $54.50 -2.83%

Interpublic Group (IPG) $6.91 -2.83%

Lockheed Martin Corp. (LMT) $74.03 -2.82%

Dow Jones I.A - Risers

Alcoa Inc. (AA) $14.20 +2.23%

Bank Of America Corp. (BAC) $17.35 +2.06%

JP Morgan Chase & Co. (JPM) $45.70 +1.76%

American Express Inc. (AXP) $33.99 +1.40%

International Business Machines Corp. (IBM) $122.70 +1.11%

Cisco Systems Inc. (CSCO) $23.58 +0.99%

Dow Jones I.A - Fallers

AT&T Inc. (T) $26.18 -3.57%

Verizon Communications Inc. (VZ) $29.38 -2.62%

Travelers Company Inc. (TRV) $48.93 -1.21%

3M Co. (MMM) $73.12 -1.10%

Merck & Co. Inc. (MRK) $32.19 -0.98%

Hewlett-Packard Co. (HPQ) $46.56 -0.96%

Earnings season unofficially kicked off after the bell today, with the first Dow component, Alcoa [AA  14.20    0.31  (+2.23%)   ], reporting after the bell.

Analysts say companies are going to have to bring it this quarter: They're looking for revenue growth, not just an improved bottom line due to cost-cutting measures. Plus, they'll also be looking at companies' outlooks for signs of the recovery.

And that's exactly what Alcoa delivered: The aluminum giant beat on both earnings and revenue.

Alcoa was the biggest gainer on the Dow, up 2.2 percent, during regular trading, and

After the bell, the stock jumped more than 5 percent.

Still, the overall season is expected to be bumpy: The current expectations are for a 25-percent drop in the blended earnings of S&P 500 companies.

Aluminum maker Alcoa Inc. was the first of the 30 companies that make up the Dow Jones industrial average to report results after the end of trading. The company's revenue and earnings topped expectations.

Alcoa's report is typically seen as the symbolic start of the reporting period, as it is usually the first Dow component to report.

Alcoa, the largest U.S. aluminum producer, reported an unexpected third-quarter profit as it benefited from rising metal prices and cost reduction by slashing jobs and raw-material costs.

    The company achieved a profit of 4 cents a share, exceeding analysts' average estimate for a 9-cent loss. Net income fell to 77 million U.S. dollars, or 8 cents a share, from 268 million dollars, or 33 cents, a year earlier. Revenue tumbled 34 percent to 4.62 billion dollars from the same period a year earlier, but was up 9 percent from the second quarter of 2009.

    Alcoa is the first among 30 Dow component companies to report the third quarter results and its rosy results were a relief after three straight quarterly losses, as investors desired to look for more evidence of economic recovery.

While it was a positive omen, investors are likely going to remain on edge until the end of the month, when a majority of the earnings have been released.

"In the vaccuum of earnings news, Alcoa's results are good, particularly because they beat on revenue," said Donald Selkin, chief market strategist at National Securities.

"But Alcoa will only have a nominal effect on the market Thursday," he said, noting that it is the least-influential component on the price-weighted Dow. "Next week brings the heavyweights."

Intel (INTC, Fortune 500), Google (GOOG, Fortune 500), Goldman Sachs (GS, Fortune 500) and a number of other financials are on the docket for next week.

Financials are expected to post the best results of any sector, due to easy comparisons against an abysmal third quarter of 2008. The sector is expected to see earnings growth of 59%.

The broad S&P 500 is expeced to see a drop in profits for the ninth quarter in a row, the worst since Thomson began tracking results a decade ago.

Early on Wednesday, Family Dollar Stores Inc. (NYSE: FDO: 28.2, -0.28) reported that fourth-quarter earnings were $60 million, or 43 cents a share, compared to $53 million, or 38 cents a share, in the year-ago period. Revenue rose to $1.81 billion from $1.77 billion a year ago. For fiscal 2010, the company expects net sales will increase 5% to 7% and same-store sales to grow 3% to 5%. Shares fell 27 cents or 0.95% to $28.21.

Among the earnings reports trickling in Wednesday, Costco Wholesale Corp. said profits fell 6 percent, partly due to a stronger dollar and increased employee benefit costs, but results still beat analysts' expectations. Shares rose $1.07 to $59.

Monsanto Co., the world's biggest seed maker, said its loss widened to $233 million as revenue fell. Adjusted earnings narrowly beat estimates. Shares fell $1.03 to $74.33.

JPMorgan Chase & Co call options look attractive ahead of its Oct. 14 quarterly earnings. "We expect the stock to go higher," wrote Goldman Sachs derivative strategists in a note. Goldman rated the stock conviction buy, with 20 percent upside to their 12-month, $54 price target.

The strategists estimate JPMorgan options are pricing in a 5 percent up or down swing on earnings, in line with the historical average earnings move for the stock. With term structure downward sloping and JPMorgan reporting just before October expiration, Goldman said it prefers buying November options. With the stock currently trading at $44.91, they recommend buying November $46 calls for $2.20.

Call buyers risk losing the full premium paid.

It was light on the economic news today but a couple of quick points: Mortgage applications rose to their highest level since mid-May as interest rates continued to drop.

And consumer borrowing fell for a seventh straight month as more Americans opted to pay off debt and banks cut credit-card limits.

VIX24.68-1.02-3.97%.

Oil,Gold & Currencies:

U.S. light crude oil for November delivery fell $1.31 to settle at $69.57 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $4.70 to settle at $1,044.40 an ounce after ending the previous session at a record $1,039.70. The previous record close of $1,020.20 was set two weeks ago.

The dollar gained versus the euro and fell against the yen, reversing its recent slide against a basket of currencies.

Oct. 8 (Bloomberg) -- The dollar fell toward a two-week low against the euro as signs the global economy is recovering spurred demand for higher-yielding assets.

The U.S. currency dropped against 15 of its 16 major counterparts as Asian stocks gained before reports that economists say will show German industrial output rose for a second month and Japan's machine orders advanced in August. The Australian dollar jumped to a 14-month high after employment unexpectedly increased in September.

"People believe that the worst is over, which makes sense," said Phil Burke, chief dealer for foreign-exchange spot trading at JPMorgan Securities in Sydney. "Overall, the dollar is still in a mid-term downtrend."

The dollar fell to $1.4748 per euro at 10:50 a.m. in Tokyo from $1.4691 in New York yesterday. It touched $1.4762 on Oct. 6, the lowest since Sept. 24. The euro was at 130.38 yen from 130.18 yen. The yen was at 88.41 per dollar from 88.61. Yesterday it rose to as high as 88.01, the strongest level in more than eight months.

The MSCI Asia Pacific Index of regional shares rose 1.3 percent, and Japan's Nikkei 225 Stock Average added 0.5 percent. The Standard & Poor's 500 Index increased 0.3 percent in New York yesterday, while gold climbed to a record for the second straight day.

The dollar declined as economists in a Bloomberg News survey forecast German industrial output expanded 1.8 percent in August following a 0.9 percent drop in July. The Economy Ministry in Berlin is set to report the data today.

A separate survey forecast Japan's factory output gained 2.1 percent in August following a 9.3 percent drop in July. The data is due tomorrow in Tokyo.

'Rebounding'

"The global economy is rebounding," said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. "That's what the equity market is telling us and commodity markets are telling us. On that basis, I'm bullish on the euro."

The European Central Bank will hold its main refinancing rate at a record low of 1 percent, and the Bank of England will keep its main rate at an all-time low of 0.5 percent, according to Bloomberg surveys. Both central banks meet today.

The Federal Reserve will start raising its benchmark rate in the third quarter of 2010, according to analysts' forecasts compiled by Bloomberg.

Australia's dollar rose as much as 1.2 percent to 90.18 U.S. cents, the highest level since August 2008, from 89.12 cents yesterday in New York.

The number of people employed rose 40,600 last month from August, the statistics bureau said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg was for a decline of 10,000. The jobless rate fell to 5.7 percent from 5.8 percent.

'Uncomfortable' Level

New Zealand's dollar climbed to 73.95 U.S. cents from 73.64 yesterday. Earlier it touched 74.21 cents, the strongest since July 2008. New Zealand Finance Minister Bill English said he's "uncomfortable" with the level of its currency.

"Generally when we've had a recession, a low dollar has helped us kick-start out of that recession," English said in an interview in London late yesterday. "That's clearly not going to be the case this time."

New Zealand is being "bundled" with Australia by investors when its economy has not performed as well, exacerbating the currency's strength, he said.

Bonds:

Treasury prices rallied, lowering the yield on the 10-year note to 3.19% from 3.25% late Tuesday. Treasury prices and yields move in opposite directions. 

What to expect:

THURSDAY: Chain-store sales; foreclosure report; BOE, ECB rate decisions; weekly jobless claims; wholesale trade; Fed's Hoenig speaks; Earnings from Pepsi, Marriott, Chevron (interim)

FRIDAY: Market peak 2-year anniversary (Dow at 14,164.53); international trade

Australia September Jobs Surge, Unemployment Dips

Australian employment surged past all expectations in September and the jobless rate dropped in what might be a turning point months earlier than anyone thought, adding to the case for more rises in interest rates this year.

US Justice Department Opens IBM Antitrust Probe

The U.S. Justice Department has opened an investigation into allegations that International Business Machines [IBM  122.78    1.43  (+1.18%)   ] abused its dominance of the mainframe business to squeeze rivals, said Computer and Communications Industry Association chairman Ed Black on Wednesday.

Alcoa's Profit a Positive Start For 'Show Me' Earnings Season

Third-quarter earnings got off to a positive start Wednesday with Alcoa's surprising profit, but investors will be watching corporate results closely in the coming weeks to see if they justify a continued rally in stock prices.

Fresh Quakes Renew Tsunami Fears for Pacific

Pacific nations braced for a fresh tsunami on Thursday after two huge subsea quakes struck the region, sending islanders fleeing for higher ground, only a week after a series of deadly tsunamis devastated the Samoa islands.

Celebrity photographer Irving Penn dies

Irving Penn, whose photographs revealed a taste for stark simplicity whether he was shooting celebrity portraits, fashion, still life or remote places of the world, died Wednesday at his Manhattan home. He was 92.

Baucus Health-Care Bill Would Cost $829 Billion

Health care legislation drafted by a key Senate committee would expand coverage to 94 percent of all eligible Americans at a 10-year cost of $829 billion, congressional budget experts said Wednesday, a preliminary estimate likely to power the measure past a major hurdle within days. 

Obama, Lawmakers, Weigh New Steps to Spur Economy

U.S. President Barack Obama met on Wednesday with the two top Democrats in Congress to discuss ways to spur the economy and reverse a climb in the U.S. unemployment rate, which is now at a 26-year-high.

Asia:

Asian stocks advanced for a third day, driving the MSCI Asia Pacific Index to a two-week high, after Australian employers unexpectedly added workers last month and Alcoa Inc. reported earnings that beat analyst estimates.

National Australia Bank Ltd. climbed 4.1 percent after the statistics bureau said the country's jobless rate fell. Alumina Ltd., Alcoa's partner in the world's biggest producer of the material used to make aluminum, climbed 5.2 percent in Sydney. Mitsui O.S.K. Lines Ltd. and Nippon Yusen K.K., Japan's two largest shipping lines, climbed more than 6 percent after being upgraded at Bank of America-Merrill Lynch.

The MSCI Asia Pacific Index climbed 1.2 percent to 118.53 as of 11:31 a.m. in Tokyo, set to close at the highest level since Sept. 23. The gauge has climbed 68 percent from a five- year low on March 9 as better-than-estimated economic and earnings reports boosted speculation the global economy is recovering from the worst slowdown since World War II.

"Valuations are no longer particularly cheap in Asia, but they don't appear to be overly excessive either," said Robert Horrocks, who helps manage $9.9 billion including Asian equities at Matthews International Capital Management LLC. "Markets now are going to be driven by the ability of companies to sustain a reasonable level of growth over the long term."

Australia's S&P/ASX 200 Index climbed 1.4 percent, the biggest advance in the region, as the statistics bureau said in Sydney today that the number of people employed rose 40,600 from August. The median estimate of economists surveyed by Bloomberg was for a decline of 10,000.

Alcoa Profit

Japan's Nikkei 225 Stock Average added 0.5 percent, while Hong Kong's Hang Seng Index gained 0.4 percent. All key indexes in the region advanced except in the Philippines. China's markets resume trading tomorrow after an eight-day holiday.

Futures on the U.S. Standard & Poor's 500 Index climbed 0.9 percent. The gauge added 0.3 percent yesterday as Alcoa, the largest U.S. aluminum producer, reported third-quarter profit, while analysts had estimated a loss. The company was the first in the Dow Jones Industrial Average to release results.

"The chances are high that other U.S. companies will follow Alcoa in reporting better-than-expected results and have positive impacts on markets here," said Kenichi Hirano, general manager at Tokyo-based Tachibana Securities Co.

National Australia, the country's third-largest bank by value, climbed 4.1 percent to A$31.24. Commonwealth Bank of Australia, the nation's largest, gained 2.9 percent to A$52.80. Fairfax Media Ltd., Australia's second-largest newspaper owner, rose 4.4 percent to A$1.65 on optimism an economic revival will help boost advertising revenue.

Risk of Contraction

Two days ago, Australia became the first country in the so- called Group of 20 nations to boost borrowing costs since the start of the credit crisis. The "risk of serious economic contraction" has passed, Glenn Stevens, governor of the Reserve Bank of Australia, said the same day.

Alumina jumped 5.2 percent to A$1.94. Alcoa's third-quarter profit excluding certain items of 4 cents a share exceeded the average analyst estimate for a 9-cent loss as metal prices climbed and the company cut costs.

In Tokyo, Mitsui O.S.K. surged 6.6 percent to 569 yen, Nippon Yusen gained 8.2 percent to 371 yen and Kawasaki Kisen Kaisha Ltd. advanced 9.1 percent to 371 yen.

BOA-Merrill lifted its ratings on all three shipping lines to "neutral" from "underperform." The Baltic Dry Index, a measure of rates for shipping commodities, also rose 4.3 percent yesterday in London, the most in almost three months. 

Nikkei 225 9,849.41     +49.81 ( +0.51%). (08.47 AM IST)

Japan's Nikkei average rose 0.5 percent on Thursday as exporters such as Tokyo Electron (8035.T: Quote, Profile, Research) gained on short-covering, while Nikon Corp (7731.T: Quote, Profile, Research) jumped after a brokerage upgrade.

Shipping firms extended gains after the Baltic Exchange's main sea freight index .BADI rose to a seven-week high on Wednesday with expectations of fresh Chinese demand driving momentum.

After moving in and out of negative territory, the benchmark Nikkei .N225 ended the morning up 49.81 points at 9,849.41. It advanced 1.1 percent the previous day.

The broader Topix .TOPX gained 0.5 percent to 889.80.

HSI 21312.21 +70.62 +0.33% .(08.49 AM IST)

Hong Kong shares stretched their winning run to a fourth straight session Thursday after a mixed finish on Wall Street, with commodity producers and property developers in the lead. The Hang Seng Index rose 0.4% to 21,319.91, and the Hang Seng China Enterprises Index rose 0.4% to 12,365.02 in early trading. The performance of the three new stocks that listed Thursday was mixed after opening higher. Shares of China Vanadium Titano-Magnetite Mining /quotes/comstock/22h!893 (HK:893 0.00, 0.00, 0.00%) opened at 3.57 Hong Kong dollars (46 U.S. cents) versus its initial public offering at 3.50 Hong Kong dollars, but later eased to 3.47 Hong Kong dollars. But Yingde Gases /quotes/comstock/22h!2168 (HK:2168 0.00, 0.00, 0.00%) rose to 7.36 Hong Kong dollars from its IPO at 7 Hong Kong dollars, while Ausnutria Dairy /quotes/comstock/22h!1717 (HK:1717 0.00, 0.00, 0.00%) climbed to 4.34 Hong Kong dollars from its IPO at 4 Hong Kong dollars. 

SHANGHAI STOCK EXCHANGE:

•The SSE will close from October 1 (Thursday) to October 8, 2009 (Thursday) and open for trading on October 9, 2009 (Friday).   

 

Hang Seng Index opens 176 points higher on Thu 

ZTE says no interest in buying Nortel assets 

Morgan Stanley retains "neutral" rating for China High Speed 

Tsinghua Holdings to issue RMB 1 bln in short-term bills 

PCCW Chairman Li raises his stake again 

Beijing Capital Land's contracted sales hit RMB 1.4 bln in Sep 

COFCO Property to raise up to RMB 3.54 bln 

Yum Brands profit in China up 32% in Q3 

Pudong Dev't Bank raises RMB 15 bln through private placement 

Taiwan's exports hit US$19.07 bln in September 

Guangzhou R&F Property to issue RMB 5.5 bln in bonds in Oct 

NWS Holdings net profits down 34% in FY 2009 

Primus Financial Holdings wins bid for AIG's Taiwan business 

China bolsters global luxury car market in Sep 

China Minsheng Bank to seek controlling stake in UCBH

GlaxoSmithKline to set up child vaccine JV in China 

New World Department Store accelerates mainland expansion

U.S. oil giant ConocoPhillips selling assets to improve financial position  
 
INVESTMENT VIEW
C&C Constructions Limited

FY09 (Jun) EPS Rs 22; Revenues Rs 750 crore, PAT Rs 41 crore
 
 
As a footnote to the Consolidated Annual Results for the year ending June 2009, C&C Construction has disclosed that it has bagged the Rigid Pavement and Granular Layer Packages C1 and C2 for the prestigious Yamuna Expressway commencing milestone 0.500 to 110 kms; worth Rs 375 crore. 
The corporate which has dominated road construction in Bihar, Afghanistan and other parts of India now carries an order book in excess of Rs 3000 crore.

(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.)
 

 

SPOT LEVELS TODAY

	4985.75	( -0.83 %)	-41.65
		1	2	3
Resistance		5050.85	5115.95	5154.90
Support		4946.80	4907.85	4842.75

FUN

	16806.66		( -0.90 %)	-151.88
			1	2	3
Resistance			17030.12	17253.59	17386.61
Support			16673.63	16540.61	16317.14

FUNDS DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	07-Oct-2009	4007.09	3372.55	634.54

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	07-Oct-2009	1668.72	1367.12	301.6

 

 

 

--

Arvind Parekh

+ 91 98432 32381

 

 

Market Outlook for 7th Sep 2009

INTRADAY calls for 7th Oct 2009

BUY REL-1283 for 1325-1355+ with sl 1270

BUY ITC-247 for 253-257+ with sl 245

BUY IRB-226 for 241-252 with sl 222

 

NIFTY FUTURES LEVELS
RESISTANCE
5057
5075
5107
5123
5155
SUPPORT
5029
5005
4954
4922
4906
4874
Buy ROBINSON LEASE;Buy NOVOPAN INDS

 

stocks that are in news today:
-L&T may exit Satyam after lock in expires on October 14 – BS
-JSW Steel Q2 crude steel production up 54% at 15.39 lakh tonnes
-Govt to split Chiria mines, SAIL to get half – BS
-BSNL, MTNL offered majority in Zain SPV – Bs
-Sunil Mittal says Bharti Airtel may also bid for WiMax
-KS Oils buys 53,000 acres land in Indonesia to develop palm oil plantations – BS
-Renault Strongly denies asking Bajaj to pick M&M stake in JV
-Dr Reddy's launches aesthetics drugs Strea C10 & Strea A15 in India
-Gitanjali Gems acquires 100% stake in Alliance Jewelleries
-Pyramid Saimira denies reports RBD Group buys 40% stake in company and production arm

 

RIL files affidavit against RNRL SLP in SC
RIL affidavit:
-Family MoU not binding on corporate entity
-RNRL trying to corner gas & make undue profits
-No power plant in existence & in position to receive any gas
-No such power plant can come into existence within 3 years
-By its own admission RNRL will sell gas at market price
-Market price could exceed govt approved $4.2/mmBtu
-MoU was signed by Mukesh Ambani in personal capacity

RIL-RNRL case update: exclusive
-6 RIL directors file standalone affidavits
RIL directors say
-MoU never seen, read by RIL board
-RIL board never accepted, approved MoU

 

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

IOB, Rolta, DCHL, KFA, Ranbaxy, ICICI Bank, Jindal Saw, Lupin, Orchid Chem & Aurobindo Pharma.

And this is list of 10 Weak futures:

Idea, Bharti Airtel, TV-18, MTNL, Rcom, Grasim, Finance Tech, Suzlon, TTML & Unitech.
Nifty is in Up trend
 

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	06-Oct-2009	4060.84	4217.81	-156.97

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	06-Oct-2009	1354.51	2122.08	-767.57

 

NIFTY FUTURES (F & O):

 Above 5057 level, rally may continue up to 5073-5075 zone and thereafter expect a jump up to 5105-5107 zone by non-stop.

 

Support at 5005 & 5029 levels. Below these levels, expect profit booking up to 4954-4956 zone and thereafter slide may continue up to 4906-4908 zone by non-stop.

 

 

Buy if touches 4922-4924 zone. Stop Loss at 4874-4876 zone.

 

 

On Positive Side, cross above 5121-5123 zone can take it up to 5153-5155 zone by non-stop. If crosses and sustains this zone then uptrend may continue.

 

Short-Term Investors:

Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop.  

 

BSE SENSEX:

 Higher opening expected. Uptrend should continue.  

 

Short-Term Investors:  

Short-Term trend is Bullish and target at around 17671.82 level on upper side.

Maintain a Stop Loss at 16613.22 level for your long positions too.

 

POSITIONAL BUY:

Buy ROBINSON LEASE (BSE Cash)  

Surprisingly gone up, and bulls may hold on gains today.

 

1 Week: Surprisingly going up, opposite to bearishness.

 

 

1 Month: Surprisingly going up, opposite to bearishness.

 

 

3 Months: Surprisingly going up, opposite to bearishness.

 

 

1 Year: Surprisingly coming down, opposite to bullishness.

 

Buy NOVOPAN INDS (BSE Cash)  

Surprisingly gone up, and bulls may hold on gains today.

 

1 Week: Bullish, as per current indications.

 

 

1 Month: Surprisingly going up, opposite to bearishness.

 

 

3 Months: Bullish, as per current indications.

 

 

1 Year: Bullish, as per current indications.

 

Global Cues & Rupee  

The Dow Jones Industrial Average closed at 9,731.25. Up by 131.50 points.

The Broader S&P 500 closed at 1,054.72. Up by 14.26 points.

 

The Nasdaq Composite Index closed at 2,103.57. Up by 35.42 points.

 

The partially convertible rupee ended at 46.89/90 per dollar on yesterday, above Monday's close of 47.525/535.

 

Interesting findings on web:

Wall Street rallied Tuesday, gaining for a second straight session as a weaker dollar boosted commodities and dollar-sensitive stocks, fostering a broad-based advance.

 

The runup had been stronger through midday, but lost some steam as the dollar cut losses and financial shares turned mixed to negative.

 

Higher commodity prices and indications that the global economic recovery might have arrived sent the Dow soaring again to a second day of triple-digit gains.

 

Gold closed at a record high and is in its ninth annual gain in a row since 2001 when it traded near $275.

 

"On the one hand, there's spending and stimulus to the economy," said Peter Jankovskis, who helps manage $1.4 billion at Oakbrook Investments in Lisle, Ill. "But any extra spending at this point is an additional contribution to the deficit."

 

Dow Jones Industrial Average increased 131.50 or 1.4% to a close of 9,731.25, S&P 500 Index added 14.26 or 1.4% to 1,054.72, and Nasdaq Composite Index added 35.42 or 1.7% to close at 2,103.57.

 

RUSSELL601.9810.87+1.84%

 

TRAN3779.6420.93+0.56%

 

UTIL374.793.23+0.87%

 

S&P 100488.236.48+1.35%

 

S&P 400686.989.54+1.41%

 

NYSE6899.68104.55+1.54%

 

NAS 1001705.2529.61

 

All 30 Dow stocks finished higher, led by Alcoa [AA  13.89    0.47  (+3.5%)   ], Intel [INTC  19.63    0.53  (+2.77%)   ] and JPMorgan [JPM  44.92    1.12  (+2.56%)   ].

 

"I think most people believe that stocks are going to generally keep drifting higher for the next few months," said Gary Webb, CEO at Webb Financial Group. "So while nothing fundamental has changed this week, investors are taking opportunities to buy on the lows."

 

"We've seen a lot of these elevator moments over the last month, these short, sharp pullbacks that ended up bringing people back in," said Fred Dickson, chief market strategist at D.A. Davidson & Co. "That's what we're seeing here."

 

Sustainable economic growth and low interest rates worldwide will spur a "multi-year" bull market in equities, led by developing nations, Fidelity International's Anthony Bolton said in an interview on Bloomberg Television in Hong Kong.

 

The economy is on the mend and housing is poised for a rebound, Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, told Bloomberg Radio. Economic growth will reach 3 percent next year, "maybe a little more," LaVorgna said. Economists surveyed by Bloomberg News last month projected the world's largest economy will expand 2.4 percent in 2010, according to the median estimate.

 

Nobel Prize-winning economist Joseph Stiglitz said U.S. unemployment will keep rising and should be the focus for policy makers, and gains in the stock market show investors have been "irrationally exuberant" about a recovery.

 

Investors also welcomed reports that Australia became the first major economy to lift interest rates since the start of the financial crisis.

 

Australia became the first of the major developed economies to raise interest rates, a move investors viewed as a further sign of global economic recovery.

 

The hike in a key lending rate by the Australian central bank "is a confirmation that things are picking up in my opinion," said Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets in Cleveland. "It's a good barometer as to what is going on in that part of the world."

 

The weak U.S. currency was also good for the stocks of multi-national companies that benefit from a weaker dollar.

 

A weaker-than-expected response to a government debt auction dulled some of the shine on the rally.

 

The broad advance benefited a number of stocks and sectors.

 

Materials and commodities stocks surged, including Dow components Alcoa (AA, Fortune 500), DuPont (DD, Fortune 500), Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500).

 

The Dow's other biggest gainers were Caterpillar (CAT, Fortune 500), Hewlett-Packard (HPQ, Fortune 500), IBM (IBM, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and United Technologies (UTX, Fortune 500).

 

The third-quarter earnings reporting period unofficially kicks off Wednesday with Dow compenent Alcoa, as is typical. The aluminum maker is expected to post a loss versus a profit a year ago, demonstrating the weak quarter expected for the materials sector.

 

General Electric Co. (NYSE: GE) and Intel Corp. (Nasdaq: INTC) are among the Dow and S&P 500 companies that will report in the next two weeks. Analysts' estimates compiled by Bloomberg predict companies will report a ninth straight quarter of declining profits before returning to growth in the final three months of the year.

 

While there's considerable optimism about upward earnings revisions, the market is at a particularly volatile point. Should earnings reveal the limits of cost cutting and reduced inventory without some pickup in sales growth, market sentiment could pivot sharply.

 

"I think expectations that we are in a recovery phase are running very, very high," said Curt Lyman, managing director at HighTower Advisors. "The focus is going to be on the quality of earnings. If that doesn't pan out, and there are downside surprises, the herd is skittish and they can turn on a dime. If that happens, the exits get very, very narrow."

 

"I think expectations going into the quarter are for a fairly positive earnings season. Last quarter about 70 percent of companies beat estimates on the heels of aggressive cost cutting and very weak consensus estimates," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

 

Since the economy has shown some signs of improvement since then, it's reasonable to think corporate results will do better, he said.

 

Third-quarter earnings for S&P 500 companies are still expected to have declined 24.8 percent from a year ago, according to data from Thomson Reuters.

 

Ahead of the first big batch of results, a few companies issued warnings about their just-completed quarter.

 

Dow component Boeing (BA, Fortune 500) said it will take a $1 billion charge in the third quarter because of higher costs to produce its 747-8 airplanes amid rough market conditions. The stock was little changed.

 

St. Jude Medical (STJ) warned Tuesday that third-quarter results would miss earlier forecasts because hospitals bought fewer of its medical devices. Shares fell nearly 13% in unusually active New York Stock Exchange trading.

 

Avocent Corp surged 20% after it agreed to be acquired by Emerson Electric for $25 a share or $1.2 billion. The Mosaic Co first quarter profit falls to $100.6 million. Pepsi Bottling quarterly net rises.

 

St Jude Medical led the decliners in the S&P 500 index with a loss of 12.7% followed by losses in Ciena Corporation of 7.9%, in Dynegy Inc of 4.8%, in Prologis of 3.2% and in Marshall & Ilsley of 1.2%.

 

Hartford Financial led gainers in the S&P 500 index with a rise of 7.9% followed by gains in Newmont Mining Corporation 7%, in Office Depot Inc of 6.6% and in Anadarko Petroleum of 6.1%.

 

Shares of industrial companies sensitive to the economy's cycles also rose. Shares of United Technologies Corp <UTX.N>, the world's largest maker of elevators and air conditioners, climbed 1.8 percent at $61.49.

 

On Nasdaq, Microsoft Corp <MSFT.O> increased 1.9 percent to $25.11 after introducing new software for mobile phones to compete with Apple Inc's <AAPL.O> iPhone. Apple shares rose 2.1 percent at $190.01.

 

Dow energy components ExxonMobil [XOM  68.66    1.08  (+1.6%)   ] and Chevron [CVX  70.56    1.17  (+1.69%)   ] gained 1.6 percent and 1.7 percent, respectively.

 

Newmont Mining (NYSE: NEM), the largest U.S. gold producer, surged 7 percent to $46.21. Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX), the world's biggest publicly traded copper producer, gained 3.4 percent to $69.61. Exxon Mobil (NYSE: XOM), the largest U.S. oil company, rose 1.6 percent to $68.66.

 

Corning (NYSE: GLW) added 4.7 percent to $15.50 after being upgraded to "Buy" from "Neutral" by UBS (NYSE: UBS), which cited "more robust" sales in China and an eased glut of supply.

 

NutriSystem [NTRI  17.46    2.41  (+16.01%)   ] shares rallied 16 percent after the company announced that it will sell its 14-day Starter program at Wal-Mart, [WMT  49.45    0.39  (+0.79%)   ] the first time the company has sold its products in the retail channel.

 

Wal-Mart rival Target [TGT  48.14    1.21  (+2.58%)   ] gained 2.5 percent after the company announced that it will match Wal-Mart's price cuts on toys for the holiday season.

 

There are no major economic reports on the calendar today, and very few notable earnings reports. After the bell, investors will get quarterly numbers from Yum Brands, [YUM  34.88    0.03  (+0.09%)   ] the parent of the KFC, Taco Bell, and Pizza Hut chains.

 

S&P 500 - Risers

 

Hartford Fin Svc (HIG) $28.32 +7.89%

 

Newmont Min Corp. (NEM) $46.21 +6.97%

 

Office Depot Inc. (ODP) $6.89 +6.66%

 

Family Dollar Stores (FDO) $28.48 +5.72%  

 

 

S&P 500 - Fallers

 

St. Jude Medical (STJ) $33.45 -12.53%

 

Dynegy Inc. Holdings Co (DYN) $2.38 -4.80%

 

Sunoco Inc. (SUN) $27.06 -3.60%

 

Prologis Sbi (PLD) $11.18 -3.20%  

 

 

Dow Jones I.A - Risers

 

Alcoa Inc. (AA) $13.89 +3.50%

 

Intel Corp. (INTC) $19.66 +2.93%

 

JP Morgan Chase & Co. (JPM) $44.91 +2.53%

 

Merck & Co. Inc. (MRK) $32.51 +2.33

 

The market has gone up when it was supposed to go down and vice versa in 2009 -- a terrible omen for the rest of the year.

 

Historically, January is one of the market's strongest months. But in January 2009, the Dow Jones Industrial Average plummeted 9%. "Sell in May and stay away" would have been a terrible idea with the Dow tacking on 16% from May 1 to Aug. 31. And while everyone went into September on edge -- September being the market's worst month historically -- the Dow industrials rose 2.3% in September.

 

"November and December, you usually get this rip to the finish. Maybe you get the opposite this year," said Gary Flam, a portfolio manager with Bel Air Investment Advisors.

 

VIX25.7-1.14-4.25.

 

Oil,Gold & Currencies:

 

U.S. light crude oil for November delivery settled up 47 cents to $70.88 a barrel on the New York Mercantile Exchange.

 

COMEX gold for December delivery rose $21.90 to settle at a record $1,039.70 an ounce, after rising as high as $1,045, an intraday record.

 

The dollar tumbled versus the euro and the yen, resuming its recent plunge against a basket of currencies.

 

The dollar rose for a fifth day against the pound after a Federal Reserve official said the central bank should start raising interest rates "sooner rather than later," boosting demand for U.S. assets.

 

The dollar gained for the first time in four days against the euro as a technical indicator signaled the U.S. currency's decline was excessive. The yen fell versus the dollar as Asian stocks extended a global rally amid signs the worldwide economy is recovering, damping demand for Japan's currency as a refuge.

 

"The Fed is showing signs to exit, which is positive for the dollar," said Toshiya Yamauchi, a Tokyo-based manager of the foreign-exchange margin trading department at Ueda Harlow Ltd. "While U.S. economic data continue to show mixed results, it's clear the economy has reached the bottom and is beginning to rebound."

 

The dollar rose to $1.5882 per pound at 11:50 a.m. in Tokyo from $1.5922 in New York yesterday. The greenback gained to $1.4685 per euro from $1.4722 yesterday, when it reached $1.4762, the weakest level since Sept. 24. The U.S. currency strengthened to 88.96 yen from 88.82 yen. The euro was at 130.63 yen from 130.76 yen.

 

The dollar advanced against 14 of its 16 major counterparts after Kansas City Fed President Thomas Hoenig yesterday said raising interest rates wouldn't derail the U.S. economic recovery.

 

"Even if we were to start immediately, much time would pass before incremental increases could be considered tight or even neutral policy," Hoenig said in a speech in Denver. "I would not support a tight monetary policy in the current environment, but my experience tells me that we will need to remove our very accommodative policy sooner rather than later."

 

Fed Comments

 

Hoenig's comments came after Australia yesterday became the first among Group of 20 economies to raise borrowing costs since the start of the financial crisis. The comments echoed those by Fed Governor Kevin Warsh, who said on Sept. 25 the central bank may need to tighten "with greater force than is customary," and Richmond Fed President Jeffrey Lacker, who said on Oct. 1 that rates may need to be raised even with unemployment near 10 percent.

 

The euro weakened as the currency's 14-day stochastic oscillator versus the dollar rose to 66.5 yesterday from 45.9 on Oct. 5, nearing the 80 level some traders use as a signal that an asset has risen too quickly and is poised to decline.

 

Short-Covering

 

"The dollar is undergoing some short-covering as its losses may be overdone a bit," said Nobuaki Kubo, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of New York-based Brown Brothers Harriman & Co. "However, the greenback's rebound is likely to be limited, given that Asian stocks are rising."

 

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in an asset's value. A short position is a bet an asset will decline.

 

The yen dropped as Japan's Nikkei 225 Stock Average rose 0.9 percent, and the MSCI Asia Pacific Index of regional shares advanced 1.1 percent. The Standard & Poor's 500 Index gained 1.4 percent in New York yesterday.

 

"Stock gains are weighing on the yen, encouraging investors to take risk," said Takashi Kudo, director of foreign-exchange sales at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp.

 

Bonds:

 

Treasury prices fell, raising the yield on the 10-year note to 3.25% from 3.22% late Monday. Treasury prices and yields move in opposite directions.

 

What to expect:

 

WEDNESDAY: Weekly mortgage applications; weekly crude inventories; consumer credit; Earnings from Costco, Family Dollar, Alcoa

 

THURSDAY: Chain-store sales; foreclosure report; BOE, ECB rate decisions; weekly jobless claims; wholesale trade; Fed's Hoenig speaks; Earnings from Pepsi, Marriott, Chevron (interim)

 

FRIDAY: Market peak 2-year anniversary (Dow at 14,164.53); international trade

 

Santander Raises $8.05 Billion in Record Brazil IPO

 

Banco Santander's Brazilian unit raised 14.1 billion reais ($8.05 billion) in a record initial public offering in Brazil and the largest IPO on a U.S. exchange in 18 months.

 

Gold Eases, But Hovers at Record High

 

Gold surged to a record high above $1,040 per ounce on Tuesday, as investors piled into the metal to preserve the value of their dollar-denominated assets against erosion by a weakening dollar and inflation.

 

Both spot gold prices and U.S. gold futures have benefited from a convergence of factors, including technical buying, a report that some oil producers could switch to other currencies to price their crude and worries about the potential inflation impact of unprecedented global fiscal stimulus.

 

"In an environment where interest rates are virtually zero, the incremental cost of moving into gold is nil. It stands to reason for investors that gold is more desirable," said Jack  Ablin, chief investment officer at Harris private bank in Chicago.

 

Spot gold hit a historic $1,043.45 per ounce, and was last up 1.9 percent at $1,036.10 at 2:36 p.m. EDT (1836 GMT), against $1,016.65 quoted late in New York on Monday.

 

Bullion surpassed its previous record $1,030.80 set in March 2008. Year to date, the metal has gained 18 percent.

 

However, Tuesday's all-time high was still sharply below the inflation-adjusted record pinpointed by analysts. Metals consultancy GFMS put that figure as high as $2,079 an ounce.

 

Most-active U.S. gold December futures hit an all-time high $1,045. December settled at $1,039.70 an ounce, up 2.2 percent or $21.90.

 

Bullion also hit six-month highs when priced in sterling and euros, breaking above 700 euros an ounce for the first time since early April.

 

The dollar slipped sharply after U.K. newspaper the Independent said Gulf Arab states were in secret discussions to end the use of dollars in oil trading. Big oil-producing countries later denied the report.

 

An interest rate hike in Australia also reinforced expectations the Federal Reserve will lag other central banks in ending its loose monetary policy.

 

Gold's rally was driven primarily by fears over currency depreciation. A weaker dollar, however, will eventually lead to import-led inflation down the road, analysts said.

 

"This is more a concern about the dollar than inflation so it has become very much more a dollar story. At the end of the day, everyone concludes all roads seem to lead to a weaker dollar at the moment," said Chris Turner, head of currency strategy at ING in London.

 

A weaker dollar makes gold and dollar-priced assets cheaper for holders of other currencies. Gold is also used as a hedge against inflation.

 

A positive technical picture for gold fueled buying on the fund side, traders said. However, the weight of near-record long positions in New York gold futures still leaves the market

 

vulnerable to a correction, analysts said.    

 

Physical Demand Rising

 

Physical demand for the metal was also rising. The largest gold exchange-traded fund, New York's SPDR Gold Trust, said its holdings rose for a second consecutive day and were up 1.5 tonnes as of Oct. 5.

 

Traders said they were also seeing rising demand in India, the largest consumer of gold last year, ahead of Diwali, a major gold-buying festival, on Oct. 19.

 

Mark Cutifani, chief executive of AngloGold Ashanti, the world's third largest and Africa's top gold producer, said he saw gold prices at $950 to $1,100 an ounce in the next 12 months, and they could break $1,100 if the U.S. economy continued to dip and investment demand rises.

 

The yellow metal's gains helped lift silver to a two-week high of $17.36 an ounce as investors bought it as a cheaper proxy for gold. It was last at $17.22 against $16.59.

 

Gold hits its highest since August last year at $308.50. It was last at $306.50 against $298.50.  

 

 

Two Front-Runners Emerging for BofA CEO Spot

 

Chief Risk Officer Greg Curl and Head of Retail Operations Brian Moynihan are the two most likely internal candidates to replace Bank of America CEO Ken Lewis, sources close to the situation told CNBC.

 

BofA: Won't Raise Card Rates Before Law Enforced

 

Bank of America on Tuesday pledged not to hike credit card interest rates or fees before a new law intended to reform industry practices takes effect in February.  

 

 

China: IMF Should Fix World's Monetary "Defects"

 

The IMF needs to fix "intrinsic defects" in the world's monetary system, China said on Tuesday as officials from around the globe wrestled with how best to ward off future financial crises.

 

Sluggish Growth, More Job Loss in 2010: El-Erian

 

The US economy could be facing more problems with job losses and slower growth in 2010, Pimco's Mohamed El-Erian told CNBC Tuesday.

 

Too Early to Pull US Economy Support: Fed Official

 

A U.S. Federal Reserve official said on Tuesday that while the U.S. economy is clearly rebounding, it is too soon to begin to withdraw the Federal Reserve's massive support.

 

"I see nothing that conflicts with the widely held opinion that we are in recovery," Kansas City Fed President Thomas Hoenig said at an economic conference.

 

"I would not support a tight monetary policy in the current environment," Hoenig said in his written remarks.

 

However, he warned that it will be important for the Fed to pull back from its ultra-low interest rates and withdraw the vast amounts of cash it has put into the financial system before igniting inflation.

 

"Monetary policy has to think ahead a year, or more," said. Hoenig cautioned that benchmark interest rates, which are now near zero, would be accommodative even at 1 percent or 2 percent.    

 

"My experience tells me that we will need to remove our very accommodative policy sooner rather than later."    

 

Besides cutting interest rates, the Fed has more than doubled the size of its balance sheet as it has sought to pull the United States out of its worst financial crisis since the Great Depression.    

 

The Fed noted in September that the economy may be picking up after a long contraction, but recent evidence of lingering weakness in the labor market raised questions about the pace of the recovery.    

 

Hoenig said government spending and tax relief programs should complement the Fed's efforts and prevent the economy from backsliding.    

 

"A vast amount of stimulus has been put in place to spark this recovery, and I believe it will prevent a double-dip recession."

 

Hoenig urged the U.S. Congress to quickly put in place a system of winding down failing major financial institutions.

 

Congressional efforts to cap executive compensation may not have the desired effect of controlling risk, he said. By ensuring that major firms could fail -- costing senior executives their jobs -regulators could do a far better job or ensuring the soundness of the financial system, he said.

 

Asia:

 

Asian stocks rose for a second day, led by mining companies and banks, as gold prices surged to a record and brokerages upgraded companies including Sumitomo Mitsui Financial Group.

 

BHP Billiton Ltd., the world's biggest mining company, gained 2.7 percent and Newcrest Mining Ltd., Australia's largest gold producer, surged 6.4 percent in Sydney. Sumitomo Mitsui Financial Group Inc., Japan's second-largest publicly traded bank by market value, jumped 6.3 percent in Tokyo after Nomura Holdings Inc. raised its share-price target.

 

The MSCI Asia Pacific Index gained 1.1 percent to 116.96 as of 12 p.m. in Tokyo, extending yesterday's 1.7 percent advance. The gauge has risen 63 percent in the past seven months on signs the global economy is emerging from its worst slowdown since World War II. Australia unexpectedly raised interest rates yesterday amid indications of economic growth.

 

"The improvement in Asian stocks can be attributed to further evidence the global economy is on the mend," said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. "Investors waiting for a pullback to increase equity exposure continue to be disappointed."

 

Australia's S&P/ASX 200 Index climbed 1.7 percent. Crane Group Ltd., the country's biggest distributor of plumbing supplies, was upgraded at Credit Suisse Group AG. In Tokyo, Hitachi Ltd., a nuclear reactor maker, added 8.1 percent as Mizuho Securities Co. raised its recommendation on the stock.

 

Japan's Nikkei 225 Stock Average increased 0.9 percent as Mitsui O.S.K. Lines Ltd. advanced 3.1 percent after a gauge of shipping fees increased the most since July. Hong Kong's Hang Seng Index rose 1.8 percent, while Taiwan's Taiex Index gained 0.7 percent.

 

U.S. Earnings

 

Futures on the U.S. Standard & Poor's 500 Index were little changed. The gauge added 1.4 percent yesterday on speculation third-quarter earnings will top estimates. Alcoa Inc. is scheduled to release third-quarter results later today, the first company in the Dow Jones Industrial Average to report.

 

Material stocks accounted for 22 percent of the MSCI Asia Pacific Index's advance today after gold futures climbed as much as 2.7 percent to a record $1,045 an ounce in New York, while copper increased for a second day with a 2.1 percent increase. Crude oil rose 0.7 percent.

 

BHP gained 2.7 percent to A$37.64, while Rio Tinto Group, the world's third-largest mining company, climbed 4.3 percent to A$60.20. Newcrest jumped 6.4 percent to A$35.02. Inpex Corp., Japan's largest oil explorer, rose 2.3 percent to 750,000 yen.

 

Dollar Decline

 

Raw-material prices climbed as the dollar's decline spurred demand for commodities as a hedge against inflation. The Dollar Index, which measures the U.S. currency against six major counterparts, traded near a two-week low as speculation the Federal Reserve will trail other central banks in raising interest rates made the greenback less attractive.

 

"Commodities are priced in dollars and a weak U.S. currency inevitably raises their prices," said Yoji Takeda, who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. "Gains in commodities are generally positive for resource companies."

 

The dollar weakened to as much as 88.65 yen from 88.98 at the 3 p.m. close of Tokyo stock trading yesterday. The U.S. currency's decline came as Australia's surprise interest-rate hike yesterday boosted demand for higher-yielding assets.

 

The Reserve Bank of Australia's decision to lift the overnight cash rate target to 3.25 percent from a 49-year low of 3 percent followed the first expansion this year in U.S. service industries. Manufacturing in emerging markets increased the most in the past three months since the second quarter of 2008, according to the HSBC Emerging Markets Index of data from purchasing managers.

 

Rising Valuations

 

Speculation of a global recovery has driven the MSCI Asia Pacific Index up by 66 percent from a more than five-month low on March 9. That's lifted the average price of companies on the gauge to 23 times estimated earnings from 21 times at this year's trough.

 

"The weight of conviction is edging towards the recovery view," said Michael Auyeung, who manages about $500 million as chief investment officer at Pacific Mutual Fund Bhd. in Petaling Jaya, outside Kuala Lumpur. "The stop-start nature of some of the economic data flows should be expected, but the trends are discernibly more to the upside."

 

Sumitomo Mitsui jumped 6.3 percent to 3,360 yen, while market leader Mitsubishi UFJ Financial Group Inc. climbed 5.3 percent to 500 yen. Nomura raised its price estimate on Sumitomo Mitsui by 8.9 percent to 4,900 yen, saying the bank was starting to cut costs to boost profit.

 

Hitachi climbed 8.1 percent to 295 yen after Mizuho Securities raised its investment rating on the company to "strong buy" from "hold." Australia's Crane rose 2.3 percent to A$10.78 after Credit Suisse upgraded the stock to "neutral" from "underperform."  

 

 

Mitsui O.S.K., Japan's No. 2 shipping line, added 3.1 percent to 533 yen. Smaller rival Kawasaki Kisen Kaisha Ltd. gained 3 percent to 340 yen. The Baltic Dry Index, a measure of shipping costs for commodities, rose 3.3 percent yesterday in London, the steepest climb since July 16.

 

Nikkei 225 9,778.25     +86.45 ( +0.89%). (08.31 AM IST)

 

The Nikkei advanced 0.9 percent, buoyed by banks after U.S. corporate earnings boosted Wall Street.  

 

HSI 21178.85 +367.32 +1.76% (08.31 AM IST)

 

Hong Kong shares rallied for a third successive day Wednesday, cheering overnight gains on Wall Street and buoyant regional markets, with exporters, property developers and resource stocks leading an across-the-board rally. The Hang Seng Index rose 1.3% to 21,082.49 and the Hang Seng China Enterprises Index rose 1.7%, with Li & Fung /quotes/comstock/22h!e:494 (HK:494 31.20, +1.70, +5.79%) rising 4.3%, Hang Lung Properties /quotes/comstock/22h!e:101 (HK:101 29.60, +0.80, +2.78%) up 2.4% and PetroChina Co. /quotes/comstock/13*!ptr/quotes/nls/ptr (PTR 116.10, +3.15, +2.79%) /quotes/comstock/22h!e:857 (HK:857 9.17, +0.26, +2.92%) climbing 2.7%.

 

SHANGHAI STOCK EXCHANGE:

 

•The SSE will close from October 1 (Thursday) to October 8, 2009 (Thursday) and open for trading on October 9, 2009 (Friday).  

 

 

W Hotels cancels contract with Sun Hung Kai Properties: report.  

 

COFCO, Longfor, local firm buy land in Chengdu for RMB 4 bln.  

 

Shin Kong Life Insurance wins bid for commercial land in Taipei.  

 

Fabulous Group to boost capital for urban renewal projects.  

 

Huafa Industrial to issue RMB 1.8 bln in corporate bonds.  

 

IHG's Hotel Indigo Hong Kong QRE to open in 2012.

 

Boeing expects billion dollar charge.

 

U.S. government opens new defect probe into Toyota.  

 

Indonesia to focus on markets for post quake recovery.

 

Economists warn of hot money danger in Indonesia.  

 

 

INVESTMENT VIEW

 

Hindustan Dorr Oliver-Building Upon Orders  

 

Hindustan Dorr Oliver Ltd has bagged an order from BALCO (a Vedanta Group of Company) worth Rs. 130 Crores for Design, Engineering, procurement, manufacturing, supply, civil works, erection/ construction, testing & commissioning of Fume Treatment plant for their Smelter Expansion Project at Korba. Fives Solios, France a world class expert in this field is the Technology partner for this project.

 

 

The total order value along with Fives Solios, France is worth Rs. 276 Crores. Execution of the said Project shall be completed within a period of 20 months. The Company has already successfully completed similar project with Vedanta group for its existing smelter project at Jharsuguda, Orissa.

 

 

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

 

--

Arvind Parekh

+ 91 98432 32381

 

 

Market Outlook for 6th June 2009

NIFTY FUTURE LEVELSRESISTANCE
5020
5044
5066
5118
5140
SUPPORT
4998
4985
4961
4939
Buy ASHIANA ISPAT;AD-MANUM FINANCE

INTRADAY calls for 6th Oct 2009
BUY HDIL-334 for 343-350+ with sl 328
BUY Bajajfinsv-301 for 311-327+ with sl 289
BUY Koutons-379 for 417-423+ with sl 370
BUY UB Holding-219 for 277+ with sl 208 [positional]

stocks that are in news today:
-Reliance Communication says every local call at 50 paise, all SMS at 50 paise
-UltraTech board meet today to mull merger with Samrudhi
-HDFC arm buys 10% stake in Nitesh Real Estate for Rs 100 crore
-ACC raises Rs 300 crore via NCDs (non-convertible debentures) through private placement
-Rains may squeeze sugar suppliers, delay in crushing to push up prices – BL
-Ashok Leyland in talks for JV in Argentina – BL
-Zensar Tech board approves buyback up to 24.2 lakh shares at Rs 165/sh ((CMP Rs 222))
-Madhucon Projects JV bags $3.9 million order in Nepal
-Lok Housing board approves issue of 50 lakh convertible warrants to promoters

Milestone buys 49% in Godrej Properties SPV for Rs 110 crore
-Indiabulls Property Investment Trust rights issue opens today
-Indiabulls Power issue opens of Oct 12, closes in Oct 15
-BSE cuts transaction fees for cash segment from Wednesday

Strong & Weak futures
This is list of 10 strong futures:
IOB, Orchid Chem, Educomp, Sun Pharma, BEL, Zeel, KFA, Ranbaxy, DCHL & Mphasis.
And this is list of 10 Weak futures:
TV-18, Idea, Grasim, Suzlon, Dish TV, Finance Tech, MTNL, Unitech LTD, GVK Power & Bharti Artel.
Nifty is in Up trend

NIFTY FUTURES (F & O):
Above 5020 level, expect short covering up to 5042-5044 zone and thereafter expect a jump up to 5064-5066 zone by non-stop.

Support at 4998 level. Below this level, selling may continue up to 4985 level by non-stop.

Buy if touches 4961-4963 zone. Stop Loss at 4939-4941 zone.

On Positive Side, cross above 5116-5118 zone can take it up to 5138-5140 zone by non-stop. If crosses and sustains this zone then uptrend may continue.

Short-Term Investors:
Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop.

BSE SENSEX:
Higher opening expected. Profit booking should happen.
Short-Term Investors:

Short-Term trend is Bullish and target at around 17671.82 level on upper side.
Maintain a Stop Loss at 16613.22 level for your long positions too.

POSITIONAL BUY:
Buy ASHIANA ISPAT (BSE Cash)
Bulls may hold on gains today.

1 Week: Bullish, as per current indications.

1 Month: Bullish, as per current indications.

3 Months: Surprisingly going up, opposite to bearishness.

1 Year: Bullish, as per current indications.

Buy AD-MANUM FINANCE (BSE Cash)
Surprisingly gone up, but bulls may lose control today.

1 Week: Bullish, as per current indications.

1 Month: Bullish, as per current indications.

3 Months: Bullish, as per current indications.

1 Year: Bullish, as per current indications.

FUNDS DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	05-Oct-2009	3735.95	4045.96	-310.01

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	05-Oct-2009	1211.39	1779.14	-567.75

SPOT LEVELS TODAY

	5003.20	( -1.58 %)	-80.20
		1	2	3
Resistance		5055.52	5107.83	5139.62
Support		4971.42	4939.63	4887.32

	16866.41		( -1.56 %)	-268.14
			1	2	3
Resistance			17007.01	17147.62	17233.22
Support			16780.80	16695.20	16554.59

Global Cues & Rupee
The Dow Jones Industrial Average closed at 9,599.75. Up by 112.08 points.
The Broader S&P 500 closed at 1,040.46. Up by 15.25 points.
The Nasdaq Composite Index closed at 2,068.15. Up by 20.04 points.
The partially convertible rupee closed at 47.525/535 per dollar on yesterday, above its Thursday's close of 47.74/75 per dollar.

INVESTMENT VIEW
Basant Agro Tech-Feeding The Land, That Feeds The People

Basant Agro is engaged in manufacturing and marketing of Fertilizers, and research and development of Hybrid Seeds.

SEED DIVISION

The Seed Division of the Company is engaged in research and develop­ment of various hybrid seeds under the supervision and guidance of renowned Scientist Dr. B.G.Bathkal, Ex-Vice Chancellor of Dr. Punja­brao Deshmukh Krishi University. Dr.Bathkal is a distinguished Scientist and well known breeder who is credited with pioneer work on development of cytoplasm male sterility in cotton in the world and is associated with R&D besides other breeders.

The Company has got well equipped laboratory wherein the research is being carried on. The R & D Laboratory of the Company has been approved by Ministry of Science & Technology, New Delhi. The company has 300 acres fully equipped research farm, the laboratory as well as farms of the Company has been visited by delegations of Israel and other Euro­pean Countries as well as by World Bank Officials. They were impressed by the research undertaken and quality of the seeds developed by the Company particularly of colour Cotton, Sorghum, Sunflower, Maize, Groundnut, Urad, Chilly, and Sweet Corn etc. etc.

The Seed Division of the Company is expected to give good results in the years to come. The Company has got the Germ Plasm for many seeds like millet, Sorghum, Cotton, Sunflower, and Maize etc. It is associated with the advanced research on many seeds under association with the ICRISAT Hyderabad. The performance of the seed division will be reflected in the financial results for the year 2004-05 and seed division will contribute substantially to the turnover well as profitability of the company from the year 2005-06.

As many research products have been launch in market, and are market fancy today. The company is embarking in a seed business in a big way by giving contract farming for hybrid seeds productions and negotiating with foreign companies for tie-up for marketing of imported seeds.

FERTILISERS DIVISION

The Company is the manufacturer of Fertilizers having Plants located at Akola in the Vidarbha Region of Maharashtra. The Kaulkhed Plant which was installed in 1994 is having capacity to produce 60,000 T.P.A. of NPK Granulated Mixed Fertilizer of various types. The Company installed second Plant in Kanheri Village to manufacture Single Super Phosphate (SSP) Powder Fertilizers with 1,20,000 T.P.A. capacity and SSP Granules Fertilizers with 60,000 T.P.A. capacity.

The Fertilizers of the Company under brand name "KRISHI SANJIVANI" has been well accepted by Farmers and the Company is registering record performance year after year. The Company is well established in Maharashtra Madhya Pradesh, Chattisgarh and Andhra Pradesh. The company is now planning to market its Fertilizers in other States like Karnataka, Rajasthan and Western Maharashtra etc.

The company has acquired the NPK mixture granulated fertilizer plant at Sangli having installed capacity 30,000 TPA which makes the total production capacity of the company of NPK mixture granulated fertilizer to 90,000 TPA. The company will be substantially benefited with the said acquisition because of the strategic location of the said unit. The company will be able to market its product into highly potential fertilizer market of western Maharashtra which includes the most fertile and irrigated area of Krishna basin.
WIND POWER GENERATION UNIT

Recently the company has diversified into wind power generation. The wind turbine generator (WTG) plant of the company has started the power generation at Dhulia site. The technology for the said power generation plant was supplied by M/s Suzlon Energy Ltd. With the commencement of the activity of power generation the bottom line of the company is expected to improve. The said power generation activity is not only in commensurate with the national policy of the government of harnessing non conventional sources of energy but also helps in reducing the power deficit in the state of Maharashtra.

MARKET SCENARIO AND FUTURE PROSPECTS

There has been increased awareness in the Farmers for the use of Chemical Fertilizers to have better agricultural output and as a result of which the demand for Fertilizers is growing year after year. Basant Agro due to its locational advantage has an edge over its competitors. It is situated at consumption centre. Wide network of its distributors and maintenance of good quality of Fertilizers has resulted in increase in the sale of Fertilizers of the Company. Its continuous efforts to minimize the cost of production are the basic key for the success in the very competitive fertilisers market.

With the positive attitude of the central as well as state government towards the agricultural sector, it is expected that there will be substantial growth of agro-based industries in the years to come. The MRP of SSP has been increased by State Govt. after 5 years substantially. The subsidy on SSP fertilisers has also been raised by Central Government by Rs. 325 per MT. This will give big rise to top & Bottom line. There are 195 units producing 75 Lacs M.T. of SSP now there are only 50 to 60 units & demand is more. It is used in Basel dose in all crops like Cotton, Oil Seed, Sugarcane and Wheat etc. etc. It's only Fertiliser that has sulphur. It is Poor man's Fertiliser.

NPK mixture is better & cheaper than complexes. It has slow releasing nature & remains for long time in field. They are tailor made as per soil & weather condition.

CONCLUSION

Company has a strong presence in Agri Sector and is considered one of the leading players in Agro Based Industries. Agriculture has been and shall remain vital sector in Indian Economy and promises to have its dominant position in years to come. Basant Agro being part of this core sector shall be key contributor in the segment.

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

--
Arvind Parekh
+ 91 98432 32381

Market Outlook for 5th Oct 2009

intraday calls 5th Oct 

Buy on dip is advisable, Don't want Risk then avoid trading today

BUY Abirlanuvo-1017 arround 985 for 1017-1026+ with sl 960

BUY HDIL-335 arround 310 for 335-340+ with sl 298

BUY Jindalswhl-1838 arround 1775 for 1980+ with sl 1750

BUY IDFC-154 arround 145 for 155+ with sl 141

 

Strong & Weak  futures  

This is list of 10 strong futures:

Orchid Chem, IOB, Jindal Saw, Ranbaxy, Educomp, Ansal Prop, Bhushan Steel, Uco Bank, ICICI Bank & Bharat Forg. And this is list of 10 Weak futures: Tulip, Idea, Finance Tech, GVK Power, Suzlon, Tata Tea, Voltas Ltd, MTNL, Dish TV & BEML.

Nifty is in Up trend

 

 

 NIFTY FUTURES (F & O):  

Below 5055 level, selling may continue up to 5034-5036 zone and thereafter slide may continue up to 5022-5024 zone by non-stop.

 

Hurdle at 5080 level. Above this level, expect short covering up to 5087 level.

 

 

Cross above 5106-5108 zone, can take it up to 5124-5126 zone by non-stop. Supply expected at around this zone and have caution.

 

 

On Negative Side, rebound expected at around 5016-5018 zone. Stop Loss at 5003-5005 zone.

 

Short-Term Investors:

 

Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop.  

BSE SENSEX:

 

Lower opening expected. Recovery should happen.  

Short-Term Investors:

 

Short-Term trend is Bullish and target at around 17671.82 level on upper side.

Maintain a Stop Loss at 16613.22 level for your long positions too.

 

INVESTMENT BUY:

Buy WOOLITE MERCANTILE COMPANY (BSE Cash)  

Bulls may hold on gains today.

 

1 Week: Bullish, as per current indications.

 

 

1 Month: Surprisingly going up, opposite to bearishness.

 

 

3 Months: Bullish, as per current indications.

 

 

1 Year: Surprisingly going up, opposite to bearishness.

 

Buy COMPUCOM SOFTWAR (BSE Cash)  

Surprisingly gone up, but sideways pattern may emerge.

 

1 Week: Bullish, as per current indications.

 

 

1 Month: Surprisingly going up, opposite to bearishness.

 

 

3 Months: Surprisingly going up, opposite to bearishness.

 

 

1 Year: Bullish, as per current indications.

 

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	01-Oct-2009	4334.59	3358.13	976.46

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	01-Oct-2009	1326.97	1658.6	-331.63

 

Global Cues & Rupee

The Dow Jones Industrial Average closed at 9,487.67. Down by 21.61 points.

The Broader S&P 500 closed at 1,025.21. Down by 4.64 points.

 

The Nasdaq Composite Index closed at 2,048.11. Down by 9.37 points.

 

Indian currency markets were closed on Friday for a national holiday.

 

Interesting findings on web:

Stocks meandered Friday, at the end of a second straight week of losses, as investors worried that a worse-than-expected jobs report was further evidence that the rally has gotten ahead of the recovery.

 

The Dow Jones industrial average (INDU), the S&P 500 (SPX) index and the Nasdaq composite (COMP) all lost a few points.

 

The Dow fell 21.61, or 0.2 percent, to 9,487.67, its lowest close since Sept. 4. The index fell as much as 79 points during trading.

 

The broader Standard & Poor's 500 index fell 4.64, or 0.5 percent, to 1,025.21, and the Nasdaq composite index fell 9.37, or 0.5 percent, to 2,048.11.

 

RUSSELL580.2-3.55-0.61%

 

TRAN3692.73-18.97-0.51%

 

UTIL367.25-2.93-0.79%

 

S&P 100475.48-1.23-0.26%

 

S&P 400663.43-6.46-0.96%

 

NYSE6674.57-43.48-0.65%

 

NAS 1001662.49-3.92-0.24%

 

A modest slide left stocks lower for a second week, the first consecutive drop since July. The Dow Jones industrial average fell for a fourth day.

 

"The [jobs] report was a disappointment, but a recovery is not going to go in a straight line," said John Wilson, chief technical strategist at Morgan Keegan.

 

The advance was part of a bigger run up that has propelled the leading indexes for roughly 7 months straight. The advance has been driven by slowly improving economic news and tremendous amounts of fiscal and monetary stimulus.

 

But lately, a number of the reports have been missing expectations, including readings on jobs, manufacturing and consumer confidence earlier this week.

 

Analysts said many investors unloaded shares following the disappointing data earlier in the week, leaving few sellers on the sidelines when the jobs report was released prior to Friday's opening bell. As the session has played out, the market has also drawn support from chart-based buying that kicked in after major indexes dropped below key levels.

 

Despite the market's recent struggles, many longtime investors remain confident that there is room for continued improvement in corporate profits and stock prices thanks in part to spending by the government and businesses to replace the traditional role of the U.S. consumer.

 

While market participants have winced at several of this week's big-picture reports, the data haven't yet sparked widespread talk of a so-called double-dip recession in which the U.S. would suffer a second downturn before it has fully recovered from the one that began in late 2007.

 

"It's kind of impressive how the market has held up today," said Uri Landesman, portfolio manager at ING Investment Management in New York. "I'm still feeling as if I can add a bit of risk here and hold some less-than-high-quality names. Yeah, I may have to take a little bit of pain in the short term, but I like the potential for upside looking further out."

 

With nerves running high, stocks have fallen in seven of the last eight days. The Dow has lost about 4.3 percent since coming within 82 points of the 10,000 level on Sept. 23.

 

Bruce Shalett, managing partner, Wynston Hill Capital in New York said the jobs report was "a reminder that while things are not as dire as they were a year ago, we still have a lot of work to do."

 

Many found the relatively calm response to the jobs report encouraging, taking it as a sign there are still investors willing to use the dips to pick up stocks they consider cheap.

 

"Pullbacks are going to constantly be used as opportunities to get into the market," said Hank Smith, chief investment officer of equity at Haverford Investments in Radnor, Pa.

 

"There's been a lot of talk particularly in the last couple of months that we're seeing a turnaround in unemployment, and obviously that's not the case," said Dan Cook, senior market analyst at IG Markets in Chicago.

 

Employers cut 263,000 jobs from their payrolls in September after cutting a revised 201,000 in August, the Labor Department reported Friday morning. Economists were expecting 175,000 jobs cuts, on average, according to Briefing.com.

 

The unemployment rate, generated by a separate survey, rose to 9.8%, a 26-year high. That was in line with economists' forecasts and up from the 9.7% rate in August. Most economists expect the national unemployment rate to hit 10% by year end, although in a number of states it is much higher.

 

The report is often the most anticipated piece of economic news each month because an eventual drop in unemployment is key to sustained recovery.

 

"There's been a lot of talk particularly in the last couple of months that we're seeing a turnaround in unemployment, and obviously that's not the case," said Dan Cook, senior market analyst at IG Markets in Chicago.

 

"We're seeing reminders here that recoveries are often choppy," said Don Rissmiller, chief economist at Strategas Research Partners in New York.

 

Referring to a term analysts use to describe a quick, sharp economic rebound, he added: "If we are having a V-shaped recovery, it's only in certain sectors, or it's happening abroad, not in the U.S."

 

However, some participants remain concerned that the market's 60% gain since March -- and its best quarterly performance since 1998 -- may have gotten ahead of the broader economy, which remains in recession.

 

"As with the ISM and Chicago PMI declines reported earlier in the week, the jobs data have raised questions about the breadth and sustainability of the auto-led third-quarter bounce in sales and output," says Action Economics.

 

"There's a lot of caution and second guessing," says Kurt Karl, chief U.S. economist at Swiss Re. "To a certain extent we got ahead of ourselves in pricing in a robust 'V' recovery, and we're just not going to have that in the next few months -- that's what these numbers are saying."

 

"Clearly the jobs report was disappointing; there's no way to sugarcoat it," says Phil Orlando, chief equity market Strategist at Federated Investors. But, he adds, "Our view is that recession ended in the second quarter, and none of this data dissuades us from this view. We continue to believe that third- and fourth-quarter GDP will be positive -- and we also think that third and fourth quarter earnings will be very strong."

 

We've had a couple of speed bumps, with manufacturing data and jobless claims that have created essentially a 6% selloff in the S&P over last two weeks, says Orlando. "What this does is give investors who have missed this rally an opportunity to put some cash to work," he says. "Our forecast has been that any 5% to 10% pullback in stocks would be met with a wave of cash looking to find a place in the equity market."

 

"[E]conomic data rarely move in a consistent pattern ... we should not be surprised that there are bumps in the road," Joel Naroff of Naroff Economic Advisors wrote in a note to clients. "Unfortunately, investors want the latest data to always be better than the previous ones and that is unrealistic. Thus, they react wildly."

 

Naroff and other economists pointed out that a huge chunk of September's job losses came from the government and therefore, private-payroll losses weren't as bad as the headline number would make it seem.

 

"If, as I suspect, the October numbers turn out to be a lot better, we will all come back to the conclusion that the economy is moving out of the recession but the recovery is likely to be quite sluggish," Naroff said.

 

A separate government report showed that factory orders plunged in August versus forecasts for a rise. The Commerce Department said factory orders fell 0.8% versus forecasts for a flat reading. Factory orders rose 1.4% in the previous month.

 

The market's optimism has been tested by economic data that have either weakened or fallen short of expectations, a disappointment after several months of hopeful signs from key industries like housing and manufacturing. That has led investors to question whether the 50 percent surge in stocks over the past six months can be sustained.

 

The fourth quarter may not be as stellar. Analysts expect the market to drift over the next few weeks as investors await companies' earnings reports and their forecasts for the coming months. The last big pullback in the market came in the weeks before second-quarter earnings were announced in July.

 

"October is shaping up to be a challenging month for investors," said Brent McQuiston, a vice president at WealthTrust-Arizona.

 

Strong earnings could help offset any growing concerns about a recovery and stabilize the market, he said, but solid revenue growth is what is needed to put the market on "firm footing." In the second quarter, many companies' sales were disappointing, and it was only through cost-cutting that profits were able to rise.

 

Meanwhile, the International Monetary Fund said a double-dip recession is possible.

 

Policy makers are likely to continue backing a weak dollar until the economy shows substantial improvement, Pimco's Bill Gross told CNBC. Worse-than-expected unemployment data reinforced that the country is still struggling to escape the worst downturn since the Great Depression, said Gross, co-CIO of Pimco, which runs the world's largest bond fund. The Fed is likely to keep interest rates low which in turn weakens the dollar -- but don't expect any government officials to officially endorse a low currency.

 

"The strong dollar is always the policy so to speak," Gross said during an interview. "One of the ways as a country to get out from under a debt burden is to devalue."

 

News that Wal-Mart's (WMT) chairman predicted a slow economic recovery and challenging business conditions also weighed on equities.

 

Wal-Mart [WMT  49.08    0.08  (+0.16%)   ] shares ticked higher after Chairman Rob Walton warned that the retailer would ride out what is expected to be a slow US recovery, while its Asian operations should do better.

 

Troubled lender CIT (CIT, Fortune 500) launched a debt-exchange plan as part of its efforts to restructure and avoid bankruptcy. But the company said if the plan is not successful, it will likely file for Chapter 11 protection.

 

Apple (AAPL, Fortune 500) shares gained after both Morgan Stanley and UBS issued bullish notes on the company's forecast.

 

First Solar rose 4.3% after Standard & Poor's said the Tempe, Ariz.-based maker of solar power modules will be added to the S&P 500, replacing Wyeth, which is being bought by Pfizer.

 

IBM (IBM) shares also moved higher, bucking the market downtrend.

 

General Electric (GE) said it was considering an IPO for its NBC Universal unit after overatures from Comcast (CMCSK).

 

Shares of Echo Global Logistics (ECHO) begin trading Friday after the freight and cargo company raised $80 million in a share offering.

 

Among other companies in the news Friday, Accenture (ACN) posted fourth-quarter earnings per share (EPS) of $0.63 (excluding a $0.24 restructuring charge), vs. $0.67 EPS one year earlier, on a 14% revenue decline. Wall Street was looking for $0.63. The company declared a $0.75 annual cash dividend, an increase of 50%. Accenture also said its board approved moving from an annual to semi-annual schedule for dividend payment starting in the third quarter of fiscal 2010.

 

Immucor (BLUD) posted first-quarter EPS of $0.30, vs. $0.28 EPS one year earlier, on a 14% revenue rise.

 

Standard Microsystems (SMSC) posted second-quarter non-GAAP EPS of $0.08, vs. EPS of $0.46 one year earlier, on a 23% revenue decline. The company expects a 9%-15% sequential increase in third-quarter revenue. Wall Street was looking for breakeven EPS.

 

Global Payments (GPN) reported first quarter EPS of $0.71, vs. EPS of $0.71 one year earlier, despite a 9% revenue rise. The company noted unfavorable foreign currency trends. Wall Street was looking for EPS of $0.65.

 

New York Times led the decliners in the S&P 500 index with a loss of 5.6% followed by losses in Goodyear Tire of 5.4%, in Motorola Inc of 4.5%, in Johnson Controls of 4.4% and in DR Horton Inc of 4.6%.

 

Invesco Ltd led gainers in the S&P 500 index with a rise of 5.5% followed by gains in AIG 5.3%, in E*Trade Financial of 5% and in BB&T Corp of 4.6%.

 

Recovery-sensitive tech and industrial stocks were also depressed today, with Cisco, HP, Boeing and Caterpillar rounding out the Dow's bottom five.

 

Pepsi [PEP  60.90    2.44  (+4.17%)   ] rose 4.2 percent after Deutsche Bank raised its price target on the stock.

 

Next week's other key reports include the ISM nonmanufacturing index for September and weekly initial jobless claims.

 

Next week, investors will be keeping an eye on the dollar for any insight on which way stocks are going. Plus, we'll get readings on the services sector, which accounts for 70 percent of economic activity, and reports from major retailers on September sales. And, earnings season unofficially kicks off with a report from Alcoa [AA  12.82    -0.10  (-0.77%)   ] on Wednesday.

 

The CBOE Volatility Index, widely considered the best gauge of fear in the market, ticked higher, ending the week at 28.63.

 

Oil,Gold & Currencies:

 

U.S. light crude oil for October delivery fell 87 cents to settle at $69.95 a barrel on the New York Mercantile Exchange.

 

COMEX gold for December delivery rose $3.60 to settle at $1,004.30 an ounce.

 

The dollar tumbled versus the euro and the yen, resuming its recent plunge against a basket of currencies.

 

The dollar fell against the euro for a second day after Group of Seven finance chiefs refrained from calling for measures to stop the U.S. currency's decline.

 

The greenback also declined against 14 of its 16 major counterparts on speculation Federal Reserve officials this week will reiterate interest rates will be kept at a record low. The yen pared earlier gains against the dollar as Japanese Finance Minister Hirohisa Fujii said the government will intervene if the yen moves in a "biased direction."

 

"The G-7 simply maintained the same statement from the last meetings without addressing the dollar weakness," Takashi Kudo, director of foreign-exchange sales at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. "As jobs data deteriorate, the Fed won't be able to raise borrowing costs anytime soon. This view will continue to cause the dollar to fall."

 

The dollar fell to $1.4637 per euro as of 11:07 a.m. in Tokyo from $1.4576 in New York on Oct. 2. The yen was at 89.84 per dollar from 89.81 in New York. It earlier climbed to as high as 89.23. The euro strengthened to 131.50 yen from 130.90 yen.

 

The dollar fell after G-7 finance chiefs meeting in Istanbul over the weekend stopped short of sounding alarm at the dollar's 14 percent decline against a basket of currencies since March.

 

Huge Rhetoric

 

"Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability," G-7 ministers and central bankers said in a statement after talks on Oct. 3, repeating language they used in April.

 

A weaker dollar risks hurting economies outside the U.S. by making the exports of companies such as Japan's Canon Inc. more expensive. The Dollar Index, which tracks the greenback against the currencies of six trading partners including the euro and yen, lost 0.4 percent to 76.766.

 

"Given the huge amount of rhetoric from various officials leading up to the meeting, warning in particular about excessive currency strength against the dollar and the negative impact on economic recovery, the relatively weak statement leaves the door open to further dollar weakness over coming weeks," Mitul Kotecha, head of global foreign-exchange strategy in Hong Kong at Calyon, wrote in a report dated today.

 

New York Fed President William Dudley is set to speak in New York today, while Kansas City Fed President Thomas Hoenig will speak at an economic forum in Denver tomorrow.

 

U.S. Jobs

 

The Labor Department on Oct. 2 reported employers eliminated 263,000 jobs in September after a revised reduction of 201,000 in the previous month. The median forecast of economists surveyed by Bloomberg News was for a decrease of 175,000. The unemployment rate rose to 9.8 percent.

 

The benchmark interest rate is 1 percent in the 16-nation euro area, compared with as low as zero in the U.S., attracting investors to European assets. The European Central Bank will keep its main refinancing rate unchanged at the Oct. 8 meeting, according to all 53 economists surveyed by Bloomberg.

 

"The ECB is likely to leave rates unchanged this week," said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. "Given Europe's rate advantage over that in the U.S., the euro will probably be bolstered."

 

Bonds:

 

Treasury prices tiptoed higher, lowering the yield on the benchmark 10-year note to 3.21% from 3.18% late Thursday. Treasury prices and yields move in opposite directions.

 

What to expect:

 

MONDAY: Supreme Court meets; ISM services index; Fed's Dudley speaks

 

TUESDAY: IMF meeting; Fed's Fisher, Hoenig speak; Earnings from Yum Brands

 

WEDNESDAY: Weekly mortgage applications; weekly crude inventories; consumer credit; Earnings from Costco, Family Dollar, Alcoa

 

THURSDAY: Chain-store sales; foreclosure report; BOE, ECB rate decisions; weekly jobless claims; wholesale trade; Fed's Hoenig speaks; Earnings from Pepsi, Marriott, Chevron (interim)

 

FRIDAY: Market peak 2-year anniversary (Dow at 14,164.53); international trade

 

Goldman Owed $1 Billion if CIT Goes Bankrupt: Report

 

Goldman Sachs [GS  179.61    0.62  (+0.35%)   ] would be due a $1 billion payment if troubled commercial lender CIT [CIT  1.17    0.11  (+10.38%)   ] were to file for Chapter 11 bankruptcy, the Financial Times reported on Sunday, citing people familiar with the matter.

 

The report said Goldman would be owed the payment under a $3 billion rescue finance package it gave to CIT in June 2008, before the U.S. government bought $2.33 billion of CIT preferred shares in December.

 

According to the FT, CIT "would be required to pay a make-whole amount" that totals $1 billion under that agreement.

 

Goldman is likely to agree to allow CIT to delay payment on some of the amount, according to the report. Beyond the $1 billion payment from its rescue package, Goldman would also receive payment from credit insurance it holds if CIT were to go bankrupt.

 

Goldman and CIT could not be reached for comment.

 

Banks Should 'Pick Up' Crisis Bill: BoE's Tucker

 

Deputy Governor of the Bank of England Paul Tucker has suggested a levy on banks that could be used to pay the costs of future financial crises, the Daily Telegraph reported.

 

Tucker said the threat of a levy could act as a deterrent against reckless behavior in the banking sector, the newspaper reported.

 

"If banking sees that in systemic crises, the banking industry would have to pick up the bill, I would like to think that would change incentives and behavior," the Telegraph quoted him as saying.

 

Tucker, who is in charge of the Bank of England's financial stability functions, made the comments at an Institute of International Finance (IIF) conference running alongside the International Monetary Fund annual meeting in Istanbul, the Telegraph said.

 

US Led Group Joins Race to Buy Volvo from Ford: Report

 

A U.S.-led consortium has entered the race to buy Volvo from Ford [F  6.84    -0.13  (-1.87%)   ], the Financial Times reported, in a challenge to China's Geely Automotive, which confirmed its interest in the money-losing Swedish carmaker last month.  

 

Citing people close to the sale, the FT said the Crown consortium has fully secured financing from U.S. private equity groups. But the consortium is also seeking additional backing from Swedish investors to signal its intent to keep Volvo in the country, according to the FT.

 

The Crown consortium is fronted by former Ford director and turnaround specialist Michael Dingman and former Ford and Chrysler executive Shamel Rushwin, the people told the FT.

 

The FT reported another informed person as saying the U.S. consortium had offered significantly less than Hong Kong-listed Geely, but that both plans involved similar plans for more than $3 billion of additional investment in Volvo.

 

The FT quoted a person close to the sale saying Geely had offered just less than $2 billion for Volvo. Other media reports have put the price tag at around $2.5 billion.

 

A Ford spokesman was not immediately available for comment.

 

A Saab spokeswoman declined to comment.

 

3 More Firms Get OK to Buy Toxic Assets

 

Three more large investment firms have raised sufficient capital to participate in the joint partnership with the government to purchase toxic assets from banks.

 

The Treasury Department said Alliance Bernstein and BlackRock, both headquartered in New York City, and Wellington Management, based in Boston, had all raised the $500 million minimum to begin operations.

 

Those three firms join the first two to clear all the hurdles for participation last Wednesday, Invesco and the TCW Group.

 

The goal of the program is to rid banks of bad loans so they can resume more normal lending, which is key for sustaining any economic recovery.

 

With the three new additions, the total purchasing power to obtain banks' soured assets has increased to $12.27 billion, Treasury said.

 

The government effort, known as the Public-Private Investment Program, or PPIP, has been plagued by delays and some analysts wonder how successful it will be in buying banks' bad assets.

 

But Treasury officials have expressed optimism about the program, predicting that the remaining four firms who are seeking to participate will qualify by the end of this month.

 

"The PPIP continues to grow," Treasury Assistant Secretary Herb Allison said in a statement Sunday. "Private capital is being drawn into the market for legacy securities and taxpayers are being given a chance to share in the profits."

 

In July, Treasury said that nine firms had qualified to participate in the PPIP program and they were given time to raise at least $500 million each, money that will be matched from the government's $700 billion bailout program.

 

The announcements in recent days that funds have begun to receive support from the government comes a year after Congress first approved the bailout effort, known as the Troubled Asset Relief Program.

 

Then-Treasury Secretary Henry Paulson had obtained congressional approval for the effort by saying its major goal would be to buy bad assets from banks.

 

However, that goal was shifted almost immediately to direct injections of capital into banks after government officials decided that the financial crisis was worsening too quickly and it would take too long to get the toxic asset purchase program up and running.

 

Treasury said that so far private investors in the five firms have come up with $3.07 billion, which Treasury has matched equally.

 

In addition, the firms will be able to borrow an additional $6.13 billion from Treasury to bring the total amount available to purchase toxic assets to $12.27 billion.

 

The government's current goal is to provide $30 billion in Treasury investment to all of the funds participating. With contributions from the private sector, that would push the total available to buy toxic assets to $40 billion.

 

BofA Board Feels Pressure to Tap Replacement CEO

 

The Bank of America board is feeling pressure from investors to find a replacement for departing Chief Executive Officer Ken Lewis before the end of the month, CNBC has learned.

 

The decision "will likely happen in weeks, not months," a person close to the Bank of America [BA  51.40    -0.71  (-1.36%)   ] board said. A decision on the timing will likely come sometime this week.

 

The general consensus of the board is to have a selection ready by the board meeting scheduled at the end of October. Whether the new CEO will be permanent or on an interim basis will depend on how old the selected person is.

 

If the selection is for an interim CEO, that person will likely stay for a year or two rather then a few weeks.

 

There is a growing chorus of analysts that say the current list of Bank of America insiders being considered for the job isn't good enough and that the company needs to look outside.

 

Possible candidates could be Bank of New York Mellon Chairman and CEO Robert Kelly or BlackRock Chairman and CEO Larry Fink. Bank of America holds a 49 percent stake in BlackRock, but Fink has said he isn't interested in the job.

 

Another possibility that many insiders and analysts are tipped as a good interim CEO is former Fleet CEO Chad Gifford, but Gifford is playing down the idea of him taking the job.

 

China Calls for Automatic IMF Voting Adjustments

 

China on Sunday called for an overhaul of the International Monetary Fund's voting system with automatic adjustments to give more say to rising economic powers.

 

In a statement to the IMF's steering committee, Yi Gang, a vice central bank governor, laid out China's broad vision for reforms at the Fund, emphasizing that Beijing wanted the organization to play a bigger role in regulating global financial markets but only so long as developing nations were given more clout.

 

"The IMF should establish a system to automatically adjust (voting) quotas and to reflect changes in countries' economic status in a timely manner," Yi said in comments posted on the central bank's website.

 

Because countries need to pump money into the IMF for any given quota increase, China's proposal would increase Fund resources as it shifts voting power from over-represented rich countries to fast-growing emerging nations.

 

Yi said "a major reason" why international institutions had failed to anticipate the global financial crisis was that they lacked adequate representation from emerging economies.

 

He also said the IMF should desist from simplistic analyses of national economic policies, a thinly veiled warning to the organization to avoid criticizing on Beijing's controversial, tightly managed exchange rate regime.

 

Best Way Forward

 

Yi said the IMF had many channels to raise cash but that increasing quotas was the best way.

 

China pledged this year to give the IMF up to $50 billion by buying bonds, but, like Russia and Brazil, it made clear that its contribution would not be permanent unless developing countries were given more power.

 

He also said Beijing thinks the IMF has a role to play in keeping exchange rates stable. "It should strengthen its supervision of international capital flows and encourage the relative stability of exchange rates of the main reserve currencies," he said.  

 

 

Group of 20 rich and developing nations agreed last month that the IMF should make recommendations about how countries can adjust their policies to better balance the global economy.

 

Getting big exporting nations such as China to increase consumption is one essential part of rebalancing, but Beijing has bristled at suggestions that it should let the yuan appreciate to curb reliance on exports and help meet that goal.

 

No Simplistic Assessments

 

While Yi did not explicitly mention the yuan, he was firm in drawing a line in the sand.

 

"The IMF should strengthen its supervision of all major financial markets and it should comprehensively consider all policies of its member states," he said. "However, it should not simplistically, mechanically assess individual policies."

 

Yi told Reuters on Saturday that China's exchange rate policy was very clear and that it had no intention of changing it.

 

While Beijing has repeatedly declared it is moving to allow more currency flexibility, the central bank has kept the yuan almost flat against the U.S. dollar since July 2008, when the global financial crisis began worsening.

 

On China's domestic outlook, Yi said the economy, which grew 7.9 percent year-on-year in the second quarter, was developing "better than predicted" and that fiscal and financial risks were "under effective control."

 

"At the same time, China will also be vigilant and guard against all kinds of latent risks, including inflation," he said.

 

China's consumer prices have fallen for six straight months, but economists think the pace of decline may have bottomed out, setting the stage for a potential rebound in inflation, fueled by a record surge of bank lending in the first half of this year.

 

Yi said the global economy had taken a turn for the better, but that the foundations of recovery were not solid yet.

 

"The major risks to the global economy include trade and investment protectionism and lack of coordination in macro-economic policies," he said.  

 

 

Will the G7 Become the G2?

 

The Group of Seven rich nations hopes to decide its future as an institution on Saturday, with

 

the United States pushing for the creation of a smaller core group that would include China, a G7 official said.

 

The official, speaking on condition of anonymity, said Washington wanted to see the G7 supplanted in global economic policymaking by a Group of Four that would bring the United States, Europe and Japan together with China.

 

The official was speaking ahead of a meeting of G7 finance ministers and central bankers in Istanbul later on Saturday.

 

A U.S. Treasury spokeswoman declined to comment. British finance minister Alistair Darling said, "These proposals have been around for a long time ... You shouldn't read too much into these proposals."

 

He added, "It is not our position that the G7 is going to be wound up."

 

Other officials also suggested the G7 would continue to exist, but with a diminished role.

 

"We will talk about how the G7 will work on, how its role will be in future ... for example the frequency of G7 meetings," said German deputy finance minister Joerg Asmussen.

 

"In the German view, the G7 should be something like a preparatory body" for meetings of the larger Group of 20 nations, which includes big developing economies such as China and India, he added.

 

Policymaking

 

For more than a decade, the G7 dominated international policymaking. But the financial crisis has undermined its power, as economies such as China have become key to managing the global recovery.

 

Any formal move to supplant the G7, which comprises Britain, Canada, France, Germany, Italy, Japan and the United States, would likely be diplomatically complex and controversial.

 

Its top finance officials have traditionally met several times a year, seeking to guide foreign exchange rates and other markets through communiques released after their meetings.

 

But the group's role has appeared in doubt since early this year, when the G20 became the main forum for debating the financial crisis. The G20 has agreed in principle to tighten financial regulation and try to reduce trade imbalances that destabilise the global economy.

 

"The G7 is not quite dead, but it is losing its relevance," the IMF's managing director, Dominique Strauss-Kahn, was quoted as saying by Emerging Markets magazine on Saturday. "It's on its way to extinction."

 

Tensions over foreign exchange rates are underlining the difficulty that the G7 is having in staying at the centre of global policymaking.

 

Persuading China to appreciate its tightly controlled yuan currency is widely seen as crucial to correcting trade imbalances, but China is not a member of the G7.

 

Japan has sounded keen to preserve the G7 as an important body. On Friday, Bank of Japan Governor Masaaki Shirakawa said the G7 remained a more convenient forum to discuss foreignexchange rates than the G20, because G7 members all had major financial markets.

 

But some other countries appear unconvinced. Canadian Finance Minister Jim Flaherty said that because discussion of global imbalances would inevitably include the yuan and the impact of the weak U.S. dollar on other economies, global currency discussions needed to extend beyond the G7.

 

 

Prince Alwaleed Urges US to Sell Citi Stake: Report

 

Prince Alwaleed bin Talal, a big investor in Citigroup, urged the U.S. government to sell its stake in the bank as soon as this year to boost investor confidence, Emerging Markets magazine reported.

 

"The earlier the U.S. government exits its investments in those companies, the better," as long as the withdrawal is not done in a way that hurts the prices of U.S. banking stocks, the Saudi billionaire was quoted as saying in an interview published on Sunday.

 

"We need to give confidence back to the shareholders and investors that these companies are moving along without government support."

 

A series of bailouts during the financial crisis has left the U.S. government with a 34 percent stake in Citigroup, after the bank obtained $45 billion from the government's Troubled Asset Relief Program.

 

Sources told Reuters last month that Citigroup [C  4.52    -0.01  (-0.22%)   ] was talking to U.S. officials about how the government should shed its 7.7 billion shares in the bank.

 

Alwaleed, who owns part of Citigroup through his investment firm Kingdom Holding, has said little in recent months about the stake. Kingdom owned 3.6 percent of the bank in July 2007 and five months later Alwaleed said he was among investors who agreed to put more money into the bank.

 

Operating Profit

 

Citigroup is expected to return to the black on an operating basis next year at the earliest, Alwaleed was quoted as saying in the interview.

 

"Citigroup has learned a huge lesson. The worst is behind them right now," Alwaleed said, adding that the bank's $100 billion of tangible common equity, "the highest in the industry," and the large scope of its operations meant its future was "very bright."

 

The bank has been profitable on a net basis in each of the last two quarters because of one-time gains and accounting items, but has not posted a quarterly profit from its main operations since 2007.

 

In the wake of the financial crisis, U.S. regulators have been discussing the problem of banks becoming "too big too fail" -- since the collapse of a big institution could undermine the entire banking system, governments can find themselves forced to spend huge sums supporting debt-ridden and unprofitable banks.

 

But Alwaleed said the solution to this problem was not breaking up big banks, and that he did not expect the U.S. government to decide to do this.

 

"Any failure of a broken-up bank is still going to impact the whole system. You need to fix the problem, not a symptom of the problem," he was quoted as saying.  

 

 

Roubini Says Stocks Have Risen 'Too Much, Too Soon, Too Fast'

 

New York University Professor Nouriel Roubini, who predicted the financial crisis, said stock and commodity markets may drop in coming months as the gradual pace of the economic recovery disappoints investors.

 

"Markets have gone up too much, too soon, too fast," Roubini said in an interview in Istanbul on Oct. 3. "I see the risk of a correction, especially when the markets now realize that the recovery is not rapid and V-shaped, but more like U- shaped. That might be in the fourth quarter or the first quarter of next year."

 

Stocks have surged around the world in the past six months as evidence mounts that the economy is emerging from its deepest recession since the 1930s. The Standard & Poor's 500 Index has soared 51 percent from a 12-year low in March while Europe's Dow Jones Stoxx 600 is up 48 percent. The euphoria contrasts with the cautious tone of Group of Seven policy makers, who said after meeting in Istanbul over the weekend that prospects for growth "remain fragile."

 

"The real economy is barely recovering while markets are going this way," Roubini said. If growth doesn't rebound rapidly, "eventually markets are going to flatten out and correct to valuations that are justified. I see a growing gap between what markets are doing and the weaker real economic activities."

 

'Anemic' Recovery

 

The International Monetary Fund predicts the global economy will expand 3.1 percent in 2010, led by growth in Asia, after a 1.1 percent contraction this year. That is still "anemic" and "very weak," Roubini said.

 

U.S. stocks fell last week after manufacturing expanded less than anticipated and unemployment climbed to a 26-year high, fueling concern the economy is rebounding more slowly than forecast.

 

Gains in the S&P 500 have pushed valuations in the index to more than 19 times reported operating profits from the past year, data compiled by Bloomberg show. That's near the most expensive level since 2004.

 

The performance of the U.S. economy is probably more sluggish than reflected in stock markets, risking a correction in equities, Nobel Prize-winning economist Michael Spence said last month. U.S. stock-market investors have "over processed" the stabilization of growth in the world's largest economy, Spence said.

 

Creating Bubbles

 

The global equity rally has added about $20.1 trillion to the value of stocks worldwide since this year's low on March 9. Governments have poured about $2 trillion of stimulus into the global economy while central banks have cut interest rates to close to zero in efforts to revive growth.

 

"In the short run we need monetary and fiscal stimulus to avoid another tipping point and to avoid deflation, but now this easy money has already started to create asset bubbles in equities, commodities, credit and emerging markets," Roubini said. "For the sake of achieving growth stability again and avoiding deflation, we may be planting the seeds of the next cycle of financial instability."

 

Jobless Rate Likely to Pass 10%: Greenspan

 

Former Federal Reserve Chairman Alan Greenspan predicts that the unemployment rate will push past 10 percent and stay at that level for a while.

 

"Pretty awful" is how Greenspan describes Friday's report that the unemployment rate has risen to 9.8 percent.

 

He says the growing number of Americans who have been out of work six months or longer is of particular concern because jobless workers lose skills over such a long period.

 

Greenspan says he would advise President Barack Obama to focus on getting the economy going, but not to go too far.

 

He says a second economic stimulus is not called for because less than half of the current stimulus is in effect and because the nature of the recovery is not yet clear.

 

Greenspan spoke Sunday on ABC's "This Week."

 

Stores Brace for Another Christmas with Scrooge

 

In the retail business, it is never too early to think about Christmas. So a lot of people are thinking about it, and taking surveys to test the mood of the American consumer, and deciding that this Christmas will be as bad as last — which is to say, one of the worst on record.

 

Retailers are relieved to hear that prediction. Flat sales this holiday season would at least mean that things had stopped getting worse.

 

"It's reflective of this 'new normal' we're in," said James Russo, vice president for global consumer insights at the Nielsen Company. "Flat is good."

 

Over all, the retailing industry posted a sales decline of about 2 percent last Christmas season, the weakest performance since the late 1960s, when the Commerce Department began tracking holiday sales figures. Results for stores that sell clothing and luxury goods were far worse, typically declining by double digits. By contrast, several reports published in the last few days, including surveys by Nielsen and Deloitte, forecast no change in holiday sales from last year to this year.

 

While recent economic reports have been mixed, several indicators suggest the economy is beginning to improve. But the turnaround, if it is real, has yet to filter through to retail sales, which are closely tied to the unemployment rate. That rate worsened more than expected in a government report on Friday, rising to 9.8 percent.

 

Analysts say that many consumers are still worried about their jobs, their stock portfolios and the value of their homes. They remain hamstrung by a tight credit market. Few experts foresee a robust recovery in consumer spending until the unemployment rate starts heading down, perhaps sometime next year.

 

If a mood of thrift and penury continues into the holiday season, retailing analysts said the beneficiaries, not surprisingly, would be discount and dollar stores, warehouse clubs and Internet retailers, as shoppers across all income levels spend less and make fewer trips to stores.

 

A holiday study published by Nielsen this week found that 85 percent of households expected to spend the same or less this year than last year.

 

People are also continuing to nest in their homes. This Christmas, sales of necessities and items associated with at-home entertainment are expected to fare best: cookware and other kitchen sundries, consumer electronics, DVDs, alcohol, tobacco and bed and bath accessories. The Nielsen report said upscale retailers should consider stocking practical items because affluent households may forgo jewelry and designer bags for the likes of generators, fireplace accessories, kitchen gadgets and family games.

 

As has been the case throughout the recession, higher-priced categories like jewelry, sports equipment and vacations are expected to be hurt most. Industry experts said that would probably lead merchants of those items to offer compelling discounts, some of which will pop up before Thanksgiving.

 

Indeed, Moody's Investors Service said in a recent research note that while clothing retailers had brought their inventory in line with weaker demand, the holiday season "may be more promotional than anticipated, as consumers have learned to delay shopping in anticipation of higher markdowns."

 

Already, major big-box chains are jockeying for the discretionary dollars of consumers.

 

Wal-Mart said this week it would bring a $10 toy section back to all of its stores, repeating a successful strategy from last Christmas. It will offer many more toys, for a wider variety of age groups, at that price. The offers will include classic board games like Monopoly, childhood favorites like Barbie dolls and Tonka trucks, a Hot Wheels Trick Track and a Lego Bionicle Legends set. Additionally, Wal-Mart said it would match any local competitor's advertised offer on the same toy if the price fell below $10.

 

On Tuesday, Kmart published a "Fab 15" toy list, highlighting a layaway program that lets consumers reserve popular items early, pay over time, then pick up their purchases before the holidays arrive.

 

The stores may have good reason to begin competing for consumers' Christmas dollars before Halloween even rolls around. According to Wal-Mart's customer research, 70 percent of consumers are planning to start their holiday toy shopping before Halloween.

 

Analysts closely watch discount chains because when consumers begin spending discretionary dollars after an economic downturn, they typically do so at discount and value-priced retailers first. As time goes on and the economy recovers, consumers move up to specialty retailers. Many analysts have said that if consumers spend more this holiday season at the likes of Wal-Mart and Costco, that bodes well for specialty stores come 2010 and 2011.

 

Mr. Russo said studies by Nielsen had found that consumers were indeed "expressing a desire to move back into the discretionary categories although — and this is really key — at moderate levels."

 

In another positive sign, Ted Vaughan, a partner in the retail and consumer products practice at BDO Seidman, said, "Retailers are starting to ramp up their inventory purchasing" for next year, referring to a BDO Seidman survey of chief financial officers at major chains.

 

The International Council of Shopping Centers, an industry trade group, published one of the most optimistic of the holiday reports so far, forecasting a 1 percent year-over-year sales increase in November and December for stores open at least a year.

 

"Does the retail industry need a miracle to have positive year-over-year sales growth during the 2009 holiday season?," the report said. "No, but should you see Kris Kringle at the Macy's Thanksgiving Day Parade, put in a request for one anyway!"

 

 

Fed Needs Goldilocks for Roach Motel Check-Out: Caroline Baum

 

If only the moderator had called on me, I might have gotten an answer to my questions and left with more confidence in the Federal Reserve's ability to pull off its exit strategy without a hitch.

 

Speaking at a conference in Washington last week sponsored by the Cato Institute and Shadow Open Market Committee, a group of self-appointed Fed watchers, Fed Vice Chairman Don Kohn reiterated the conditions and tools for withdrawing excess liquidity already outlined by Fed chief Ben Bernanke.

 

The tools include raising the interest rate the Fed pays on reserve balances to put a floor under short-term rates; draining reserves via outright sales of securities or reverse repurchase agreements; and allowing loans made under the Fed's "unusual and exigent circumstances" authority to wind down, paring the central bank's balance sheet through natural attrition.

 

That's not an option with the long-term securities the Fed has purchased, and continues to purchase. If the Fed perceives spreads between Treasuries and mortgages, for example, to be "distorted," or if long-term interest rates don't rise with increases in the Fed's target rate, the Fed "could consider sales of those assets," Kohn said.

 

That statement presumes the Fed knows the right level for spreads, according to Ram Bhagavatula, managing director at Combinatorics Capital LLC, a hedge fund in New York.

 

"In 2007, Bernanke said spreads were too tight. Last year, spreads were too wide," he said. "How do they know what's right?"

 

'Just Right'

 

In fairy-tale land, Goldilocks may be able to tell when the porridge is "too hot" or "too cold," but how do a handful of humans know when it's "just right?" That's a tough call in any environment; the difficulty is compounded when the discerner is also the distorter-in-chief.

 

"Once the Fed got involved in the credit side of the equation," buying mortgage-backed securities to keep home-loan rates low, "they destroyed information in the private markets," Bhagavatula said.

 

Yields on all debt securities, not just MBS, have narrowed relative to Treasuries this year. How much is the result of the Fed's outright purchases and how much is natural healing? Are investors buying junk bonds because they have absolute value or provide a good return on a risk-adjusted basis?

 

There's another problem with Kohn's comment, one that had me squirming in my seat at the Sept. 30 conference. It was a little less than a year ago, in that same auditorium at Cato, that Kohn gave an elegant defense of the Fed's hands-off approach to asset bubbles.

 

Selective Prescience

 

With the benefit of hindsight -- after fanning the bubble, watching it burst and cleaning up the mess -- Kohn said he was still skeptical about the Fed's ability to identify an asset bubble in time to lean against it and unconvinced that using monetary policy to check speculation would have benefits that outweigh the costs.

 

How is it the Fed can be so prescient when it comes to credit spreads and interest rates and so clueless when it comes to asset prices? And why is Kohn willing to intervene in one case and not lean in the other, using monetary policy to take some of the wind out of economy-destabilizing bubbles? Supervision isn't a substitute for monetary policy. No amount of regulation -- more, better, different -- can counteract the powerful incentive of easy money.

 

Policy Asymmetry

 

I didn't get a chance to ask my question, and I doubt Kohn would have answered it to my satisfaction. To think that the Fed, or anyone, can discern market distortions in a "structured economic environment," as a Tokyo reader referred to the U.S. economy, is ludicrous.

 

"It makes the exit strategy difficult to execute," Bhagavatula said.

 

Exiting is never easy. The history of Fed policy in the modern era is one of asymmetric responses, in more ways than one.

 

First, the Fed doesn't tolerate deflation, or a decline in the price level, even if it's the good kind. Technological innovation enables businesses to produce more with less. The economy grows, prices fall, real incomes rise. What's not to like?

 

Prices can also decline because demand collapses. That's the Great Depression scenario, with prices, output and wages all falling.

 

The second asymmetry is evident in interest-rate changes. The Fed is "quick to ease and slow to tighten," Bhagavatula said, pointing to the 1994 tightening episode as an exception. "The record shows rates go down precipitously and up slowly."

 

Exit Hurdles

 

He doesn't expect this time to be different. Yes, the Fed wants to do the right thing and raise rates preemptively to maintain price stability. Bernanke and Kohn are dedicated civil servants who made decisions under the worst of circumstances for the good of the nation, not for their personal aggrandizement.

 

It's always easier to check in to the Roach Motel than check out, politically and, this time, practically. Banks are holding $854 billion of excess reserves in their accounts at the Fed compared with an average of $1 billion to $2 billion before the crisis. Eventually the Fed will have to suck them up to avert inflation.

 

Add to that the age-old problem faced by policy makers, and you can understand why the exit is fraught with risks. The decision to withdraw monetary accommodation is based on "a forecast of economic developments, not on current conditions," Kohn reminded us last week.

 

We all know how that worked out in the past.  

 

 

Asia:

 

Asian stocks fell for a third day, led by technology and mining companies, after economist Nouriel Roubini said share prices may drop and a report showed the U.S. lost more jobs than estimated.

 

Samsung Electronics Co., which gets 19 percent of sales from America, dropped 2.9 percent, and Honda Motor Co., which generates 47 percent of its revenue in North America, retreated 1.5 percent. Mitsubishi Corp., which derives almost half of its sales from commodities, lost 1.9 percent after oil and metal prices decreased.

 

The MSCI Asia Pacific Index declined 0.3 percent to 114.11 as of 10:14 a.m. in Tokyo. The gauge fell 2.8 percent last week, the biggest drop since the five days ended Aug. 21, on concern a seven-month rally outpaced the prospects for an economic recovery.

 

"The fundamentals of the global economy will improve rather slowly, and we'll continue to see some of the excitement cool down," said Tomochika Kitaoka, a senior strategist at Mizuho Securities Co. in Tokyo.

 

South Korea's Kospi Index dropped 1.6 percent and New Zealand's NZX 50 Index lost 0.4 percent. Japan's Nikkei 225 Stock Average added 0.1 percent, while Australia's S&P/ASX 200 Index gained 0.3 percent.

 

Futures on the S&P 500 added 0.3 percent. The gauge retreated 0.5 percent in New York on Oct. 2. Payrolls dropped more than economists had estimated in September, a Labor Department report showed. Orders placed with U.S. factories fell 0.8 percent in August, the Commerce Department said, while economists had forecast orders would be unchanged.

 

U.S. Demand

 

Asian exporters fell on concern U.S. demand is faltering. Samsung Electronics, the world's largest maker of computer- memory chips, declined 2.9 percent to 769,000 won. Honda lost 1.5 percent to 2,630 yen.

 

Mitsubishi Corp. fell 1.9 percent to 1,744 yen. Its smaller rival Mitsui & Co., which gets 38 percent of sales from commodities, dropped 2.8 percent to 1,093 yen.

 

Crude oil slid 1.2 percent on Oct. 2, the most in a week. A gauge of six metals, including copper and nickel, fell 2 percent in London, adding to the previous day's 2.8 percent drop.

 

The MSCI gauge has climbed 62 percent from a five-year low on March 9 as stimulus measures worldwide dragged economies out of recession. Stocks on the index traded at 22.4 times estimated earnings. That's still higher than 17 times for stocks on Standard & Poor's 500 Index in the U.S.

 

"Markets have gone up too much, too soon, too fast," Roubini, the New York University professor who predicted the financial crisis, said in an interview in Istanbul on Oct. 3. "I see the risk of a correction, especially when the markets now realize that the recovery is not rapid and V-shaped, but more like U-shaped. That might be in the fourth quarter or the first quarter of next year."

 

Michael Geoghegan, HSBC Holdings Plc's chief executive officer, is convinced there will be a second global economic slump and as a result doesn't want the bank to grow too fast, the Financial Times cited him as saying.  

 

 

Nikkei 225 9,736.63     +4.76 ( +0.05%).(08.35 AM IST)

 

Japan's Nikkei share average edged up 0.2 percent on Monday on gains in bank shares and retailers after touching a 10-week low on concern over the fragility of the U.S. economic recovery.

 

A surge in shares of Fast Retailing (9983.T), which said on Friday that same-store sales at its Uniqlo casual-clothing chain in Japan in September jumped 31.6 percent from a year earlier, helped pull the Nikkei into positive territory.

 

Advances in banking shares .IBNKS.T also lifted the market. Shares in lenders have recently been battered by worries that lenders may come out with share offerings in the face of a global regulatory push for banks to carry bigger capital buffers.

 

But exporters such as Kyocera (6971.T) and Honda Motor (7267.T) retreated on lingering concern that the yen's recent strength may eat into their overseas profits, while construction firms .ICNS.T extended their losses after falling in the past few weeks.

 

"While the (U.S. jobs) data was bad and optimism about the U.S. economy may have receded, I do not think market players think that this means that the outlook for the U.S. economy is ruined," said Hideyuki Ishiguro, supervisor at Okasan Securities' investment strategy department. "I think it just means market sentiment has returned to neutral for the time being," Ishiguro added.

 

The Nikkei was up 17.55 points or 0.2 percent at 9,749.42 .N225, after falling as low as 9,713.92, its lowest since July 23.

 

The broader Topix fell 0.1 percent to 873.44 .

 

 

HSI 20378.04 +2.55 +0.01% (08.37 AM IST)

 

 

Hang Seng Index opens 32 points lower on Mon

 

Hong Kong stocks fell on Monday morning, with the benchmark Hang Seng Index opening 32 points lower at 20,338.17.

 

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 43 points lower at 11,483.74.

 

PetroChina<601857><0857><PTR> rose 0.70% and opened at HK$8.58. Sinopec<600028><0386><SNP> grew 0.31% from the previous closing to HK$6.39.  

 

 

 

SHANGHAI Stock Exchange:

 

•The SSE will close from October 1 (Thursday) to October 8, 2009 (Thursday) and open for trading on October 9, 2009 (Friday).  

 

 

Glorious Property tumbles 14.8% on HK debut.

 

Irico launches TFT-LCD glass substrate project in Zhangjiagang (5 Oct)

 

 Henkel eyes further growth in China  

 

Baidu launches wireless search service in Japan  

 

China imposes anti-dumping tax on PVC imports  

 

Fortescue misses funding deadline for CISA deal  

 

Vanke, COFCO Property JV buys land in Beijing for RMB 2.93 bln  

 

Bengang Steel forecasts loss of up to RMB 1.5 bln in Jan-Sep  

 

GM opens science lab in Shanghai  

 

JPMorgan retains "neutral" rating for Greentown  

 

Morgan Stanley assigns "buy" rating for Shimao Property  

 

Shanghai Dragon to sell four assets, earning RMB 119 mln  

 

China Unicom starts pre-sale of iPhone  

 

China South Locomotive wins contracts worth RMB 72.4 bln  

 

IMF announces China, world growth forecasts  

 

CNOOC may buy into Ugandan oil project  

 

China vows to curb aluminum smelting  

 

China Real Estate seeks to IPO in US, raise $200 mln  

 

CITIC Real Estate to sell Beijing firm for RMB 1.31 bln  

 

UC RUSAL revives HK IPO  

 

COSCO operates container terminals in Greece  

 

Powerlong Real Estate lowers IPO price  

 

Greenland Group buys land in Shanghai for RMB 7.25 bln  

 

Giant Interactive sees Q3 revenue down 20%-25%

 

 

INVESTMENT VIEW 

India Road Construction: Policy changes in favour of private developers

 

 

 

Key Beneficiaries: C&C, Valecha Engineering, Unity Infra, IRB Developers, Sadhbhav Engineering, HCC, IVRCL, NJCC, Madhucon and L&T

 

 

The regulatory framework is being tweaked to improve the risk-return perception. The key policy changes in recent times or potential amendments affecting highways and roads are discussed below. Inspite of delays and re-runs of RfQ rounds of several of the projects in the pipeline because of the changes.

 

 

 

Pre-qualification criteria

 

 

 

Recently, projects that have not attracted bids (38 of 60) were modified to reflect more realistic costs, thus, attracting bidders in the next round of bidding. The cap on the

 

number of financial bids (six) has been removed. Instead, now the bidders should have experience (Threshold Technical Capacity or TTC) of executing projects worth 200%

 

of the project bid on. The industry is demanding a reduction of the threshold to 100%.

 

 

 

However, NHAI will have the flexibility to reduce the TTC by 50% of the Total Project Cost (TPC), that is: provide for TTC to be one-and-a-half times of TPC. This is expected to increase the competition for smaller roads. However, very few players would be able to pre-qualify for the larger road packages without partnering with large foreign developers/construction companies.

 

 

 

Modification of minimum equity holding criterion on cards

 

 

 

In response to the industry demands, the government is now considering modifying the minimum equity provision to promote investments in the sector. Relaxation of this clause should also lead to matching risks and investor profile. For example, the construction companies should be allowed to exit once the construction is done or the construction risk is eliminated. The present agreement requires the developers to hold at least a majority stake (51%) in the project for the first three years and 26% thereafter.

 

 

 

Changes to tolling policy will increase toll rates

 

 

 

In order to attract developers to take traffic risks, the government has modified the tolling policy to include a 3% (without compounding) fixed escalation plus 40% of change in Wholesale Price Index (WPI). This change results in higher toll-rates to developers. For structures (bridges, bypass or tunnels), the toll fee will be linked to the capital cost instead of length implying a greater linkage between the cost of construction and toll tariff. A provision exists for charging an overloading fee, if a weighbridge is installed at a toll plaza. Given the rampant practice of overloading on Indian roads, the implementation of this rule is circumspect.

 

 

 

Timing of viability gap funding

 

 

 

Those projects that had received a viability gap funding were facing the problem of timing of cash flows as half of the viability gap funding was paid during construction and the other half during the first five years of commencement date. The government, in turn, has decided to meet the funding gap upfront, which has made such projects more attractive.

 

 

 

Land acquisition

 

 

 

Land acquisition has been a major impediment for road project execution. The government had proposed transferring 50% of land at the time of the award and the remaining during construction. To facilitate execution further, it has now planned to hand over 80% of land at the time of the award and the remaining during construction. Separately, there were projects that were not awarded commencement certificates due to the inability of the government to acquire 5-10% of land.

 

 

 

The private developer and lenders were not allowed to collect toll until the commencement certificate was awarded. Now, the private developers will be allowed to collect toll if they deposit 80% of the estimated cost of construction on the undeveloped stretch of road.

 

 

 

Termination clause

 

 

 

By introducing a termination clause, the NHAI essentially stripped the concessionaire off of upside for taking traffic risks. According to the clause, the NHAI could end the concession period if the traffic increases beyond the designed capacity of the road for more than three years. However, the industry is lobbying strongly against this provision and we expect relief in the near future.

 

 

 

Conflict of interest clause

 

 

 

Under the present scenario, two different bidders cannot directly/indirectly hold more than 5% in the other. This threshold was raised from 1%. Furthermore, it excludes banks, insurance companies, pension funds and public financial institutions from this clause. Though this hike is expected to bring in more investments in the sector, it might not be sufficient as a PE fund typically holds more than 5% stake in companies, thereby still invoking this clause. It is likely that the limit will be raised to 25% as appealed by the investor class.

 

 

(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