Waiting for Big B-day

You sort of start thinking anything's possible if you've got enough nerve.

World equity markets started a new month and a new quarter on a positive note, with gains being registered across the board. The catalysts were a slew of economic reports that further reinforced a growing view that the worst of the global recession is behind us. Still, a few headwinds like unemployment and bankruptcies are yet to be tackled fully. Global trade remains in a limbo, while recovery in the crucial banking and housing sectors remain sluggish.

Coming to the today’s outlook, the Indian market is likely to extend Wednesday's gains, at least at the start. Things could turn uncertain and sideways afterwards as most players would likely remain restrained ahead of the Railway Budget tomorrow and the Union Budget on Monday. The Economic Survey for FY09 will be presented in the parliament today.

We believe the Budget will be neutral from markets’ perspective. Expectations have been muted and rightly so. No point speculating on a big event like budget. The right approach is to wait for the event to unfold and then take a call. At the same time, one should not be too pessimistic either.

Economic activity across the globe is on a recovery path, though in the mature economies things are still precarious. Back home, mixed signals are coming from the latest data points. Manufacturing sector continues to show encouraging signs, as do the monthly sales volume of auto and cement companies. On the export front though, the gloom persists and is unlikely to end anytime soon. In fact, even inflationary expectations may escalate following the fuel price hike.

Also bear in mind, Wednesday's rally was pretty much restricted to the large caps, while the broader market remained subdued. Market breadth was negative and turnover too was down from the previous day. As far as fund action goes, the FIIs were net buyers while the local institutions chose to lock in some gains.

FIIs were net buyers in the cash segment on Wednesday at Rs1.86bn while the local institutions pulled out Rs763.8mn. In the F&O segment, the foreign funds were net buyers at Rs519.5mn. On Tuesday, FIIs were net buyers at Rs2.29bn in the cash segment.

US stocks rose on Wednesday, spurred by encouraging reports on manufacturing and housing. Eight of 10 industries in the S&P 500 index advanced as the Institute for Supply Management’s (ISM) factory index shrank at the slowest pace in 10 months and home resales increased for a fourth month.

The Dow Jones Industrial Average gained 57 points, or 0.7%. The S&P 500 index rose 4 points, or 0.4%, and the Nasdaq Composite index climbed 11 points, or 0.6%.

US stocks ended an otherwise strong second quarter with losses on Tuesday on a weaker-than-expected consumer confidence report and falling oil prices. But investors resumed their shopping spree on Wednesday after manufacturing and housing reports showed the pace of the economic contraction is easing.

The manufacturing report was driving gains. What is also encouraging is that customer inventories are too low, which could suggest a pickup in production.

Gains were broad based, with 24 of 30 Dow stocks rising. Wall Street is coming off the best quarter in years. The S&P 500 gained 15.2% in the April-through-June period for its best quarter since the last three months of 1998. The Dow rose 11%, posting its best three-month period since the second quarter of 2003. The Nasdaq's 20% gain gave it its best quarter since the second of 2003.

Pending home sales rose 0.1% in May, the National Association of Realtors reported. Economists had forecast a steady number after rising a revised 7.1% in April. It was the fourth straight month of gains.

Manufacturing showed a small improvement in June. The Institute for Supply Management's manufacturing index improved to 44.8 from 42.8 in the previous month. Economists thought it would improve to 44.9.

Employers in the private sector cut 473,000 jobs from their payrolls in June, according to a morning report from payroll services firm ADP. Economists had estimated 394,000 job cuts. The report is seen as a precursor to the more widely watched government employment report due on Thursday.

Another report showed that the number of announced job cuts fell in June for the fifth month in a row. Challenger, Gray & Christmas said that job cuts fell to 74,393, down 33% from May and 9% from a year ago.

Ford Motor said its June sales dropped 11% versus a year earlier, a more modest decline than it has shown in recent months. But Ford was the exception, with most major automakers reporting bigger-than-expected declines as the industry continued to struggle.

General Motors (GM) said its June sales fell 33% from a year ago. The automaker was in bankruptcy court for a second day on Wednesday seeking approval for its restructuring plan. Meanwhile, Chrysler said sales fell 42% in June versus a year ago.

General Mills reported fiscal fourth-quarter profit nearly doubled from a year ago and issued a fiscal 2010 profit forecast that is above analysts' estimates.

AIG shares slumped 22% in the aftermath of its annual meeting on Tuesday, in which shareholders approved a proposal to put into effect a 1-for-20 reverse stock split. The shareholders also ousted the majority of the company's board at the meeting. AIG will remain under government control for the time being.

Energy prices surged, with US light crude oil for August delivery falling 58 cents to settle at $69.31 a barrel on the New York Mercantile Exchange.

COMEX gold for August delivery rallied $13.90 to settle at $942 an ounce.

Treasury prices were little changed, with the benchmark 10-year note yield at 3.53%.

In currency trading, the dollar fell versus the euro and gained against the yen.

European shares started the new month and quarter on an upbeat note, buoyed by sharp gains in metal stocks. The pan-European Dow Jones Stoxx 600 index climbed 1.6% to 209.12, with every sector trading in the green.

The French CAC-40 index gained 2.4% to 3,217.00, the UK's FTSE 100 index rose 2.2% to 4,340.71 and Germany's DAX index advanced 2% to 4,905.44.

 
Bulls may extend gains at open

Indian markets ended on a high on Wednesday with the NSE Nifty ending above the 4,300 levels. After losing some steam in the previous trading session, bulls were back and the rebound was led by the index heavyweights.

Stocks like DLF, M&M, and Reliance Infra were among the top gainers. The interest rate sensitive stocks along with the Oil & gas and the PSU stocks were in momentum.

Also the Railway, Education and Oil marketing stocks were in the limelight ahead of Union Budget to be presented on July 6, 2009.

The BSE Sensex gained 152 points or 1% to end at 14,645 after touching a high of 14,727 and a low of 14,355. The index had opened at 14,506 against the previous close of 14,494.

The NSE Nifty surged 50 points or 1.1% to shut shop at 4,341.

Asia markets ended in the red; the Nikkei index in Japan slipped 0.3% at 9,939, Australia's S&P/ASX ended lower by 2% to 3,874. Hang Seng index declined 1% at 18,378.

Elsewhere in the Europe, stocks were trading with gains. The FTSE index was up 1.5% at 4,310. The DAX index was up 1.5% at 4,879. CAC 40 index gained 1.8% at 3,195.

Coming back to India, among the BSE Sectoral indices BSE Realty index was the top gainer gaining 4.2%, followed by the BSE Teck index up 1.5%, BSE Bankex index up 1.3% and BSE Auto index up 1.2%.

The BSE Mid-Cap index ended higher by 1.1% and BSE Small-Cap index was up 0.3%.

In the Sensex, the major gainers were DLF, M&M, Reliance Infra, RCom, Tata Motors, Bharti, Sun Pharma and SBI.

On the other hand, major losers were Hindalco, ONGC, ACC, Tata Power and Grasim.

Among the big gainers in the broader market were Bajaj Holding, Areva T&D, Neyveli Lignite, SCI, Ispat Industries and IRB Infra.

Outside the frontline indices, the top losers included REI Agro, Fortis Health, Gujarat NRE, Mphasis, Glenmark, Yes Bank and Exide Industries.

Education stocks were in the demand on reports that the government would increase the outlay on in the Education sector. The government would offer incentives for companies when it announces its budget on July 6.

Educomp Solutions rallied by over 8% to Rs4123, NIIT Ltd. shot up over 14% to Rs70.3, while Aptech Ltd. rose over 10% to Rs177. Shares of Everonn Systems also surged over 9% to Rs448.

Oil marketing companies like HPCL and BPCL and IOC gained by 4% to 6% on hopes that the Union Budget may include a roadmap for decontrolling fuel prices.

Shares of Areva T&D India surged by 8% to Rs363 after its French parent Areva said that it has put the Transmission and Distribution (T&D) division up for sale globally, including the Indian arm.

Currently Areva holds ~72% stake in Areva T&D India. The Indian arm of Areva had net profit of Rs2.26bn on net sales of Rs26.55bn.

Shares of SCI surged by over 7.5% to Rs133 after government announced that it would examine a stake sale in the company. Shipping Corp to acquire 32 vessels in year ending March 31, 2010, says Shipping Secretary.

Shares of Hero Honda ended flat at Rs1398. The company’s June sales rose 23.7% to 3,65,734 units thereby registering its sixth consecutive month of over three lakh sales starting January’09. Hero Honda had sold 2,95,675 units of two-wheelers in June 2008.

Hero Honda’s cumulative sales for the Q1 (April-June) of FY’10 rose by 25.1% to 11,18,987 units of two-wheelers, thereby taking its share in the domestic motorcycle market to an all-time high of 59%. The company’s sales in the corresponding period last year was 8,94,244 units.

TVS Motor gained by 3% to Rs46.4 after the company posted 6% growth in June 2009, registering total two wheeler sales of 115,488 units against 109,082 units in the corresponding period of the previous year. Domestic sales of the company registered a growth of 12% clocking 1,05,361 units in June 2009 as against 94,072 in the corresponding period of the previous year. The company continued its positive growth trend, registering 5% growth for the period April to June 2009.

Maruti Suzuki edged higher by 0.5% to Rs1070. The company sold a total of 75,109 vehicles in June 2009. This includes 13,336 units for export. This is the highest ever monthly export volume in the company’s history.

The company had sold a total of 61,247 vehicles in June 2008.Maruti Suzuki’s volume in the domestic A2 segment grew by 22.2% while in the A3 segment the sales volume grew by 5% during the month as compared to sales in June 2008.

TEN MOST ACTIVE FUTURES Expiry Date: July 30, 2009

TEN MOST ACTIVE OPTIONS Expiry Date: July 30, 2009

Symbol No.of Cont Traded Last price Open Interest % chg in Op.Int RELIANCE 40,872 2,067.35 6028500 1.41 ICICIBANK 26,488 730.70 10196200 3.44 HDIL 24,059 234.55 12634776 3.62 SUZLON 23,176 106.90 40350000 -2.60 RELCAPITAL 23,160 943.20 3677976 5.13 SBIN 20,635 1,777.35 2613996 2.14 DLF 19,428 325.70 14720800 -1.72 RELINFRA 18,571 1,232.70 3569784 2.90 TATASTEEL 18,242 379.75 14248600 2.05 UNITECH 16,956 82.95 68746500 2.72

Symbol Option Type Strike price No.of Cont Traded Open Interest % chg in Op.In RELIANCE CA 2,100 2,594 221250 19.05 HDFCBANK CA 1,500 1,054 416600 92.16 TATASTEEL CA 400 1,031 837344 4.28 RELIANCE CA 2,070 890 91500 127.61 SUZLON CA 120 808 1701000 -1.22 SUZLON CA 110 734 1521000 19.58 INFOSYSTCH CA 1,800 711 350000 44.51 IDEA CA 80 586 1042200 82.94 UNITECH CA 90 539 1791000 14.37 RELIANCE CA 2,400 502 190200 6.64

SUPPORT & RESISTANCE LEVEL

June 2009  COMPANY NAME S3 S2 S1 CLOSING PRICE R1 R2 R3 Sensex Index 14,400 14,459 14,523 14,645 14,768 14,831 14,891 Nifty Index 4,267 4,285 4,304 4,341 4,378 4,397 4,415 ABB Ltd 747 755 764 780 797 805 813 ACC 742 747 753 763 774 779 784 Ambuja Cements 87 88 88 90 91 92 93 Bajaj Holdings 370 377 386 402 418 427 434 BHEL 2,164 2,177 2,189 2,215 2,240 2,252 2,265 Bharti Airte 804 809 814 824 834 839 844 Cipla 232 235 239 245 251 255 258 Dabur India 120 121 122 124 126 127 128 GAIL India 281 283 284 288 291 293 295 Grasim Ind. 2,275 2,283 2,292 2,308 2,324 2,332 2,340 HCL Tech 185 186 187 190 193 194 195 HDFC Bank 1,478 1,484 1,490 1,503 1,515 1,521 1,527 Hero Honda 1,310 1,332 1,355 1,399 1,444 1,467 1,488 Hindalco 80 81 82 84 85 86 87 Hindustan Unilever 266 268 270 273 276 278 279 ICICI Bank 706 712 718 730 742 748 754 Infosys Tech 1,763 1,771 1,779 1,795 1,811 1,819 1,827 ITC Ltd 188 189 189 191 193 194 195 L&T 1,536 1,545 1,555 1,574 1,593 1,603 1,612 MTNL 98 99 100 102 104 105 106 M&M 692 697 703 714 725 731 737 Maruti Suzuki 1,050 1,056 1,061 1,072 1,083 1,089 1,094 National Alumin 291 293 296 300 304 307 309 ONGC 1,023 1,030 1,038 1,052 1,066 1,073 1,080 Oriental Bank 176 177 178 181 184 185 186 PNB 658 665 671 684 697 703 709 Ranbaxy Labs 238 240 242 246 250 253 255 Reliance Capital 890 902 914 938 962 975 986 Reliance Comm 287 290 293 299 305 308 311 Reliance Energy 1,178 1,191 1,205 1,232 1,259 1,273 1,286 Reliance Inds 1,995 2,010 2,027 2,059 2,091 2,107 2,123 R Power 167 168 169 172 174 175 176 Satyam Computer 71 71 72 73 75 75 76 Siemens India 473 477 480 487 495 498 502 SBI 1,731 1,743 1,755 1,780 1,804 1,816 1,828 TCS 380 383 386 393 399 403 406 Tata Motors 290 292 295 300 304 307 309 Tata Power 1,106 1,116 1,127 1,148 1,168 1,179 1,189 Tata Steel 384 387 390 396 402 405 407 Tata comm 472 476 480 487 494 498 502 Wipro 371 373 375 379 384 386 388 Wire And Wireless 19 19 20 20 20 20 20 Zee Entertainment 169 171 173 176 180 182 184 NOTE : S1, S2 and S3 are critical support levels while R1, R2 and R3 are resistance levels. Trading call depends on the price band