BSE-30!
19,052 (-8)
Top Gainers
Oct 16, 2007 (Close)
ICICI BANK
1,156.75
5.48%
HINDALCO
197.45
4.55%
REL. ENERGY
1,904.40
3.09%
MARUTI SUZUKI
1,186.80
2.28%
NTPC
231.25
1.96%
NSE-50!
5,668 (-2)
Top Gainers
Oct 16, 2007 (Close)
TATA POWER
1,365.75
23.22%
SIEMENS
1,695.90
11.94%
ICICI BANK
1,159.65
5.67%
HINDALCO
197.60
4.69%
REL. ENERGY
1,900.85
3.06%
Top Losers
INFOSYS
1,868.25
-3.14%
HIND. UNILEVER
212.45
-3.08%
M&M
814.80
-2.34%
L&T
3,346.25
-2.02%
SBI
1,924.35
-1.67%
Top Losers
ZEE ENT
336.50
-3.30%
INFOSYS
1,866.35
-3.19%
STERLITE IND.
903.40
-2.99%
HIND. UNILEVER
212.95
-2.90%
HCL TECH.
303.30
-2.73%
Sensitivity Analysis
[ADVANCED SEARCH]
BHARTI AIRTEL HINDALCO RELIANCE COMM RELIANCE
MARKET MONITOR EQUITYMASTER RESEARCH SERVICES
19,052 (-8)
Top Gainers
Oct 16, 2007 (Close)
ICICI BANK
1,156.75
5.48%
HINDALCO
197.45
4.55%
REL. ENERGY
1,904.40
3.09%
MARUTI SUZUKI
1,186.80
2.28%
NTPC
231.25
1.96%
NSE-50!
5,668 (-2)
Top Gainers
Oct 16, 2007 (Close)
TATA POWER
1,365.75
23.22%
SIEMENS
1,695.90
11.94%
ICICI BANK
1,159.65
5.67%
HINDALCO
197.60
4.69%
REL. ENERGY
1,900.85
3.06%
Top Losers
INFOSYS
1,868.25
-3.14%
HIND. UNILEVER
212.45
-3.08%
M&M
814.80
-2.34%
L&T
3,346.25
-2.02%
SBI
1,924.35
-1.67%
Top Losers
ZEE ENT
336.50
-3.30%
INFOSYS
1,866.35
-3.19%
STERLITE IND.
903.40
-2.99%
HIND. UNILEVER
212.95
-2.90%
HCL TECH.
303.30
-2.73%
Sensitivity Analysis
[ADVANCED SEARCH]
BHARTI AIRTEL HINDALCO RELIANCE COMM RELIANCE
MARKET MONITOR EQUITYMASTER RESEARCH SERVICES
Due to sun outage, markets will remain closed from 11:25 am to 12:10 pm. The final closing will
be at 4:15 pm. This schedule will be effective from 25th September till 9th October, 2007.
Best PerformingStocks & FundsTuesday, 16th October, 2007
ClosingVolatile trade...
After slipping into the negative territory, the domestic indices witnessed a turnaround in the final hours of trade to close flat. While buying was
witnessed among power, banking and select engineering stocks, pharma, software and energy stocks closed in the red. On the sectoral indices front, while he BSE Bankex Index (up 2.8%) emerged as the key gainer, BSE Infotech Index lost 1.8% in today's trade. As far as global markets are concerned, the Asian markets closed weak. European indices too have opened on a negative note.The BSE Sensex closed at 19,052 (down 7 points) while the NSE Nifty closed at 5,668 (down 2 points). The rupee was trading at 39.36 to the dollar.
The Sensex opened with a positive gap of 44 points at 19,103, and soon rallied to a new all-time intra-day high of 19,174. However, profit-booking on account of weak global markets saw the index slip into red. The index touched a low of 18,778 - down 396 points from the peak. Fresh buying, thereafter, saw the index recover all its losses at the close. The overall market breadth was negative with 3 losers for every 2 gainers on the Nifty. Tata Power (up 23%), Siemens (up 12%) and Hindalco (up 6%) were the key gainers among the Nifty stocks.
Software major TCS reported a revenue growth of 8.4% QoQ driven by 7.6% QoQ growth in volumes and 0.9% QoQ growth in billing rates. Rupee dampened the topline growth by 0.51%. EBITDA margins expanded 0.5% QoQ, mainly due to cost rationalisation. Rupee dampened the operating margins by 0.3%. The company will put in mechanism to diversify across geographies and hedging strategies. PAT grew by 4% QoQ. It was largely impacted due to the lower other income and higher tax incidence. Forex hedging stood at US$ 2.6 bn. TCS added 51 new clients and 9,268 employees during the quarter. Attrition rate in IT services stood at 10.9% and BPO at 17.1%. Software stocks closed weak with I-Flex, Tech Mahindra, Infosys (each down 3%) and TCS (down 1%) leading the pack of losers.
Energy stocks are closed mixed with Gujarat Gas (up 14%) and Castrol (up 7%) leading the pack of gainers. On the other hand, BPCL (down 3%) and HPCL (down 2%) were among the biggest losers. As per a leading daily, the Bombay High Court has asked RIL and RNRL to renegotiate the gas supply agreement in 4 months during which RIL cannot allocate gas to third parties. It may be noted that RNRL had moved the court late last year to enforce the scheme of demerger. The demerger entitled RNRL to 28 m cubic meters per day of gas from the KG basin at a price of US$ 2.34 per million British thermal unit (mbtu). Meanwhile, the empowered group of ministers has recently approved the price of KG basin gas at US$ 4.2 per mBtu. Although a lot will depend on the renegotiated contract or an appeal to the Supreme Court, this is a negative development for RIL as realisation from its KG basin gas would be significantly affected. Both RIL and RNRL are closed marginally in the negative.
Tata Power has been among the top gainers over the past month, appreciating 76%. During this period the company announced plans to invest Rs 60 bn to generate 1,300 MW electricity in Jharkhand by FY12. It has obtained a coal block to support a generation of 500 MW. In addition, the International Finance Corp., the private-sector lending arm of the World Bank, agreed to finance 4,000 MW ultra mega power project at Mundra, Gujarat to be operated by Tata power. In a separate development the company was reportedly keen to pick up 15% stake in the power exchange to be set up by National Commodity and Derivatives Exchange (NCDEX) and National Thermal Power Corporation (NTPC). The stock advanced by a massive 23% in today's trade. Among its peers, while Neyveli Lignite gained 10%, PTC India edged up by 6%. -->
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2:30 pmGaining strength?
Though still into the negative, the benchmark indices showed signs of recovery during the previous hour of trade. Currently, amidst heavy selling pressure, buying is being seen in power, banking and telecom stocks. The overall market breadth is negative with losers outnumbering gainers in the ratio of 1.6 to 1 on the NSE.
The BSE Sensex is trading at 18,943 (down 116 points) while the NSE Nifty is trading at 5,638 (down 33 points). The rupee is trading at 39.35 to the dollar.
Oil stocks are trading mixed. While Gujarat Gas (up 14%), Cairn India (up 4%) are garnering investor interest, ONGC (down 3%) and Petronet LNG (2%) are trading weak. Petronet LNG has decided to diversify into the power sector and plans to set up a 1,100-mw gas-based power project, close to the site of its Dahej LNG re-gasification terminal. Given the synergies with the existing LNG terminal at Dahej, the cost of the power project has been estimated at close to Rs 30 bn. The project would be financed with a mix of debt and equity. The diversification move by Petronet LNG into the power sector is more of a risk mitigating exercise so as to protect the capacity of LNG it plans to produce at its two LNG re-gassification terminals at Dahej and Kochi. The company is already in the process of expanding the capacity of its Dahej LNG terminal from 6.5 mtpa to 12.5 mtpa. Similarly, it is in the process of creating a LNG regasification capacity of 5 mtpa at its Kochi LNG terminal.
Telecom stocks are trading mixed. While Idea Cellular (up 5%) and RCOM (1%) are garnering investor interest, VSNL (down 3%) and Bharati Airtel (2%) are trading weak. With the pitch for more spectrum getting shriller, mobile operators may be asked to cough up money if they want more than 10 MHz capacity. The department of telecom (DOT) may also put an overall cap at 15 MHz beyond which the operators will not be able to get additional spectrum at any cost. In case two mobile companies in a circle merge, they may have to surrender any additional spectrum if the combined entity has more than 15 MHz capacity.
The BSE Sensex is trading at 18,943 (down 116 points) while the NSE Nifty is trading at 5,638 (down 33 points). The rupee is trading at 39.35 to the dollar.
Oil stocks are trading mixed. While Gujarat Gas (up 14%), Cairn India (up 4%) are garnering investor interest, ONGC (down 3%) and Petronet LNG (2%) are trading weak. Petronet LNG has decided to diversify into the power sector and plans to set up a 1,100-mw gas-based power project, close to the site of its Dahej LNG re-gasification terminal. Given the synergies with the existing LNG terminal at Dahej, the cost of the power project has been estimated at close to Rs 30 bn. The project would be financed with a mix of debt and equity. The diversification move by Petronet LNG into the power sector is more of a risk mitigating exercise so as to protect the capacity of LNG it plans to produce at its two LNG re-gassification terminals at Dahej and Kochi. The company is already in the process of expanding the capacity of its Dahej LNG terminal from 6.5 mtpa to 12.5 mtpa. Similarly, it is in the process of creating a LNG regasification capacity of 5 mtpa at its Kochi LNG terminal.
Telecom stocks are trading mixed. While Idea Cellular (up 5%) and RCOM (1%) are garnering investor interest, VSNL (down 3%) and Bharati Airtel (2%) are trading weak. With the pitch for more spectrum getting shriller, mobile operators may be asked to cough up money if they want more than 10 MHz capacity. The department of telecom (DOT) may also put an overall cap at 15 MHz beyond which the operators will not be able to get additional spectrum at any cost. In case two mobile companies in a circle merge, they may have to surrender any additional spectrum if the combined entity has more than 15 MHz capacity.
1:30 pmProfit booking...
The broader markets slumped into the red as selling action was witnessed across heavyweights during the previous hour of trade. The advance to decline ratio is poised at 1:3 on the NSE. Heavyweights in the metals and energy sectors are registering the highest losses currently.
The BSE Sensex is trading at 18,860 (down 198 points) while the NSE Nifty is trading at 5,609 (down 62 points). The rupee is trading at 39.38 to the dollar.
Energy stocks are trading mixed with Gujarat Gas (up 14%) and Castrol (up 6%) leading the pack of gainers. On the other hand, GAIL (down 4%) and ONGC (down 3%) were among the biggest losers. As per a leading daily, the Bombay High Court has asked RIL and RNRL to renegotiate the gas supply agreement in 4 months during which RIL cannot allocate gas to third parties. It may be noted that RNRL had moved the court late last year to enforce the scheme of demerger. The demerger entitled RNRL to 28 m cubic meters per day of gas from the KG basin at a price of US$ 2.34 per million British thermal unit (mBtu). Meanwhile, the empowered group of ministers has recently approved the price of KG basin gas at US$ 4.2 per mBtu. Although a lot will depend on the renegotiated contract or an appeal to the Supreme Court, this is a negative development for RIL as realisation from its KG basin gas would be significantly affected. Both RIL and RNRL are currently trading lower by 1%.
Tata Power has been among the top gainers over the past month, appreciating 76%. During this period the company announced plans to invest Rs 60 bn to generate 1,300 MW electricity in Jharkhand by FY12. It has obtained a coal block to support a generation of 500 MW. In addition, the International Finance Corp., the private-sector lending arm of the World Bank, agreed to finance 4,000 MW ultra mega power project at Mundra, Gujarat to be operated by Tata power. In a separate development the company was reportedly keen to pick up 15% stake in the power exchange to be set up by National Commodity and Derivatives Exchange (NCDEX) and National Thermal Power Corporation (NTPC). The stock is currently trading higher by as much as 17%. Among its peers Neyveli Lignite is trading up by 10% while Power Grid is up by 5%.
The BSE Sensex is trading at 18,860 (down 198 points) while the NSE Nifty is trading at 5,609 (down 62 points). The rupee is trading at 39.38 to the dollar.
Energy stocks are trading mixed with Gujarat Gas (up 14%) and Castrol (up 6%) leading the pack of gainers. On the other hand, GAIL (down 4%) and ONGC (down 3%) were among the biggest losers. As per a leading daily, the Bombay High Court has asked RIL and RNRL to renegotiate the gas supply agreement in 4 months during which RIL cannot allocate gas to third parties. It may be noted that RNRL had moved the court late last year to enforce the scheme of demerger. The demerger entitled RNRL to 28 m cubic meters per day of gas from the KG basin at a price of US$ 2.34 per million British thermal unit (mBtu). Meanwhile, the empowered group of ministers has recently approved the price of KG basin gas at US$ 4.2 per mBtu. Although a lot will depend on the renegotiated contract or an appeal to the Supreme Court, this is a negative development for RIL as realisation from its KG basin gas would be significantly affected. Both RIL and RNRL are currently trading lower by 1%.
Tata Power has been among the top gainers over the past month, appreciating 76%. During this period the company announced plans to invest Rs 60 bn to generate 1,300 MW electricity in Jharkhand by FY12. It has obtained a coal block to support a generation of 500 MW. In addition, the International Finance Corp., the private-sector lending arm of the World Bank, agreed to finance 4,000 MW ultra mega power project at Mundra, Gujarat to be operated by Tata power. In a separate development the company was reportedly keen to pick up 15% stake in the power exchange to be set up by National Commodity and Derivatives Exchange (NCDEX) and National Thermal Power Corporation (NTPC). The stock is currently trading higher by as much as 17%. Among its peers Neyveli Lignite is trading up by 10% while Power Grid is up by 5%.
12:30 pmIn the green...
The markets moved into the positive territory in the previous hour of trade. At present the advance to decline ratio on the NSE is in favour of the latter in the ratio of 1:1.1 indicating the cautious sentiment among the participants. Select stocks from the power and banking sectors are witnessing good buying interest while select stocks from the FMCG and auto sectors are being subject to profit booking.
The BSE Sensex is trading at 19,085 (up 26 points) while the NSE Nifty is trading at 5,684 (up 14 points). The rupee is trading at 39.32 to the dollar.
As per a leading business daily, pharma major Wockhardt is in the final stages of acquiring US drug maker Morton Grove Pharmaceuticals Inc, a company that makes prescription liquid pharmaceutical products. The deal size is in the range of US $50 m to US $70 m. Wockhardt has ambitious plans for boosting its revenue from the US, the largest pharmaceutical market in the world. At present, US contributes just about 9% of the company's revenue while Europe contributes 52%. It is looking at acquisitions to expedite its growth in the US. Morton Grove employs about 300 people and manufactures and markets over 50 products. It has about 11 generic drug applications under regulatory review. The company has over 30 oral liquid, topical liquid and prescription nasal spray products in the pipeline that could enter the market in the coming years as their inventor's patents expire. Besides, having a line of approved products with a distribution channel is likely to provide a huge advantage to the company. Currently, the stock is up 1%, while its peer Dr Reddy's is up marginally.
Stocks from the television broadcasting sector are trading weak with Zee Entertainment (down 1%) and TV 18 (down 2%) being the key losers. Earlier this month, IBF, the apex body for TV channels in the country had cited hike in input cost to announce a levy of 25% surcharge on all ad rates being offered by the broadcasters, starting October 16. The IBF had decided to continue offering the current ad rates for a month, if advertisers accepted the surcharge of 25% before October 15. This decision by IBF followed advertisers' boycott threat to protest the surcharge move. Big clients including the likes of HLL and P&G, among others, have refused to accept the IBF decision to levy a surcharge of 25% on advertisements. From Tuesday, programmes across most TV channels will have just about 10-20% of the usual advertisements. It is estimated that this situation will not last for more than a week. While most mass entertainment channels have accepted the IBF advisory to increase the ad rates by imposing the 25% surcharge on advertisements, some news, niche and regional channels would complete the existing deals with their advertising clients at the ongoing rates before transiting to the new regime.
The BSE Sensex is trading at 19,085 (up 26 points) while the NSE Nifty is trading at 5,684 (up 14 points). The rupee is trading at 39.32 to the dollar.
As per a leading business daily, pharma major Wockhardt is in the final stages of acquiring US drug maker Morton Grove Pharmaceuticals Inc, a company that makes prescription liquid pharmaceutical products. The deal size is in the range of US $50 m to US $70 m. Wockhardt has ambitious plans for boosting its revenue from the US, the largest pharmaceutical market in the world. At present, US contributes just about 9% of the company's revenue while Europe contributes 52%. It is looking at acquisitions to expedite its growth in the US. Morton Grove employs about 300 people and manufactures and markets over 50 products. It has about 11 generic drug applications under regulatory review. The company has over 30 oral liquid, topical liquid and prescription nasal spray products in the pipeline that could enter the market in the coming years as their inventor's patents expire. Besides, having a line of approved products with a distribution channel is likely to provide a huge advantage to the company. Currently, the stock is up 1%, while its peer Dr Reddy's is up marginally.
Stocks from the television broadcasting sector are trading weak with Zee Entertainment (down 1%) and TV 18 (down 2%) being the key losers. Earlier this month, IBF, the apex body for TV channels in the country had cited hike in input cost to announce a levy of 25% surcharge on all ad rates being offered by the broadcasters, starting October 16. The IBF had decided to continue offering the current ad rates for a month, if advertisers accepted the surcharge of 25% before October 15. This decision by IBF followed advertisers' boycott threat to protest the surcharge move. Big clients including the likes of HLL and P&G, among others, have refused to accept the IBF decision to levy a surcharge of 25% on advertisements. From Tuesday, programmes across most TV channels will have just about 10-20% of the usual advertisements. It is estimated that this situation will not last for more than a week. While most mass entertainment channels have accepted the IBF advisory to increase the ad rates by imposing the 25% surcharge on advertisements, some news, niche and regional channels would complete the existing deals with their advertising clients at the ongoing rates before transiting to the new regime.
11:30 amParing gains...
Markets pared some of the gains during the previous hour of trade as participants resorted to profit booking at higher levels. The advance to decline ratio is in the favour of the former with 1.1 advances being recorded for every decline on the NSE. Currently, banking and power sector stocks are garnering investor interest, while select stocks in the metal, auto, energy and software sectors are witnessing selling pressure.
The BSE Sensex is trading at 19,021 (down 38 points) while the NSE Nifty is trading at 5,657 (down 13 points). The rupee is trading at 39.32 to the dollar.
As per a leading business daily, Grasim Industries is planning to set up a new cement grinding plant with a capacity of 1.2 to 1.3 MTPA in Punjab with an investment of Rs 1.50 to 2 bn within a year, besides ramping up the capacity of its existing plant in the state. The company had already announced to invest Rs 80 bn on ramping up its cement capacity to 46 MT from the present 31 MT by FY09. The cement major has 11 composite plants, seven split grinding units and four bulk terminals (including one in Sri Lanka). The move is in line with the company's plans of achieving sales of Rs 110 bn the end of this fiscal against Rs 95 bn last fiscal, besides planning to consolidate its market share above 20%. While the stock (down 1%)is trading weak, its peers ACC (up 1%), Ultratech Cement and Ambuja Cements (each marginally up) are trading firm.
IDFC declared results for the second quarter and half year ended September 2007 yesterday. Besides a re-shuffle in its loan portfolio, nothing much has changed in the business dynamics of IDFC in the last quarter. The infrastructure financing entity reported 36% YoY growth in advances in 1QFY08 on the back of a buoyant 43% YoY growth in disbursements. The sanction to disbursement ratio also improved to 57.5% in this quarter as against 54.6% in the corresponding quarter of FY07. The share of non-interest income to IDFC's operating income has increased from 21% in 1HFY07 to 25% in 1HFY08. The bottomline grew by 27% YoY despite higher provisioning and operating expenses. However, net interest margins dropped to 2.2% from 2.8% in 2QFY07 as the institution accessed high cost borrowings. The stock along with its peer HDFC is trading lower by 1%.
The BSE Sensex is trading at 19,021 (down 38 points) while the NSE Nifty is trading at 5,657 (down 13 points). The rupee is trading at 39.32 to the dollar.
As per a leading business daily, Grasim Industries is planning to set up a new cement grinding plant with a capacity of 1.2 to 1.3 MTPA in Punjab with an investment of Rs 1.50 to 2 bn within a year, besides ramping up the capacity of its existing plant in the state. The company had already announced to invest Rs 80 bn on ramping up its cement capacity to 46 MT from the present 31 MT by FY09. The cement major has 11 composite plants, seven split grinding units and four bulk terminals (including one in Sri Lanka). The move is in line with the company's plans of achieving sales of Rs 110 bn the end of this fiscal against Rs 95 bn last fiscal, besides planning to consolidate its market share above 20%. While the stock (down 1%)is trading weak, its peers ACC (up 1%), Ultratech Cement and Ambuja Cements (each marginally up) are trading firm.
IDFC declared results for the second quarter and half year ended September 2007 yesterday. Besides a re-shuffle in its loan portfolio, nothing much has changed in the business dynamics of IDFC in the last quarter. The infrastructure financing entity reported 36% YoY growth in advances in 1QFY08 on the back of a buoyant 43% YoY growth in disbursements. The sanction to disbursement ratio also improved to 57.5% in this quarter as against 54.6% in the corresponding quarter of FY07. The share of non-interest income to IDFC's operating income has increased from 21% in 1HFY07 to 25% in 1HFY08. The bottomline grew by 27% YoY despite higher provisioning and operating expenses. However, net interest margins dropped to 2.2% from 2.8% in 2QFY07 as the institution accessed high cost borrowings. The stock along with its peer HDFC is trading lower by 1%.
10:30 amVolatile start...
Markets have started on a volatile note today as alternative bouts of buying and selling activity is witnessed. Currently 22 stocks on the Nifty are trading in the green indicating caution. While auto, engineering and energy stocks are trading in the red, telecom and steel stocks are the gainers.
The BSE Sensex is trading at 19,108 (up 49 points) while the NSE Nifty is trading at 5,693 (up 23 points). The rupee is trading at 39.18 to the dollar.
Software major TCS reported a revenue growth of 8.4% QoQ driven by 7.6% QoQ growth in volumes and 0.9% QoQ growth in billing rates. Rupee dampened the topline growth by 0.51%. EBITDA margins expanded by 0.5% QoQ mainly due to cost rationalisation. Rupee dampened the operating margins by 0.3%. The company will put in mechanism to diversify across geographies and hedging strategies. PAT grew by 4% QoQ. It was largely impacted due to the lower other income and higher tax incidence. Forex hedging stood at US$ 2.6 bn. TCS added 51 new clients and 9,268 employees during the quarter. Attrition rate in IT services stood at 10.9% and BPO at 17.1%. While the stock along with Satyam is up 2%, Infosys is down marginally.
In the US markets, stocks plunged into the red yesterday as crude oil prices hit record high prices. Dow Jones, NASDAQ and S&P index ended 1% lower. Oil hit the high of US$ 86.2 per barrel, before pulling back a bit to end at US$ 86.1, a new record close. Heating oil and natural gas prices jumped as well, raising questions on consumer spending. As regards global markets, while the European indices ended in the negative, the Asian indices have opened mixed.
Pre-OpenConcerns at 19k
The markets are hitting new highs everyday. Strong GDP growth, stronger rupee, and lower inflation numbers are some of the positive factors that have supported this momentum. But the question is, will this euphoria last forever? There are the negatives that could hamper the upward journey.
Political Instability: This is one of the prime concerns. Politics is the art of the impossible, and even more so, figuring the impact of politics on the stock market. Political instability creates doubts in the minds of the foreign investors and may lead to the fall in the markets. Though the recent concerns over mid-term polls has not led to the stock market correction, cautiousness on this front is needed. The present political imbroglio over Indo-US civil nuclear cooperation deal presents a big event risk. History suggests that in this kind of situation Indian markets have reacted sharply.
Huge inflow- RBI stand: Capital inflows have increased dramatically over the past few weeks. During the fortnight ended September 28, foreign exchange (FX) reserves increased by US$ 15.6 bn. 12-month trailing capital inflows as of September 2007 increased to an all-time high of US$ 75 to 80 bn as compared with US$ 27 bn during the 12 months ended September 2006. The key driver of the recent rise in capital inflows has been foreign loans and portfolio equity inflows. This has led to the intervening of the RBI to prevent sharp appreciation in the rupee and in the money market to ensure that short-term interest rates do not decline.
US economy: The US economy is facing the pressure of the credit and mortgage sectors. Though the Fed has reduced the interest rates, negative impact on the long term on credit crisis still exist. The temporary cure would further aggravate it, leading to inflationary pressures. With US being a major source of exports from India, this may create problems for our economy. Also, the risk of a reversal in capital inflows due to risk aversion to recent problems in the credit markets in the US and Europe may cause a fall.
Crude prices: The crude prices have gone up by 34% YoY. India imports around 75% of its crude requirements. With higher crude prices, the trade balance would get affected. Also, it would cause inflationary pressure across all products and services, which could slacken the demand growth pace.
Input pressure: Though the data released every Friday on inflation shows a decline in inflation on YoY basis, the real picture faced in routine life is harsh. Not only crude but also the other raw materials have become expensive. As per ASSOCHAM's recent report, prices of major commodities have shown maximum price fluctuations to the extent of 23% to 25% over the last one year. Not only the consumers but also the companies are facing the brunt of higher input prices, which would affect their operating margins. While, headline inflation is at 4%, core inflation is at 4.8%. Although both core and headline inflation is within the RBI's comfort zone of 5%, the recent rise in oil and foodstuff prices has raised concerns.
Trade deficit: India's April-August 2007 trade deficit climbed to US$ 32.5 bn, 63.3% higher than that of US$ 19.9 bn last year led by stronger rupee and higher crude prices. The widening trade deficit would also pressurise the current account deficit. Further, as per the RBI, the shortfall in the current account was US$ 4.7 bn in the three months ended June 30 2007, as compared with a surplus of US$ 2.6 bn in the previous quarter. The rising rupee would hurt export-oriented industries and their competitiveness and any slowdown in these industries may affect overall growth outlook.
The BSE Sensex is trading at 19,108 (up 49 points) while the NSE Nifty is trading at 5,693 (up 23 points). The rupee is trading at 39.18 to the dollar.
Software major TCS reported a revenue growth of 8.4% QoQ driven by 7.6% QoQ growth in volumes and 0.9% QoQ growth in billing rates. Rupee dampened the topline growth by 0.51%. EBITDA margins expanded by 0.5% QoQ mainly due to cost rationalisation. Rupee dampened the operating margins by 0.3%. The company will put in mechanism to diversify across geographies and hedging strategies. PAT grew by 4% QoQ. It was largely impacted due to the lower other income and higher tax incidence. Forex hedging stood at US$ 2.6 bn. TCS added 51 new clients and 9,268 employees during the quarter. Attrition rate in IT services stood at 10.9% and BPO at 17.1%. While the stock along with Satyam is up 2%, Infosys is down marginally.
In the US markets, stocks plunged into the red yesterday as crude oil prices hit record high prices. Dow Jones, NASDAQ and S&P index ended 1% lower. Oil hit the high of US$ 86.2 per barrel, before pulling back a bit to end at US$ 86.1, a new record close. Heating oil and natural gas prices jumped as well, raising questions on consumer spending. As regards global markets, while the European indices ended in the negative, the Asian indices have opened mixed.
Pre-OpenConcerns at 19k
The markets are hitting new highs everyday. Strong GDP growth, stronger rupee, and lower inflation numbers are some of the positive factors that have supported this momentum. But the question is, will this euphoria last forever? There are the negatives that could hamper the upward journey.
Political Instability: This is one of the prime concerns. Politics is the art of the impossible, and even more so, figuring the impact of politics on the stock market. Political instability creates doubts in the minds of the foreign investors and may lead to the fall in the markets. Though the recent concerns over mid-term polls has not led to the stock market correction, cautiousness on this front is needed. The present political imbroglio over Indo-US civil nuclear cooperation deal presents a big event risk. History suggests that in this kind of situation Indian markets have reacted sharply.
Huge inflow- RBI stand: Capital inflows have increased dramatically over the past few weeks. During the fortnight ended September 28, foreign exchange (FX) reserves increased by US$ 15.6 bn. 12-month trailing capital inflows as of September 2007 increased to an all-time high of US$ 75 to 80 bn as compared with US$ 27 bn during the 12 months ended September 2006. The key driver of the recent rise in capital inflows has been foreign loans and portfolio equity inflows. This has led to the intervening of the RBI to prevent sharp appreciation in the rupee and in the money market to ensure that short-term interest rates do not decline.
US economy: The US economy is facing the pressure of the credit and mortgage sectors. Though the Fed has reduced the interest rates, negative impact on the long term on credit crisis still exist. The temporary cure would further aggravate it, leading to inflationary pressures. With US being a major source of exports from India, this may create problems for our economy. Also, the risk of a reversal in capital inflows due to risk aversion to recent problems in the credit markets in the US and Europe may cause a fall.
Crude prices: The crude prices have gone up by 34% YoY. India imports around 75% of its crude requirements. With higher crude prices, the trade balance would get affected. Also, it would cause inflationary pressure across all products and services, which could slacken the demand growth pace.
Input pressure: Though the data released every Friday on inflation shows a decline in inflation on YoY basis, the real picture faced in routine life is harsh. Not only crude but also the other raw materials have become expensive. As per ASSOCHAM's recent report, prices of major commodities have shown maximum price fluctuations to the extent of 23% to 25% over the last one year. Not only the consumers but also the companies are facing the brunt of higher input prices, which would affect their operating margins. While, headline inflation is at 4%, core inflation is at 4.8%. Although both core and headline inflation is within the RBI's comfort zone of 5%, the recent rise in oil and foodstuff prices has raised concerns.
Trade deficit: India's April-August 2007 trade deficit climbed to US$ 32.5 bn, 63.3% higher than that of US$ 19.9 bn last year led by stronger rupee and higher crude prices. The widening trade deficit would also pressurise the current account deficit. Further, as per the RBI, the shortfall in the current account was US$ 4.7 bn in the three months ended June 30 2007, as compared with a surplus of US$ 2.6 bn in the previous quarter. The rising rupee would hurt export-oriented industries and their competitiveness and any slowdown in these industries may affect overall growth outlook.
Higher valuations: After the recent fall in the global markets due to the sub-prime crisis, India has been one of the few emerging markets to see strong rise in the sensex. On a trailing 12 month basis, while Shangai A share is 54.66, Sensex is 25.47 as compared to Russia's RTS index value of 13.49 and Thailand's 17.99. The valuations are on the highr side ignoring factors like relatively lower IIP growth, high crude oil prices and the continued political clash on Indo-US nuclear treaty and stretched valuations.To conclude...While we continue to remain bullish on long-term growth prospects of the economy, we believe that valuations become little stretched at this point and markets are running ahead of fundamentals. With valuations taking a backseat in this mad rush of capital inflow, we advise investors to concentrate on the fundamental aspect and not get carried away by the one-way movements in the indices.
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