Sydney - Gold hasn't had the kind of gains many expected it to make despite a stream of negative news in recent weeks, but the metal is back in focus again as a reliable store of value, said senior industry analyst Ian McAvity.
McAvity who is the editor of "Deliberations on World Markets," a newsletter that tracks precious metals, currencies and global equity markets, has been tracking the metal for the past 35 years.
"Gold has protected investors very well from the deflationary crash in asset values that is leading to the global attempt at hyper-inflating to try and achieve a directional reversal," said McAvity.
Gold hit a record $1,032.35 a troy ounce in March last year, before the financial crisis reached fever pitch with the failure of Lehman Brothers in September 2008, followed by the U.S. government bailout of insurance giant AIG.
At 0543 GMT Monday, spot gold was trading around $952.00/oz, down 60 cents from the New York close.
"(Gold's) rise against all currencies over the past three years has only just begun in the big picture sense," McAvity said. "While people point to gold still being below the peak it hit a year ago, how many other financial assets are trading at a multiple of their price levels of three, five or ten years ago?"
Gold, seen as a safe-haven in troubled times and a hedge against inflation and dollar weakness, has played a key role in portfolio diversification in the past.
Even in the hot money days when stock markets saw record rallies, gold maintained a steady uptrend, and prices more than tripled from around $280/oz in 2002 to its $1,032.35/oz record.
Since then, the Dow Jones Industrial Average has plummeted to a 12 year low, oil has slumped from nearly $150 a barrel to around $50/bbl now, and copper in December sank to the lowest level since 2004.
Gold on the other gained about 3% during 2008, and topped $1,000/oz in February.
Now with competitive currency devaluation becoming a real threat, gold could well see the next wave of investor interest from those looking to protect their wealth.
Alongside the U.S. Federal Reserve's plans to pump $1 trillion into the system via buying Treasury bonds and mortgage securities to bolster the economy, the Bank of England has announced similar measures for quantitative easing.
The Swiss National Bank meanwhile has said it will buy corporate bonds and intervene in the foreign exchange market to prevent a deflationary spiral.
These moves have ignited long-term inflation risks, but have also drawn comparisons with Japan's "lost decade," with concerns that the Fed's measures may fail to kick start the economy, leading to a gold-negative deflationary environment.
But McAvity said competitive devaluation would likely enhance gold's position as the currency of choice for preservation of capital "until some credible rearrangement of major forex relationships emerges."
These prospects and even more severe doomsday scenarios have prompted many gold bugs to wheel out well-worn predictions of a gold rally to $2,000-$5,000/oz.
"Who knows? It would be the result of market forces trying to assess the purchasing power of a flood of paper, supported only by ever-changing rules," said McAvity. "An ounce of gold will still be an ounce of gold."
It was a spectacular session for the benchmark indices on the back of huge buying in oil & gas, metal and banking stocks. Strong global cues helped the Nifty to close the day above the 2900 mark, important psychological level while the Sensex ended above the 9400 level. Today's surge in the markets was on the back of strong volumes.
The US White House is expected to announce bank bailout plan today. Global markets were up on anticipation that US Treasury Secretary Tim Geithner will deliver this plan today. Long only funds were buyers across the Asia today. Incremental flows were positive on good volumes while there was a lack of selling pressure at FII desk.
The 30-share BSE Sensex touched an intraday high of 9,454.69, before closing the day at 9,424.02, up 5.1% or 457.34 points. The 50-share NSE Nifty surged 4.73% or 132.85 points, to settle at 2,939.90, after hitting a high of 2949.75. All sectoral indices finished in the green.
Hans Goetti, CIO, LGT Bank, feels over the next few weeks one can enjoy this bear market rally in practically every market. He said the Sensex could easily go to 10,400.
Reliance Industries, ONGC, NTPC, Bharti Airtel, SBI, HDFC, SAIL, ICICI Bank, Infosys, HDFC Bank and Reliance Communication were leading contributors in today's gain. These stocks were up between 3% and 8%. However, only two stocks like DLF and HCL Tech closed in the red.
The markets reported highest turnover since September 2008. Total traded turnover was at Rs 77,293.07 crore. This includes Rs 10,285.77 crore from NSE Cash segment, Rs 63,299.50 crore from NSE F&O and the balance Rs 3,707.80 crore from BSE cash segment.
Global cues
Asian markets surged ahead of likely US bank bailout plan today. Hang Seng was up 4.78% and Straits Times gained 4.21%. Nikkei, Taiwan Weighted and Jakarta Composite went up 3.3-3.4%. Seoul Composite was up 2.44% and Shanghai gained 1.95%.
US Treasury, Fed and the FDIC are going to buy between $500 billion and $1 trillion of troubled bank assets. They are going to put in $75-100 billion from bailout fund to team up with private investors.
At the time of closing of Indian equities, European markets were trading higher. The FTSE 100 was trading at 3,901, up 58 points. The CAC was up 25 points, to 2,816 and the DAX was up 65 points, to 4,134.
The US futures were witnessing huge buying interest; the Dow Jones futures were up 189 points, to 7,404 and the Nasdaq futures were trading at 1,218.75, up 30.75 points.
Sectoral indices
Banking, metal and oil & gas stocks were star performers of the day. BSE Bankex outperformed other indices, was up 6.66% or 269.91 points, to 4,325.54. Axis Bank, PNB, ICICI Bank and SBI were up 7.3-9%. HDFC Bank was up 5.60% and HDFC gained 8.3%, which is not a part of Bankex.
Oil & gas sector, which has highest weightage in the NSE Nifty, was the second biggest gainer. Respective Index surged 407.43 points or 6.4%, to 6,775.40. Reliance Industries jumped 7.56% and Reliance Petroleum was up 6.90%. Cairn India and ONGC shot up 5.4-6%.
Metal was second prominent sector that led this gain due to surge in commodities in the international markets. The BSE Metal Index closed at 5,592.55, up 6.31% or 332.09 points. Tata Steel surged 10.39%. Hindalco, SAIL, JSW Steel, JSL and Sterlite Industries were up 5-9%.
Power stocks also charged up today, Reliance Infrastructure shot up 9.88%. Suzlon Energy, Reliance Power, Tata Power, NTPC and GMR Infra were up 2.5-6%. BSE Power Index gained 3.66% or 62.97 points, to close at 1,785.52.
Buying was also seen in telecom stocks, wherein Tata Communication, Idea Cellular, Reliance Communication, Tata Teleservices, Bharti Airtel and MTNL were up 2-8.5%.
Ranbaxy Labs jumped 10.80%. Glenmark, Sun Pharma, Dr Reddys Labs, Wockhardt and Cipla gained 2.2-4.6% in the pharma space. The BSE Healthcare Index was up 2.85% or 73.41 points, to 2,652.66.
Capital Goods stocks like Punj Lloyd, L&T, BHEL and Siemens advanced 2.2-4%. Respective Index went up 2.84% or 164.02 points, to settle at 5,938.26.
Technology stocks also participated in this rally, BSE IT Index moved up 2.44% or 54.14 points, to 2,271.58. Wipro, Infosys and TCS were up 2-3.3%.
Auto stocks witnessed huge buying interest, majorly led by Tata Motors, which will launch Nano, cheapest car in the World, today. The stock jumped 3.2%. M&M and Maruti Suzuki were up 3-3.8%. BSE Auto Index was up 2.35% or 66.63 points, to 2,898.96.
Among the other indices, the BSE FMCG Index closed at 1,961.90, up 39.33 points or 2.05% and the BSE Realty Index was up 1.39% or 21.66 points, to settle at 1,577.68.
In the FMCG space, Ruchi Soya, Tata Tea, GSK Consumer, ITC and HUL were up 2.5-3.7%. In the realty sector, AkrutiCity, HDIL, Indiabulls Real and Unitech gained 3.7-8% while DLF was down 2.8%.
The market breadth remained in favour of advances due to positive broader indices; about 1783 shares advanced while 1132 shares declined. Nearly 153 shares remained unchanged.
Among the broader indices, the BSE Midcap Index was up 75.38 points or 2.73%, to close at 2,836.44 and the Small Cap Index went up 62.54 points or 2.01%, to 3,176.92. The CNX Nifty Junior went up 3.95%, to 4126.40.
In the midcap space, HMT, India Infoline, Deccan Chronicle, Bajaj Holdings, ICSA, Jindal Saw and Bhushan were up 11-20%.
Gokaldas Exports, Bajaj Auto Finance, Sanwaria Agro, Mcnally Bharat Engg and Dewan Housing shot up 13.5-20% in the small cap segment.
Sensex above 9350; Bank, Metal, Oil & Gas indices up 5-6%
At 2:54 pm, the benchmark indices extended gains. Metal, banking, oil & gas, power and telecom stocks were star performers followed by capital goods, auto, pharma and FMCG.
Incremental flows were positive on good volumes while there was a lack of selling pressure at FII desk. Dealers expect Nifty March series expiry at around 2850-2900 levels.
At 2:54 pm, the Sensex was trading at 9,366, up 400 points and the Nifty was trading at 2,829, up 120 points. However, the Nifty March futures were trading with 3-5 points discount and Nifty futures added over 1 crore share in OI.
Nifty 2800 call shed about 12 lakh shares in OI and Nifty 2900 Put has seen addition of 174% or 23 lakh shares in OI.
Sterlite Industries added about 43 lakh shares in OI with a rollover of 29% and Tata Steel added about 47 lakh shares in OI with a rollover of 21%. BSE Metal Index was up over 6%. Jindal Saw, Tata Steel, Sterlite Industries, JSW Steel, SAIL, Hindalco and JSL were up 6-10%.
ADAG stocks like Reliance Communication, Reliance Capital and Reliance Infrastructure were up 5.4%, 17% and 11%, respectively. Mukesh Ambani's Reliance Industries shot up over 6% and Reliance Petroleum up 6%.
Among the other sectoral indices, Bank and Oil & Gas indices gained 5-6%. Power, Capital Goods, Auto, Healthcare, FMCG and IT indices rose 2-3%.
The market breadth was positive; about 1740 shares advanced while 1171 shares declined. Nearly 157 shares were unchanged. Broader indices - BSE Midcap Index was up 2.6% and Small Cap Index up 1.8%.
European markets were trading sharply higher. FTSE was up 76 points, to 3,916. CAC was trading at 2,829, up 38 points and DAX was up 76 points, to 4,145.
The US futures were witnessing buying interest; the Dow Jones futures were up 189 points, to 7,404 and the Nasdaq futures were trading at 1,218.75, up 30.75 points.
Mkts strong on +ve global cues; RIL, ONGC, Bharti up 4-5%
At 1:57 pm, the benchmark indices were trading sharply higher on the back of positive global cues. All sectoral indices were in the green barring realty due to weak DLF stock. Metal, banking, oil and gas, infrastructure and telecom stocks were witnessing huge buying interest, as incremental flows were positive.
Dealers expect expiry at around 2,850-2,900 levels and they also said upside looks capped. Domestic funds were looking to book profit at higher levels.
At 1:57 pm, the Sensex was trading at 9,299, up 332 points and the Nifty was trading at 2,906, up 100 points. Among the broader indices, BSE Midcap Index was up 2% and Small cap index gained 1.5%.
Metals stocks rallied on back of surge in global commodity prices while the outlook is still cautious. BSE Metal Index was up nearly 6%. Sterlite Industries shot up 9.73%. Jindal Saw, Tata Steel and SAIL gained around 7% each. JSW Steel, Jindal Steel, Hindalco and JSL were up 3.8-5.3%.
PNB, Axis Bank, ICICI Bank, SBI and HDFC Bank moved up 4.5-8% in the banking space. BSE Bankex was up over 5%.
The BSE Oil & Gas Index gained 4.5%, as Reliance Petroleum, Reliance Industries, Cairn India, GAIL and ONGC were up 4.5-5%.
Among the other indices, Power, TECK, Capital Goods, FMCG, Auto, Healthcare and IT indices went up 1.6-2.8%.
The market breadth was positive; about 1711 shares advanced while 1171 shares declined. Nearly 185 shares were unchanged.
European markets were trading higher. FTSE went up 48 points, to 3,891. CAC was trading at 2,823, up 32 points and DAX was up 72 points, to 4,141.
Asian markets were strong. Hang Seng jumped nearly 4.8%. Nikkei, Jakarta, Taiwan and Straits Times gained over 3%. Shanghai was up 2% and Kospi went up 2.4%.
The US futures were trading strong ahead of expected Geitherner’s bank rescue plan announcement today. The Dow Jones Futures were up 181 points, to 7,396 and the Nasdaq Futures were up 29 points, to 1,217.
Nifty tests 2900 mark; metal, oil & gas, financials lead
At 12:35 pm, the markets were witnessing huge buying interest and extended the rally. The Nifty tested the 2900 mark, after 21 sessions. Last time it had touched the same level on February 16, 2009. Metal, banking, oil & gas, capital goods, power and telecom were supporting the benchmark indices.
Among frontliners, Reliance Industries, ONGC, NTPC, Bharti, SAIL, SBI, ITC, HDFC, BHEL, ICICI Bank, TCS and Reliance Communications shot up 2.5-6%. However, only DLF was down 4%.
At 12:36 pm, the Nifty was trading at 2908, up 101 points and the Sensex was trading at 9,284, up 320 points. Among broader indices, BSE Midcap and Small cap indices were up 1.5-1.8%.
BSE Metal Index was up 4.8% and Oil & Gas Index was up 4.4%, Bank and Power indices gained over 3%. Among other indices, Capital Goods, FMCG, IT, Healthcare and Auto indices were up 1.7-2.6%.
Market breadth was positive; about 1726 shares advanced while 1177 shares declined. Nearly 164 shares were unchanged.
Asian markets moved up further. Hang Seng, Nikkei, Straits Times, Taiwan Weighted and Jakarta Composite gained 3-4%. Shanghai and Kospi went up 2-2.5%.
Nifty inching towards 2900; metals, oil & gas, infra zoom
At 11:50 am, continuous buying in metal, oil & gas, infrastructure, telecom, technology, banking and auto stocks was helping the markets to add more gains. The Nifty was inching towards the 2900 mark while the Sensex was trading above the 9200 level.
Reliance Industries, ONGC, NTPC, Bharti, SAIL, ITC, Infosys, TCS, BHEL, HDFC and SBI were leading players.
At 11:50 am, the Sensex was trading at 9,225, up 258 points and the Nifty was trading at 2,893, up 86 points. However, the Nifty March Futures were trading with 5-8 points discount. Among the broder indices, BSE Midcap and Small cap indices gained 1.4-1.6%.
The BSE Metal Index shot up over 4%, as Tata Steel, SAIL and Sterlite Industries were up 4.5-5.2%. Sesa Goa, JSW Steel, Hind Zinc, Hindalco, JSL and NALCO gained 2.3-3.4%. Shanghai Aluminum and Zinc were up 5% on the London Metal Exchange.
Cairn India, Reliance Petroleum, Reliance Industries and ONGC shot up 3.5-4% in the oil & gas space. Respective Index was up 3.7%.
Power stocks charged up today. Tata Power, Reliance Infrastructure, NTPC, Suzlon Energy and Reliance Power gained 2.3-5.8%. BSE Power Index went up 2.8%.
The BSE Capital Goods Index was up 2%, as BHEL, Punj Lloyd, Siemens, L&T and ABB were up 1.7-2.4%.
PNB, Axis Bank, SBI, ICICI Bank and HDFC Bank were up 1.7-4.8% in the banking space. BSE Bankex gained 2%.
Among the other indices, IT, Auto, FMCG and Healthcare indices rose 1.2-1.9%. However, the realty index was down over 1% due to DLF, which fell 2%.
The market breadth was in favour of advances due to positive broader indices. About 1777 shares advanced while 1117 shares declined. Nearly 173 shares were unchanged.
In the midcap space, Bajaj Holdings, Spice Communication, Religare Enterprises, ICSA and Bajaj Finserv shot up 9-13%.
Bajaj Auto Finance, Mcnally Bharat Engg, Gokaldas Export, Sanwaria Agro and VST were up 11.5-19% in the small cap segment.
Mkts move up further; RIL, ONGC, Bharti, Infy, NTPC lead
At 10:42 am, the benchmark indices moved up further andwere trading higher. Buying was seen in oil & gas, telecom, metal, capital goods, technology and financial stocks. The Nifty was above the 2850 level while the Sensex stood above the 9100 level.
The Sensex was trading at 9,171, up 205 points and the Nifty was trading at 2,872, up 65 points. The broader indices were also in the limelight; BSE Midcap and Small cap indices went up 1.3% each. However, the Nifty futures were trading with 3-5 points discount.
Among the frontliners, Tata Motors, Tata Steel, Sterlite Industries, Reliance Infrastructure, Jaiprakash Associates, Idea Cellular, SAIL and Tata Communication were the top gainers. They gained 3-5%. However, DLF and Ambuja Cements were only losers.
Reliance Industries, Infosys, ITC, Bharti Airtel, ICICI Bank, ONGC and NTPC were leading contributors in today's gain.
The BSE Metal outperformed other indices, gained nearly 3%. Oil & Gas, Power, Capital Goods, TECK and Bank indices were up 2-2.5%. Auto, IT, FMCG and Healthcare indices went up 1-1.8%.
The market breadth was positive; about 1740 shares advanced while 1165 shares declined. Nearly 162 shares were unchanged.
Subhash Projects shot up 12%, as the company bagged order worth Rs 492 crore.
Block Deal
25 lakh GSPL shares change hands on BSE at Rs 38.80/sh
2 crore BILT shares change hands on BSE at Rs 16.10/sh
Asian markets were trading higher. Hang Seng, Jakarta, Nikkei, Straits Times, Kospi and Taiwan Weighted gained 2-3%. Shanghai was up 1.6%.
Nifty above 2850 on +ve Asian cues; metals, infra gain
The markets started the first day of the week on a bullish note following strong Asian cues. Metal, infrastructure, oil & gas, banking and auto stocks were witnessing buying interest.
At 9:58 am, the Sensex was at 9,127, up 161 points and the Nifty was trading at 2,859, up 52 points. CNX Midcap was up 30 points, to 3,230.
Tata Motors, ONGC, M&M, Reliance Infrastructure, Reliance Communication, SAIL, ICICI Bank, Reliance Capital, Sterlite Industries, Tata Steel, HDFC, Reliance Industries and BHEL were the gainers.
Tata Motors surged 6% ahead of Nano's launching.
Among the midcap and small cap stocks, Spice Communication, Ballarpur Industries, S Kumars Nationwide, Everonn Systems, Rolta, Punj Lloyd and SREI Infrastructure gained over 4-15%. However, Satyam, AkrutiCity and Gujarat NRE Coke were down 2-8%.
Global cues:
Asian markets were trading strong ahead of expected Geitherner’s bank rescue plan announcement today. Hang Seng, Nikkei, Straits Times, Kospi, Jakarta Composite and Taiwan Weighted surged 2-3%. Shanghai went up 1.2%.
The US markets slipped on Friday. The market disappointed in the Term Asset-Backed Securities Loan Facility (TALF) turnout, as investors applied for nearly 2.5% of the $200 billion the Fed has set aside to boost consumer and small-business spending.
The Dow Jones Jones Industrial Average ended down 1.7% or 122 points, at 7278 and the Nasdaq Composite was down 1.8% or 26.2 points at 1458. The S&P 500 went down 2% or 15.5 points, to settle at 769.
Commodities
Crude shot up 10% last week and was trading above $52 a barrel. Gold gained 2.7% last week.
Market cues:
FIIs net sell Rs 150 crore in the cash market on Friday (prov)
DIIs net sell Rs 94.03 crore in the cash market on Friday (prov)
FIIs net buy $39.1 million in equities on March 19
Mutual Funds net sell Rs 45 crore in equities on March 19
NSE total F&O Open Int up by Rs 1,177 crore to Rs 69,599 crore
F&O cues:
Total Futures Open Interest up by Rs 639 crore, total Options Open Int up by Rs 537 crore
Sensex: We said, "Supportive action can gain momentum if Index trades strongly above day's high of 9087. Failure to do that would lead to lackluster trading." Index failed to trade above 9087. Lackluster trading saw it lose a marginal 35 points. Realty Index lost more, down 4%. A/D ratio also ended marginally negative. The action formed another Doji-like pattern near the Red resistance line and 61.8% correction level. It indicated bulls struggling at technical resistances, but not yet giving up. Holding day's low at 8867 and/or trading above 9K would both be +ve signs for bulls, who may attempt to challenge these resistances for the upper Grey channel.
Technical Outlook: • The Nifty has formed a bull candle after breaking out from last week’s inside day candle • The levels of 2700 acted as strong support for the entire week • On the upside, the Nifty is now facing resistance to the trend line joining highs of January 2009 (3141.80) and February 2009 (2969.75). Value of this trend line for the next week comes to 2800. The Nifty is sustaining above 2800. Therefore, it would be a bullish trigger and may target the 2860-2880 area • On the downside, good support appears around 2,770-2750 levels • We expect the Nifty to trade in the range of 2720–2860 levels for the coming week • The resistance remains at 2830 and 2860, whereas supports exist around 2770, 2720 levels
Derivative Outlook • The PCR-OI has risen from 1.40 levels to the 1.59 mark. This was on account of noteworthy addition of OI in the 2700, 2800 and 2900 Put options while significant unwinding was noticed in the 2500, 2600 and 2700 Call options. An addition of 70502, 71164 and 11938 contracts was witnessed in the 2700, 2800 and 2900 Puts while 10625 contracts got unwound in the 2500 Put. Huge Put buying at 2700 strike was seen in the Nifty for the first four sessions of the week. This Put buying was seen near the resistance zone of 2800 in Nifty. However, since the Nifty was constantly able to hold the 2770 mark on the downside, we saw some unwinding by Put buyers at 2700 in the last session. The 2700 Put base currently stands at 7.66 million shares and is likely to hold as a strong support for the Nifty on a closing basis in the coming week. A similar action was also visible in the 2600 Put option. The 2800 Put witnessed Put writing in the last two sessions of the week. We have observed sell straddle at 2900 in the last week. On the other hand, significant short covering by Call writers was seen in the 2600 and 2700 Call options during the week. However, some profit booking was seen in the 2600 and 2700 Calls in Friday’s session. We feel the market is likely to trade in the range of 2700 and 2900 for the expiry week. Hence, one can form ‘Sell Strangle’ within this range for the coming week
• The Nifty futures combined OI stands at 37.36 million shares wherein the March OI stands at 24.34 million shares and April OI stands at 12.43 million shares. Significant short covering was observed over the week in the Nifty March series, which declined by 4.32 million shares in OI. With the Nifty gaining by 3.23% during the week, we feel some long positions got added in the Nifty April series. The rise in the Nifty was mainly due to positive global cues throughout the week. We have seen it trading in the range of 2750 and 2835 during the week, where most of the shorts got covered near the 2770 mark whereas fresh shorts got added in April near 2830 mark. Also, the short rollovers of March were mainly in the range of 2800-2850. Hence, we feel the Nifty may continue to see selling pressure near 2850 levels while on the downside 2750 could continue to act as an intermediate support
• Further short covering was seen in the Nifty March series, which depicted a decline in OI by 1.54 million shares. The April series added 2.17 million shares in OI
• The options data shows maximum addition of OI in the 2800 strike price option whereas unwinding was seen in almost all other strikes. The 2800 Put added 17074 contracts with drop in IV from 34.73 to 32.06. In the past two sessions Put writing was seen in the 2800 Put since nearly 12 lakh shares got added in this Put. However, a decent number of Put buyers at this strike price are still standing in the system. Unwinding of 7482, 8373 and 4016 contracts was observed in the 2700, 2600 and 2500 Puts, respectively. For the first time, we have seen unwinding by Put buyers at 2700 and 2600. Also, the 2700 Put base with 7.66 million shares in OI currently stands as the second largest options base after 2500. Unwinding by Call buyers was also noticed in the 2700 Call. Some Call writing was seen in the 2800 Call, which added 4578 contracts. We feel, the 2700 level could continue to act as a decent support for it in the coming sessions on closing basis
• FIIs were net sellers to the tune of Rs 149 crore. DIIs were net sellers to the tune of Rs 94 crore
● Indian markets are likely to open positive, taking cues from Asian cues. The SGX Nifty was trading 30 points up in the morning. Other Asian markets were also trading positive in the morning on optimism that Japan will step up measures to bolster its economy and as commodity prices rose. Oil prices rose over 1% towards $53 a barrel on expectations that the US Treasury's efforts to stabilise the ailing financial system would speed up a recovery of the US economy. The rupee is expected to open strong on rising Asian stock markets reviving hopes of capital inflows into the local share market
● The Sensex has supports at 8890 and 8780 and resistances at 9110 and 9230. The Nifty has supports at 2770 and 2750 and resistances at 2830 and 2860
● Asian stocks gained, led by banks and mining companies, on optimism that Japan will step up measures to bolster its economy and as commodity prices rose. The Nikkei advanced 158.5 points, or 2.0%, to trade at 8,104.5. The Hang Seng gained 261.5 points, or 2.0%, to trade at 13,095.0
● US stocks slid on Friday as the Federal Reserve's plan to rekindle consumer and small business lending fell short of expectations and General Electric was hit by analysts' bearish comments. The Dow Jones slipped 122.42 points, or 1.65%, to 7,278.38. The S&P 500 shed 15.50 points, or 1.98%, to 768.54. The Nasdaq lost 26.21 points, or 1.77%, to 1,457.27
On the road to deflation? The week was marked by a historic event when inflation came in at a low of 0.44% as of March 7 against 2.43% recorded the week earlier. Clearly, this low inflation level can be attributed to the high base effect considering that this is a year-on-year indicator. The meltdown in commodity prices, including crude oil and base metals, has been so steep that input prices fell sharply during the period, bringing inflation to near-zero levels. Over the next few weeks, inflation is expected to turn negative, as the commodity decline seeps into the system. However, economists are of the view that we will once again revert to positive inflation levels given that commodity prices have more or less bottomed out and a huge amount of liquidity has been pumped into the system. In other words, while we may be technically entering into a deflation—with negative inflation—due to the high base effect, there is little to indicate that the macroeconomy will undergo the severe pains of a typical deflationary scenario.
So with inflation at 0.44%, do we see the RBI cutting rates further now that it has even more leeway to do so? Well, the RBI has been aggressively reducing interest rates, but the banks have not responded in equal measure, preferring to park their funds rather than lend it out. However, while lending rates may fall in future, banks believe that any delay in economic revival, say, in the second half of the current calendar year would result in a short-term rise in NPAs.
Meanwhile, it was an eventful week in the global markets, when the dollar hit its two-month lows against the euro on the Federal Reserve’s plan to buy bonds and long-term treasuries to revive the economy. Besides raising inflation levels, this move was perceived to put pressure on yields, which would prompt investors to look elsewhere for higher-yielding assets. With the dollar taking a hit, dollar-denominated assets, including gold, crude oil and base metals, witnessed a rally during the week. Ditto for equity markets worldwide. For the week, the Nifty and the BSE Sensex rose 3.23% and 2.40%, respectively. The Nifty is expected to hover in the 2700-2900 range until expiry, and any instability on the global front should again induce profit-taking from the highs.
The final trading hour witnessed considerable volatility, as alternate bouts of buying and selling led the Indian indices to hover around 2800. BSE Sensex closed 29 points down and NSE’s Nifty ended flat. Stocks from mid-cap space ended lower. However, small-cap stocks remained in the limelight and closed higher. Daily chart of Nifty indicates one more day of indecision or consolidation by its second inside bar. On hourly chart, Nifty is forming a descending triangle, which generally breaks on the downside as per the definition. During the course of the day, the last hour rally was just a throw-over (bullish trap) and not a genuine breakout, and in the coming session Nifty will witness a downside breakout from the descending triangle. After long time, the market breadth was in favour of bears with 594 declines and 591 advances.
Hourly KST is still tilted in favour of bears. Our short- and mid-term biases are down for the target of 2630 and 2450 respectively and the short- and mid-term reversals pegged at 2840 and 3111 respectively.
Metal and fast moving consumer goods (FMCG) sectors posted gains for the day, whereas realty and capital goods sectors reported losses. From the 30 stocks of Sensex, Hindalco Industries (up 6%) and ONGC (up 3%) led the clutch of gainers and Tata Motors (down 6%) and ICICI Bank (down 5%) led the drove of losers.
Global stock markets rallied sharply during the week due to the stimulus packages announced by various governments across the globe. The recent announcement by the US Federal Reserve on buyback of securities to the tune of US$300 billion led to a sharp rally in the global stock markets and the Bank of Japan announced that it would buy bonds from commercial banks to spur lending. In the US markets, jobless claims have declined for the fi rst time, whereas unemployment levels reached all-time levels in the UK. Global commodity markets traded on a strong note during the week, with crude oil prices gaining around 12% and other base metal prices trading firm.
Asian markets traded firm during the week, with the Japanese Nikkei gaining around 10% and the Chinese Shanghai Composite rallying around 7%. The domestic stock markets extended their gains, with the Nifty adding 3.23% and the Sensex gaining 2.4% during the week. The markets displayed strength during the week’s trade, with stocks from sectors like energy, BFSI, construction and metals trading fi rm. However, markets witnessed profi t booking at every rise towards the upper end of the 2700-2900 band, although it traded firm on the back of increased trading volumes. The Nifty is expected to trade in a tight 2700-2900 range until expiry of the March series.
The week was marked by a historic event when infl ation came in at a low of 0.44% as of March 7 against 2.43% recorded the week earlier. Clearly, this low infl ation level can be attributed to the high base effect considering that this is a year-on-year indicator. The markets are expected to enter the negative infl ation zone (read defl ation), technically speaking, over the next couple of weeks as the full impact of the commodity price declines seep in. Meanwhile, in an interesting development, SEBI has sought opinions on the extension of trading hours, which could provide a good opportunity for traders in the long term.
We stand vindicated on our stance on the shipbuilding industry with the deceleration in order inflows gaining momentum since Sep'08 and virtually coming to a halt in Feb'09 with inflows of 0.1 Mn dwt. CY08 started on a strong note and clocked healthy order inflows of 154 Mn Dwt, despite the downturn since Sep'08. However , India disappointed with a sharp drop in incremental orders to 0.1 Mn Dwt (0.1% share of 154 Mn Dwt). India's inability to hold on to its market share at the very onset of the downturn - raises serious concerns on the Indian player's ability to remain unscathed during the downturn. This is especially since we foresee impact of the downturn to be more severe, going forward. We believe that the industry is largely over-ordered and is likely so see higher incidences of cancellations and execution delays. We have revised our revenue and earnings estimates downwards for FY09-12E period. We maintain our 'SELL' rating on ABG Shipyard with revised target price of Rs63 and 'REDUCE' rating on Bharati Shipyard with target price of Rs 45.
Our downturn scenario is playing out. CY08 surpassed our estimates with 154 Mn Dwt of order inflows. However, we believe that the sharp deceleration witnessed incremental orders of under 1 Mn Dwt while Feb'09 saw inflows virtually dry up with 0.1 Mn Dwt. With key assumptions panning out as per expectations, we believe that out earlier envisaged 'Best Case' scenario is playing out. The industry, with 154 mn Dwt order inflows in CY08, is over-ordered by 96 Mn Dwt or 16.7% of total assessed demand, indicating complete dry out and reversals of order inflows during CY09-12E period. We believe that the bulk segment (Dry and Liquid) is the most vulnerable segment to cancellations.
India a no show - market share dips to 0.1% from 0.8% Despite an overall robust CY08, India failed to capitalize on the available opportunity. India's share in incremental orders dropped to a dismal 0.1% or 0.1 Mn Dwt in CY08 against 1.5% or 3.6 Mn Dwt in CYo7. We had expected marginal players to be the first victims in a downturn, but were surprised at the beating it has taken at the very onset of the downturn. India also witnessed decline in orders in the offshore segment - its niche strong hold.
Indian 2-wheelers industry after showing impressive performance over 1992-2007 is facing a tough environment for the last two years. We believe that this phase is temporary and 2-wheelers will again move into growth phase. Given their operational efficiency, ease in maneuvering city traffic and low cost of ownership, 2- wheelers continue to be the preferred mode for daily commuting. We expect domestic 2-wheelers market to stabilise by FY17 with penetration levels of 135 vehicles per thousand population. We expect entry of low cost cars to have some impact on 2-wheelers demand especially in scooters segments.
● Base correction over the last two years: Over the last two years, the 2-wheelers industry has seen a base correction especially in the entry level segment. This should provide a platform for the sustainable growth in future.
● Low dependence on financing: During FY02-07, increasing penetration of financing led to strong growth for the industry. However with high default rates, financing flow has been restricted over the last two years. This augurs well for the industry and now onwards, we can expect growth in the industry on its own merits rather than finance stimulation. Return of financing will provide upside to our volume estimates for the industry.
● Global financial crisis to impact exports : 2-wheelers exports from India are expected to be adversely impacted by global financial crisis. We forecast exports growth to slowdown to single digits in FY10 & post that we expect a growth of 15%.
● Rationality in players’ behaviour: Over the past one year, we have observed rationality in players’ behaviour, which has led to profitability improvement despite increase in raw material cost. We expect that this trend to continue and players will refrain from indulging in price war.
After the week ended December 19, 2008, this was the first instance when the Nifty produced two back rallies on a weekly closing basis. The 3.23% rise in the Nifty and 2.40% hike in the Sensex, effectively hides the enthusiasm on the street which saw the BSE Small cap Index rising 6.15% during the week.
Around a 1000 stocks rose more than 10% and 246 rose more than 20% during the week, the BSE Small Cap rose more than 7.2% during the course of the week from the previous weekly closing. The percentages mentioned are for the best gains during the week and are not closing gains.
The gymnastics of the small cap stocks not withstanding, the Nifty was unable to close above the 2830 mark. Though the popular index did cross the 2830 mark on an intraday basis on Wednesday,it's subsequents rallies had lower tops. So both on the daily and the weekly charts the 2830 mark has stood like a rock fending off any attacks on its territory.
Meanwhile, let's not forget that our rally was essentially manufactured in the US. And the Dow too was under similar situation, unable to close above the 7500 mark. The rally, which was led by short covering in the banks, showed signd of sputtering.
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