>Daily Market & Technical Outlook (ICICI Direct)

Key points

• Market Outlook — Open flat on flat global cues
• Positive — FIIs buying
• Negative — MFs selling, uncertain political scenario

Market outlook

■ Indian markets are likely to open flat, taking cues from global markets. Asian markets were mostly weaker in the morning as stocks took a breather from recent gains after investors in the US and Europe booked profits, sending share indices lower. The rupee is expected to open steady on Tuesday on mixed regional stocks and traders are expected to await general election results on Saturday for direction

■ The Sensex has supports at 11620 and 11430 and resistances at 11770 and 11890. The Nifty has supports at 3520 and 3480 and resistances at 3590 and 3620

■ Asian stocks fell, led by banks and mining companies, as HSBC Holdings said 2009 will be a tough year. The market also witnessed a fall in metal prices. The Nikkei fell 136.3 points, or 1.4%, to trade at 9,315.7. The Hang Seng declined 29.8 points, or 0.2%, to trade at 17,058.2

■ US stocks fell on Monday as investors booked profits in financials after a two-month run-up and news of several banks' share offerings heightened worries about their dilutive impact on current shareholders. The Dow Jones shed 155.88 points, or 1.82%, to 8,418.77. The S&P 500 declined 19.99 points, or 2.15%, to 909.24. The Nasdaq dipped 7.76 points, or 0.45%, to 1,731.24

■ Stocks in news: Orchid Chemicals, Bank of India. Tata Motors, Gujarat NRE coke, Bajaj Auto


To see full report: OPENING BELL 120509

>Daily Derivatives (ICICI Direct)

Derivative Comments

• The Nifty May series witnessed an addition of 93050 shares in OI with a fall in Nifty by 1.83%. The basis shifting from a premium of 2.30 points to negative 2.55 points suggests further closure of some long positions along with addition of few shorts in the Nifty in yesterday’s session. However, the drop in turnover depicts less participation in the market

• From the options data we see a maximum addition of 11225 contracts in the 4200 Call followed by an addition of 9287 contracts in the 3600 Call. The IV of the 4200 Call has risen from 44.63 to 50.09 whereas that of 3600 has increased from 49.96 to 53.48. Some Call writing has happened at the 4200 strike price. Although the Call writers were fairly active in the 3600 Call, we have seen decent buying in this Call option in the last half hour of trade. On the other hand, 8695 contracts got added in the 3500 Put followed by 4581 contracts addition in the 3200 Put. Even though the 3200 Put IV has risen from 57.21 to 61.86, the base of 3.58 million shares in OI suggests decent support for the market in this expiry. Moreover, the 3400 Put has 4.60 million shares in OI, which is the highest option base. This indicates strong support for the Nifty in the
coming sessions

• The FII Index futures witnessed a short build up of 1.44% in OI with a net sale of Rs 184 crore

To see full report: DERIVATIVES 120509

>Daily Calls (ICICI Direct)

Sensex: We said, "Holding 11765 can test upper end of Red channel at 12100-50 ... Resistance at upper Red channel can, however, be negative." Holding 11765, Index began 150 points higher, initially reaching 12027. Failing to reach upper channel, later, made it lose 400 points. Realty lost 5%. A/D ratio remained -ve at 1:3.

The action formed a bear candle with bigger body than last Wednesday and Friday. Its low of 11621 now exactly touches the Green support line and lower end of the Red falling channel. Watch 11621 if holds. Its Break can create panic. However, one may watch next support near last Monday's gap-up area and previous high (11367).

To see full report: CALLS 120509

>State Bank of India (CITI)

4Q09 Results: Margin(al) Pressure, But Balance Sheet is Fine

■ Up 46% yoy, ahead of estimates; but P&L shows signs of pressure — SBI's profits were supported by robust fee growth and large treasury gains, but its aggressive pricing strategy pulled down NIMs and earnings quality. SBI's P&L appears to be 'paying the price of growth' (but can also be fixed faster), while balance sheet quality remains slightly ahead (and therein lies the risk). We see risk/reward for SBI as relatively balanced, with slight positive skew due to incipient signs of economic stabilization.

■ NIMs were the key disappointment, but can be pulled back quickly — SBI's NIMs were down ~70bps qoq (but a reasonable 293bps for FY09) – recovery is always a challenge, but can be pulled back quickly (management confident, track record favorable). Core fee growth remained robust (+29% yoy) and along with treasury gains eased pressure on earnings. Between lower NIMs and likely higher costs (distribution expansion) – the P&L does seem to be weighed down at the moment, but can change relatively fast with the environment.

■ Balance sheet remains healthier — SBI's balance sheet has held up well so far – under pressure from the economy and its own aggressive strategy. Asset quality and capital remain in-line with peers (2% of domestic loans restructured, 9% Tier 1); and deposit franchise retains momentum (+38% yoy) and quality (41% CASA). International book though has seen sharp rise in
NPLs (1% slippage in 4Q) – potentially, an indicator of underlying stress.

To see full report: STATE BANK OF INDIA

>BAER INSIGHT

India: Slowing economy, political uncertainty

■ Recent exuberance on the Indian bourses leaves us more puzzled – after deleveraging, risk aversion and synchronised global recession saw investors flee.

■ Political uncertainty poses risk of prolonged slowdown in reforms and focus on short-term populist and regional priorities.

■ Domestic economic slowdown and ebbing foreign investor interest seem unlikely to reverse with a big bang and corporate profits likely to follow suit.

After a drop of about 58% in 2008, MSCI India (in local currency terms) has pared back some of its losses in a spectacular rally since mid-March 2009 providing a return of approximately 15%, YTD. We look for a plausible justification:

• Political stability as seen in Indonesia;
• Revitalisation of growth as in China;
• Resilience in corporate profits.

The answer is none of the above, but simply based on hope that the stars will align. In order for India’s rally to be justified, the following would be necessary:

• Global growth to be re-instated faster than it turned down;

• India to re-emerge as a source of goods and services and destination for investment even faster than risk aversion hit all geographies and asset classes;
  

• India Inc. to witness a V-shape recovery in profits with FY03/10 estimates almost at thesame levels as before;
  

• India’s ongoing parliamentary election to have minimal impact on Indian economy and foreign investor interest.

To us, none of these are believable outcomes. In fact, pandemic of swine flu and geopolitical risks in Pakistan and elsewhere seem to increase the threat to global growth even further. India’s attractiveness as an investment destination depends on how quickly and effectively her political stability is restored after the elections. India Inc’s performance is linked to several macro factors, which have turned negative and how soon their impact dwindles is a matter of concern for now.

So the recent Indian equity rally seems like a classic case of - wishes being horses for Indian equity investors to ride. That said we analyse further the major hurdles faced by Indian equity investors at this point in time.

Political uncertainty

India is in the process of conducting her 15th general elections in a staggered manner with an estimated electorate of 714 million voters and 546 parliament seats. The polling was scheduled in five phases on 16 April, 22 April, 23 April, 30 April, 7 May and 13 May 2009. The results of the election will be announced all in one shot on 16 May 2009. The 2009 general election will see three main national pre-poll alliances take on each other.

At the 2004 elections the two largest national parties Congress and BJP managed to bag only 145 (26.7%) and 138 (22.2%) seats respectively. A government was put in place by forming a working coalition with outside support and by trading ministerial representation for support on the floor of the parliament. We do not expect things to be very different this time around. Given the volatile nature of coalition politics in India, alliances may change over time - before and after the polls.

Revitalisation of global growth and risk appetite is necessary, though not mandatory

India’s stock market performance over the last 2½ years has been concurrent with high global growth. As seen from the historical GDP growth chart above, the world experienced it highest growth of >5% and that too for a prolonged period of time of two years as against the short peaks earlier. This was accompanied by an accentuated investor risk-appetite. Foreign fund inflows into India were at historical highs. Total capital inflows during FY03/08 totalled to USD108bn. This propelled markets further.

Also Indian IT, textile and diamond exports saw geometrical growth in the last five years. Industrial production witnessed a sharp upward trend, peaking at a growth rate of 13.7% y/y in the quarter ended January 2007. Rise in prices of commodities and end-products added to the growth and wealth effect of developing and exporting nations like India and the top-line growth of their corporates. Things have changed now.

In contrast to the capital inflows in FY03/08, the quarter ended 31 December 2008, saw a capital outflow of USD3.7bn. Industrial production too has come off with the three months ended February 2009 recording deceleration of 0.5% y/y. All told, we find it hard to believe that the setback reversal will be over so quickly.

Corporate profit recovery likely to be slow

Recent easing action of the Reserve Bank of India (RBI) and the accompanying acknowledgement of slower growth expectations in FY03/10, lend additional support to our skepticism in the near term. Although RBI has made an estimate of 6% growth in FY03/10, analysts’ estimates are coming at even lower levels (JP Morgan 5.5%, Citibank 5.2% and Credit Suisse 4.9%).

India Inc.’s growth was on the back of strong topline growth due to increased volume and pricing
on exports and domestic sales. These trends have certainly reversed for now. It was also attributable to a strong investment cycle, partially funded by foreign capital inflows and partially by leveraging promoters’ balance sheets against personal holdings of listed stocks, which have lost about 75% from the peak in January 2008.

Further downside risk to equities

While Indian demographics remain attractive and domestic demand should be more resilient as compared with aging economies, the slowdown in the investment cycle is severe and domestic demand has pulled back.

For now, faster and stronger recovery in global growth and a clear verdict from the Indian electorate are necessary for a justified and sustainable recovery on the Indian bourses. Bothare not very probable in our view.

To see full report: BAER INSIGHT

>Indian Cement Sector (UBS)

Continued volume momentum in April ’09

■ Strong April ’09 despatch growth for cement majors except ACC
Grasim’s cement despatch growth in April’09 was 17.4% YoY (3.18mt, -5.6% MoM). We had highlighted in our note dated 4th May 2009 “Turn positive on the sector” that Grasim would benefit significantly from front-loaded capacity additions. Ambuja’s despatch growth in April was 10.8% YoY (1.64mt, -4.7% MoM) while ACC’s despatches were up 4% YoY (1.80mt, -6.2% MoM). Despatch data of April’09 for the industry is yet to be released.

■ Assume FY10 demand growth at 5%; prices unlikely to fall YoY
We estimate cement demand to grow at 5% in FY10 in line with UBS’s India GDP forecast of 5.1%. Historically, cement demand has grown at an average 1.4x the real GDP growth rate. We believe cement growth in excess of 5% will further reduce excess capacity in FY10, alleviating any concerns on price declines. Any positive surprise from despatch growth will only strengthen our view on the sector. We do not expect average cement prices in FY10 to fall on YoY basis.

■ Preferred picks in the sector: Grasim and Ambuja
Our preferred picks are: 1) Grasim due to front-loaded capacity addition and a significant increase in captive power capacity; and 2) Ambuja due to a significant increase in captive power capacity, its net cash position, and significant scheduled cement capacity expansion in 2009-10. We also have Buy ratings on ACC and India Cements.

To see full report: INDIA CEMENT SECTOR

>Indian Banking Sector (MF GLOBAL)

■ What kind of credit growth can banks achieve? - We expect a credit growth of 16% and deposit growth of 19% in FY10e

■ Where will the interest rates move from here? Waning inflation and declining economic activity would necessitate reduction in interest rate.

■ To what extent can the weakening fiscal position impact G-secs yields? - The long term bonds yield will remain firm on account of swelling fiscal deficit

■ How do the margins of the banks pan outover FY10? - decline in C-D ration & lag effect in repricing deposits to impact margins in FY10e

■ To what extent can NPAs of the banks increase? - GNPA levels could, at worst, rise to 5.8% including assets re-structured under new RBIguidelines on restructuring

■ Are the banks adequately capitalized to overcome the current turmoil? The current level of capital base can enable the banks to achieve a credit growth of 20% CAGR over FY09-11

■ What is the right valuation to enter the stock given the above uncertainty? Stocks are tradig at discount to their historic median valuation after considering worst case credit default assumption

■ Near term trigger
- Further relaxation in key policy rates will provide as near term trigger for the sector.

■ Top picks: Large Cap - SBI, ICICI Bank
Mid Cap - PNB, BOI, BOB & UBI

To see full report: INDIAN BANKING SECTOR

>Asian Macro Views (CITI)

Swine Flu Impact – SARS Déjà-vu?

■ WHO seems likely to raise its pandemic alert level to 6 — Confirmed cases are still largely in the West and only two cases have been found in Asia so far (Hong Kong and South Korea). Swine flu mutates rapidly and reporting problems make morbidity and mortality rate calculations unclear. Laboratory tests showing the efficacy of anti-viral drugs such as Tamiflu are encouraging, though there is no vaccine yet that exactly matches swine flu.

■ Differences with SARS may result in smaller economic impact — First, there already exists a medical fix for swine flu, even if imperfect. Second, Asia is not the epicentre of the shock. Third, Asia is much better prepared now, both from a medical and governance standpoint. Hence the direct economic impact may be somewhat less severe now, though it could still be a hindrance to a smooth economic recovery.

■ Pandemic a negative shock to aggregate demand and supply, with greatest impact on non-tradables sectors, which should result in real exchange rate depreciation — If disease is contained relatively quickly and there is no permanent decline in population and production, the immediate net impact of a pandemic is to lower output and inflation. With a greater proportional impact on non-tradable/ services where “human interaction” is unavoidable, as compared to tradables/ manufacturing, this should imply a REER depreciation, particularly for small open
economies, as was the case during SARS.

■ Poorer, more densely populated and very open countries look more vulnerable to higher rates of infection — Our pandemic vulnerability index finds that Pakistan, Indonesia and India as well as Hong Kong and Singapore are most vulnerable to higher rates of infection, even though the last two have some of the highest health care expenditure per capita in the region. The countries that look to be the least vulnerable would be Taiwan and Korea, though ironically, Korea is one of the two Asian countries with confirmed cases of swine flu, illustrating the random nature of the spread of disease.

■ Assuming equal rates of infection, economies most dependent on transport/tourism could take the biggest hit to GDP growth — Our economic vulnerability index, which looks at the exposure of each economy to vulnerable sectors, finds that Thailand, Singapore and Hong Kong are likely to take the biggest hit on GDP growth. At the other end of the spectrum are Korea, Malaysia and Indonesia. Surprisingly, Taiwan does not fare too poorly, contrary to the SARS experience, though this was because Taiwan was more badly infected by SARS than many other countries.

To see full report: ASIAN MACRO VIEWS

>Cipla (FIRST GLOBAL)

What Happened Last Quarter…

Cipla Ltd. (CIPL.BO/CIPLA.IN) delivered an overall robust performance in Q4 FY09, with total operating revenues up 22% Y-o-Y, the EBIDTA margin (excluding forex loss/gains) expanding by 7.2 percentage points, and net earnings increasing by 41% Y-o-Y to Rs.7.7 bn, ahead of our estimate of Rs.7.4 bn. For the full year FY09, Cipla managed to post a topline growth of 25% Y-o-Y, as against management’s conservative guidance of 12-15% Yo-Y, though a forex loss of Rs.2.3 bn for the full year FY09 prevented the company from maintaining its net margin at the FY08 level, as guided by management. Nevertheless, the EPS for the quarter came in at Rs.9.9, marking a growth of 9% Y-o-Y, as against our estimated growth of 5% Y-o-Y in the EPS to Rs.9.5. We have moderately raised our FY10 revenue estimate from Rs.58.9 bn to Rs.60.4 bn, though we are keeping our FY10 EPS estimate intact at Rs.12.2 and continue to expect a robust bottom line growth of 23% for FY10. In view of Cipla’s robust performance in FY09, we believe that the company will be able to maintain its growth momentum, going forward, particularly given the two important drugs that are expected to be launched soon. For the European market, Cipla has Budesonide inhalers in Germany and Portugal and Salbutamol MDI in Denmark and Portugal. Plus, the recent demand for Tamiflu, on account of the sudden outbreak of Swine Flu, for which Cipla is the only Indian supplier, is likely to help the company comfortable achieve our estimates.

We believe that Cipla’s strong performance in FY09, recent demand for Tamiflu, positive hearing on Tarceva (Erlotinib), and improving near term earnings outlook will continue to drive the stock in the near term. Cipla’s earnings growth is likely to improve from 9% in FY09 to 23% in FY10, which, in turn, will drive an expansion in the company’s return ratios. We, therefore, maintain our ‘ST Outperform’ rating on Cipla.

To see full report: CIPLA

>Orbit Corporation Ltd (SBIcap Securities)

Orbit Corporation Ltd (OCL’s) result was disappointing, on the back of the deterioration in the macroeconomic environment, which has affected the whole real estate sector. OCL sales registered a decline of 60% in FY09 at Rs 2835 mn when compared to Rs 7055 mn in FY08. On QoQ basis the company showed a growth of 65% from Rs 483 mn in 3QFY09 to Rs 796 mn in 4QFY09. OCL was able to log some incremental sales in 4QFY09 which it was not able to do in 3QFY09. Sales transactions in 4QFY09 indicate stabilization of the real estate market. We believe that transactions will be slow in the high & premium segment where OCL primarily operates. We maintain our rating of market performer for the stock.

Incremental Sales gives evidence of revival:
The Company booked sales of around 16,521sq ft in 4QFY09 as compared to 3QFY09, where the company was not able to log any incremental sales. The value of the incremental sales for the 4QFY09 was Rs 360 mn. All of the sales were booked in the residential segment with no commercial transaction taking place is this quarter.

Incremental sales on with a huge discount:
The sales booked by the company in 4QFY09 were at a discount of ~30% - 35% from the rates quoted in 2 quarter of the fiscal year. The sales were mainly in the region of Lower Parel where rates have come down from Rs 23000-25000 quoted in Q2 FY09 to Rs 15000-16000 per sq ft in Q4FY09. Sales at Nepensea road have been at the rate of Rs. 35,500 per sq ft in Q4FY09.

Sales Backlog providing some buffer:
Net Sales registered a declined of 60% in FY09 at Rs 2835 mn from Rs 7055 mn in FY08. OCL which was not able to log any incremental sales in 3QFY09 saw some transaction happening in 4QFY09. This gives the signal that the real estate market is stabilizing. Moreover sales backlog of Rs 3994 mn in 4QFY09 provide some visibility in terms of future earnings.

Decrease in EBITDA and PAT margins:
OCL registered a 4% decrease in EBITDA margin from 49% in FY08 to 47% in FY09. 0n QoQ basis registered a decrease of 60% from 72% in 3QFY09 to 28% in 4QFY09. The PAT margins registered a decline of 69% on QoQ basis and decline of 62% from 33% in FY08 to 13% in FY09.

Increase in Debt a concern:
The debt has increased by Rs 216.14 mn, taking the total debt (including CCD’s) to Rs 6773.03 mn in 4QFY09. This has led the increase in DE ratio 1.2x TO 1.24x from Q3 FY09 to Q4FY09. OCL has already restructured debt of Rs 2 bn (NCD’s) for a period of 3 years. The company has to repay term loan of Rs 640 mn till Oct – March 2010.

Increase in interest cost and Sales Impairment effect:
OCL’s interest cost has increased by 15% on YoY basis to Rs 235.1 mn from Rs 205.2 mn, because of increase in loan; On QoQ basis the company registered a decline of 9%. The tax provision made in earlier quarters was in excess of the actual tax liability for the entire financial year due to impairment effect which was due to reduction in sales area of Orbit WTC from 333000 sq ft to 316000 sq ft. Hence, for Q4-FY09 no further tax was provided and excess tax
provision was written back.

Valuations
At the current price of Rs 71.9, the stock is trading at PE multiple of 7x and 5.9x for FY09 and FY10E earning respectively. Poor macroeconomic conditions have not only hampered corporate expansion plans but have also weaken the residential market due to uncertain job environment. However sales backlog of Rs 3994.5 mn in 4Q FY09 gives some visibility in terms of earnings in FY10 but we believe high end residential market will take more time to recover when compared to mid or affordable housing. We also believe that OCL’s inability to sell Hafeez Contractor House due to the weak real estate market can impact the revenue for next 1-2 quarters. We maintain our rating of Market performer for the stock.

To see full report: Orbit Corporation Ltd

>Spot gold steady, dollar provides support

London - Spot gold prices traded steady in Europe Monday and traders and analysts said as long as equity markets continue to inspire more confidence in the broader markets gold prices will likely drift.

At 0931 GMT, spot gold was trading at $913.20 a troy ounce, down 0.3% from Friday's close. Spot silver was at $13.88/oz, down 0.7%. Spot platinum was at $1,134.50/oz, down 1%. Spot palladium was at $237/oz, down 0.6%.

"Gold prices will struggle to make a convincing move higher if equities remain bullish," said Mitsubishi analyst Tom Kendall.

In the broader market, European stocks traded down and oil prices were lower. Lower oil prices fed into broader commodity weakness, Kendall said.

A weaker U.S. dollar is providing some support Monday, but investor demand has dissipated with exchange traded fund holdings remaining mostly unchanged. Kendall said in the short-term, gold prices will likely trade sideways to lower.

Gold holding in the SPDR Gold Trust ETF, listed in New York, were again unchanged at 1,104.09 metric tons, and moved only marginally since April 23.

On the technical charts, a close above $919/oz and $920/oz could inspire some buying, Kendall said.

Overall, recent price moves indicate market participants are uncertain about price direction, said Standard Bank. The market's uncertainty over its next direction is illustrated by falling volumes on COMEX and the liquidation of long speculative positions, the bank said.

Gold price dips should be viewed as a buying opportunity for now as long as $902.6/oz holds as support, said FuturesTechs analysts. "We'll switch to short-term neutrality if this level breaks," FuturesTechs said.

Spot gold prices down slightly, quiet trade

London - Spot gold prices are trading down slightly in a quiet market, says Mitsubishi analyst Tom Kendall. "Gold prices will struggle to make a convincing move higher if equities remain bullish," Kendall says. Adds that a weaker dollar is providing some support Monday, but investor demand has dissipated with exchange traded fund holdings remaining mostly unchanged. Says in the short-term, gold prices will likely trade-sideways-to-lower. Spot gold is trading at $913.50/oz, -0.3% from Friday's close.

Asia spot gold steady, weak dollar helps

Sydney - Spot gold prices were steady in Asia Monday, reacting to a weaker dollar, but overall activity was quiet, traders and analysts said.

At 0656 GMT, gold traded at $915.75 a troy ounce, down 45 cents on the New York close.

Better-than-expected U.S. non-farm payroll data Friday boosted equity markets and pared some of gold's gains, but prices held up relatively well.

While waning risk aversion on the back of signs of the U.S. economy bottoming out should clip gold, it appears to have a stronger impact on the dollar, which in turn is helping gold, said Phillip Futures Analyst Adrian Koh.

"I think the argument that concerns for rising inflation are also driving gold is premature. The market is still focused on the economy, and excess liquidity isn't going to hit for another two years down the road," Koh said.

Kitco Analyst Jon Nadler said inflation risk continues to be "practically nil at the moment. One does not come out of a deflation of this size by immediately flipping over into a highly inflationary environment. Here, and now, at best, we might have an absence of deflation."

Gold prices have shown "impressive resilience" in the past few weeks given lack of exchange traded fund buying and a rangebound dollar, Deutsche Bank said in a note.

Gold's outlook would depend on direction for the dollar. "We have argued for some time that we believe risks are more skewed to U.S. dollar weakness, which may be triggered by a relapse in global equity markets," Deutsche Bank said.

Gold holding in the SPDR Gold Trust ETF, listed in New York, were again unchanged at 1,104.09 metric tons, and moved only marginally since April 23.

At 0652 GMT, spot silver was down 2 cents at $13.97/oz. Platinum was down $5.50 at $1,141.50/oz and palladium was unchanged at $239.00/oz.

On Tocom, April 2010 gold futures were down Y13 at Y2,916 a gram, while platinum was down Y52 at Y3,633/gram.

Source: COMMODITIESCONTROL

>Nymex crude down on profit taking; econ unease

Singapore - Crude oil futures lost ground Monday in Asia as traders opted to take profit amid a lack of upside leadership from regional equities.

Sentiment remained cautious despite the recent run-up in oil and share prices, as concerns over the health of the global economy lingered amid steep job losses and bloated crude inventories in key markets.

"We continue to worry about demand in oil markets," said Peter Beutel, president at trading advisory firm Cameron Hanover.

"The assumption is that consumption will rebound if the economy turns. Nonetheless, the four-week aggregate averages seem to be getting worse each week."

On the New York Mercantile Exchange, light sweet crude futures for delivery in June traded at $57.98 a barrel at 0658 GMT, down 65 cents in the Globex electronic session.

Nymex heating oil for June slipped 134 points to 150.50 cents a gallon, while June reformulated gasoline blendstock traded at 168.25 cents, 230 points lower.

Nymex crude Friday spiked to $58.57 a barrel, the highest intraday price since Nov. 17, as traders interpreted a slower-than-expected pace in U.S. job losses as a sign the economy may be bottoming out.

The Labor Department said 539,000 nonfarm jobs were lost last month, lifting unemployment to 8.9% - the highest rate in a quarter century.

Still, oil analysts cautioned the market's near-term outlook remained uncertain, particularly with fundamentals staying weak.

The U.S. Energy Information Administration May 6 reported the country's crude stockpiles rose for the ninth straight week to 375.3 million barrels, the highest since 1990, despite aggressive output cuts by the Organization of Petroleum Exporting Countries.

"Macroeconomic expectations certainly do seem to have stabilized and then begun a process of some improvement," analysts at Barclays Capital, led by Paul Horsnell, said in a report late Friday.

"Stronger price performance and a better macroeconomic environment - at least in terms of expectations - are both positive for market sentiment, but the jury is still out as to when the flow of oil market data could become the dominant source of support for oil."

Looking ahead, a slew of official reports are due this week, potentially offering further clues of where global oil consumption may be headed.

The EIA will release its monthly report Tuesday as well as its outlook for summer fuels demand, followed by OPEC on Wednesday, then the International Energy Agency, the energy security watchdog of the Organization for Economic Cooperation and Development, on Thursday.

At 0658 GMT, oil prices on London's ICE Futures exchange were mixed, with June Brent crude down 59 cents at $57.55 a barrel.

Gasoil for May, expiring Tuesday, changed hands at $481.25 a metric ton, chalking up $4.25 from Friday's settlement.

MCX crude oil erodes early gain

Mumbai - Crude oil at MCX eroded the early gain and traded in the negative territory during the evening session Monday. The domestic market fell down in unison with international market which tumbled by more than 2.80 per cent during the intra day session. The investors preferred to book profit ahead of the OPEC meeting.

The uncertainty on the economic recovery is still hanging on the market sentiments, keeping the prices down below USD 58 a barrel.

June Crude oil at New York Mercantile Exchange (NYMEX) was seen to trade at USD 57.13 [-1.50] a barrel. The market made high of USD 58.60 during the intra day session.

The price of crude oil at MCX was traded lower at 6.03 PM as May contract quoted at Rs 2831.00 [-26.00] a barrel. The contract traded in a range of Rs 2878-2812 a barrel. The far month contracts also traded down as June and July contract quoted at Rs 2888.00 [-31.00] and Rs 2940.00 [-34.00] a barrel each respectively.

OPEC meeting provides oil price uncertainty

London - Outcome of the upcoming OPEC meeting provides uncertainty for the oil market short-term, says Edward Meir at MF Global. "The cartel may feel under pressure to go along with yet another round of cuts, as hawks in the group argue that, despite rising prices, crude stockpiles are increasing and could derail the recent gains, perhaps once the recent infatuation with equities is over...On the other hand, if political pressures prevail, OPEC may pass on the cuts altogether, stressing increased compliance instead." ICE June Brent -93c at $57.21/bbl, Nymex June light, sweet -$1.07 at $57.56/bbl.

Source: COMMODITIESCONTROL