Thursday, March 5, 2009

>Asia Economic Alert (NOMURA)

Asia Economic Alert

India: RBI cuts policy rates by 50bp, as expected

● In an inter-meeting move, the RBI cut the repo and reverse repo rates by 50bp each to 5.00% and 3.50%, respectively, citing the “deeper and wider than anticipated” growth slowdown.

● With the election code of conduct in place, fiscal policy is largely constrained until after the election in May, leaving monetary policy as the first line of defence against a growth slowdown.

● We continue to expect another 100bp cuts in both the repo and reverse repo rates by mid-2009.

In an inter-meeting move, the Reserve Bank of India (RBI) cut the repo and reverse repo rates by 50bp each to 5.00% and 3.50%, respectively, in line with market expectations. The cash reserve ratio was left unchanged at 5.0%, given sufficient liquidity in the system. Cumulatively, the RBI has now cut the repo rate by 400bp from its peak and the reverse repo rate by 250bp (Figure 1). The recent raft of weaker-than-expected economic data, including the sharp slowdown in real GDP growth to 5.3% y-o-y in 4Q08 from 7.6% in 3Q, along with a weakening global economic outlook, falling business confidence and decelerating investment activity, motivated this cut. According to the RBI, the impact of the global downturn on India “has turned out to be deeper and wider than anticipated earlier.”

We interpret this rate cut as a clear signal from the RBI to commercial banks to cut both deposit and lending rates further. While most public sector banks and some private and foreign banks have reduced their lending rates, in general lending rates have been slow to adjust and have not come down as much as policy rates, largely due to still-high deposit rates. The need for banks to keep borrowing at high-cost deposit rates is likely to fall in the coming months, as we expect credit growth to ease sharply to below 15% y-o-y by 4Q09 from about 20% currently and from a peak of nearly 30% in November 2008. However, concerns over rising credit risk will remain, suggesting that banks are likely to tighten their lending conditions over the coming quarters.

To see full report: Economic Alert

>Daily Market Preview (MARWADI FINANCIAL)


* The rate cut will boost positives of global markets. The RBI has done the final act - one more round of rate cuts and we feel that this move is continuation with fiscal & monetary imperative to bolster sagging economy. But it’s still uncertain when Demand cycle turns upward and
downward growth is captured.

* Indian markets are expected to be in recovery mode as world markets also rallied smartly from their much oversold territory. The narrowed discount on the Nifty shows some sign of short covering and we believe that markets to move upto 2700. Accumulate Metals, Banking, and FMCG stocks

To see full report: Market Preview 05-03-2009

>Daily Technical Report (MARWADI FINANCIAL)


Wall street snaps 5-day losing streak, Asian market up as china’s wen pledges increased spending. Reserve bank fulfill the much awaited reduction in Key policy rate, both Repo and R-repo rate cut by 0.5%. From this decision we expect that the liquidity situation, especially in PSU bank is increase. Further loan rate cut and lending increase from this levels. Housing and other interest sensitive sector get the benefit from this decision, and provide some base to create to demand. So this is allover good effects to Indian economy and stabilization of currency, that is good sign to Indian economy.

On technical note we expect market open with positive Gap and through the day will remain in positive territory. Today especially banking counters and interest sensitive counters looks attractive so concentrate in that segment. Intraday trader it is advisable to make fresh position after conformation of the trend and in morning session open with Gap up but it may consolidate further so wait for that consolidation and after it is recommend to make fresh position.

Today sensex trade in the range of 8475-8345 And Nifty in the range of 2670-2630

To see full report: Technical Report 05-02-2009

>Metals & Mining Sector (CITI)


Broad Declines in Pricing and Micro Indicators

* Steel Prices – Pricing fell globally with US HRC declining 4% to $500/ton and while US rebar is still listed at $575/ton, import rebar offers fell 5% to $455/ton. European and China HRC fell 4-5% and China rebar fell 6%. US OCTG prices maintained their downward trajectory falling 8% to $2,160/ton. On the input side, European shredded scrap fell 27% to $180/ton and China iron ore declined 5% to $81/tonne.

* Steel Indicators – Steel mill utilization slipped to 41.8% from 45.4% the prior week. The Feb ISM Manufacturing index will be issued on Monday (Mar 2nd) at 10AM ET. Historically, this has been one of the most reliable leading indicators (by ~3 months) for steel demand and mill utilization rate.

* Coal Prices – Domestic coal prices are unchanged due to lack of activity with CApp indicated at $68.20/ton, IL Basin at $55/ton, PRB at $13/ton and NApp at $66/ton. However, trade press Platts noted that small spot volumes of noncompliance (1.5 lb SO2) CApp is available at a discount (adjusted for grade), which would imply a compliance CApp coal value of ~$65/ton. Internationally, seaborne thermal (10,800 btu/lb) declined by $10/tonne to $58/tonne.

* Coal Indicators – For the week ending Feb 21st, US production increased by 0.3% YoY and electricity generation declined by 4.2%. With colder weather subsiding on a national basis, the impact of the industrial slowdown on electricity demand is more evident. YTD, coal production has declined 1.0% vs a 1.5% decline in electricity generation.

* Specialty Metals – Global passenger load factors (PLF) continued to decline in January, falling 2.3% YoY to 72.8% suggesting weaker demand for planes and metals such as titanium and nickel alloys. Developing markets were the hardest hit with Asia Pacific PLF falling 3.5% YoY to 73.5% and the Middle East dropped 4.7% YoY to 71.9%. Ferrotitanium dropped 6.2% to $1.36/lb.

To see full report: Metal Sector