Key developments during the week
• India Jan‐Mar GDP growth 5.3%; FY12 estimate cut to 6.5%
• India govt FY12 fiscal deficit 5.8% of GDP vs 5.9% Budget aim
• India govt FY12 tax mop‐up 8.906 trln rupees vs 9.017 trln aim
• India Apr exports $24.45 bln, up 3.2% on year
• India May HSBC manufacturing PMI flat at 54.8 vs 54.9 Apr
• India Apr core infrastructure sector growth 2.2% vs 4.2% yr ago
• Petronet LNG's Kochi terminal to begin commercial ops in Jan
• GAIL to use French co Axens' technology for Pata 1‐butene unit
• CRISIL to buy UK‐based analytics firm for up to 2.5 bln rupees
• JFE Steel inter‐se transfers entire 16.2% stake in JSW Steel to arm
• Govt cuts base import price of gold by 1%, silver by 2%
• Cabinet OKs new telecom policy; aims at pan‐India free roaming Bharti selects Alcatel‐Lucent as tech partner for faster broadband
• India eases qualified foreign invest norms; expands list of nations
• BHEL commissions 250 MW unit at Uttar Pradesh thermal power plant
• GVK's Alpha coal project gets environment clearance from Australia
• Gujarat NRE arm signs coking coal supply pact with Jindal Steel
• Alstom T&D gets 960‐mln‐rupee order from Maharashtra power utility
• MOIL OKs vertical shaft project at Balaghat mine to up output
• RIL sources say govt needs to make KG‐D6 gas price LNG‐linked
Domestic events week ahead
• Jun 05: Services PMI and composite PMI for May, by HSBC.
Global events week ahead
•Jun 05 : Final Services Purchasing Managers' Index (PMI) & Retail Sales m‐o‐m of Europe
• Jun 06 : Revised GDP q‐o‐q of Europe & German Industrial Production m‐o‐m, Crude Oil Inventories of US
• Jun 07 : Services Purchasing Managers' Index (PMI) of Britain, Unemployment Claims of US
• Jun 08 : Final GDP q‐o‐q of Japan, Producer Price Index Input m‐o‐m of Britain, Trade Balance of US
Weekly Sector Outlook and Stock Picks
Auto sector ‐ Seen flat‐to‐down; to track global markets
Auto stocks are seen flat‐to‐down in this week on subdued May sales numbers, the recent steep hike in petrol prices, andweakening of the rupee against the dollar. However, positive on Mahindra & Mahindra Ltd, which reported a 28% rise in total vehicle sales in May. The market will also look out for any announcement on petrol price cut. There have been speculations that oil‐marketing companies might cut petrol prices by 1.50‐2.00 rupees. Any major development in the global markets could also set the trend for the auto stocks.
Pharma sector – Seen outperforming broad market this week
Pharmaceutical stocks are expected to outperform the broad market this week. Investors are expected to continueoffloading their stakes this week as the broad market currently lacks direction amid global uncertainties and domestic worries. Pharmaceutical stocks, being defensive in nature, will tend to move against the broad market trend.
Sun Pharmaceutical Industries, whose management's 18‐20% sales guidance for the next two years. The company is also likely to announce a few acquisitions outside the US market. Ranbaxy Laboratories is also likely to rise this week as street expect the company to launch its acne‐treating drug as soon as it gets approval from US Food and Drug Administration
Capital Goods sector ‐ To trade with negative bias this week
Shares of capital goods and engineering companies are likely to trade with a negative bias this week in the absence of any positive triggers. Most capital goods shares are seen declining following disappointing gross domestic product growth data, released Thursday. Growth in the Indian economy moderated to 5.3% in the quarter ended March. Poor performance of the industry sector hit economic growth. The industry sector grew 3.4% in 2011‐12 as against 7.2% a year
ago. During the year, mining sector contracted 0.9% from a growth of 5% a year ago. Growth in the manufacturing sector slowed to 2.5% in the year ended March from 7.6% a year ago, while construction sector grew 5.3% during the year, as against 8.0%. These sectors are the key contributors to capital goods and engineering companies' order books. In the past two trading sessions, the BSE Capital Goods index has declined nearly 4%.
High interest rates, delays in government approvals, uncertain external environment and overall weak business sentiments have had a huge bearing on the industrial growth. Even as overall sentiment towards heavy engineering segment continues to remain weak
FMCG Sector ‐ Seen rangebound on defensive play in weak market
Shares of fast‐moving consumer goods companies may move in a narrow range in the week ahead as the weakness in the broad market may prompt investors to stay put in these stocks, which are generally considered a defensive bet in a falling market. The clear demand outlook for products of these companies and their good set of numbers in the Jan‐Mar quarter are also likely to support these stocks. This week, while the BSE's FMCG index remained flat, the National Stock
Exchange's Nifty and BSE's Sensex lost 1.6% each.
Cement Sector ‐ Seen rangebound with negative bias this week
Shares of major cement companies are seen rangebound this week amid lack of sector‐specific triggers. However, the bias is likely to be negative on low demand outlook as the sector enters a seasonally weak period. Demand for cement typically dries by mid‐June, as construction activity slows down during monsoon.
Shares of cement makers are likely to remain under pressure on expectation that the Competition Commission of India,which is investigating allegations of price rigging by companies, may announce its order soon.
IT Sector ‐ Rangebound this week amid lack of triggers
Shares of major information technology companies are likely to trade rangebound this week, and may take cues from the broad market amid lack of any sector‐specific cues. The bias may, however, remain negative this week as global demand for information technology services remains under pressure. Companies are banking on demand revival in the second half of the current financial year, failing which they may not meet their earnings guidance. Most sector majors, except Tata Consultancy Services, have already hinted at tepid growth for 2012‐13 (Apr‐Mar). While industry body NASSCOM expects the sector to grow 11‐14%, sector bellwether Infosys has guided for 8‐10% growth. TCS is the only company to have confidently said it will beat industry growth. Investors are likely to eye the movement of rupee against the dollar. Software exporters are likely to see a strong benefit from the weakness in rupee. Most large Indian IT companies getnearly 70% of their revenue from the US.
Oil Sector ‐ Oil retailers seen rangebound
Shares of oil marketing companies will track announcement of a possible petrol price cut as well as crude prices and rupee‐dollar movement this week, but may remain mostly in range. With Finance Minister Pranab Mukherjee stressing on efforts to reduce the burgeoning fiscal deficit by cutting government expenditure and subsidies, the market is hoping that government may soon take a call on raising diesel and cooking gas prices.
Currently, the three state‐owned oil marketing companies Indian Oil Corp Ltd, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Lt are losing revenue worth 4.57 bln rupees daily on sale of fuels at subsidised rates. A cut in petrol prices,due to decline in crude prices, though may have a momentary negative impact on the stocks. The companies are widely expected to announce an over 1.60 rupees per litre cut in the price of petrol soon. Crude oil prices, however, continued to
soften, which eased the pressure on these oil companies.
Telecom Sector ‐ To eye EGoM meet on spectrum auction norms
Shares of major telecom operators will eye the upcoming meeting of the Empowered Group Of Ministers, which is likely to take a decision on the final set of recommendations on spectrum auction norms. The meeting is slated for Tuesday. The Telecom Commission, in its meet on May 26, had kept the spectrum reserve price, recommended by the Telecom Regulatory Authority of India, unchanged and has asked the regulator to submit an analysis of the impact of the proposal
on tariffs. TRAI will submit a circle‐wise impact assessment of the base price on tariffs. TRAI's analysis report, along with the final set of recommendations by the telecom department, will be presented before the ministers' panel. The overall trend in telecom stocks this week is, however, seen remaining weak tracking the bearishness in the broad market.
Steel Stocks Outlook ‐ Seen down this week tracking indices
Shares of major steel companies are likely to trade with a negative bias this week tailing the key indices as slowdown in domestic and global economy will weigh on investor sentiment. The Indian economy grew at 5.3% in Jan‐Mar, its slowest pace in over seven years and was way below consensus estimate of 6.1%. The GDP had expanded 6.1% in Oct‐Dec and 9.2% a year ago. Also, with uncertainty over the European political scenario and slowdown in China, the macroeconomic
picture globally remains gloomy. Last week, SAIL surprised the market by posting better than expected results on better volumes and improved realisations. The public sector steel maker's Jan‐Mar net profit rose 3% on year to 1577 cr rupees.
Bank sector‐ Weak; SBI, Bank of Baroda seen as top picks
Bank stocks are expected to remain slightly weak in line with the rest of the equity market. Comments from the Reserve Bank of India Deputy Governor Subir Gokarn indicating that the slowdown in growth was creating more room for policyeasing is seen as positive for banks. Hopes for a repo ra te cut in June, which were low earlier have now risen after this comment and bank stocks will take comfort from this. So far, banks have cut loan rates with not enough cut in deposit
rates, if repo rate is cut, then deposit rates will also go down substantially. Any reduction in deposit rates will help banks improve their net interest margins and subsequently their profitability.
Citing concerns on as set quality, Fitch Ratings' on Friday revised Indian Bank's outlook to negative from stable, which can lead to selling pressure in the banks' shares.
Market Range for Week 4700‐ 4980
Resistance – Nifty facing Resistance level @4880 level above this level it may go up to @4950 &@ 4980 level.
Support ‐ Support comes for market @4820 level for Nifty; below this level Nifty next support @4780 and @4720 will be the major support for Market.
Technical – Last week Nifty opened at 4931 & it made a high of 5020.Last week we have seen some selling from higher lelvel. Nifty made a low of 4831 & closed at 4841.Last week Nifty drag 189 points from its high & on weekly basis it closed at 79 point’s lower. Sensex made a weekly high of 16544 & a low of 15933 almost it drags 611 points in the week from its high.So overall last week we have seen some profitbooking from higher level.
Weekly Nifty View –
Last week we had expected market range (4800‐5180) & market made a high of 5020 & made a low of 4831, so overall it hold over both side range.In last week report we had mentioned, on daily chart market had made “Morning Star” formation & osilator was in oversold, but it was facing resistance on lower channel line,on weekly chart it was taking support around 200WMA
because of all that we had mentioned above 4950 we can see some up side & market made a high of 5020 & from there we have seen some selling in the market.Now on daily chart short term moving avg.(5‐20)SMA showing negative crossover & osilator showing negative crossover.On weekly chart market taking support at 200 WMA, but still not able to cross upper channel line.So overall still 4950‐4960 will be major resistacne for market & close below 4800‐4780 can see
some more selling pressure in the market, so still should use caution approach at higher level.
On Friday, the Dow plunged 275 points, or 2.2%, the biggest one‐day drop since November.The S&P500 lost 32 points, or 2.5% & the Nasdaq dropped 80 points, or 2.8%.
Market Commentary ‐
News flow from euro‐zone will continue to dictate near term trend on the domestic bourses as risk aversion arising from euro‐zone debt worries rattled global markets in the month just gone by. The barometer index, BSE Sensex, lost 6.35% in May 2012 on euro‐zone debt worries. Concerns about Greece's possible exit from the European Union rattled global equity markets after the splintered results of a parliamentary election on 6 May 2012 left no party able to put together a government. That led the country to call another election on 17 June 2012. Shares of exporters will be in focus as Commerce Minister Anand Sharma unveils the foreign trade policy for 2012‐13 on Tuesday, 5 June 2012. The economic crisis in the US and Europe is hitting India's exports. Both these markets account for about one‐third of country's total shipments. The expansion in the country's merchandise exports, which grew by as much as 82% in July 2011, came down to 3.2% in April 2012 due to the demand slowdown in western markets. Infrastructure and cement stocks will be in focus after Prime Minister Manmohan Singh on Friday, 1 June 2012, approved the setting up of a mechanism that will track the progress of all major infrastructure projects to avoid delays in
their completion. The government will periodically review the progress of projects under the Investment Tracking System to ensure that issues are quickly identified and resolved. All public‐sector projects with an investment of Rs 1000 crore or more will be monitored by the National Manufacturing Competitive Council. The Department of Financial Services will monitor similar‐sized projects of private companies, and the two bodies will report the progress of projects
to the prime minister every quarter.
• India Jan‐Mar GDP growth 5.3%; FY12 estimate cut to 6.5%
• India govt FY12 fiscal deficit 5.8% of GDP vs 5.9% Budget aim
• India govt FY12 tax mop‐up 8.906 trln rupees vs 9.017 trln aim
• India Apr exports $24.45 bln, up 3.2% on year
• India May HSBC manufacturing PMI flat at 54.8 vs 54.9 Apr
• India Apr core infrastructure sector growth 2.2% vs 4.2% yr ago
• Petronet LNG's Kochi terminal to begin commercial ops in Jan
• GAIL to use French co Axens' technology for Pata 1‐butene unit
• CRISIL to buy UK‐based analytics firm for up to 2.5 bln rupees
• JFE Steel inter‐se transfers entire 16.2% stake in JSW Steel to arm
• Govt cuts base import price of gold by 1%, silver by 2%
• Cabinet OKs new telecom policy; aims at pan‐India free roaming Bharti selects Alcatel‐Lucent as tech partner for faster broadband
• India eases qualified foreign invest norms; expands list of nations
• BHEL commissions 250 MW unit at Uttar Pradesh thermal power plant
• GVK's Alpha coal project gets environment clearance from Australia
• Gujarat NRE arm signs coking coal supply pact with Jindal Steel
• Alstom T&D gets 960‐mln‐rupee order from Maharashtra power utility
• MOIL OKs vertical shaft project at Balaghat mine to up output
• RIL sources say govt needs to make KG‐D6 gas price LNG‐linked
Domestic events week ahead
• Jun 05: Services PMI and composite PMI for May, by HSBC.
Global events week ahead
•Jun 05 : Final Services Purchasing Managers' Index (PMI) & Retail Sales m‐o‐m of Europe
• Jun 06 : Revised GDP q‐o‐q of Europe & German Industrial Production m‐o‐m, Crude Oil Inventories of US
• Jun 07 : Services Purchasing Managers' Index (PMI) of Britain, Unemployment Claims of US
• Jun 08 : Final GDP q‐o‐q of Japan, Producer Price Index Input m‐o‐m of Britain, Trade Balance of US
Weekly Sector Outlook and Stock Picks
Auto sector ‐ Seen flat‐to‐down; to track global markets
Auto stocks are seen flat‐to‐down in this week on subdued May sales numbers, the recent steep hike in petrol prices, andweakening of the rupee against the dollar. However, positive on Mahindra & Mahindra Ltd, which reported a 28% rise in total vehicle sales in May. The market will also look out for any announcement on petrol price cut. There have been speculations that oil‐marketing companies might cut petrol prices by 1.50‐2.00 rupees. Any major development in the global markets could also set the trend for the auto stocks.
Pharma sector – Seen outperforming broad market this week
Pharmaceutical stocks are expected to outperform the broad market this week. Investors are expected to continueoffloading their stakes this week as the broad market currently lacks direction amid global uncertainties and domestic worries. Pharmaceutical stocks, being defensive in nature, will tend to move against the broad market trend.
Sun Pharmaceutical Industries, whose management's 18‐20% sales guidance for the next two years. The company is also likely to announce a few acquisitions outside the US market. Ranbaxy Laboratories is also likely to rise this week as street expect the company to launch its acne‐treating drug as soon as it gets approval from US Food and Drug Administration
Capital Goods sector ‐ To trade with negative bias this week
Shares of capital goods and engineering companies are likely to trade with a negative bias this week in the absence of any positive triggers. Most capital goods shares are seen declining following disappointing gross domestic product growth data, released Thursday. Growth in the Indian economy moderated to 5.3% in the quarter ended March. Poor performance of the industry sector hit economic growth. The industry sector grew 3.4% in 2011‐12 as against 7.2% a year
ago. During the year, mining sector contracted 0.9% from a growth of 5% a year ago. Growth in the manufacturing sector slowed to 2.5% in the year ended March from 7.6% a year ago, while construction sector grew 5.3% during the year, as against 8.0%. These sectors are the key contributors to capital goods and engineering companies' order books. In the past two trading sessions, the BSE Capital Goods index has declined nearly 4%.
High interest rates, delays in government approvals, uncertain external environment and overall weak business sentiments have had a huge bearing on the industrial growth. Even as overall sentiment towards heavy engineering segment continues to remain weak
FMCG Sector ‐ Seen rangebound on defensive play in weak market
Shares of fast‐moving consumer goods companies may move in a narrow range in the week ahead as the weakness in the broad market may prompt investors to stay put in these stocks, which are generally considered a defensive bet in a falling market. The clear demand outlook for products of these companies and their good set of numbers in the Jan‐Mar quarter are also likely to support these stocks. This week, while the BSE's FMCG index remained flat, the National Stock
Exchange's Nifty and BSE's Sensex lost 1.6% each.
Cement Sector ‐ Seen rangebound with negative bias this week
Shares of major cement companies are seen rangebound this week amid lack of sector‐specific triggers. However, the bias is likely to be negative on low demand outlook as the sector enters a seasonally weak period. Demand for cement typically dries by mid‐June, as construction activity slows down during monsoon.
Shares of cement makers are likely to remain under pressure on expectation that the Competition Commission of India,which is investigating allegations of price rigging by companies, may announce its order soon.
IT Sector ‐ Rangebound this week amid lack of triggers
Shares of major information technology companies are likely to trade rangebound this week, and may take cues from the broad market amid lack of any sector‐specific cues. The bias may, however, remain negative this week as global demand for information technology services remains under pressure. Companies are banking on demand revival in the second half of the current financial year, failing which they may not meet their earnings guidance. Most sector majors, except Tata Consultancy Services, have already hinted at tepid growth for 2012‐13 (Apr‐Mar). While industry body NASSCOM expects the sector to grow 11‐14%, sector bellwether Infosys has guided for 8‐10% growth. TCS is the only company to have confidently said it will beat industry growth. Investors are likely to eye the movement of rupee against the dollar. Software exporters are likely to see a strong benefit from the weakness in rupee. Most large Indian IT companies getnearly 70% of their revenue from the US.
Oil Sector ‐ Oil retailers seen rangebound
Shares of oil marketing companies will track announcement of a possible petrol price cut as well as crude prices and rupee‐dollar movement this week, but may remain mostly in range. With Finance Minister Pranab Mukherjee stressing on efforts to reduce the burgeoning fiscal deficit by cutting government expenditure and subsidies, the market is hoping that government may soon take a call on raising diesel and cooking gas prices.
Currently, the three state‐owned oil marketing companies Indian Oil Corp Ltd, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Lt are losing revenue worth 4.57 bln rupees daily on sale of fuels at subsidised rates. A cut in petrol prices,due to decline in crude prices, though may have a momentary negative impact on the stocks. The companies are widely expected to announce an over 1.60 rupees per litre cut in the price of petrol soon. Crude oil prices, however, continued to
soften, which eased the pressure on these oil companies.
Telecom Sector ‐ To eye EGoM meet on spectrum auction norms
Shares of major telecom operators will eye the upcoming meeting of the Empowered Group Of Ministers, which is likely to take a decision on the final set of recommendations on spectrum auction norms. The meeting is slated for Tuesday. The Telecom Commission, in its meet on May 26, had kept the spectrum reserve price, recommended by the Telecom Regulatory Authority of India, unchanged and has asked the regulator to submit an analysis of the impact of the proposal
on tariffs. TRAI will submit a circle‐wise impact assessment of the base price on tariffs. TRAI's analysis report, along with the final set of recommendations by the telecom department, will be presented before the ministers' panel. The overall trend in telecom stocks this week is, however, seen remaining weak tracking the bearishness in the broad market.
Steel Stocks Outlook ‐ Seen down this week tracking indices
Shares of major steel companies are likely to trade with a negative bias this week tailing the key indices as slowdown in domestic and global economy will weigh on investor sentiment. The Indian economy grew at 5.3% in Jan‐Mar, its slowest pace in over seven years and was way below consensus estimate of 6.1%. The GDP had expanded 6.1% in Oct‐Dec and 9.2% a year ago. Also, with uncertainty over the European political scenario and slowdown in China, the macroeconomic
picture globally remains gloomy. Last week, SAIL surprised the market by posting better than expected results on better volumes and improved realisations. The public sector steel maker's Jan‐Mar net profit rose 3% on year to 1577 cr rupees.
Bank sector‐ Weak; SBI, Bank of Baroda seen as top picks
Bank stocks are expected to remain slightly weak in line with the rest of the equity market. Comments from the Reserve Bank of India Deputy Governor Subir Gokarn indicating that the slowdown in growth was creating more room for policyeasing is seen as positive for banks. Hopes for a repo ra te cut in June, which were low earlier have now risen after this comment and bank stocks will take comfort from this. So far, banks have cut loan rates with not enough cut in deposit
rates, if repo rate is cut, then deposit rates will also go down substantially. Any reduction in deposit rates will help banks improve their net interest margins and subsequently their profitability.
Citing concerns on as set quality, Fitch Ratings' on Friday revised Indian Bank's outlook to negative from stable, which can lead to selling pressure in the banks' shares.
Market Range for Week 4700‐ 4980
Resistance – Nifty facing Resistance level @4880 level above this level it may go up to @4950 &@ 4980 level.
Support ‐ Support comes for market @4820 level for Nifty; below this level Nifty next support @4780 and @4720 will be the major support for Market.
Technical – Last week Nifty opened at 4931 & it made a high of 5020.Last week we have seen some selling from higher lelvel. Nifty made a low of 4831 & closed at 4841.Last week Nifty drag 189 points from its high & on weekly basis it closed at 79 point’s lower. Sensex made a weekly high of 16544 & a low of 15933 almost it drags 611 points in the week from its high.So overall last week we have seen some profitbooking from higher level.
Weekly Nifty View –
Last week we had expected market range (4800‐5180) & market made a high of 5020 & made a low of 4831, so overall it hold over both side range.In last week report we had mentioned, on daily chart market had made “Morning Star” formation & osilator was in oversold, but it was facing resistance on lower channel line,on weekly chart it was taking support around 200WMA
because of all that we had mentioned above 4950 we can see some up side & market made a high of 5020 & from there we have seen some selling in the market.Now on daily chart short term moving avg.(5‐20)SMA showing negative crossover & osilator showing negative crossover.On weekly chart market taking support at 200 WMA, but still not able to cross upper channel line.So overall still 4950‐4960 will be major resistacne for market & close below 4800‐4780 can see
some more selling pressure in the market, so still should use caution approach at higher level.
On Friday, the Dow plunged 275 points, or 2.2%, the biggest one‐day drop since November.The S&P500 lost 32 points, or 2.5% & the Nasdaq dropped 80 points, or 2.8%.
Market Commentary ‐
News flow from euro‐zone will continue to dictate near term trend on the domestic bourses as risk aversion arising from euro‐zone debt worries rattled global markets in the month just gone by. The barometer index, BSE Sensex, lost 6.35% in May 2012 on euro‐zone debt worries. Concerns about Greece's possible exit from the European Union rattled global equity markets after the splintered results of a parliamentary election on 6 May 2012 left no party able to put together a government. That led the country to call another election on 17 June 2012. Shares of exporters will be in focus as Commerce Minister Anand Sharma unveils the foreign trade policy for 2012‐13 on Tuesday, 5 June 2012. The economic crisis in the US and Europe is hitting India's exports. Both these markets account for about one‐third of country's total shipments. The expansion in the country's merchandise exports, which grew by as much as 82% in July 2011, came down to 3.2% in April 2012 due to the demand slowdown in western markets. Infrastructure and cement stocks will be in focus after Prime Minister Manmohan Singh on Friday, 1 June 2012, approved the setting up of a mechanism that will track the progress of all major infrastructure projects to avoid delays in
their completion. The government will periodically review the progress of projects under the Investment Tracking System to ensure that issues are quickly identified and resolved. All public‐sector projects with an investment of Rs 1000 crore or more will be monitored by the National Manufacturing Competitive Council. The Department of Financial Services will monitor similar‐sized projects of private companies, and the two bodies will report the progress of projects
to the prime minister every quarter.
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