India Market Ignores Higher Inflation

Elena
22 Dec, 2006
New York City

Ahead of three day weekend market showed a slight upward bias. India Sensex picked up momentum to close up in the final hour of trade. Pharma, engineering, metal and select auto stocks rallied while banking stocks declined. Hero Honda led the advancers and Satyam led the decliners. Inflation at wholesale level continues to trend upwards on rising food prices. U.K. based Vodafon said that it plans to bid for controlling stake in Hutchinson Essar.

[R]10:30AM The Sensex finished Friday up on strong buying in large-caps.[/R]
The Sensex on BSE closed 86.88 points, or 0.65%, higher at 13,471.74. The market-breadth was strong with 1,501 shares that advanced, 1,069 that declined and 92 that stayed unchanged. For every two decliners there were three advancers. From the Sensex stocks, there were 22 advancers while the rest declined. The turnover on BSE was Rs 4,188.60 crore, lower than Rs 4,369 crore on Thursday. The turnover on NSE was Rs 7,570.55 crore, compared to Rs 7,936.67 crore on Thursday.

Economic news

The wholesale price index advanced 5.32% in the last twelve months ending on December 9th, higher than the previous week rise of 5.16% on higher food prices. The annual inflation rate was 4.39% a year ago.

The Reserve Bank of India today allowed 49% foreign investments in stock exchanges, depositories and clearing corporations in accordance with SEBI regulations. Foreign direct investment has been limited to 26%, and foreign funds can obtain up to 23% stake through buying in the secondary market. This is in preparation of allowing local stock and commodity exchanges to seek capial from international investors.

Vodafon is close to making a bid for a controlling stake in Hutchinson Essar, the fourth largest mobile telecom in the country. The bid is likely to value the company at more than $15 billion. Reliance Mobile is in the proces of raising funds along with its U.S. based private equity group Blackstone. Malaysia based Maxis Group is also looking to bid for the company.

Most-active stocks

Tech Mahindra was the most active stock on BSE with turnover of Rs 485.50 crore followed by Sobha Developers and Great Offshore.

Advancers

Hero Honda led the gainers, 3.74% higher to Rs 755.10. The stock traded in a broad range between Rs 728 and Rs 759. L&T up 2.92% to Rs 1,440 and Grasim rose 2.06% to Rs 2,718.10.

IT stocks were in demand as Wipro gained 3.02% to Rs 575, Infosys edged up 0.41% to Rs 2,170 and TCS gained 1.22% to Rs 1,150. Tata Steel advanced 1.88% to Rs 476.40 hitting an intra-day high of Rs 479.95.

Index heavy Reliance Industries added 0.85% to Rs 1,272 on 3.97 lakh shares. ICICI Bank advanced marginally to Rs 855 after it announced it had borrowed $1 billion yen-denominated loans from overseas markets to fund credit growth.

Cement shares surged on firm cement prices. Gujarat Ambuja led the sector, up 2.03% to Rs 135.50. Other cement shares also gained with ACC gaining 1.59% to Rs 1046, Shree Cement, up 1.21% to Rs 1,380 and UltraTech Cement advancing 2.48% to Rs 1,038.

Mahindra & Mahindra advanced 2.31% to Rs 870 following the statement from the company that it agreed to buy 90.47% of German auto parts firm Schoneweiss & Co. GmbH for an undisclosed sum.

Tech Mahindra surged 10.59% to Rs 1,650.50 sustaining its recent surge after winning a mega $1 billion five-year outsourcing deal from BT to provide strategic sourcing services.

Decliners

Satyam Computer led the decliners, down 1.03% to Rs 461. The company announced on Thursday that its back office unit Nipuna Services had signed an animation order worth $25 million. Nipuna will partner with 4K Animation of the U.K.

HDFC Bank shed 0.44% to Rs 1,006. The bank has increased its prime lending rates by 1.5% to 13% effective December 20. It has also increased deposit rates by 50 to 75 basis points on various maturities over the past month.

Other decliners included Tata Motors dipping 0.81% to Rs 858, ITC off 0.76% to Rs 169.45 and Hindustan Lever losing 0.57% to Rs 218.70.


[R]9:45AM Stocks opened lower on profit-taking ahead of holiday weekend.[/R]
U.S. stock markets opened lower, despite positive economic data, as traders turned to profit-taking ahead of the Christmas holiday weekend. Tech stocks, which provided strength to the market in pre-open trading, were in focus. Research In Motion ((RIMM)), BlackBerry device maker, posted 47% profit jump on strong shipments of its handheld devices. The company reported a profit of 93 cents per share, up from 63 cents per share last year. Quarterly sales rose 49%. The stock rose 2.5% in early trading. Micron Technology ((MU)) rose 4.2% after the chip maker said that its Q3 profit tripled. The biggest advancer among technology stocks was Red Hat ((RHT)), which surged 14% after the maker of computer operating systems reported Q3 earnings, and was able to deflect competition from Oracle Corp. In the first hour of trading, the Dow Jones industrial average fell 53.68, or 0.43 percent, to 12,367.57. Blue chips are backing off record levels seen earlier this week. The Standard & Poor''s 500 index was down 4.74, or 0.33%, at 1,413.56, and the Nasdaq composite index fell 7.16, or 0.30%, to 2,408.69. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.59% from 4.55% late Thursday.


[R]9:30AM London benchmark index nudged higher on Friday despite miners fall.[/R]
The benchmark FTSE 100 Index gained 2.9, or less than 0.1%, to 6186.10 at 11:47 a.m. in London. The U.K. market closes at 12:30 p.m. today.

Advancers

Carnival, the largest cruise operator in the world, advanced 2.6%, extending 2.9 % gain made yesterday. The company reported a 24% surge in fourth-quarter profit, topping its forecast, as demand for European trips rose.

Centrica gained 2.8% after Citigroup lifted its share-price estimate r by 26%. Forth Ports advanced 1.4%. The last publicly traded U.K. port operator announced 2006 results will top company forecasts because of higher property profits.

Monterrico Metals rallied 4.5%. The British company intending to develop a copper mine in Peru received a takeover offer from a bidder it did not identify.

Decliners

Vedanta, the largest producer of copper and zinc in India, shed 1.1%. Kazakhmys, biggest copper producer in Kazakhstan, gave up 0.9% while Rio Tinto, the world third largest mining company, shed 1.3%.

Vodafone lost 1.7%. The world largest mobile-phone operator is likely to make an approach for a controlling stake in Hutchison Essar, the fourth-biggest wireless operator in India.

Premier Foods Plc declined 5.8%. The food company that is acquiring competitor RHM stated full-year sales will be at the lower end of its guidance on increased commodity prices and energy costs.


[R]9:00AM Stock futures gained on tame inflation and strong earnings.[/R]
U.S. stock futures gained Friday as tame inflation data and well-received results in the technology sector lifted sentiment. The Department of Commerce said consumers increased their spending in November by 0.5%, the largest amount in four months. Another economic report showed stronger-than-expected demand for big-ticket goods. Durable goods orders rose 1.9%, higher than the 1.5% gain economists were anticipating.

In earnings news, Research In Motion Ltd. ((RIMM)), BlackBerry device maker, posted late Thursday 47% profit jump on strong shipments of its handheld devices. The company reported a profit of $176 million, or 93 cents per share, compared with last year''s $120.1 million or 63 cents per share. Quarterly sales rose 49% to $835.1 million, compared to the $560.6 million a year ago. Research in Motion was generally expected to earn 94 cents a share, excluding onetime costs and benefits, on revenue of $815.9 million. Among other tech stocks, expected to move higher, computer software maker Red Hat ((RHT)) posted a stronger-than-forecast 45% sales growth. Memory chipmaker Micron Technology ((MU)) reported tripled profit on 16% sales growth.

However, Qualcomm ((QCOM)) lowered its profit outlook, citing rising legal costs to defend patents. The company stock was also downgraded to underweight from neutral at J.P. Morgan. Elsewhere, Walgreen ((WAG)) reported surging Q1 profit. The drugstore chain said net income rose 25% to 43 cents per share, up from 34 cents per share last year. S&P 500 futures rose 1.10 points at 1,430.90 and Nasdaq 100 futures rose 0.25 points at 1,785. Dow industrial futures rose 14 points to 12,515.


[R]Durable goods orders jumped 1.9%.[/R]
Friday morning, the Department of Commerce released its report on durable goods orders in the month of November, showing that orders for goods meant to last at least three years rose more than economists had expected. The report showed that durable goods orders rose 1.9 percent in November after falling by 8.2 percent in October. Economists had been expecting orders to rebound by a somewhat more modest 1.2 percent. The increase in durable goods orders was due in large part to a rebound in orders for transportation equipment, which rose 9.4 percent in November following a 21.3 percent decrease in October. A sharp rise in orders for defense aircraft contributed to the rebound. Excluding orders for transportation equipment, durable goods orders fell by 1.1 percent in November compared to a 1.6 percent drop in the previous month.

A notable decline in machinery orders contributed to the decrease in orders excluding transportation, as new orders for machinery fell 8.9 percent in November after a 4.0 percent increase in October. At the same time, orders for computers and electronic products showed a notable rebound, increasing by 7.5 percent in November after falling 10.1 percent in October. The rebound reflected a significant turnaround in orders for computers and related products. The report also showed that shipments of durable goods edged up 0.1 percent in November after rising 0.3 percent in October, while inventories of durable goods rose 0.3 percent in November following a 0.7 percent increase in the previous month.

[R]Personal income and spending rose slightly above expectations.[/R]
The Department of Commerce released its report on personal income and spending in the month of November on Friday. The report showed that personal income and spending both rose slightly less than expected. The report showed that personal income rose 0.3 percent in November, matching the revised increase in October. The increase came in slightly below economist estimates of a 0.4 percent increase, which would have matched the increase that was originally reported for the previous month. At the same time, personal spending increased by 0.5 percent in November following a revised 0.3 percent increase in October. Economists had been expecting spending to increase by 0.6 percent compared to the 0.2 percent increase originally reported for the previous month.

[R]8:00AM Red Hat posted 37% profit drop in Q3 but beat estimates.[/R]
Red Hat ((RHT)), a provider of the open source Linux operating system and services, reported Q3 profit drop of 37% because of stock options expenses and tax provisions. The company said earnings dropped to $14.6 million, or 7 cents per share, down from $24.6 million, or 12 cents a share last year. Excluding stock options expenses and income tax provisions, profit totaled $29.6 million, or 14 cents per share, exceeding estimates of 12 cents a share. Revenue rose 45% to $105.8 million from $73.1 million in the year-ago quarter.

The company attributed its Q3 performance to strong market demand and solid execution.The company said it added 12,000 net customers in the quarter and continued integrating JBoss, a middleware maker Red Hat acquired in April. The company is planning to introduce a new product lineup in the first six months of 2007. Red Hat shares rose $2.45, or 13.6%, to $20.41 in after-hours trading.


[R]7:30AM Asia finished higher with autos advancing in Japan and utilities in HK.[/R]
Asian markets finished higher on Friday. The Nikkei 225 Index in Tokyo closed 0.3% higher at 17,104.96, its highest level since May 9. Toyota led the advance, up 1.6%, an all-time high closing price, after the auto maker announced that its production for next year is estimated to total 9.42 million vehicles, on that may exceed General Motors as the world''s No. 1 auto maker. Other advancers were steelmaker JFE Holdings, which added 0.8% and Japan''s largest non-life insurance company Millea Holdings, which gained 0.2%.

The Hang Seng Index advanced 0.5% to 19,320.52. The China Enterprises Index advanced 0.9% to 9,589.71. Utilities hog the limelight after HongKong Electric said it will increase its local tariffs 2.5% next year because of high fuel costs. HongKong Electric gained 1.1%. Although CLP Holdings stated it would not increase its tariffs, it rose 0.8%. Port-equipment maker China Communications Construction advanced 4% and Jin Jiang Hotels added 3%.

The Korea Composite Stock Price Index, or Kospi, in South Korea gained 0.1% to 1,437.49. Posco, the world''s third-largest steel maker by output, fell 1.9% after China largest steel firm Shanghai Baosteel Group agreed to a 9.5% increase in iron ore prices in 2007 with Brazil''s CVRD. Kookmin Bank gained 0.3% and Shinhan Financial Group was up 1.6%.

Shares New Zealand dropped 0.2% to 4,019.20, while Australia S&P/ASX 200 Index advanced 0.3% to 5,577.80. Singapore Straits Times Index gained 0.7% to 2,942.39 and Taiwan Weighted Price Index moved up 0.4% to 7,652.47.


[R]6:30AM European shares dipped Friday trading in a tight range before Christmas.[/R]
European markets were lower on Friday. In morning trade, London FTSE 100 was fractionally lower at 6,181.2, Frankfurt Xetra Dax fell 0.3% to 6,556.66 and the CAC 40 in Paris shed 0.3% to 5,493.96.

Advancers

Irish media group Independent News & Media advanced 2.1% having said that it expects its 2006 adjusted earnings per share to increase by more than 10% compared to a year ago. Also, engineering group Alstom advanced 2.3% on reports that it could be strike a deal for a locomotive order from China.

Decliners

Vodafone Group dipped 0.5%. The mobile company reaffirmed its interest in making a bid for a controlling stake in Hutchison Essar, the Indian mobile operator majority owned by Hutchison Telecom.

Sacyr-Vallehermoso led the Spanish construction sector lower having revealed that it had taken a five-year syndicated bank loan for 5.175 billion euros to pay for its 20% stake in Repsol, the oil company. JPMorgan gave the stock an underweight rating The broker stated Sacyr looked expensive at current valuations. The stock shed 1.7%.

Cintra, the Spanish motorway construction group, slipped 2.8%. The company, a unit of construction group Ferrovial, was downgraded earlier in the week by UBS. Ferrovial dipped 0.4%.

Oil and gold

Oil prices held below $63 a barrel on Friday after dipping from a three-month high in the previous session on unusually warm weather in the United States Northeast. U.S. crude was up 15 cents at $62.81 a barrel in early trade in London. London Brent crude rose 14 cents to $62.60 a barrel.

Gold was steady in thin trade on Friday, with many dealers already away for Christmas holidays. Gold was at $618.70/619.70 in early trading, steady near the $618.20/619.20 seen in late New York trade on Thursday.

Currencies

The U.S. dollar was trading at 118.30 yen on on Friday, down from 118.36 yen from late Thursday in New York. The euro rose to $1.3194, from $1.3175.