IT stocks in India Rise

123jump.com Staff
26 Sep, 2007
New York City

Indian stocks continue to advance on steady foreign fund flows, expectations of lower interest rates, and a decline in inflation. Government plans to offer 12,000 crore rupees bonds to refinery companies to cover the losses from selling fuel at below market cost. IT stocks rallied after Wipro booked an order of $150 million with Thamse Utillity.

[R]1:00PM New York, 10:30PM Mumbai – Sensex closed at a record level for the third day in row. RBI is likely to lower rates in the next meeting in October.[/R]

Sensex in Mumbai closed with small gains on selective buying in the index shares. It opened higher on speculation that the U.S. may cut interest rates for the second time in as many months after lowering rates by 0.5% last week.

The BSE Sensex was up 0.3% or 21.8 at 16,921.39 and managed to reach an intra-day high of 17,073.80. The CNX Nifty advanced 0.03% or 1.6 to 4,940.50. Of the Sensex shares, 16 advanced while the rest slid. Satyam Computer led the gainers in the Sensex with a rise of 5% to 432 rupees and Reliance Energy led the decliners with a loss of 5.3% to 1,030 rupees.

Of the stocks traded on the Bombay Stock Exchange 1,485 gained, 1,244 fell and 60 remained unchanged. Daily turnover on BSE amounted to 7,786 crore rupees up from to 7,491 crore rupees in previous session.

The Finance Minister Chidambaram said that the Reserve Bank of India could be forced to intervene if there is a disorderly movement in the exchange rate. He said while the rupee is stable against other global major currencies, it has appreciated 10.5% in the nine months. The Reserve Bank of India is expected to lower rate at the next meeting on October 31st.

Separately Reserve Bank of India raised its limit to $500 million from $400 million for prepayment of commercial loans to private corporations. All other prepayments will require RBI approval.

Of the Sensex shares, IT stocks, recovered from previous losses after the Reserve Bank of India relaxed the norms for outbound investments by mutual funds and raised the limit for companies to prepay their external loans.

Refineries stocks gained after the news that the government is planning to issue bond worth 12,000 crore rupees to cover the losses from selling fuel at below cost. Hindustan Petroleum jumped 4.5% to 277 rupees, Indian Oil closed 7% to 470 rupees, and Bharat Petroleum increased 6% to 369 rupees.

Wipro soared 4.8% to 456 rupees after receiving an order of $130 million from UK based uitility company Thames Water. Of the other IT stocks, Infosys gained 3.1% to 1,826 rupees and TCS jumped 4.5% to 1,047 rupees.

Reliance group stocks fell after a steady rise in the last five trading sessions. Reliance Industries slid 3% to 2325 rupees on 11.63 lakh shares. Reliance Communications fell 0.9% to 589 rupees, Reliance Natural Resources shed 3.32% 91 rupees, IPCL down 1.91% to 462 rupees, Reliance Capital shed 2.7% to 1505 rupees and Reliance Petroleum which closed weaker at 2.6% to 155 rupees. Reliance Retail is likely to close its operations in Noida, Gaziabad, and Uttar Pradesh. The closure is likely to lead a loss of 1,050 jobs.

Housing Development Corporation soared 3.5% to 2,478 rupees after reaching an intra-day high of 2,538 rupees in anticipation of lower rates. Bank stocks advanced as well. Vijaya Bank led the gainers with a rise of 5.7% to 68 rupees followed by 5% gain to 145 rupees in Indian Overseas Bank, and 3% to 102 rupees in Allahabad Bank.


[R]12:00 PM New York – Auto stocks rallied in New York after a tentative agreement between GM and Union.[/R]

At Mid-day trading in New York Dow Jones increased 76.90 to 13,856.90, Nasdaq added 22.14 to 2,705.41 and S&P500 advanced 8.95 to 1,526.16.

General Motors ((GM)) and the UAW have reached a preliminary agreement covering 74,000 auto workers. The deal will lead to a creation of healthcare fund operated by the union which GM will help to start. While pension costs of retirees are required to be funded by the company, labor laws do not require General Motors to set aside funds for the health care costs.

The agreed fund, likely to be named Voluntary Employees’ Beneficiary Association or VEBA, will be responsible for healthcare liabilities of the retired workers. Retiree medical expenses at Ford, Chrysler, and General Motors have exceeded $100 billion in 2006 and these expenses are growing at 6%. With the agreement, if approved by the members will take liability off the balance sheet of General Motors and remove large, growing, and uncertain future medical costs. The new flexibility will help GM to seek better debt alternatives and possibly focus on building vehicles that will help it to improve its competitive standing.

The agreement is likely to provide General Motors and to the industry a cost visibility and free management to tackle international competition. The details of the contract are sketchy but from talks with the Union and GM representatives, it appears that the future staff reductions are tied to the cash flow and unit volumes at the company. In the negotiations GM is looking for cost management and ability to decrease staff and the Union is looking for job security for its members and guarantee in health care costs in the adverse business conditions.

It appears that GM has been able to link future hiring and layoff with the future unit sales and the Union has convinced GM to fund retiree health expenses regardless of the business fluctuations. The agreement is a step that will link GM, the Union members, and shareholders to the market conditions. A much needed step in the right direction.

General Motors ((GM)) after the news jumped 4% or $1.60 to $36.02 and Ford Motor ((F)) added 4% or 36 cents to $8.70.

[R]1:00PM London , 8:00AM New York - European equity markets opened higher on Wednesday, lifted by rallying financial stocks and following gains in Asia.[/R]

The FTSE Eurofirst 300 was up 0.5% to 1,536.54, Frankfurt’s Xetra Dax added 0.4% to 7,798.65, the CAC 40 in Paris gained 0.4% to 5,664.45 and London’s FTSE 100 climbed 0.6% to 6,434.8.

In London trading stocks were higher at mid-day trading as banks rallied. By mid morning, the benchmark FTSE 100 was up 59.9 points, or 0.9%, to 6,456.1, while the mid-cap FTSE 250 added 24.1 points, or 0.2%, to 10,877.3. At mid-day trading 85 stocks in the Index were trading higher.

Northern Rock led the gainers with a rise of 12% to 182p, after saying it had received a number of requests. Northern Rock confirmed on Tuesday that it has cancelled £60m dividend payout and added today that the bank has been approached by several parties about ”a variety of potential transactions” that may, or may not, lead to a takeover.

Royal Bank of Scotland rose 0.7% to 514p after it said its consortium with Fortis and Santander had increased its stake in Dutch takeover target ABN Amro to more than 8%. Elsewhere in the financial sector, Invesco, the Anglo-US fund manager, rose 5.4% to 665p after it proposed moving its primary listing to New York.

In Frankfurt trading DAX index at mid-day increased 0.47% or 36.81 to 7,806.25. Of the 30 stocks in index 21 are trading higher and 9 are lower.

Deutsche Börse, the German stock market operator, jumped 3 per cent to €96.20 after Credit Suisse lifted its target price from €107 to €115 and kept its ”outperform” rating after the company reported strong trading volumes throughout September. The note added that German exchange operator had boosted efficiency by restructuring and the new valuation reflected this, while traders share buyback announcements, and merger and acquisitions in the sector.

Further north, the spotlight was on Nordic bourse operator OMX. Borse Dubai and Nasdaq said they had agreed with key shareholders of OMX on a revised higher offer and secured nearly 48 percent of OMX shares through ownership and options.

Dubai increased its offer by 15% to SKr 32 billion or pay SKr265 per share higher than previous offer of SKr 230. Dubai with a stake of nearly 48% in OMX needs additional 2% to consume its deal to purchase the exchange. Largest shareholders Investor AB an Nordea have agreed to sell their stake in the exchange to Dubai.

Anglo Irish Bank, recently sold off over concerns about the economy, was the best performing of the eurozone lenders, up 2.5 percent to €12.40.

ASML, the Dutch maker of chip manufacturing equipment, rose 2.3 percent to €23.67 after confirming that none of its creditors had opposed its proposed €2.04-a-share capital repayment and reverse stock split. The company said the move was scheduled for September 28.


[R]6:00AM New York, 7:00PM Tokyo – Stocks in Tokyo rise. August trade surplus surges.[/R]

Japan stocks gained propped by forecast beating trade surplus figures for August. Financial companies also weighed in on gains on expectations weakening U.S. housing and retail markets will force a further rate cut.

In Tokyo trading Nikkei 225 rose 0.21% or 34.01 to 16,435.74. Retailer Dowa Holdings led the gainers with a rise of 7.35%.

According to the Finance Ministry August trade surplus soared to 743.2 billion yen on surging car and steel exports to Europe and the Middle East. Exports rose 14.5% compared to 11.5% in July. However, imports rose at 5.7%, sharply lower than rate 15% in July. The surplus quadrupled from a year ago.

Exports to the U.S. gained 4.6% and to the European Union also edged up by 15.6% from 13.1% in July. Shipment to China gained 23.8% from 20.6% in July led by a sharp rise of 88% in auto shipments.

The yen fell against the dollar at 114.83 from 114.78. The yen has risen more than 7% against the dollar since the end of June. Oil prices slipped 1.8% to $79.53 per barrel, the biggest fall since August 17. Metal prices also retreated. Zinc shed 0.6% and nickel declined 1.7%.

Of the Nikkei 225 stocks, Dowa Holdings led the gainers, climbing 7.32%, followed by a rise of 6.12% in Mitsubishi UFJ Nicos, 5.71% in GS Yuasa Corporation, 5.03% in Hitachi Zosen and 4.71% in Yokohama Rubber. Kajima Corporation led decliners with a loss of 7.58%. Inpex Holdings lost 5.83%, followed by NTT Docomo down 3.6% and Tokyo Dome Corp fell 3.15% respectively. Toyo Seikan slipped 2.77%.

Toshiba Corp jumped 4.2% ahead of earnings release and recent surge in nuclear reactor makers around the world.

Hino Motors close, 50% owned by Toyota, closed up 4%, after it raised its half year profit forecasts on rising demand from construction booms in Middle East and South America. Operating profit is estimated to rise 12% to 24 billion yen for the first six months ending September 30. Previously the company expected a 20% drop. Half year sales forecasts increased 9% to 66.5 billion yen.

Banks and realty groups closed higher on expectations that rate may be lowered in the U.S. after the October Federal Reserve meeting. Traders are expecting that interest rate may be lowered by 0.25%. The sentiment helped financial stocks to recover. Sumitomo Mitsui jumped 2.6%, Mizuho added 1.1%, and Sumitomo Realty increased 2.4%. Credit card processing service provider Aeon Credit Service soared 8.9%.

Retailers were in focus today after the news that Yamada Denki agreed to acquire Kimuraya Select and also raised its holding in Best Denki. Market has been expecting a consolidation in the industry.