Trading Tips

Date : 05.03.2012

RIL off nearly 2% (Mar 05)

Key benchmark indices trimmed losses after hitting fresh intraday lows in after afternoon trade. The barometer index, BSE Sensex, was down 256.17 points or 1.45%, off about 220 points from the day's high and up close to 40 points from the day's low. The market breadth was weak. Weakness in global stocks hit sentiment adversely. World stocks fell as China cut its economic growth forecast to its lowest level in eight years. China is the world's second largest economy after the US.

Except BSE FMCG index, all the other 12 sectoral indices on BSE were in the red. Index heavyweight Reliance Industries (RIL) shed nearly 2%. Realty stocks extended recent losses. Interest rate sensitive banking stocks edged lower on fears banks' bad loans could increase in a slowing economy. Metal stocks declined after China's Premier Wen Jiabao today, 5 March 2012, cut the country's growth target to 7.5% for 2012, from an 8% goal in place since 2005.

The market edged lower in early trade on weak Asian shares. The market trimmed losses after hitting fresh intraday low in morning trade. The market was range bound in mid-morning trade. The market extended losses to hit fresh one-week low in early afternoon trade. The market fell further, with the Sensex hitting 4-1/2 week low in afternoon trade. The market trimmed losses in mid-afternoon trade.

At 14:20 IST, the BSE Sensex was down 256.17 points or 1.45% to 17,380.82. The index fell 298.19 points at the day's low of 17,338.80 in afternoon trade, its lowest level since 2 February 2012. The index fell 38.57 points at the day's high of 17,598.42 in early trade. 

The S&P CNX Nifty was down 73.15 points or 1.36% to 5,286.25. The index hit low of 5,271.45 in intraday trade, its lowest level since 27 February 2012. The index hit a high of 5,344.50 in intraday trade. 

The market breadth, indicating the overall health of the market, was weak. On BSE, 1,768 shares fell and 937 shares rose. A total of 103 shares were unchanged.

From the 30-share Sensex pack, 24 declined and the rest rose. 

Index heavyweight Reliance Industries (RIL) fell 1.92%. RIL along with BP PLC will reportedly submit a joint plan to the government to develop the D6 natural gas block and its satellite fields as an integrated unit. The proposal, which will be submitted in the next few weeks, will seek to maximise the use of existing infrastructure to develop all the fields which haven't been worked on yet, BP India chief Sashi Mukundan said last week. The proposal is significant in that it will seek approval to develop an entire block as one unit, rather than follow the current practise of getting clearance for one oil or natural gas field at a time. 

In 2011, BP purchased a 30% stake in 21 RIL's oil and gas blocks across India, including D6, which is India's biggest gas discovery so far. RIL is facing declining output at D6 due to reservoir complexity, a natural decline in reserves and delays in developing satellite fields. Output at the D1, D3 and MA fields in the D6 block has plunged to about 38 million metric standard cubic meters a day (MMSCMD) from 60 MMSCMD in June 2010. It is estimated that output will fall further to 27.60 MMSCMD in the next financial year starting April, and to 22.60 MMSCMD in the year after that. 

RIL recently said its wholly-owned subsidiary Reliance Holding USA, Inc. priced a $500 million reopening of its existing 5.4% Guaranteed Senior Notes due 2022. The additional notes will be consolidated and will form a single series with the $1,000 million 5.4% Guaranteed Senior Notes due 2022 and will be fully and unconditionally guaranteed by RIL. Reliance Holding USA, Inc. will apply the net proceeds to fund its ongoing capital expenditure, to make business investments, to refinance its existing debt and for general corporate purposes. 

Tata Motors rose 1.31% on reports the company's Jaguar Land Rover unit and China's Chery Automobile Co are seeking regulatory approval for a 17.5 billion yuan car venture in eastern China. The venture, to be located close to Shanghai in Changshu city, will make Land Rover SUVs initially followed by Jaguars in the second phase, reports added.

Realty stocks extended recent losses. DLF, Unitech, HDIL and D B Realty shed by between 1.87% to 3.59%. Property consultants and real estate developers have reportedly demanded industry status to the realty sector in the forthcoming Budget. They have also sought incentives to promote affordable housing segment and an increase in the tax exemption on home loans. To boost supply, they have also asked for a single-window clearance for real estate development projects and foreign direct investment (FDI) in multi-brand retail to create demand for retail space in shopping malls.

Interest rate sensitive banking stocks edged lower on fears banks' bad loans could increase in a slowing economy. India's biggest private sector bank in terms of branch network, ICICI Bank fell 3.19%. 

State Bank of India declined 2.79%. The bank late last month cut interest rates on education loans by 25 to 100 basis points.

India's second largest bank by net profit HDFC Bank dropped 2.79%. Among other banking stocks, Bank of India, Canara Bank, Axis Bank and Punjab National Bank shed by between 1.76% to 4.32%. 

Metal stocks declined after China's Premier Wen Jiabao today, 5 March 2012, cut the country's growth target to 7.5% for 2012, from an 8% goal in place since 2005. China is the world's largest consumer of copper and aluminum. Sterlite Industries, Bhushan Steel, Tata Steel, Sail, Hindalco Industries, Nalco, and Hindustan Zinc shed by between 1.05% to 4.53%. 

JSW Steel fell 3.38%. The company said during market hours today that its crude steel production was severely impacted in February 2012 due to usage of inferior grades of iron ore. The company's crude steel production rose 13% to 6.10 lakh tons in February 2012 over February 2011. 

Tata Power Company fell 1.73%. The company through its subsidiary, Khopoli Investments and South Africa's Exxaro Resources have formed an equal joint venture to create a new energy company called Cennergi in South Africa. Cennergi will focus on investigation of feasibility, development, ownership, operation, maintenance, acquisition and management of electricity generation projects in South Africa, Botswana and Namibia. Tata Power made the announcement during trading hours today, 5 March 2012. 

Raymond rose 3.59%. With regard to media reports that LVMH was negotiating to invest about $150 million in the company's arm Raymond Apparel, Raymond has clarified that there is no such proposal before the company's board.

An earthquake of medium intensity jolted Delhi and its satellite towns on Monday afternoon, pulling panic-stricken people out of their homes and offices, media reports said. There were no immediate reports of any casualty. 

India's services sector lost momentum in February and firms shed workers for the first time in three months despite growing more confident about the year ahead, a business survey showed on Monday. HSBC's Business Activity Index, compiled by Markit and based on a survey of around 400 firms, fell to 56.5 in February from 58.0 in January. The employment sub-index slipped below the 50-mark separating growth from contraction for the first time since November, reflecting similar trends in the factory sector during the month. The confidence index regarding future business inched up to a new eight-month high of 71.7 in February from 71.2 in January. 

Foreign institutional investors (FIIs) sold shares worth a net R 0.50 crore Saturday, 3 March 2012, as per provisional data from the stock exchanges. FIIs bought shares worth R 442.64 crore in the first three trading sessions of March 2012. FIIs had bought shares worth a net R 25212.10 crore in February 2012, as per data from Securities & Exchange Board of India (Sebi). FIIs had bought shares worth a net R 10357.70 crore in January 2012. 

Exit polls have predicted a hung assembly in Uttar Pradesh with the Samajwadi Party (SP) emerging as the single largest party and Mayawati's BSP on its way out. In Uttarakhand and Punjab, most of the polls by news channels hinted at the Congress having an edge over the BJP. In Manipur, the exit polls have predicted that while the Congress will be comfortably ahead of the Manipur People's Party-led opposition combine, it might just fall short of a majority. In Goa, exit polls have indicated that the BJP-led combine has an edge over the Congress-NCP alliance. 

Polling for assembly elections in five states concluded on Saturday, 3 March 2012. The counting of the votes takes place tomorrow, 6 March 2012, with the results due on the same day.

The government is working with state governments for early implementation of a goods and services tax (GST), Finance Minister Pranab Mukherjee said on 22 February 2012. 

Finance Minister Pranab Mukherjee will present the annual budget for 2012/13 on 16 March 2012, while the railways budget will be presented on 14 March 2012. The budget session of parliament will start on 12 March 2012. The government will present on March 15 the Economic Survey for 2011/12, a document on the state of economy prepared by the economic division in the ministry of finance. The annual budget is usually presented on the last working day of February. However, the budget has been delayed this time due to the assembly polls. 

Reports indicate that the finance ministry is considering a proposal to increase excise duty from 10% to 12%, although still lower than the level before the 2008 financial crisis. The move is aimed at helping the government improve its fiscal situation but it is expected to push up the cost of almost all manufactured goods from food products to consumer durables and automobiles. 

Mining shares led decline in European stock markets on Monday after China cut its economic growth forecast to its lowest level in eight years. Key benchmark indices in France, Germany and UK shed by between 0.32% to 0.8%. China is a large consumer of natural resources and any indications about future growth in that country tend to influence mining stocks. 

Moody's Investors Service on Friday, 2 March 2012, cut Greece's sovereign debt rating to the lowest possible level after a debt-restructuring deal that imposes hefty economic losses for private creditors. Moody's lowered Greece's local and foreign-currency bond ratings a notch to C from Ca, becoming the third credit rating agency to downgrade the country following the announcement of the swap deal to lighten its debt burden. 

European Union leaders have cleared the release of long-awaited second bailout package for debt-ridden Greece. This is to enable Greece avoid a default on paying back euro 14.5-billion debts due on 20 March 2012. Finance ministers of the euro group, during a two-day meeting in Brussels Friday, kicked off the preparations to release the first tranche of the euro 130-billion rescue package. 

Meanwhile, all but two European Union countries signed a fiscal pact to tighten budget discipline on Friday, marking a coup for Germany that pushed for the accord to prevent a repeat of the loose spending that led to economic crisis. Only Britain and the Czech Republic did not sign the agreement, under which all other countries in the 27-nation bloc are to write a golden rule on balanced budgets into national constitutions or equivalent laws and automatic correction mechanisms if the rule is breached. 

Asia markets edged lower on Monday, led by losses in technology and energy stocks. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan shed by between 0.08% to 1.38%. 

China's services sector output grew at its fastest pace in four months in February as new business growth reached an eight-month high, a private-sector survey of purchasing managers showed today. The reading contrasted with an official report on Saturday that signaled that the sector was shrinking. The private-sector HSBC China Services PMI climbed to a seasonally adjusted 53.9 in February from 52.5 in January, well above the 50 mark that demarcates expansion and contraction. The official PMI for non-manufacturing sectors fell to 48.4 in February from 52.9 in January, the National Bureau of Statistics said on Saturday. 

China's Premier Wen Jiabao cut the country's growth target to 7.5% for 2012 in a bid to find leeway for promised economic and welfare reforms while delivering stability ahead of a leadership transition later this year. 

Trading in US index futures indicated that the Dow could fall 34 points at the opening bell on Monday, 5 March 2012.  www.goldennifty.com