Forex: More Pain Ahead!!!

Forex: More Pain Ahead!!!

Ø  The Indian rupee tumbled to its all-time low as jittery global investors pulled out funds amid fast deteriorating economic health and higher than reported trade deficit .

Ø  Given the magnitude of the crisis, it is obvious that there are no quick-fix solutions; revival process will be a long-drawn struggle, thus causing severe damage to the investor and consumer confidence. The impact of this on the global economies and market will be very negative.

Ø  We feel if Rupee continues to depreciate we may continue to see more outflows from FIIs. India may not be able to reap benefits of softer commodities price because of the sharper depreciation of rupee. Overall the weakened macro-economic fundamentals are also reflecting in the large twin deficits, which in turn are hurting the rupee and increasing fears of more downgrade by global rating agencies .

Ø  Market dynamics continues to remain bearish. There is severe pressure on trade/current account; flows into debt capital market is down and not expected to revive soon; FII flows into equity capital market will be down not ruling out reverse flow.

Ø  On the flip side ailing rupee and high inflation would make it difficult for India to achieve 7.5 per cent economic growth during the current financial year.

Ø  In short, there is more pain ahead. We See Rupee sliding to 56-57 levels soon. The rupee has been the worst performing unit amongst its Asian peers this year.

Ø  While weak trade data and choppy domestic shares added to the downward pressure, we feel the Forex situation is in grave and it will make equity market vulnerable and hence we may witness further sell-offs from foreign investors.

Pre Open Thoughts: Currency Crumble!!!

Pre Open Thoughts: Currency Crumble!!!

Ø  A weak currency is the sign of a weak economy, and a weak economy leads to a weak nation.  A steep fall in the rupee since February to an extent reflects the rapid deterioration in India’s economic fortunes. A big problem is that policymakers have little room to arrest the economic slowdown. The Government is also hamstrung due to a swelling fiscal deficit. The eurozone credit crisis and anemic US economy have made matters worse. Downside risks for the Indian and global economy still persist. Therefore, one cannot rule out further drop in equities and currencies. There is only one option: endure the pain and avoid misadventures.

Ø  The start is likely to be positive owing to overseas markets but it’s likely to be volatile. Whether the early pop will sustain remains to be seen.

Ø  Traders will be eyeing the rupee movement as it has touched a fresh all time low, though finance minister Pranab Mukherjee has expressed concern over the sharp fall in rupee and said it was linked to the Eurozone uncertainty and Centre was keeping a close watch on the situation.

Ø  Meanwhile, the somberness may continue as Planning Commission deputy chairman Montek Singh Ahluwalia has said that ailing rupee and high inflation would make it difficult for India to achieve 7.5 per cent economic growth during the current financial year.

Ø  However, amidst all these dark clouds there emerged one silver lining –that oil has come off a bit.

Ø  Softer global conditions, weak investor and business confidence, government paralysis, and tight monetary conditions are all weighing on demand back home.

Ø  The Nifty has violated a key trough of 4900. We remain cautious in the near term as long as the Nifty trades below 4900, which corresponds to a bearish range.

Results Today:

Tata Power Co. group, Power Finance Corp, Wockhardt, Container Corp. of India, Opto Circuits, Opto Circuits ,GTL, Talwalkars Better Value Fitness.

Global Data Watch:

Bank of Japan Monetary Policy Meeting Minutes (May 22), China Conference Board Leading Economic Index, UK Consumer Price Index (Apr), UK Core Consumer Price Index (Apr), UK DCLG House Price Index (Mar), UK Public Sector Net Borrowing (Apr), UK Retail Price Index (Apr), US Fed’s Lockhart speech, EU Consumer Confidence (May), US Existing Home Sales (Apr), US Existing Home Sales Change (Apr), US Richmond Fed Manufacturing Index (May), Japan Merchandise Trade Balance Total (Apr), Japan Adjusted Merchandise Trade Balance (Apr), Japan Imports and Exports (Apr).

India Market Wrap

Ø  INDICES: Sensex +31 at 16183 (0.19%), NIFTY +15 at 4906 (0.3%), CNXMIDCAP +36 at 6903 (0.52%)

Ø  SECTORAL PERFORMANCE: BANKEX 1.08%, AUTO 0.48%, CAPITAL GOODS 1.96%, HEALTHCARE 0.28%, Metal 0.4%, OIL & GAS 0.52%, IT -1%, FMCG -1.17%, PSU 0.64%, REALTY 1.9%, Consumer Durables 0.03%, POWER 1.27%

Ø  MARKET BREADTH: 327 Advances, 167 Declines (BSE 500)

Ø  VOLUMES: BSE $0.28bn (-22.39%), NSE $1.42bn (-24.72%), F&O $17.85bn (-37.58%)

Ø  TODAY'S GAINERS: TPWR 5.23%, RELI 3.89%, MSIL 3.61%, SBIN 3.55%, RPWR 3.2%

Ø  TODAY'S LOSERS: WPRO -2.06%, ITC -1.96%, INFO -1.78%, HUVR -1.35%, ACC -1.28%

MARKET COMMENTARY:

Frontline India indices looked set to end another day with pairing off gains and closing flat towards the close as the Indian benchmarks continued to be besieged by a sliding rupee, which touched an all-time low against the dollar today for a fourth consecutive day. Key benchmark indices were range bound in early afternoon trade. On global front though a statement from G8 leaders after a summit over the weekend boosted sentiment but could not hold on to the gains. G8 leaders over the weekend backed keeping Greece in the euro zone and vowed to take all steps necessary to combat financial turmoil while revitalizing a global economy increasingly threatened by Europe's debt crisis. Most Asian stock indices were trading higher on Monday after Chinese Prime Minister Wen Jiabao said that China will focus more on policies that boost economic growth. Back home the 'White Paper' on black money was tabled in Parliament on Monday by Finance Minister Pranab Mukherjee, The White Paper said that Vodafone tax case provides instance of misuse of corporate structure to avoid payment of taxes. Sustained buying was visible in the capital goods, realty and banking stocks. The country’s largest lender State Bank of India moved up further, rising 4 percent after reporting better than expected net profit of Rs 4,050 crore for the fourth quarter of financial year 2011-12 as against Rs 21 crore in a year ago period. Its competitors ICICI Bank and HDFC Bank were up 1 percent and 0.5 percent, respectively. The Realty sector stocks also witnessed renewed buying interest. Moreover, the broader indices were going neck to neck with while the market breadth which was slightly positive.

NEWS ON TODAYS MOVERS:

Ø  Tata Steel fell traded flat with gains of nearly 0.70% despite the company  consolidated net profit plunged 89.63% to Rs 433 crore on 0.5% growth in turnover to Rs 33999 crore in Q4 March 2012 over Q4 March 2011. But showed a strong sequential performance in Q4

Ø  State Bank of India rose 3.55% , extending Friday's 5.08% rise triggered by strong Q4 March 2012 results.

Ø  Reliance Capital jumped 7.96%, after the company reported a consolidated net profit of Rs 329.32 crore in Q4 March 2012 compared with a net loss of Rs 6.46 crore in over Q4 March 2011.

Ø  JSW Steel rose 1.95%, after the company said its crude steel production grew 35% to 7.15 lakh tons in April 2012 over April 2011.

Ø  Aviation companies rose 1.93%, as oil companies cut jet fuel prices recently, the third straight reduction in rates since April 2012

Ø  Larsen & Toubro rose 2.68%, after the company said L&T Construction has bagged new orders worth Rs 744 crore during the first quarter of 2012-2013.

Ø  Bhel rose 2.99%, after the company bagged a contract for supply and installation of electrostatic precipitator package for 2x660 megawatts Solapur super-critical thermal power project in Maharashtra.

Ø  Jain Irrigation Systems traded flat for the day despite of company announcing a JV , partnering with G8 and various African nations company has committed investment and project of $375 million over the next few years to build sustainable agriculture and to improve income of small holder farmers in Sub-Saharan Africa.

CORPORATE NEWS:

Ø  BHEL bags contract from Solapur power project

Ø  Adani Enterprises Q4 cons net profit at Rs309.45 cr

Ø  Chettinad commissions cement plant in Karnataka

Ø  H&R Johnsona division of Prism Cement, to invest Rs225 crore this fiscal

Ø  JSW Steel crude steel production grew 35%

Ø  Uflex eyes 60% growth in net profit this fiscal

Ø  Moser Baer to restructure Rs1,800 crore term debt

Ø  Tata Steel Odisha plant to be ready by next fiscal

Ø  L&T Construction bags orders worth Rs744 crore

Ø  SBI extends gain on healthy Q4 earnings

Ø  Ranbaxy to re-launch skincare brand Sotret in US

Ø  RIL, HFCL tie up for 4G launch

Ø  CCI clears 3 state oil firms of cartelisation charges

Ø  FDC board to consider Buy-back of shares

Ø  Dr Reddy's launches much-delayed acidity drug in US

ECONOMIC NEWS:

Ø  India's policies have dampened investment climate: US envoy

Ø  White Paper for setting of Lokpal to deal with black money

Ø  Banking Laws to be tabled in parliament today

Ø  Cabinet to consider FDI in aviation proposal soon

Ø  India April service tax rises 35.6% to 88.5 bln rupees

Ø  India April excise tax grew 17.8% to 126 bln rupees

Ø  India April customs tax revenue fall 8.8% to 115.9b rupees

Ø  India April indirect tax revenue rises 10% to 330.4b rupees

Mid Market Wrap

Market Commentary:

Ø  Asian stocks rose from a five-month low, the yen slid against all its major peers and commodities gained on speculation China and Japan may take steps to boost economic growth.

Ø  Backhome, prolonging its Friday’s up-move, domestic benchmarks are trading with traction, though some profit booking was witnessed in early trade. The BSE Sensex and NSE Nifty gained ~0.5% each amid a choppy trade. Nifty was trading firm above 4900 level.

Ø  Stocks in Focus:

v  SBIN: continued to extend its positive run that was started post its Q4 results on Friday. Stock was up by over 3.5%.

v  Tata Steel lost 1% to Rs 396 after weak Q4 results.

Ø  The rupee was broadly flat against the dollar tracking a mild recovery in risk assets after G8 leaders over the weekend backed keeping Greece in the euro zone.

Ø  From Intra-day perspective, we expect Nifty May Futs to trade in the range of 4860-4920.

Ø  INDICES: Sensex +67 at 16220 (0.41%), NIFTY +22 at 4914 (0.46%), CNXMIDCAP +42 at 6909 (0.61%)

Ø  SECTORAL PERFORMANCE: BANKEX 1.19%, AUTO 0.18%, CAPITAL GOODS 1.46%, HEALTHCARE 0.29%, Metal 0.28%, OIL & GAS 0.8%, IT -0.38%, FMCG -0.48%, PSU 0.66%, REALTY 1.21%, Consumer Durables 0.19%, POWER 0.81%

Ø  MARKET BREADTH: 362 Advances, 127 Declines (BSE 500)

Ø  TODAY'S GAINERS: SBIN 3.85%, TPWR 3.8%, RELI 3.73%, MSIL 3.18%, KMB 2.34%

Ø  TODAY'S LOSERS: NTPC -1.59%, WPRO -1.51%, TATA -1.49%, INFO -1.29%, HCLT -1.28%