Thursday’s Market Preview: Flat-to-positive opening expected; corporate earnings eyed

The local market is likely to see a flat-to-positive opening with a positive bias as global markets were in the green. Investors will also read into the third quarter earnings reports to give further direction to the market later in the day. Key indices in the US recorded modest gains on Wednesday on a rally in banking stocks and good demand for Portugal’s bond sale. Markets in Asia received support from the US markets, which finished with modest gains and on the positive outcome of the Portuguese bond auction. The SGX Nifty was up 19.50 points at 5,887.50 compared to its previous close of 5,868 on Wednesday.

On Wednesday, the Sensex opened with an upward gap of 157 points at 19,353 (the Nifty was up 46 points at 5,800). This was the highest opening gap since 3 December 2010. However, after a good positive opening, the market turned very volatile, crashing by as much as 1.8% from its early high, before the bulls took up the reins once again and helped it to end on a positive note, breaking the six-day downward trend. The Sensex ended 338 points up at 19,534 and Nifty ended 109 points up at 5,863.

Wall Street closed with modest gains overnight, supported by a rally in banking stocks and on the good demand for Portuguese bonds. Banking stocks received a boost after Wells Fargo upgraded its outlook of the sector. Also, JP Morgan said that it would hike dividend. The Portuguese government sold bonds worth 1.25 billion euro in an auction conducted on Wednesday, supporting investor sentiment worldwide.

The Dow gained 83.56 points (0.72%) at 11,755.44. The S&P 500 rose 11.48 points (0.90%) at 1,285.96 and the Nasdaq was up 20.50 points (0.75%) at 2,737.33.

Markets in Asia were trading in the positive zone in early trade on Thursday tracking gains in the US markets and on the outcome of the government bond auction in Europe. Raw material stocks gained on speculations that higher demand for commodities will increase as economies continue to grow.

The Shanghai Composite was up 0.08%, the Hang Seng surged 0.80%, the Jakarta Composite jumped 1.47%, the KLSE Composite was up 0.16%, the Nikkei 225 gained 0.64%, the Straits Times rose 0.27%, the Seoul Composite added 0.16% and the Taiwan Weighted was up 0.29% in early trade.

India’s telecom sector will witness up to Rs2,50,000 crore investments and the market will cross the Rs4,50,000 crore or $100 billion-mark in five years, Boston Consulting Group (BCG) said on Wednesday.

Contrary to the general belief that telecom story is over, we believe that the game is still on. The only difference is that voice market is flattening and the growth will be in services,” BCG India’s partner and director, Arvind Subramanian said.

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JSW, SAIL and Essar may hike steel prices by 2% to 3% within three days

This would be the second such hike in January—rising raw material prices and the demand-supply mismatch may further worsen the scenario

Surging prices of raw materials-mainly coking coal-have started showing their impact, as Indian steel companies are likely to increase prices by 2%-3% within the next two to three days.

"JSW Steel will increase prices of its products by 2%-3% by the middle of this month," Sharad Mahendra, senior vice-president, marketing and sales, JSW Steel, told Moneylife.

"Steel Authority of India Limited (SAIL) has decided to increase prices by Rs1,250 per tonne-effective from 10th January-but the official announcement is yet to be made," said a source close to the development, who preferred anonymity.
 
On 3rd January, JSW and Essar Steel increased prices of flat products by around 4%- 5%, while SAIL decided on a 3% rise in the price of its products.

But Essar Steel preferred not to comment on its future strategy. A spokesperson from Essar Steel told Moneylife, "Right now, we are reviewing (the) market situation. Within the next couple of days, we will have (a) clear picture."

Prices of coking coal, the main ingredient for making steel, have been going up in the international market, as mining operations and shipments from Queensland, Australia, the main supplier of the commodity, have been hit by the unprecedented floods that have swamped the region (See: http://moneylife.in/article/4/13075.html).

"Prices of coking coal and iron ore are increasing at a rapid pace, and this has forced us to go in for another price hike this month," added Mr Mahendra.

Indian steel companies expect contracts for coking coal prices in the next quarter to reach $300 per tonne from the current January-March contract prices of $225 per tonne. In spot markets, coking coal prices have already crossed $270 per tonne.

Margins of steel companies are already under pressure due to high raw material costs. However, a few players will pass on the hike to customers. "We will definitely pass on the hike to customers as our margins are already coming down," said Mr Mahendra from JSW Steel.

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Wednesday Market Report: Upmove may get truncated

Watch whether the market remains strong above today’s highs

The market opened strong on positive global cues. Early gains were supported by buying in banking, IT, oil & gas and realty stocks. The indices witnessed a steep decline after the government released the Index of Industrial Production (IIP) data for November, which came in sharply lower at 2.7% year-on-year. Trade was range-bound in the noon session, but picked up on fund buying, sending the indices to their intra-day highs in the closing hour and finishing a tad below those figures.

The Sensex opened with an upward gap of 157 points at 19,353 (the Nifty was up 46 points at 5,800). This is the highest opening gap since 3 December 2010. However, after a good positive opening, the market turned very volatile, crashing by as much as 1.8% from its early high, before the bulls took up the reins once again and helped it to end on a positive note, breaking the six-day downward trend. The Sensex ended 338 points up at 19,534 and Nifty ended 109 points up at 5,863.

Since 1991, there have been 41 instances when the Sensex declined for six days in a row. Out of these, on 23 occasions the bellwether index staged a comeback on the seventh day (including today). On 22 occasions, the Sensex has ended positive on the eight day as well, 14 times. However this doesn't mean that the downward journey has ended. We mentioned in our yesterday's market report that a pullback is likely, which may take the Sensex to 19,600 and the Nifty to 5,880 before a fresh decline starts. The index may hit these levels tomorrow before stalling.

The market breadth was charged towards the gainers today. The Sensex had 22 gainers against eight losers, while the Nifty ended with 43 advancers and seven declining stocks. Among the broader indices, the BSE Mid-cap index gained 1.68% and the BSE Small-cap index rose 1.42%.

Baring BSE Capital Goods, all sectoral gauges closed in the green. BSE Consumer Durables (up 4.64%), BSE Realty (up 3.27%), BSE Metal (up 2.80%), BSE Bankex (up 2.66%) and BSE Auto (up 2.02%) were the top gainers. On the flip side, BSE Capital Goods fell 0.18%.

The top Sensex gainers were Sterlite Industries (up 6.49%), Tata Motors (up 4.83%), ICICI Bank (up 4.47%), TCS (up 3.28%) and HDFC (up 3.13%). The losers were Bajaj Auto (down 1.52%), Larsen & Toubro (down 1.43%) and Hindustan Unilever (down 1.29%).

Industrial growth plunged to an 18-month low of 2.7% in November 2010 from over 11% recorded in the previous month. The sharp deceleration in November figures was because of a mere 2.3% growth in manufacturing, which constitutes around 80% in the IIP, which measures the expansion in factory production.

Markets in Asia finished on a firm note, on hopes of improved earnings reports and on a positive global outlook. Higher commodity prices also added to the support.

The Shanghai Composite gained 0.56%, the Hang Seng surged 1.54%, the Jakarta Composite jumped 2.88%, the KLSE Composite rose 0.23%, the Nikkei 225 added 0.02%, the Straits Times was up 0.11%, the Seoul Composite gained 0.32% and the Taiwan Weighted advanced 0.38%.

Back home, the Insurance Regulatory Authority of India (IRDA) said guidelines for public float of life insurance companies will be ready by early February. As per the draft guidelines compiled by IRDA, only insurance companies which have been in operation for the last 10 years would be eligible to launch IPOs. Also, the present IPO guidelines of the Securities and Exchange Board of India require a three-year profit record for a company to float a public issue.

Foreign institutional investors were net sellers in the equities segment on Tuesday, pulling out funds worth Rs1,162.57 crore. Domestic institutional investors, on the other hand, were net buyers of stocks worth Rs1,064.18 crore.

The Mukesh Ambani-led Reliance Industries (up 1.61%) has signed a pact with the Gujarat government to develop Pandit Deendayal Petroleum University into a top world-class institute. Promoted by Gujarat State Petroleum Corporation (GSPC), the university offers undergraduate and post-graduate energy education programmes and intensive research initiatives.

HCL Infosystems (up 1.39%) has informed the exchanges that it has been awarded a project worth Rs40 crore by Department of Higher Education, Government of Himachal Pradesh for setting up fully integrated information and communication technology labs and multimedia classrooms in 628 government senior secondary schools in the state.

Jindal Steel and Power (up 2.13%) said that it is carrying out due diligence for acquiring stakes at a producing oil block in Kazakhstan besides mulling prospects to set up a refinery in Georgia. The company would weigh various aspects including quantity of the crude production of the block and the amount of investment required, among others, before taking the final call.

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