Sucheta Dalal explains the role of companies, investment bankers and regulators in fetching poor...
Sensex gains 68 points to close at 17,199 in volatile trade
The stock market climbed to a five-week high in volatile trade on Wednesday, with the BSE Sensex gaining 68 points to close at 17,199 while the Nifty closed 18 points up at 5,108. Market volatility is expected to continue over the next two days as traders roll over positions in the derivatives segment ahead of expiry of the November 2009 contracts on Thursday. At the end of Tuesday’s trading, rollover in Nifty futures was about 54% while rollover in Mini Nifty futures was about 33%. The market-wide rollover was about 48%.
Reliance Industries (RIL) rose 1% on reports that the company has reopened 900 gas stations, which were shut down when state-run oil marketing firms were selling heavily subsidised fuel.
India’s largest small-car marker Maruti Suzuki India rose 1% on reports that the company will spend Rs2,000 crore to expand production capacity at its Manesar factory in Haryana.
However, India’s largest commercial vehicle maker Tata Motors fell 1% on reports that the company is looking at buying private equity firm Actis’s stake in truck and bus-maker Swaraj Mazda.
Mahindra Satyam slumped 11% on reports that the Central Bureau of Investigation found evidence of an additional Rs4,739 crore corporate fraud in the company, committed by its founder R Ramalinga Raju and his associates.
Bajaj Hindusthan was up 5% on reports that a foreign fund hiked its stake in the firm.
Unitech fell 2% on equity-dilution worries following reports that the company has sought approval from the department of industrial policy and planning and the Reserve Bank of India to raise $700 million through foreign currency convertible bonds.
J Kumar Infraprojects’ order book is worth Rs1,475 crore after receiving pilling works orders from Larsen & Toubro and others worth Rs8.75 crore. The stock remained flat.
Welspun Gujarat Stahl Rohren was up 3% on reports that the company has successfully mobilised $250 million.
During the day, Asia’s key benchmark indices in Hong Kong, China, Japan, Singapore, South Korea and Taiwan rose by between 0.34%-2.07% on expectations of stronger economic growth.
As per data released by the Japanese finance ministry, Japan’s exports fell 23.2% in October, compared with a 30.6% decline in September.
On Tuesday, in the US markets, the Dow Jones Industrial Average was down 17 points while the S&P 500 and the Nasdaq Composite slipped one point and seven points, respectively.
As per reports, US Federal Reserve officials are confident that the US economic recovery will be durable, but they do not see employment or inflation picking up soon. The US Fed projected the economy will shrink 0.1% to 0.4% this year and grow by 2.5% to 3.3% in 2010. US GDP growth in the September 2009 quarter was revised to 2.8%, lower than the initial reading of 3.5%. The conference board’s gauge of consumer confidence rose to 49.5 in November 2009 from 48.7 in October 2009 and home prices improved for a fifth straight month in September 2009.
According to the Office for National Statistics in London, the UK’s gross domestic product fell 0.3% less than previously estimated in the third quarter as consumer spending stopped falling and the service industries’ slump eased.
— Swapnil Suvarna [email protected]
The investment case for gold has become increasingly compelling with central bank buying and a structural change in interest in gold as an investment product among retail customers, said Standard Chartered (StanChart) in a research note.
“Although the upside will be capped by lower jewellery demand, increased availability of scrap gold as prices surge to new highs and periodic dollar strength in the first half of 2010, we see gold moving higher to average $1,300 per ounce (oz) in the fourth quarter (Q4) of 2010 once the dollar resumes its weakening trend,” said Helen Henton, global head of commodity research StanChart.
Gold has averaged $955 per oz so far this year.
In its Commodities Quarterly report, StanChart has said that it expects platinum to outperform gold in 2010, supported by the upward momentum provided by gold prices and due to supply issues, including rising costs and a vulnerable power grid in South Africa.
After plummeting in Q4-2008, commodity prices have performed well this year. The Dow Jones UBS index is up 15% so far this year, led by a 64% lift in industrial metals prices. Crude oil prices are also up 74%, but the energy complex as a whole is down this year as natural gas prices have been weighed down by massive oversupply. Precious metals have also risen 37% year-to-date, the research note said.
The gains have been driven by a combination of US dollar weakness, supply restraint, improving investor sentiment and, eventually, a pickup in actual demand. Crude oil demand, for instance, bottomed in the second quarter and is now edging higher.
The levels of demand are still below previous peaks, however, StanChart said it does not expect crude oil demand to return to the previous peak in Q4-2008 before 2012. The weak demand growth and the potential among the leading producers to expand output are likely to keep crude prices capped, with average price for Q4 of 2010 forecast at $88 per barrel, it added.
Crude oil has averaged $60 a barrel so far this year.
Among base metals, StanChart said it is relatively more bullish on copper and lead where the supply situation is tighter. The outperformance of the base metals complex this year is a direct result of China’s stimulus package and early recovery. While the level of imports may have been excessive and inventories have risen, the recovery in end use demand has been evident in the key metal consuming sectors, it added.
According to the report, commodity prices will retreat in the first half of 2010 as the dollar rebounds and concerns emerge over the sustainability of the global recovery. It said during this period investors are likely to refocus on commodity market fundamentals—those with the tightest supply are likely to outperform. With liquidity still ample, the pull back is unlikely to be severe.
The second half of 2010 is likely to be markedly different from the first half as renewed US dollar weakness, pickup in growth in the US, in particular, and ample liquidity draw investor funds back to commodities, pushing prices higher, the report added.
With the notable exception of nickel, soya beans, sugar and rice, prices will rise in the Q4 of 2010 versus the corresponding period in 2009, StanChart said.
Among agricultural commodities, which have underperformed other commodities this year, corn is expected to lead prices higher in 2010 as a result of poor weather conditions in the US and China. Corn and palm oil are also likely to benefit from firmer energy prices in the second half of next year. In contrast, the winning agricultural commodities of 2009—sugar and soya beans—are likely to underperform as improved crops flood the market, dampening prices, the StanChart research report said.
-Yogesh Sapkale [email protected]