Market experts strike a note of caution

Stock market experts have advised caution as the bulls continue to roar on Dalal Street.

Global inflows, which surged after the last week’s rate cut by the US Federal Reserve, propelled the benchmark indices to new milestones. Bourses registered gains for the ninth straight session on Friday, September 28th.

The BSE Sensex advanced by 140.54 points or 0.82 per cent to close at 17,291.10, while the Nifty gained 21 points or 0.42 per cent to close at 5,021.25 points.

Foreign portfolio investors have bought stocks worth $2.62 billion or Rs 10,488.69 crore since the Fed rate cut on September 19.

“Market developments in the near future may take the investors by surprise,” said big bull Rakesh Jhunjhunwalla, speaking at the 38th annual general meeting of the Indo-American Chamber of Commerce (ICC).

Jhunjunwalla, who has been bullish on the domestic equity markets for the last three years since the bull run started, pointed out that cycles, be they corrections or booms, had become shorter now.

“There is extreme excitement in the markets and things would move at an incredible speed. Both gains as well as falls would be fast,” he said. Recently, the BSE Sensex registered its fastest 1,000 points gain, which came in a mere six trading sessions.

Jhunjhunwalla also predicted an interim slowdown in the domestic software industry and a cut in software spends following a slump in the US economy.

Enam Securities Chairman Vallabh Bhansali advised retail investors to be extremely selective in their stock pickings and invest only in fundamentally sound stocks.

“Even though there may be a correction in the short run, the Indian markets seem to be on a steady wicket, considering the quality of enterprises and liquidity,” he said.

Bhansali cautioned investors to be alert to any subprime crisis lurking in the domestic market.

Yesterday’s rally was led by metal, banking and power sector stocks.

Longest non-stop rise recorded in Sensex

The Sensex has recorded its longest-ever, non-stop climb of 1,785 points in just nine trading sessions between September 17 and September 28. Meanwhile, the S&P CNX Nifty too has increased by a record 500 points.

During the course of the rally, the Sensex rose 11 per cent from 15,505 on September 17 to 17,291 on Friday (September 28th). Earlier, the Sensex’s longest non-stop rise was of 1,301.42 points between August 23 and September 4 this year.

Over 15 years ago, in 1992, Big Bull Harshad Mehta drove an unbroken 1,165.54-point rally in 10 trading sessions from 2382.07 on February 19 to 3547.61 on March 9.

In the current surge, the major contributors have been Reliance Industries, ICICI Bank, Bharti Airtel and HDFC. These four heavyweights added almost 50 per cent, or 792 points.

All the stocks in the 30-scrip Sensex, except Ambuja Cements, gained ground. The Ambuja stock fell 0.06 per cent from Rs 145.19 to Rs 145.15 on the BSE.

Reliance Industries, which has the highest weightage of 14.26 per cent in the Sensex, accounted for 19 per cent – 307.56 points – of the total gain. In the period, the stock rose 14.4 per cent to Rs 2,320.20.

ICICI Bank, which has the second highest weightage (9.98 per cent), contributed 223 points, Bharti Airtel 146.83 points and housing finance company HDFC 114.67 points.

Reliance Communications (56.31 points) and Reliance Energy (50.70 points) together contributed 107.01 points. Reliance Energy, the largest gainer, appreciated 23 per cent from Rs 907.80 to Rs 1,117.25 during the period.

Larsen & Toubro, State Bank of India, ONGC, HDFC Bank and Infosys Technologies contributed more than 75 points each.

How BSE indices closed today...

US bull mkt coming to an end: Jhunjhunwala

Rakesh Jhunjhunwala, Investor and Trader feels that the US housing market is unlikely to bottom in mid-term - there is still a lot of pain left. He also feels that US economic growth is unsustainable.

According to Jhunjhunwala the bull market in the US is showing signs of excesses. He believes that the US bull market is coming to an end. Jhunjhunwala forsees a big slowdown for techs if the US slows down.

He also feels that interest rates and commodity prices will also come down.

One, the problem in the housing market problem is going to get worse because there will be a lot of foreclosures. Two, there is a lot of housing under construction which cannot be stopped immediately. Housing is 70% of America’s GDP and that itself would lead to a slowdown in America.

He thinks the world is underestimating the consequences of this subprime or the meltdown of the US housing. There is a vicious cycle in America where you give money on credit to people who cannot not afford USD 50,000 - you give them half million dollars; not based on their ability to pay, but on the value of their capital assets. Such potentially "bad" borrowers primarily drove the buying of houses in the last 24 months. They will keep defaulting.

This slowdown in the housing industry is going to lead to a slowdown in the US economy. This again, would mean lower wages and lower employment, which could result in greater housing loan repayments defaults.

There is a very large subprime market even in Britain. So this will continue to transfer itself even to Europe.

Rakesh Jhunjhunwala believes there have been great excesses in the US bull market. That bull market, in his opinion, is coming to an end and the real excesses will be exposed only after the bull market is over.

The US economy is the engine of economic growth worldwide. It has an unsustainable methodology of growth, where you borrow, borrow, borrow and consume, consume, consume. Also we have had a 25-year bull market in America and all bull markets, regardless of regulators, always produce excesses. Excesses are not products of loose regulations but more products of bull markets because then markets make people lose their sense and they become absolutely greedy.

The US is a very dynamic economy; it has great self-correcting measures. This recession in America depends on factors like whether it is going to be orderly, or create a lot of disequilibrium etc. If it is an orderly one, Jhunjhunwala thinks Indian markets will be not be affected to a very large extent. But if it is a huge disequilibrium, then things are going to be quite unpredictable.

Nifty hits 5,000 on F&O expiry day ...

Following the recent dream run of the Sensex, the Nifty also witnessed a phenomenal run today and breached the psychological level of 5000 on account of strong rally seen across the board led by oil & gas, IT and capital goods sectors. Cues from the
global markets were also very strong.

The Nifty took 203 trading days to move from 4000 to 5000, as against the 213 trading days taken by the index to climb from 3,000 to 4,000. For the journey from 4500 to 5000, it took only 52 trading days. Major contributors from 4K to 5K were RIL - 268 points and Bharti - 102 points. SAIL & RPL contributed 82 points each.

How BSE indices closed today...

Sensex landmarks...

Sensex breaches 17,000 mark: IT stocks surge...

It was a volatile session for the markets. After touching the 17,000 mark in the morning the BSE index kept moving to and fro but ended the day on a flat note. There was strong performance by IT and banking stocks. However, realty and oil & gas stocks were trading under pressure on account of selling pressure.

The Sensex breached the 17,000 mark for the first time ever but could not sustain ts position at the higher levels. Surprise rally was seen in IT stocks like Wipro, Satyam, Infosys followed by select buying in bank and metal stocks

Sensex rally from 16,000 to 17,000 has been led Reliance group of stocks along with telecom pivotal Bharti, L&T, HDFC and ICICI Bank.

When we look at it in terms of sectors, energy sector is the forerunner whether it has been oil & gas major Reliance Ind or Rel Energy. Reliance Petroleum and RNRL made big moves in the last week. After the 50 bps rate cut by the Fed realty stocks were buzzing as well and among the gainers were DL, Unitech and Penisula Land. Metal stocks like Sterlite, Sesa Goa, Tata Steel, SAIL and Hindustan Zinc have been helping the uptrend.

Sensex was up 21.85 points or 0.13% at 16921.39, and the Nifty up 13.55 points or 0.27% at 4952.40.

About 1614 shares have advanced, 1347 shares declined, and 72 shares are unchanged.

The BSE Midcap Index ended at 7,352.62 up 0.54%.

The BSE Smallcap Index ended at 9,029.34 up 0.7%.

The BSE Bankex was up 1% at 8,038.07. Karnataka Bank, Kotak Mahindra, SBI, ICICI Bank, Yes Bank, Bank of India moved upwards.

The BSE Capital Goods Index was down 0.4% at 13,714.26. Kalpataru Power, Praj Industries, Kirloskar Bros, BEML, Triveni Engg closed lower.

The BSE Health Care Index was down 0.5% at 3,703.82. Orchid Chemical, Glenmark, Wockhardt, Apollo Hospital, Divis Labs closed lower.

The BSE Auto Index closed at 4,867.13 down 1%. Maruti Udyog, Apollo Tyres, Mah and Mah, Exide Industrie, Hero Honda closed higher.

The BSE Metal Index closed at 11,772.22 down 1.4%. Shree Precoated, Jindal Steel, Mah Seamless, Hindalco, JindalStainless closed lower.

The BSE FMCG Index closed at 2,098.05 down 0.7%. United Spirits, Dabur India, United Breweries, Colgate, HUL closed lower.

BSE Oil and Gas Index closed flat at 8,260.71. RNRL, Petronet LNG, Reliance, Reliance Petro ended in red.

The BSE IT Index was up 2% at 4,470.56. Satyam, HCL Tech, Infosys, Patni Computer, Wipro, TCS closed higher

The BSE realty Index lost 1% at 7,470.27. Unitech, Ansal Propertie, Mahindra Gesco, DLF closed lower.

The NSE cash turnover was at Rs 16960.82 crore and the NSE F&O turnover was at Rs 78536.17 crore. The BSE cash turnover was Rs 7784.10 crore. Total market wide turnover was at Rs 103281.1 crore.

Investors should be wary of taking new positions: JM Financial Consultants

Ashit Kampani, MD, JM Financial Consultants, has said that investors should be wary of taking new positions at these levels. “Sustainability is an issue, so investors should wait and watch.”

He has said that with the rupee appreciating, crude oil moving up and also interest rates situation post-Fed cut are three main ingredients of whatever is happening externally into the country.

He feels that investors should wait for Q2 earnings, which will be out in the next 20 days, to see which companies will be hurt by the rupee appreciation and rising crude prices.

Also, internally there are a lot of developments in infrastructure and the confidence of investor, which is moving up, is allowing them to continue investing in India.

He is particularly bullish on the infrastructure sector and has said that it would lead a huge rally and take the markets to new highs.

According to him, these two factors are allowing most of the people to take larger bets. But he advises one to be wary of getting into fresh positions here, because sustainability is an issue at this point of time. Markets are still ahead of the corporate results which are just around the corner.

17000 beckons Sensex

Backed by the momentum, the Sensex is likely to target 17,000 this week. In case of a downside, the index is likely to find significant support around 15,800-16,000. This week, the Sensex may face resistance around 17,000-17,140-17,280, while on the downside, it is likely to find support around 16,125-15,990-15,850.

Expiry ahead to temper sentiment

The markets extended the gains made in the previous session and that too on improved volumes. The bear squeeze seen on an empirical basis prior to the derivatives expiry was seen continuing in earnest.

Traded volumes on the NSE logged a spike and the market breadth continued to remain negative as the combined exchange figures were 1852 : 2075.

The capitalisation of the breadth on a commensurate basis was positive as the figures were Rs 22,948 crore : Rs 3,401 crore. The derivatives data for the previous session indicated a slow build up of fresh longs and the PCR continued to rise.

The indices have closed at the upper end of the intraday range and that too on good volumes. The market breadth indicates a bias by the retail segment to book profits at higher levels, especially in the technology and small-cap scrips.

Going by the money flow indicators, the buying momentum seems to be originating from the stronger hands / institutional players.

The intraday range specified for Monday at the 4760 / 4910 was easily overcome on the upsides as the closing was convincingly above this threshold. The 4805 pivot proved to be short term bullish support above which the bulls prevailed over the bears.

The coming session is likely to witness a range of 4995 on the upsides and 4870 on declines. The bullish pivot for the day will be the 4905 level above which the Nifty spot will continue to remain positive.

The coming session is likely to be a positive one, subject to overseas cues and continued follow up buying at lower levels. Avoid the temptation to go short as the impeding expiry of the September series will see a continued bear squeeze.

Merrill Lynch overweight on Reliance Energy

Merrill Lynch is bullish on Reliance Energy and has maintained overweight rating on the stock with target price of Rs 1209.

Merrill Lynch research report on Reliance Energy

Conclusion:

Reliance Energy is focusing on the boom in Indian infrastructure, where we believe significant opportunities exist in the utility, infrastructure, real estate and coal mining/oil and gas exploration space. The company’s financial strength and aggressive efforts to win new projects increase our confidence on Reliance’s growth trajectory going forward.

Utility + EPC has great potential:

In July 2007, the Empowered Group of Ministers awarded the 4,000 MW Sasan UMPP to Reliance Energy for its bid of Rs1.19/kWh. The company is also looking at various other power projects with an aggregate capacity of 14GW apart from the 4,000 MW Krishnapatnam UMPP, for which it will submit its proposal later this month. Furthermore, the EPC business seems well poised with an outstanding order book of Rs50 bn and the potential to increase as more power projects are handed out in the future.

Encompassing other segments in the infrastructure space:

Reliance is executing various road and metro projects worth over Rs60 billion. It also has plans to develop jointly 11 million sq ft of real estate in Hyderabad over the next seven years.

Implications:

We believe the macro growth story in India coupled with the company’s aggressive efforts will be positive in the longer term. We maintain our Overweight rating and have increased our price target from Rs813 to Rs1,209.

Investment Thesis:

One of India’s largest integrated electric utilities in the private sector with experience in generation and distribution businesses. Surplus cash position allows the company to finance large power projects. EPC division can benefit from the increasing activity in the generation space as a result of the government’s XIth five-year plan

Key Value Drivers:

Regulatory regime improving in India. Thrust provided by the government to increase private participation in the utility sector

Potential Catalysts:

Winning additional generation projects. Go-ahead given to the two transmission projects that are currently stalled • Substantial increase in EPC order book

Key Risks:

Non-deployment of surplus cash, which would depress ROE

Market closes on a new high: Nifty eyeing 5000 mark

It has been one of the most interesting times in the Indian stock markets as they have been making new records touching some new highs. Sensex and Nifty closed the near the high point of the day and also on a new life time high. Nifty was up 90 points inching towards 5000 mark. Sensex scored over 280 points breaching 16,800 mark.

Big records were made in today's session as Open Interest has hit 1 lakh crore mark. This will be the biggest series ever rolled over on Thursday. Even in terms of overall turnover we hit an alltime high.

India outperformed Asian peers with markets like Hang Seng ending with moderate gains. Europe was a little tenative and is trading almost flat. Today's top gainers were energy and bank stocks.

Reliance group of stocks were buzzing and rallied to new highs. The most mysterious being RNRL up at Rs 93.80, along with Rel Energy, Rel Ind, Reliance Capital and Rel Petroleum.

However, technology stocks ended lower on selling pressure due to strong rupee, which touched a new nine year high of 39.77 per dollar.

Sensex was up 281.60 points or 1.70% at 16845.83, and the Nifty up 94.65 points or 1.96% at 4932.20.

About 1417 shares have advanced, 1550 shares declined, and 65 shares are unchanged.

The BSE Small Cap Index closed at 8,963.43 up 0.7%.

The BSE Midcap Index ended at 7,310.14 up 1.5%.

The BSE FMCG Index closed flat at 2,153.57. United Brewerie, Marico, HUL, Colgate closed in green.

The BSE Metal Index closed at 13,030.47 up 2%. Jindal Steel, SAIL, Hindalco, Shree Precoated were among the losers.

The BSE Health Care Index was up 0.3% at 3,663.23. Glenmark, Ranbaxy Labs, Biocon, Matrix Lab closed higher.

The BSE Capital Goods Index was up 2.2% at 14,837.71. Reliance Infra, Jyoti Structure, Areva T&D, Larsen, Crompton Greave ended higher.

The BSE Auto Index closed at 5,297.26 up 2%. Maruti Udyog, Ashok Leyland, Hero Honda, Bajaj Auto were among the gainers

The BSE IT Index closed at 4,349.83 down 2%. Financial Tech, HCL Tech, TCS, Wipro, I-Flex Solution ended weak.

The BSE Bankex was up 2.5% at 8,961.49. Andhra Bank, PNB, Bank of Baroda, Allahabad Bank, ICICI Bank closed higher.

The BSE Oil and Gas Index closed at 9,651.17 up 3.3%. Reliance Natura, Reliance Petro, Petronet LNG, GAIL Reliance and ONGC closed in green.

The NSE cash turnover was at Rs 18792 crore and the NSE F&O turnover was at Rs 79397 crore. The BSE cash turnover was Rs 7740.11 crore. Total market wide turnover was at Rs 105929.1 crore.

How BSE indices closed today...

Happy Daughters' Day!

Today, India celebrates "Daughters' Day" for the first time. May their tribe increase!

BSE market cap breaches Rs 50 trillion mark

The record breaking rally in the country's stock market pushed the total investor wealth, on September 21, past the Rs 50,00,000 crore milestone for the first time in its history.

The cumulative market capitalisation of all the 4,500-odd companies listed on the Bombay Stock Exchange, the world's biggest bourse in terms of listed firms, o Friday soared to a new peak of Rs 50,18,265.06 crore.

BSE's benchmark 30-share index, Sensex, rose to a new peak of 16,616.84 points before settling 1.32 per cent higher at a new closing high of 16,564.23 points. Friday's gain added more than Rs 70,000 crore to investors' wealth.

The collective market cap of 30 Sensex scrips stood at Rs 21,66,048 crore, led by the country's most valued firm RIL with over Rs three trillion.

The total market cap of all the companies listed at the National Stock Exchange, which has relatively lower number of listings, also rose to a new high of Rs 47,16,035 crore. NSE's 50-share benchmark Nifty scaled a new peak of 4,855.70 points.

Besides the indices and market cap, as many as 94 stocks touched their life-time highs on September 21. These stocks included Reliance Industries, SBI, IFCI, Reliance Capital, SAIL, IDBI, Grasim, Reliance Energy, GAIL, IDFC, RNRL, Reliance Petroleum, Cairn India and Reliance Industrial Infrastructure Ltd.

After breaching the 16,000 level for the first time ever on September 19 with its highest ever single day gain of 653 points, the Sensex has continued its upward journey. It added 216 points on September 21, following a modest 25-point rise on September 20.

Total investor wealth rose Rs 5,00,000 crore in little over two months during the Sensex's journey from 15,000 to 16,000. The market value of all BSE companies was about Rs 44,02,000 crore on July 6 when the Sensex hit 15,000.

Heady mix: Markets see new lifetime highs in 3 sessions...

The last three days have seen almost all asset classes touching new all-time highs.

On September 21, in the commodity markets, crude touched a new intraday high of USD 83.90 a barrel today on the New York Mercantile Exchange. However, it could not sustain those gains and closed down 0.38 cents to USD 81.40 per barrel.

Gold too hit a 28-year high on September 20. Spot gold prices surged to USD 730.25 an once, its highest since January 1980 when it hit a record high of USD 850.

In the forex market, the rupee touched a new nine-year high on September 21. It had appreciated to 39.90 as against September 20th close of 40.20. The Indian unit has appreciated beyond USD 40 for the first time since May 1998.

The indices too joined the party on September 21. Both the Sensex and Nifty hit their respective all-time highs in Friday’s intraday trades; the Nifty touched a high of 4,855.70 while the Sensex hit 16,616.84.

How BSE indices closed on September 21...

Ambani brothers make hay while Sensex shines...

Yesterday was yet another spectacular day for the Reliance group companies in terms of wealth creation, be it the Mukesh Ambani camp or Anil Dhirubhai Ambani Group (ADAG) companies. All the group companies have been doing extremely well over the past one-month and have added enormous wealth to their investors.

Mukesh Ambani's Group Reliance Petroleum and Anil Ambani’s RNRL were the star performer in Friday's trade; they surged up 11% and 35% respectively.

On Friday evening the total market cap for Mukesh Ambani's Group stood at Rs 401,800 crore and ADAG stood at Rs 190,700 crore. If we consider the combined market cap then they added Rs 26238 crore in a single day compared with Thursday's close.

According to Dipan Mehta, Member of BSE & NSE, “ Reliance Group has captured the market’s imagination. There is a lot of froth in the market especially in these stocks so lot of day traders, speculators also trying to ride this particular trend and therefore we are seeing Reliance Group companies doing exceedingly well.”

He further added, “Over the last two-three months if it is one group, which has outperformed the market, it is the Reliance Group; both brothers and therefore any stock, which is in the group market seems to have taken fancy to that and we are seeing blowout volumes and stock price movements.”

“Not all of it is related to any perceptible change in the fundamentals of these companies, but it’s just that the PEs are getting rerated upwards and there is a lot of excitement and expectations from these group companies.”

In percentage terms in last one month Reliance Industrial Infrastructure has gained by 115%, RNRL 66%, Reliance Capital 47% and Reliance Petroleum 43%.

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