LSE Securities. Major Indices Performance

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LSE Securities Weekly Report 22th January 2010 Few earnings disappointments and weak global cues caused some serious damage to the local equity markets this week, which brought an end to the

China s step to control lending growth coupled with likely policy tightening from Beijing following the 10.

1 LSE Securities Weekly Report 22th January 2010 Few earnings disappointments and weak global cues caused some serious damage to the local equity markets this week, which brought an end to the four-week winning streak of the key indices. Except Monday, the BSE s 30- share Sensex and the NSE s 50-share Nifty could not manage a positive close during the entire week. China s step to control lending growth coupled with likely policy tightening from Beijing following the 10.7% growth registered by the third largest economy of the world during the fourth quarter of 2009, dampened investors sentiments across the globe. The US President Barack Obama, on Thursday, proposed new rules to limit banks risk-taking, which triggered global sell-off in Friday s trade. Back home, situation worsened after poor quarterly earnings from the engineering and construction major, Larsen & Toubro (L&T). The top line of the company declined 6.37% during December 2009 quarter on the back of execution delays. Third quarter results of telecom major -- Bharti Airtel -- and India s leading oil and gas producer -- Oil & Natural Gas Corporation (ONGC) -- also fell short of market expectations. Meanwhile, strong set of numbers from Reliance Industries and ITC capped further slide in the markets. Food inflation based on the wholesale price index (WPI) for the week ended January 9 has come down marginally but the figure has stayed above the level of 15% for the ninth consecutive week, which will add pressure on the government to take corrective steps sooner than later. The second line stocks also underwent sharp correction after a recent surge. Realty, capital goods and oil & gas counters were the biggest draggers for the markets during the week under review. The Bombay Stock Exchange s (BSE) Sensex tumbled points or 3.96% to 16, in the week ended January 22, while the S&P CNX Nifty plummeted points or 4.12% to The BSE Mid-cap index contracted 3.78% to 6, and the Small-cap index slipped 3.45% to 8, On the National Stock Exchange (NSE), CNX Mid-cap plunged 4.12% to , CNX IT dipped 3.98% to , CNX Nifty Junior slid 3.80% to and Bank Nifty declined 1.55% to The government on Thursday released the wholesale price index (WPI) for the week ending January 9 in respect of Primary Articles and commodities in the broad group Fuel, Power, Light & Lubricants. The Primary Articles Index which has a weight of 22.02% in the overall WPI increased by 0.4% to from in the previous week. As a result, the annual rate of inflation for primarily articles, calculated on point to point basis, increased marginally to 13.93% as compared to 13.82% for the previous week and 11.87% during the corresponding week of the previous year. The annual food inflation softened marginally to 16.81% compared with 17.28% in the previous week. Among BSE sectoral indices, Realty down 7.98%, Capital Goods (CG) down 6.51%, Oil & Gas down 6.06%, Healthcare (HC) down 5.99% and Power down 4.53% were the main losers. There were no gainers in the BSE sectoral space. Soaring food prices have been a major issue in Indian economy with both the government and the Reserve Bank of India facing pressure to put a brake on expansionary policies to ease inflationary tendencies. In recent weeks though there has been some softening in food prices. This however is not expected to change RBI s thinking much and the Indian banking regulator is still expected to initiate the process of monetary tightening in forthcoming policy review. Growth of Indian economy may slowdown in the third quarter of this fiscal as compared to the previous quarter, said a government official on Thursday. Pronab Sen, chief statistician of the central government said that December quarter growth was likely to be lower than September quarter due to poor farm growth. Foreign Institutional Investors (FIIs) turned net sellers in equities during the week with gross purchases of Rs 12,137.5 crore and gross sales of Rs 13,785.9 crore, leading to a net outflow of Rs 1,648.5 crore. On the other hand, they were net buyers in the debt segment with gross purchases of Rs 4,896.7 crore against gross sales of Rs 2,346.4 crore, resulting in a net inflow of Rs 2,550.3 crore. SYMBOL Last Week Close 15-January 2010 Major Indices Performance High Low Last 22-January 2010 % BANKNIFTY CNX CNX CNXDEFTY CNXIT CNXMIDCAP MIDCAP NIFTY NIFTYJR

2 FIIs Movement ( Rs. Cr.) Mutual Fund Movement ( Rs. Cr.) Gross Purchase Gross Sales Net Investment Equity Debt Equity Debt Equity Debt Gross Purchase Gross Sales Net Investment Equity Debt Equity Debt Equity Debt 22-JAN (569.60) Jan (32.30) (92.70) 21-JAN (462.80) Jan (205.60) Jan (451.50) (124.90) Outlook for the coming week 19-JAN (498.60) Investors are expected to continue their selli ng spree in the coming week as the global concerns continue to linger on the local equities. Apart from this, the futures and options (F&O) expiry for the January series (on January 28) and the quarterly monetary policy review from the Reserve Bank of India (RBI) (on January 29) will also play a crucial role next week. The apex bank is likely to hike cash reserve ratio (CRR) in its policy review. CRR is the amount of funds that the banks have to keep with RBI. There will be only four trading sessions next week as the markets will remain close on Tuesday January 26, on account of Republic Day. Quarterly earnings announcements from frontliners like DLF, Godrej Inds, HCL Tech, Hero Honda, Hindalco Inds, Hindustan Unilever (HUL), Jet Air India, LIC Housing Fin, Mahindra & Mahindra (M&M), Power Grid Corp, State Bank of India (SBI), Sterlite Inds, Steel Authority of India (SAIL), Sun Pharmaceutical Industries, Tata Teleservices, Tata Steel, Tata Motors and Wockhardt will set the tone for the markets in the coming week. The primary market will also be under focus as four initial public offerings (IPOs) are lined up for next week. The IPO schedule will be Aqua Logistics (January 25-January 28), Syncom Healthcare (January 27-January 29), Vascon Engineers (January 27-January 29) and Thangamayil Jewellery (January 27-January 29). Undoubtedly, global cues will be the deciding factor in the coming week. Key data from the US economy next week will be December home sales numbers and fourth quarter Gross Domestic Product (GDP) figures. A Federal Reserve committee meet is scheduled next week to discuss a key interest rate. Apart from this, all eyes will also be on whether Fed Chairman Ben Bernanke gets confirmation vote in the Senate for the second term or not. His first term ends on January 31. Few result announcements will also hog limelight. Top Gainers Idea Cellular was the biggest gainer on the Nifty during the week, surging 4.64%. The company s consolidated net profit for the December quarter declined by 22.48% to Rs crore from Rs crore in the year ago period. The street was expecting even a stiff fall in its net profit to Rs 142 crore. Total income (consolidated) of the country s fifth-largest mobile operator grew by 15.32% to Rs 3, crore from Rs 2, crore in the same quarter of last fiscal. HCL Technologies, up 3.59%, was another major gainer on the Nifty this week. The company has received its board s nod for the amalgamation of HCL Technoparks, a wholly-owned subsidiary, with itself by way of scheme of amalgamation. The board has also approved the draft scheme of amalgamation for the said merger. The IT major will announce its second quarter result on January 25. NSE TOP Gainers - Nifty Company Name Prev (Rs.) Last (Rs.) Chg (Rs.) Chg% Idea Cellular HCL Technologies Maruti Suzuki India Bharti Airtel Hero Honda Motors

3 Top Losers Larsen & Toubro (L&T), down 10.87%, was the biggest loser on the Nifty this week. The largest engineering company of the country reported a huge setback in its third quarter results and went way back to market expectation. It was company s first drop in quarterly sales since the quarter ended December 31, 2002, when revenue declined by 1%. The company posted a net profit of Rs crore for Q3FY10 against Rs 1, crore in Q3FY09 down by 50.09%. Net sales fell by 6.08% to Rs 8, crore in the December quarter compared to Rs 8, crore in the corresponding period a year ago. Jaiprakash Associates was another major loser on the Nifty during the week, plunging 10.46%. Selling was witnessed in the counter despite strong quarterly earnings on standalone basis excluding extraordinary items. The company has reported a net profit of Rs crore for the October-December 2009 quarter against Rs crore for the October-December 2008 quarter, down 38.90%. Its total income has increased to Rs 2, crore from Rs 1, crore, registering a Year-on-Year (YoY) growth of %. Company Name NSE TOP Losers - Nifty Prev (Rs.) Last (Rs.) Chg (Rs.) Larsen & Toubro JP Associate DLF Cairn India Grasim Industries Chg% Technical Viewpoint - S&P CNX Nifty NSE Weekly Chart During the week, S&P CNX Nifty touched the highest level of on January 18, 2010 and the lowest point of on January 22, On the last trading day of the week, the Nifty closed at 5036, with weekly losses of points or 4.12%. For the coming week, followed by levels are likely to be good support levels for the Nifty, whereas, on the upside resistance for the Nifty is likely to be at followed by levels.

4 Derivatives Snapshot Highest In OI (Index Futures, Index Option) Type Symbol Expiry Type Strike LTP Volume in Volume Value (Rs. Lakhs) in Open Interest O I FUTIDX NIFTY 28-Jan FUTIDX NIFTY 25-Jan FUTIDX MINIFTY 28-Feb OPTIDX NIFTY 28-Jan-10 CE OPTIDX NIFTY 28-Jan-10 CE OPTIDX NIFTY 28-Jan-10 PE Highest In OI (Stock Futures, Stock Option) Type Symbol Expiry Type Strike LTP Vol in Vol Value (Rs. Lakhs) in Open Interest O I FUTSTK RELIANCE 28-Jan FUTSTK LITL 28-Jan FUTSTK EDUCOMP 28-Jan OPTSTK RELIANCE 28-Jan-10 CA OPTSTK RELIANCE 28-Jan-10 CA OPTSTK RELIANCE 28-Jan-10 CA US Market The US markets declined heavily in the holiday shortened week. Though the markets got a good start and surged to their fresh 15 month high on Tuesday after a holiday on Monday, it declined for rest of the three trading days. The Dow Jones industrial average closed the week down points, or 4.12%, at 10, The Standard & Poor s 500 index lost points, or 3.89%, to 1, The Nasdaq composite index fell points, or 3.61%, to 2, A top Chinese banking regulator said that the country will increase monitoring of banks as it tries to prevent speculative bubbles in areas like real estate and raised concern that China s curbs on bank lending might jeopardize the global recovery. Meanwhile foreign demand for long-term US financial assets jumped sharply in November. The Treasury Department said that foreigners purchased $126.8 billion more in assets than they sold in November, the largest gain since an increase of $128.9 billion in October China, the largest holder of US Treasury securities, trimmed its holdings by $9.3 billion in November, pushing them down to $789.6 billion, the smallest level since last June. On the other hand, Japan -- the second largest owner of US Treasuries -- boosted its holdings in November by $11.4 billion to $757.3 billion. During the week the Labor Department said initial claims for unemployment aid rose by 36,000 to a seasonally adjusted 482,000. Though, a separate report on Thursday that sought to forecast future economic activity, offered a more positive outlook. The Conference Board s index of leading economic indicators jumped 1.1% in December, suggesting that economic growth could pick up this spring. It was the latest proposal of President Barack Obama that spooked, not only the US markets but the whole global market. The new proposal aims to clamp down on speculation by commercial banks and keep them from getting so big that a collapse would jeopardize the financial system. That could force the breakup of some the nation s biggest banks. High Low % Dow Jones Nasdaq S&P

5 European Market The European markets swayed in the same direction as the other world markets went for the week. It was the monetary tightening by the Chinese government that led to the decline in the global markets followed by the proposed stricter norms of the big banks. The European markets were under pressure due to their internal problems as well. The rising debt level in Greece along with the widening gap in the UK budget weighed on the sentiments. The DAX 30 snapped the week lower by 3.07% while the FTSE 100 was down by 2.79%. UK budget gap in December widened to 15.7 billion from 13.8 billion a year ago month according to the latest data released by the Office for National Statistics. The cash requirements in the month surged to 23.6 billion from 21.6 billion a year ago. The deficit for the fiscal year from April to December increased to billion from 63.3 billion a year ago period and net debt increased to 61.7% of gross domestic product or 870 billion. The deficit is record high since 1974, when records keeping began. In the Euro region a composite index of manufacturing and service industry as measured by Markit Economics declined to 53.6 in January from 54.2 in December. A read above indicates an expansion. Service index declined more than expected to 52.3 from 53.6 in December and manufacturing index increased to 52 from The eurozone economy had moved out of recession by the third quarter of 2009, when it grew 0.4 per cent. But the end of government help for car sales, weak banking sector and rising unemployment are all likely to have taken a toll on domestic demand, particularly in Germany. Greece Finance Minister Papconstantinou said Greece planned to issue a total of 53 billion debt as 16 billion of debt mature in the second quarter. High Low % DAX FTSE Asian Market The trigger for the decline of the global markets erupted from the Asian markets with China indicating to tighten its monetary policy and all the Asian markets suffered heavily including China. Hang Seng suffered the most and declined by 4.29%, Nikkei 225 was down by 3.57%, Straits Times was down by 3.05% and Shanghai Composite snapped the week lower by 2.96%. Head of banking regulation, Liu Mingkang said China is looking to curb the lending by 22% to 7.5 trillion yuan or $1.1 trillion. The tighter lending is expected to curb asset prices and real estate markets. Japan s Ministry of Economy, Trade and Industry reported that the Tertiary Industry Activity, which gauges demand for services, dropped 0.2% to 96.6 in November in seasonally adjusted terms. Industries that contributed to the increase were wholesale and retail trade 0.7%; accommodations, eating and drinking services 2.4%; scientific research, professional and technical Services 1.3%; information and communications 0.6% and medical, healthcare and welfare 0.6%. METI also noted that industries that contributed to the increase were miscellaneous services (except government services etc) with 2.1%; electricity, gas, heat supply and water with 1.5%; living-related and personal services and amusement services with 1%; real estate and goods rental and leasing with 0.5%; finance and insurance with 0.4%; transport and postal activities with 0.2% and compound services with 2.2%. China reported another quarterly economic expansion that fueled worries that Chinese economy may have overheated. In the fourth quarter economy expanded at 10.7% compared to a year ago and in 2009 grew at 8.7% above its target rate of 8%. China also revised its third quarter expansion to 9.1% from the previous estimate of 8.9% and first quarter at 6.2% from 6.1%. Fixed investment in urban areas soared 30.5% in 2009 according to the Chinese statistics agency. Industrial production increased in December at 18.5% and retail sales surged at 17.5% according to a separate report issued by the agency. Consumer price index in December increased 1.9% and producer price index rose by 1.7%, meeting the forecasts laid out by most economists. High Low % Hang Seng KLSE Nikkei Straits Times Seoul Shanghai Disclaimer : This document has been prepared by LSE Securities and Accord Fintech Pvt. Ltd. and is being distributed in India by LSE Securities, a registered broker dealer. This information in the document has been complied by the research department. Due care has been taken in preparing the above document. However, this document is not, and should not be construed, as an offer to sell or solicitation to buy any securities. Any act of buying, selling or otherwise dealing in any securities referred to in this document shall be at investor s sole risk and responsibility. This document may not be reproduced, distributed or published, in whole or in part, without prior permission from the company. Copyright Accord Fintech Pvt. Ltd. and LSE Securities

LSE Securities. Major Indices Performance

LSE Securities. Major Indices Performance LSE Securities Weekly Report 02nd January 2010 Domestic equity markets finished the last week of 2009 with good gains underpinned by strong indications from the world-wide markets. The local markets had