Nifty - Selling Climax To End
*** The Nifty lost 147 points over the day to close at 4919. Another
big decline for the markets yesterday that saw them trade in a
range in the first half (read as distribution) and thereafter witness
a freefall in the second half leading to the test and close below
our mentioned support/target of 4950/16600. Technically, the fall
can only be understood as a selling climax where typically no
support level is a “good” level for a day or two. Despite testing
4950 we did not spot any bottoming triggers and hence were
forced to maintain a bearish stance. Currently, with the markets
oversold with positive divergence on most indicators, we believe
that a trading bottom atleast should be formed around the 16300
level (4860-4900 zone on the Nifty) in the next couple of days.
There are a couple of negatives in the form of a MT trendline
breakdown and the fact that the popular 200-DMA has been
breached. We shall continue our “hunt” for a bottoming pattern
because only once it emerges will we have confirmation. Overall,
the selling climax should end in a day or two around the levels
mentioned above after which a quality recovery is likely.
Market News & Trends
* OIL PSUs : Govt hikes the administered pxs of natural gas sold by ONGC &
Oil India to $4.2/mmbtu fm existing $1.79/mmbtu.. will add revenues of Rs55bn
& Rs60bn to ONGC and Oil India resp.. will improve their PAT by 15% each..
separately GAIL has been allowed to charge mkting margin of ~ 11 cents/mmbtu -
wud positively impact the PAT annually by ~ Rs2bn
* TELECOM : Govt completes 3G auction, to garner Rs 677bn (nearly double the
estimates) which should help contain govt's fiscal deficit
* M&M : plans to launch a couple of compact diesel-driven, pick-up truck models
in the US by year end
* JINDAL STEEL & POWER : Co to replace Grasim in the Sensex wef 26th May 2010
* SESA GOA/NMDC : Steel Min to push for further increase in export duty of iron
ore if needed
* SRF : plans investments of Rs 10bn over nxt 4 yrs on a new plant in Dahej to
produce flourine based speciality chemicals
*** Corporate News – Industry trends
– The Union Cabinet affected an increase of over 113% in the price of natural gas
produced by public sector companies ONGC and Oil India. The two companies
will now realise a price of US$3.82 per mBtu. (BS)
– Standard Chartered Private Equity fund is in talks to buy a 15% stake in
bottling company CK Jaipuria Group for as much as Rs150cr. (ET)
– Tata Power has moved the Bombay high court against the Maharashtra
government's decision asking it to continue supplying power to rival Reliance
Infrastructure at regulated rates. (Mint)
– Vodafone and Bharti paid a combined $5.1bn for 3G mobile licences. RCom
also won the right to provide 3G services in an auction that lasted 34 days and
will generate $14.6bn for the government, nearly twice of what it had expected.
(DNA)
– Power Grid Corp of India plans to float tenders valued at around Rs640bn in
2010-11 for nine high-capacity corridors that will transmit power from new
projects in Orissa, Sikkim Jharkhand, Chhattisgarh, Madhya Pradesh, Andhra
Pradesh and Tamil Nadu. (Mint)
– Aegis, a part of the Essar group, has signed an agreement with US-based
education finance service provider Sallie Mae to acquire the latter's customer
service centre in Texas. (Mint)
– Ranbaxy Laboratories said its European unit was recalling select batches of
three products to add safety warnings under the regulations there. Ranbaxy
said there was no “product quality concerns“, but did not name the products.
(Mint)
– Avantha Group has entered into a definitive agreement with US-based
Pyramid Healthcare Solutions to acquire 100% stake in the company. The
stake is valued at $20mn of which $14.5mn has been paid upfront while the
balance will be paid after two years. (Mint)
– Air India is again seeking financial help from the government, this time it is
Rs50bn equity support, as a one-time moratorium on interest repayment.
(DNA)
– M&M’s ambitious foray in the United States, a first by an Indian automobile
company, is to take place by the year end, with the launch of a couple of
compact diesel driven, pick-up trucks. (BS)
– The Munjal family, promoters of the Hero Group, announced a family
settlement agreement following which their 26% stake in Hero Honda will now
be owned by Suman Kant Munjal, the second son of group Chairman Brij
Mohan Lall Munjal. (BS)
– ONGC and Oil India Ltd can now sell gas from the fields given to them on a
nomination basis at US$4.2/mBtu, on par with the price of RIL Krishna-
Godavari Basin field gas. The Cabinet gave its nod to more than double the
current price of natural gas sold under administered regime from
US$1.79/mBtu to US$3.82/mBtu plus 10% royalty. The increase in gas prices
would be valid up to March 31, 2014. (BL)
– SRF Ltd is working on investment plans of around of Rs10bn, spread over the
next four years, on a new plant at Dahej in Gujarat. This would produce mostly
fluorine-based specialty chemicals for use as intermediates in the manufacture
of pesticides and drugs for customers in Europe, the US and Japan. (BL)
– Cash-strapped HPCL has extended credit facilities to Kingfisher Airlines up to
June 30 without a bank guarantee, defying a government instruction. (ET)
– Essar Steel's first blast furnace in its Hazira facility is set to come up by the end
of the next month. The blast furnace will have a production capacity of 2 mn
tonnes pa. The company will import 600,000 tonnes of coking coal this year.
(BL)
– Bank credit increased by Rs130.2bn in the fortnight ended May 7, according to
the data released in the RBI's scheduled banks' statement of position in India.
Outstanding bank credit as on May 7 was at Rs32,277.7bn.
*** Economic/Regulatory development
– The country’s merchandise trade began the new financial year with exports
posting a growth of 36.2%, at US$16.9bn in April from US$12.4bn in the same
month last year. (BS)
** International trends
– Germany declared war on speculators, stunning investors with a ban on naked
short selling of certain financial instruments and wrong footing its European
partners who said they were not consulted. Chancellor Angela Merkel urged the
European Union to speed up financial market supervision and introduce a new
tax on them, saying Berlin was ready to act alone on a ban on activities which
some leaders blame for much of the euro zone debt crisis. (BS)
– The cost of living in the US unexpectedly dropped in April for the first time in
more than a year, reinforcing forecasts that the Federal Reserve will keep
interest rates near zero for much of 2010. The 0.1% fall in the consumer price
index was the first decrease since March 2009, figures from the Labor
Department showed in Washington. (BS)
