Posts Tagged ‘Base metal’

Weekly Update 13th – 17th December 2010

The fall in the domestic markets in the week gone by was really painful. The fall was seen across the board; both mid and small size company stocks were heavily punished. SEBI probed in some companies for price rigging reignited the concerns that there may be some cases which are yet to come.

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On the global front, thiswas the week when most of the major developed markets along with the emerging economies closed in positive. The disconnect reveals that overhand in the markets was more related to domestic issues only.U.S. economic data is continuing to point out that environment over there is improving. A consumer sentiment that reflects the strength of consumer spending rose six months high to 74.2 in the first half of December from 71.6 at the end of November.

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U.S. trade deficit in October shrank more that expected to $38.7 billion from a revised $44.6 billion shortfall the month before. Further more, the expected continuance of Bush tax for next two years which is likely to be cleared by U.S. senate in next two weeks will also help in improving sentiments. Japanese economy saw an annualized expansion of 4.5 percent for the quarter ended 30th September against expectations of 4.1 percent. In order to address inflationary pressures in the economy, China once again raised the reserve requirements for the third time in five weeks by 50 bps.

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The recent move takes reserve ratios requirement now to18.5 percent for the biggest banks. Chinese leaders have also indicated that the nation will shift to a tighter, “prudent” monetary policy for next year. Consumer and producer price index rose to 5.1 percent and 6.1 percent respectively for the month of November as against the expectation of 4.7 and 5.1 percent respectively. Moving ahead, we believe that the concerns pertaining to Indian Industrial growth and in turn overall growth of the economy would not be there after seeing the 10.8 percent growth in IIP for the month of October as compared to 4.4 percent last month. Moreover,we also believe that even for the month of November we could see the Industrial growth picking up close to 12 percent.

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The indicators like car sales growth of 20 percent,commercial vehicle sales growing by more than 18 percent and HSBC Manufacturing PMI rising to 58.4 in November from 57.2 in previous month give support to our belief.In the forthcoming days we believe we may continue to see bouts of volatility in the markets as nervousness is still there. In short term now we think the advance tax figures would help the markets in gauging the profitability of India Inc. as the result season is approaching. Nifty has strong support between 5900-5840 and Sensex between 19400-19000.In commodity section, bullions counter may trade on volatile path due to lack of clear direction on risk sentiment. Base metal counter will take cues from economic data from US. Crude oil further movement will depend on the demand from China, OECD countries and weather conditions in Europe.

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OPEC members are planning to increase output over the coming months. Copper will continue to make fresh high in near term as the global deficit will push its prices to new levels. The outcome of Central Economic Work Conference in China will further guide the movement in metal counter. In agro pack guar complex may remain on weaker side amid weak export demand. Jeera and peeper maytad lower on selling pressure on news of re-sowing. Mentha oil can tumble lower onarrivals. Soya will remain range tracking mixed movement in CBOT. CPO may trade on higher side tracking firm Malaysian CPO.

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Weekly Update 7th – 11th June

Unlike developed economies market that closed in red, our market closed in the positive on the back of robust GDP growth of 7.4% in the year ending March 2010 driven by solid rebound in manufacturing activity.

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Auto & Cement sales numbers also joyed the markets. Good monsoon which is likely to be in range of 98% of the long term average will help in entailing inflation and will boost rural economy, a major factor for the overall growth of the economy kept the markets on a strong foot in the week gone by.

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On the contrary, bad news continued from the rest of the world. Export led recovery is losing momentum in Japan. Manufactures are planning to increase production at a slower pace in the coming months in view of the cut in European government expenditures that may damp sales of Japanese goods over time. Unemployment is increasing and job prospects are worsening together with cuts in household spending.

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Euorpean region economy which is struggling to gather strength after the debt crisis and has sought to cut expenditure got another jolt after Hungary said its economy is in a “very grave” situation, reigniting concern the region’s debt crisis is spreading. Hungary Prime Minister said that talk of a default is “not an exaggeration” because a previous administration “manipulated” figures.

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The country was bailed out with a 20 billion-euro ($24 billion) aid package from the European Union and International Monetary Fund in 2008. U.S. markets saw Indices dropping to four months low after the lower than forecast payroll numbers for the month of May. However the positive news in the payroll survey was in earnings, the workweek, and production hours. Wage inflation picked up with a 0.3 percent rise in May, following a 0.1 percent advance the month before.

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The average workweek for all workers edged up to 34.2 hours from 34.1 hours in April. The gain point out to future hirings and suggests increase in industrial production for the month.

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Overall trend of world stock markets is still down though the markets tried to take a recovery intra week but the US and European markets spoiled the party.

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Base metal commodities did not bounce even slightly which went to show that stock markets tried a recovery without participation of industrial commodities.

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Nifty faces resistance between 5150-5180 levels and Sensex between 17200-17400 levels.

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Sentiments are still very fragile and investors are very watchful in commodity.

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Technically, base metals and energy appear oversold; hence they may generate some lower level buying. However, one should not judge it as a major one sided rally in these commodities as fears on European economy is still hovering. Even, negative outcome of economic data’s from various economies is further indicating slowdown in economic activities. If mercury goes high further and we see further decline in crude and other inventories in US, then it will stimulate buying in crude oil. Natural gas has already seen good short covering in the prices in past few weeks, can witness more buying for the same reason.