Posts Tagged ‘Sensex’

Weekly Update 2nd – 6th August 2010

Asian markets saw buying as more than half of the companies that announced results in the MSCI Asia Pacific Index have exceeded the analyst’s estimates, boosting confidence about the strength of the recovery. U.S. economy expanded at a 2.4 percent annual pace in the second quarter less than forecast, indicating that the world largest economy will see a moderate recovery.

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The jobless recovery is curbing household purchases as consumer spending that accounts for about 70 percent of the economy rose 1.6 percent in last quarter, compared with a 1.9 percent rate in the previous three months. U.S. financial system recovery is fragile and as per IMF stress tests banks may need as much as $76 billion in capital. In India, as per expectations RBI hiked the policy rates and indicated that monetary steps will continue in order to moderate inflationary pressures.

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RBI chief said that despite of the monetary measures, monsoon rains would play a critical role in moderating food prices. Now RBI will release eight monetary policy statements in a year that will cut short the time of monetary policy adjustments. The central Bank also revised its estimates for inflation and economic growth to 6 percent and 8.5 percent from earlier estimates of 5 percent and 8 percent respectively.

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The annual monsoon rains bounced back from a 17-percent deficit in the previous week to 38 percent above normal in the week to 28 July 2010.Heavy, well distributed showers in the past week helped total rainfall rise to normal during July have raised the farm sector prospects thereby indicating a pickup in rural demand.

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Till now the results announced so far have shown a mixed picture with some disappointment coming from the large caps.The combined net profit of a total of 1,085 companies declined 12.6 percent to `47280 crore on 23.1 percent increase in sales to 609368 crore in Q1 June 2010 over Q1 June 2009. Going next week some of the top companies like SBI, Bharti Airtel, Tata Motors, Tata steel, etc will announce their quarterly numbers and would help in setting the undertone of the market.

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Indian Stock Markets are holding on to the gains though the momentum for rise is lacking. But the world stock markets are slowly inching up with base metals commodities also showing strength. The rise in Rupee and the midcap stocks rally in the week gone by gives a hope of further rally. It seems the market would take a clearer direction in the coming week. Nifty has support between 5315-5250 levels and Sensex between 17700-17500 levels.

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It is quite visible that good corporate earnings have propped up the sentiments of financial market and commodity is not an exception. Hence we have seen that capital inflow switched to riskier asset from safe asset like gold and dollar index.

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Base metals are the major beneficiary and they are trading at multi months high whereas crude is reacting on stocks pile up in US and ignoring other positive cues. If positive outcome of economic indicators and earnings continue to come in near future then all base metals will trade in a range with upside bias and vice a versa.

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Even in crude oil some lower level buying may occur this week. Expect further fall in gold and if it breaches the mark of 17500 then we may see some spurt in physical buying. In agro commodities, spices may trade in a range on mix fundamentals.

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Weekly Update 28th June – 2nd July

China’s central bank move to increase flexibility in yuan against the dollar pushed global markets higher with the onset of the week. The optimism for the demand of commodities rose as the move is expected to increase Chinese consumers demand with the rise in purchasing power. Thereafter, the worrisome news flow from both U.S. & Europe only gave weakness to the markets.

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Disappointing earnings forecast by U.S. companies reignited the growth concerns in the market during the week. Fed policy makers left the overnight interbank lending rate target unchanged in a range of zero to 0.25 percent. Fed echoed that low inflation, stable price expectations and high unemployment “are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

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It said the U.S. recovery is progressive but not strengthening and “Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.” Concerns also rose about solvency position of both U.K. and Global banks. Bank of England said that U.K. banks remain “vulnerable” to further writedowns on their assets because of a potential decline in investor appetite for risk. Overall investors are circumspect of the global recovery and are not sure whether the austerity plan by various government will lead to economic prosperity.

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The Indian government now seems to be batting its second innings in power by working on many reforms that were in its agenda for long time. On the recommendations of Kirit Parekh committee, the government decided to go ahead by linking petrol prices to market linked prices & giving Rs. 2/-, Rs. 3/- & Rs. 35/- hike in diesel, kerosine & LPG prices respectively. The long awaited step is expected to cool down the burgeoning under-recoveries of OMC’s & will help consequently in lowering the fiscal deficit. As per our estimates the said increase will accentuate inflation by close to 0.50%. The move that was quite necessary from the long term perspective may put some pressure on the Equity & Bond Markets. As we are already facing high inflation & are on mercy of good monsoon, the step is likely to increase worries. We expect now, with the robust manufacturing activity & clear signs of demand pull inflation the next step may come soon from the monetary body by hiking policy rates. The move may lead to some correction in the capital markets & bond prices may fall.

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Trend of Indian stock markets is up though U.S. and other markets is down which is giving rise to volatility here. Even dollar index is taking some reaction which might give some relief rally to metals in coming week. Nifty has support between 5200- 5100 levels and Sensex between 17300-17000 levels.

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Notwithstanding the doubt over the health of world economy, especially U.S. and Europe, commodity is reacting optimistically on every small news and statements.

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CRB index is going through a consolidation phase; any positive news can result in good upside. Two factors; flattish dollar index amid strong Asian economic growth accompanied by commodity demand can keep commodity on stronger side. In past seven months dollar index has rallied around 20%, the move was not showing the inner strength of dollar, rather it was majorly due to European debt crisis and safe haven demand. If we see rangebound to bearish movements in dollar index again it will boost up commodities prices. However, we can see some correction in between, but that should be considered as good buying opportunity.

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Weekly Update 21st – 25th June

Global markets saw synchronized gains of more than two percent this week except China’s Shanghai Composite Index which closed in the negative. The recent measures that were taken in China to cool down the economy like larger down payment for home buyers and increase in reserve requirements for banks seems to have started showing its effects as reflected by the weakening demand for construction metals like Nickel pig iron. Asset price bubble concerns rose after property prices in China rose by 12.4 percent in May.

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China Banking Regulatory Commission said that risks associated with home mortgages are growing and a “chain effect” may reappear in real-estate development loans. The economic restructuring in China has raised the possibility of resurgence in credit risks. The index of leading indicators in US, a gauge of the outlook for growth over the next three to six months, climbed 0.4 percent in May. It is viewed that the largest economy will continue expanding though at a moderate pace in the second half of the year without stoking inflation & creating fewer jobs. This would help the Federal Reserve in continuing with low interest policy for longer time. The European Union’s decision to publish the results of stress tests came after more than a year when U.S. published the results of stress tests on 19 financial institutions. The details of the tests including whether they include a sovereign debt restructuring is not yet disclosed by the European Union. However the step is welcomed by the investors as it will reveal the soundness of the European financial system.

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Coming back at home, as mentioned last week the possibility of hike in policy rates by RBI is gaining strength after Inflation accelerated to 10.16 percent in May giving concerns of generalized Inflation in the economy. Demand side pressures are quite evident now with the encouraging growth in Industrial production together with healthy growth in Exports and Imports. The European concerns that may have a bearing effect on the India’s trade and temporary liquidity squeeze in the Banking system has so far refrained the Banking regulator to continue its exit from an expansionary policy in a calibrated manner.

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Indian Stock Markets went up sharply last week and are looking much better but the problem it seems is with other world markets. It has to be seen whether the Indian markets are able to pull the other markets up or the weaker markets pull down India. Base metal commodities are not doing well though precious metals are all looking good. It seems volatility is likely to continue in such a scenario.

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Nifty has support between 5200-5100 levels and Sensex between 17300-17000 levels.

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Market players were enthralled with the captivating movements commodities noticed last week. Base metals and energy touched multi months low in the beginning of the week while second half of the week witnessed steep profit booking. Sideways congestion may be witnessed in commodities this week, as investors are endeavoring to figure out the next direction in commodities.

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However, the week is full of event risk and may trigger volatility in between.

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Many meets and high importance economic releases from US, UK and other nations are scheduled this week. Traders may refrain to create large position before FOMC meeting, which is scheduled on Wednesday.

Weekly Update 14th – 18th June

The global Markets reacted in a negative fashion with the onset of the week due to concerns arising from small increase in non-farm payrolls in U.S. & default risk from Hungarian Economy. The investors concerns subsided after Germany factory orders surged for a second consecutive month in April.

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European debt crisis which has pushed down Euro 20 percent against the dollar seems to be helping the industry as the demand for goods from emerging economies like China is encouraging companies to add workers. Bernanke statement that the recovery is moderate-paced in U.S. further helped the market in recouping the losses. Although he said that Unemployment may remain high for some time. He also said that “We have right now a very accommodative, very easy monetary policy”. “We can’t wait until unemployment is where we’d like it to be” or inflation gets “out of control” to tighten credit, giving signals that hike in interest rate may come sooner.

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IMF is of the view that the risk to the growth has risen significantly and policy makers around the globe are left with little or no room to provide support to the growth. China surprised the markets as the economy withstood the European crisis after showing that exports grew close to 50 percent in the month of May from a year earlier and new loans were 630 billion Yuan ($92 billion), beating the expectations.

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In the monetary policy, Bank of England remained committed to the record low interest rates to stave off the threat of contagion from the euro region’s sovereign debt crisis. Coming back home, India’s Index of Industrial Production showed a significant growth of 17.6% compared to a year before. The seventh consecutive double digit growth complemented by double digit growth in capital goods & consumer durables may tempt RBI to raise interest rates with the Inflation hovering close to double digits. High inflation & more likely pick up in credit offtake due to strong Industrial Production activity may induce RBI to give signals to banks to raise the interest rates by making an increase in policy rates.

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Trend of world stock markets is still down though all markets took a sharp counterrally from lower levels. If the rally sustains this week, then we can say that temporarily they have made a bottom. But the fear of Euro zone would still linger on in the back of our mind. Nifty faces resistance between 5150-5180 levels and Sensex between 17200-17400 levels

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At present there are lots of opportunities for traders to take advantage of volatility in the commodity prices, but this is also the fact that money may not be consistently made on only one side. Last week, we saw a smart recovery in metals and energy complex while bullions fell. However, the movement was not so confident that we can say that downside is overdone and now we can see rally from the current levels. However, one can expect a gradual recovery in base metals prices. In bullions, rally may get tired but buying is still intact and any bad news can stimulate buying with limited upside. If positive data comes further as last week then base metals may see further recovery and vice a versa.

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Weeekly Update 17th – 21st May

Global markets saw a sigh of relief with the start of new week after the European Union unveiled a 750 billion-euro ($949 billion) financial assistance program backed by European Central Bank bond purchases aimed to prevent a broader sovereign-debt crisis in the region. But thereafter could not build onto the gains as it was felt that the rescue plan may not help in averting a slowdown in the region. The concerns from developed nations to developing nations like china continued to cast a dark shadow on the investors mind. Chinese market went into a bear market on the concerns that the government will make borrowing dearer to check spiraling inflation & growth.

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With the fallout of European crisis it is widely believed that the central banks may not adopt tighter monetary policies with the fragile recovery. Chief of Indian central bank said that he plans to raise interest rates in a calibrated way given the risks to global growth. The belief led to a rally in the interest rate sensitive’s like Realty, auto & consumer durables in the domestic markets.

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Whereas the growth concerns continued to punish sectors like metal & oil.

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However safe heavens like gold & bond markets continued to see money coming in with investors seeking for safe shelters.

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Continued double digit growth i.e. 13.5% in march in Industrial production for the sixth consecutive month has mirrored one clear thing that India per se is on strong footing if compared to any part of world. Planning commission chief Montek singh ahluwalia saying that government is working out a 500 billion rupee fund to improve the infrastructure, is making our belief strong that infrastructure sector will see a robust growth in India over the long period.

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Trend of all world stock markets is still down and even a strong rally of Monday could not bring much relief as the markets gave up the rally in later part of the week on the back of weaking Euro and uncertainity in Europe. Neither the base metal commodities nor Crude is able to rally which shows lack of strength in the rally in stock markets. Nifty faces resistance between 5100-5200 levels and Sensex between 17000-17500 levels.

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The underlying unease over health of EU economy has room for more buying in bullions. At the same time bullions are paying no attention to dollar index the way they used to in general. Inflation in China, which is on 18 months highs, is indicating further monetary tightening, which may weigh on commodity prices in future. Overall trend of base metals and energy may remain weak, however, lower level buying cannot be denied in between. Important data from Japanese economy front may also give further direction to base metals and energy. On agro commodities front, they may remain volatile before expiry.

Weekly Update 26th – 30th April 2010

Domestic markets started the week on a negative note on the back of the Greek debt issues and Goldman Sachs fraud issues, but managed to close in the positive terrain supported by firm US markets in line with less than expected hike in Policy Rates & Cash Reserve Ratio by RBI to tame the inflation; Policy rates and CRR increased by 25 bps each. The food price index rose 17.65% in the 12 months to April 10, marginally higher than an annual rise of 17.22% in the previous week. Moreover IMF announcement of India`s growth at 8.5% for the calendar 2011 boosted the sentiments.

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Additionally, announcement of government recapitalization of PSU banks stimulated banking sector and banking stocks were among the major gainers of the week. Good corporate numbers, expectation of good monsoon together with buying by foreign institutions kept the momentum intact for the rest of the week. Going forward market participants globally would be closely watching G20 finance chiefs plan to withdraw economic stimulus as the recovery strengthens.

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The IMF this week said that rising government debt is one of the biggest threats to the world economy.

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Forecast of normal monsoon season by Indian Meteorological department may keep the sentiments positive in the coming week but volatility may rise ahead of the expiry. On the global front, the UK’s economy grew at a slower than anticipated pace in the first quarter. In US, sales of new homes surged by 27 percent in March and orders for most durable goods climbed, indicating the U.S. economy is speeding ahead into the second quarter. Greece troubles that kept the markets jittery especially for the payments approaching in the month of May came to an end after it said that it has sought a relief aid from the European Union to save it from a default.

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US stock markets kept the rally intact which held the other world markets and did not let them fall.

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Shanghai remained under pressure as commodities saw some pressure and profit booking at higher levels. Indian stocks are seeing more strength in cash stocks and banking stocks. Nifty has support between 5200-5100 levels and Sensex between 17400-17200 levels.

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This week is full of event risk, especially from US economy side. Gradually, commodity is retreating from the higher levels but it will be too early to say that it is giving a clear indication for the approaching time. But yes, upside is limited.

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Negative expectation of US GDP figure for the first quarter may hammer the prices. If dollar index trades above the level of 82 then it would keep gold to be in sideways territory. Copper saw three weeks nonstop downside and it is expected to see more downside. Range trading in crude oil is indicating the saturation at the higher levels and market needs big news to see further upside..

Weekly Update 12th-16th April 2010

The markets continued with their upward momentum despite the concerns arising that Greece may default on 304.2 billion euros ($405.2 billion) of its debt. Trichet expressed confidence that Greece won’t default & many believe that IMF may come in for a bailout.

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Concerns also arose over the huge gains that markets world over has seen in a year. All in all the optimism about the strength of the recovery in global economy suggested by various positive economic data kept the market pace intact. According to National Institute of Economic and Social Research, UK GDP expanded by 0.4% in the first quarter matching the increase seen in the last quarter of the previous calendar year.

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Huge bank credit offtake in the last fortnight ending 26 March 2010 to the tune of Rs. 1.15 lakh crore after the continuous signs of Industrial,service & external sector recovery will increase the faith among the investors about the economy. The recent run up in the markets hassomewhat discounted the expected good corporate results & the increase in policy rates by the RBI to avoid the danger of generalised inflation in the economy. From the market activity, it looks that the Midcap & small cap would remain the favorites among the investors due to relative valuations. In the coming week, focus of the market would be on the Infosys results & guidance & market would also look on to the IIP numbers, especially the capital goods to gauge the momentum in the Industrial activity.

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Trend of all world markets is up and so have the Indian Stock Markets posted a 9 week continuous rally. The falling dollar index and the rising rupee gave steam to various asset classes which all moved up. The debate between the problems of Greece or other European nations will be unending but till the trend is up, one should look at longs. Nifty has support between 5250-5150 levels and Sensex between 17700-17300 levels.

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Recent buoyancy coupled with projected tightness in the supply of various commodities is signifying the bottoming out of global economy.

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Improvement in housing, job and retail sales data are stimulating fresh buying in commodities, especially in metals and energy. Remarkable jump in dollar index is unable to give much impact on commodities as they are trading on their own fundamentals. Nevertheless, several commodities hit multi months high, hence cautious approach is advised here. Appreciating rupee, which gained more than 5% in just nine weeks, is most likely to eat up the volatility in domestic exchanges. Price movements could be locked in agro commodities as well, particularly in spices, as export activities have become subdued due to the same reason of appreciation in rupee.

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