понедельник, 30 марта 2009 г.
>Weekly Derivatives (ICICI Direct)
NIFTY HIGHLIGHTS:
■ The Nifty Spot has surged by 10.72% to close at 3108 from the previous week’s close of 2807
■ The total futures OI in the market stands at Rs 28682 crores whereas all options OI stands at Rs 27755 crores
Technical Outlook
• The Nifty closed 10.74% positive posting one of the biggest weekly gains. Nifty gained in all the five trading session in last week trade
• The Nifty has formed strong bull candle after breaking out above 2800 levels
• On the upside the Nifty is now testing 3150-3170 area where profit booking is expected
• On the downside good support appears around 2,950-2900 levels
• We expect the Nifty to trade in the range of 3200 – 2900 levels for the coming week
• The resistance remains at 3150 and 3200, whereas supports exist around 3000, 2920 levels
Derivative Outlook:
• The PCR-OI has moved from 1.59 to 1.51 mark after making a high of 1.96 on the expiry day. The sharp fall in PCR-OI on Friday is because of unwinding of huge put positions of March series. In the current series, addition of put OI is more than compared to call OI. In The April series, maximum addition of OI was registered in 2900 put which added 76108 contracts followed by 72499 contracts addition in 3000 put. The 2700 and 2800 puts added 44807 and 49802 contracts respectively. On the flip side, the maximum concentration of OI was seen in call options ranging from 3000 to 3200 wherein the 3200 call added 39148 contracts followed by 33597 contracts in 3100 call and 25485 contracts in 3000 call. With rise in IVs of these call options; we conclude that decent call buying was observed in these calls in last week. The rise in put IVs also suggest significant put buying, however this could be ‘Put Hedge ‘ strategy adopted my many market participants in order to hedge their long future positions. The maximum put OI base in April stands at 2700 with 4.82 million shares whereas the largest call OI base is currently at 3000 with 2.71 million shares in OI. We feel that the 2700 level may stand as a strong support for Nifty in this series. Moreover, OTM call options have not witnessed any major call writing in last week and hence we advise participants not to go for higher OTM call writing at current levels
• The Nifty futures combined OI stands at 38.09 million shares wherein April OI stands at 37.24 million shares. Over the week, we have seen addition of 24.81 million shares in April futures OI accompanied with a 10.74% surge in Nifty price. In the expiry week, we observed significant long positions adding in April series. The rollover in the Nifty was at 69.61% wherein majority of them were long rollovers whereas Market-wide rollover stood at 77.04%. This also concludes that rollover in stocks is comparatively higher to Nifty. The April futures OI is near to the 4 crore mark, which is considered as a psychological level from where we could see some unwinding in OI. Once the Nifty crosses the 40 millions shares in OI in near month, participants are advised to book profit in their long positions. However, from the current levels we may see further upside in Nifty, possibly 3200 in near term
To see full report: DERIVATIVES 300309
■ The Nifty Spot has surged by 10.72% to close at 3108 from the previous week’s close of 2807
■ The total futures OI in the market stands at Rs 28682 crores whereas all options OI stands at Rs 27755 crores
Technical Outlook
• The Nifty closed 10.74% positive posting one of the biggest weekly gains. Nifty gained in all the five trading session in last week trade
• The Nifty has formed strong bull candle after breaking out above 2800 levels
• On the upside the Nifty is now testing 3150-3170 area where profit booking is expected
• On the downside good support appears around 2,950-2900 levels
• We expect the Nifty to trade in the range of 3200 – 2900 levels for the coming week
• The resistance remains at 3150 and 3200, whereas supports exist around 3000, 2920 levels
Derivative Outlook:
• The PCR-OI has moved from 1.59 to 1.51 mark after making a high of 1.96 on the expiry day. The sharp fall in PCR-OI on Friday is because of unwinding of huge put positions of March series. In the current series, addition of put OI is more than compared to call OI. In The April series, maximum addition of OI was registered in 2900 put which added 76108 contracts followed by 72499 contracts addition in 3000 put. The 2700 and 2800 puts added 44807 and 49802 contracts respectively. On the flip side, the maximum concentration of OI was seen in call options ranging from 3000 to 3200 wherein the 3200 call added 39148 contracts followed by 33597 contracts in 3100 call and 25485 contracts in 3000 call. With rise in IVs of these call options; we conclude that decent call buying was observed in these calls in last week. The rise in put IVs also suggest significant put buying, however this could be ‘Put Hedge ‘ strategy adopted my many market participants in order to hedge their long future positions. The maximum put OI base in April stands at 2700 with 4.82 million shares whereas the largest call OI base is currently at 3000 with 2.71 million shares in OI. We feel that the 2700 level may stand as a strong support for Nifty in this series. Moreover, OTM call options have not witnessed any major call writing in last week and hence we advise participants not to go for higher OTM call writing at current levels
• The Nifty futures combined OI stands at 38.09 million shares wherein April OI stands at 37.24 million shares. Over the week, we have seen addition of 24.81 million shares in April futures OI accompanied with a 10.74% surge in Nifty price. In the expiry week, we observed significant long positions adding in April series. The rollover in the Nifty was at 69.61% wherein majority of them were long rollovers whereas Market-wide rollover stood at 77.04%. This also concludes that rollover in stocks is comparatively higher to Nifty. The April futures OI is near to the 4 crore mark, which is considered as a psychological level from where we could see some unwinding in OI. Once the Nifty crosses the 40 millions shares in OI in near month, participants are advised to book profit in their long positions. However, from the current levels we may see further upside in Nifty, possibly 3200 in near term
To see full report: DERIVATIVES 300309
воскресенье, 29 марта 2009 г.
>Opening bell 30-3-09(ICICI Direct)
Key points
Market outlook — Open negative and trade negative
Positive — MF, FII buying, crude cooling off
Negative – Rupee weakening again, Asian markets
Market outlook
Indian markets are likely to open negative taking its cues from the
global markets. SGX Nifty was down by 65 points. We have witnessed
a brisk rally from the recent lows and we expect profit booking to
continue. The players would like to go light on positions ahead of the
important G 20 summit and hence we may witness pressure on the
market for the coming sessions as well. Our markets will closely watch
at the developments in US markets and the outcome of G 20 summit.
We advice not to take aggressive positions for the week unless we see
decisive break on either side of the band. Trading interest will be
witnessed in Reliance for the coming session or two because of the
gas production which is anticipated to start in a day or two.
To read full report Opening bell
Market outlook — Open negative and trade negative
Positive — MF, FII buying, crude cooling off
Negative – Rupee weakening again, Asian markets
Market outlook
Indian markets are likely to open negative taking its cues from the
global markets. SGX Nifty was down by 65 points. We have witnessed
a brisk rally from the recent lows and we expect profit booking to
continue. The players would like to go light on positions ahead of the
important G 20 summit and hence we may witness pressure on the
market for the coming sessions as well. Our markets will closely watch
at the developments in US markets and the outcome of G 20 summit.
We advice not to take aggressive positions for the week unless we see
decisive break on either side of the band. Trading interest will be
witnessed in Reliance for the coming session or two because of the
gas production which is anticipated to start in a day or two.
To read full report Opening bell
>KARVY BAZAAR BAATEIN
From 30 March'09 to 5 April'09
Cautious optimism in play…
The markets across the globe cheered last week as the Obama administration announced a detailed bank rescue plan to buy US$1 trillion worth of toxic assets from the country’s ailing fi nancial institutions. Moreover, a stream of better-than-expected economic indicators emanated from the US, raising hopes of an early global economic recovery. Accordingly, stock markets rallied spectacularly last week, with the BSE Sensex and the Nifty rising by about 12% and 11% respectively. In fact, this uptrend began much earlier on March 9, and since then, the Dow Jones, the BSE Sensex and the Nifty have risen more than 20%, underlining the cautious optimism that has seeped into the markets. The optimism is clearly shared by the FIIs, which have been net buyers worth Rs2,400 crore in the Indian markets during the same period. With the US bank rescue plan in place and recent indications that major banks had operated profitably in the first two months of 2009, global investors may believe the worst is over for US banks, even as economists fiercely debate over the effectiveness of the plan.
So what does the plan entail? Well, its objective is to rid banks’ balance sheets off toxic assets and illiquid loans, thereby enabling them to start lending once again. The Treasury, in conjunction with the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, announced the “Public–Private Investment Program” as part of its efforts to cleanse balance sheets across the financial system and ensure credit availability to households and businesses.
The Federal Government would use US$75-100 billion from the Troubled Asset Relief Program (TARP) and capital from private investors to generate US$500 billion in purchasing power to buy out troubled assets. The investment programme would have the potential to expand to as much as $1 trillion over a period of time, according to the US Treasury. The participation of long-term investors, such as individuals, pension plans, and insurance companies would be particularly encouraged. The “Public–Private Investment Programme” would be designed around three basic principles—maximizing the impact of each taxpayer dollar, shared risk and profits with private-sector participants, and private-sector price discovery.
Meanwhile, back home, the annual inflation was reported at 0.27% for the week-ended March 14. While, technically, we are close to deflation levels, there is little to indicate that we would undergo the pains of a typical deflationary scenario.
To see full report: KARVY BAZAAR BAATEIN
Cautious optimism in play…
The markets across the globe cheered last week as the Obama administration announced a detailed bank rescue plan to buy US$1 trillion worth of toxic assets from the country’s ailing fi nancial institutions. Moreover, a stream of better-than-expected economic indicators emanated from the US, raising hopes of an early global economic recovery. Accordingly, stock markets rallied spectacularly last week, with the BSE Sensex and the Nifty rising by about 12% and 11% respectively. In fact, this uptrend began much earlier on March 9, and since then, the Dow Jones, the BSE Sensex and the Nifty have risen more than 20%, underlining the cautious optimism that has seeped into the markets. The optimism is clearly shared by the FIIs, which have been net buyers worth Rs2,400 crore in the Indian markets during the same period. With the US bank rescue plan in place and recent indications that major banks had operated profitably in the first two months of 2009, global investors may believe the worst is over for US banks, even as economists fiercely debate over the effectiveness of the plan.
So what does the plan entail? Well, its objective is to rid banks’ balance sheets off toxic assets and illiquid loans, thereby enabling them to start lending once again. The Treasury, in conjunction with the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, announced the “Public–Private Investment Program” as part of its efforts to cleanse balance sheets across the financial system and ensure credit availability to households and businesses.
The Federal Government would use US$75-100 billion from the Troubled Asset Relief Program (TARP) and capital from private investors to generate US$500 billion in purchasing power to buy out troubled assets. The investment programme would have the potential to expand to as much as $1 trillion over a period of time, according to the US Treasury. The participation of long-term investors, such as individuals, pension plans, and insurance companies would be particularly encouraged. The “Public–Private Investment Programme” would be designed around three basic principles—maximizing the impact of each taxpayer dollar, shared risk and profits with private-sector participants, and private-sector price discovery.
Meanwhile, back home, the annual inflation was reported at 0.27% for the week-ended March 14. While, technically, we are close to deflation levels, there is little to indicate that we would undergo the pains of a typical deflationary scenario.
To see full report: KARVY BAZAAR BAATEIN
>TRADE WINDS (KARVY)
30 March 2009 to 05 April 2009
Five potential positives for our markets…
The worst financial crisis in the global economy is likely to present a wonderful opportunity for those who have the conviction and courage to participate in the markets using calculated risks. The unprecedented efforts by governments across the globe and the coordinated action by major central banks in the form of stimulus packages, tax cuts, reduction in interest rates, and infusing liquidity into the system were aimed at getting the global economy back on track. The actions are likely to pave the way for a recovery in the global economy as well as a rally in global stock markets.
The following are some of the key positive factors that could contribute to the rally in stock markets.
■ Increased government spending: The governments in major economies like the US, European Union, Japan, China and India have increased spending on infrastructure, which is likely to trigger demand in auto, cement, construction, and capital goods sectors. The measures announced by policymakers to revive the housing market are likely to bear fruit in the next few months and is likely to boost the positive sentiment in the markets.
■ Reduction in tax rates: The Indian government has taken several measures in the form of reduction in excise duty and service tax as a measure to stimulate demand in the country. The US fiscal package signed by Obama includes tax cuts for the middle-income group in an effort to boost the economy by leaving more money in the taxpayers’ hands.
■ Lower inflation and interest rates: The global economic slowdown has brought down inflation to all-time low levels. The fall in demand for crude oil, metals and other commodities has led to lower inflation across the globe. Inflation in India has come down to 0.27%, triggering concerns over the emergence of a deflation, although there is little to indicate that India will undergo the pains of a typical deflationary scenario.
■ Increased consumer confidence and spending: Consumer confidence will be boosted once the results of these stimulus packages reach the end-user. Also, credit availability at much lower interest rates to corporates will ensure timely ongoing expansion plans. The political stability in the US has brought clarity in regard to its policies. In India, too, clarity will emerge on various policies and economic issues once the new government is formed. A clear policy environment will improve and facilitate consumer confidence.
■ Growth in EPS and FII inflows: The above factors will enable companies to maintain profit margins and increase sales. This will lead to rise in net profit and EPS. The Sensex EPS growth will attract FIIs (foreign institutional investors), besides investments by DIIs (domestic institutional investors), such as mutual funds and insurance companies, which channelize the domestic savings into stock markets.
To see full report: TRADE WINDS
Five potential positives for our markets…
The worst financial crisis in the global economy is likely to present a wonderful opportunity for those who have the conviction and courage to participate in the markets using calculated risks. The unprecedented efforts by governments across the globe and the coordinated action by major central banks in the form of stimulus packages, tax cuts, reduction in interest rates, and infusing liquidity into the system were aimed at getting the global economy back on track. The actions are likely to pave the way for a recovery in the global economy as well as a rally in global stock markets.
The following are some of the key positive factors that could contribute to the rally in stock markets.
■ Increased government spending: The governments in major economies like the US, European Union, Japan, China and India have increased spending on infrastructure, which is likely to trigger demand in auto, cement, construction, and capital goods sectors. The measures announced by policymakers to revive the housing market are likely to bear fruit in the next few months and is likely to boost the positive sentiment in the markets.
■ Reduction in tax rates: The Indian government has taken several measures in the form of reduction in excise duty and service tax as a measure to stimulate demand in the country. The US fiscal package signed by Obama includes tax cuts for the middle-income group in an effort to boost the economy by leaving more money in the taxpayers’ hands.
■ Lower inflation and interest rates: The global economic slowdown has brought down inflation to all-time low levels. The fall in demand for crude oil, metals and other commodities has led to lower inflation across the globe. Inflation in India has come down to 0.27%, triggering concerns over the emergence of a deflation, although there is little to indicate that India will undergo the pains of a typical deflationary scenario.
■ Increased consumer confidence and spending: Consumer confidence will be boosted once the results of these stimulus packages reach the end-user. Also, credit availability at much lower interest rates to corporates will ensure timely ongoing expansion plans. The political stability in the US has brought clarity in regard to its policies. In India, too, clarity will emerge on various policies and economic issues once the new government is formed. A clear policy environment will improve and facilitate consumer confidence.
■ Growth in EPS and FII inflows: The above factors will enable companies to maintain profit margins and increase sales. This will lead to rise in net profit and EPS. The Sensex EPS growth will attract FIIs (foreign institutional investors), besides investments by DIIs (domestic institutional investors), such as mutual funds and insurance companies, which channelize the domestic savings into stock markets.
To see full report: TRADE WINDS
>South Indian Bank (BONANZA)
Company Background
Thrissur (Kerala) based South Indian Bank (SIB) is one of the earliest banks in South India, came into being during the Swadeshi movement in 1928. It is mainly a strong regional player in South India. The Bank has grown gradually steadly. Presently, it has a branch network of 537 branches (including 17 extension counters), all with CBS technology.
Highlights
• The bank has shown decent performance. Its profits have grown very well, from Rs.8.7 Crore in FY 2005 to Rs.153.39 Crore in FY 2008, a growth of 260% compounded. It has also shown very good improvement in Assets quality. Its Net NPA stand at 0.4% presently, down from 3.81% in FY 2005.
• SIB has been paying dividend regularly. At current price the dividend yield works out to be 6.5%, if dividend payout of Rs.3/Share is maintained.
• Bank gave 1 for 4 Bonus in Q3 FY 09.
• Bank has maintained its PLR at 16%. This should improve the net interest income for the bank.
• The bank has high capital adequacy ratio of 14.62%.
• SIB has good market share of large South India based NRIs and their families in India. It serves the niche market due to its decades old relations in specific regions. About 24% of bank’s business is from NRI market.
• SIB is a very good M&A target, due to no dominant promoter group and strong presence in South Indian market.
To see full report: SOUTH INDIAN BANK
Thrissur (Kerala) based South Indian Bank (SIB) is one of the earliest banks in South India, came into being during the Swadeshi movement in 1928. It is mainly a strong regional player in South India. The Bank has grown gradually steadly. Presently, it has a branch network of 537 branches (including 17 extension counters), all with CBS technology.
Highlights
• The bank has shown decent performance. Its profits have grown very well, from Rs.8.7 Crore in FY 2005 to Rs.153.39 Crore in FY 2008, a growth of 260% compounded. It has also shown very good improvement in Assets quality. Its Net NPA stand at 0.4% presently, down from 3.81% in FY 2005.
• SIB has been paying dividend regularly. At current price the dividend yield works out to be 6.5%, if dividend payout of Rs.3/Share is maintained.
• Bank gave 1 for 4 Bonus in Q3 FY 09.
• Bank has maintained its PLR at 16%. This should improve the net interest income for the bank.
• The bank has high capital adequacy ratio of 14.62%.
• SIB has good market share of large South India based NRIs and their families in India. It serves the niche market due to its decades old relations in specific regions. About 24% of bank’s business is from NRI market.
• SIB is a very good M&A target, due to no dominant promoter group and strong presence in South Indian market.
To see full report: SOUTH INDIAN BANK
>Macroeconomic Research (FIRST GLOBAL)
Food for Thought: Will the rate cuts help?
Benefits of earlier rate cuts yet to percolate down the system & help arrest economic slowdown…
Is the headroom from low inflation for further rate cuts merely theoretical…
The Story…
The Reserve Bank of India (RBI) has been on a rate-cutting spree, along with most other Central banks of the world. Lately, it has lowered its policy rates, the Repo rate (the rate at which RBI lends short-term funds to banks) and the Reverse Repo rate (the rate at which overnight funds are parked with it), under the Liquidity Adjustment Facility (LAF), each from 5.5% and 4% to their new levels of 5% and 3.5% respectively. Before the rate-cutting cycle started, the Repo and Reverse Repo rates were at 9% and 6% respectively. The RBI has maintained its status quo on the Cash Reserve Ratio (CRR), the amount of cash balances parked by banks with it as a percentage of the net demand and time liabilities, at 5% since the last cut by 50 bps.
The easing of RBI’s monetary policy began from October 2008 onwards and so far, it has slashed the Repo rate by 400 bps, the reverse Repo by 250 bps, and the CRR by 400 bps. The RBI’s key aim behind the cuts is to signal banks to lower their lending and deposit rates and shed their risk aversive approach by passing on the benefits of the easing of its monetary policy to the productive sectors in order to stimulate demand and increase confidence in the economy. The lowering of the reverse Repo rate lowers the incentive for banks to park their surplus funds with the RBI on its LAF window, as a result of which, banks are expected to cut their lending rates. Though banks have reluctantly reduced their PLR rates, with the benefits of these cuts have not really percolated down the system and arrested the economic slowdown, as evident from the continuous negative data coming in. In April’08-January’09, the IIP growth stood at 3%, which is almost one-third the growth of 8.7% recorded during the same period in same period in the previous year, due to the slowdown across all the key sectors. Exports have recorded a decline for four consecutive months from October 2008 to January 2009. Theoretically at least, the low wholesale price inflation provides the RBI with sufficient headroom to extend rate cuts in the absence of any fiscal measures during the code of conduct period.
■ The Inflation provided monetary policy cushion may be illusory : The WPI inflation is expected to touch 0% to a negative 1.3% by the end of March 2009 and shall remain negative till October- November 2009, mainly due to the double-digit base effect. While part of the reason for the discrepancy between the WPI and CPI is the lag effect, the differences in the basket weights are also to blame. Food inflation, for instance, remains fairly high even in the WPI basket. This means that an easy monetary policy may not be a costless proposition.
■ Bond yield movements: The RBI’s borrowings have already surpassed the targeted levels by 80% to Rs.2.61 trillion for FY09 vis-à-vis Rs 1.45 trillion in FY08. As a result, the long-term (20-year and 30-year) and medium-term (5-year and 10-year) G-secs have lost their attractiveness, based on the expectation of a deluge of G-secs entering the market in the coming months. Rate cuts and falling inflation alone cannot ensure a softening in the soaring medium and longterm G-sec yields and it is only consolation in the form of the RBI’s decision to purchase Gsecs under OMO that could provide the much-needed relief.
■ Key sectors that may benefit:
- Auto: The policy rate cuts will signal banks to provide cheaper finance to these segments in order to help stimulate consumption and help the ailing Auto sector. Hence, banks could further lower their lending rates for these segments.
- Banking: Instead of sitting on idle cash, banks can choose to lower their lending rates in the coming months and also reduce their deposit rates, primarily to improve margins. The trade-off here will depend on how the government bond rates move.
- Real Estate: Since the interest rates have already been reduced significantly, the possibility of a further cut in lending rates appears unlikely, unless banks lower their deposit rates from the current 8.5-9% level.
■ Conclusion: We maintain our view that another cut in the policy rates by the RBI is imminent, though the exact timing of these cuts cannot be predicted, as inflationary pressures will vanish in the next two months and provide more room for such rate cuts.
To see full report: MACROECONOMIC RESEARCH
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