JAI maTA
di
JAI MATA DI
SABSEBADARUPAIYA
MARKET
SUMMARY & DAY FORWARD
DATE: 30th July 2010.
We
have started giving commodity calls in crude, Gold & silver.
ABOUT AMERICAN ECONOMY & markets:
Once
again investors found themselves grappling with weakness in the market after
stocks made early gains but then turned south. Adding to the headwinds, Federal
Reserve Bank of St. Louis President James Bullard released a paper in which he talked about the potential for deflation.
Overseas action wasn't any more bullish. Pete Boochvar of Miller Tabak tells us
to note that markets
around the world are also losing steam just as the S&P fails at its
200-day moving average around 1113. I’m now watching 1090 as a critical level
on the S&P, adds Steve Grasso. If we break that level I suspect investors will become fearful and maybe even
panic a little bit. In the wake of results from Kellogg and Colgate
investors are rethinking their defensive trades, he explains. Looking ahead, if
China’s PMI numbers are
weak they could
really take the air out of this rally, Adami adds. I’ve been wrong many
times, he admits, but it feels like the market has turned and it wants to go
lower. The traders are eagerly awaiting the latest GDP results due Friday before the bell. What they show
could confirm or deny recent market gains.
U.S. economic growth likely slowed in the second quarter as a capital investment drive by businesses was sated by imports and consumer spending tapered off, a government report is expected to show on Friday. Gross domestic product expanded at a 2.5 percent annual rate compared to a 2.7 percent pace in the first quarter, according to a Reuter’s survey. "We expect the economy to have shifted into lower gear in the second quarter, primarily due to a widening in the trade deficit and also weaker consumer spending," said Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pennsylvania. Although the slowdown in the recovery from the worst downturn since the 1930s was flagged by a stream of weak economic data in the past couple of months, a softer report could revive fears of a double-dip recession among investors. The rebuilding of inventories from record low levels has been a major force in the recovery which started in the second half of 2009. Analysts will be watching to see if final demand recovered after braking sharply in the first quarter. "The economy in the second half is going to lean more heavily on consumer spending because the biggest support from fiscal stimulus and inventories is now ending," said Moody's Economy.com's Sweet.
St. Louis Fed president James Bullard
came out with some bold statements on Thursday; among the commentary he said
the current Fed policy could lead to Japanese-style deflation and warned of the
danger of "exceptionally low" pledge in the Fed statement.
In
the August edition of the ‘The Gloom, Boom & Doom Report’ Marc Faber
questions whether the Dow
could hit 1,000 as
predicted by Robert Prechter, based on his interpretation of Elliot
Waves, Fibonacci numbers and socioeconomic trends. Prechter, who has written 13
books on finance (external link), believes that the stock market is
historically overvalued in terms of dividends and earnings, because of a
"great rise in positive social mood." But the mood changed in 2000
and the "trend toward negative social mood will lead to an economic
contraction," according to Prechter. "Small bear markets lead to
recessions, big bear markets lead to depressions. The current bear market will be the biggest in nearly 300
years, so the depression will be correspondingly deep," Prechter
said. Prechter goes onto to suggest the bear market is of super-cycle degree,
the biggest since 1720-1784 and will therefore see a decline for equities
deeper than the decline
during the great depression, which saw the Dow fall 89 percent. "The
trend toward negative social mood that has been in progress since 2000 and
which is about to accelerate will continue to curtail lending and lead to a
tidal wave of defaults and a terrific deflation," he said. "The amount of outstanding credit
today is so large that system-wide defaults could lead to as much as an 80
percent –90 percent decline in the volume of dollar-denominated credits
worldwide," according to Precther. "In such an environment, surviving
dollars and dollar credits, representing the denominator of the DJIA, will rise
in value, and the Dow —along with everything else not used as money — will fall
in dollar price," he added.
Marc
Faber says before dismissing Prechter as a lunatic you should look at his
record. In 1978 when he
predicted the Dow would reach 2,300 in his book Elliot Wave Principle no one
believed it possible. "Prechter is right when says that when manias come
to an end, prices tend to retreat to where the mania started. So from this
point of view, a Dow Jones at 1,000 should not be excluded," Faber said.
Faber also sympathizes with Prechter's view that there will one day be a complete
credit collapse. Where he differs from Prechter is on that crucial factor,
timing. "It is likely
that if the Dow where to fall by more than 20 percent from the present level
there would be further massive fiscal and monetary stimulus packages – not just
in the US but worldwide," Faber said. "These economic policy
measures would likely fail to boost economic activity in the US but could
support asset markets," he added. Faber's biggest problem with
Prechter's theory is his view that surviving "dollars and dollar credits,
representing the denominator of the DJIA, will rise in value, and the Dow –
along with everything else used as money – will fall in dollar price." "The question here is really, with the
Dow below 1,000, what kind of dollars – and especially what kind of dollar
credits – will survive," Faber said. "It is safe to assume that almost all banks in the world,
and almost all governments, will be bust." "I want my readers
to think very carefully about the implications of a Dow below 1,000 (or even
just below 5,000). Does anyone really think that the money printing
presses won't run 24 hours a day? For sure I don't," he wrote in his
August report.
The
Dow Jones Industrial Average lost 30.72, or 0.3 percent, to close at 10,467.16,
after a rocky session that saw the Dow trade in a nearly 200-point range.
Still, the Dow has gained more than 7 percent in July, putting it on track to
post the biggest monthly percentage increase and best July gain since July
2009, when it rose 8.6 percent. The S&P 500 fell 0.4 percent and the NASDAQ shed
0.6 percent. The CBOE volatility index, widely considered the best gauge of
fear in the market, was below 24 at the closing bell. St. Louis Fed President
James Bullard, a voting member of the FOMC, rattled the market a little after
he said that the Fed may
have to take the more severe measure of buying government debts if prices stay
too low for too long. But he said the risk of deflation is low. Some
market pros, like James Dailey, CIO at Team Asset Strategy Fund, cautioned that
the current market is similar to the rally off the "Bear Stearns low" in March 2008. “The
euro crisis [is] similar to the Bear Stearns crisis where people thought it’s
over,” Dailey told CNBC. “So the sovereign debt issues and the currency
issues as we go forward
are likely to re-emerge.”
ASIAN
MARKETS:
It’s
a week of dueling predictions for the Chinese economy—in a debate that pits the
International Monetary Fund against one of the most successful investors in the
hedge fund sector. On Thursday, the IMF publicly released the results of its
so-called “Article IV
consultation with China.” The report is conducted every year, but 2010
was the first year since 2006 that the results had been made public. The
Chinese government blocked
publication in each of the previous years. The 2010 report, though, had a bullish take on
the Chinese economy, projecting 10.5 percent growth in 2010, an increase in
domestic demand of 11.5 percent, and a decline in unemployment from 4.3 percent
to 4.1 percent. The IMF executive directors commended what they called China’s
“proactive and decisive policy response” to the global economic crisis. “Growth
is expected to continue to be robust, while the inflation outlook appears
benign,” the IMF wrote. In fact, the main problem that the IMF saw was that Chinese growth
could be so robust that international trade imbalances could worsen. Contrast that take
with the view of Jim Chanos, founder of the hedge fund Kynikos Associates,
who has been predicting for much of the year that China’s economy is overheated and destined for some sort of
setback. Chanos is most famous for being one of the earliest investors
to discover Enron's
dubious accounting. Chanos, a source familiar with the situation said, has
briefed officials at the highest levels of the U.S. defense establishment on
his view of the Chinese economy’s troubles. He argues that China has a “credit-driven property bubble” and points
to a slew of statistical and anecdotal data to back that up. On the statistical
side, Chanos says that Chinese
economic stimulus was a whopping 14 percent of its GDP, versus a
relatively small 6 percent for the U.S. And he points to commercial office vacancy rates
of 18 percent in Beijing and 14 percent in Shanghai. Anecdotally, Chanos
points to a nearly
entirely empty newly constructed city called New Ordos in Inner Mongolia
in which much of the property was purchased by speculators, and sits empty. And he cites a popular
television soap opera in
China called “Dwelling Narrowness,” which centers on the struggles it’
characters face finding affordable housing in a big Chinese city. All of that,
Chanos argues, points to a society
that’s dangerously close to an economic retrenchment.
Asian stocks lost ground on Friday following the weaker
lead on Wall Street after weak
outlooks from U.S. technology companies and downbeat comments by a Federal Reserve Officer underlined
concerns about the U.S. economic recovery. All eyes are on U.S. economic growth
figures out tonight. Economists forecast GDP growth to slow to 2.5 percent in
the three months to June, from 2.7 percent in the first quarter. Japan's stocks
lost 0.6 percent. But a bright spot was Sony, which surged more than 4 percent
after the company posted a surprise profit on Thursday and lifted its annual
outlook. The benchmark Nikkei shed 158.72 points to 9,537.30 but
was set to end the month on a positive note, snapping a three-month falling
streak. In Hong Kong, shares dropped 0.5 percent, tracking falls in
overseas markets, with banks leading the slide as investors locked in gains
after recent strength. The benchmark Hang Seng index was last quoted at 21,029.81,
snapping an eight-day winning streak. China's key Shanghai Composite Index fell 0.4 percent,
giving up the 0.6 percent gain made yesterday. Taiwan stocks also lost ground
as weak forecasts from U.S. tech firm’s outweighed record profits by the world's
top contract chip maker the main
TAIEX share index dropped 0.4 percent or 38.36 points to 7,760.63.
INDIAN economy
& stock MARKET:
After deregulating petrol price,
the government is now rejigging the formula for apportioning subsidy burden. As
per a petroleum ministry proposal under North Block's consideration, the
government would bear two-thirds of the estimated subsidy requirement in a
financial year, while upstream
crude oil producers and downstream fuel retailers between them would bear the
rest. "We want the government to compensate for two-thirds of the
under-recovery (losses of retailers due to selling fuel below cost)," petroleum
secretary S Sundareshan told FE. The remaining would be borne by upstream firms
ONGC, Gail India and Oil India along with downstream firms HPCL, IOC and BPCL. If
the finance ministry agrees to this, government's proportionate share in the
under-recovery this year estimated at Rs 53,000 crore at a crude price of $75 a
barrel would rise to 66% from last year's 56%. In absolute terms, that would be
a rise from last fiscal's Rs 26,000 crore to Rs 35,333 crore this year. The
finance ministry, however, has allocated only a small petroleum subsidy
component in its budget Rs 3,108 crore for this fiscal for kerosene and LPG.
The original subsidy allocation in the Budget is almost invariably raised
upwards. Its decision last year to stop the practice of issuing oil bonds to
fuel retailers and give cash subsidy instead, is an act of tying its own hands
when it comes to approving subsidy because cash subsidy would require making a
saving somewhere else. The
remaining Rs 17,667 crore will have to be met by both upstream firms and retailers.
That would bring some relief to upstream firms ONGC, GAIL India and Oil India,
which shouldered 31.3% of last fiscal's under-recoveries at Rs 14,430 crore.
For fuel retailers IOC, HPCL and BPCL, an equal sharing of burden with upstream
firms would mean absorbing more of their under-recoveries. Last fiscal, the
retailers absorbed only 12.2% at Rs 5,621 crore.
State-owned Oil and Natural Gas Corporation's net
profit for the June quarter fell 24.5% to Rs 3,661 crore from a year ago as the company gave
heavy discounts to refinery-cum-retailers to enable them to sell diesel and
cooking fuel below cost. The oil and gas producer gave Rs 5,515 crore in the
first quarter to retailers in the form of discounts as against Rs 429 crore in
the same quarter a year ago. ONGC's discounts account for about 84% of the
total discounts given by all upstream companies ONGC, GAIL (India) and Oil
India Ltd to retailers like IOC, HPCL and BPCL in the quarter. ONGC's sales revenue dipped 8.1%
to Rs 13,710 crore in the quarter even as net realization from oil declined to
$48.04 a barrel from $58.25 the same time a year ago, ONGC stated. The
company had in 2009-10
fiscal paid Rs 11,554 crore fuel subsidy.
When decontrol of oil price announced, we have
written clearly that for whose benefit this decontrol is? Now after results you
will all agree that not in the interest of oil marketing Companies. Still Govt’s
decides when to increase or decrease the rate. Some news that facing stiff resistance
from opposition parties Govt. is going to reduce the prices by scrapping 1 Rs cess
introduced in budget & 1 Rs by the oil marketing Companies. Still price of
all the Companies are at their highs. Is there any justification? Everyday news
of selling Govt. stake in the Companies flashes on news channels. Is this for
the benefit of operator (as per I.B. information) who involved in a biggest
stock market scam? PLEASE AVOID TRADING IN THE COUNTER AS YOU ALL KNOW WHAT
HAPPENED WHEN SCAM IS OUT & PRICES OF SHARES JACKED BY THE OPERATOR. As per
our view we think correct price for ONGC is at 1000.
Goldman Sachs said on Friday it had
raised its rating on Cairn India
The Reserve
Bank of India’s key policy lending
rate may be raised to 6.25% by December and 6.75% by mid-2011, Credit Agricole said on Thursday. The
bank had earlier predicted the repo rate
at 6% by December and 6.5% by mid-2011, it said. The rate was raised to 5.75%
at the central bank's monetary policy review on Tuesday. "Indian policy
makers seem increasingly desperate to catch up with inflation as a belated
start of the tightening process left them substantially behind the curve,"
said Dariusz Kowalczyk, senior economist and strategist, Credit Agricole CIB,
Hong Kong. The RBI is likely to raise interest rates more aggressively in the
rest of the fiscal year, a Reuter’s poll conducted on Tuesday showed, and most
economists surveyed expect rates to be raised by the end of September. "Clearly,
monetary policy settings
have not matched price
developments and RBI goals, and more needs to be done to rectify the
imbalance," Kowalczyk wrote. "Further more, the RBI begun to
increase rates as late as in March, when inflation was already rampant. Being
behind the curve means that policy makers need to do more than they would if
they had started the process sooner. The delay has allowed price pressures to
spread beyond the original culprit food to the wider economy." Credit
Agricole said it expects inflation to be "quite sticky" at just under
10% year-on-year until October and then stabilizing at around 6% during 2011.
Bharat
petroleum Corporation, BPCL has announced its first quarter
results. The company’s Q1 net loss was at Rs 1,718 crore versus profit of Rs 614 crore. Its
net sales were up 34.20% at Rs 34,212 crore versus Rs 25,493 crore.
Hero Honda Motors has announced its first quarter
Q1 results. The company’s Q1 net profit was down 1.6% at Rs 492 crore
versus Rs 500 crore, year-on-year, YoY. Its net sales were up 11.91% at Rs
4,265 crore versus Rs 3,811 crore, YoY. The company’s raw material cost was up
at Rs 3,084 crore versus Rs 2,577 crore, year-on-year, YoY. Its EBITDA margin
was at 14%
Siemens has announced its results for the quarter
ended June 2010. It has reported adjusted profit after tax (PAT) of Rs 156.1
crore in Q3FY10 as against Rs 200.1 crore, de-growth of 22% (YoY). Reported PAT
declined to Rs 156 crore from Rs 337 crore.
Gujarat State Petro net, GSPL has declared its
first quarter results. The company’s Q1 net sales were down at Rs 251.8 crore
versus Rs 257.9 crore, quarter-on-quarter, (QoQ). Its net profit was down at Rs
105.1 crore versus Rs 107.9 crore, QoQ.
Mahindra
and Mahindra have reported a sales turnover of Rs 5,160.10 crore and a net
profit of Rs 562.39 crore for the quarter ended Jun 2010. For the quarter ended
Jun 2009 the sales turnover was Rs 4,242.59 crore and net profit was Rs 400.85
crore.
KEC International has announced its first quarter
results of FY10. It has reported consolidated net profit at Rs 26.4 crore as
against Rs 38.4 crore. Consolidated net sales jumped to Rs 846 crore from Rs
726 crore.
Indian Hotels has declared its first quarter
results. The company’s Q1 net profit was down at Rs 3 crore versus Rs 16
crore. Its net sales were up at Rs 329 crore versus Rs 262 crore.
Our market opens the first day of a new
series on a soft note. Earlier, the US markets ended lower for the second day
running while Asia, this morning, is looking weak. Open interest position in
option market has gone up significantly. FII’s have built up their positions in
option market & as per our view this is very big bearish sign for current
series. Last day of the quarter and all bad results are announced last. Market
has taken clues and gone down by 100 BSE points.
We are here in public
domain, on 13th of July 2010 when Nifty is above 5400 we declare
market will see the biggest crash in coming days. Trader community will face
highest difficulties as they are directed by huff aria.
COMMODITY – GOLD
.
Gold rose Thursday as U.S. equities pared early gains amid increased worries of U.S. deflation risk and slowing growth. James Bullard, president of the Federal Reserve Bank of St. Louis, commented that the central bank may have to take the crisis-era approach of buying government debt if prices stay too low for too long. Weakness in the U.S. equities usually benefits gold, as it boosts its appeal as an alternative investment and makes dollar-priced assets cheaper for holders of other currencies. Prices have struggled to maintain higher levels since hitting a record $1,264.90 an ounce in June, with investors liquidating their gold holdings in favour of other assets as equities recovered some of the losses made earlier this year. "Gold does very well in a market disruption/risk environment, which is what we obviously saw in May and June to some extent," said Michael Lewis, head of commodities research at Deutsche Bank. "Those concerns have come off the boil a bit."
COMMODITY – CRUDE
.
U.S.
crude oil prices rose on Thursday, breaking a string of two straight lower
finishes, as a broadly weaker dollar and positive euro zone and German economic
data provided lift. Crude oil prices rose despite a seesaw day for U.S.
equities on Wall Street The
appearance of a tropical wave and a tropical disturbance in the Atlantic Basin
also supported oil,
even though the U.S. National Hurricane Center gave both systems a low chance
of forming a cyclone over
the next 48 hours. Also Thursday, the euro hit a 12-week high against a
broadly weaker dollar, lifted by data showing euro zone economic sentiment
jumping to a 28-month high, while German unemployment declined for the 13th consecutive
month. Also supportive was news that U.S. initial jobless claims fell in the
week to July 24.
Earlier in the day, Peter Beutel,
energy analyst at Cameron Hanover, thinks oil is overpriced and is only at its
current levels because of investors borrowing money at low interest and buying
the commodity. "Someday, and I don't know if it's when we go to slightly
higher interest rates, if that's when it occurs...a lot of people have to
wake up and say, 'What am I doing long oil at even $70, or even $65, maybe $60,
maybe $55?' based on the amount of oil we've got right now," he said. Beutel
said there is 22 percent more crude oil in storage than two years ago—"and
we don't have near the kind of demand we had two years ago," when oil
reached its record high of $147 a barrel. He added that he could "make a
very good argument" for oil between $30 and $40 a barrel—but doesn't see
it going there.
AS STOCK MARKET IS RANGE
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ON COMMODITY AND ALL CLIENTS ARE EARNING GOOD PROFITS.
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