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Cong, Trinamool fills papers for both bypoll seats

Jul 302009
 

mamta-banerjeeCongress and Trinamool Congress candida-tes filing nominations for bypolls in both Sealdah and Bowbazar Assembly seats, the
difference between the alliance partners deepened on Wednesday. State-level leaders of both parties are now hoping the dispute will be resolved in Delhi before August 1, the last date for withdrawing nominations.

Trinamool candidates Swarnakamal Saha and Sikha Mitra (wife of Somen Mitra) filed nominations respectively for the Bowbazar and Sealdah seats, while Pradip Ghosh did so as the Congress candidate from both seats. Santosh Pathak also filed nomination as an alternative Congress candidate from Bowbazar.

Left Front has fielded CPI Kolkata secretary Prabir Deb at Sealdah and Independent Manati Gomes at Bowbazar.

In Delhi, AICC general secretary Keshav Rao said the filing of nominations did not mean the alliance had come to an end. “Trinamool has filed nominations in two seats, we have also filed nominations in these two seats. But, this is not a big thing.” He said discussions were still on and appealed to Trinamool chairperson Mamata Banerjee to leave one of the two seats to Congress. “We are natural allies and should go together.”

It was learnt from Trinamool sources, however, that Mamata was extremely upset that Congress had formed the municipal board in Uluberia with help from BJP, leaving Trinamool out. This had hardened her stand, though she was initially considering the possibility of leaving one Assembly seat for Congress.

Pradesh Congress Committee general secretary Manas Bhunia said Congress should be allowed to contest from Sealdah and Bowbazar since the party had won both in the last Assembly polls.
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Sensex lacklustre ahead of this session

Jul 302009
 

equity-title-insuranceIndian markets were choppy ahead of settlement of July series F&O expiry. Buying activity was seen in realty and banks while pharma and capital goods were marginally lower. Positive opening of European markets also provided support.

“The winning ways appeared almost contagious for bulls at the start of the week, but the key indices have decided to take a pause amid a deluge of earnings. While the aggression of the bulls seems to be waning, it appears to be the season of aggression elsewhere. Anil Ambani has again upped the ante in the long-standing and controversial gas supply row with his elder brother. The Opposition is crying foul against the recent Indo-Pak joint statement signed by the PM. ABG Shipyard has hiked the offer price for Great Offshore by 11%. Microsoft has stepped up its effort to take on the might of web search titan Google by finally tying up with Yahoo.

Locally and globally, the markets haven’t traveled much after the recent spurt. Today appears to be no different with lack of convincing cues from abroad. We expect another cautious to flat start, followed by the usual F&O expiry-related volatility,” said India Infoline report.

Bombay Stock Exchange’s Sensex was at 15264.65, up 91.19 points or 0.60 per cent. The index touched an intra-day high of 15315.54 and low of 15065.48.

National Stock Exchange’s Nifty was at 4533.55, up 20.05 points or 0.44 per cent. The broader index hit a high of 4551.80 and low of 4474.50.

BSE Midcap Index was up 0.59 per cent and BSE Smallcap Index gained 0.88 per cent.

Market breadth was positive on the BSE with 1409 advances and 1070 declines.

European shares were in the green led by positive earnings. FTSE 100 was up 0.67 per cent, CAC 40 gained 0.22 per cent and DAX moved 0.29 per cent higher.
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Tata Steel expected 47% fall in first quarter

Jul 302009
 

tata-steelTata Steel posted a worse-than-expected 47% fall in first quarter net profit on weak prices, but India’s second-largest steel producer
said higher volumes and lower costs will improve profitability in the second quarter.

The flagship company of the Tata group, which is also the world’s sixth-largest steel producer, saw its standalone net profit falling to Rs 790 crore from Rs 1,488 crore in the year-ago period. Sales fell 8.7% to Rs 5,554 crore in the quarter, as customers postponed purchases in a falling market.

Prices of hot-rolled coils, the base-grade category, were hovering around Rs 26,000 per tonne in the April-June quarter, compared with Rs 45,000 a tonne in the same quarter last year. Prices, however, have started picking up in July, backed by the massive stimulus package in the US and a general improvement in the liquidity condition.

“But things are improving…here and globally,” said Tata Steel managing director B Muthuraman. The company’s European unit Corus has already raised steel prices by around $40 a tonne, while capacity utilisation in Europe may go up to 65% in the next quarter from 53% at present.

International operations are vital for the company, as Indian operations account for only 25% of Tata Steel’s combined capacity of 30 million tonnes. In fact, the group’s consolidated net profit for the quarter fell due to slow sales in Europe.

The first quarter saw a 22% rise in sales volumes in India, as demand for long steel products which are used in construction grew in anticipation of increased government spending in infrastructure.

On Wednesday, shares of Tata Steel fell 6.1% on BSE to end the day at Rs 442.35.

Worldsteel, an international trade body whose 180 members account for 85% of the global steel output, has predicted a 15% fall in steel consumption in 2009. The world body has forecast a gradual recovery for the industry next year.

One of the largest beneficiaries of the three-year bull run that started in 2005, the steel industry was also among the first to be affected by the global recession, which saw large mills in Europe and the US closing down, as prices plunged below the cost of production. The cascading impact of this trend took a toll even on large steel consuming markets such as India and China, with prices crashing by around 60% at one point.

Lower prices, coupled with higher raw material cost, almost halved the operating profit to Rs 1,742 crore. Tata Steel imports around 30% of its coking coal requirements. The cost of imported coking coal tripled in the last 12 months.
Tata Steel’s ferroalloy business, which accounts for around 5-10% of the total revenue, saw operating margin falling to 5% from around 50%, due to lower demand from stainless steel makers. Overall, the company’s operating margin contracted by 1,900 basis points to 31%.

Separately, the board of Tata Steel and unit, Hooghly Met Coke, approved a scheme of amalgamation of HMPCL with Tata Steel. Tata Steel currently owns 100% of the paid-up capital of HMPCL.
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Sensex pares losses

Jul 302009
 

shaves-320-points-off-sensexThe key benchmark index cut losses to climb above 15,000 levels after the European markets opened in the positive zone. Realty, metals and capital goods stocks continued to remain under pressure.

The Sensex was down 131 points at 15,200 and the Nifty shed 45 points to trade at 4,519.

On the sectoral front, the BSE realty index fell 4.3 per cent and the BSE metal index lost 1.8 per cent.

Among the Sensex stocks, DLF was the biggest loser. The stock fell 6.4 per cent. Sterlite Ind, Tata Steel and Tata Motors were the other main losers, down over 4 per cent each.
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US stocks market is holding up,

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Jul 302009
 

usstockThe stock market is holding up, just not pressing ahead as the economic signs look a little less promising.
Stocks had their fourth straight day of minimal moves on Wednesday as commodity prices slid and orders for big-ticket manufactured goods fell, injecting more uncertainty into the market.
Investors are uneasy but aren’t giving up on stocks. The Dow Jones industrials lost only 26 points on Wednesday and major indexes are still up about 11 percent since mid-July. Analysts say the market’s buoyancy after such a big gain is a welcome sign of stability, but also that more good news is needed for stocks to resume their climb.
For now, though, investors are finding more reasons for concern. The price of oil and other commodities fell for a third day after stocks tumbled in China on fears that growth in that country would slow. That could hurt demand for a range of commodities.
The Commerce Department said orders to U.S. factories for manufactured goods those expected to last at least three years fell an unexpectedly steep 2.5 percent in June. The slide reflected troubles in the auto industry and a drop in demand for commercial aircraft. It was the largest drop in five months, and was worse than the 0.6 percent analysts expected.
Lackluster demand at a government debt auction for the second straight day fanned worries that rising interest rates could hobble a recovery. That boded poorly for a big auction of 7-year Treasury notes on Thursday.
Traders are facing an intense seven-day run of economic reports that will help shape views about how quickly the United States can pull out of the longest recession since World War II. On Thursday, weekly unemployment figures are due and a reading of gross domestic product for the April-June quarter comes on Friday. Next week, reports are expected on manufacturing, housing, employment and the service industry.
Manny Weintraub, president of Integre Advisors in New York, said some good numbers could bring out more buyers because investors are betting on what the economy will look like in the coming months, not what it looks like now.
“As long as things are getting better the market can go up,” Weintraub said.
The Dow fell 26.00, or 0.3 percent, to 9,070.72. The Dow
also fell Tuesday after a weak reading on consumer confidence. The two-day drop was the first for the Dow in more than a month. The average is on pace to record its best July in 20 years.
The broader Standard & Poor’s 500 index fell 4.47, or 0.5 percent, to 975.15, while the Nasdaq composite index slid 7.75, or 0.4 percent, to 1,967.76.
Energy and materials stocks fell after China’s benchmark Shanghai Composite Index dropped 5 percent on worries that authorities might try to keep the country’s economy from growing too quickly. A slowdown in China’s economy would erode demand for a range of resources.
Investors were also unnerved after U.S. crude inventories rose more than expected last week. The rise prompted worries that weakness in the economy was curbing demand for energy.

Bond prices were mixed after a disappointing auction of five-year notes. That raised fears that Washington will have to offer investors higher returns on debt, which can drive up borrowing costs on consumer loans like mortgages. The yield on the benchmark 10-year Treasury, which moves opposite its price, fell to 3.67 percent from 3.69 percent late Tuesday.
Investors took some comfort from a Federal Reserve report that found the economy is seeing early signs of stabilizing in some parts of the country. That comes as traders have been cautious following the surge in stocks that began July 13 when corporate earnings reports started coming in stronger than expected.
In corporate news, Microsoft Corp. and Yahoo Inc. announced a 10-year deal that gives Microsoft access to the Internet’s second-largest search engine audience. Microsoft rose 33 cents to $23.80, while Yahoo fell $2.08, or 12.1 percent, to $15.14.
Three stocks fell for every two that rose on the New York Stock Exchange, where consolidated volume came to 5.4 billion shares compared with 5.6 billion Tuesday.
The Russell 2000 index of smaller companies fell 3.57, or 0.7 percent, to 548.38.
The dollar was mixed against other major currencies, while gold prices fell.
Overseas, Britain’s FTSE 100 rose 0.4 percent, Germany’s DAX index rose 1.9 percent, and France’s CAC-40 advanced 1 percent. Japan’s Nikkei stock average rose 0.3 percent.
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Markets flat in the early deals

Jul 302009
 

bombay-stock1The key benchmark indices were flat in the early deals today. The benchmark Sensex was down 15 points at 15,158 levels and the Nifty lost 11 points to trade at 4,502 levels.

Realty, metals and capital goods stocks were under pressure. The realty index on the BSE fell 0.6 per cent and the metal index slipped 0.5 per cent. The BSE capital goods index was down 0.3 per cent.

Among the Sensex stocks, Tata Steel led the losers. The stock shed 1.4 per cent.
The company, yesterday, reported a 47 per cent fall in the first quarter net profit. Sterlite Industries, ITC and Sun Pharma were the other main losers in the Sensex pack.
In the US markets, stocks had their fourth straight day of minimal moves on Wednesday as commodity prices slid and orders for big-ticket manufactured goods fell, injecting more uncertainty into the market.
The Dow fell 26.00, or 0.3 percent, to 9,070.72.
The broader Standard & Poor’s 500 index fell 4.47, or 0.5 percent, to 975.15, while the Nasdaq composite index slid 7.75, or 0.4 percent, to 1,967.76.

Asian markets were trading lower today. Japan’s Nikkei, Hong Kong’s Hang Seng and South Korea’s Kospi dipped over 0.3 per cent each. China’s Shanghai Composite fell over 1 per cent.
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Rupee low against US dollar

Jul 302009
 

finance1The Indian rupee on Thursday declined by 28 paise to a one-week low against the dollar in early trade on month-end dollar demand from importers and firmness in the US currency against major Asian currencies.

At the Interbank Foreign Exchange (forex) market, the domestic currency was quoted at 48.58 a dollar, a loss of 28 paise over the previous close.

The rupee on Wednesday lost 21 paise to close at 48.30/31 a dollar.

Dealers said month-end dollar demand from refiners and importers and firming US dollar overseas weighed on the Indian unit.

Expectations of capital outflows from weak stock markets also put pressure on the rupee.

The BSE Sensex on Wednesday ended 1.03 per cent down at 15,173.46 points.
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Nifty turns positive;

Jul 302009
 

equity-negliKey indices were volatile Thursday as market headed for settlement of July series F&O expiry. IT, realty and banks were amongst top performers while capital goods and metals were subdued.

National Stock Exchange’s Nifty was at 4526.40, up 12.90 points or 0.29 per cent. The index touched an intra-day high of 4530.70 and low of 4474.50.

Bombay Stock Exchange’s Sensex was at 15249.04, up 75.58 points or 0.50 per cent. The 30-share index touched an intra-day high of 15253.46 and low of 15065.48.

“Reiterating our short term view, support for Nifty is placed around 4200-4250 range while hurdle continues to remain higher at 4650-4700 range. As for today’s trade, key support for the day is placed at 4470-4460 range with next support at 4420-4430 range. Hurdle is seen in the range of 4540-4550 range on higher side and then at 4600-4610 range,” said Reliance Money report.

BSE Midcap Index was up 0.30 per cent and BSE Smallcap Index gained 0.72 per cent.

Amongst the sectoral indices, BSE IT Index was up 2.14 per cent, BSE Realty Index gained 0.72 per cent and BSE Bankex gained 0.46 per cent. BSE Capital Goods Index was down 0.55 per cent and BSE Metal Index slipped 0.43 per cent.

TCS
(3.64%), Tata Communications (2.97%), HDFC (2.73%), Hindustan Unilever (2.72%) and BPCL (2.56%) were amongst the Nifty gainers.

PNB (-6.90%), Sunpharma (-4.93%), National Aluminium (-2.29%), Siemens (-1.72%) and Cairn India (-1.58%) were the top index losers.

Market breadth was positive on the Nifty with 29 advances and 21 decline
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Quick profits from a short-term trading strategy

Jul 302009
 

budgetThey profess to be long-term investors, but the lure of quick profits from a short-term trading strategy is irresistible for most fund
managers. And sometimes that means blurring the line that separates a legitimate trading strategy from one based on privileged information.

With companies seeking to raise capital being forced to price their off-market share placements to institutional investors, or Qualified Institutional Placements, at a discount to the market price, many fund managers have found a way to boost their portfolio’s performance through some smart trading.

When a company plans a QIP offering, merchant bankers sound out institutional investors to test the appetite for the issue. The moment potential investors get an indication that it will be priced at a discount to market rates, many of them start short selling the futures of the stock even before the price is publicly announced at the end of the day.

“The issue is open for subscription after market hours, but the book is built (meaning indicative bids are sought) during market hours; so fund managers have a fair idea of the pricing,” said an official at a domestic fund house.

There is a floor price — the two-week average price of the stock — below which merchant bankers cannot price the issue. Technically, they can price the issue at a premium to the market price. But given the uncertain outlook, institutional investors are bargaining hard and asking for a discount to the market price.
Companies starved for capital do not want to let the opportunity pass, and usually give in.
Once the QIP price (which is usually at a discount to the market rate) is officially announced, the stock comes under pressure in the next few sessions. Naturally, the futures price too weakens in tandem with the spot price. Investors who have gone short on the stock use this opportunity to cover their positions and lock in a tidy profit.

“If the fund manager who is approached by the merchant banker already has shares of that company in his portfolio, he will also offload the stock to the extent that he can replenish by subscribing to the QIP,” says a wealthy individual who is sore at institutional investors having an unfair advantage when it comes to QIP issues.

Stocks like HCC, HDIL, Bajaj Hindustan, Unitech and Shree Renuka have seen fluctuations in prices just before and after the QIPs. The July futures price of Bajaj Hindusthan fell by 15% within three trading sessions of the QIP issue’s completion. HDIL July futures fell by over 20% immediately after the issue, and HCC’s by around 12%.
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Indian power firm NHPC Ltd will kick off

Jul 302009
 

nhpcIndian power firm NHPC Ltd will kick off a $1.25 billion IPO next week in the first share sale by a state company since the Congress
party’s unexpectedly strong re-election in May spurred investor hopes for pro-market reforms.

Despite opposition from labour groups and leftist parties, the government is forecast by some watchers to offload roughly $5 billion a year in state shares, which could hearten a bond market worried about fiscal responsibility but do little to address a yawning deficit and $90 billion borrowing plan.

Uncertainty over how stake sale proceeds can be used also clouds the outlook for any benefit to government finances.
What the market is likely to price in is the prospect of larger disinvestments going forward,
Investors are expected to lap up shares in government firms, given attractive pricing, a record of outperformance relative to IPOs by private firms, and a roaring stock market run since March that has been fueled by an influx in foreign funds.

NHPC opens its IPO on August 7 in what would be the first for a state firm in India since Feb. 2008. Oil India is expected to follow with a $500 to $600 million issue in September.

Also in the works could be a multi-billion-dollar IPO by telecoms firm Bharat Sanchar Nigam Ltd and secondary offerings by power equipment maker Bharat Heavy Electricals, Rural Electrification Corp, trading firm MMTC Ltd and mining firm NMDC Ltd.

For a list of possible government stake sales, click “Government deals typically have done well. Government a couple of times has been credited with reopening the IPO markets,” said Vedika Bhandarkar, head of India investment banking at JPMorgan.

The pipeline of equity from state firms promises to top the record $6 billion raised from government asset sales between 1999 and 2004 when the pro-business Bharatya Janata Party (BJP) was in power. During that period, shares were sold in firms such as Oil and Natural Gas Corp and Maruti Suzuki.

Since then, the government raised just $1.4 billion as allies of the ruling coalition and labour unions thwarted plans for stake sales.

“We could see issuances in infrastructure, power, mining and agricultural sectors followed by banks and insurance companies,” said A. Murugappan, executive director at ICICI Securities.

PRICED TO PERFORM Government offerings typically come with attractive valuations, ensuring healthy investor returns.

NHPC, which produces 4,815 megawatts and has 11 projects under construction that will nearly double its capacity, will be priced at twice its book value at the top end of the range.

That compares to nearly 4 times book for Adani Power, which has little operational capacity and is building plants to produce 6,600 megawatts, analysts said. Adani is raising up to $625 million in India’s largest share sale in more than 18 months.

Local banks SBI Capital Markets, Enam Securities Pvt Ltd and Kotak Mahindra Capital are managing NHPC’s offering.

Indian state companies that listed between 2004 and 2009 have shown share price gains on average of 140 percent compared with just 3.5 percent for their private sector peers, according to a study by SMC Capitals, a deal tracking firm.

“There will be quite a bit of interest for state-run firms from Indian and foreign investors. The macro picture has changed, the economy seems to have bottomed, there is ample liquidity,” said Sashi Krishnan, chief investment officer at Bajaj Allianz Life Insurance. He oversees $4.5 billion in funds.

“State firms have a large retail portion and typically leave something on the table for investors. If the offer is at a significant discount to the secondary market, and with foreign funds looking to raise India exposure, it will see good demand.”

NO FISCAL PANACAEA Investors were disappointed in early July when the government’s budget contained few details on its disinvestment plans, beyond pledging to maintain controlling 51 percent stakes.

Even so, a few billion dollars from asset sales would be a drop in the bucket as New Delhi copes with the highest fiscal deficit in 16 years and benchmark bond yields that have shot up 165 basis points in 2009 on worries over heavy borrowing.

Complicating matters is a rule that requires all government divestment proceeds to go into the National Investment Fund (NIF), which is managed by mutual fund units at state-run firms.

According to official guidelines, 75 percent of the income from the NIF is used for funding social sector schemes to promote education, health and employment, while the residual amount is invested in state-owned firms that can be revived.

By comparison, Chinese state companies, which dominate issuance there, are required to give 10 percent of their IPO shares or proceeds to the national pension fund.
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