MyValueResearch

Dawn of 16th Dec 08

Rupee higher on $ weakness, Gsec SEE 6.05, Liquidity Surplus in spite of Ad. Tax, FII Return 400$ ml in Dec, US becomes JP Fed cut will take rates to 0.50%, M&M continues tightening

RUPEE

Ø INR edged higher on Tuesday in the wake of the USD’s weakness against some Asian currencies. At 9:05 a.m. INR was at 47.93/94 per USD, above Monday’s close of 48.05/06.

CALL

Ø Rates closed at 6.00/6.10 %, higher from its Friday close of 5.20/5.40 %. It had closed at 5.50/5.60 % in illiquid trading on Saturday. “The tightness was due to advance tax outflows, and this may continue for one more day,” said the chief dealer at a foriegn bank. “Because payments were mostly done electronically and that the cash is expected back to the system in three-four days, we see cash rates near 5.25-5.50 levels by start of next week,” he added. RBI absorbed a total of 356.70 billion INRs through its twin reverse repo auctions while it injected only 23 billion INRs via the repo route, which shows surplus cash in the system.

BONDS

Ø Yields are expected to ease for a seventh consecutive day on Tuesday on growing hopes of further interest rate cuts to bolster a slowing economy. 10Y bond yield ended at 6.17 % on Monday, off an intraday low of 6.05 % but still below Friday’s close of 6.21 %. It hit 6.04 % on Friday, its lowest since September 2004. The Fed is widely expected to cut its key interest rate by 50 basis points to 0.50 % and possibly outline other policy measures it can take as official rates fall to near zero.

STOCKS

Ø Rose 1.47 % on Monday to their highest close in more than a month, with the recent return of FII and expectations of more policy steps to counter slowing activity lifting investor confidence. “The gains are reflective of the positive global cues. FII buying has come in, although it may not be in a big way. Certainly, there’s not much selling,” said V.P. Chaturvedi, Managing Director at Tata Asset Management Co. Foreign institutional investors have bought a net $400 million of shares this month up to Thursday, but are still net sellers of $13.3 billion this year.

GLOBAL

Ø DJIA 8,564.53 -65.15 Nikkei 8,608.16 -56.50 FTSE 4,277.56 -2.79 H Seng14,884.51 -157.28 US10Y 2.513 -0.059 EUR 1.3704 Yen 90.45 Gold 826.00 Crude 44.85

Ø U.S. stocks tumbled on Monday, roiled by worries about how big a bite the global financial crisis has taken from banks’ profits and fallout from a massive hedge fund fraud scheme.

Ø FTSE ended 0.1 % lower Monday as gains in commodity issues were countered by weak banks and insurers and as Wall Street fell ahead of Tuesday’s U.S. interest rate decision.

Ø Nikkei average fell 0.7 % on Tuesday as investors locked in recent gains ahead of an interest rate decision by the U.S. Federal Reserve, while Honda Motor and other exporters were hurt by a firmer yen.

Ø USD tumbled to two-month lows against the euro and a basket of currencies on Monday on speculation the Federal cut interest rates to near zero this week, further eroding the greenback’s yield appeal.

Ø Gold rose more than 2 % in Europe on Monday as the USD slipped to a fresh two-month low versus the euro, boosting interest in the precious metal as a currency hedge.

Ø Copper reversed its gains together with European equities and eased on Monday after earlier rising more than 3 %, buoyed by optimism over the Chinese economy and a weaker USD.

Ø Oil prices fell more than 2 % on Monday as deepening economic worries countered expectations that OPEC would agree to its biggest supply cut ever when the group meets in Algeria this week.

INDIA FRONT PAGE

Ø The telecom ministry is set to reject a proposal to impose an “administrative tax” on successful bidders of 3G wireless frequencies, fearing a tax could impair revenue collections at the spectrum auction by over 50 billion INRs.

Ø Foreign firms may not require the government’s approval to acquire stake in local companies through warrants. However, the Indian company should belong to a sector where foreign investment in allowed freely or under the automatic route.

Ø Apollo Hospitals is planning to get into drug manufacturing and early-stage clinical trials. A three-member team is already looking for acquisition targets in the drug manufacturing space.

Ø Tata Capital plans to raise 10 billion INRs worth of debt to meet fund requirements for executing its expansion plans. The company is planning to sell bonds with a yield as high as 11.5 %.

Ø Tata Teleservices Ltd, which has written off 51.41 billion INRs, will write off another 16.48 billion INRs as part of its capital restructuring programme. It has till March 15 to complete the restructuring.

Ø SEBI is considering the grant of an extension to all IPO whose validity has expired. This may be only an interim step, given the extraordinary market conditions across the globe.

Ø Two-wheeler maker Bajaj Auto Ltd has decided to shut down production at its plant near Aurangabad in western India for 10 days this year against the 5-day annual block closure.

Ø Hindustan Petroleum Corp is keen on raising its stake in Mangalore Refinery and Petrochemicals from the present 16.97 %.

Ø Mahindra & Mahindra said the group has laid off 900 people worldwide in the current fiscal on account of the current economic slowdown. However, it continues to hire people for sectors which are still witnessing growth.