MyValueResearch

Dawn of 11th June 09

INR@ 47.35 , looks to stocks, Bond supply woes will liquidity offset, Stocks rise to 8M High, SGX Nifty flat, Credit offtake slow.

US 10Y tops 4%, Russia says IMF bonds over US Treasury, Oil zooms, Cu 8M High.

Service Tax back 12%, Citi Reduces NBFC asset book by 66.33% Kingfisher on debt spree.

 

RUPEE
INR @ 47.35 , it had strengthened on Wednesday as the 3M rally in local shares extended gains to more than 90 % and bolstered expectations of more FII  inflows. INR ended at 47.24/25 about 0.5 % stronger than a close of 47.48/49 at close on Tuesday, when it had fallen to 47.80 during trade, its weakest since May 28. FII inflows of more than $6.5 billion since mid-March have helped the INR climb about 10.5 % from its record low of 52.2 in early March. Last year, record outflows of more than $13 billion had pushed the INR down by about a fifth.  $ fell against higher-yielding currencies on Wednesday as the optimism about economic improvement gave investors the confidence to take on more risk. 1M NDF @ 47.32/42.

 

BONDS
Yields should rise ahead of the 150 billion auction on Thursday, with higher U.S. Treasury yields and further gains in global crude prices weighing on sentiment.  However, redemption of 5.48 % 2009 federal bond on Friday, which would release 226 billion into the system, will provide comfort, dealers said. 10Y ended at 6.79 % on Wednesday, its highest level since April 9 and 14 basis points above Tuesday’s close of 6.65 %. It has risen 9 basis points this month and 154 basis points in 2009.  U.S. Treasury prices fell on Wednesday, sending benchmark yields up to 4.0 % for the first time in 8M, after an auction of 10-year notes heightened concerns over the burgeoning U.S. budget deficit.  Oil prices climbed to $72 a barrel, gaining about 5 % since last Friday’s settlement.

 

STOCK
Green shoots in world economy lifted Asian, European markets. SENSEX  rose 2.25 % on Wednesday to its best close in 10 M, as markets across Asia and Europe were boosted by cash-flush investors buoyed by signs of revival in global economic growth. Central Banks  around the world have created an enormous amount of liquidity in the system, and this liquidity has to find room somewhere,” Subhajit Gupta, head of research at Reliance Equities, said.

 

CALL
Rate were virtually unchanged on Wednesday as banks remained flush with cash, enabling them to meet RBI needs in the first half of the biweekly reporting period. 1D Call  closed at 3.25/30 %, barely changed from its previous close of 3.20/30. FM said on Wednesday banks should provide credit at reasonable rates to spur growth, saying cuts in official rates by the RBI Bank of India had not been passed on.    RBI data last week showed that bank loans grew only 15.9 % on year as on May 22, compared with near 30 % levels in October 2008.    Banks parked 1.16 trillion with the RBI in its reverse repo auction on Wednesday.    The weighted average rate in the call money market was 3.27 %, while in CBLO, it was 2.91 %.

 

GLOBAL MARKET

DJIA  8,739.02  -24.04  Nikkei   9,961.97  -29.52 FTSE  4,436.75  +31.96 H Seng 18,653.92 -131.74 US10Y 3.954  +0.092 EUR 1.4011 Yen 98.00   98.03 Gold  953.75  Crude   71.39

·         U.S. stocks fell on Wednesday on worries that rising interest rates could put a damper on consumer and business spending, but stocks pared losses late in the session to finish off the day’s lows.     The market had extended losses after a 10-year Treasury note auction sparked a sell-off in bonds, pushing yields briefly above 4 % for the first time since October.

·         FTSE ended 0.7 % higher on Wednesday, driven by gains in mining and energy stocks, while banks rose on growing investor confidence.

·         Nikkei stock average edged down 0.3 % on Thursday after climbing above 10,000 to an 8M high, as worries about rising U.S. interest rates offset gains made by steel shares on a brokerage upgrade. 

·         $ rose broadly on Wednesday as an auction of $19 billion in 10-year Treasury  notes eased some investor fears about the US ability to sell long-term debt to help finance a ballooning budget deficit.     The $ fell earlier after Russia’s CB said it will diversify its currency RBIs by cutting U.S. Treasury purchases and buying IMF-backed bonds.

·         Gold futures erased initial gains to finish unchanged on Wednesday, as a $ bounce and signs of lagging physical jewelry demand prompted investors to take profits.

·         Copper rose to an 8M high before retreating on Wednesday, tracking $ weakness but finding some support from improving economic sentiment.

·         Oil prices surged to a seven-month high near $72 a barrel on Wednesday after a U.S. Gov. report showed a slowdown in crude imports eating away at inventories in the world’s top energy user.

 

INDIA FRONT PAGE

·         The Gov. is considering a proposal to restore the rate of service tax to its earlier level of 12 % after it was reduced to 10 % in the third stimulus package in February.

·         Japan’s Suntory is the suitor for a majority stake in Indage Vintners and is holding due diligence to buy 51 % stake in the company.

·         Mercator Lines is set to acquire three gearless post Panamax bulk carriers on a charter basis and would invest around 5 billion INR for this additional expansion of vessels.

·         Swedish furniture giant IKEA has called off plans to set shop in India after talks with the Gov. to further open up FDI  in single-brand retail operations fell through.

·         CitiFinancial, Citibank India’s non-banking finance arm, has reduced its asset book by one third and branch network by a quarter of the year ago level as part of a restructuring plan.

·         Kingfisher Airlines is looking to roll over close to 8 billion of short term debt even as it finalises the paper-work to borrow another 15 billion from a few Indian PSU

·         The Maharashtra Gov. has ordered a high level inquiry into wind turbine maker Suzlon Energy’s land deals in the past two to three years at Dhule and Nandurbar.

·         BSNL will invest 150 billion INRs in FY10 to upgrade infrastructure and roll out new value-added services.

·         Shipping Corp of India will soon start operating and managing seven of the 14 Sindhu class offshore supply vessels belonging to Oil & Natural Gas Corp