MyValueResearch

Dawn of 1st July 09

INR @ 48.09 best Q in 2 years, but 1.65% down in June, Stocks best Q in 17 years, Bonds wait for Budget – Benchmarks change, Call below 1T but no cause to worry. Current Ac. Deficit 2.6% GDP.

US Consumer Confidence disappoints, but S&P best Q in 10 years

United Sprits PE, Shriram Properties IPO, Reliance Power offload stake. Pension rules change

 

INR
INR @ 48.10 but rose 5.9 % in April-June, clocking its biggest quarterly rise in 2 years, on robust FII flows into the stock market and traders said next Monday’s budget would set the trend for the coming months.  INR ended at 47.90/91 on Tuesday, about 0.4 % stronger than the previous close of 48.10/11. In early trade, it had hit 47.8350, its highest since June 17.    However, the INR fell 1.65 % in June, its steepest drop since February, as
FII took profits and pulled out about $650 million over the past two weeks.    Goldman Sachs said it expected the INR to strengthen over the next 12 months to 44.7. INR was supported on Tuesday by the $’s weakness against major currencies.  The $ index, was down 0.3 % at 1130 GMT.   RBI data on Tuesday showed the current account deficit for the fiscal year ended March widened to $29.82 billion, or 2.6 % of GDP.

 

BONDS
Yields are seen trading in a tight range on Wednesday, as the market awaits a clear direction on Gov. borrowing in next week’s budget. FM is to present the full year’s budget on Monday. In its interim budget announced in February, the Gov. had scheduled 3.6 trillion of market borrowing for the fiscal year 2009/10.  The yield on the most traded 7.94 %, 2021 bond losed at 7.25 % on Tuesday, one basis point above Monday’s close.  10Y ended at 7.01 % on Tuesday, from its previous closing of 7 %.  

 

STOCK
Fell 2 % on Tuesday, but rallied by almost a half during April-June in their biggest quarterly gain in 17 years as investors rode on signs of an economic recovery and hopes for market-friendly policies.     The outlook for the coming quarter will depend upon how much the PM lives up to market expectations for reforms such as further opening up the economy to foreigners and stake sales in state companies.     Progress of annual monsoon rains, which provide a lifeline to India’s trillion-$ economy, the federal budget next Monday and quarterly company results in July should set the trend.

 

CALL
Cash rates ended unchanged on Tuesday, as ample funds in the system offset demand from banks who borrowed for their quarter-end needs.    Rates were slightly higher in early trades, tracking higher rates in the CBLO, due to an increase in borrowing by mutual funds to meet quarter-end redemptions.    Banks, who have parked funds with mutual funds, tend to withdraw their funds at the end of the quarter to boost liquidity positions in their balance sheets. The first quarter of the current financial year ends on Tuesday. Call closed at 3.25/30 %, unmoved from previous close.    The RBI absorbed 833.35 billion INRs through its two-day reverse repo auction on Tuesday, registering a fall below 1 trillion INRs for the first time since April 4.

 

GLOBAL MARKET
#  DJIA 8,447.00  -82.38  Nikkei   9,967.32   +8.88   FTSE  4,249.21  -44.82  Hang S    18,528.51 -149.78 US10Y  3.535   EUR 1.4029 Yen 96.33  Gold 934.50   Crude   69.98

#  U.S. stocks fell on Tuesday as an unexpected drop in consumer confidence dented optimism about an economic recovery, but the S&P 500 still closed out its best quarter in more than a decade.

#  FTSE shed 1 % on Tuesday in the wake of weaker than expected consumer confidence figures in the United States, with banks, miners and food retailers leading the fallers.

#  Nikkei average edged down 0.2 % on  Wednesday, with Orix Corp and All Nippon Airways 202.T> sliding on news of possible public share offerings.

#  $ gained against a basket of currencies on Tuesday after a report showing an unexpected drop in U.S. consumer confidence for June, prompting investors to seek shelter in the greenback.

#  U.S. gold futures tumbled below $930 an ounce Tuesday as a stronger $ prompted broad-based commodities weakness, and a more stable economic environment could further decrease safe-haven buying in the metal.

#  Copper erased earlier gains to close lower on Tuesday, under pressure from a firmer $, quarter-end positioning, and growing perceptions that prices have risen too far in the face of a poor fundamental backdrop.

#  U.S. crude oil futures posted further losses Tuesday afternoon, as a report by a private business research group that consumer confidence fell unexpectedly in June sparked renewed worries about oil demand.

 

INDIA FRONT PAGE
#  United Spirits has received three term sheets from PE giants Blackstone Kohlberg Kravis Roberts & Co and Capital International for buying a stake worth $250-$300 million in the company.

#  Shriram Properties, part of the Chennai-based diversified Shriram Group, has appointed Macquarie and Enam Financial Consultants as advisors for the proposed 5-7 billion INR IPO public offering.

#  Patni Computer  and Mphasis are among the potential bidders for the Indian software unit of the troubled insurance giant, AIG

#  Mothercare the UK-based retailer for kids and mothers-to-be, may soon end its exclusive franchise agreement with Shoppers Stop to sell products in India. The UK retailer is scouting for another local partner and is in talks with Trent    

#  Reliance Power Ltd is in preliminary talks with five global power companies, including China Light and Power Holdings, to sell a 15 % equity stake in the company.

#  Private trusts may soon be permitted to park their funds in listed shares and specified debt securities, official sources indicate.