MyValueResearch

Dawn of August 12th

INR @ 48.13 falls on Asian Stocks, Yields may ease as US debt 3Y auction sails through, Market – No major impact on liquidity due to CMBs.  IIP set to rise 3rd month in a row Reuters Poll ,Stocks weak on overseas cues and rains. All eyes on FOMC , US wholesale inventories fall , Analyst warms about Banks , China factory output below expectation sends commodity block currencies lower , Oil slips as US Gov. forecasts lower demand goes below 70. Delhi Airport bill goes up 50%.

 

INR

INR @ 48.13 weakened to its lowest in nearly two weeks on Wednesday, tracking lower Asian shares, & investors would watch IIP later in the day for cues on the economy’s strength.    At 9:05 a.m. INR was at 48.16/17, its lowest since July 31. On Tuesday, it closed at 47.97/98.

 

BONDS

Indian federal bond yields are expected to drop on Wednesday as global crude prices were lower with a fall in U.S. Treasury yields also expected to underpin sentiment. 10Y  ended at 7.03 % on Tuesday, below Monday’s close of 7.10 %.  Oil was trading above $69 a barrel. On Tuesday, it had fallen by $1.15. The IIP is to be released around noon. It probably rose in June for the third month in a row, helped by a rebound in sectors linked to the Gov.’s stimulus spending, a Reuters poll showed on Tuesday. The median estimate was for a 3.3 % rise.   U.S. Treasury prices rose on Tuesday as stock market losses fuelled a safe-haven bid & strong demand  at a three-year note sale fed hopes that buyers would show enthusiasm for the two remaining Treasury auctions this week. FOMC  is expected to hold its benchmark overnight rate in a range of zero to 0.25 %. A statement on the decision is due.

 

STOCK

Indian shares nosed up 0.4 % on Tuesday, led by automakers M&M , Tata Motors & Maruti Suzuki after the market shed 5.6 % over the past three sessions. But worries that a shortfall in crucial monsoon rains will hit economic growth, concerns over pricey stocks & mixed overseas markets kept investors wary.

 

CALL

Indian call rates were steady on Tuesday as ample liquidity in the banking system helped banks meet their funding needs comfortably. Call @ 3.25/30 %, largely unmoved from its previous close of 3.25/30.    Traders said cash management bills (CMB), the new money market instrument Gov. announced late on Monday, may not impact the cash rates as the regulators are unlikely to leave the system cash-strapped with a huge borrowing target to be met . The weighted average rate in the call money market was 3.26 %, while in CBLO  was 2.82 . Banks Parked 1.1 trillion in the Rev. Repo Auction.

 

GLOBAL MARKET

DJIA  9,241.45  -96.50  Nikkei  10,502.96  -82.50   FTSE  4,671.34  -50.86 HSeng 20,601.88 -472.33 US10Y 3.674   EUR 1.4151  Yen 95.91  Gold 942.75  Crude    69.35

    * U.S. stocks fell on Tuesday after a prominent banking analyst warned the sector’s fundamentals have yet to improve, & an unexpectedly large drop in wholesale inventories raised worries about an economic recovery. Financial stocks, which had gained about 25 % in the last month, tumbled after Rochdale Securities analyst Richard Bove painted a gloomy outlook for the banking industry. He said bank stocks are trading on “fumes,” & he expects a short-term pull-back in their stock prices.

    * FTSE shed 1.1 % on Tuesday knocked by weakness in heavyweight banks, miners, & oils, with defensive issues back in favor headed by International Power after pleasing results.

    * Nikkei pulled back from 10-month highs on Wednesday as concerns over a U.S. economic recovery grew, with investors locking in profits before the end of a FOMC  meeting.

    * Yen rose broadly on Tuesday as investors bought the low-yielding currency as U.S. stocks declined & on rising risk aversion after disappointing economic data from China.  China reported below-forecast growth in factory output & investment, reminding investors that the world’s third-largest economy is not yet back on a solid footing. The news also added to the currency woes of the so-called commodity-bloc countries that supply raw materials to China, such as Australia & Canada. The commodity-bloc currencies were among Tuesday’s biggest decliners against the U.S. $.

    * Gold eased in Europe on Tuesday, reversing earlier gains, as the $ swung towards a session high versus the euro amid caution ahead of a two-day FOMC.

    * Copper prices closed lower on Tuesday as mixed economic data from the United States & top consumer China raised concerns about the health of the global economy & its potential impact on metals.

    * Oil prices fell on Tuesday as doubts resurfaced over the pace of economic recovery after data showed another drop in U.S. wholesale business inventories & the U.S. Gov. revised lower its forecast for global oil demand.

 

INDIA FRONT PAGE

    * ONGC Videsh,  has initiated talks with three Russian firms to put in a joint bid for a substantial stake in YPF, the Argentinean arm of Spanish oil major Repsol YPF SA.

    * PE equity arms of Goldman Sachs <GS.N> & Standard Chartered are in discussions to invest 2 billion in building safety & security solutions provider Firepro Systems for a 26 % stake.

    * BHEL will sign a pact on Wednesday to set up a joint venture with Maharashtra State Power Generation Company to set up a thermal power plant with a maximum capacity of 1,500 megawatts at Latur, Maharashtra.

    *  Etisalat DB Telecom India, in which Emirates Telecommunications Corp (Etisalat) holds a 45 % stake, is close to signing a 15-billion-INR outsourcing deal with IT major Wipro Technologies.
   
    *  Infrastructure development & construction firm, Anant Raj Industries <ANRA.BO>, said it has deferred plans to raise funds through QIB.

    * Indraprastha Gas Ltd will finalize its negotiations with Reliance Industries Ltd for the supply of D6 Block gas by Wednesday. A formal agreement on the gas supply will be signed soon.

    *  The project cost of rebuilding the capital’s Indira Gandhi  International Airport,  run by private sector consortium Delhi International Airport Ltd (DIAL), has increased by around 50 % , or almost 30 billion INRs.