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Indian stock market daily morning report (November 20, 2009, Friday)

Contributed by Keynote Capitals

By Nitin A. Khandkar (Keynote Capitals)

Views on markets today

- Uncertainties about the global economic recovery and risk averseness of the investors due to a stronger dollar impacted the markets yesterday. High beta real estate, banks and metal stocks turned weak.

- Market breadth was weak as investors sold large cap stocks. FIIs sold equities worth Rs4.6bn, while domestic institutions bought equities of Rs1.2bn.

- Asian markets have moved lowered today on fears that the global economy would take some more time to recover. Exporter and technology stocks dragged the Japanese markets down while Chinese banks pulled the Hang Seng down.

- We expect a weak opening for the Indian markets this morning, as FIIs seem to be pulling their money out of the global markets, pending further visibility on the economic recovery. While FIIs have provided support to the markets over the last few days, if the trend were to reverse, we may see other investors too turning cautious.

Buzzing Stocks

- Edelweiss Capital plans to form a life insurance JV with Japanese insurance group Tokio Marine Holdings. The companies will invest Rs5.5bn ($118mn) as initial capital in the venture. The proposed JV will seek regulatory approval from the Insurance Regulatory and Development Authority (IRDA).

- New Delhi Television has announced that its UK based subsidiary NDTV Networks Plc. has repurchased the $100mn Step up Coupon Bonds due 2012, for $72.4mn. The repurchase has allowed NDTV Networks Plc to significantly reduce its outstanding borrowings and also to cut down on interest burden.

- Our comment: NDTV last month agreed to buy back the 26% stake in NDTV Networks from NBC Universal. Following that, the subsidiary is repurchasing bonds worth $100mn. We see both these developments as NDTV's strategy to consolidate its holdings and at the same time, restructure debt on the books of the subsidiary. We do not have a rating on NDTV currently.

- Suzlon Energy has sold 35% stake in a subsidiary, Hansen Transmissions for about Rs1,720Cr to reduce part of its debt.

- Jindal Drilling has been awarded an order for charter hire of drilling unit 'Noble Ed-holt' from ONGC for a period of five years worth Rs635 Cr.

- Thermax has bagged an order worth Rs477Cr for constructing and commissioning 2x60MW captive power plant from a leading conglomerate in Orissa for its ferro alloy unit in Orissa.

- McNally Bharat has received an order of Rs306.45Cr for design, engineering, manufacture, supply, erection, and commissioning of New Coal Handling Plant in Coke Oven Battery 6 Area at Rourkela Steel Plant, Rourkela.

US markets

Analysts revealed that stock prices have reflected a 25% earnings increase next year. Confirmation of these over optimistic levels triggered a broad based sell off. Buyers showed some mild interest late in the session and helped stocks make a couple of upward spurts, but the moves were quickly repressed with Dow Jones ending in red zone 0.9%. Bank of America downgrade of the chipmaker sector weighed heavily on tech stocks. Health care sector finished 0.5% lower following news that Senator Reid presented last evening a health care reform bill from the Senate. Treasury Secretary Geithner appeared before Joint Economic Committee on Financial Reform yesterday.

Economic data did little for stocks
Initial jobless claims for the week ending November 14 hit 505,000, which is in-line with what had been expected. The 4-week moving average now stands at 514,000, down from 520,500. Continuing claims came in at 5.61mn, which is in step with what had been widely forecast.

Leading economic indicators for October increased 0.3%, which is not as strong as the 0.4% that was expected. Philadelphia Fed Survey for November came in at 16.7, which is better than the reading of 12.2 that had been widely forecast.

3Q mortgage delinquencies hit 9.6%, which is up from the 9.2% that was registered in 2Q.