Huffs, puffs on Mt 12,000

Mumbai: After eight continuous weeks of higher weekly closings, it should be time for a change in market direction.

But expectations of extremely positive second quarter results from companies may be the one factor keeping the Indian equity markets afloat.

The Bombay Stock Exchange Sensex huffed and puffed on Friday before it finally crossed the 12,000-point mark. The last time it closed above this psychologically significant level was almost four months ago, on May 18, 2006.

“Eight weeks of ending higher means that a correction is due,” says Prem Daga, technical analyst at Professional Investor. In these eight weeks, the Sensex has gained 1,924 points, closing at 12,009.59 points on Friday.

The closest it came in the recent past to mirroring such gains was when it rose consecutively for the seven weeks ending April 7, 2006, and before that in the week to December 16, 2005. There was also a period when the Sensex saw 16 consecutive weeks of positive closings till August 19, 2005, gaining 1,626 points over the span.

According to Daga, the weekly candlestick chart (used in technical analysis) shows that this week’s candle is a doji.

“This means that the opening (index level) for the week and the close are roughly the same, indicating bearishness,” explains Daga. While the Nifty opened at 3,470.35 on Monday, it closed at 3,478.60 points on Friday.

Further, the intra-day highs made by the Nifty this week and the last, at 3,487 and 3,490 respectively, indicate resistance at 3,490, added Daga.

Friday’s marginal gain of 36.57 points for the Sensex came after the index had declined by more than 125 points from the start. The overall market gain was not decisive either, with losers outnumbering gainers in the ratio of 1.6:1.

On the fundamentals side, however, Indian companies remain on the road for greater glory with results for the second quarter expected to be good.

“We expect decent to good numbers from corporates this quarter. The key concern going forward would be the slowing down of the US economy, which may impact liquidity flows into emerging markets, including India,” says Shriram Iyer, head of research at Edelweiss Securities.

Foreign institutional investors have been net buyers of Indian equity worth Rs 2,038 crore this month, while mutual funds have also played their part in giving a leg up to the markets, being net purchasers by Rs 501 crore.

Oracle to pay $531 mn for 20% in i-flex

Oracle Corp today announced a 20 per cent open offer for shareholders of i-flex Solutions for $531 million (nearly Rs 2,496 crore), putting the valuation of the software development company at Rs 12,480 crore. Oracle, the world’s largest database software maker, offered to buy 16,629,023 i-flex Solutions shares at Rs 1,475 apiece. The offer is priced at a 2.48 per cent premium over today’s close of the i-flex scrip at Rs 1,439.25. The offer will remain open between November 6 and November 25. DSP Merrill Lynch is the manager for it. Oracle’s stake in i-flex may go up to 75 per cent if the offer is fully subscribed. The Oracle offer is in line with the Securities and Exchange Board of India takeover regulations that require a group or individual to come out with a 20 per cent open offer to minority shareholders after their acquisition of shares in excess of 5 per cent of a company in a year

IMF says strong China growth to lift emerging Asia

SINGAPORE, Sept 14 (Reuters) - Led by China, emerging Asian economies will grow 8.3 percent in 2006, about half a percentage point more than previously thought, the IMF said in a report on Thursday. The strong outlook for China will bode especially well for Hong Kong, Indonesia, South Korea, the Philippines, Singapore and Thailand given their strong intraregional trade ties, the IMF said in its World Economic Outlook. The IMF in April had forecast growth in emerging Asia this year at 7.9 percent. "Growth continues to run above 8 percent in emerging Asia, with much of the momentum due to vibrant expansions in China and India," the IMF said. The fund upgraded its growth forecast for China to 10 percent from 9.5 percent and for India to 8.3 percent from 7.3 percent. There was also a chance that both countries may expand at an even faster pace this year thanks to strong global economic conditions. The fund said while China's central bank had allowed limited movement in its exchange rate in recent months, further flexibility was needed. "More substantial appreciation of the currency would help to reduce the current account surplus and give the central bank greater control of domestic monetary conditions," the IMF said. "The central bank's current focus on limiting renminbi fluctuations against the dollar makes effective liquidity control difficult." Direct measures of monetary control and limited interest rate increases by Beijing were not enough to restrain credit growth, creating worries about the possibility of an investment boom-bust cycle. That could lead to overcapacity, weaker profits and balance sheet problems. Other near-term risks for Asia included higher oil prices, trade protectionism, an outbreak of bird flu and slower growth in Japan or the United States. Tighter monetary policy could also lower growth prospects. India may need to further tighten monetary policy to fight pressures from inflation in the face of strong domestic demand and high oil prices, the IMF said. Global markets could take a hit, hurting growth prospects, although the fund said Asian economies were better positioned to handle a downturn thanks to healthy current account surpluses and fast-growing reserves. The regional current account surplus will likely moderate by about 0.5 percentage point to around 4.25 percent of GDP in 2006-2007. The fund said any currency reform would need to be supported by reform in the financial sector.

Crude stretches loss streak to 7 sessions

SAN FRANCISCO (MarketWatch) -- Crude futures closed under $64 a barrel Tuesday for the first time since mid-February, as traders digested estimates for lower global oil demand and a decision by key oil producers to stand pat on output quotas and looked ahead to Wednesday's U.S. petroleum supply data.

Prices marked a seventh-losing session to tally a total drop of 9.3% since Aug. 31. Jitters over an attack on the U.S. embassy in Syria offered little support.

The Paris-based International Energy Agency cut its estimates Tuesday for global oil-product demand in 2006 and 2007.

That report "helped pressure us down after the terror attack ... in Syria," said Alaron Trading Analyst Phil Flynn. Also, "a report that Iran will work to stop the insurgency in Iraq pressured trade," he said.

Crude for October delivery closed down $1.85 at $63.76 a barrel on the New York Mercantile Exchange after tapping a low of $63.67. The contract hasn't traded or closed at level this low in almost seven months.

Among the products, October unleaded gasoline closed down 4.25 cents to a nearly seven-month low of $1.5521 a gallon, while October heating oil shed 4.57 cents to $1.7597 a gallon.

Four armed men attacked the U.S. embassy in Damascus by throwing a grenade into the embassy compound and by trying to detonate a car bomb, media reports said. The attack was foiled, however, with the attackers either killed or wounded. There were no indications of U.S. casualties. 

Meanwhile, the Organization of the Petroleum Exporting Countries decided Monday to keep current production limits for members unchanged at 28 million barrels per day, excluding Iraq, but left the door open to a supply cut before the end of the year.

For a year, the cartel "has been pumping close to its fastest rate for 25 years to guard against price shocks and ease pressure on consumer economies," said John Kilduff, an analyst at Fimat USA.

The cartel will hold a special meeting on Dec. 14 in Nigeria and reserved the right to make "necessary consultations" prior to the December meeting, "should market conditions so warrant," OPEC said in a statement Monday. 

Demand growth slowdown

In energy news Tuesday, world petroleum demand is expected to grow by 1.2 million barrels per day in 2006 and by 1.7 million barrels per day in 2007, the Energy Information Administration, the reporting arm of the Energy Department, said Tuesday in its monthly short-term energy outlook.

But the estimates reflect a second-straight monthly downward revision because of "slower-than-expected demand growth in the Organization for Economic Cooperation and Development countries," it said.

Over half of the demand growth for next year is projected to come from the U.S. and China, the report said, with demand growth expected to be strong in the oil-exporting countries of the Middle East.

Over in the U.S. petroleum consumption will likely be unchanged in 2006 compared with 2005, but in 2007, the EIA expects demand to rise by 2%.

In a separate monthly report, the Paris-based International Energy Agency cut its estimates for global oil-product demand by 100,000 barrels to 84.7 million barrels per day in 2006, and by 160,000 barrels to 86.2 million barrels per day in 2007.

In 2006 and 2007, spot prices for crude oil will likely average around $70 a barrel retail and regular gasoline prices will likely average about $2.65 a gallon, according to the U.S. government report.

Spot prices for natural gas will average about $7.51 per thousand cubic feet for this year -- that's $135 below the 2005 average, the EIA said. And for 2007, it expects prices to average $8.30, "assuming sustained high oil prices, normal weather and continued economic expansion in the United States."

For oil, "one of the underlying concerns is the outlook for the U.S. economy," said James Williams, an economist at WTRG Economics. And "if the U.S. experienced a recession in 2007, it would certainly push oil prices down."

Then again, "there has been much written about high oil prices causing recessions but it is equally true that recessions cause low oil prices," he said. So for now, "the greatest risk to oil prices at this time is negative news about the U.S. or Chinese economy."

Man Financial analyst Ed Meir said that while technical conditions may be ripe for a bounce in oil, "sellers should continue to look to sell on rallies, as a picture of improving supply, rising inventories, a fading hurricane season, and the continued dithering over Iran all weigh on prices."

Iran had said over the weekend that it was considering suspending uranium enrichment for up to two months, but officials from delegations familiar with the outcome of the weekend's negotiations said Tuesday that Iran also made it clear it would not halt enrichment before the start of talks on Tehran's nuclear program, the Associated Press reported.

In related news, Iran's President Mahmoud Ahmadinejad promised to help Iraq establish security, following a request from Iraqi Prime Minister Nouri al-Maliki, according to Dow Jones.

Al-Maliki asked that Tehran help prevent al-Qaida militants from coming across the border to carry out attacks, Dow Jones reported, citing comments from an Iraqi official.

Supply data on tap

Traders Tuesday also eyed estimates for reports on petroleum supplies from the Energy Department and American Petroleum Institute due Wednesday. Expectations for those reports are mixed.

Analysts at Wachovia Corp. predict a fall of 1.85 million barrels for crude supplies, while Fimat is looking for a climb of 1.1 million. A Platts survey shows that most analysts expect a decline of 1.9 million.

Gasoline supplies likely rose by 500,000 barrels, Wachovia said. Fimat expects a fall of 720,000. The Platts survey showed expectations for a climb of 1 million.

And distillate inventories likely rose 2 million barrels, according to estimates from Wachovia, Fimat and Platts.

Natural-gas prices slip

In other energy trading Tuesday, natural-gas futures slipped lower. Tropical Storm Gordon in the Atlantic was not seen as a threat to energy assets in the Gulf of Mexico, but it was a reminder that the market is currently in the middle of the peak hurricane season.

October natural gas fell by 9.6 cents to close at $5.574 per million British thermal units. It touched $5.44 on Monday -- the lowest intraday level the contract has seen since July 7, 2004.

"Hurricanes remain of little concern to the Gulf of Mexico production sector, and natural-gas storage remains well supplied," said Kilduff.

Looking ahead, Strategic Energy & Economic Research expects Thursday's update on natural-gas supplies from the Energy Department to show an increase of 95 billion cubic feet for the week ended Sept. 8. A year ago, supplies rose 81 billion and the five-year average rise is 89 billion, according to SEER.

In equities, benchmarks tracking stocks in the oil and gas sectors fell, with the Oil Service Index suffering from the biggest decline.

And in Tuesday's metals trading, gold futures extended its losing streak to five sessions.

Taking a broad measure of the commodity-futures markets, the Reuters/Jefferies CRB Index stood at 310.71 points, down 1% from the previous session after an intraday low of 310.44. It hasn't traded at a level that low since late 2005.

Myra P. Saefong is a reporter for MarketWatch in San Francisco.

powered by performancing firefox

Oil imports lead to record trade gap in July

WASHINGTON (MarketWatch) -- Higher prices for imported oil pushed the U.S. trade gap of goods and services to a new record in July, a government report showed Tuesday.

The nation's trade deficit widened by 5% in July to $68.0 billion, the Commerce Department said. This beats the previous record of $66.6 billion set last October.

The U.S. imported $20.8 billion worth of crude oil in July, the highest amount on record. The import average price per barrel of crude oil was a record $64.84 in the month.

The widening of the deficit was larger than expected. The consensus forecast of Wall Street economists had been for the deficit to widen to $65.4 billion. 

The worsening deficit will be a drag on economic growth in the third quarter.

For the first seven months of the year, the trade gap is $453.0 billion. This is a faster pace than the same period last year, meaning that the record $716.7 billion annual deficit set last year could be broken.

In July, imports rose while exports declined. This is the first drop in exports since February.

Imports increased 1.0% to a record $188 billion, while July exports fell 1.1% to $120 billion.

Imports of goods alone rose 1.4% in July to $159.1 billion. The U.S. imported a record amount of petroleum, industrial supplies, capital goods and consumer goods in July.

Meanwhile, exports of goods alone fell 1.5% in July to $73.4 billion. The U.S. exported a record amount of autos and auto parts in the month. Exports of civilian aircraft fell 18.9% to $2.59 billion.

The petroleum deficit widened 4.3% to $25.6 billion, the second highest on record.

The value of U.S. oil imports rose to $20.8 billion in July from $20.5 billion in June. The quantity of oil imports fell to 321.6 million barrels from 330.9 million in June.

The U.S. trade deficit with China widened to $19.6 billion in July from $17.6 billion in the same month last year. The trade gap with China rose to $121.3 billion in the first seven months of the year from $107.7 billion in the same period last year.

But U.S. exports to China set a new record in July.

China reported Monday that its August trade surplus rose to a record $18.8 billion, the fourth straight monthly record.

The U.S. set record monthly trade deficits with the European Union and the OPEC nations. 

powered by performancing firefox

India’s industrial output surges

NEW DELHI - India’s industrial production in July grew at its fastest annual pace in a decade, which analysts said could prompt the central bank to again raise interest rates over inflation concerns. Boosted by healthy consumer spending on items such as cars and televisions, industrial output rose a higher-than-expected 12.4% from a year earlier as factories churned out goods to meet rising demand, data released today showed. Annual growth in India’s industrial production was last at these levels in May 1996, Reuters data shows. The annual rise exceeded the median forecast in a Reuters survey for growth of 9.9%. Industrial output has been strong for several months with growth rates of a revised 9% in June, and 11.1% in May. "Overall, industrial data buttress our view that there are enough domestic reasons for the Reserve Bank of India to continue tightening, Fed pause nothwithstanding," said A. Prasanna, an analyst at ICICI Securities in Mumbai. But Finance Minister Palaniappan Chidambaram said he saw the numbers exerting no upward pressure on interest rates. The central bank raised its benchmark short-term interest rate by 25 basis points to 6% on July 25, its second increase in six weeks, as it stepped up its fight against mounting price pressures in the fast-growing economy. Federal bond yields rose after the data was released with the yield on the benchmark 10-year bond pushing up to 7.79% from 7.77% beforehand. Some analysts said July’s strong momentum was partly due to last year’s low annual growth base of 4.7%. Output growth slowed in July 2005 due to floods in western states, the country’s most-heavily industrialised region, and a fire at a key offshore oil rig.

Reliance Gets Go Ahead for DTH

Anil Ambani's Reliance-ADAG has reportedly received the letter of intent (LoI) from the Ministry of Information and Broadcasting (I&B) to foray into the direct-to-home (DTH) broadcasting service in the country. Reliance Communications, however, declined to comment on this development. The government has reportedly asked the company to complete formalities, including bank guarantee and license fee. The company will now submit fees for the license, which it expects to procure within four to six weeks. Subsequently, the service will be launched within six to eight months. Reliance-ADAG had applied for license to enter DTH services about a year ago when the two Ambani brothers reached a settlement on the issue of ownership of the Reliance Group. The service will be called "Reliance Blue Magic," and Reliance will be the fifth operator to enter the DTH arena after Zee Group's Dish TV, Star TV and Tatas' Tata Sky, Prasar Bharati's DD Direct Plus, and Kalanidhi Maran-promoted Sun TV. Meanwhile, Reliance-ADAG's entry into DTH is seen as the group's strategy to include the entire range of delivery systems through which content can be delivered to customers.

OIL PRICES SLIP

:

Oil prices slip Friday, September 8, 2006 (Singapore): Crude oil prices fell in Asian trading Friday after a US inventory report showed that higher refinery production was helping boost gasoline and distillate inventories. Light, sweet crude for October delivery dropped 17 cents to $67.15 a barrel in electronic trading on the New York Mercantile Exchange. The contract on Thursday fell 18 cents to settle at $67.32 a barrel. Heating oil inched down marginally to $1.8870 a gallon (3.8 liters), while gasoline prices gained 0.18 cent to $1.6435 a gallon. Natural gas futures rose slightly to $5.720 per 1,000 cubic feet. Alaskan production Also easing supply worries was the possibility that BP PLC could restore lost Alaskan production at Prudhoe Bay back on line by the end of October as well as the resumption of some oil production in Nigeria. US crude inventories fell 2.2 million barrels last week to 330.6 million barrels, the US Department of Energy's Energy Information Administration said Thursday. Gasoline inventories rose by 700,000 barrels to 206.9 million barrels, which is 6.6 percent above year-ago levels. Distillate fuel inventories rose by 3.1 million barrels to 139.9 million barrels, a bigger build than most analysts expected. They are now slightly above were they were a year ago. (AP)

ACC plans Rs 1,000-cr capacity expansion

ACChas lined up capacity expansion projects and new ready mix concrete (RMC) units for eastern India, the total cost of which would be more than Rs 1,000 crore.