July 16 -- China’s gross domestic product grew 7.9 percent in the second quarter as the nation became the first of the major economies to rebound from the global recession.
The figure, announced by the statistics bureau in Beijing today, exceeded the 7.8 percent median forecast of 20 economists in a Bloomberg survey and a 6.1 percent gain in the first quarter that was the slowest in almost a decade.
China, the biggest contributor to global growth, overtook Japan as the world’s second-largest stock market by value yesterday after a 4 trillion yuan ($585 billion) stimulus package spurred record lending and boosted share prices. The first-half expansion laid the foundation for meeting the year’s 8 percent growth target for creating jobs and maintaining social stability, the statistics bureau said today.
“The pace of the recovery is even quicker and stronger than we initially expected,” said Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong, who raised his growth forecast after today’s report. “There’s clear evidence that this infrastructure-led recovery is going to be more sustainable than many people expected.”
The yuan traded at 6.8312 against the dollar as of 5:30 p.m. in Shanghai, from 6.8315 before the data were released. The Shanghai Composite Index closed 0.2 percent lower.
‘Not Yet Firm’
The foundation of China’s recovery is “not yet firm” and the government will stick to its “moderately loose” monetary policy and “proactive” fiscal stance, statistics bureau spokesman Li Xiaochao said.
China accounted for a third of global expansion last year, according to International Monetary Fund data using purchasing- power-parity calculations to account for exchange-rate differences.
The global economy will shrink 1.4 percent this year, including a 2.6 percent contraction in the U.S. and a 6 percent decline in Japan, the IMF said in a July 8 report. Emerging economies, led by China, are set to regain growth momentum in the remainder of this year, helping the world to recover from the worst slump since World War II, the IMF said.
“China’s growth is getting back on track after being pulled down by the global export slump,” said David Cohen, an economist with Action Economics in Singapore. “It’s leading the turnaround in the global economy.”
Urban Spending
Urban fixed-asset investment surged 35.3 percent in June from a year earlier, the statistics bureau said. The 33.6 percent gain for the first half was the biggest in five years. Industrial production increased 10.7 percent in June from a year earlier, the largest gain in nine months excluding seasonal distortions. Retail sales climbed 15 percent.
An infrastructure spending boom is helping companies from China Southern Power Grid Co. to China Merchants Property Development Co.
“China still faces difficulties including shrinking external demand, falling corporate profits and declining fiscal revenue,” Li said. “We’re still facing great pressure in generating jobs.”
China’s economy is the only one of the world’s 10 biggest still expanding. The People’s Bank of China sold today one-year and three-month bills at the highest yields this year, guiding money-market rates higher to slow record growth in money supply.
$2 Trillion Reserves
The nation’s foreign-exchange reserves, the world’s biggest, rose to a record $2.132 trillion last quarter as the central bank sold yuan to prevent an appreciation that would make the country’s exports more expensive.
Tim Condon, chief Asia economist at ING Groep NV, said the central bank may raise the one-year lending rate as early as the first quarter of next year.
“Growth may accelerate to near 9 percent in the third quarter and 10 percent in the fourth quarter,” said Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong. “The government won’t tighten policies too early but it should tell banks not to lend without limit.”
The government must prevent abnormal growth in loans as they could trigger inflation and financial risks, the financial and economic affairs committee of the National People’s Congress said, the official Xinhua news agency reported.
Morgan Stanley, JPMorgan Chase & Co., Royal Bank of Scotland and UBS AG raised growth forecasts for China today. The economy will expand 9 percent in 2009 and 10 percent in 2010, Morgan Stanley said in an e-mailed note.
Social Stability
China is targeting faster growth to maintain stability after the loss of millions of migrant workers’ jobs and ahead of the 60th anniversary of Communist Party rule in October. Ethnic riots in Urumqi in the northwestern Xinjiang province on July 5 left at least 192 people dead.
The GDP rebound snaps a two-year run of progressively slower growth. Shanghai’s benchmark stock index has climbed almost 90 percent from last year’s low, led by PetroChina Co. and Industrial & Commercial Bank of China Ltd.
The economy grew 7.1 percent in the first half from a year earlier. Consumption contributed 3.8 percentage points and investment accounted for 6.2 percentage points, with a decline in the trade surplus shaving off 2.9 percentage points.
Consumer prices fell 1.7 percent in June from a year earlier, the fifth monthly decline and the biggest drop since 1999, today’s data showed. Producer prices slid a record 7.8 percent.
Thursday, July 16, 2009
Q+A: India-U.S. ties past, present and future
U.S. Secretary of State Hillary Clinton arrives in India this week against the backdrop of New Delhi's strained relations with neighbor Pakistan, the global slowdown and the war in Afghanistan.
WHERE DO U.S.-INDIA TIES STAND?
New Delhi and Washington are enjoying some of their best-ever relations -- thanks in part to the previous president, George W. Bush, and Indian Prime Minister Manmohan Singh.
Perhaps the biggest leap forward came when both leaders trumped domestic critics to sign a landmark civilian nuclear deal in 2008, worth billions of dollars and ending a 30-year ban on nuclear commerce with India.
Trade has blossomed and years of market reforms have helped India's information technology and outsourcing sectors feed into the U.S. economy.
HAVE THEY ALWAYS BEEN FRIENDS?
No. In the Cold War era, India was a member of the Non-Aligned movement that in theory was independent from the United States and the Soviet Union.
In practice, India bought most of its defense equipment from the Soviets and a chunk of its economy, until liberalization began in earnest in the early 1990s, was under state control.
New Delhi refused to sign the Non-Proliferation Treaty which left it in nuclear isolation -- including from the United States -- for decades. Some loud voices in the U.S. Congress said Bush's nuclear deal had let India off the hook.
Many Indian politicians who grew up in the Cold War era were suspicious of U.S. global dominance -- a legacy of mistrust evident in the Indian left's failed attempt to block the pact.
HAS PAKISTAN'S CLOSENESS WITH THE U.S. BEEN A PROBLEM?
Some in India fear the United States prioritizes Pakistan -- at New Delhi's expense. President Barack Obama needs Pakistan to focus on fighting insurgents in Pakistan and Afghanistan as Pakistan's relations with India have taken a nosedive.
India, which accuses its neighbor of complicity in the Mumbai militant attacks, suspects the United States may let Pakistan off lightly in tackling anti-India militants to keep its ally onside.
There is also a school of thought that, to stop Pakistan from being distracted with India, the two rivals must be coaxed into resolving a dispute over Kashmir.
India sees the fate of the divided region as its own business, and any perceived attempt by the Obama administration to meddle could sour ties.
But Singh and his Pakistan counterpart are set to meet in Egypt this week on the fringes of a summit, which could pave the way for new talks.
WHAT ABOUT TRADE DISPUTES?
India and the United States were at the center of a tariff dispute that brought the Doha world trade talks grinding to a halt in 2008, as India worried an unchecked flood of cheap imports would threaten its millions of poor farmers.
Both sides more recently made the right noises on reaching a consensus. India's trade minister went as far as to say the " "impasse has been broken," but later tempered his remarks.
July's G8 summit may have been another boost to more open trade, as leaders pledged to conclude Doha by 2010.
PROTECTIONISM?
Obama took office in the thick of a global financial crisis and amid fears the slowdown would bring greater protectionism.
Much was made in the Indian media of an Obama attack on companies that ship jobs and profits abroad in which he said they pay lower taxes in Bangalore, India, than in Buffalo, New York.
But India's growing economy, rising status and huge untapped markets will likely remain too tempting a prospect for the United States to turn back the clock.
Clinton may have calmed Indian nerves and set the scene for her India visit when she said in June that bilateral ties needed an "upgrade" and the slowdown was no excuse to "fall back on protectionism."
On the other hand, the WTO chief tempered optimism after the G8 by saying few countries had dismantled dangerous protectionist barriers as the financial crisis continues to bite.
(Editing by Bryson Hull and Vicki Allen)
WHERE DO U.S.-INDIA TIES STAND?
New Delhi and Washington are enjoying some of their best-ever relations -- thanks in part to the previous president, George W. Bush, and Indian Prime Minister Manmohan Singh.
Perhaps the biggest leap forward came when both leaders trumped domestic critics to sign a landmark civilian nuclear deal in 2008, worth billions of dollars and ending a 30-year ban on nuclear commerce with India.
Trade has blossomed and years of market reforms have helped India's information technology and outsourcing sectors feed into the U.S. economy.
HAVE THEY ALWAYS BEEN FRIENDS?
No. In the Cold War era, India was a member of the Non-Aligned movement that in theory was independent from the United States and the Soviet Union.
In practice, India bought most of its defense equipment from the Soviets and a chunk of its economy, until liberalization began in earnest in the early 1990s, was under state control.
New Delhi refused to sign the Non-Proliferation Treaty which left it in nuclear isolation -- including from the United States -- for decades. Some loud voices in the U.S. Congress said Bush's nuclear deal had let India off the hook.
Many Indian politicians who grew up in the Cold War era were suspicious of U.S. global dominance -- a legacy of mistrust evident in the Indian left's failed attempt to block the pact.
HAS PAKISTAN'S CLOSENESS WITH THE U.S. BEEN A PROBLEM?
Some in India fear the United States prioritizes Pakistan -- at New Delhi's expense. President Barack Obama needs Pakistan to focus on fighting insurgents in Pakistan and Afghanistan as Pakistan's relations with India have taken a nosedive.
India, which accuses its neighbor of complicity in the Mumbai militant attacks, suspects the United States may let Pakistan off lightly in tackling anti-India militants to keep its ally onside.
There is also a school of thought that, to stop Pakistan from being distracted with India, the two rivals must be coaxed into resolving a dispute over Kashmir.
India sees the fate of the divided region as its own business, and any perceived attempt by the Obama administration to meddle could sour ties.
But Singh and his Pakistan counterpart are set to meet in Egypt this week on the fringes of a summit, which could pave the way for new talks.
WHAT ABOUT TRADE DISPUTES?
India and the United States were at the center of a tariff dispute that brought the Doha world trade talks grinding to a halt in 2008, as India worried an unchecked flood of cheap imports would threaten its millions of poor farmers.
Both sides more recently made the right noises on reaching a consensus. India's trade minister went as far as to say the " "impasse has been broken," but later tempered his remarks.
July's G8 summit may have been another boost to more open trade, as leaders pledged to conclude Doha by 2010.
PROTECTIONISM?
Obama took office in the thick of a global financial crisis and amid fears the slowdown would bring greater protectionism.
Much was made in the Indian media of an Obama attack on companies that ship jobs and profits abroad in which he said they pay lower taxes in Bangalore, India, than in Buffalo, New York.
But India's growing economy, rising status and huge untapped markets will likely remain too tempting a prospect for the United States to turn back the clock.
Clinton may have calmed Indian nerves and set the scene for her India visit when she said in June that bilateral ties needed an "upgrade" and the slowdown was no excuse to "fall back on protectionism."
On the other hand, the WTO chief tempered optimism after the G8 by saying few countries had dismantled dangerous protectionist barriers as the financial crisis continues to bite.
(Editing by Bryson Hull and Vicki Allen)
Gold zooms pass Rs 15,000, at 52-week high
Extending gains for the fifth day in a row, gold prices surged to a 52-week high here at Rs 15,000 per ten gram on aggressive buying by funds in line with firming overseas trend.
Gold prices added Rs 130 at Rs 15,040 per ten gram, a level last seen on April 2 as stockists and jewellery makers indulged in creating fresh positions ahead of the festival season.
The precious metal in the current five-day rally gathered a handsome gain of Rs 340 per ten gram on sustained buying by stockists and jewellers.
In overseas markets, which normally set price trends here, gold surged to 940 dollar an ounce on the back of a weak US dollar renewing interest in gold as a safe investment.
A similar strength was noticed in silver as coins and jewellery manufacturers indulged in buying, fearing the metal might further rise.
Silver ready rose by Rs 250 at Rs 22,050 per kg and weekly-based delivery by Rs 320 at Rs 21,920 per kg. The metal managed to gain Rs 750 per kg. Silver coins also rose by Rs 200 at Rs 29,300 for buying and Rs 29,400 for selling of 100 pieces.
Standard gold and ornaments spurted by Rs 130 each at Rs 15,040 and Rs 14,890 per ten gram respectively. Sovereign also moved up by Rs 50 at Rs 12,450 per piece of eight gram.
Gold prices added Rs 130 at Rs 15,040 per ten gram, a level last seen on April 2 as stockists and jewellery makers indulged in creating fresh positions ahead of the festival season.
The precious metal in the current five-day rally gathered a handsome gain of Rs 340 per ten gram on sustained buying by stockists and jewellers.
In overseas markets, which normally set price trends here, gold surged to 940 dollar an ounce on the back of a weak US dollar renewing interest in gold as a safe investment.
A similar strength was noticed in silver as coins and jewellery manufacturers indulged in buying, fearing the metal might further rise.
Silver ready rose by Rs 250 at Rs 22,050 per kg and weekly-based delivery by Rs 320 at Rs 21,920 per kg. The metal managed to gain Rs 750 per kg. Silver coins also rose by Rs 200 at Rs 29,300 for buying and Rs 29,400 for selling of 100 pieces.
Standard gold and ornaments spurted by Rs 130 each at Rs 15,040 and Rs 14,890 per ten gram respectively. Sovereign also moved up by Rs 50 at Rs 12,450 per piece of eight gram.
Tata Motors to deliver first Nano on Friday
Tata Motors Ltd, India's largest vehicles maker, said on Thursday it would deliver the Nano, the world's cheapest car, to its first customer on Friday.
Chairman Ratan Tata had showcased the Nano at an auto show in New Delhi in January last year, but consumer bookings began only in April this year after the project was delayed due to land disputes at its planned site in the eastern state of West Bengal.
The plant for producing the Nano was shifted to a new site in Gujarat on the west coast, but the first batch of Nanos would come from its car plant in Pantnagar in northern India.
Tata has assured price protection for the first 1,00,000 customers, for whom the cars will be available for Rs 1,00,000 excluding taxes.
Chairman Ratan Tata had showcased the Nano at an auto show in New Delhi in January last year, but consumer bookings began only in April this year after the project was delayed due to land disputes at its planned site in the eastern state of West Bengal.
The plant for producing the Nano was shifted to a new site in Gujarat on the west coast, but the first batch of Nanos would come from its car plant in Pantnagar in northern India.
Tata has assured price protection for the first 1,00,000 customers, for whom the cars will be available for Rs 1,00,000 excluding taxes.
Calls for 16th july
RESEARCH-Nifty(FUT) R-4285/4335/4475 S-4200/4150/4065;Sensex(CASH)
R-14400/14555/14965 S-14145/13995/13735;MARKET OUTLOOK:VOLATILE WITH
+VE BIAS
RESEARCH: MARKET OUTLOOK: The market sentiments somewhat twisted positive on the back of finance minister’s comments on divestment policy and firm global markets. At the same time, technically, NIFTY ended above 20 days DMA (4230) suggesting positive sign, hence NIFTY can move towards 4360 and 4440 levels. Market may open with an upside gap backed by firm global markets and it can be expected to trade sideways thereafter. The NIFTY has immediate resistance at 4250 and 4292. If it breaks 4326 levels, it could test 4360 levels. On the down side, the support comes in at the 4155 and 4126 levels. Trade cautiously as profit booking can be expected at any time.
9:40 AM 7/16 RESEARCH-Global Market (in %): DOW JONES (+3.07%), S&P 500 (+2.96%), NASDAQ (+3.51%), FTSE (+2.57%), DAX (+3.07%), NIKKEI (+1.43%), HANG SENG (+1.89%) & SGX NIFTY (+56 POINTS)
11:13 AM 7/16 RESEARCH: LT Q1'10 PAT (INCREASED BY 165.45%) AT 1598 CR VS 602 CR(YOY)
12:41 PM 7/16 RESEARCH: EUROPEAN MARKET UPDATE : FTSE(-0.3%), DAX (-0.4%), CAC (-0.3%)
2:12 PM 7/16 RESEARCH - INTRADAY CALL ( CASH ) : ZEEL TGT ACHIEVED. GIVEN A INTRADAY RETURN OF 7.1%
R-14400/14555/14965 S-14145/13995/13735;MARKET OUTLOOK:VOLATILE WITH
+VE BIAS
RESEARCH: MARKET OUTLOOK: The market sentiments somewhat twisted positive on the back of finance minister’s comments on divestment policy and firm global markets. At the same time, technically, NIFTY ended above 20 days DMA (4230) suggesting positive sign, hence NIFTY can move towards 4360 and 4440 levels. Market may open with an upside gap backed by firm global markets and it can be expected to trade sideways thereafter. The NIFTY has immediate resistance at 4250 and 4292. If it breaks 4326 levels, it could test 4360 levels. On the down side, the support comes in at the 4155 and 4126 levels. Trade cautiously as profit booking can be expected at any time.
9:40 AM 7/16 RESEARCH-Global Market (in %): DOW JONES (+3.07%), S&P 500 (+2.96%), NASDAQ (+3.51%), FTSE (+2.57%), DAX (+3.07%), NIKKEI (+1.43%), HANG SENG (+1.89%) & SGX NIFTY (+56 POINTS)
11:13 AM 7/16 RESEARCH: LT Q1'10 PAT (INCREASED BY 165.45%) AT 1598 CR VS 602 CR(YOY)
12:41 PM 7/16 RESEARCH: EUROPEAN MARKET UPDATE : FTSE(-0.3%), DAX (-0.4%), CAC (-0.3%)
2:12 PM 7/16 RESEARCH - INTRADAY CALL ( CASH ) : ZEEL TGT ACHIEVED. GIVEN A INTRADAY RETURN OF 7.1%
Wednesday, July 15, 2009
Revised Sensex March 2010 target to 18000: Macquarie
Seshadri Sen of Macquarie Research said that even as the market outlook in the short term remained difficult to call due to mixed cues, he saw an upside to the market in the medium and long term. "We have revised our March 2010 Sensex target to 18,000," he added.
Q1FY10 earnings, he said, were likely to be better than Q4 of FY09. “High beta stocks continue to be our favorites for the long term, financials and infrastructure remain our top bet,” he added.
Speaking on the inflation, he said, the inflation would move up by the end of the year but not to such a high extent as to spook the equity markets.
Here is a verbatim transcript of the exclusive interview with Seshadri Sen
Q: After the recent rally have you had reason to change your year end targets at all for the Index or you pretty much stick with that?
A: We did revise our March 2010 Sensex target to 18,000 around the Budget time, so yes we have because we are seeing continuous earnings upgrade starting to come through already and we think that that process will continue. So from a longer-term perspective we do believe that the market has upside and so yes we do see the previous top that was formed on Budget day being broken.
Q: What is going wrong with the foreign institutional investors (FII) flows over the last few days, since the Budget a billion dollars has gone out of the cash market if you take the QIPs out- is there some disappointment on the back of the Budget, is it monsoons, is it a global trend what is your sense?
A: It is a mixture of all three. To start with very unrealistic expectations were built up after the elections. There were many announcements looked for in the Budget which did not belong to the Budget; FDI in insurance, oil price reform don’t belong to the budget and it was a little unreal for that to be expected. So there were a lot of flows which came in on the back that which I guess moved out.
Globally things also started to falter a bit and so that also added and plus that was a period when monsoon uncertainty was at its high, it now seems to have calmed down a little bit but that was the period when you saw the highest amount of monsoon uncertainty which also led to a little bit of outflows. But if the economy recovers and the earnings upgrade start to come through, you will probably see some of those FII flows start to come back.
Q: Yesterday a lot of people watched what the Finance Minister had to say quite carefully about the roadmap for disinvestment, how he is going to treat the fiscal deficit, market borrowing, did that allay some of the concerns which global investors expressed after the Budget?
A: Some of it yes but not all of it because while the promise is there of fiscal improvement, we believe at Macquarie that this is a temporary phase where the fiscal deficit will remain high but the truth is that what is out there are the moment is the FY10 number, the rest of it is little bit of hope. So to some extent, some of the concerns have been allayed. People were looking for issues to be dealt in the budget which did not belong to the budget and yesterday’s address has addressed some of those concerns with the market.
But I think from here on some of this investors will look to actual movement on the ground before they start taking that on board.
Q: To stay with macros, the one concern that seems to be coming to the fore is the rise of inflation and how equity markets perform in an inflationary environment- do you see that as a risk as well?
A: We don’t see inflation definitely remaining at these levels. Inflation will perk up a little bit towards the end of the year but I don’t think it will go up to the extent that it will completely spook the equity markets. You cannot have a perpetually 0% environment and economic growth and equity market performance - all three cannot exist together. So as long as inflation stays moderate but higher than the current levels, I don’t think it’s a concern. To answer your question, yes inflation will perk up sometime towards end of this year or early part of next year but I don’ think it will be to the extent that it will spook the equity markets.
Q: We are very young in earning season but what are your expectations of this quarters earnings might go by and what it might do to justify the way market is trading right now?
A: This earnings season, I don’t think will be spectacular, it won’t be terrible either. We were all expecting an economic recovery only in the second half of this year; we are still going through a slightly difficult period for the economy and this earnings season obviously looks back at the April to June quarter when the economy was still tottering a bit. So it will be better than the January-March season, which is one positive cue for the market but it certainly won’t justify the current valuations but I think the valuations look beyond this current quarter.
Everybody recognizes that the economy is coming out of a trough and as long as the lead indicators for an economic recovery in the second half remain in place, I am not sure that the market will be too spooked by relatively ordinary earnings numbers. I just want to say that I don’t think they will be terrible but they will be just ordinary.
Q: From a tactical perspective what would you do now – would you load up on high beta which has been leading this rally, infrastructure, real estate, financials, metals or would you want to lean a bit more on the defensive side after the current rally and the recent correction that you have seen?
A: Tactically short-term you may want to load up a bit on defensives but we have a slightly longer-term view and for that I think the so called high beta names continue to dominate, are favourites. We do expect just the sectors that you enumerated financials, property, infrastructure do remain our favourites because we think there is still upside to the market and it is better to play leverage to an improving economy rather than trying to be defensive at this stage.
But in the short-term defensives may work better but that is really difficult call to make.
Q1FY10 earnings, he said, were likely to be better than Q4 of FY09. “High beta stocks continue to be our favorites for the long term, financials and infrastructure remain our top bet,” he added.
Speaking on the inflation, he said, the inflation would move up by the end of the year but not to such a high extent as to spook the equity markets.
Here is a verbatim transcript of the exclusive interview with Seshadri Sen
Q: After the recent rally have you had reason to change your year end targets at all for the Index or you pretty much stick with that?
A: We did revise our March 2010 Sensex target to 18,000 around the Budget time, so yes we have because we are seeing continuous earnings upgrade starting to come through already and we think that that process will continue. So from a longer-term perspective we do believe that the market has upside and so yes we do see the previous top that was formed on Budget day being broken.
Q: What is going wrong with the foreign institutional investors (FII) flows over the last few days, since the Budget a billion dollars has gone out of the cash market if you take the QIPs out- is there some disappointment on the back of the Budget, is it monsoons, is it a global trend what is your sense?
A: It is a mixture of all three. To start with very unrealistic expectations were built up after the elections. There were many announcements looked for in the Budget which did not belong to the Budget; FDI in insurance, oil price reform don’t belong to the budget and it was a little unreal for that to be expected. So there were a lot of flows which came in on the back that which I guess moved out.
Globally things also started to falter a bit and so that also added and plus that was a period when monsoon uncertainty was at its high, it now seems to have calmed down a little bit but that was the period when you saw the highest amount of monsoon uncertainty which also led to a little bit of outflows. But if the economy recovers and the earnings upgrade start to come through, you will probably see some of those FII flows start to come back.
Q: Yesterday a lot of people watched what the Finance Minister had to say quite carefully about the roadmap for disinvestment, how he is going to treat the fiscal deficit, market borrowing, did that allay some of the concerns which global investors expressed after the Budget?
A: Some of it yes but not all of it because while the promise is there of fiscal improvement, we believe at Macquarie that this is a temporary phase where the fiscal deficit will remain high but the truth is that what is out there are the moment is the FY10 number, the rest of it is little bit of hope. So to some extent, some of the concerns have been allayed. People were looking for issues to be dealt in the budget which did not belong to the budget and yesterday’s address has addressed some of those concerns with the market.
But I think from here on some of this investors will look to actual movement on the ground before they start taking that on board.
Q: To stay with macros, the one concern that seems to be coming to the fore is the rise of inflation and how equity markets perform in an inflationary environment- do you see that as a risk as well?
A: We don’t see inflation definitely remaining at these levels. Inflation will perk up a little bit towards the end of the year but I don’t think it will go up to the extent that it will completely spook the equity markets. You cannot have a perpetually 0% environment and economic growth and equity market performance - all three cannot exist together. So as long as inflation stays moderate but higher than the current levels, I don’t think it’s a concern. To answer your question, yes inflation will perk up sometime towards end of this year or early part of next year but I don’ think it will be to the extent that it will spook the equity markets.
Q: We are very young in earning season but what are your expectations of this quarters earnings might go by and what it might do to justify the way market is trading right now?
A: This earnings season, I don’t think will be spectacular, it won’t be terrible either. We were all expecting an economic recovery only in the second half of this year; we are still going through a slightly difficult period for the economy and this earnings season obviously looks back at the April to June quarter when the economy was still tottering a bit. So it will be better than the January-March season, which is one positive cue for the market but it certainly won’t justify the current valuations but I think the valuations look beyond this current quarter.
Everybody recognizes that the economy is coming out of a trough and as long as the lead indicators for an economic recovery in the second half remain in place, I am not sure that the market will be too spooked by relatively ordinary earnings numbers. I just want to say that I don’t think they will be terrible but they will be just ordinary.
Q: From a tactical perspective what would you do now – would you load up on high beta which has been leading this rally, infrastructure, real estate, financials, metals or would you want to lean a bit more on the defensive side after the current rally and the recent correction that you have seen?
A: Tactically short-term you may want to load up a bit on defensives but we have a slightly longer-term view and for that I think the so called high beta names continue to dominate, are favourites. We do expect just the sectors that you enumerated financials, property, infrastructure do remain our favourites because we think there is still upside to the market and it is better to play leverage to an improving economy rather than trying to be defensive at this stage.
But in the short-term defensives may work better but that is really difficult call to make.
Calls for 15th july
RESEARCH-Nifty(FUT) R-4155/4205/4320 S-4085/4040/3970;Sensex(CASH)
R-13985/14120/14475 S-13765/13630/13415;MARKET OUTLOOK:VOLATILE
WITH+VE BIAS
(7/15/2009 10:39:11 AM): RESEARCH: BTST CALL (CASH): BOOK PROFITS IN RENUKA
(7/15/2009 11:32:25 AM): RESEARCH- INTRADAY CALL (CASH) : BUY ONGC ABOVE 1024 TGT 1044 SL 1010
(7/15/2009 12:19:21 PM): RESEARCH: INTRADAY CALL (FUTURES): NIFTY SL TRIGGERED
R-13985/14120/14475 S-13765/13630/13415;MARKET OUTLOOK:VOLATILE
WITH+VE BIAS
(7/15/2009 10:39:11 AM): RESEARCH: BTST CALL (CASH): BOOK PROFITS IN RENUKA
(7/15/2009 11:32:25 AM): RESEARCH- INTRADAY CALL (CASH) : BUY ONGC ABOVE 1024 TGT 1044 SL 1010
(7/15/2009 12:19:21 PM): RESEARCH: INTRADAY CALL (FUTURES): NIFTY SL TRIGGERED
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