Wkly Tech Analysis: Pullback likely to persist
31 May 2010, 0440 hrs IST, Deepak Mohoni
31 May 2010, 0440 hrs IST
31 May 2010, 0440 hrs IST, Supriya Verma Mishra
31 May 2010, 0440 hrs IST, Kiran Kabtta Somvanshi
31 May 2010, 0440 hrs IST
31 May 2010, 0439 hrs IST, BAKUL CHUGAN TONGIA
31 May 2010, 0439 hrs IST, Karan Sehgal
31 May 2010, 0439 hrs IST
31 May 2010, 0438 hrs IST, Rajesh Naidu
STOCKS: Sun Pharmaceuticals: Buy
Better-than-expected financial performance, promising outlook for its domestic and international formulations business and the possibility of resumption in manufacturing at Caraco's site by the end of this year make Sun Pharmaceuticals ...
STOCKS: SAIL: Hold
Investors can consider holding on to steel major SAIL, whose massive size in terms of production capacity, raw materials and cash, coupled with low levels of debt and a robust domestic market for its products, makes for a compelling case to ...
TECHNICAL ANALYSIS: Go short in RNRL
RNRL (Rs 52): The stock has been in a downtrend for the last nine months, though it witnessed a pull back rally in the last ten days. As long as it stays below Rs 76, the outlook remains negative. The stock now finds crucial support at Rs ...
TECHNICAL ANALYSIS: Pivotals: Reliance Industries (Rs 1,033.8)
It was an extremely volatile period for Reliance Industries in May as the stock spiked to Rs 1,093.6 and then crashed towards our lower medium-term target of Rs 966. The short-term trend in the stock is down since the May 13 peak of Rs 1,093. ...
TECHNICAL ANALYSIS: Sizzling Stocks: Sesa Goa (Rs 373.8)
Sesa Goa turned red hot on Friday as market participants decided that the recent sell-off was excessive and Chinese demand was unlikely to wane anytime soon. The stock spiked to the high of Rs 375 on Friday to record gain of over 20 per cent ...
NEW DELHI: On May 26, an Airbus ACJ 320 with the call sign ‘VT-IAH’ touched down at New Delhi’s Indira Gandhi International Airport from Mumbai. Another flight, a Falcon 2000 that answered to the call sign ‘VT-AAT’, landed two minutes later. The pilots of both the jets informed their billionaire owners that they have landed safely. Outside, the day was just beginning, but the mercury in Delhi had already climbed to 38 degrees.
Mukesh Ambani, the owner-passenger from the first plane, walked out of the airport in his characteristic brisk style, his mind preoccupied with the packed schedule for the day. On top of his priority list was a meeting of the Prime Minister’s Council on Trade and Industry. At the airport, Mukesh ran into Angarai Sethuraman, head of corporate affairs at the Anil Dhirubhai Ambani Group (ADAG) and a close aide to Anil Ambani. He was there to receive the owner-passenger of the second jet: Anil Ambani. Suddenly, Sethuraman was face-to-face with his old boss. Mukesh, chairman of India’s largest private sector company, Reliance Industries (RIL), calmly walked up to Sethuraman, shook hands and asked him warmly, “How are you, Sethu?” That small gesture travelled quickly through the political and business circles of the Capital, where the news on Monday that the Ambani brothers have decided to end their six-year-long acrimonious battle and to “collaborate” had been received with surprise bordering on scepticism. Even though the brothers lived and worked in Mumbai, many of their battles were fought in the power corridor of Luyten’s Delhi. The Capital’s decision makers and influencers knew the bitter saga closely. It had divided them, put them in awkward spots, and in many cases, rewarded them handsomely. The fault lines of the battle divided the loyalties of New Delhi, whose importance was understood early and well by the Reliance patriarch, the late Dhirubhai Hirachand Ambani. So the city had to see for itself if there was actually a thaw in hostilities. By warmly greeting a man who had been a key figure in the rival camp’s New Delhi affairs, Mukesh Ambani sent a clear signal—he meant to stick to the agreement in spirit. Exactly a week earlier, on May 19, Kokilaben Ambani, Dhirubhai’s widow and mother of the warring brothers, had returned after a visit to the famous Shiva temple at Kedarnath in the Himalayan foothills. “This has gone too far now. The two of you have to resolve the differences,” Kokilaben is believed to have told younger son Anil, according to insiders who have heard accounts of the conversation. Anil had accompanied her on the pilgrimage along with his sister Deepti Salgaonkar. But Kokilaben had been there before and almost done that. Five years ago, she had stepped in and drew up a settlement between her two sons, who lived in reasonable harmony while her husband was alive, and had a bitter fallout soon after his death. The agreement, dividing the companies Dhirubhai Ambani had assiduously built between his two sons, was signed on June 18, 2005. Six months before that Mukesh Ambani had, during a TV interview, admitted to “ownership issues” that were in the “private domain”. That was the first public admission of disharmony that had been brewing behind the scenes since the death of Dhirubhai. |
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The markets are likely to open with a downward bias on continued international weakness. The US markets tumbled Monday with the Dow giving up all but 5 points of gains registered Friday during a fury of short covering on the options expiry.
After trading in a narrow range for much of the day, the Dow Jones Industrial Average tumbled 127 points, the S&P 500 lost 14 points to 1074 and the NASDAQ shed 15 points at 2214.
The late swoon indicated those investors’ fears about Europe's credit crisis and tighter rules on Wall Street are still running strong. Financials led the decline on a day when the street refused to take cognizance of the 7.6% rise in existing home sales.
The euro was under pressure during the session as the market weighed news that the Bank of Spain bailed out a regional savings bank. The 1.1% rise in Dollar Index, however, did not prevent the Crude and Gold futures to move higher 17 cents and $ 17.90 higher respectively.
The bullish fervour seen in the morning trades in our markets could not hold for the day as bears came back in the afternoon to snatch the initiative away from the nascent bulls. The Nifty managed to cling on to just 13 points of gains, from the 98 points seen at one point.
Barring Reliance Infra, which saw some additional position build up, the rest of the clan saw positions being pruned as investors took advantage of the god sent rally to prune positions.
Our stated view was also the same.
Expect the Nifty to take support around the 4850 level. If the 4832 level breaks, it will not augur well and we could see a cascade of selling by risk managers in that eventuality.
Autos, banks, metals, realty still look weak. As the settlement draws near, the options are becoming cheap and times match the stop loss of a trader. Switching to options during the last two days of the settlement is protective and also gives you more bangs for the buck. Ask your RM to understand how you can hedge your portfolio or use options to trade.
| Replace all non-compete agreements with a ‘simpler pact' on gas-based power generation. |
Our Bureau
Mumbai, May 23
In a move that will change the competitive landscape between the Ambani scions Mukesh and Anil, the brothers have cancelled all existing non-compete agreements between their groups, drawn-up during the Reliance re-organisation in 2006.
A new and “simpler” non-compete agreement has instead been formalised relating only to gas-based power generation, said identical statements issued separately by the two groups on Sunday.
The agreement cancelling earlier non-compete agreements (except in the matter of gas-based power production) was signed between the Mukesh Ambani-led Reliance Industries Ltd (RIL) and Anil Ambani led-Reliance ADA Group companies on Sunday.
The new agreement opens up sectors that were hitherto out of bounds for either groups, such as telecommunications and the financial sector for the older brother Mukesh.
Gas-based power generation continues to be off-limits for RIL up to March 31, 2022. An appropriate exception has been made in respect of RIL's captive gas-based power plants, the note explained.
For younger brother Anil, the doors are now open to sectors such as oil and gas and petrochemicals.
COURT FALLOUT?
The latest development comes two weeks after the Supreme Court had ruled on the gas-pricing dispute between the two brothers. The apex court had directed the Mukesh-owned RIL and the Anil-owned RNRL to renegotiate a gas supply agreement within six weeks of the court judgement and to report the agreement to the court within eight weeks.
However, there is no clarity on whether the latest agreement between the Ambani brothers is an off-shoot of the apex court-directed negotiations and merely a precursor to a new gas sharing agreement which the Supreme Court has mandated.
The latest statement did say that RIL and Reliance Natural Resources Ltd (RNRL) will expeditiously negotiate gas supply arrangements in accordance with the orders of the Supreme Court. “We hope to conclude these negotiations very soon,” the note added.
Further, the new non-compete agreement will eliminate the possibility for further disputes between the two groups, “on matters relating to the scope and interpretation of the non-compete obligations,” the note added.
The agreement has removed road blocks for each of the two groups to expand in new areas, an industry-watcher agreed, adding however, that it may be too early to say if RIL would be interested in any of the areas where ADAG is already present.
In the past, the two brothers have fought over Mr Anil Ambani's efforts to acquire South African telecom company MTN and more recently, over the gas supply arrangement between Mr Mukesh Ambani's RIL and Mr Anil Ambani's Reliance Natural Resources Ltd.
A few years ago, there was another public spat when Mr Anil Ambani protested against a 2,000-MW captive plant that was proposed for the RIL-promoted Haryana Special Economic Zone. He had then cited violation of the non-compete agreement between them, while the RIL camp held that the plant was only incidental to the SEZ business. RIL has a captive power plant at its new refinery in Jamnagar too.
POWER: Truce or war?
After Dhirubhai Ambani's death in 2002, his empire was re-organised between the warring Ambani scions under the stewardship of their mother Ms Kokilaben, in June 2005.
But industry watchers differ in their interpretation of the latest development, calling it variously as “a road to a truce”, and an “out-and-out war”, or a “total severing of relations”.
Some felt that there would be greater consolidation activity between the groups. “There are certain indications that point to M&A activities between the two groups, especially with Mr Mukesh Ambani showing keen interest in the telecom sector,” said Mr Kishor P. Ostwal, head of CNI Research.
Others, however, felt this was unlikely. “We think it is out-and-out no-holds barred war. It's a you-do-what-you-like, I'll-do-what-I-like situation. Only in the case of gas they are forced to have an agreement,” said another analyst.
“The settlement is positive for both the groups But what will be more interesting is when they announce the monetary component of the deal. The ADAG group especially is dry of money,” said Mr Harjit Singh Sethi, Country Head, Institutional Equity Broking at Almondz Global Securities.
There was much speculation on whether Mr Anil Ambani has conceded more, as it is easier for Mr Mukesh Ambani to enter telecom, finance (in particular) and non-gas based power, than it is for the former to enter a capital intensive industry such as refining or exploration.
The press statements from the two brothers, though, had reconciliatory overtones.
“RIL and Reliance ADA Group are hopeful and confident that all these steps will create an overall environment of harmony, co-operation and collaboration between the two groups, thereby further enhancing overall shareholder value for shareholders of both groups,” the note said.
The boards of directors of both RIL and Reliance ADA Group companies have given their green signal to the latest agreement.
India's billionaire Ambani brothers took a step towards reconciliation of their long-running feud on Sunday, ending non-compete agreements in a step they hoped would lead to cooperation between the two groups.
Both groups said they hoped to reach a conclusion soon in a gas supply agreement between Reliance Industries (RIL) and Anil's Reliance Natural Resources that had been at the heart of their dispute.
"RIL and Reliance ADA Group are hopeful and confident that all these steps will create an overall environment of harmony, co-operation and collaboration between the two groups, thereby further enhancing overall shareholder value for shareholders of both groups," both companies said in statements.
The announcement comes weeks after the Supreme Court ruled in Mukesh Ambani's favour in a bitter dispute over gas pricing that had made headlines, riven India's richest family and raised questions about the influence of big business on government policy.
On Sunday, Reliance Industries and Anil's Reliance ADA Group said they had agreed to cancel all existing non-compete pacts which the groups had signed in 2006 and entered into a new and simpler non-compete pact only for gas-based power generation.
"If you weigh the positives and negatives, this is more positive for Reliance Industries than R-ADAG group, because this gives Reliance an opportunity to look into expansion in other areas, which they were not allowed to do earlier," said S.P. Tulsian, an independent investment consultant.
"You can't rule out the possibility of Reliance entering in sectors such as telecom," adding the Reliance shares are expected to open up on Monday, in the wake of this development.
The two brothers, who both live in Mumbai but had not been on speaking terms during their dispute, inherited their business empires from their father Dhirubhai Ambani in 2005.
Mukesh got the jewel - Reliance Industries, which has interests in oil and gas exploration, petrochemicals, infrastructure and textiles. Anil got the telecoms, power and financial services businesses.
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Ambanis find synergies in telecom and retail
Ambani deal: A shot in the arm for D-Street
. Video: Ambanis bury hatchet | Full Coverage | Blog: Beginning of a new era
Altered scenario may prompt RIL to venture into financial services
Markets may peg up RIL, Reliance Power and RNRL the mostIn the US markets stocks logged their biggest drop of the year ahead of the German vote on the EU bailout and options expiration. Plus, a vote in the senate to end the debate on financial reform cleared the path for a final vote today, which added another layer of selling pressure.
The market started off jittery amid worries about Germany acting alone in imposing the ban on some naked short selling and a disappointing jobless-claims report.
The Dow shed more than 370 points, finishing at its session lows after the selloff accelerated in the final minutes of trading. The S&P 500 lost nearly 4%, while the Nasdaq was the hardest hit as most of the tech giants took a beating, with Apple, Google and Intel all down around 4%.
All three major indices are now in correction territory, down over 10% from their April highs. At this rate, the market is on track for its worst month in over a year. Volume was nearly double the daily average, with more than 2 billion shares changing hands on the New York stock exchange. Declines outpaced the advances in a 30 to 1 ratio.
The CBOE volatility index jumped over 25% and was above 45 at the closing bell, its highest level in over a year. All 30 Dow components finished lower, led by Bank of America, Alcoa and GE.
At closing bell, the Dow closed more than 3% down at 10,068, the S&P 500 shut shop at 1,071 and the Nasdaq lost more than 4% to end at 2,204.
Initial claims for unemployment benefits shot up by 25,000 to 471,000 last week, which rattled an already jittery market as economists had expected claims to drop to 440,000.
Meanwhile, the Philadelphia fed reported its gauge of regional manufacturing activity dropped to 21.4 in April, slightly more than expected, from 20.2 in March. And leading indicators fell 0.1% in April, the first decline in a year.
The euro has risen against the dollar on speculation that the european monetary officials may intervene to prop up the single currency and on short-covering.
In the commodity space, global economy fears pushed the CRB to the lowest since September last year. Crude continues to trade lower just below the USD 70 mark. The NYMEX June contract which expired yesterday fell to USD 64 as positions rolled & squared.
Copper prices dropped to the lowest level in 14 weeks on mounting signs the global economic recovery is fading. Other metals like aluminium and zinc also traded lower. MUMBAI: Stocks have been under pressure for some time now due to fundamental reasons pertaining to their respective sectors as well as due to economic uncertainties in the global markets.
On Monday, traders heaved a sigh of relief as the Nifty bounced back after briefly slipping below its 200-Daily Moving Average of 4980. Index heavyweights like Reliance Industries and ONGC, which pulled the Nifty down, too have slipped below their 200-DMA. The 200-DMA is a historical tool and indices or prices don’t breach this level on the downside very often. If the price stays above 200-DMA, it’s a bullish sign, whereas a move below it signals a bearish sentiment. “Given global concerns, most of the stocks have underperformed for good reason and should be left out. Weakness in index heavyweight Reliance Industries appears as a precursor to some correction in coming days. If the market stays below 5000 levels then we might see 4600 on the Nifty,” said Sandeep J Shah, CEO, Sampriti Capital. List of the biggies that are significantly below their 200 DMA
The stocks may have fallen temporarily and look bearish on the charts. However, they can be picked up at current levels for the long-term period of over a year. “Investors can enter these stocks at current levels for a holding period of minimum one year. Investors can put 25% of the funds at these levels and wait to accumulate at lower levels,” said Ajay Parmar, head of research at Emkay Global Financial Services. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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