11 November 2010
10 November 2010
Market Reports (Its my 1700th Post)
Jet flies high as co draws fresh interest
Shares of Jet Airways soared 11% on Tuesday to . 890.25, after touching a fresh 52-week high of . 896.40 earlier in the day. Total traded volumes were 15 times the two-week average. Analysts said the recent interest among investors in the stock follows the company’s better-than-expected earnings show in July-September.
The buzz is that ‘Pink Panther’ and associates have been buyers of this stock of late. The company’s profit quadrupled in a period, which is normally subdued. Investors have also taken note of the company’s efforts to reduce interest costs. Analysts believe that the airline industry must refrain from increasing capacity for companies’ profits to improve.
Power Grid soars on FPO frenzy
Shares of stateowned Power Grid Corporation rose 5.5% to . 103.75 on Tuesday over five times the twoweek average traded volumes. Interestingly , the frenzied buying of Power Grid shares in the secondary market at this price comes when its follow-on public offering (FPO), which has opened on Tuesday, is accepting bids at . 85-90 apiece. The sudden jump in premium in the current market price to the FPO price may entice investors, who see an opportunity to buy in the FPO and sell it at a higher price, to subscribe to the public issue.
But the question is, will this premium sustain even after the public is-sue closes on Friday ? There have been instances in the past where share prices of state-owned companies have shot up ahead of the FPO, but slid soon after the issue closed. Traders, who borrowed to buy in the FPO and sell on listing of the fresh issue to make a quick buck, lost money in the process.
Contributed by Harish Rao & Nishanth Vasudevan
Shares of Jet Airways soared 11% on Tuesday to . 890.25, after touching a fresh 52-week high of . 896.40 earlier in the day. Total traded volumes were 15 times the two-week average. Analysts said the recent interest among investors in the stock follows the company’s better-than-expected earnings show in July-September.
The buzz is that ‘Pink Panther’ and associates have been buyers of this stock of late. The company’s profit quadrupled in a period, which is normally subdued. Investors have also taken note of the company’s efforts to reduce interest costs. Analysts believe that the airline industry must refrain from increasing capacity for companies’ profits to improve.
Power Grid soars on FPO frenzy
Shares of stateowned Power Grid Corporation rose 5.5% to . 103.75 on Tuesday over five times the twoweek average traded volumes. Interestingly , the frenzied buying of Power Grid shares in the secondary market at this price comes when its follow-on public offering (FPO), which has opened on Tuesday, is accepting bids at . 85-90 apiece. The sudden jump in premium in the current market price to the FPO price may entice investors, who see an opportunity to buy in the FPO and sell it at a higher price, to subscribe to the public issue.
But the question is, will this premium sustain even after the public is-sue closes on Friday ? There have been instances in the past where share prices of state-owned companies have shot up ahead of the FPO, but slid soon after the issue closed. Traders, who borrowed to buy in the FPO and sell on listing of the fresh issue to make a quick buck, lost money in the process.
Contributed by Harish Rao & Nishanth Vasudevan
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Market on endless Journey
(Welcome ur comments/feedback on posting 1700th post after a long journey in my blogging)
Src: ET, NCP blog, Mktcalls, Bramesh blog and Myiris etc
09 November 2010
08 November 2010
After Diwali..........
04 November 2010
Happy Diwali & Morning Calls
WISHING YOU A VERY HAPPY & PROSPEROUS DIWALI
HAPPY INVESTING.
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04 Nov 2010
WellPack Papers and Containers Ltd – 300 times Returns in 2 yrs – Now dumped from 130 to 40 !!
Eimco Elecon does 20%, Will this Diwali be a pleasant and positive day ?
Diwali Picks - 2010
Top Picks for Diwali
Mahurat Picks
Daily Market Outlook - Nov 4 2010
Daily Market Outlook - Nov 4 2010
Gravita India IPO Subscription Details
Grey Market Premiums - Nov 3 2010
Src: Mktcalls, DP blog, Myiris, HDFCSEC and etc
03 November 2010
QE2 - The Fed's Big Gamble: Here's What Could Go Wrong
The Fed's Big Gamble: Here's What Could Go Wrong-
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India, emerging mkts to benefit from QE2: Edelweiss
SRC: YAHOO FINANCE, MONEYCONTROL
, On Wednesday November 3, 2010, 6:34 am EDT
The Federal Reserve is about to take a huge risk in hopes of getting the economy steaming along again. Nobody is sure it will work, and it may actually do damage.
The Fed is expected to announced today that it will buy $500 billion to $1 trillion in government debt, and drive already low long-term interest rates even lower. The central bank would buy the debt in chunks of $100 billion a month, probably starting immediately.
Economists call it "quantitative easing." It gets the name "QE2" -- like the ship -- because this would be the second round. The Fed spent about $1.7 trillion from 2008 to earlier this year to take bonds off the hands of banks and stabilize them.
Here's how it's supposed to work this time: The Fed buys Treasury bonds from banks, providing them cash to lend to customers. Buying so many bonds also lowers interest rates because demand for Treasurys leads to higher prices and lower yields. Interest rates are linked to yields. Lower rates encourage people to borrow money for a mortgage or another loan.
At the same time, lower interest rates make relatively safe investments like bonds and cash less appealing, so companies and investors take the cash and buy equipment or other investments, like stocks. The S&P 500 takes off and Americans celebrate with a shopping spree. Businesses see a rise in sales and begin hiring again, and a virtuous cycle of more spending and more hiring ensues.
But many analysts and even supporters of the plan see dangers. It could make the weak dollar even weaker and lead to trade disputes with other countries. It could lead bond traders to believe that higher inflation is on the way, and they could derail the Fed's efforts by pushing rates higher. Many investors argue that it may create bubbles as hedge funds and other speculators borrow cheaply and make even bigger bets on stocks, commodities and markets in developing countries like Brazil.
"It's a desperate act," says Jeremy Grantham, co-founder of the investment firm GMO. Grantham says it's a clear message from the Fed to the rest of the world: "The U.S. doesn't care if the dollar weakens."
Here is a look at the ways the Fed's strategy could backfire:
--DOLLAR DROP
As word trickled out over recent months that the Fed was planning a new round of bond purchases, the dollar sank. It hit a 15-year low to the Japanese yen Nov. 1. Why? In the simplest terms, a country that cuts interest rates makes its currency less attractive to the worlds' investors. The interest rate is also the investors' yield, the payout they receive. When that yield falls, the world's banks move their money into countries with higher rates. They may exchange U.S. dollars for Australian dollars then invest the money in higher-paying Australian bonds.
"The Fed aims to push up the prices of stocks, bonds, real estate, and you name it," says Bill O'Donnell, head of U.S. government bond strategy at the Royal Bank of Scotland. "Everything is going to go up but the dollar."
A drop in the dollar can help companies like Ford that sell their products abroad. When the dollar weakens against the euro, for example, one euro buys more dollars than before. Foreign customers notice the price of the Explorer they've been eyeing is lower in their currency, yet Ford still pockets the same number of dollars for every sale.
The downside is that a weakened dollar pinches people in the U.S. because anything produced in other countries becomes more expensive, like oranges from Spain or toys from China.
"Look around you," says Thomas Atteberry, a fund manager at First Pacific Advisors. "How many things can you find that were made in the U.S.A?"
--BLOWING BUBBLES
Buying bundles of Treasurys knocks down interest rates, making borrowing cheap. But it also motivates investors to move out of safe investments into riskier ones in search of better returns. The stock market, for instance, rises in value and everyone with some of their savings in stocks feels wealthier. Ideally, it produces what what economists call a "wealth effect": People who feel better off spend more.
The problem, according to some critics, is that cheap borrowing costs and buoyant markets make a fertile environment for bubbles, which eventually pop. "The effort to help the economy sets up another more dangerous bubble," says Grantham, who warned of Japan's surging real estate and stock markets in the 1980s, soaring Internet stocks in the 1990s and the housing market in the 2000s.
Stocks in developing countries are a likely candidate for the next bubble. Cash from Europe and the U.S. has plowed into emerging markets, such as Brazil and Chile, since the financial crisis, largely because these countries have less debt and faster economic growth than in the developed world.
Another concern: Hedge funds borrowing cheap money can magnify their bets, taking a loan at 2 percent to buy a security that's rising 10 percent. They sell the security, pay off the bank and pocket the rest. That's true whenever interest rates remain low. Falling rates allow speculators to borrow larger amounts. In the extreme, losses from hedge funds and other borrowers can put their banks at risk and leave governments to clean up the mess.
The game only works as long as the investment keeps climbing. When the bubble breaks, the fallout can devastate an economy.
"I think bubbles are the main villain in this piece," Grantham says.
Cheap debt provided the fuel for the housing bubble, allowing home buyers to take out larger loans on the belief that somebody else would buy the house at a higher price. Fed chief Ben Bernanke's answer, Grantham said, is to start the cycle over again by blowing a new bubble. "All they can do is replace one bubble with another one," he said.
--FALLING FLAT
For others in the bond market, the greatest worry isn't that the Fed will flood the economy with dollars and lets inflation run wild. It's that the Fed will prove too timid.
"Whether QE2 works or not will be decided by the bond market," says Christopher Rupkey, chief economist at Bank of Tokyo. "Without a big number that gets the market's attention, the program they announce could be dead on arrival."
News reports that the Fed may spend less than the $500 billion bond traders have been betting on has helped push long-term rates higher in the last three weeks. David Ader, head of government bond strategy at CRT Capital, sketches one scenario if the Fed shoots too small. Say the Fed announces a $250 billion plan. The yield on the 10-year Treasury note, which is used to set lending rates for mortgages and corporate loans, could jump from 2.6 percent to maybe 3.2 percent.
"If the Fed's efforts fail we suddenly look like Japan," Ader says. "Japan started off wimpishly, then did it again, and again and then they wound up losing a decade."
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India, emerging mkts to benefit from QE2: Edelweiss
SRC: YAHOO FINANCE, MONEYCONTROL
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The Only Indian (2010) Nominated for this Award
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Stock Reports
Range-Bound Trading
Atul
Nifty daily analysis
Heard on the Street
Technical calls for intra-day
Intraday F&O calls
SHIPYARD update- ABG & BHARTISHIPAYRD
DIWALI PICK - BAJAJ HOLDING
SONATASOFTWARE Break-Out looking good
BEL(BHARAT ELECTRONICS) Weak Defence
Src: ET, NCP blog , Myiris, bramesh blog, akp blog and etc
02 November 2010
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