Friday, July 18, 2014

PRUDENT MORNING MANTRA - 18.07.2014

GEOPOLITICAL CONCERNS WEIGH ON WORLD EQUITIES

WORLD MARKETS

US indices plunged between 1%-1.4% yesterday as investors fled equities and other risky assets after the crash of a passenger plane in Ukraine and as Israel launched a ground offensive in Gaza.

A Malaysia Airlines passenger plane carrying 295 people crashed over eastern Ukraine after being hit by a surface-to-air missile. Both the Ukrainian government and the pro-Russia separatists fighting in the region denied responsibility.

Subsequently, Israeli Prime Minister Benjamin Netanyahu announced the start of a ground campaign in Gaza. The decision came as a surprise as officials from the Palestinian authority and Israel were believed to be progressing in talks in Egypt aimed at a lasting cease-fire.

Earlier, US equities began the session in the red after the US and European Union imposed sanctions on Russian banks, energy companies and defense companies in another
try at getting Russia to stop its backing of Ukrainian rebels. Russian President Putin responded by saying that relations between the U.S. and Russia are in danger of reaching a "dead end" and could damage U.S. business interests in his country.

Economic reports had housing starts unexpectedly falling in June, applications for jobless benefits declining last week and a gauge of manufacturing activity in the Philadelphia region expanding in July.

European markets lost anywhere between 0.7%-2.2%. A final reading of euro zone inflation data for June came in as expected on Thursday, with consumer prices rising 0.5 percent from the year before.

Gold jumped 1.3% to $1,316.90 an ounce, Nymex crude shot up 1.9% to $109.2 a barrel, dollar gained and the yield on the benchmark US Treasury note fell 7 basis points to 2.457%.

AT HOME

Benchmark indices ended marginally higher after a rangebound trade, extending the rising streak to third straight day. Sensex gained 11 points to settle at 25561 while Nifty finished at 7640, up 16 points. BSE mid-cap and small-cap indices however outperformed significantly, gaining 1.4% each.

BSE Metal and Power indices climbed 2.5% and 2.4% respectively, becoming top gainers among the sectoral indices while Realty and Oil & Gas indices lost 0.8% and 0.4% respectively.

Tata Power surged after the Delhi Electricity Regulatory Commission approved a tariff hike of 8.32% for the three electricity distribution utilities (discoms), BSES Yamuna, BSES Rajdhani and Tata Power Delhi Distribution Ltd for the fiscal 2014-15.

Bajaj Auto reported weaker-than-expected quarterly numbers. Net profit was almost unchanged y-o-y at Rs 738 cr, dented by weak operational performance and higher depreciation charge. Revenues grew 7% to Rs 5252 cr. EBIDTA Margin slipped 170 bps y-o-y to 19.6%.

FIIs net bought stocks, index futures and stock futures worth Rs 1912 cr, 520 cr and 115 cr respectively while DIIs were net sellers to the tune of Rs 1316 cr. However the figures for the cash segment should be adjusted for M & M  deal where Goldboot holding sold 1.9% stake for Rs 1400 cr.

Rupee depreciated 6 paise to close at 60.18/$.

OUTLOOK

TCS, after market hours, reported better-than-expected 5.5% sequential dollar revenue growth for June quarter at USD 3964 mn. Consolidated net profit, as against the expectation of an 11% dip, fell 4.5% to Rs 5057 cr. EBIDTA margin stood at 26.3%, down 285 bps q-o-q but better than the expectation of 25.7%.

Today morning Asian markets are trading with average cuts of half a percent and SGX Nifty is suggesting about 35 points lower opening for our market.


Immediate support on the hourly chart is placed at 7525 which should serve as the stop loss for trading longs. 7731, followed by 7808 continue to be the targets on the way up.

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