Musings on the Sensex - Financial Year 2008-2009

In the just concluded financial year (April 2008 - Mar 2009) the Sensex has been one of the worst performers among the global indices. In spite of the sharp rally during March '09, the Sensex finished about 35% below its April 1, 2008 level.

Many investors who invested in the stock market in 2004 and 2005 and enjoyed the bull market ride must be saying: 'Thank God this year is over, and let us hope the next year isn't this challenging'.

For investors who had never experienced a bear market before, the past year must have been a trial by fire. There are few stronger forces that smash one's ego and self-confidence than a full-tilt bear market. First your paper profits, and then your real money starts gurgling down the drain.

So what are some of the learnings from this gut-wrenching experience? Some of the old cliches - not necessarily about the stock market - come to mind:-

1. The higher you climb, the harder you fall - as in life and career, so in the market. Those who borrowed money, or used life-savings to enter the market during its peak must be feeling this the most.

One is reminded of the story of Icarus, who wanted to fly and put together wings with feathers and wax. He flew higher and higher till the sun's rays melted the wax and he fell to his death.

2. What goes up, must come down - the economy, the stock market, and most importantly, life itself goes through a series of ups and downs. It isn't the end of the world. To paraphrase an old song: 'you get yourself up, dust yourself down, and start all over again'.

3. You have to take the bitter with the sweet - for your own good health and for the health of your portfolio. Life experiences are some times happy and some times sad. Stock picks go up in value or they go down sharply. You have to accept it with equanimity.

4. Happiness is a state of mind. Just visit any slum in the metro cities in India (and I'm not specifically talking about Dharavi or 'Slum Dog Millionaire'). Don't just see the squalor all around. Look at the little children. They are smiling and laughing and joking and having a good time. We lose some money in a stock and have long faces. Hey! It's only money.

5. Never try to catch a falling knife. When a stock's price keeps going down one is tempted to buy at a lower price to average out the cost of buying at much higher prices earlier. Don't ever do it. A stock's price can always go down even more. Wait for the signals of a turn around before re-entering a stock.

If you keep reading my blog posts (I wrote two posts on what not to do in a bear market on Nov 10, '08 and Nov 23, '08), you will receive hints from time to time about where the Sensex is likely to go next.

Technical analysis is not a science, so I may get it wrong some times. But as a thumb rule, look at the 200 day EMA. If it is moving down and the Sensex is below it, the bear market isn't over. A sharp rally like we saw in Mar '09 may temporarily take the Sensex above its 200 day EMA (it hasn't done so yet). But it must close above for a few days till the 200 day EMA begins to flatten. That would be the first sign of a trend change.

Dow Jones Chart Pattern - Mar 27, 2009

Continuing my series of posts on global indices, today's discussion is about the Dow Jones chart pattern. It is interesting to compare the different global indices - while there are broad similarities, there are subtle differences. (Readers in the USA are requested to please give their inputs whether my analysis is on the right track or not.)

Let us have a look at the 6 months closing chart pattern of the Dow Jones Industrial Averages:-

(Please right-click on the image above and open it in a new tab or window for a better view.)

The Dow made a 52 weeks low in Nov '08 (rather than in Oct '08 for the Sensex and Hang Seng) and then entered the sideways consolidation chart pattern, much like the other indices.

It pierced the Nov '08 low and made a new 52 weeks low in Mar '09. Then followed a sharp upward rally that took it beyond the resistance of the 50 day EMA (unlike the FTSE).

Some analysts in the USA termed the Mar '09 rally as the beginning of a new bull market, based on the fact that the Dow rallied more than 20% from its Mar '09 bottom. Apparently, a 20% rise from a bottom is considered a 'definition' of a bull market.

I'm not particularly convinced by such a definition. The 200 day EMA is generally accepted as the long term trend decider of the market. When an index is below it, it is a bear market. Only when the index moves above the 200 day EMA from below, and the 200 day EMA stops moving down and begins to flatten out will the trend change to a bull market be confirmed.

The Dow is presently almost 1700 points below the 200 day EMA level of about 9500. That indicates that the long term bear market is nowhere close to an end.

Mind you, waiting for the index to crossover the 200 day EMA  may prevent an investor from catching the next bull ride at the lowest point. But trying to catch the exact bottom is a near impossible task. Better to be safe than sorry.

The technical indicators are showing weakness, and the Dow is reflecting that. The ROC and RSI are turning down from overbought regions. The slow stochastics is in the overbought zone but the %K line is about to go below the %D line. The MACD is still positive.

The volumes (overlaid on the index chart) had been lower during the last couple of days of the rally. Sure enough, the Dow started to move down, though it closed at a higher level than that of the previous week.

Bottomline? The sharp rally seems to be over. The Dow is back in the sideways consolidation pattern, where it is likely to remain for a while longer. The Q1 and Q2 results will indicate which way Mr Market will move next.

FTSE Chart Pattern - Mar 27, 2009

The FTSE chart pattern will be discussed in today's post as part of my endeavour to provide a more global perspective to the stock market scenario. (I have a few readers from the UK, and would request them to please give me a feedback on my analysis and let me know if I'm on the right track or not.)

Let us take a look at the 6 months closing chart pattern of FTSE:-

(Please right-click on the image above and open it in a new tab or window for a better view.)

The global rally in world stock markets in the month of Mar '09 has taken both the Hang Seng and the Sensex above the 50 day EMA. Not so for the FTSE, which is still struggling in the region between the 20 day EMA and the 50 day EMA.

The 20 day EMA is gradually moving up, but is still below the 50 day EMA. The FTSE is well below the 200 day EMA, which means the stock market is still in a long term bear grasp.

A rectangular sideways consolidation phase - defined approximately by the 4600 level on the upper side and the 3700-3800 zone on the lower side - began after the Oct '08 lows. The 3700-3800 zone acted as a support during Nov '08, but got penetrated in late Feb '09 and the FTSE made a new closing low at 3500 in Mar '09.

Though it bounced off sharply from the Mar '09 low, the up move is showing signs of fizzling out. Why? Because the FTSE seems to be in the process of making a 'rounding top' chart pattern.

The slow stochastics has entered the over bought zone. MACD is barely positive. ROC is already turning down. RSI has flattened after entering the over bought zone.

Technical analysts often claim that all fundamentals are reflected in the chart patterns. If we take that claim at face value, we may conclude that the fundamentals of the UK economy are in worse shape than those of South East Asia (as represented by the Hang Seng chart pattern) and India (as represented by the Sensex chart pattern).

Bottomline? The FTSE is likely to test the recent low of 3500 and may go even further downwards. Looks like this bear market isn't going to end any time soon.

Sensex Chart Pattern - Week ending Mar 27, 2009

The real challenge in studying and analysing the Sensex chart pattern is the fickle nature of Mr Market. When the consensus opinion was that the chart pattern indicated a possible down ward movement, Mr Market decided to surge upwards. And how!

What caused this buying frenzy last week? Did the economy suddenly turn for the better? Did the government's stimulus package create a change in sentiments? Did the FIIs get bored and decide to have some fun? The answer is: none of the above.

Far from getting better, the economy is likely to get worse in 2009 than it was in 2008. The stimulus package may have some effect eventually, but there is usually a lag between theory and practical results on the ground.

Yes, the WPI is almost down to zero. But that also indicates a drop in demand rather than just a drop in wholesale prices. And the CPI is still in double digits.

The FIIs definitely did some buying. The sudden spurt in HDFC - a favourite of the FIIs - bears testimony to that. What was their motive? My guess is that they want to sell some more. But with the market at near bottom, they would not get decent prices.

By sharply moving the market up - they have the money power to do so - the FIIs managed to squeeze out the short sellers, who had to quickly buy to cover their shorts. Some retail buying interest also added to the bulls getting the upper hand.

Another important factor to note is about the 'T+2' settlement in the market. Friday's transactions were the last for the financial year Apr '08 to Mar '09. Any transactions made from Monday, Mar 30, '09 onwards will get settled in the next financial year.

So DIIs probably used the opportunity to 'pad' their NAVs for the current financial year. I would venture to say that this up move is on its last legs. Just my gut feel.

Let us now look at the technicals of the 6 months closing chart pattern of the Sensex:-

(Please right-click on the image above and open it in a new tab or window for a better view.)

The Sensex sharply pierced through the resistance of the 50 day EMA and closed above the psychological 10000 level. The 20 day EMA has turned up and merged with the flattening 50 day EMA.

The slow stochastics and ROC are both well into over bought zones. The RSI is about to enter the over bought zone. The MACD has turned positive for the first time since Jan '09. Even the volumes have picked up from last week.

All the indicators are confirming bullishness. So why am I not convinced about this up move? There are three specific reasons.

First, the Sensex is still well below the down ward sloping 200 day EMA. That indicates that we are still in a long term bear market. Second, the Sensex is yet to penetrate the upper level (of 10950) of the rectangular sideways chart pattern of the past 5 months. Last, but not the least, I've yet to see the hopelessness and capitulation of all market participants that signal the possible end of a bear market.

Bottomline? I will be closely watching the Sensex behaviour around the 10950 level mentioned earlier. Next, the 11300 or so level where the 200 day EMA should provide strong resistance. Till those two resistances are taken out with higher volumes, this up move will not indicate a change of trend from bear to bull.

Stock Market News, Financial News - Mar 27, 2009

Heavy borrowing could pressure rates - officials

By Rajesh Kumar Singh and Manoj Kumar

NEW DELHI (Reuters) - India could overshoot its annual borrowing target in the 2009/10 fiscal year if more fiscal stimulus is rolled out to revive a slowing economy, and this will put pressure on interest rates, senior officials said on Friday.

Policy advisers also said the economy will fare significantly worse in 2009 than in the previous year, and more doses of fiscal and monetary policy may be needed to boost demand and lift growth.  (More ...)

Will Satyam be an albatross around Larsen's neck?

By Sumeet Chatterjee

BANGALORE (Reuters) - Larsen & Toubro is seen as the front-runner to acquire fraud-tainted outsourcer Satyam Computer Services Ltd but a potential purchase could bring more pain than gain.

Not only will the acquisition be a tricky one due to uncertainty about Satyam's accounts and potential legal liabilities from U.S. lawsuits but also it would distract Larsen from its main engineering and construction business.  (More ...)

Reliance signs gas deal with fertiliser firms

NEW DELHI (Reuters) - Reliance Industries on Friday signed deals with 12 fertiliser firms to sell about 15 million standard cubic metres a day (mmscmd) of gas from its block off the country's east coast. Supplies will start from mid-April, Reliance said. 

The firms will pay Reliance a marketing margin of 13.5 cents per million British thermal units (mmBTU) for the gas, said Satish Chander, Director General of Fertiliser Association of India. The margin is in addition to the government-set price of $4.2 per mmBTU for the gas.       (More ...)

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ADVFN World Daily Markets Bulletin (excerpts)

US Market

Stocks Moving Lower As Traders Cash In On Recent Gains

Stocks are showing notable weakness during mid-morning trading on Friday, as investors take profits from the recent rally and digest some mixed economic news. With the decline, the Nasdaq has once again slipped below the unchanged line for the year-to-date period.

On the economic front, the Commerce Department released its report on personal income and spending in the month of February. While the report showed an increase in spending that came in line with estimates, income fell by a little more than expected.

The report showed that personal spending rose 0.2 percent in February following an upwardly revised 1.0 percent increase in January. The modest increase in spending came in line with the expectations of economists.

At the same time, the Commerce Department said that personal income edged down 0.2 in February after a downwardly revised 0.2 percent increase in the previous month. Economists had been expecting a slightly more modest 0.1 percent decrease.

The final reading of the Reuters University of Michigan's consumer sentiment index for March was also released earlier, showing a revised reading of 57.3. Economists had expected the consumer sentiment index to be lifted to 56.8 from the mid-month reading of 56.6.

In other news, President Barack Obama is meeting today with the CEOs of JP Morgan, Citigroup, Goldman Sachs and other banks, as well as executives from industry associations, to discuss the economy and the administration's proposals to increase regulation of the financial system.

Additionally, President Obama will soon unveil the results of a federal examination of the restructuring plans from General Motors and Chrysler, a condition for the auto-makers to rece ive more government capital.

White House Press Secretary Robert Gibbs said the details would be announced before the President departs for the G20 Summit in London on Tuesday.

"The President, as part of viability plans from both GM and Chrysler, is required by the 31st to give an update on those plans and where our government sees them, and we'll be doing that also in the next few days," Gibbs said.

The major averages pulled back to new lows for the session in recent trading, but they have regained some ground since then. The Dow currently remains down 128.39 at 7,796.17, the Nasdaq is down 29.14 at 1,557.86 and the S&P 500 is down 13.55 at 819.31.

European Shares

Europe's top stocks have swung into the red in choppy trade on Friday, led lower by a weak energy sector. U.K.'s FTSE 100 Index is showing a loss of 0.9 percent, while the French CAC 40 Index and the German DAX Index are falling 2 percent and 2.1 percent, respectively.

Asia Markets

The Japanese stock market took a pause for breath Friday bringing to an end nine successive days of rises for the Topix index.
Nevertheless, the Nikkei 225 index reached its highest point since 9 January during the session before easing back to 8,626, down 9 points. Hong Kong's Hang Seng Index ended the day up 0.1 percent.

Commodities

Oil and gold rise after gloomy GDP data
The worst US GDP data for 26 years sent investors scurrying for the safety of gold, pushing the April futures contract up to $940, up $4.20 on the day.

US GDP fell by an annual rate of 6.3% in the final quarter of last year, worse than the initial read of 6.2% but better than consensus forecasts from economists of a 6.6% fall.

Meanwhile, the appeal of gold as a safe asset was further enhanced by news that the total number of US unemployed rose to a record 5.56m, although the dollar’s strength limited the extent of gold’s gains.

The oil price was also on the rise, with the April contract rising above $54 a barrel, reversing Wednesday’s losses when the Energy Information Administration revealed that crude inventories rose by 3.3m barrels last week.

Forex
Dollar dominant
US GDP data that was not as bad as feared prompted support for the greenback Thursday. Though US GDP fell by an annual rate of 6.3% in the final quarter of last year, worse than the initial read of 6.2%, it was still better than consensus forecasts from economists of a 6.6% fall.

Sentiment towards the dollar was also boosted by the relative success of the US Treasury’s auction of seven-year notes. The Treasury sold $24bn of notes at a yield of 2.384%.

The euro was out of favour after data from the European Central Bank (ECB) showed a slowdown in the growth of private sector lending. The aggregate value of loans was 4.2% higher in February than a year earlier, compared with a 5% year-on-year g ain in January. The figures are likely to add pressure to the ECB to cut interest rates some more this year, which will diminish the appeal of the euro.

Sterling also fell back in New York trading despite a good response to the sale of index-linked gilts due to mature in 2022, which was oversubscribed. The auction result came as a relief after the flop the previous day of the auction of 40-year gilts.

The pound fell back by almost a cent, to $1.4444 in New York, having earlier made headway in London trading, where it reached $1.4562. However, even in London the currency finished below its best levels of the day after UK retail sales data revealed a far bigger than expected 1.9% drop in sales from the previous month.

Hang Seng Chart Pattern - Mar 27, 2009

Yes, you read it right. I'm going to discuss the chart pattern of the Hang Seng index today. In a globalised world, looking at the chart pattern of several stock indexes across the world may provide a  better perspective of where the smart money is getting deployed.

Let us look at the 6 months closing chart pattern of the Hang Seng. It does look quite similar to the Sensex chart.

(Please right-click on the image above and open it in a new tab or window for a better view.)

The Hang Seng's closing low made in end Oct '08 has not been penetrated yet. During the rectangular sideways chart pattern since the Oct '08 low, highs above the 15000 level were made in Dec '08 and Jan '09. This 'double top' formation has defined the upper level of the rectangular consolidation pattern.

The rally in Mar '09 has taken the Hang Seng to 'over bought' region as confirmed by the slow stochastics. The MACD is slightly in the positive zone. Both the ROC and RSI are supporting the bullish move, but showing signs of weakening. Volumes have increased the past couple of sessions.

An index (or a stock) can remain in the 'over bought' region for some time, so a reaction may not be imminent. But the weakness in the ROC and RSI may prove otherwise.

The index has penetrated both the 20 day EMA and the 50 day EMA from below, indicating bullishness. But it is still way below the 200 day EMA, which means it is still in a long term bear market. The double top above the 15000 level is likely to provide strong resistance.

Bottomline? The fundamentals of the global economy hasn't suddenly changed for the better. So this looks like a typical sharp bear market rally. But the increase in volumes and the 20 day EMA ready to cut across the 50 day EMA from below may be the first signs of a trend change.

Stock Market News, Financial News - Mar 26, 2009

WTO head warns of slippage in protectionism fight

GENEVA (Reuters) - Global commerce risks being strangled by an incremental build-up of restrictions that could undercut policies to revive the world economy, the head of the World Trade Organisation (WTO) said on Thursday.

WTO Director-General Pascal Lamy said there were no signs of an imminent descent into high-intensity protectionism.  (More ...)

RBI to buy back $15.8 billion of bonds

NEW DELHI (Reuters) - The Reserve Bank of India (RBI) plans to buy back 800 billion rupees ($15.8 billion) of bonds from the market between April and September to soothe investors' nerves after the government detailed a massive borrowing plan.

The yield on the benchmark 10-year bond had jumped to two-week highs above 7 percent on Thursday, and opinion was divided on the potential impact of the central bank's intended buying. Bond markets are shut on Friday for a holiday.  (More ...)

Wall St clampdown in prospect, Europe data gloomy

By Gilbert Kreijger

AMSTERDAM (Reuters) - U.S. and European officials outlined plans for tough new financial rules on Thursday, part of efforts to stabilise the economy and curb the risk-taking that nearly wrecked the banking sector and set off a worldwide recession.

President Barack Obama's treasury secretary, Tim Geithner, was set to outline proposals in Congress that would create a powerful systemic risk regulator with authority to look deep into non-bank financial firms, such as hedge funds and private equity firms, officials said.  (More ...)

RBI: challenge to stem growth slowdown

By Manoj Kumar and Rajkumar Ray

NEW DELHI (Reuters) - The economic slowdown has been steeper than previously estimated and the challenge is to arrest it, but further fiscal stimulus will carry a cost, Reserve Bank of India Governor Duvvuri Subbarao said on Thursday.

His comments came soon after the government said it would tap markets for 2.4 trillion rupees ($47.4 trillion) of borrowings in the first half of 2009/10, two-thirds of its projected record borrowing for the full fiscal year that starts on April 1.  (More ...)

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ADVFN World Daily Markets Bulletin (excerpts)

US Market

Stocks Remain Mostly Positive In Late Morning Trading

After showing a strong upward move earlier in the session, stocks continue to see notable strength in late morning trading on Thursday. The major averages all remain in positive territory, adding to the gains posted in the previous session.

Transportation stocks are turning in some of the market's best performances, as traders express some optimism about signs of stabilization in the economy. Significant strength is visible among railroad stocks, which saw notable weakness on Wednesday.

A variety of other sectors have also shown strong upward moves over the course of the morning, with health insurance, steel, healthcare provider, and housing stocks posting notable gains.

On the other hand, banking stocks have moved back to the downside after ending the previous session mostly higher, limiting the upside for the broader markets. Tobacco stocks are also giving back some ground after trending higher in recent sessions.

In recent trading, the tech-heavy Nasdaq rose to a new high for the session, although it has given back some ground in the past few minutes. The Nasdaq currently remains up 29.50 at 1,558.45, while the Dow is up 44.45 at 7,794.26 and the S&P 500 is up 7.04 at 820.92.

US GDP worst for 26 years

The struggling US economy posted its worst performance since 1982 in the three months to December, government data confirmed today.

GDP fell by an annual rate of 6.3% in the final quarter of last year, worse than the initial read of 6.2% but better than consensus forecasts from economists of a 6.6% fall.

The decline was spread across the whole economy with consumer and businesses suffering equally. Consumer spending fell by 4.3% rate with the large ticket items down by 22%. Housing fell 23% completing three straight years of decline. Business spending fell by 28% rate, with exports tumbling at a 24% rate.

Economists say the economy is still struggling, with current forecasts suggesting a 5% decline in the current quarter though some tentatively predict a recovery towards the end of 2009.

The IMF recently forecast the US likely to contract by 2.6% in 2009, taking it back to levels seen in the eighties, though it could rebound by the third quarter of 2010.

Canadian Market

Toronto stocks have rallied in early trading Thursday to recover some of the recent slide. Resource stocks have led the upward charge as commodity prices moved higher.

The S&P/TSX Composite Index has added 97.74 points or 1.11% to move at 8,895.18. Bay Street's main index has closed lower in each of the two previous sessions.

European Shares

Europe's top stocks are largely unchanged in midday trade, with the German Dax posting some gains and the French and Swiss markets both in red territory.

German consumer confidence fell slightly to 2.4 in April from a revised reading of 2.5 in the previous month. It was the first drop in seven-months.

Asia Markets

Indian market surges on global rally

Thursday, the Indian market closed higher for the fourth straight session amid strong global cues after better-than-expected economic data in the U.S. fueled hopes of an economic recovery in the world's largest economy.

Additionally, sustained buying by foreign funds in the past few days, hopes of rate cuts following a further retreat in the inflation rate and short covering on account of the expiry of the March series derivatives contracts aided the rally.

The inflation rate dropped to 0.27% in the 12 months to March 14 compared to 0.44% in the previous week, driven by a sharp fall in price of inputs and food articles and on account of high base effect. Significantly, prices of manufactured items showed a modest rise on a week-over-week basis.

The BSE Sensex opened higher at 9,740 and rose to a fresh 2-1/2 month high of 10,061 before finishing at 10,003, up 335 points or 3.47% over the previous close. Similarly, the S&P CNX Nifty rose 98 points or 3.28% to 3,082.

Commodities

Oil prices came under pressure on Wednesday but settled off earlier lows after the government’s weekly report showed a much bigger than expected build in energy stockpiles.

The Energy Information Administration said crude inventories rose 3.3m barrels last week compared with expectations of a 1.4m barrels increase.

Gasoline inventories fell by 1.1m barrels in the week while forecasts had been for a decrease of 900,000 barrels. Meanwhile distillate, which is used in diesel and heating oil, fell by 1.6m barrels, bigger than the 200,000 barrels decline expected.

Stock Market News, Financial News - Mar 25, 2009

Oil nears $54 on Geithner comments

By Chris Baldwin

LONDON (Reuters) - Oil retraced early losses on Wednesday, rising to around $54 a barrel after the U.S. Treasury Secretary said he was "quite open" to recent Chinese suggestions on moving to a new global reserve currency.

Oil appeared little moved by data from the Energy Information Administration that showed U.S. weekly crude stocks rose last week to their highest since 1993.  (More ...)

Satyam value in peril over toxic liabilities

Hindustan Times

The government's silence on the provision of any amnesty or protection scheme to prospective buyers fraud-hit Satyam Computer Services is set to bring down the valuation of the IT firm significantly, say experts involved in the deal.

The issue will be raised by the shortlisted bidders in the course of the due diligence process. Bidders, who are not satisfied with the financial and legal data provided to them on the IT firm, could even back out at the final stage.  (More ...)

Dabur's Burman plans 200-strong eatery chain

Hindustan Times

From Ayurvedic medicines and consumer goods to fast food. Dabur's vice-chairman Amit Burman is now on an entrepreneurial drive to set up a chain of quick-service food outlets.

"We are going to invest Rs 200 crore towards 200 "Lite Bite" food joints to be set up soon all across India," Burman told reporters on the sidelines of the Food Forum of India industry seminar last week.  (More ...)

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ADVFN World Daily Markets Bulletin (excerpts)

US Stocks at a Glance

Major Averages Move Off Their Highs But Remain Firmly Positive

Stocks have shown a strong upward move over the course of morning trading on Wednesday, with the major averages offsetting the losses posted in the previous session. The rebound comes as traders react to some much better than expected economic data.

Earlier in the day, the Commerce Department released a report revealing that durable goods orders unexpectedly showed a substantial increase in the month of February after falling in each of the six previous months.

The report showed that durable goods orders jumped 3.4 percent in February after falling by a revised 7.3 percent in January. Economists had been expecting durable goods orders to fall by 2.5 percent compared to the 4.5 percent decrease that had been reported for the previous month.

The Commerce Department also released a separate report showing an unexpected in increase in new home sales in the month of February, continuing a recent string of better than expected housing market reports.

The report showed that new home sales rose 4.7 percent to an annual rate of 337,000 in February from an upwardly revised January rate of 322,000. The results surprised economists, who had been expecting sales to fall to 300,000 from the 309,000 originally reported for the previous month.

In recent trading, the major markets have moved well off their best levels of the day, although they are holding onto strong gains. The Dow is currently up 148.46 at 7,808.43, the Nasdaq is up 26.03 at 1,542.55 and the S&P 500 is up 15.07 at 821.32.

Canadian Market

Toronto Stocks Move Moderately Higher In Morning Trading

Toronto stocks have turned higher in Wednesday morning trading, recovering some of the losses seen yesterday. Gold-related stocks were among the big gainers as the precious metal rebounded on the Comex.

The S&P/TSX Composite Index has added 79.27 points or 0.89% to move at 8,928.66. A higher close would be the 10th in 12 sessions.

European Shares

FTSE struggles as miners fall
Market Movers
FTSE 100 3,866.48 -1.15%
techMARK 1,123.30 -0.37%
FTSE 250 6,319.36 -1.31%

For the second day in a row a bright start has been undermined by the mining sector.

Platinum is the problem today with Anglo American and Lonmin the worst performers, though Rio Tinto is also lower even though the Australian Competition & Consumer Commission opted not to block the increase of Chinalco’s stake to 18%.

Broker Evolution Securities observed that the controversial deal still has more difficult obstacles to overcome and suggests that the recent rally in the Rio share price presents a ‘strong selling opportunity’.

Asia Markets

Asian markets end mixed as investors take profits

The markets across the Asia-Pacific region ended mixed on Wednesday, as investors preferred profit taking following an extended relief rally. The markets, having shrugged off the early weakness following a weak closing by Wall Street stocks, could not maintain the momentum and the euphoria over a revival in global economic conditions seems to be losing steam for want of evidence that could instill confidence. Global demand continues to be weak as is evident from a report released earlier in the day by the Japanese government, which showed that exports plummeted by a record 49.9% year-over- year while imports fell 43.0% year-over-year to 3.443 trillion yen.

Commodities

Crude Oil Drops Ahead Of EIA Report

Oil prices dropped for a second straight day on Wednesday as traders looked ahead to the Energy Information Administration's weekly inventory report. The drop took crude further off its recently seen multi-month high.

Crude oil prices fell to $52.60, down $1.38 for the session. Prices touched as low as $52.08 in the early going.

Stock Chart Pattern - Unitech Ltd.

This is the fourth in the series of stock chart pattern discussions on Wednesdays. Why did I choose an over-hyped but down-in-the-dumps real estate stock like Unitech? The answer will be apparent when we take a look at the interesting 6 months chart pattern below:-

(You can right-click on the image above and open it in a new tab or window for a better view.)

After falling off a cliff in Oct '08, Unitech rose sharply to above 50 on good volumes before falling rapidly again to make a new low in end Nov '08. Nothing remarkable so far - many other stocks behaved similarly in the Oct-Nov '08 period.

What happened next is the interesting part. The stock entered a sideways consolidation pattern - much like the Nifty, of which it is a part. But take a look at the volumes (overlaid on the price chart).

Significant increase in volumes without a corresponding rise in price level usually indicates 'accumulation'. The 50 day EMA is far below the 200 day EMA and the gap is increasing. That means, sooner or later the stock is likely to break up wards.

Who is doing the buying? Good question. A lot of retail investors stuck at higher prices may be buying at current low levels to average down - which is a risky policy. But that alone wouldn't have created the high volumes. My guess is that insider buying is happening as well.

Why? Because Telenor of Norway is interested in Unitech's nascent telecom business. Recently they made a substantial lump sum payment to Unitech. That will ease some of the liquidity problems in the real estate business.

The ROC is neutral. RSI is in the negative zone. MACD is also marginally negative. But the slow stochastics has moved up strongly from the oversold zone.

The stock has been facing resistance at the 20 day EMA since going above it briefly in Dec '08 and Jan '09. It has again penetrated the 20 day EMA from below. Penetration from below of the 50 day EMA and a couple of closes above it will indicate that the buying momentum is gaining control.

Bottomline? Unless the strong resistance between 50-60 levels is overcome, there is no point in entering Unitech. In the longer term charts, the stock has made a 'mountain' like pattern. That indicates that it will stay in the dumps for a long time and may never regain the previous highs. If I were you, I would stay far away from such speculative stocks.

Stock Market News, Financial News - Mar 24, 2009

HDFC cuts loan rates by 50 bps

MUMBAI (Reuters) - Housing Development Finance Corp said on Tuesday it is cutting its retail prime lending rate by 50 basis points from March 25.

The lending rate has been brought down by 100 basis points since December 2008, it said.  (More ...)

Reliance gas to cut oil use in India - Goldman

NEW DELHI (Reuters) - Gas supplies from Reliance Industries' KG Basin block will replace about 7 percent of local oil consumption in 2009/10, rising to 14 percent in the following three years, Goldman Sachs said in a report.

The U.S. bank said the start of supplies from the block off India's east coast would also trigger investment of over $10 billion in gas transmission and distribution infrastructure in the next five years.

It would also reduce the country's current account and fiscal deficits and support economic growth, Goldman Sachs said.  (More ...)

GE-Hitachi in N-reactor pacts with BHEL, NPC

Hindustan Times

GE Hitachi Nuclear Energy (GEH), a joint venture of US-based General Electric and Japan's Hitachi, on Monday announced the signing of two agreements with the Nuclear Power Corporation of India (NPCIL) and Bharat Heavy Electricals Ltd (BHEL) to build nuclear reactors for power generation in India.

Speaking to Hindustan Times, Kishore Jayaraman, CEO, GE Energy, for India, Bangladesh and Sri Lanka, said that under the agreements, GEH along with NPCIL and BHEL will plan necessary resources required in the manufacturing and construction of a multiple-unit Advanced Boiling Water Reactor (ABWR) nuclear power station.  (More ...)

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ADVFN World Daily Markets Bulletin (excerpts)

US Stocks at a Glance

Nasdaq Pulls Back To A New Low For The Session

Stocks are seeing notable weakness in mid-morning trading on Tuesday, with the major averages giving back some ground after posting standout gains in the previous session. The weakness in the markets is largely due to profit taking following Monday's rally.

While stocks are moving mostly lower, selling pressure has remained somewhat subdued, as traders keep an eye on comments by Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner's before the House Financial Services Committee.

In prepared remarks, Bernanke drove home the point that while the bonuses AIG has given to employees were inappropriate, the overall bailout of the world's largest insurer was necessary to prevent a 1930s style meltdown.
Additionally, Geithner made it known that the AIG Financial Products division was unregulated, operating in unregulated ways and that all institutions that pose systemic risk to the broader economy must be subject to oversight.

The major averages have moved to the downside in recent trading, with the tech-heavy Nasdaq pulling back to a new low for the session. The Dow is currently down 100.75 at 7,675.10, the Nasdaq is down 27.08 at 1,528.69 and the S&P 500 is down 11.99 at 810.93.

Canadian Market

Toronto Stocks Surrender Some Of Recent Rally

Toronto stocks have turned lower on Tuesday as traders cashed in on a recent rally. The drop took the market off its highest level in six weeks.

The S&P/TSX Composite Index has lost 135.40 points or 1.51% to 8,766.65. The index has closed higher in nine of the previous sessions.

European Shares

Early gains evaporate after inflation data
Market Movers
FTSE 100 3,910.16 -1.08%
techMARK 1,129.66 +0.82%
FTSE 250 6,407.82 +0.26%

Blue chips have reversed their early gains after inflation data showed a surprise rise in the government's measure in February.

Economists were scratching their heads as to why prices rose to 3.2%. RPI, arguably the real measure of inflation, fell to zero, but again this was higher than expected with minus 0.5% the consensus figure.

Asia Markets

Asian markets end higher on optimism about banking sector stability

The major markets across the Asia-Pacific region ended in the green on Tuesday, buoyed by the cues from Wall Street, where the markets witnessed the biggest one-day rally since October 2008 after the Obama Administration unveiled plans to help banks sell toxic assets and pave way for a revival in credit flow, which is critical for reviving the economy. Positive economic data on existing home sales also lifted market sentiment.

Market analysts are speculating that the extension of the relief rally might signal that the bottom has already been reached and the markets may find stability in the short-term, on optimism that the plans will really work and the global economic recovery might take place sooner than expected, with the banking sector likely to lead the recovery.

Commodities

Crude Backs Away From Multi-Month High

Crude oil prices edged lower on Tuesday and gave back some of yesterday's rally. The decline took prices away from the recently-seen multi-month high.

Light sweet crude for May delivery fell 48 cents to $53.32 per barrel. Prices slipped as low as $52.87 in the opening moments of the session after touching above $54 on Monday.

Traders looked ahead to the Energy Information Administration data on weekly inventories, due Wednesday. Last week's report showed crude oil inventories increased 2 million barrels from the previous week. Motor gasoline inventories unexpectedly increased by 3.2 million barrels last week.

Stock Market News, Financial News - Mar 23, 2009

Tata Nano to hit roads in July

By Janaki Krishnan

MUMBAI (Reuters) - The Nano, the world's cheapest car, will hit Indian roads in July, four months after its formal launch on Monday, and demand is expected to far outstrip supply as the price tag of around $2,000 draws legions of new buyers.

Hundreds of thousands are expected to put their name down for Tata Motors' Nano, including many previously limited to motorbikes or public transport.  (More ...)

U.S. lays out plan to attract buyers for toxic debt

By David Lawder and Glenn Somerville

WASHINGTON (Reuters) - The U.S. Treasury Department on Monday rolled out detailed plans for persuading private investors to help rid banks of up to $1 trillion in toxic assets that are seen as a roadblock to economic recovery.

Generous government financing will underpin the so-called Public-Private Investment Program, which Treasury will kick off with $75-$100 billion that comes from its existing $700-billion bailout fund approved by Congress last fall.  (More ...)

Vodafone, Telefonica to share Europe networks

Financial Express

Vodafone and Telefonica have agreed to share network infrastructure in four European countries to meet a surge in demand for mobile broadband while saving hundreds of millions of pounds in costs.

The agreement announced on Monday, the biggest of its kind to cover multiple countries, is a sign of the urgency to save money and also of the success of flat-rate data packages in stimulating demand for Internet access on the go.  (More ...)

IMF says clean banks before crisis can be solved

GENEVA (Reuters) - The economic crisis cannot be resolved until the banking sector is cleaned up, the head of the International Monetary Fund said on Monday.  (More ...)

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ADVFN World Daily Markets Bulletin (excerpts)

US Stocks at a Glance

Major Averages Rally To New Highs For The Session

Stocks are showing significant strength during mid-morning trading on Monday, as investors cheer the new plan for fixing the downtrodden banking sector. Some strong earnings in the retail sector and existing home sales figures are also helping to drive stocks higher.

Earlier in the day, Treasury Secretary Geithner announced his plan to help the troubled banking industry. The plan will involve setting up an investment fund to buy mortgage-related securities and other assets that are driving down the balance sheets at the banks.

The new Public Private Investment Program would combine taxpayer money with private funds, aiming to buy loans and free up banks to renew lending.

On the economic front, existing home sales for the month of February came in considerably better than analysts had anticipated, rising to a rate of 4.72 million from a pace of 4.49 million units in January. Economists had expected sales to slip to a 4.45 million unit rate.

The major averages have seen some further upside in recent trading, rising to new highs for the session. The Dow is currently up 276.22 at 7,554.60, the Nasdaq is up 51.03 at 1,508.30 and the S&P 500 is up 28.73 at 797.27.

European Shares

Barclays boosted by iShares talk

Financials and miners are leading London’s advance as the market awaits an announcement later today by US Treasury Secretary Timothy Geithner in which he is expected to give more details of the US government's stimulus plans.

With further help for the banking system expected to be announced by Geithner, banks are understandably in demand. Barclays is higher on talk that it could conclude a sale of iShares business for £5bn as early as this week. Barclays bear Sandy Chen at Panmure Gordon is unimpressed, and said his 40p price target for Barclays could be cut if the bank offloads iShares.

Asia Markets

Asian markets advance on stimulus expectations; resource, financials gain

The major markets across the Asia-Pacific region advanced on Monday, led by resources and financial stocks, on higher commodity prices. Hopes of a stimulus package from Japan to revive the economy, announcement from China that it would meet its growth target and expectations of initiatives from U.S to unclog the credit markets and remove the toxic assets from the banks' balance sheets, more than offset the weaker closing in Wall Street on Friday.

In Asian trading, crude oil futures for May delivery, in their first day as a front-month contract, are currently at $52.67 a barrel, up $0.60. On Friday, the April futures expired at $51.06 a barrel, up $0.55 from their previous close.

Commodities

Gold Prices Edge Lower Again

Gold prices inched lower again in early trading on Monday, giving back a little more of last Thursday's massive rally. Trading took place amid the release of details of a new government plan to subsidize private investors' purchase of toxic assets on the books of troubled banks.

April-dated gold fell to $947.50, down $8.70 for the session. Prices dipped as low as $947.20 after earlier trading at $958.10.

How to pick Stocks for Investment - Part I

Which are good stocks to pick for my investment portfolio? How do I go about picking such stocks? Can you please share your 'buy list'? Is this a good time for stock picking?

These are some of the questions I face most often from friends, relatives and investors. The fact that many are still asking such questions is an indication that the bear market hasn't reached its bottom yet.;-)

Some of the business TV channels ring a bell when the stock market closes trading for the day. No bell ringing can announce the end of a bull or bear market. One has to look for certain human behavioural indications.

Near the peak of a bull market, all conversation - whether at family gatherings or around the office water cooler - leads to a discussion about the stock market, and who has made a killing on which stock. The newspaper headlines scream "Sensex crosses 20000" in huge bold fonts. Business channel hosts 'celebrate' every 1000 point Sensex rise wearing beaming smiles and funny coloured plastic hats.

When the bear market meanders down towards its bottom, the newspaper headlines go back to reporting political or sports news. Business TV hosts have glum looks and talk in hushed monotones. Friends and relatives smile weakly if they catch your eye, and then slide away mumbling about some important business to attend to. 'Shares' becomes a dirty word, not to be uttered in front of children or in public.

So why did I choose to discuss stock picking at this time? It is for the benefit of those investors who have bought stocks by following some one's advice or tips without doing any home work and have not just lost money, but have realised their folly.

Serious investment is akin to running a business. It requires all the due diligence, courage, knowledge and perseverance that are needed to make a success of any business. (For excitement and thrill, there are casinos and race tracks.)

Enough pontification. On to some basic guidelines that I have followed with a reasonable measure of success (that means, with more than a 50% chance of my picks making money).

In a prior post, I had explained how the stock market and the overall economy move in cycles, with the stock market 'leading' the economic cycle by a few months. I had also discussed which sectors come in to prominence at which stage of the cycle.

For example, many investors stuck with overpriced real estate stocks may be thinking that this is a good time to buy the beaten down stocks. The problem is that they will have to wait a really long time - till the next bull market nears maturity - to earn any reasonable profits.

An important criteria for smart investment is to identify at which stage the market and economic cycles are in now. Then short-list the top two or three stocks (by size and reputation) from the corresponding sectors for further analysis.

Just because some sectors tend to dominate others at different stages of the market cycle does not mean an investor should flit in and out of sectors to try and 'time' their profits. Again, consider the real estate example. The sector has been dogged by lack of transparency, accounting shenanigans and dubious managements. Such sectors should be avoided like the plague.

In a post on Dec 14, '08, I had indicated the sectors that I like for long term investment. I had also listed out a number of stocks in such sectors. Interested readers may want to go through that post.

In the next installment of this topic, I will provide some thumb rules on how to narrow down your 'buy list' to the 10 or 12 outstanding stocks that should form your 'core'  investment portfolio.

Sensex Chart Pattern - Week ending Mar 20, 2009

In last week's Sensex chart pattern analysis, this is what I had written about the Sensex rally:

How much further upwards can the Sensex go? Since Dec '08, the Sensex had made three attempts to cross the 50 day EMA, and failed all three times. Chances are that it will again get resisted at the 50 day EMA level of around 9100 or so.

Was it clairvoyance? Not at all. Just an observation based on past experience of chart pattern watching. This is what makes technical analysis such an interesting subject - even though fundamental analysts denigrate its importance.

(Readers, and soccer lovers, who would like to learn more about the fundamental analysis vs. technical analysis debate can click on the following link:-

http://investmentsfordummieslikeme.blogspot.com/2008/06/why-michael-ballack-is-good-role-model.html)

Without further ado, let us look at the 6 months Sensex chart:-

(You can right-click on the image above and open it in a new tab or window for a better view.)

Continuing the previous week's rally, the Sensex pierced through the 20 day EMA from below, which was a short term positive. It made valiant efforts to overcome the resistance of the 50 day EMA - but failed.

Despite a close just above the 9000 level on Thursday, Mar 19, '09 the contest between the bulls and bears finished about even-steven, with the Sensex closing below the 9000 mark but about 200 odd points above last week's close. That is the good news.

Now the bad. Through the week, the Sensex remained in between the 20 day and 50 day EMAs. Volumes gradually came down - even on uptick days.

The slow stochastics emerged from the oversold zone but is about to enter the overbought zone (above the '80' line). The RSI also emerged from the oversold zone but stalled at the mid-point. The ROC is marginally above the '0' line. MACD is still a bit negative.

Bottomline? The Sensex continues its consolidation in the rectangular sideways chart pattern, where it has remained for nearly 5 months. But now it is gradually trending down with a lower-top and lower-bottom pattern. So the likelihood of breaking downwards is increasing by the day. Investors should remain patient and keep their cash safe in a bank.

Stock Market News, Financial News - Mar 20, 2009

Oil at $52, recoups losses after ship collision

By Chris Baldwin

LONDON (Reuters) - Oil hovered above a four-month high on Friday at $52 a barrel, recouping earlier losses as the market sought a new base above $50 and after news of a ship collision in the key Strait of Hormuz shipping lane.

The market surged on Thursday to $51.61, its highest settlement since Nov. 28, after the U.S. Federal Reserve announced a plan to buy long-term government debt and the dollar fell, boosting investor appetite for commodities.  (More ...)

SEBI seeks comments on derivative proposals

MUMBAI (Reuters) - India's market regulator is seeking comments on recommendations to introduce over-the-counter products and mini contracts in individual stock derivatives, as well as options contracts with a tenure of three years or more.

The Securities and Exchange Board of India (SEBI) said its Derivatives Market Review Committee also recommended that products such as options on currency futures and derivatives on volatility indexes should be considered.  (More ...)

Ashok Leyland Feb sales drop, duty cuts help

MUMBAI (Reuters) - Sales by Indian commercial vehicle maker Ashok Leyland Ltd in February more than halved from a year ago as a sliding economy put a brake on industrial activity and the movement of goods.

Sales of trucks and buses dived 57 percent to 3,245 units in the month, the firm said on Wednesday. But that was up a third from January after the government lowered factory gate duties.

Earlier in the week, its rival Tata Motors reported a similar trend, with sales dipping an annual 25 percent in February, recovering some ground from a sharper 43 percent contraction in the month before.  (More ...)

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ADVFN World Daily Markets Bulletin (excerpts)

US Stocks at a Glance

Major Averages Turn Mixed After Seeing Early Strength

Stocks are seeing notable uncertainty during mid-morning trading on Friday as investors react to some mixed corporate news and wait for a speech from Fed Chairman Ben Bernanke. The major averages have had difficulty sustaining any significant moves.

Bernanke's speech is expected to cover the financial crisis and community banking when he delivers it at the Independent Community Bankers of America's National Convention at 12 am ET.

European Shares

FTSE tracks sideways as financials cancel each other out

FTSE is tracking sideways today as a weak bank sector offsets more gains for the life insurers. HSBC and Barclays are among the worst performers after the former went ex-rights, but elsewhere in the banking sector, Lloyds is going well.

Life groups continue to tick up led by Legal & General and Prudential. The Pru is being helped by stories that its new chief executive's first job could be to break the life group up.

Asia Markets

Asian markets end mixed; financials drop on profit taking

Mixed trading was witnessed in the major markets across the Asia-Pacific region on Friday, except Japan, which is closed for a holiday, following weak cues from Wall Street, where profit taking dragged the major indices lower despite a rise in commodity, gold prices. While resource stocks advanced on higher commodity prices, investors were skeptical over the moves of the U.S Federal Reserve and the Bank of Japan towards quantitative easing through printing money that might stoke inflation in the long term.

In Asian trading, crude oil was modestly lower in electronic trading, after rising $3.47 to $51.61 a barrel on the New York Mercantile Exchange on Thursday.

Commodities

Gold Prices Inch Lower After Huge Rally

The price of gold edged lower on Friday morning as some investors collected profits on yesterday's sharp rally. The dollar steadied against major rivals following massive losses in recent days.

April-dated gold futures fell to $50.58, down $1.03 for the session. Prices touched as low as $948.70 in the early going.

Gold soared $68.70 on Thursday amid worries of inflation after the Federal Reserve's plan to buy as much as $1.15 trillion in bonds was revealed yesterday. The rally took the metal to its best levels in almost a month.

Have some fun in a Bear Market

The prolonged bear market seems to have taken away all the fun and thrill of investing in the stock market. Brokers and business TV hosts have long faces. Analysts are predicting gloom and doom, with worse to follow. Capacity expansions are being curtailed, GDP is cooling off, WPI is coming down but CPI is going up.

Amidst all this, bored operators chose to have some fun by jacking up the prices of Akruti City to stratospheric levels in an effort to trap short sellers. The jury is still out on who had the last laugh.

I thought, let us all have some fun. So I've chosen an excerpt from a crazy short story titled 'Examining Psychic Phenomena' written by Woody Allen (yes, the loony actor and filmmaker). It was published in an anthology of  humorous stories (The Ultimate Humour Book, Chancellor Press, 1991).

The excerpt has a tenuous connection to this blog. Read, enjoy, pass it along.

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Spirit Departure

Mr Albert Sykes reports the following experience:  'I was sitting having biscuits with some friends when I felt my spirit leave my body and go make a telephone call. For some reason, it called the Moscowitz Fiber Glass Company. My spirit then returned to my body and sat for another twenty minutes or so, hoping nobody would suggest charades. When the conversation turned to mutual funds, it left again and began wandering round the city. I am convinced it visited the Statue of Liberty and then saw the stage show at Radio City Music Hall. Following that, it went to Benny's Steak House and ran up a tab of sixty-eight dollars. My spirit then decided to return to my body, but it was impossible to get a cab. Finally, it walked up Fifth Avenue and rejoined me just in time to catch the late news. I could tell that it was reentering my body, because I felt a sudden chill, and a voice said, "I'm back. You want to pass me those raisins?"

'This phenomenon has happened to me several times since. Once, my spirit went to Miami for a weekend, and once it was arrested for trying to leave Macy's without paying for a tie. The fourth time, it was actually my body that left the spirit, although all it did was get a rubdown and come right back.'

Spirit departure was very common around 1910, when many 'spirits' were reported wandering aimlessly around India searching for the American Consulate. The phenomenon is quite similar to transubstantiation, the process whereby a person will suddenly dematerialize and rematerialize somewhere else in the world. This is not a bad way to travel, although there is usually a half-hour wait for luggage. The most astonishing case of transubstantiation was that of Sir Arthur Nurney, who vanished with an audible pop while he was taking a bath and suddenly appeared in the string section of the Vienna Symphony Orchestra. He stayed on as the first violinist for twenty-seven years, although he could only play 'Three Blind Mice,' and vanished abruptly one day during Mozart's Jupiter Symphony, turning up in bed with Winston Churchill.

Stock Market News, Financial News - Mar 19, 2009

India adds 13.45 m mobile users in Feb - TRAI

NEW DELHI (Reuters) - Indian mobile firms added 13.45 million subscribers in February, a performance bettered only by January's record signings of 15.41 million, data from the telecoms regulator showed on Thursday.

The country's mobile subscriber base rose to 375.74 million at end-February, the Telecom Regulatory Authority of India said, rising 3.7 percent from January.  (More ...)

India, China agree to remove irritants in trade

Financial Express

China, concerned over recent six-month ban by India on its toy exports on health and safety grounds, has called for boosting and diversifying the bilateral trade between the two countries. It has agreed to give India more market access. 

India-China bilateral trade during 2007-08 was to the tune of $37.9 billion with the balance tilted in favour of China. India's exports amounted to $10.8 billion while its imports were $27.1 billion.  (More ...)

Tata Motors ties up with Indian Bank for retail finance

India's largest auto maker, Tata Motors, on Thursday said it has tied up with public sector lender Indian Bank for providing financing facilities to its passenger vehicle customers.

"In order to provide an added facility of car finance to its customers, Tata Motors has entered into an understanding with Indian bank for financing its range of passenger vehicles," the company said in a statement.  (More ...)

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ADVFN World Daily Markets Bulletin (excerpts)

US Stocks at a Glance

Major Averages Turning In A Mixed Performance

Stocks have come off their highs in mid-morning trading on Thursday and are showing significant uncertainty as investors respond to mixed news from the economic and corporate fronts. The major averages are currently turning in a mixed performance.

The uncertainty follows a late day rally in the previous session, when investors benefited from a positive reaction to the Federal Reserve's plan to buy treasury notes and mortgage-related assets, driving a sharp upward move in late day trading.

European Shares

London’s advance is growing in strength, despite expectations of a weak opening on Wall Street. Financials lead the advance, supported by miners, on hopes that the US programme of quantitative easing will boost the world’s major economy.

In a move mirroring recent actions by the Bank of England, the US central bank said it would move to buy treasury notes with maturity dates of between two to 10 years to “help improve conditions in private credit markets.”

Asia Markets

Asian markets end mixed; Financials advance on U.S initiative to unclog credit markets

Mixed trading was witnessed among the major markets in Asia-Pacific region on Thursday, with markets in Japan, Taiwan and South Korea drifting lower while markets in Australia, China, Singapore, Hong Kong, Malaysia and Indonesia ended higher.

In Asian trading, crude oil advanced $0.87 a barrel to $49.01 in electronic trading, after closed down $1.02 at $48.14 a barrel on the New York Mercantile Exchange on Wednesday.

Commodities

Gold Surges More Than $50 An Ounce

Gold soared in early trading Thursday amid recession fears on Federal Reserve's plan to buy as much as $1.15 trillion in bonds. The metal surged in electronic trading following the announcement Wednesday afternoon.

April-dated gold moved to $948.00, up $58.90 for the session. The metal hit as high as $951.90 in electronic transactions.

Stock Market News, Financial News - Mar 18, 2009

Investment drought spells fresh energy crisis

By Barbara Lewis and Simon Webb

VIENNA (Reuters) - No sooner has the world recovered from a deep economic downturn than it could face a set-back from surging oil prices, energy leaders warned on Wednesday, citing a sharp drop in investment in the sector.

Representatives of consumers, producers, national and international oil companies agreed at an OPEC seminar that a weaker oil price had meant delayed or cancelled projects. (More ...)

Maxis commits $10 billion to Aircel

NEW DELHI (Reuters) - Malaysia's Maxis Communications Bhd is investing $10 billion in its Indian unit Aircel to accelerate its expansion in the world's fastest-growing mobile market, and is interested in bidding for 3G spectrum.

Half of that has already been spent expanding Aircel's network, Maxis chief executive Sandip Das said at the launch of services in the lucrative Delhi zone on Wednesday, adding he hoped to nearly double the number of subscribers this year.  (More ...)

IBM in talks to buy Sun Microsystems

By Ritsuko Ando and Anupreeta Das

NEW YORK (Reuters) - IBM is in talks to buy Sun Microsystems Inc, sources with knowledge of the matter said, a move that could bolster the technology giant against rivals in the high-end computer server market.

International Business Machines Corp is offering to pay at least $6.5 billion, or double Sun's Tuesday closing price of $4.97, The Wall Street Journal reported online earlier. Shares of Sun jumped 64 percent in pre-market trading to $8.16, while IBM shares fell 2 percent to $90.89.  (More ...)

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ADVFN World Daily Markets Bulletin (excerpts)

US Stocks at a Glance

Dow And S&P 500 Falling To New Lows For The Session

Stocks are seeing considerable weakness in mid-morning trading on Wednesday, as traders cash in on the market's recent gains. The major averages are giving back some ground after ending the previous session at their best closing levels in almost a month.

The weakness in the markets is largely due to profit taking, with traders cashing in on the strong gains seen in recent sessions. However, selling pressure has remained relatively subdued, helping the major averages to hold onto the bulk of their recent gains.

Some traders may be staying on the sidelines ahead of the Federal Reserve's announcement of its latest decision on interest rates.

European Shares - Back to square one

Leading shares are mixed after a poor set of UK unemployment figures put the kibosh on an early attempt to continue yesterday’s rally.

The number of people out of work rose to 2.03m in the November - January quarter from 1.97m in the October to December period. A record 138,400 people signed on for job seeker’s allowance in February. This was well in excess of the 90,000 new claimants that had been expected and brings the total number of claimants to 1.39m.

Asia Markets - Markets advance on Wall Street's gains

The major markets across the Asia-Pacific region advanced for the fourth day in succession, led by financials. However, the rally seems to be losing steam, with profit taking in select stocks and a slump in metals generating some selling pressure. Except Australia, all the other markets in the region ended in the green.

Crude oil ended $0.71 down in Asian trading at $48.45 a barrel in electronic trading, after having closed at $49.16 a barrel on the New York Mercantile Exchange on Tuesday. In the New York session, the commodity gained, $1.81 after hitting an intra-day low of $46.53 and a high of $49.82.

Stock Chart Pattern - State Bank of India

For the mid-week stock chart pattern discussion, I'll take a look at the technicals of the largest bank in India, SBI.

I have a bias against stocks of public sector undertakings (PSUs). At one point of time (and may be even now), PSUs were hot beds of corruption and red tape. Even the military establishments weren't free of this dual menace.

30 years back, when I was first posted at New Delhi, and had to solicit business from the likes of EPI, BHEL, NTPC, ONGC, MES, a well-wisher advised that I should get hold of a 'fixer' if I wanted to crack open government orders.

As a green horn, I had no clue what a 'fixer' was and how to locate one. So I muddled along without making much headway. I believe things have improved a lot since then, but my negative feelings about doing business with PSUs have remained.

I still haven't overcome my bias to make investments in PSUs. After my father passed away ten years ago, I had to run pillar-to-post to recover his pension amount and savings bank account balances from SBI. But there has been a sea change in attitude towards efficiency and customer service at SBI, to the point where it is now near the top of my 'buy list'.

Let us have a look at the 6 months chart pattern of SBI:-

(You can right-click on the image above and open it in a new tab or window for a better view.)

All the three EMAs - 20 day, 50 day and 200 day - are moving downwards with the shorter term averages below the longer term ones. If you don't know what EMAs are and how to 'read' them, please read the blog post: "Why you need to follow the latest trends to become a better investor".

SBI was treading water in a sideways rectangular consolidation chart pattern, just like the Sensex, but broke below the strong support at 1000 level early this month. It is now making an effort to climb back into the rectangular consolidation zone, but is facing resistance from the short-term 20 day EMA.

If it manages to break upwards, it will be resisted strongly at the 1100 level - both by the 50 day EMA, and the down sloping trend line that can be drawn by connecting the two previous tops of 1400 and 1200 (made in Jan '09 and Feb '09 respectively).

Notice how the 20 day EMA moved up and then merged with the 50 day EMA before moving back down again during the Jan '09 up move. The down move was hastened by the news of the Satyam fraud. Due to such chart patterns, technical analysts claim that fundamental analysis is of little use because the stock price reflects the fundamentals. (I don't necessarily agree with such a view.)

The slow stochastics and RSI are trying to emerge from oversold zones (below '20' line) to support the current up ward pull back. But the MACD is still very much in negative zone. The most interesting indicator is the volumes, which are higher on down days and lower on up days. This is not a good sign.

In the Jan '09 attempt to move up, the 200 day EMA provided the resistance. In Feb '09, the 50 day EMA resisted the up move. In Mar '09, even the 20 day EMA is proving a tough barrier. All this points to the conclusion that the down move in SBI isn't over.

Fundamentally, SBI is far less riskier than ICICI Bank and Axis Bank because of its correspondingly lower exposure to derivatives. It is also trading around its book value and is therefore looking like a value buy.

Bottomline? There is strong support on the longer term charts at 900, from where it bounced back recently. Thereafter there is support at the 700-750 level. Those are levels where long term investors can start to nibble at this stock. (Since I don't trade, I'm wary of advising trading calls. May be initiate fresh shorts when this up move gets exhausted around 1050-1100. But please do your home work diligently.)

ADVFN World Daily Markets Bulletin - Mar 17, 2009

US Stocks at a Glance

Nasdaq Moves Firmly Positive, Dow Lingers Near Unchanged

With traders expressing some uncertainty about the near-term outlook for the markets, stocks are showing a lack of direction in morning trading on Tuesday. The major averages have had difficulty sustaining any significant moves.

The lackluster performance by the broader markets comes after stocks saw considerable late-day weakness in the previous session, bring an end to their recent 4-day winning streak.

Investors now seem to be questioning whether the markets will see any further upside or move back to the downside to retest the multi-year lows set earlier this month.

Nonetheless, some positive sentiment was generated by a report from the Commerce Department showing an unexpected increase in housing starts in the month of February. The growth was largely due to a significant jump in new construction of multi-family structures.

While the Nasdaq and the S&P 500 have moved firmly into positive territory in recent trading, the Dow is lingering near the unchanged line. The Dow is currently down 6.37 at 7,210.60, while the Nasdaq is up 12.49 at 1,416.51 and the S&P 500 is up 4.26 at 758.15.

Canadian Market

Bay Street Stocks Slightly Lower After Five-Session Streak Of Gains

Canadian stocks are slightly lower in early trading on Tuesday after gaining in each of the last five sessions. Gold-related stocks pulled the market lower as the precious metal fell on the Comex.

The S&P/TSX Composite Index dropped 38.03 down 0.45% to move at 8,348.68. The market had closed yesterday at a monthly high.

Gold stocks are leading the decliners with a 3.1% drop, while materials stocks are down 2.7%. April gold has dropped $5.50 to $916.50.

Kirkland Lake Gold is down 6.3% after the company reported third quarter net loss of C$4.69 million or C$0.08 per share, compared to a loss of C$1.89 million or C$0.03 per share in the year-ago quarter.

New Gold has lost 1.5% after the company reported fourth-quarter net earnings of US$41.1 million. Consolidated revenue for the quarter of 2008 was US$59.0 million.

Mining stocks have dropped 2.2% as Inmet is down 4.25%, Teck Cominco is down 3.4% and First Quantum has lost 3%.
Ensign Energy is flat after the stock was downgraded to Underweight from Market Weight by Thomas Weisel Partners.

OPTI Canada is down 1.13% after the company said president and chief executive officer Sid Dykstra, will step down, effective April 28. He will be replaced by Christopher Slubicki.

Meanwhile, Nokia Corp. announced it will cut about 1,700 jobs globally to increase cost-efficiency and acclimatize to the market situation.

On the economic front, Canadian manufacturing sales decreased 5.4% to $41.7 billion in January, falling to the lowest level in almost 10 years, according to data released by Statistics Canada.

The S&P/TSX Composite Index rallied 83.32 points or 1% to end at 8,386.71. The market closed at its highest level in more than one month

European Shares

FTSE recovery fizzles out
Market Movers
techMARK 1,132.52 -1.08%
FTSE 100 3,811.68 -1.35%
FTSE 250 6,200.98 -1.11%

FTSE made a brief move towards the blue late in the morning but is now firmly in the red, with an update from Shell and adverse broker coverage of other stocks weighing on the index.

Oil heavyweight Royal Dutch Shell is a drag on the index after the group’s strategy update. The group said it has balance sheet flexibility to maintain investment and grow dividends in the downturn and to fund future growth projects. The group said it is continuing with plans to build new upstream and downstream capacity, while managing the near-term challenges of the global economic slowdown.

Shell’s value is also hit by the lower oil price, which is usually good news for Carnival, but the cruise operator falls back after seeing its price target cut at RBS. The broker is worried that low bookings in January will affect the company’s results next week.

Caterer Compass is also hit by unfavourable broker coverage, with Deutsche Bank moving the stock to ‘hold’ from ‘sell’ after a share price rally. Cash call talk continues to dominate sentiment. Barclays is off the pace a little after yesterday's surge on news it may consider selling iShares to avoid joining the asset protection scheme.

Life and pensions group Friends Provident reported full-year underlying profits in line with expectations and said it expects new business in early 2009 to be below the 2008 comparatives.

Department store chain Debenhams is sharply lower after it said first half pre-tax profit will be ahead of previous year but there was no mention of the cash-call expected by some. The group said the combined impact of higher gross transaction value, gross margin and tight management of costs will result in first half profit before tax and EBITDA being ahead of the previous year.

JJB Sports has agreed a further extension of the standstill arrangements with its lenders and confirmed it is considering a company voluntary arrangement to help it ease some of its crippling debt problems.

Thomas Cook Group climbs after it said Karl-Gerhard Eick will succeed Thomas Middelhoff as non-executive chairman with immediate effect. Eick joined the Thomas Cook board in December 2008 as an Arcandor nominated non-executive director.

Component distributor Diploma has warned that a tough time for its seals business in the US and the adverse effects of the pound's weakness have hit both sales and profits in the past six months.

Higher production volumes and commodity prices pushed Venture Production profits up 82% in the year. Pre-tax profit rose to £184.2m from £101.2m last year as revenue rose 38% to £494.9m thanks to substantially higher oil prices especially in the first half of the year and strong UK gas markets.

Torotrak surged forward as Allison Transmission, the world leader in fully automatic transmissions for commercial vehicles, took a 10% stake at 16.5p per share and purchased technology rights for £8.4m.

Kirkland Lake Gold is upbeat after third quarter losses narrowed slightly from the previous quarter and as it sits on a pile of cash to fund mining operations in Canada.

Broadband and telecom systems company BATM Advanced Communications revealed a 20% increase in annual pre-tax profit but investors were disappointed and the shares fell back. The company said it is 'cautiously optimistic' about prospects for this year and beyond.

Banks and energy stocks are leading Europe’s main markets lower in midday trade, ending a five-day rise. BNP Paribas, France’s largest bank, Switzerland's Credit Suisse and Banco Santander are all among the main fallers.

Energy stocks, including Royal Dutch Shell and Total are down in line with the falling crude price. It has been announced today that Simon Henry will be the new chief financial officer at Royal Dutch Shell when he takes up his new position on 1 May.

He’ll move up from his current role as Executive Vice President Finance in Shell International Exploration to replace Peter Voser who’ll be the new chief executive as of 1 July.

Across the markets, the German DAX has dropped 61 points to 3,983, the French CAC is down 49 points at 2,742, while the Swiss market fell 35 points to 4,780.

German carrier Air Berlin said it is in advanced talks with travel company TUI Travel over a potential strategic cooperation for TUI's German charter airline TUIfly.

Under the planned deal, a group member company of TUI Travel will participate in Air Berlin with a minority interest which will not exceed 20%. Air Berlin would indirectly acquire a participation in the same percentage in TUIfly. Final approval of the TUI Travel and Air Berlin board was still outstanding, Air Berlin said.

Asia Markets

Financials prop up Asian markets for third day in succession

The major markets across the Asia-Pacific region advanced for the third day in succession on Tuesday led by financial stocks after Standard Chartered Bank plc, the second largest bank in the UK, joined the list of major banks reporting positive performance in the first two months of 2009. Expectations of stimulus from the BOJ, as well as indications of rate cuts by RBA as early as April, lifted sentiment across the markets overshadowing the weaker closing in the U.S market on Monday.

Crude oil traded modestly lower in Asian trading. Oil prices, which declined sharply following OPEC's decision not to change the output levels, rebounded on Monday on expectations that economic recovery might happen earlier than expected and closed at $47.35 after trading in a broad range of $43.62 to $47.63.

Commodity prices, measured by a group of six metals in the London Metals Exchange, gained 3% on Monday with April futures price in New York for copper surging up 5%. Resource related stocks advanced following higher prices.
The relief rally in the global markets seems to be losing steam after the markets discounted positive comments by officials of major banks such as Citigroup, JP Morgan, Bank of America and Barclays Bank that they expect positive results for the first quarter of 2009. Comments by Standard Chartered Bank, the second biggest bank in the UK, that it had a strong start to 2009, helped the banks rally for the fifth consecutive day.

The benchmark Nikkei 225 Index advanced 244.98 points or 3.18% to close at 7,949, while the broader Topix Index of all First Section issues gained 19.83 points to close at 762.

Japan's service sector output was up a seasonally adjusted 0.4% on month in January, the Ministry of Economy, Trade and Industry said on Tuesday, posting an index score of 106.4. The data came in sharply higher than analyst expectations for a 0.5% monthly decline following the revised 1.6% decline on month in December and the 1.1% fall in November.

Financial stocks advanced on expectations that the BOJ might announce new initiatives for stabilizing the banking sector and provide stimulus to the economy. Sumitomo Mitsui Financial soared 7.28% and Mitsubishi UFJ Financial advanced 6.35%. Mizuho Financial and Resona Holdings advanced 5.29% and 3.71% respectively.

Sumco Corp., the second largest manufacturer of silicon wafers in the world surged up more than 9% after brokerage firms, Nomura Holdings and KBC Securities, upgraded the stock to "buy" rating. Chipmakers Elpida Memory and Shin-Etsu Chemical also advanced.

Exporters posted gains helped by a weaker yen. Sony Corp advanced 4.13%, Canon gained 2.89% and Sharp ended up by 2.11%.

Automakers advanced after the Nikkei business daily reported that Toyota plans to slash the price of its current generation Prius hybrid car to 1.89 million yen from 2.33 million yen to match rival Honda's Insight. Toyota also plans to bring to market in 2011 a new hybrid that is more affordable than the Prius. Both Toyota Motor and Hondo Motor gained more than 3% each.

Hitachi said on Monday that it will spin off its money-losing automotive devices operations and digital consumer business and focus on heavy electric machinery, railway and social-infrastructure businesses in a bid to turn around its battered operations. The company also appointed the head of its plant technology firm as president of the parent company. The stock ended higher by 1.90%.

Oil-related stocks ended higher following the overnight gain in crude oil price. Nippon Oil advanced 4.47%, Inpex gained 2.80%, and Showa Shell rose 1.79%.

In Australia, the benchmark S&P/ASX200 Index advanced 103.50 points or 3.09% to close at 3,452, while the broader All Ordinaries Index gained 92 points, or 2.78% to close at 3,389.
The minutes of the recently concluded RBA meeting, in which the central bank paused, raised hopes that the RBA will cut interest rates as early as April to help the economy combat recession, which helped lift market sentiment despite lingering doubts about the global economic outlook. Economic data indicating a rise in lending by banks to corporate houses and households also generated some buying interest.

Commonwealth Bank of Australia advanced 4.84%; National Australia Bank rose 3.38%, Westpac Banking Group gained 3.08% and ANZ Bank added 2.42% during the day. Investment bank Macquarie Group soared 8.78%.

In the resources sector, index leader BHP Billiton rose 2.84% and Rio Tinto gained 2.36%. Gold

Among energy stocks, Santos advanced 3.09% and Woodside Petroleum added 1.86%, while Oil Search remained unchanged from previous close.

Airline stocks also advanced with Virgin Blue Holdings, which reported an increase in domestic and international traffic for January, advancing 7.07%, and Quantas Airways gaining more than 6%.

Retail stocks ended higher on positive sentiment across the markets. Wesfarmers advanced 3.77%, David Jones rose 2.02% and Woolworths gained 2.63%.

In Seoul, the benchmark KOSPI Index surged up more than 3.4% or 38.42 points to close 1,164, led by financials and foreign buying in select blue-chip stocks. The local currency continued to strengthen against the U.S green back, closing higher by 31.50 won at 1408.50.

Financials led the rally; Shinhan Financial surged up more than 9.5% and KB Financial, the holding firm of Kookmin bank, advanced 6.77%. Woori Finance ended higher by 7.26%.

Among the blue-chip stocks, Samsung Electronics added 2.1% and LG Electronics gained 2.94%.

Exporters advanced on the strengthening of the local currency. Among the automakers, Kia Motors soared 6.67% and Hyundai Motor advanced 2.64%. Ssangyong Motor gained 3.08%.

Shipbuilding stocks also gained with Hyundai Heavy Industries and Samsung Heavy Industries adding 5.28% and 5.30% respectively.

The stock market in Hong Kong ended lower on Tuesday, giving away most of the gains made intra-day, on profit booking and concerns about the global economic outlook.
The benchmark Hang Seng Index, which gained 450 points or 3.6% on Monday, closed at 12, 878, down 99 points or 0.76%.

Telecom stocks declined sharply; Hutchison Whimpoa is down 4.44% and China Mobile lost 3.59%.

Insurance stocks Ping An and China Life shed 4.73% and 4.94% respectively. China-related stocks also declined on profit taking. China Overseas declined 6.82%, while China Resources lost 2.21%.%. In the resource space, Aluminum Company of China decreased 3.42%, Petrochina lost 2.18% and CNOOC shed 0.56%.

Mixed trend was witnessed among utilities; While HK & China Gas declined 2.38%, HK Electric gained 2.60 Financial stocks also closed mixed. While HSBC Holdings gained 2.88%, Bank Comm advanced 0.59% and Hang Seng Bank added 0.64%, BOC Hong Kong declined 3.30%.

Among the other markets in the region, China's Shanghai Composite Index gained 3.02% or 65.04 points to 2,218 and Taiwan's Weighted Index advanced 1.41% or 70 points to 5,041. Indonesia's Jakarta Composite Index declined 0.96% or 12.76 points to 1,312 and Singapore's Strait Times Index declined 27.61 points to close at 1,559.

Commodities

Crude Oil Prices Move Higher Again

Crude oil prices gained again on Tuesday morning, adding to its recent surge. Traders are betting that an improved economic outlook will help energy demand.

Light sweet crude for April delivery rallied to $47.88, up 53 cents on the session. Earlier, oil reached a weekly intraday high of $48.20.

Traders looked ahead to the Energy Information Administration's inventory report on Wednesday. Last week, the EIA said crude oil inventories increased 749,000 barrels in the week ended March 6. This is a little higher than the expectations of economists, who were looking for a build of about 300,000 barrels.

On the economic front, the U.S. Labor Department revealed Tuesday that producer prices rose by 0.1 percent for February. This followed a rise of 0.8 percent in the previous month.

Economists had expected producer prices to rise by 0.4 percent.
Meanwhile, the Commerce Department reported that housing starts rose 22 percent to an annual rate of 583,000 in February from a revised January estimate of 477,000. Economists had expected starts to fall to 450,000 from the 466,000 originally reported for the previous month.

Oil prices turned higher on Monday as confidence in an economic turnaround out-weighed the Organization of Petroleum Exporting Countries' decision to leave output unchanged.

Light sweet crude for April delivery finished at $47.35 per barrel, up $1.10 for the day. Prices touched as high as $47.63 after earlier touching as low as $43.63.

OPEC decided Sunday to not reduce oil production below current levels, instead deciding to focus their efforts on getting member countries to abide by their current output quotas. The cartel's 152nd meeting was held in Vienna.