the U.S. government "will never" lose its sterling credit rating despite big budget deficits

International News:

Treasury Secretary Timothy Geithner (GYT'-nur) says the U.S. government "will never" lose its sterling credit rating despite big budget deficits and a newly increased debt limit that now tops $14 trillion. Geithner says in an interview broadcast Sunday that in times of economic crisis, international investors will continue to buy U.S. Treasury bonds because the bonds are a safe investment. The euro fell toward the lowest level in eight months against the dollar on speculation mounting budget deficits in some European nations will keep policy makers from raising interest rates. The chief executive of German software company SAP AG, Leo Apotheker, has resigned after his contract was not renewed and will be succeeded by two co-CEOs, the company said Sunday. Apotheker, who has been with the company since 1988, became co-CEO in April 2008 and took the helm alone less than a year ago.

Domestic News:

PE investments in India double in Jan '10 (y-o-y) to $386 mn. The Planning Commission has said that investment in the infrastructure sector has doubled in the past five years from 4 per cent to 8 per cent of GDP. The National Highways Authority of India (NHAI) plans to increase the outlay on building roads for 2010-11 by 64.6 per cent to Rs 47,736 crore. The government may not tinker with the corporate tax rates in the Budget 2010-11 despite pressure from India Inc to slash rates or at least do away with surcharge and cess. Government plans to raise about Rs. 30,000 cr in the next financial year from stake sale in public sector firms, in an attempt to bring down the fiscal deficit. Indian telecom companies will together save at least $1.5 billion this fiscal in capital expenditure due to sharing of towers and other accompanying infrastructure. New value-added tax (VAT) rule introduced in European Union from January this year, may squeeze margins for India’s tech firms like TCS, Infosys and Wipro.

Corporate news:

Larsen & Toubro (L&T), is eyeing a revenue of Rs 3,700 crore this fiscal from its electrical systems business, which manufactures switchgears, metering systems, petrol dispensing pumps and medical equipment, among others. India’s biggest sugar refiner Shree Renuka Sugars will put in the final bid for Brazil’s Equipav Acucar E Alcool next week. McNally Bharat Engineering Company has bagged two orders worth Rs 56.64 crore from Hindalco, for construction related works. Indiabulls Group will develop a Special Economic Zone (SEZ) at Sinnar near Nashik in association with the Maharashtra Industrial Development Corporation. Kohinoor Foods plans to manufacture Thai and Italian ready-to-eat packaged foods at its two existing facilities in Haryana by end-2010. Maruti looks to export Ritz to SE Asia, Middle East. Cadila Pharmaceuticals’ plan to develop H1N1 (swine flu) vaccine may get delayed as the government has shown caution in giving go ahead for the clinical trials.

Derivative View:

Nifty near contracts ends the extended week down by 126.30 points at a discount of 7.90 points with unchanged OI. Nifty OI PCR in at 1.031 compared to 1.152 at the close of last week. Nifty puts sees addition of 1.08 Crores and calls sees addition of 1.55 Crores over the day. Highest OI in Nifty calls seen at 5000 Feb strike and puts at 4800 Feb strike. Nifty VIX at 29.22 from 26.13 last day. During the Fridays session 4400, 4700 4500 & 4600 Feb strike Nifty puts adds 35.28 Lakhs in OI during the Friday session. 4700, 4600, 4900 & 5100 Feb strike calls add 24.58 Lakhs during the Friday session. 4800, 4900 & 5000 Feb puts saw unwinding 33.2 Lakhs in OI during the session. No significant unwinding was seen in Nifty calls during the session. Short covering was seen in Nifty futures over the week and Index options was seen to be bought. Stock futures saw long build up during the week.

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o The International Monetary Fund said that India can gradually start raising interest rates as Asia’s third-largest economy

International News:

The International Monetary Fund said that India can gradually start raising interest rates as Asia’s third-largest economy is among the first to recover after the global financial crisis. Stocks buckled Thursday under the growing belief that the global economy is weaker than many investors expected and likely to stop companies from hiring. A flood of bad news, including rising debt levels in European nations and an unexpected jump in the number of Americans filing for unemployment benefits, had investors pulling money out of assets like stocks and commodities that look increasingly risky. Warren Buffett’s Berkshire Hathaway Inc. was stripped of its last AAA credit rating by Standard & Poor’s after the billionaire investor agreed to buy railroad Burlington Northern Santa Fe Corp. Berkshire, which is taking on debt to fund the $26 billion takeover, was cut to AA+ from S&P’s highest grade. Companies in the U.S. are spending the highest portion of bond-sale proceeds in more than a decade for acquisitions and expansions, joining Warren Buffett’s “all- in wager” on a recovery and taking advantage of the lowest borrowing costs since 2004. Australia’s central bank said economic growth will continue to accelerate this year even if policy makers are forced to raise the benchmark interest rate by another three quarters of a percentage point. The economy will be growing at an annual pace of 3.25 percent in the three months through December 2010, up from 2 percent last quarter. Food inflation up 17.56% y-o-y, on January 23, compared to 17.40 percent in the previous week. The country's software and business process outsourcing exports are expected to rise 5.5 per cent to touch $50 billion in the current fiscal (2009- 10), according to Nasscom. International Monetary Fund (IMF) has predicted that the Indian economy would grow at 8 per cent in fiscal 2010-2011. FDI inflows rise 10% to $1.5 bn in Dec 2009. India's exports are likely to contract by 5.2 per cent in the current fiscal but would start looking up in 2010-11, according to a Reserve Bank-sponsored survey. Trai plans to set up a national policy on setting up telecom towers by June. Sugar mills and other food processors have entered into contracts to import over 12 lakh tonnes of sugar in the last one month. USFDA has asked Ranbaxy to assess the manufacturing practices at its plants saying that the company has failed to adequately address the concerns raised by it earlier. Dalmia Cement (Bharat) Ltd has raised its stake in OCL India to 45.4 percent, from 21.7 percent earlier, through inter-se transfer, in an all cash deal. The foreign lenders of Wockhardt have said they would not object to the proposed sale of its nutritional business to Abbott if the money received were to be put in a separate account till their case was pending in the High Court. Real estate developer DB Realty has fixed the issue price of its initial pubic offer (IPO) at Rs 468 per share, the lower end of its price band. Essar Oil, India's largest private fuel retailer, plans to nearly double its petrol pumps to 2,500, by March 2011. Public sector enterprise HMT Watches is likely to receive a revival package from the government by the beginning of the next financial year for plant upgradation and revamping marketing strategy.
Israel court stops Sun Pharmaceuticals Industries Ltd. from exercising a warrant to purchase additional Taro shares till the time an earlier temporary injunction is in effect.

Derivative View:

Nifty near contracts ends the day down by 92.20 points at a discount of 11.75 points adding OI by 3.1% with indications of short build up. Nifty OI PCR in at 1.098 compared to 1.148 in the last trading session. Nifty puts sees addition of 11.05 Lakhs and calls sees addition of 32.70 Lakhs over the day. 4600, 4200, 4500 & 4800 Feb strike Nifty puts adds the most during the day and 4900, 4800, 5100 & 5300 Feb strike calls add the most during the day. 5000 & 4700 Feb puts saw unwinding of positions during the session. Highest OI in Nifty calls seen at 5000 Feb strike and puts at 4800 Feb strike. Nifty VIX at 27.07 from 25.54 last day. Long build up seen over the day in etc. Short build up seen in GMRINFRA, UNITECH, AMBUJACEM, HCC, RENUKA, HINDZINC, HINDUNILVR, MINIFTY, HINDALCO, LITL, BAJAJHIND, VOLTAS, RANBAXY, JPASSOCIAT, HCLTECH, RPOWER, PATELENG, BANKNIFTY, CROMPGREAV, DLF, DIVISLAB, KOTAKBANK, ACC & CENTURYTEX etc. FII side sees marginal short build up in Nifty futures and short build up in stock futures and Nifty options was bought with an addition of open Interest.

Outlook & Strategy:

Technically in Nifty near contracts chart patterns are indicating the break down of the flag formation with an eventual target of 4350 in the coming days. Nifty open Interest put call ratio moved down over the day and IV’s have started moving up with negative implications for the market. Short build up was seen in Nifty and a lot of stocks during the day.

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Toyota Motor Corp.

International News:

Toyota Motor Corp. may recall its new Prius hybrid model in Japan after the government ordered the company to investigate brake-related complaints on the car.
The yen and dollar strengthened against higher-yielding currencies on speculation the Asia- Pacific region’s economic recovery will slow and European nations will struggle to reduce their deficits. Australian retail sales unexpectedly fell in December for the first time in five months as households, reeling from a record three interest-rate increases, cut spending at department stores and supermarkets.
Ben S. Bernanke vowed to defend the independence of the Federal Reserve, work harder to explain its decisions to the public and step up supervision of the nation’s banks during his second term. Visa Inc. said its profit rose 33 percent in the fiscal first-quarter on increased revenue, even as consumers pull back sharply on spending amid the recession. The Kirit Parikh panel has suggested freeing petrol and diesel prices and called for raising LPG rates by a steep Rs 100 per cylinder and kerosene by Rs 6 a litre, recommendations that may not be acceptable to the government battling high inflation. The Reserve Bank of India (RBI) has decided to withdraw a short-term foreign currency funding facility provided to non-banking financial and home finance firms, with immediate effect. The government has approved the bill for auctioning of coal blocks for captive use by industries like steel and power. Pronab Sen, the country’s chief statistician has said that the government should wait till May to roll back stimulus.

Corporate news:

Inox Leisure has acquired 43.28% stake in the Shroff family promoted Fame India, which owns the chain of Fame Multiplexes. Open offer to follow soon. L&T has bagged orders worth Rs 1100 crore in the buildings and factories segment. Home appliances major Whirlpool India, an arm of the US-based Whirlpool Corp, aims to grab 15 per cent market share in the air-conditioning segment by the year 2012, from the current five per cent. Steel Authority of India (SAIL) has hiked steel prices by Rs 500 a tonne, effective from February 1. Vedanta Resources plans to list its aluminum subsidiary, Vedanta Aluminum this year. Lupin plans a new research centre at Aurangabad. DSP’s Hemendra Kothari buys Gujarat Ambuja’s 12% stake in ING Vysya Life Insurance Company. UltraTech-Grasim combine will invest around Rs. 7000 cr to set up greenfield facilities over the next 3-4 years. Atlas Copco to step up global sourcing from India.

Derivative View:

Nifty near contracts ends the day up by 104.05 points at a discount of 6.35 points paring OI by 6.4% with indications of short covering. Nifty OI PCR in at 1.148 compared to 1.103 in the last trading session. Nifty puts sees addition of 31.19 Lakhs and calls sees addition of 8.2 Lakhs over the day. 4800, 4900 and 5000 Feb strike Nifty puts adds the most during the day and 4700 and 5000 Feb strike calls add the most during the day. Highest OI in Nifty calls seen at 5000 Feb strike and puts at 4800 Feb strike. Nifty VIX at 25.54 from 26.69 last day. Long build up seen over the day in BEL, YESBANK, UNIPHOS, HINDZINC, HDIL, ASHOKLEY, JINDALSAW, TITAN, TRIVENI, RNRL, TATASTEEL, AXISBANK, SAIL, DABUR, SIEMENS, SBIN, INDIANB, BANKBARODA, IDBI & ROLTA etc. Long unwinding seen in MPHASIS, IDFC, LT, NAGARCONST, TATATEA, MCDOWELL-N, M&M, HCC, INDIACEM, STER, DENABANK, KOTAKBANK & VOLTAS etc. FII side sees short covering in Nifty futures and long build up in stock futures over the day.

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Asian stocks advanced

International News:

Asian stocks advanced, lifting the MSCI Asia Pacific Index for a second day, after U.S. pending home sales increased and commodity prices gained. The National Association of Realtors' pending home sales index rose 1%, in line with expectations. The index fell 16.4% in the previous month. Testifying at a Senate Banking Committee meeting, White House economic adviser Paul Volcker sought to expand on Obama's call for greater limitations on bank trading. U.S. auto sales rose 6% in January, although results were generally disappointing. Sales were hurt by weak demand from consumers and the well-publicized problems at Toyota Motor.

Domestic News:

Fiscal Deficit for the current year is likely to drop to 6.5%, on account of revision of the base year form 1999-2000 to 2004-05. Industry chamber Assocham expects WPI inflation to surge to double digits by this fiscal-end, much higher than the Reserve Bank of India's (RBI) projections of 8.5 per cent, because of rising prices of steel, cement and coal due to short supply. Fitch has revised its rating for the Telecom sector from “stable” in 2009 to “stable to negative” for 2010, due to stiff competition and a faster than expected decline in tariffs. Auto manufacturers in India plan to add 2.5 million units in manufacturing capacity in four years, which could lead to overcapacity. Top steel companies have seen their sales volumes increase upto 30%, in January 2010, on a y-o-y basis. Raw sugar prices may ease on bumper Brazilian output.

Corporate news:

Infosys, TCS to go on hiring spree in Q4. Great Offshore has deferred its plan to raise funds through the issue of securities. Adani Power Ltd (APL), belonging to the $5 billion Adani group, will set up a coal-based thermal power project of 1320 MW, in Chhindawara district in Madhya Pradesh. Siemens Ltd plans to invest Rs. 500 cr, over the next three years, to build wind turbines for the Indian market. GVK Power and Infrastructure (GVKPIL) has managed to arrange debt funding of Rs. 2400 cr for its 540 mw coal-based power plant in Punjab. Titan plans a new plant at Pantnagar to make watches. Wipro Consumer Care and Lighting is in advanced talks to buy Nigeria based Tura International. Reliance Communications has found few callers after more than a month of putting its biggest global assets (including its prized FLAG undersea cable network) up for sale. ITC to open nine more of its Fortune brand of hotels this year. Bharat Electronics Ltd. (BEL) to get Rs. 4279 cr IAF order for Akash Missiles.

Derivative View:

Nifty near contracts ends the day down by 77.70 points at a discount of 8.35 points adding OI by 8.2% with indications of short build up. Nifty OI PCR in at 1.103 compared to 1.139 in the last trading session. Nifty puts sees addition of 32.49 Lakhs and calls sees addition of 43.86 Lakhs over the day. 4800 and 4500 Feb strike Nifty puts adds the most during the day and 4900 and 4800 Feb strike calls add the most during the day. Highest OI in Nifty calls seen at 5000 Feb strike and puts at 4800 Feb strike. Nifty VIX at 26.69 from 25.13 last day. Long build up seen over the day in DRREDDY & MPHASIS. Short build up seen in CIPLA, IDFC, TATACOMM, RANBAXY, RENUKA, MTNL, PTC, TULIP, YESBANK, UNITECH & GVKPIL ETC. FII side sees short build up in Nifty futures long build up in stock futures and Nifty options was seen to be written.

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Shanghai Composite Index sank 1.1 percent

Domestic News:

China’s Shanghai Composite Index sank 1.1 percent as the Purchasing Managers’ Index, a gauge of the country’s manufacturing industry, fell more than economists forecast in December. Citigroup Inc. plans to sell or split off its $10 billion Citi Private Equity unit, expanding the list of money-management businesses the U.S. Toyota Motor Corp.’s head of U.S. sales plans to make U.S. television appearances today, starting with NBC Universal’s “Today” show, as the world’s largest automaker works to resolve its biggest recall crisis. Administration officials said that the White House's stimulus plan directly funded 599,108 jobs in the fourth quarter. The figure is based on about 160,000 reports from state, local and corporate recipients that have spent stimulus money to keep teachers in schools and cops on the street, as well as to rebuild roads, launch green energy initiatives and fund other projects. Amazon.com says it will give in to publishing giant Macmillan and agree to sell electronic versions of its books even at prices it considers too high. Component shortage puts the brakes on auto firms as component vendors fail to keep pace with the demand from auto majors. FDI inflows up 13% in December 2009 at $1.5billion State-run oil firms cut aviation turbine fuel (ATF) prices by 5.5 per cent to almost negate the steep hike they effected earlier this month. Service tax rate may be raised to 12 per cent in the upcoming Budget. Interest rates expected to hold steady in near term. Ficci has cautioned that it will be "dangerous" for economic growth and employment if the fiscal incentives given to spur economy were rolled back. Centre has given ‘in principle' approval to over 38,000 MWe (mega watt electrical) of new reactor capacity to scale up India's nuclear capacity nearly ten-fold over the next decade .IT services exports to grow at 13-15% in 2010-11. Sebi has shut its doors on several foreign funds amid concerns that they might turn out to be vehicles for round-tripping of money by local residents. Mahindra & Mahindra will launch six-to-seven new variants of vehicles across various segments during the next fiscal. NTPC Vidyut Vyapar Nigam Ltd (NVVNL), a wholly-owned subsidiary of NTPC Ltd, is planning to procure up to 1,000 Mw of solar power by 2013, and mix it with the unallocated thermal power to produce bundled power. Siemens AG, is making India a major hub for research and development of medical diagnostic tools, using Computer Aided Design (CAD). State Bank of India (SBI), has said it had a capital requirement of Rs 50,000 crore over the next five years of which Rs 15-20,000 crore would be raised through the equity route in the next two years.

Derivative View:

Nifty near contracts begins the new expiry up by 27.50 points at a discount of 6.40 points adding OI by 7.4%. Nifty OI PCR in at 1.152 compared to 1.143 at the previous day. Nifty puts sees addition of 47.27 Lakhs and calls sees addition of 38.18 Lakhs over the day. 4800 and 4700 Feb strike Nifty puts adds the most during the day and 5000 and 4800 Feb strike calls add the most during the day. Highest OI in Nifty calls seen at 5000 Feb strike and puts at 4800 Feb strike. Nifty VIX at 26.13 from 28.92 last day. Long build up seen over the day in IBREALEST, BANKBARODA, COLPAL, SIEMENS, CANBK, ROLTA, BAJAJ-AUTO, DENABANK, ORIENTBANK, ALBK, CENTURYTEX, ABB, ANDHRABANK, UCOBANK, IFCI, HCC, IDBI, CHAMBLFERT, NOIDATOLL & DLF. Short build up seen in OPTOCIRCUI, IVRCLINFRA, BAJAJHIND, SESAGOA, WIPRO, DRREDDY, TATAMOTORS, SUNTV, SAIL & IOB. Short build up in Nifty and stock futures and Nifty options was seen to be bought by the FII’s during the day.

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Obama administration wants to increase taxes

International News:

The Obama administration wants to increase taxes on Americans earning more than $200,000 by almost $970 billion over the next decade and take in an additional $400 billion from businesses even as it retooled a proposed crackdown on international tax-avoidance techniques. President Barack Obama’s $3.8 trillion fiscal 2011 budget puts an emphasis on job creation with $100 billion in additional stimulus spending, along with higher taxes for the wealthy in an attempt to narrow the deficit. The spending blueprint forecasts this year’s budget shortfall will hit a record $1.6 trillion, following a $1.4 trillion deficit in 2009. The 2011 deficit is predicted to be $1.3 trillion, with deficits remaining above $700 billion for the rest of the decade, according to the projections. JPMorgan Chase & Co. may drop plans to acquire the North American operations of Sempra Commodities LLP after President Barack Obama said he would seek to curb banks’ proprietary trading activities. Australia’s central bank may raise its benchmark interest rate by a quarter percentage point today for a record fourth straight meeting as the nation’s economic expansion fuels a surge in employment.

Domestic News:

Major auto companies, including Maruti Suzuki, Mahindra & Mahindra and General Motors, have reported record sales for January, 2010. Planning Commission Deputy Chairman, Montek Singh Ahluwalia, has expressed confidence that in the years to come India could emerge as the fastest growing economy in the world, beating China as the nation has yet to achieve its full growth potential. Govt may decide on freeing petrol, diesel pricing this week according to Petroleum Minister Murli Deora. Price of petrol may go up by Rs. 4.7 and diesel by Rs. 2.3 a litre. Cement makers have reported double-digit growth in January 2010 sales driven by increased demand from the housing sector, especially of low-cost homes, and infrastructure. India's economy to grow 7.5-8 per cent in fiscal 2010-11 and 2011-12 according to World Bank. India’s imports moved to positive territory for the first time since the financial crisis, clocking a growth of 27% in December 2009. RBI Governor, Subbarao, has hinted at curbs on capital inflows in the short term to avoid stark economic imbalances. Government fixes NTPC follow-on issue price at Rs. 201 per share. Zylog Systems has announced the acquisition of Brainhunter, a consulting and engineering services company in Canada, for Rs. 150 cr. Maruti Suzuki’s January 2010 sales at 95,649 units marked its highest ever sale for a month till now, up 33.3 per cent over the same month last year. Cox & Kings India is scouting for acquisitions in countries like the US, Canada, England, Australia and New Zealand. IVRCL Infrastructures & Projects has bagged a road project worth Rs 1,125 crore from National Highways Authority of India (NHAI). Global steel giant Arcelor Mittal has acquired 29 per cent stake in Uttam Galva for Rs 422 crore through open offer, taking its holding in the domestic firm to 34.42 per cent. Parsvnath Developers will invest Rs 7,000 crore over the next five years in construction of its ongoing projects and plans to raise up to Rs 300 crore through private equity by March-end Mercator Lines is looking to add 4-5 ships in the tanker segment, over the next three months, as the prices of vessels have come down sharply.

Derivative View:

Nifty near contracts ends the day up by 23.80 points at a marginal discount of 0.25 points adding OI by 0.4%. Nifty OI PCR in at 1.139 compared to 1.152 in the last trading session. Nifty puts sees addition of 17.98 Lakhs and calls sees addition of 20.513 Lakhs over the day. 4900 and 4700 Feb strike Nifty puts adds the most during the day and 5000 and 5100 Feb strike calls add the most during the day. Highest OI in Nifty calls seen at 5000 Feb strike and puts at 4800 Feb strike. Nifty VIX at 25.13 from 26.13 last day. Long build up seen over the day in TITAN, BEL, CUMMINSIND, NAGARCONST, SUNTV, BPCL, TULIP, TRIVENI, BHUSANSTL, IOC, HINDPETRO, ASHOKLEY, GRASIM, TATAMOTORS, M&M, ORIENTBANK, SESAGOA, AXISBANK, DABUR & GAIL. Short build up seen in ICSA, ANDHRABANK, SBIN, HDFCBANK & RELCAPITAL. FII side sees short covering in Nifty futures marginal long build up in stock futures .

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