Pre - Market report on 22.05.2008
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N.Sukumar
May 22, 2008, 12:02:58 AM5/22/08
to Kences1
Oil hot, Stocks to feel the heat
=================================================
Stocks head for a lower open on concerns of higher inflation and lower
consumer spending caused by the spike in the crude oil prices. Crude
today crossed the $ 134 mark and looks to make new highs on the news
that the current production will not be able to meet the demand for
Oil.
Overnight the US markets tumbled on a 'double whammy' from record-high
oil prices and a bleak economic assessment from the Federal Reserve,
which warned about the lower economic growth and higher unemployment
going forward. The bank also hinted that there might not be any
interest rate cuts in the future. The Dow and NASDAQ ended 1.77
percent due to the sell off by anxious investors. Asian markets are
expected to follow the same trend and end lower for the third day in a
row.
No doubt the impact of the spike in oil prices will have a negative
effect on the Indian economy, but things are not as bad as feared. We
think that the current scenario which is driven by boom in oil and
higher commodity prices might last for the next 3 to 4 months. One
should also realize that the corporate world has really performed
exceedingly well, considering the dire macro economic picture we have
had for the past 4 months. Scenarios like these will infact boost the
productivity and operational efficiencies of the companies, as they
try to cut their costs in different ways to encounter the challenge.
To summarize the long term fundamentals are intact, but the short and
medium term looks bleak as we might see an interest rate hike from the
central bank soon sucking the money out of the system.
State Bank of India has decided to withdraw its circular on banning
tractor and farm equipment loans due to political pressure. Mahindra
is close to acquire 76 percent of Kinetic Motors for a consideration
of Rs 120 Crores. There are rumors circulating in the markets that the
Italian energy major Eni Spa (which holds a controlling stake in Hind
Oil Exploration) might acquire Cairn Plc (parent of cairn India) and
might announce an open offer to Cairn India share holders. These
rumors are baseless and the spike in stock is due to the rise in Oil
price and some speculation. Coming to the stock specific action, Metal
and Oil stocks are likely to continue their run today. On the downside
we might see an impact on the Airline stocks because of rising oil
costs and banking stocks might tumble on the possibility of interest
rate hike. Sugar stocks might surprise on the upside on hopes of
higher prices in the coming months. Overall, this might not be a great
day for the bulls.
Market Close Box
BSE Sensex 17243.16 12.98
NSE Nifty 5117.65 12.70
USD Rs.42.72
Oil Nymex $133.1
N.Sukumar
Research Analyst
=================================================
Stocks head for a lower open on concerns of higher inflation and lower
consumer spending caused by the spike in the crude oil prices. Crude
today crossed the $ 134 mark and looks to make new highs on the news
that the current production will not be able to meet the demand for
Oil.
Overnight the US markets tumbled on a 'double whammy' from record-high
oil prices and a bleak economic assessment from the Federal Reserve,
which warned about the lower economic growth and higher unemployment
going forward. The bank also hinted that there might not be any
interest rate cuts in the future. The Dow and NASDAQ ended 1.77
percent due to the sell off by anxious investors. Asian markets are
expected to follow the same trend and end lower for the third day in a
row.
No doubt the impact of the spike in oil prices will have a negative
effect on the Indian economy, but things are not as bad as feared. We
think that the current scenario which is driven by boom in oil and
higher commodity prices might last for the next 3 to 4 months. One
should also realize that the corporate world has really performed
exceedingly well, considering the dire macro economic picture we have
had for the past 4 months. Scenarios like these will infact boost the
productivity and operational efficiencies of the companies, as they
try to cut their costs in different ways to encounter the challenge.
To summarize the long term fundamentals are intact, but the short and
medium term looks bleak as we might see an interest rate hike from the
central bank soon sucking the money out of the system.
State Bank of India has decided to withdraw its circular on banning
tractor and farm equipment loans due to political pressure. Mahindra
is close to acquire 76 percent of Kinetic Motors for a consideration
of Rs 120 Crores. There are rumors circulating in the markets that the
Italian energy major Eni Spa (which holds a controlling stake in Hind
Oil Exploration) might acquire Cairn Plc (parent of cairn India) and
might announce an open offer to Cairn India share holders. These
rumors are baseless and the spike in stock is due to the rise in Oil
price and some speculation. Coming to the stock specific action, Metal
and Oil stocks are likely to continue their run today. On the downside
we might see an impact on the Airline stocks because of rising oil
costs and banking stocks might tumble on the possibility of interest
rate hike. Sugar stocks might surprise on the upside on hopes of
higher prices in the coming months. Overall, this might not be a great
day for the bulls.
Market Close Box
BSE Sensex 17243.16 12.98
NSE Nifty 5117.65 12.70
USD Rs.42.72
Oil Nymex $133.1
N.Sukumar
Research Analyst
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