9am with Emkay
Contents
Sourthwest Monsoon Economy Update; Some setbacks after a good start
Southwest monsoon faces some set backs after a decent start
The advancement of the southwest monsoon seems to be slowing as the meteorological data reveal. The cumulative rainfall till the week ended June 23, 2010 stood at 11.1% below LPA. The rainfall for the week ended June 23, 2010 stood at 21.2% below normal.
The number of divisions experiencing excess/normal rainfall was at 21 from 22 of last week. The divisions experiencing scanty rainfall were at 16 compared to 16 of last week.
Northern states face severe shortfall
The northern states are facing a severe shortfall as the rainfall till the week ended June 23, 2010 was 69% below LPA. Uttar Pradesh, in particular is looking at 82% deficit over LPA.
Reservoir levels near their LPA
The current reservoir levels of 12% of FRL seem slightly slack when compared to their long term average levels of 14% for week ended June 23, 2010. But compared to last year's levels of 9%, this is certainly an improvement.
Forecast over next week
As the monsoon travels towards central, north and northwestern India states like UP, Madhya Pradesh, West Bengal and Bihar are likely to see better rainfall.
Economy Update; Fuelling inflation but dousing fiscal fire
n Empowered Group of Ministers (EGoM) deregulates petrol prices completely. The prices of diesel, LPG and kerosene upped by Rs2/litre, Rs35/cylinder and Rs3/litre respectively.
n We expect a 120-130bps increase in the inflation including 40bps indirect increase through power and freight costs.
n We expect the move to impact the government finances positively by ~Rs176bn or 0.6%
n Policy rate hikes to happen but calibrated. Bonds yields may react negatively initially but positive news flow on govt finances augurs well
Punj Lloyd Company Update; 'Unknown' to 'Known'; HOLD; Target: Rs 132
n Punj Lloyd is traversing from the 'Unknown' to the 'Known' – as 92% of orders under analysis have relevant prior experience
n Breakdown of Rs299 bn worth project orders reveal only few orders that lack prior experience on geography as well as scope of work
n Libya is the main 'Game Changer', cushioned by past experience. Executed Rs13.5 bn gas pipeline project for Sirte Oil Company in Aug '06
n Any upgrade in earnings estimates and ratings will follow profitable execution of order backlog. We maintain 'HOLD' with price target of Rs132/Share
n Technical Comments
Weekly "shooting star"
On w-o-w basis, Nifty has marginally closed in green with a gain of mere 7 points. Moreover, the index has formed a top reversal pattern, which is named as "shooting star" meaning trouble overhead in the dictionary of candlestick patterns. Secondly, this pattern is formed near the previous hurdle of 5399, where the bulls have surrendered during past two occasions. So the winning probability of this "shooting star" is quite high. Going further, on hourly chart there is a blend of bearish confirmations namely - moving average break and lower top lower bottom formation, which again says that a short term dip is on the cards. Key supports to watch out for in the coming week are 5147 and below that 5060 (the 200-dsma).</ P>
BSE Oil & Gas
Last week BSE Oil & Gas index outperformed the broader markets and tested the mentioned target of 10618. Finally this index closed at 10604 with a gain of 3.02% on w-o-w basis. On the Weekly chart this index is facing lot of resistance near to five month old trendline thus now in the coming days if this index starts trading above 10720 levels then we will witness further upside in this index.
BSE Bankex
Last week BSE Bankex fell sharply and broke the 21DEMA as well as on the weekly chart it had made "Bearish Engulfing" pattern. Thus now going forward this index can correct till 10701 levels which is 38.20% retracement level of the whole rally from 10011 to 11127.
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