US week ahead: Retail, jobs data to rule stocks’ next move

A week packed with data awaits investors eager for fresh clues on when the Federal Reserve will start to trim its stimulus program, as traditionally bullish December kicks off with the S&P 500 poised to mark its best year since 1998.

Traders will also sweep through sales data from retailers after the long Thanksgiving weekend, which kick-starts the holiday shopping season. Vice President Joe Biden’s trip to Asia will increase the focus on a standoff pitting China against Japan, South Korea and the United States over air routes over the East China Sea.

Employment numbers will be the highlight as traders second-guess what the data will mean for the Fed and its announced intention to gradually reduce its USD 85 billion in monthly asset purchases, which have lit a fire under the stock market this year.

The Fed has repeatedly said its stimulus remains data-dependent, leading traders to treat soft data as a bullish market catalyst that guarantees Fed stimulus.

“The whole market is trying to channel the Fed,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

She said volatility is to be expected as the reaction to data is more a “let’s interpret how the Fed interprets it” rather than what it means for the economy.

Nonfarm payrolls for November on Friday will cap three days of jobs data that includes ADP’s November report on private-sector payrolls on Wednesday and weekly US jobless claims on Thursday.

Economists expect the US economy to have created 185,000 jobs in November, down from 204,000 in October, according to a Reuters survey of economists.

Other major economic indicators due next week include the Institute for Supply Management’s data on the US manufacturing and services sectors, with the ISM’s factory index expected on Monday and its services index due on Wednesday. Domestic car and truck sales are scheduled for release on Tuesday, followed by US factory orders on Thursday and the preliminary reading for December on consumer sentiment from Thomson Reuters/University of Michigan on Friday.

November marked the third consecutive month of gains for the Dow Jones industrial average, the Standard & Poor’s 500 and the Nasdaq Composite. The S&P 500 ended slightly lower on Friday, but closed its eighth positive week in a row, its longest weekly stretch of gains since a nine-week run from November 2003 to January 2004.

The benchmark S&P 500 is up 26.62 percent so far this year, which would make its best yearly gain since it climbed 26.67 percent in 1998.

RETAILERS ON CENTER STAGE

Consumer views are a key data point as the most important shopping season of the year, when some retailers make nearly half of the year’s profits, gets under way.

The National Retail Federation expects that up to 140 million shoppers hit US stores over the Thanksgiving weekend, slightly more than the 139 million who turned out last year.

If reports start to show the numbers don’t add up, retail stocks may feel some heat.

“The market seems to be focused on the consumer and on retail sales. They’re going to dice up and analyze what sales figures have been for this weekend,” said Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston.

He said there’s special interest in this season because there are fewer shopping days and retailers are significantly reducing prices to attract shoppers.

This year’s holiday shopping season in the United States is one of the shortest in years, with less than 30 days between Thanksgiving and Christmas.

Zaro said that however important sales and traffic numbers are, soft data should be treated carefully.

“I’m not sure it’s a proxy for the overall market. There are areas of the economy doing quite well and areas of the market that are doing well beyond retailers, which are relatively mixed.

” Regardless of how strong the numbers are, consumer stocks could be due for a slowdown. Retail stocks have underperformed the S&P 500 in the period from Thanksgiving to Christmas for the past three years, according to data from Bespoke Investment Group, an investment research firm in Harrison, New York.

Bespoke’s data show that since 2000, the S&P 500 has averaged a gain of 1.7 percent during that key period, with positive returns in all but three years. Retail stocks have averaged a gain of just 0.8 percent in the same time frame, with positive returns during six of the 13 years.

A CHILL FROM CHINA?

During Biden’s visit to China, Japan and South Korea next week, he will seek to ease growing tensions in the region. Last week, China established a new airspace defense zone over the East China Sea, including the islands at the heart of its dispute with Japan.

China scrambled jets on Friday in response to two US spy planes and 10 Japanese aircraft, including F-15 fighters, entering its new air defense zone, state news agency Xinhua said.

“This is a little bit of a brush fire, and I’m hopeful it will de-escalate in a hurry,” said Jim Russell, senior equity strategist for US Bank Wealth Management, in Cincinnati.

“It’s not the season to have a geopolitical distraction on what is already a shortened and highly promotional shopping season,” he said.

Nasdaq ends brief post-holiday session at 13-year high

The Dow and the S&P 500 dipped in thin holiday trading on Friday, but technology stocks helped lift the Nasdaq to a 13-year high.

The Nasdaq got a boost from the technology sector, with Apple up 1.9 percent at USD 556.07, Microsoft Corp up 1.4 percent at USD 38.13 and Amazon Inc up 1.8 percent at USD 393.62.

“It’s almost as if people are rotating into the bigger blue-chip names, especially the technology big caps. We wouldn’t be shocked at all to see the small and mid-cap names lag a little bit,” said Ryan Detrick, senior technical strategist with Schaeffer’s Investment Research, in Cincinnati.

But with the both the S&P and Dow on an eight-week winning streak, investors may be cautious in adding new positions.

“We expect, and we recommend to our clients, that if they have exceeded their strategic allocation to equities, to take profit at these levels,” said Paul Mangus, head of equity research and strategy for Wells Fargo Private Bank, in Charlotte, N C.

Volume was light, with slightly over 2 billion shares traded on all US platforms, according to BATS exchange data, as many US investors remained out following the Thanksgiving holiday on Thursday. The US stock market ended its regular session three hours early at 1 pm.

The Dow Jones industrial average fell 10.92 points or 0.07 percent, to end at 16,086.41. The S&P 500 slipped 1.42 points or 0.08 percent, to finish at 1,805.81. But the Nasdaq Composite added 15.136 points or 0.37 percent, to close at 4,059.886.

Retail stocks were in focus as the holiday shopping season gets under way. Many stores opened on Thanksgiving for the first time ever this year, but stores had to resort to steep discounts and shoppers appeared to be making careful purchases.

The S&P retail index rose 0.3 percent. Among some of the most active retail names, Target Corp declined 0.8 percent to USD 63.93, Best Buy Co Inc jumped 2.4 percent to USD 40.55, and J C Penney Co gained 1.1 percent to USD 10.19.

In the health-care sector, CVS Caremark Corp shares gained 0.3 percent to USD 66.96 after Wednesday’s news that CVS will buy drug infusion services provider Coram LLC for USD 2.1 billion. The transaction will let CVS Caremark bolster its pharmacy benefits management business by offering cost-effective delivery of specialty drugs.

India must make best use of technology, says Ambani

Emphasizing on wide use of technology, noted industrialist Mukesh Ambani today said education, livelihood and health are the three most important issues facing India, which aspires to be a superpower.

“If I think about re-imagined India, to my mind education, livelihood – the ability to earn today- and health are the three most important things before the country,” he said. The Reliance Industries  Chairman was speaking at a discussion on ‘Re-imagining India: Unlocking the Potential of Asia’s Next Superpower’ . Embracing technology in a big way will help India to transform itself into a new India in a very short span of time, he maintained.

“Take broadband technology – it is providing access to opportunities irrespective of geographies. So, you can access them in all the 5,432 small towns and cities, and 6,00,000 villages in a matter of a couple of years and then scale up. That is what gives me optimism and positivity.” Stressing on importance of education, the billionaire- industrialist said it enables people to embrace tools of technology.

“Today we have a current account deficit. Bulk of it is because of import of energy (oil & gas). For a country like India, there is no other option but to rely on technology, even to solve our energy problems. “But a pre-requisite to that is education – to make 250 million young Indians acquire skills and make most of available technology,” Ambani added.

The Asia’s third largest economy has an efficient education system but there was a need to make it more effective, he said. Speaking on the occasion, Mahindra and Mahindra  Group Chairman Anand Mahindra said India has a chance to create a completely new template. He said smaller states are better to manage. “I have no problem about more states coming up. If size is the issue, make it (states) more manageable,” Mahindra said.

ICICI Brokerage sells 6.27 lakh shares of Bata India

On November 12, 2013 Bata BN BV bought 6,08,657 shares of Bata India  at Rs 888.05 on the BSE.

However, ICICI Brokerage Services Limited sold 6,27,000 shares at Rs 888.35.

In the previous trading session, the share closed at Rs 951.85, up Rs 36.30, or 3.96 percent.

The share touched its 52-week high Rs 977 and 52-week low Rs 688.25 on 01 August, 2013 and 20 March, 2013, respectively.

The company’s trailing 12-month (TTM) EPS was at Rs 28.53 per share. (Sep, 2013). The stock’s price-to-earnings (P/E) ratio was 33.36. The latest book value of the company is Rs 108.98 per share. At current value, the price-to-book value of the company was 8.73. The dividend yield of the company was 0.63 percent.

Tata Global Q2 net up 51.23% at Rs 180.03 crore

 

Tata Global Beverage  reported 51.23 percent increase in consolidated net profit at Rs 180.03 crore for the second quarter ended September 30, aided by exceptional income.

The company had posted a net profit of Rs 119.04 crore for the same period of previous fiscal, Tata Global Beverage (TGBL) said in a statement.

The company’s net sales during the quarter under review rose to Rs 1,906.23 crore during the second quarter, as compared to Rs 1,842.57 crore during the same period of previous fiscal. Exceptional income during the quarter was Rs 92.05 crore, the company said.

The company also announced merger of its subsidiary, Mount Everest Mineral Water with TGBL. “The boards of directors of Tata Global Beverage (TGBL) and Mount Everest Mineral Water (MEMW) in their respective meetings, approved a proposal to merge MEMW with TGBL,” the company said in a statement.

“This merger will enable increased operational efficiencies and better synergy between both businesses… The proposed merger will facilitate the growth of the Himalayan natural mineral water brand owned by MEMW,” it added.

TGBL is a global beverage business and the world’s second largest tea company. The group’s annual turnover is USD 1.4 billion and it employs over 3,000 people worldwide.

Vodafone to invest additional Rs 7,100 cr in 2-3 yrs

Vodafone India, the nation’s second-biggest telecom firm, is planning to invest GBP 700 million (about Rs 7,100 crore) in the next 2-3 years, mainly on rolling out 3G networks.

This amount will be in addition to Rs 4,000-6,000 crore annual investments the company has been making in recent years. The investment will be part of Project Spring under which Vodafone Group will invest GBP 7 billion by March 2016, to establish stronger network and service differentiation in major global markets.

“About 10 percent (of GBP 7 billion) in the 2-3 years, depends also on what is available… The investment will be above the normal level of investment we would have done so its like catch up investment,” Vodafone India MD and CEO Marten Pieters told PTI. The company has been investing around Rs 4,000 crore to Rs 6,000 crore every year to expand operations in the world’s second-biggest mobile phone market. Pieters said the investment will be made in three things – retail network, 3G rollout and building connectivity. ”

…a bit will be in retail, big part will go for the roll out of 3G and the third part is what we call the backhaul, meaning the connectivity,” he added. Asked about the investment climate in the country now, Pieters said it has improved but there still are things which need to be decided.

“We think the environment has improved but a lot of it is still undecided. It looks better but we are waiting for rules around spectrum pricing, we are waiting for the M&A rules, we are waiting for the rules for the auction. So we don’t know (yet). We will only know when the outcome is there, but so far so good,” he said.

He added, however, that more spectrum should be made available to the operators. “We think there needs to be a lot more spectrum made available and then we will see next wave of investment because you can talk about investment climate but you also need to have something to invest in,” he said.

Pieters said the company has invested about Rs 55,000 crore in telecom networks in the past six years. UK-based Vodafone has around 154 million subscribers in India, and broadly 18 percent of the Indian mobile market as per August data. It is country’s second-biggest telecom company in terms of user base.

Pia Singh buys over 1.31cr DLF shares for Rs 194cr

Realty major DLF  ‘s promoter Pia Singh today picked up more than 1 crore shares of the company for Rs 194 crore from another promoter entity.

Pia Singh, daughter of DLF Chairman K P Singh, bought about 1.31 crore DLF shares from Mallika Housing Company LLP through the open market, according to information available with the stock exchanges.

The shares were purchased at an average price of Rs 147 each, valuing the transaction at Rs 193.95 crore, the data showed.

DLF shares fell 2.36 per cent to close at Rs 144.65 on the BSE. As of September 30, Pia Singh held about 81.38 lakh shares representing a 0.46 per cent stake in DLF, while Mallika Housing held 9.09 crore scrips, amounting to a 5.11 per cent holding in the company.

In a separate transaction, Bata India  ‘s promoter Bata BN BV shored up its stake in the company by picking up an additional 6.08 lakh shares for Rs 54.05 crore.

ICICI Brokerage Services Ltd offloaded 6.27 lakh Bata India shares in a transaction estimated to be Rs 55.70 crore. At the end of September, Bata BN BV held 3.34 crore shares, or a 52.01 per cent stake, in Bata India. Shares of Bata India rose 3.96 per cent to settle at Rs 951.85.

Rupee at fresh 2-month low, down 47 paise to 63.71/$

The rupee continued to slide against the dollar for the fifth day in a row and closed down 47 paise at a fresh two-month low of 63.71 today amid bearish local equities and demand for the US currency from importers.

A firm dollar overseas also weighed on the rupee as the dollar index, consisting of six major global rivals, was up by 0.28 per cent.

At the interbank foreign exchange market, the domestic currency resumed lower at 63.35 and moved in a range of 63.30 to 63.84 against the dollar before settling at 63.71, a fall of 47 paise or 0.74 percent.

The rupee has plunged 209 paise, or 3.39 per cent, in five straight sessions. It is at the lowest level since closing at 63.84 on September 10.

“Rupee was seen depreciating against the US dollar due to persistent dollar strength, rising dollar demand from the domestic oil companies and debt market outflows. Also, the stock markets which ended the session on a negative note contributed to the weakness in the local currency,” said Abhishek Goenka, CEO of India Forex Advisors.

The 30-share benchmark S&P Sensex tumbled 209.05 points, or 1.02 per cent, to a one-month low, completing six days of losses. Overseas investors pumped in Rs 333.50 crore in stocks yesterday, according to provisional data

SBI Q2 PAT seen down 27%, asset quality pressure may remain

Country’s biggest lender  State Bank of India (SBI) will announce its second quarter (July-September) earnings on Wednesday. Asset quality is the key to watch out for as analysts expect some pressure on asset quality to persist in the quarter.

Even new chairperson Arundhati Bhattacharya on September 24 said there was a concern on asset quality, hence her outlook is the key concern for analysts.

Net slippages are expected to decline Q-o-Q due to higher recoveries or upgrades (led by agri) during second quarter, but higher restructuring will continue into Q2, feel analysts.

Analysts are also worried that because of management change it may be a quarter of kitchen sinking. In Q4FY11, when Pratip Chaudhuri took the charge from OP Bhatt, profit after tax sank 99 percent to Rs 20.9 crore as provisions increased 77 percent Y-o-Y to Rs 4,157 crore accompanied with a 56 basis points sequential drop in net interest margin to 3.04 percent. He cleaned up all the liabilities on the books like pensions, teaser rate loan provisions.

According to a CNBC-TV18 poll, profit after tax is likely to decline 27 percent year-on-year to Rs 2,675 crore while net interest income (the difference between interest earned and interest expended) may increase 8 percent Y-o-Y to Rs 11,861 crore in three-month period ended September 2013.

Analysts feel net interest income may be impacted by net interest margin compression while the profitability will be largely depend on provisions.

The bank may record a net investment loss of Rs 100 crore during September quarter as against gain of Rs 670 crore in June quarter and Rs 490 crore in a year ago period.

Net interest margin is expected to decline 10 basis points sequentially. SBI had maintained guidance of domestic net interest margin at 3.5 percent to 3.6 percent for the seccond quarter as against 3.44 percent reported in first quarter.

Loan growth is expected to be strong at around 20 percent year-on-year while deposit growth may be lower at 14 percent in the quarter gone by. The bank had stated that credit growth in Q2 will be strong at 20-21 percent led by corporate and retail.

Meanwhile, state-controlled lender, on October 8, cut bulk deposit rates for 7-60 days by 50 basis points while the bank hiked base rates by 10 bps to 9.8 percent on September 19 and by 20 basis points to 10 percent on November 6.

The stock on Tuesday closed at Rs 1,675.45 apiece on the BSE, down 1.73 percent from previous close.

NHPC Q2 net profit drops 9.67% to Rs 707.58cr

State-run NHPC  reported 9.67 percent drop in net profit to Rs 707.58 crore for the second quarter ended September 30, 2013-14 fiscal.

The company had reported net profit of Rs 783.38 crore in the July-September quarter of the previous fiscal 2012-13, NHPC said in a regulatory filing to the stock exchanges.

Total income of the company during Q2, 2013-14 decreased to Rs 1,950.23 crore, from Rs 2,013.26 crore in the year-ago period.

The company’s board has approved the buyback of up to 10 percent of fully paid-up equity shares of Rs 10 each for an aggregate amount of nearly Rs 2,400 crore. Since the government holds 86.36 percent stake in NHPC, buyback of shares on proportional basis would mean government getting about Rs 2,000 crore.