And miles to go…

If all difficulties were known at the outset of a long journey, most of us would never start out at all.

We’ve bounced back from the bear market lows to reclaim a milestone. But, we are still a long way away from the all-time highs. The question now is how would the journey ahead be? There are no easy answers, though on the whole, the mood seems to be upbeat. The real test for all will be when the steroid (stimulus) is gradually withdrawn. For now, everything looks bright and beautiful so may as well enjoy it.

All the bad news seems to have been discounted and the concerns are being overlooked temporarily. The fact is we went down hard and have rebounded. The worry is whether the ascent can continue at the same pace without major reversals. Stocks could gain further ground if the pace of liquidity gush persists. Among the potential headwinds are: inflation, interest rates, uncertainty over the external environment and lofty valuations.

Today, we see another day of stock taking and consolidation. Global cues too are indecisive. Our advice is don’t get too euphoric. Avoid undue risks and enjoy the long weekend. The upcoming earnings season should provide an opportunity to assess and evaluate. The advance tax numbers do point to a healthy states of affairs for India Inc over the year-ago period. But, in most cases this could be a result of cost cutting and not due to any meaningful gains on the demand side. That will take some more time to materialise. As always there will be surprises, both negative and positive. So, brace yourself for some volatility in the near term at least.

US stocks ended slightly down on Thursday as sales from FedEx and Oracle missed analysts’ estimates. Investors struggled to balance hopes for an economic recovery with fears that equities have surged too far, too fast.

The Dow Jones Industrial Average lost 8 points, or 0.1%, at 9,783.92 after ending the previous session at its highest point since last Oct. 6. The S&P 500 index fell about 3 points, or 0.3%, at 1,065.49 after ending the previous session at its highest point since Oct. 3 of last year.

The Nasdaq Composite lost 6 points, or 0.3%, at 2,126.75 after closing at its highest point since last Sept. 26.

The three major US indexes have ended higher in 8 of the last 10 sessions.

US stocks surged to almost one-year highs on Wednesday on continued optimism about the economy. Thursday brought new reports supporting hopes that a recovery is holding firm, but investors turned cautious after the recent spurt.

US stocks have surged over the last six months as investors have welcomed a string of improving economic news and better than expected corporate earnings. Since bottoming at a 12-year low in March, the Dow has gained about 50% and the S&P 500 is up 58%, as of Wednesday's close. Since bottoming at a six-year low, the Nasdaq has advanced 68%.

Trading could be volatile and volume could be higher through the quarterly options expiration on Friday when stock index futures and options, and individual stock futures and options all expire at the same time.

The number of Americans filing new claims for unemployment fell last week to 545,000 from a revised 557,000 in the previous week, the Labor Department reported Thursday morning. Economists forecast that claims would rise modestly. Continuing claims, a measure of Americans who have been filing claims for unemployment for a week or more, rose to 6.23 million versus forecasts for a rise to 6.1 million.

A rise in apartment construction helped push August housing starts to the highest point in roughly nine months, the Commerce Department reported. Starts rose 1.5% to an annual unit rate of 598,000 from a revised 589,000 in July, the government said. That was in line with economists' forecasts.

Building permits, a measure of builder confidence, rose 2.7% to 579,000 from a revised 564,000 in July.

The Philadelphia Fed index rose to a 27-month high in September, adding to other evidence that the manufacturing sector is recovering. The index, a regional read on manufacturing, rose to 14.1 in September from 4.2 previously. Economists thought it would rise to 8, on average.

FedEx said fiscal first-quarter earnings fell 53% from a year ago, meeting the forecast it issued last week. The package delivery firm reported weaker earnings that met forecasts on lower revenue that was shy of expectations. Shares fell 2.2%.

Oracle reported weaker quarterly revenue that missed forecasts late on Wednesday. The software maker also reported higher quarterly earnings of 30 cents per share that were in line with forecasts. Shares fell 2.8%.

American Airlines parent AMR said it raised $2.9 billion, including cash and financing. The airline also said it will shift some flights to more profitable hubs such as Chicago and New York and away from St. Louis and other places. Shares rose almost 20%.

The dollar hit a fresh 9-month low against the euro and bounced after hitting a 7-month low against the yen. The falling greenback has been lifting dollar-traded commodities including oil and gold lately, but prices were muted on Thursday.

US light crude oil for October delivery fell 4 cents to settle at $72.47 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery fell $6.70 to $1,013.50 an ounce after settling Wednesday at a record high of $1,020.20.

Treasury prices gained, lowering the yield on the benchmark 10-year note to 3.40% from 3.46% on Wednesday.

European shares rose for third straight session and the tenth time in eleven days. After gaining 1.4% in the previous session, the pan-European Dow Jones Stoxx 600 rose 0.5% to 246.15, another fresh 2009 high.

Advancers far outnumbered decliners in London, Frankfurt and Paris, with gainers in particular in the aviation sector.

The UK's FTSE 100 index rose 0.8% to 5,163.95, the German DAX index climbed 0.5% to 5,731.14 and the French CAC-40 index was up 0.6% to 3,835.27.

It was a momentous day for the Indian markets as NSE Nifty hit the 5,000 levels for the first time since May 23, 2008. Bulls were indeed in high spirits in the morning trades led by firm global cues and buying witnessed all over. However, the joy was very short lived as index heavyweight Reliance Industries fell over 5% dragging the index by 103 points single handedly. Sentiments further got a hit after inflation broke in to positive territory fir the first time in 13-weeks.

The BSE Sensex fell nearly 110 points while, the NSE Nifty gave away nearly 40 points from their respective intra-day high’s.

Aviation stocks were in the linelight led by Jet Airways on speculation taxes on jet fuel may be cut. Shares of Jet Airways shot up by over 18% to end at Rs315, Kingfisher Airlines rallied by over 12% to end at Rs53 and Spice Jet surged over 7% to end at Rs33.6.

The BSE Sensex advanced 34 points or 0.2% at 16,711 after touching a high of 16,820 and a low of 16,636. The index opened at 16,686 against the previous close of 16,677. The NSE Nifty was up 7 points to shut shop at 4,965.

In Asia, the Nikkei in Japan gained by 1.7% at 10,443 while Australia's S&P/ASX ended higher by 1.4% at 4,714. The Hang Seng index in Hong Kong gained 1.7% at 21,768. Shanghai SE Composite in China gained by 2% at 3,060.

In Europe, stocks were in the green. The FTSE in the UK was up 0.9%, The DAX in Germany was up 0.6% and the CAC 40 index in France gained 0.6%.

Coming back to India, among the BSE sectoral indices, the Teck index was the top gainer, gaining 2%, followed by the IT index that was up 2%. The BSE Auto index up 1.5% and the BSE Bankex index was up 0.8%.

The BSE Mid-Cap index gained 0.3% and the BSE Small-Cap index gained 0.2%.

Among the 30-components of Sensex, 22 stocks ended in the green and 8 ended in the negative terrain. Among the major gainers were Hindalco, ACC, JP Associates, Bharti, Maruti and Grasim.

On the other hand, Reliance Industries, Tata steel, ITC, NTPC and Hero Honda were among the major laggards.

Outside the frontline indices, the big gainers in the broader market were Jet Airways, Proctor & Gamble, Essar Oil, HCL Tech and Indian Hotels. On the other hand, losers included EIH Ltd, EKC, Godrej Ind, IFCI and LIC Housing Fin.

India’s Inflation broke in to the positive terrain for the first time in over 12 months. The annual rate of inflation stood at 0.12% for the week ended August 5, 2009 over as compared to -0.12% for the previous week July 29, 2009 and 12.42% during the corresponding week August 06, 2008 of the previous year. The government announced that it revised inflation for week ended July 11 to -0.63% from -1.17%.

Reliance Industries announced that Petroleum Trust sold 10.5mn equity shares of the Company. Reliance Industrial Investments and Holdings Ltd, a wholly owned subsidiary of Reliance, is the sole beneficiary of the Trust.

The Trust will realize approximately Rs31.88bn, at an average price of about Rs2,125 per share. The shares are carried in the books at a cost of Rs158 per share by the Trust.

Petroleum Trust is a special purpose vehicle created for Reliance Industries holding in the earlier Reliance Petroleum when the company merged the latter with itself some seven years ago. The stake of the Trust rose again when IPCL merged with RIL.

DSP Merrill Lynch Limited and Citigroup Global Markets India Private Limited acted as joint arrangers for the seller.

Shares of Reliance Industries lost over 4.5% to Rs2086. The stock opened at Rs2169 and made an intra-day high of Rs2204 and a low of Rs2070. Total traded volumes stood at 10.2mn shares.

BHEL plans to spend Rs15.9bn to expand capacity to produce equipment capable of generating 20,000MW by March 2012.

Shares of BHEL ended flat at Rs2275. The stock opened at Rs2294 and made an intra-day high of Rs2314 and a low of Rs2265. Total traded volumes stood at 0.13mn shares.

Shares of Bharati Shipyard surged by over 2.6% to Rs214 after the company picked up an additional 3.01% stake, raising its holding to 22.48% for an amount of ~Rs3.05bn on acquiring its 22.48% stake in Great Offshore.

Bharati acquired 1.11mn shares at an average Rs558.81 per share through Dhanshree Properties Pvt. Ltd, a Bharati Shipyard unit, for a total of Rs624mn.

ABG Shipyard had proposed an open offer of Rs520 per share on August 5, 2009 for Great Offshore to lift its 7.87% stake.

Shares of Petronet LNG gained by 2.5% to Rs76.2 after the company announced its plans to raise Rs50bn in debt to build power plants. The company plans to borrow money from overseas and local banks by the end of 2010, Managing Director P. Dasgupta said. The company may raise an additional Rs20bn in 2011, selling shares to existing investors.

Petronet’s planned power plants will be built adjacent to its import terminals at Dahej in Gujarat state in western India and Kochi in the southern state of Kerala.

The plants will have the capacity to generate 1,200MW of electricity and may be completed in 2012.

Shares of Thermax advanced by 3.5% to end at Rs525 after the company announced its entry into the independent power producer segment by bagging an order worth Rs10.01bn for the turnkey supply of a 270 MW power plant being set up by a Hyderabad based Infrastructure Company.

The boilers for this project will be manufactured by Thermax using the circulating fluidized bed combustion (CFBC) technology Licensed from Babcock & Wilcox, USA.

Shares of Raymond were locked at 10% upper circuit to end at Rs204.85 after the company announced that the board of directors approved the proposal for commencement of Realty Development as new business.

Shares of Alstom Projects surged over 4% to Rs544 after the company and its *consortium partners have signed a signaling equipment and services contract worth Rs1.87bn with the Bangalore Metro Rail Corporation Ltd (Â"BMRCL") for the first two lines of the new Bangalore metro system in India.

(*The consortium is led by ALSTOM Projects India Ltd and composed of ALSTOM Transport SA (ATSA), Thales Security Solutions and Services and Sumitomo Corporation).
The contract also has a provision for BMRCL to exercise a firm option of value Rs1.41bn (out of which Alstom’s share is Rs500mn) within 15 days of the base contract coming into effect.