After weak start, bears may loosen grip
Experience is what you get when you don't get what you want.
What an experience the last couple of days has been. We've had a Ferocious Friday, a Manic Monday and a Terrible Tuesday. Going by the cues, we’ll have a Weak Wednesday at least at start. In the interim, the Sensex has shed around 1,000 points. Last week's euphoria over the benchmark BSE index hitting 14k has gone for a toss. What's worse, levels of 12K are being talked about. We expect some sort of a rebound later after a savage correction. The undertone remains pretty grim. If you have been booking profits, enough investment opportunities are available. For the near term we continue to advocate caution.
The heartening thing today is that the Federal Reserve, as expected, has left its benchmark rate unchanged, as the US economy is slowing. But, the US central bank remains on guard for any surprising spikes in inflation.
Another positive for the market today is that FIIs were net buyers in the cash segment over the last couple of days even as the key indices were getting pummeled. On Monday, foreign funds pumped in Rs4.22bn while the provisional data shows that yesterday too they were net buyers of Rs2.59bn.
Most of the selling in the last few sessions has come from the derivative segment. On Monday, FIIs pulled out Rs13.84bn from the F&O segment, But, yesterday they were net buyers of Rs3.4bn on the derivative side of the market. Foreign funds were net sellers of Rs4.15bn in Index Futures yesterday while in Stock Futures they pumped in Rs4.8bn.
Interestingly, Mutual Funds withdrew a whopping Rs6.02bn from the cash segment on Monday. A financial daily reports that a large domestic Mutual Fund has been selling over the past few sessions, especially the mid-caps, to buy cheap for its newly launched fund. Tuesday’s Mutual Fund data will be released only after today's close of trade. What is also not known is the level of Mutual Fund activity in the F&O segment, as no data is readily available.
US stocks fell on Tuesday after the Fed said that inflation is still a threat to the world's largest economy and earnings at Nucor Corp. and Best Buy missed analysts' consensus estimates.
The S&P 500 Index closed nearly unchanged at 1411.56. The Dow Jones lost 12.90 points, or 0.1%, to 12,315.58. Shares of General Electric rose after the conglomerate said that its 2007 profit will be higher than some analysts anticipated. The Nasdaq dropped 11.26 points, or 0.5%, to 2431.60.
Fed policy makers reiterated that some inflation risks remain in a statement after keeping their benchmark interest rate unchanged at 5.25%. The view disappointed investors, some of whom had been betting that the central bank will signal a rate cut.
Steel companies' shares tumbled after Nucor, the second-largest US producer of the metal, said that profit this quarter will be less than anticipated because of lower prices, higher inventories and record imports. Retailers fell after disappointing earnings from Best Buy, the largest US consumer-electronics chain.
US light crude oil for January delivery lost 20 cents to settle at $61.02 per barrel on the New York Mercantile Exchange. The front-month contract was quoting 7 cents lower at $60.95 per barrel in extended trading in Asia this morning.
Bond prices rose, lowering the yield on the benchmark 10-year note to 4.49%, from 4.52% late on Monday. The dollar slipped against the euro and the yen. Gold prices fell $3.10 to $631.70 an ounce.
European shares closed slightly higher. The pan-European Dow Jones Stoxx 600 index gained 0.4% to 359.72. The French CAC-40 closed virtually unchanged at 5,426.82 while the German DAX Xetra 30 advanced 0.1% to 6,476.17 and the UK's FTSE 100 dipped 0.1% to 6,156.40.
In emerging markets, the Bovespa in Brazil fell by 0.6% to 43,018 while the IPC index in Mexico gained 0.3% to 25,828 and the RTS index in Russia added 0.2% to 1841.
Asian exporter stocks rose on Wednesday, led by Toyota and Samsung, after crude oil fell to a two-week low and gains in the dollar improved the outlook for overseas earnings.
The Morgan Stanley Capital International Asia-Pacific Index, rose 0.1% to 136.66 as of 11:09 a.m. in Tokyo. Stock benchmarks also advanced in New Zealand, South Korea, Taiwan and China, whose Shanghai Composite Index touched its previous record.
Japan's Nikkei 225 Stock Average was down 6 points at 16,631 while the Hang Seng tumbled by 202 points to 18,705. The Kospi in Seoul advanced 6 points to 1383 while the Straits Times in Singapore lost 28 points to 2865.
Banks, including Sumitomo Mitsui Financial Group, fell on concern that profits will be curbed because the Bank of Japan will not increase interest rates when it meets next week.
Major Bulk Deals:
Reliance MF has bought Deepak Fertilizers while Carlson Fund has sold the stock; ABN AMRO Bank and Bear Stearns have picked up Federal-Mogul Goetze (India) while HDFC MF has sold it; Blackstone Asia has purchased more of Indo Tech Transformers; Govt of Singapore has bought Nitco Tiles; Birla Sunlife MF has picked up NIIT Tech; DWS Investment has bought OBC while Merrill Lynch has sold it; Citigroup Global has purchased Vijaya Bank but Goldman Sachs has sold the stock; Reliance MF has picked up Voltamp; ABN AMRO Bank has sold Webel SL Energy Systems.
Insider Trades:
The Great Eastern Shipping Co. Limited: Bharat K Sheth, Deputy Chairman and Managing Director has purchased from open market 17650 equity shares of The Great Eastern Shipping Co. Limited on 5th December, 2006.
Kirloskar Oil Engines Ltd: Vikram Shreekant Kirloskar, Director has sold in open market 15000 equity shares of Kirloskar Oil Engines Ltd from 6th December to 7th December, 2006.
Market Volumes:
The turnover on NSE was up by 18% to Rs111bn. BSE PSU index was the major loser and lost 4.39%. BSE Capital Good index (down 4.14%), BSE Metal index (down 3.90%), BSE Bank index (down 3.23%), BSE Auto index (down 3.13%) and BSE Pharma index (down 3.14%) were among the other major losers.
Volume Toppers:
Reliance Communications, SAIL, Zee Telefilms, India Cements, Reliance Industries, ITC, Indiabulls, Tata Steel, Gujarat Ambuja, HLL, Hindalco, Polaris, GMR Infrastructure, Indian Hotels, Unitech, IDBI, Satyam Computer and Lanco Infratech.
Lower Circuit Filters:
ACE, Atlanta, Adani Enterprises, Anant Raj Industries, Ambalal Sarabhai, Inox Leisure, Gulf Oil Corp, Flex Industries, Shaw Wallace, Hindoostan Spinning, NEPC India and Nirlon.
Delivery Delight:
Britannia and Dabur
Brokers Recommendations:
Mahindra Gesco – Outperform from Kotak
Long Term Investment:
Hindustan Construction
Major News Headlines:
Satyam signs MoU with Egypt to set up development center
ONGC to consider interim dividend on December 23rd
Anant Raj Industries to raise Rs12.25bn through share sales
HPCL to consider interim dividend on December 20th
3i Infotech ties up with Oracle to develop technology center in Chennai
Tata Steel may raise Corus bid to 525 pence per share: reports
Bihar Tubes secures export orders
Garware Offshore to consider raising FII limit to 60% on December 20th
Bajaj Hindusthan signs US $80mn ECB contract
BSEL Infrastructure's UAE unit raises US$25mn