Hesitation can bring devastation
He who hesitates is not only lost, but miles from the next exit.
Our suggestion to increase your cash position would have done well for you. Hesitation to lighten over-leveraged position usually wipes out most of your earlier gains in a session or two. Is the pre-budget rally over? That's the question considering the recent events, especially Monday's carnage. The bulls will hope for a dead cat bounce to exit some counters. It's seems like an uphill battle this time to scale to a new peak before budget. With inflation shooting up and interest rates likely to continue their upward march, the bears seem to be slowly resurfacing. In case of a minor rebound, don't get fooled, as there could be some more downside left in the near term. Barring a slight decline in oil prices the scene on the global front is also not particularly encouraging.
One positive could be the FII figures. They were net buyers on Friday as well as Monday (provisional) in the cash segment. But, its the F&O segment where the action has taken place in the past few days. Unwinding of long positions in the derivative segment has accentuated the weakness in the cash segment. How much more of the fall is still on the cards is debatable. Hence, it would be prudent to take a backseat for a while and wait for the market to stabilise before taking a fresh plunge. We expect a weak opening and perhaps some buying could set in at lower levels. Long term investors can continue holding the fundamentally sound stocks and again expect bounce back in the front line counters first.
FIIs were net buyers to the tune of Rs1bn yesterday (provisional) in the cash segment. On Friday too, they pumped in a net of Rs2.75bn. However, in the F&O segment, foreign funds were net sellers of Rs16.58bn yesterday. Mutual Funds are also not offering any support and pulled out Rs1.91 on Friday.
US shares closed lower on Monday as lower oil prices hit energy companies and the nagging concerns about delinquencies in the sensitive housing market continued to weigh on homebuilders and mortgage lenders.
The S&P 500 dropped 4.69, or 0.3%, to 1433.37 after slumping 0.7% last week. The Dow Jones Industrial Average fell 28.28, or 0.2%, to 12,552.55. The Nasdaq Composite Index slipped 9.44, or 0.4%, to 2450.38. All three benchmarks retreated for a third day in a row.
Crude oil futures declined 3.5% to $57.81 a barrel on the New York Mercantile Exchange after Saudi Arabia told Asian refiners to expect more shipments next month and the nation's oil minister said that OPEC doesn't need to cut production further. March crude was at $57.88, up 7 cents from NY close in extended trading in Asia. Oil prices are down 26% from a record $78.40 in July 2006.
Investors were also wary at the start of a busy week that brings reports on retail sales, housing and manufacturing, as well as Fed Chairman Bernanke's visit to the Capitol Hill. The Fed chairman gives his semiannual testimony before the Congress on Wednesday and Thursday.
COMEX gold for April delivery sank $5 to $667.30 an ounce. Treasury prices slipped, lifting the yield on the benchmark 10-year note to 4.8% from around 4.78% late on Friday.
In currency trading, the dollar rose versus the euro and yen after the weekend G7 meeting ended without members - finance ministers of the world's largest economies - specifically addressing the weakness of the yen, which recently fell to a 21-year low.
Shares of aluminum producer Novelis surged by more than 13% after it agreed to be bought by India's Hindalco Industries for $6bn in cash and debt.
Indian ADRs too had a bad day at office in the US. Patni was down 2.9%, VSNL tumbled almost 10%, Satyam was off 1.5%, Tata Motors shed 2.6%, Dr. Reddy's advanced 1.15%, HDFC Bank lost 1%, ICICI Bank slid 2.6% and MTNL plunged 7.8%.
European shares lost ground. The pan-European Dow Jones Stoxx 600 index declined 0.6% to 378.05. The UK's FTSE 100 dropped 0.5% to 6,353.50, while the German DAX Xetra 30 slipped 0.8% to 6,859.45 and the French CAC-40 lost 0.9% to 5,643.95.
In emerging markets, the Bovespa in Brazil gave up 0.8% to 43,934 while the RTS Index in Russia slumped 2.5% to 1838 and the IPC index in Mexico gained 0.2% at 27,972.
Asian markets are mixed this morning. The Nikkei in Tokyo rose by 110 points to 17,614 while the Hang Seng in Hong Kong slumped 376 points to 20,217, and the Kospi in Seoul was down 3 points at 1411.