Bulls CRRy…Teddy bear, Reddy bear
True love stories never have endings…
Happy Valentine’s Day and in keeping with the spirit of the day you will see bears all around. The Indian growth story has not ended as yet. But the bulls sure are heart-broken and the latest monetary tightening step from the RBI has added to the tears. The central bank has decided to up the ante against spiraling inflation by hiking the CRR by 50 basis points to 6%. The message is clear from the RBI. It wants to reign in prices at any cost. The CRR hike is aimed at reducing the amount banks can lend. The RBI is particularly weary of lending to the sensitive areas like the capital market and real estate, besides personal loans and credit cards. Be prepared for a knee-jerk reaction this morning. We expect the banking and real estate sector to be the biggest losers of this move. Hike in CRR in all likelihood will prompt for another round of PLR hikes, which would pull down consumer loan growth and especially mortgage loans. The ripple effect of this would be felt by the real estate sector, where this could form the much awaited trigger for drop in real estate prices, which have held on despite rising interest rates (small correction in some parts).
In the first week of December, when the last CRR hike was announced the market had lost a lot of ground, led of course by the banking shares. The same scenario could get repeated yet again. Inflation is turning out to be the unexpected party pooper for the bulls. Things are unlikely to improve soon, as the slew of monetary and fiscal measures announced to tame inflation will take time to take effect. The writing is on the wall. Those who have the cash, buy for the medium to long term as frontline counters will be available at much attractive levels these days. Strong global cues are unlikely to lend much support initially. And like Tuesday, don’t get trapped in any short bounce backs.
FII inflows have also started waning after the revival last week. Foreign funds were net sellers to the tune of Rs3.85bn (provisional) in the cash segment yesterday. In the F&O segment, they were net buyers of Rs6393.5mn. FIIs pumped in Rs2.19bn in the cash segment on Monday. With this, their net investment this month stands at $544.8mn. On the other hand, Mutual Funds withdrew Rs3.89bn on Monday.
US stocks snapped a three-day decline on Tuesday with the Dow Jones Industrial Average registering its biggest rally this year as takeover speculation boosted mining shares and General Motors jumped after an analyst upgrade.
Alcoa gained the most on a report that BHP Billiton and Rio Tinto are preparing bids for the world's largest aluminum maker. GM climbed to an 18-month high after Merrill Lynch said a $17bn pension surplus may cover some costs of a new labor contract.
The Dow rose 102.30, or 0.8%, to 12,654.85, the best performance since Dec. 27. The S&P 500 added 10.89, or 0.8%, to 1444.26, with all 10 of its industry groups posting gains. The Nasdaq Composite Index advanced 9.50, or 0.4%, to 2459.88. Since reaching a six-year high on Feb. 7, the S&P 500 has dropped as much as 1.2%.
Citigroup to Shed Red Umbrella Trademark, Symbol Weill Embraced for Empire Citigroup Inc. decided it's better off without Sanford Weill's umbrella.
US light crude oil for March delivery rallied $1.25 to settle at $59.06 a barrel in New York. Oil prices slid 3.5% on Monday after the oil ministers of Saudi Arabia and Qatar said that OPEC may keep crude output unchanged at its March meeting. Oil was 11 cents up at $58.95 in extended trading.
COMEX gold for April delivery rose $1.20 to $668.50 an ounce. Treasury prices inched lower, raising the yield on the benchmark 10-year note to 4.81% from 4.80% on Monday. In currency trading, the dollar fell versus the euro and yen following the trade gap report.
Barring Wipro and MTNL all Indian ADRs closed in the red.
European shares closed higher. The pan-European Dow Jones Stoxx 600 index closed 0.2% higher to 378.72. The UK's FTSE 100 rose 0.5% to 6,381.80, while the German DAX Xetra 30 added 0.5% to 6,895.34 and the French CAC-40 advanced 0.7% to 5,682.69.
Asian stocks had the biggest jump in two weeks on Wednesday, led by BHP Billiton and Nippon Mining Holdings, after copper and oil prices rallied.
Samsung Electronics and Kookmin Bank led gains in South Korea after North Korea agreed to end its nuclear-weapons program in exchange for aid.
The Morgan Stanley Capital International Asia-Pacific Index rose 0.8% to 144.44 at 11:05 a.m. in Tokyo, set for its biggest advance since Feb. 1.
Japan's Nikkei 225 Stock Average gained 120 points to 17,727.74. The Hang Seng in Hong Kong advanced 84 points to 20,216. The Kospi in Seoul climbed 20 points to 1439 and the Straits Times in Singapore rose 31 points to 3180.
Australia's leading share index hit a lifetime high, led by gains in BHP Billiton, Rio Tinto and other resource shares after industrial metals and crude oil prices rebounded.
Sydney's benchmark S&P/ASX 200 was up as much as 0.5% at 5,968.90, easing back from an intraday record of 5,975.9. The gains eclipse its previous lifetime high of 5,947.3 set on Tuesday.
In emerging markets, the Bovespa in Brazil surged by 2.9% to 45,197 while the IPC index in Mexico added 1% to 28,262 and the RTS index in Russia climbed 1.5% to 1866.
Bear hug, will it tighten or loosen?
The markets lost ground for third consecutive trading session as wild intra-day gyrations continued on Dalal Street. After registering a weak opening, the key indices recovered in the afternoon trades on back of buying in the Auto, Oil & Gas and Technology stocks lifting the benchmark index to hit an intra-day high of 14363.75. However, lack of buying support at higher levels, brought the markets lower. The benchmark Sensex swung over 400 points before finally settling 99 points down at 14090 and NSE Nifty slipped 14 points to close at 4044.
HCL Tech gained by 1.8% to Rs654 after the company announced a strategic alliance with Eckler Ltd with an objective of deepening the Company's Insurance Domain expertise. The scrip has touched an intra-day high of Rs655 and a low of Rs601 and has recorded volumes of over 66,000 shares on NSE.
Orchid Chemicals plunged over 9.5% to Rs241. The company raised $200mn selling bonds. The scrip touched an intra-day high of Rs269 and a low of Rs236 and recorded volumes of over 16,00,000 shares on NSE.
Ashok Leyland was in reverse gear the scrip fell over 2.5% toRs43. The company announced that they have placed bid to buy Punjab Tractors. The scrip has touched an intra-day high of Rs46 and a low of Rs43 and has recorded volumes of over 47,00,000 shares on NSE.
Alstom Projects advanced over 2% to Rs458 after the company received 3 Hydro Power orders worth Rs7.5Bn. The scrip touched an intra-day high of Rs474 and a low of Rs435 and recorded volumes of over 2,00,000 shares on NSE.
Technology stocks are trading higher. Mid-Cap stocks like Moser Baer has spurred nearly by 7% to Rs342, NIIT Ltd have surged by 6% to Rs577 and Polaris is up by 3.5% to Rs209. Among the heavy weights Wipro and Satyam Computer are among the major gainers.
Oil exploration stocks recorded smart gains. Reliance Industries advanced 0.5% to Rs1366 and ONGC gained 2.2% to Rs885.
Select Pharma stocks also lost ground towards the end. Glaxo slipped 1.8% to Rs1105 and Cipla was down 2% to Rs243. However, Ranbaxy gained 0.6% to Rs411 and Sun Pharma edged higher 0.3% to Rs1015.