Surprise assault, bulls may counter attack
A tactical retreat is not a bad response to a surprise assault, you know. First you survive. Then you choose your own ground. Then you counterattack
The last hour attack by bears came as a bit of a surprise because the bulls had managed to hold fort for most part of the day. Heavy selling by possibly institutional investors saw the key indices slip from a day's high and end sharply down. Some attribute the sudden fall to unwinding of long positions in the F&O segment on the last day of the settlement. In fact, for the first time since June 2006, the Nifty fell during a F&O series. But, don't despair as the March Nifty futures ended the day with a 24-point premium to the spot Nifty index.
The put-to-call (PCR) ratio is also down. The F&O rollover has been quite good, though the near-term outlook remains cloudy as investors are reluctant to build fresh long positions before the budget. Having said that we feel that the market direction post-budget will hinge more on foreign capital inflows and the emerging economic conditions like inflation and movement in interest rates. The latter will perhaps have a major impact on the market. A further hardening of interest rates may spook the bulls. So, keep an eye on inflation and the Government moves on this front.
Globally things are looking benign at the moment, though oil prices have crossed the $60 per barrel mark yet again and could spoil the bull party. From the voices heard so far, real estate may be at the receiving end this budget. In a nutshell, things are going to remain choppy and making money won't be as easy as it was in the recent past. A stock specific approach and reduction in the number of stocks you hold could be the best way to survive the choppiness. There is a chance of a bounce back after yesterday's sudden and sharp plunge. But that doesn't mean the bulls may be out of the woods yet.
FIIs were net sellers to the tune of Rs4.35bn (provisional) in the cash segment yesterday. In the F&O segment, they were net buyers at Rs770mn. On Wednesday, foreign funds offloaded stocks worth Rs402mn in the cash segment. Mutual Funds pumped in Rs178.1mn on the same day.
Shares of Power Finance Corp. (PFC) will list today. Atlanta will definitely be under pressure after SEBI barred 16 entities, including the promoters of the company from trading in the company's shares for alleged price manipulation post listing of the stock. Rolta India should advance after the RBI approved the proposed hike in the investment limit for overseas investors up to 40% of the company's paid-up capital. On the other hand, the central bank has barred further purchases by foreign investors in Jaiprakash Associates as the investment ceiling in the stock has reached 22% of its paid up capital.
Wockhardt could attract some investors after the domestic pharma major announced its results yesterday. Zensar Tech is likely to hog the limelight amid reports that the RPG Group will buy out the stake held by its Japanese partner Fujitsu. Apollo Hospitals is another scrip to watch out for after a financial daily reported that the company is eyeing UK-based Abbey Hospitals. Hexaware is also expected to make a move as it is reportedly looking at buying an IT firm in Europe or the US. Cement counters will remain in the spotlight amid reports that the Big Five companies in the country are holding back production ramp-up to gain from the current high price scenario. There is also talk of a possible ban on exports.
US stocks closed mixed on Thursday. The Dow Jones Industrial Production fell for the second straight day on the back of rising oil prices, a jump in Treasury bond yields and Iran's refusal to stop uranium enrichment. However, the Nasdaq Composite Index climbed to a six-year high on buoyant demand for semiconductors. The sentiment turned weak after Iran defied a United Nations Security Council demand to halt its atomic programme and on speculation that the US might raise its terror alert.
The Dow dropped 52.39 points, or 0.4%, to 12,686.02, its worst loss since Feb. 9. The S&P 500 finished almost unchanged at 1456.38. The Nasdaq rose 6.52 points, or 0.3%, to 2524.94, the highest since February 2001.
A jump in oil prices also aided the decline. Crude futures climbed 1.5% to $60.95 a barrel, the highest close this year. In other markets, Treasuries fell and the dollar approached the strongest in four years against the yen.
European shares closed higher, as gains in the mining sector coupled with good earnings from BASF and Nestle boosted sentiment. Italy's main stock market index also managed gains despite the resignation of the country's prime minister.
The UK's FTSE 100 rose 0.4% to 6,380.90, while the German DAX 30 closed up 0.5% at 6,973.73 and the French CAC-40 climbed 0.2% to 5,707.86.
The DAX touched a new high for the second time in two days. It reached 7,012.34, a level not seen since November 2000.
The Milan-based S&P/MIB index rose 0.4% to 42,456.00. Romano Prodi resigned as premier late on Wednesday after losing a Senate vote on foreign policy.
The pan-European Dow Jones Stoxx 600 index rose 0.3% to 379.76.
In Asia, Japan's Nikkei 225 index continued its climb above the 18,000 level, finishing the morning session at 18,127.98, a gain of 0.11%. In Asian regional markets, stocks generally advanced. Markets in China and Taiwan remained closed for Lunar New Year holidays and are scheduled to reopen on Monday.
Australia's S&P/ASX 200 was up 0.33% at 6,037.10 after touching a new intraday high; South Korea's Kospi reversed early losses to add 0.09% to 1,466.71; Hong Kong's Hang Seng shed as much as 0.13% to 20,781.26; the Singapore Straits Times was nearly flat at 3,2090.52 and Kuala Lumpur's Composite too was barely changed at 1,276.85.