If we believe that tomorrow will be better, we can bear a hardship today.
The buzz on the street was that weakness could be ‘created’ to coincide with the DLF issue. Not much of stage management required as bears have found support from the global markets. Fresh concerns about inflation and hardening of interest rates are the immediate worries. It all started with Federal Reserve chief Ben Bernanke's speech earlier in the week, where he said that prices are rising too quickly. Then there was the rate hike by the European Central Bank. And, though the Bank of England left rates steady yesterday, most experts are betting on a rate hike in the next meeting.
The trigger for the sell-off in global markets overnight was the sudden jump in US Treasury yields, which rose to 5.13% - the highest in 11 months - from 4.96% late on Wednesday. This has prompted bond guru Bill Gross to turn bearish on the bond market. Gross now expects strong economic growth worldwide to push up global interest rates and put a damper on the Treasury market. With global equity markets tumbling, we expect the Indian stocks to open sharply down and remain weak for most part of the day. Also, FIIs have been net sellers of late, reversing the trend from the past two months. Another worry is the spike in oil prices.
FIIs were net sellers to the tune of Rs2.87bn (provisional) in the cash segment yesterday while the local institutions pumped in Rs2.84bn. In the F&O segment, they offloaded stocks worth Rs11.14bn. On Wednesday, foreign funds were net sellers of Rs696mn. Mutual Funds were net sellers of Rs1.93bn on the same day.
UCO Bank should be under pressure amid reports that the RBI has pulled up the bank for not heeding its advice on provisioning for bad loans. M&M could be in focus as a financial daily reports that it is in talks for buying an Italian gearbox maker for Rs4bn. Wipro might attract some attention as it has decided to merge six subsidiaries with itself. Tata Steel may also be in the spotlight amid reports that it is looking at jointly developing a $3bn integrated steel project in Angola.
Patni Computer will continue to hog the limelight as a business daily reports that private equity major General Atlantic Partners, which already holds around 16% in the software company, is likely to increase its stake. ONGC may rise after the company said that it has made five new oil & gas discoveries.
Entertainment Network India is another stock that is likely to be active. The company has signed a MoU with Shri Puran Multimedia Ltd., whereby the latter has agreed to solely and exclusively utilize the sales support function offered by the Company on a national level to facilitate the sale of airtime of radio stations.
K Sera Sera Productions' Board has authorized Managing Director to explore the opportunities available for working with GV Films. Spanco Telesystems' Board has approved an investment of up to Rs750mn in Bharat BPO Services, which is a 50:50 JV between the company & Omnia BPO Services Ltd. for its Railway project. Omnia is a Spice telecom group company.
US stocks extended their losses on Gross' remarks. Recent concerns about rising interest rates have sent Wall Street and global markets into a tizzy. The Dow Jones Industrial Average has shed about 400 points in the past three sessions. The Dow industrials tumbled 199 points to 13,266.73. The S&P 500 fell 26.66 points, or 1.8%, to 1490.72. The Nasdaq Composite Index lost 45.80 points, or 1.8%, to 2541.38.
Indexes extended their declines after oil prices climbed to a nine-month high. Crude oil for July delivery climbed 1.5% to $66.93 a barrel in New York after a government report showed that refinery outages curbed US fuel production. In currency trading, the dollar rose versus the euro and the yen. COMEX gold for July delivery fell $9.40 to settle at $665.20 an ounce, falling with other dollar-traded commodities.
European shares lost ground, as investors continued to adjust their expectations for global interest rate levels. The Dow Jones Stoxx 600 index dipped 1.3% to 385.18. The German DAX Xetra 30 closed down 1.4% at 7,618.61 and the French CAC-40 declined 1.5% to 5,890.49. However, the UK's FTSE 100 closed down only 0.3% to 6,505.10.
European 10-year note yields climbed to 4.5% on speculation the region's central bank will keep raising interest rates after lifting the refinancing rate to 4% on June 6.
In the emerging markets, the Ibovespa in Brazil tumbled 2% to 52,049 while the IPC index in Mexico slid 1.6% to 31,184 and the RTS index in Russia was down 1.1% to 1803.
Asian stocks slumped again this morning on concern that rising global interest rates will curb consumer spending and corporate profits. All 10 industry groups of the Morgan Stanley Capital International Asia-Pacific Index declined, sending the regional benchmark to its biggest loss in seven weeks.
BHP Billiton, the world's largest mining company, led materials stocks lower along with metals prices. An index of six metals traded on the London Metal Exchange (LME) dropped 1.2% yesterday. Nickel slumped 5.7% and zinc fell 0.8%.
The MSCI index lost 1.3% to 150.85 as of 10:51 a.m. in Tokyo, the most since April 19, after yesterday sliding 0.2% from a record high. The benchmark has dropped 0.3% this week, snapping a two-week, 2.7% advance.
In Japan, the Nikkei 225 Stock Average dropped 1.7% to 17,755.70. Japanese shares declined after a report showed that April machinery orders rebounded less than some economist estimates.
Stock indexes plunged more than 1% in Australia, South Korea, Singapore, New Zealand and the Philippines. China's CSI 300 Index swung between gains and losses.
Markets were on the receiving end for second consecutive trading session with benchmark Sensex sliding almost 350 points. The key indices witnessed wild intra-day gyrations during the day as NSE Nifty swung nearly by 100 points. IT stocks hogged the limelight as the dollar strengthened against the Indian rupee the rupee closed at Rs40.70 per dollar.
The other entire key sectoral ended in negative territory BSE FMCG, Auto and Banking index were the major losers losing over 1% each. The Auto stocks like Bajaj Auto, Hero Honda and TVS Motors slipped as they announced cut in production on decline in demand. Finally, the 30-share Sensex dropped 69 points to close at 14186. NSE-50 Nifty was down 18 points to close at 4179.
L&T slipped by 1.3% to Rs1896. The company announced that it has secured 1.87 Dirham order. The scrip touched intra-day high of Rs1940 and a low of Rs1879 and recorded volumes of over 6,00,000 shares on NSE.
Reliance Communication gained by 1% to Rs520 after the company announced that it has added 1.4mn Mobile users in the month of May. The scrip touched intra-day high of Rs531 and a low of Rs500 and recorded volumes of over 9,00,000 shares on NSE.
Sterlite Optical advanced by 2.8% to Rs218 after the company was granted optical Fiber patent in USA. The scrip touched intra-day high of Rs223 and a low of Rs210 and recorded volumes of over 11,00,000 shares on NSE.
Lanco Infratech slipped by 2.8% to Rs170. The company announced that its units 5.84% stake would be bought by IFC. The scrip touched intra-day high of Rs177 and a low of Rs167 and recorded volumes of over 7,00,000 shares on NSE.
Elecon Engineering surged by over 6% to Rs456 after the Board of Directors announced that they would meet on June 15th to consider Bonus Issue. The scrip touched intra-day high of Rs469 and a low of Rs422 and recorded volumes of over 5,00,000 shares on NSE.
Technology stocks witnessed some fresh buying as Dollar strengthens against Indian Rupee. Index heavy weight Infosys advanced by 1% to Rs1957, Satyam Computer gained by over 3.5% to Rs481, Wipro was up 2.7% to Rs545.
Banking stocks also were on the receiving end. Index heavy weights like SBI slipped by 2.1% to Rs1360, HDFC Bank was down by 2% to Rs1105 and ICICI Bank edged lower by 0.3% to Rs909. Corp Bank, Bank of Baroda and Bank of India were the major losers among the Mid-cap stocks.
Oil & Gas stocks also witnessed some profit booking. Reliance Industries slipped by 1.3% to Rs1669, ONGC has dropped by 1.2% to Rs854. Oil refinery stocks also slipped HPCL dropped by 1.9% to Rs271 and IOC was down by 1.2% to Rs440.
Insider Trades:
Clutch Auto Limited: J M Financial Mutual Fund through its various schemes has purchased from open market 100000 of Clutch Auto Limited on June 1, 2007
Prime Securities Limited: Mr N Jayakumar, President has purchased from open market 75000 equity shares of Prime Securities Limited on June 4, 2007
Lower Circuit:
Tripex Overseas, Marg Construction and Donear Industries
Upper Circuit:
Prime Focus, GVK Power, Hindustan Oil Exploration, Kernex, Dawn Mills, ION Exchange, Ruby Mills, IID Forgings and Bharat Bijli.
Delivery Delight (Rising Prices & Delivery):
Amtek Auto, Aurobindo Pharma, Bank of Rajasthan, Engineers India , Financial Technologies, GVK Power, Hindustan Oil Exploration, IFCI, Jagran Prakashan , Nucleus Software, Pfizer, Rajesh Exports, Spanco Telesystems, Tata
Chemicals and TV Today.
Abnormal Delivery:
Hindustan Motors, Bank of Baroda, TVS Motor, Punjab National Bank, Punj Lloyd and Crompton Greaves
Major Bulk Deals:
Citigroup Global has sold Balkrishna Industries; HDFC MF has sold Ceat; Citigroup Global has bought Fedders Lloyd.
Security in ban period:
The derivative contracts in the underlying IFCI have crossed 95% of the market-wide position limit and are currently in the ban period. It is hereby informed that all clients/ members shall trade in derivative contracts of IFCI only to decrease their positions through offsetting positions. Any increase in open positions shall attract appropriate penal and disciplinary action.
Major News:
Elecon Engineering Board to meet on June 15 to consider bonus
AIA Engineering to pay Rs3.5 per share as dividend
R Com adds 1.4mn Mobile users in May
SKF invests in new plant in India
L&T secures US$51mn order from Dubai
Tata Motors ups stake in Automobile Corp to 37.8%
IFC to buy 5.84% stake in Lanco Infratech unit for $8mn
HCC bags order worth Rs1.68bn from Tata Steel
Sterlite Optical granted optical Fiber patent in USA
Network 18 starts unit for event management business
TVS Motors cuts bike production by 5000 units per month
Hero Honda cuts motorcycle production as demand slows
Bajaj Auto cuts bike production as much as 10%
Pratibha Industries secures order for water supply scheme from J&K