Ninety percent of the clients I see, if they get a raise, the first thing they say is 'I can bet a bigger house or a better car.' Not 'I can pay off (the mortgage and car loan) I have now.
That more or less sums up the situation as far as sub-prime lending is concerned. After a remarkable rescue act by the bulls for two days in a row, another weak start is in store. No prices for guessing the reason. Its the same old problem with the US housing market, especially the subprime mortgages. Wall Street got another battering on Friday. Markets in Europe, Latin America and other emerging markets also took a beating. Asian markets, barring China, have opened sharply down. As a result, we expect a gap-down opening in our market as well.
The fact that the sell-offs have come on higher volume and the subsequent rebounds have seen lower volume remains a cause for concern. Another worry is the withdrawals from the FIIs. There are also no major catalysts on the horizon, as most of the positives have been factored in. The market should remain weak in the near term purely due to the global meltdown.
One should exit weak scrips and stick to the strong ones. Fresh buying is not called for at this stage. One should endure the current volatility and decide on the next course of action once things stabilise a little. A rebound later in the day is always possible. But don't get tempted. Invest only if you can hold on for long.
There are fears that the trouble in the US credit markets could be worse than earlier thought. S&P has cut its outlook on Bear Stearns to negative after two of its hedge funds collapsed last month owing to the subprime contagion. The Wall Street firm's CFO says the US fixed-income market is as bad as he has seen in 22 years. In fact, Bear Stearns' President has had to step down, due to the credit market crisis.
Global investors pulled out $1.4bn from global emerging markets funds during the week ended August 1, according to Emerging Markets Portfolio Funds Research. European markets were down on Friday. All emerging markets equity funds had outflows of $2bn in the latest week versus net inflows of $2.4bn in the week ended July 24.
One event to keep a close eyes and ears on is tomorrow's Federal Reserve meeting. The US central bank is most likely to hold its key interest rate steady at 5.25%. However, a school of thought believes the turmoil across global stock markets and concerns about credit markets should force the Fed to change its stance shortly. But, rising oil prices could still keep the Fed on inflation watch for the foreseeable future.
Mphasis and Torrent Gujarat Biotech will announce their results today. Shares of Alpa Laboratories will get listed on the bourses today. Airlines might gain amid reports that most carriers have hiked fuel surcharge in the wake of an increase in jet fuel prices.
Punj Lloyd could advance after its recent announcements. ICI India is likely to be in focus. Akzo Nobel and a German partner have reached a tentative agreement to buy Imperial Chemical Industries (ICI), the parent of the Indian arm. If the deal goes through there is likely to be an open offer for ICI India as well.
SBI is another stock that may rise amid reports that the Government is expected to fund the banking major's growth plans. RPG Transmission and KEC International will attract attention as the two companies' boards will meet today to discuss a merger.
TRF could gain as the company has received an order worth Rs1.15bn from NMDC, Hyderabad.
European markets declined on Friday. The pan-European Dow Jones Stoxx 600 index lost 1.3% to 372.03, with oil & gas companies among the weakest performers following the drop in crude oil prices. The UK's FTSE 100 slipped 1.21% to 6,224.30, the German DAX 30 slid 1.31% to 7,435.67 and the French CAC-40 dived 1.48% to 5,597.89.
In Brazil, the Bovespa plunged 1,845 points, or 3.4%, to end at 52,846.38. Mexico's IPC index crashed 723 points, or 2.4%, to shut shop at 29.671.77. The Bovespa shed 0.14% for the week, while the IPC was down 1.9%. Chile's IPSA erased earlier advances to end down 0.9% at 3,297.74. It shed 0.2% during the week.
Among the other emerging markets, the RTS index in Russia was up 0.7% at 1970 while Turkey's ISE National-30 index in Istanbul was down 903 points or 1.4% at 63,365.
Indian shares climbed anew on Friday, as investors continued their shopping spree after the big crash of August 1. The sentiment has improved over the last couple of days with the Dow Jones Industrial Average gaining more than 200 points despite the ongoing crisis in the subprime mortgage market.
The benchmark BSE Sensex jumped by 153 points or 1% to end at 15,138.40 after touching a high of 15,235.51 and a low of 15,061.13. The NSE Nifty too advanced by 1% to shut shop at 4401.55.
The BSE Small-Cap index and the BSE Mid-Cap index gained 1.1% and 1.4%, respectively. Among the sectors, Real Estate (2.15%), Consumer Durable (2.1%), Capital Goods (1.4%), Metals (1.4%), Banking (1.3%), FMCG (1.3%), IT (1.2%) and Auto (1%) stocks were the big gainers. Oil & Gas and Pharma shares posted modest gains.
Within the Sensex, the top gainers were SBI (2.7%), NTPC (2.3%), HDFC (2.2%), ACC (2%), Tata Steel (2%), Grasim (1.8%), Hindalco (1.75%), Wipro (1.7%), Maruti (1.7%) and ICICI Bank (1.65%). Among the notable losers were Ranbaxy (1.4%), Dr. Reddy's (1.3%) and Ambuja Cements (1%).
Technology stocks recorded smart gains. Wipro gained by 1.7%to Rs470, Satyam Computer advanced by 1.1% to Rs471 and Infosys added by 0.8% to Rs1915. Mphasis, Financial Technology and Patni were the major gainers among the Mid-Cap stocks.
Metal stocks were also trading firm led by gains in index heavy weights like SAIL surged by 3% to Rs148, Sterlite Industries gained by 1.6% to Rs631, Hindalco advanced by 1.6% to Rs162 and Hindustan Zinc added 2.1% to Rs723.
However, US stocks plummeted anew on Friday as the worries surrounding the subprime mortgage market and its fallout on the American financial sector continued to cast a spell on the market.
Fund Activity:
FIIs were net sellers of Rs1.43bn (provisional) in the cash segment on Friday. At the same time, local institutions were net buyers of Rs591mn. In the F&O segment, FIIs were net buyers at Rs17.73bn.
On Thursday, FIIs offloaded Rs4.19bn from the cash segment.
Major bulk Deals:
Capital Research and Management has picked up J&K Bank while Vontobel Funds Inc sold the stock; DSP Merrill Lynch Capital has sold India Infoline; Fin Brains Securities (India) has sold Simplex Projects.
Insider Trades:
Shringar Cinemas Limited: Balkrishna Shroff, Director bought from market has bought 10000 equity shares of Shringar Cinemas on 1st August 2007.
Lower Circuit:
Rama Pulp Paper and Balasore Alloy
Upper Circuit:
Goldstone Tech, Ganesh Forgings, Easun Reyrolle, Zuari Industries, Prism Cements, Era Constructions, Accentia Technologies, Maxwell Inds and Sulzer India.
Delivery Delight (Rising Price & Rising Delivery):
ABB, Alstom Projects, Ballarpur Industries, Dishman Pharma, ITC, Jaiprakash Associates, Mphasis BFL, Praj Industries, Punj Lloyd and Reliance Petroleum.
Abnormal Delivery:
Reliance Capital, Ultratech Cement, Unitech, Chennai Petro, SBI, Rolta, Reliance Industries, Hindalco, Tata Tea, Kesoram, GSK Pharma, Aurobindo Pharma and HDFC.
Major News & Announcements:
Inflation rate was 4.36% in week ended July 21 vs expectations of 4.37%
Govt approves FDI proposals worth Rs5.75bn
Apar Industries gets export order of Rs1.11bn
Govt allows TV 18 group to buy stake in MTV India for $50.5mn
Punj Lloyd form JV for Real Estate development
Infosys in multi-year services accord with Canadian Pacific
Parsvnath gets nod for Indore IT SEZ
Goldstone Technologies to foray into business intelligence