There are two ways to slide easily through life; to believe everything or to doubt everything. Both ways save us from thinking.
Investors can’t help but think what lies ahead and would like to believe that a steep drop in industrial growth for the month of July is more of an aberration rather a trend. Expect the key indices to be rangebound in the next few days. Be selective in stock picking and avoid aggressive purchases. After two straight days of declines, we expect a flat open and maybe the bulls may stretch themselves in the green by the end of the day.
An indecisive trend in Asia and anxiety ahead of next week's Federal Reserve meeting kept the bulls from advancing on Thursday. Trading activity has slowed considerably this week as investors are not ready to take more risks at this point in time. Though FII inflows are continuing unabated the interest from other categories of investors, mainly retail, has ebbed on account of the spike in volatility. Global trends have taken precedent to local developments off late. The same is expected to continue for a while till the US economy pulls itself out of the current turmoil, fueled by the slump in the housing sector. Its a tall order, but the Fed may just be able to engineer a soft landing for the world's largest economy.
Optimistically thinking, there's nothing to worry about, as the impact may be muted in emerging markets such as India. After a slowdown in industrial growth in July things should improve in the coming months though some moderation is imminent due to the aggressive monetary tightening by the RBI and partly due to the base effect. The political turmoil could have a temporary effect on the sentiment but overall outlook remains strong over the medium to long term.
US stocks fell marginally on Wednesday after a volatile session. Record high oil prices and a falling US dollar cast a shadow on Wall Street ahead of next week's much-awaited Federal Reserve policy meeting.
Technology shares were down after Texas Instruments slashed its sales forecast. Office Depot fell to a two-year low after analysts cut earnings estimates.
The Dow Jones Industrial Average declined for the first time in three days, losing 16.74 points, or 0.1%, to 13,291.65. The Standard & Poor's 500 Index finished flat at 1,471.56, helped by a rally in energy shares after oil climbed to a record. The Nasdaq Composite Index lost 5.4 points, or 0.2%, to 2,592.07.
About three stocks dropped for every two that rose on the New York Stock Exchange.
Crude oil hit a new record high in New York, crossing $80 per barrel for the first time ever, after the government said crude supplies fell far more than expected.
US light crude for October delivery set a trading high of $80.18 late in the session before pulling back slightly to settle at $79.91 a barrel, still up $1.68 a barrel and another record close. The old trading high was $78.77 a barrel hit Aug. 1. Oil prices are down about 30% in 2007.
Treasury prices fell, raising the yield on the 10-year note to 4.41% from 4.37% late on Tuesday. In currency trading, the dollar fell to a record low versus the euro and was little changed against the yen. COMEX gold for December delivery fell 40 cents to settle at $720.70 an ounce.
Treasury Secretary Henry Paulson said the recent market turbulence has not been caused by problems in the real economy, but because of bad lending practices. He also said that problems with subprime mortgages will take longer to correct than those in other financial markets.
European stocks ended with small gains after a choppy session. The pan-European Dow Jones Stoxx 600 index, which was down for most of the session, closed with a rise of 0.2% at 369.21. The UK's FTSE 100 rose 0.4% to 6,306.20 and the German DAX 30 advanced 0.2% to 7,472.99. The French CAC 40 ended 0.5% higher at 5,508.01.
Latin American stocks closed lower. The Bovespa, Brazil's benchmark stock index, slipped 0.1% to 53,868.88. Mexico's IPC fell 0.4% to 30.079.87. The benchmark IPSA index in Chile fell 1.3% to 3,113.49 and Argentina's Merval dropped 0.3% to 2,013.07.
In other emerging markets, the RTS index in Russia was down 0.6% at 1899 while the ISE National-30 index in Turkey closed nearly flat at 61,932.
Asian markets were trading mixed this morning. The Nikkei in Tokyo was up 61 points at 15,859 while the Hang Seng in Hong Kong rose 80 points to 24,390. The Kospi in Seoul was flat at 1812 and the Straits Times in Singapore too was nearly unchanged at 3507.
In yet another dull trading session, markets swung between green and red before closing a tad lower. Bulls failed to carry on the momentum after a positive start as they struggled to find any clear direction as government report showed industrial production in July grew at the slowest pace in nine months. Volumes were almost flat, turnover in cash segment was marginally down by 0.19% and in F&O segment was down by 2.8%. Finally, the 30-share Sensex closed lower by 37 points at 15505 and NSE Nifty closed flat at 4497.
SBI marginally gained 0.2% to Rs1624 after the company announced that their plan to raise Rs100bn and would sell shares by December. The scrip touched an intra-day high of Rs1639 and a low of Rs1619 and recorded volumes of over 6,00,000 shares on NSE.
Tata Steel gained by 0.5% to Rs711 following media reports that the company is planning to set up 5mn tons steel plant in South Africa. The scrip touched an intra-day high of Rs717 and a low of Rs712 and recorded volumes of over 10,00,000 shares on NSE.
Alchemist was locked at 5% upper circuit to Rs96.20 after the company announced that they would acquire majority stake in Kaiser Hospital. The scrip touched an intra-day high of Rs96.20 and a low of Rs92.40 and recorded volumes of over 2,00,000 shares on NSE.
Kinetic Engineering spurred by over 3% to Rs142 as the company yesterday announced that they would be developing the gearbox for Tata’s Rs1 lakh car. The scrip touched an intra-day high of Rs157 and a low of Rs142 and recorded volumes of over 1,00,000 shares on NSE.
Essel Propack rallied by over 7% to Rs67 after reports stated that the Indian maker of laminated tubes and packaging plans to buy the packaging unit of Alcan Inc. The scrip has ouched an intra-day high of Rs69 and a low of Rs64 and recorded volumes of over 4,00,000 shares on NSE.
Reliance Industries edged higher by 1.5% to Rs2013 after reports stated that the world's largest polyester maker will pay $250mn to buy the assets of Hualon Corp. of Malaysia. The scrip touched an intra-day high of Rs2021 and a low of Rs1992 and recorded volumes of over 24,00,000 shares on NSE.
IDFC advanced by 1.4% to Rs134 as the RBI has increased the investment limit for FIIs in the companies. The scrip touched an intra-day high of Rs138 and a low of Rs133 and recorded volumes of over 57,00,000 shares on NSE.
Power stocks ended higher for a second day in a row. Suzlon gained by 1% to Rs1335, REL was up by 4% to Rs894, Tata Power advanced by 0.8% to Rs734 and CESC gained 1% to Rs473.
Pharma stocks were in poor health. Sun Pharma edged lower by 0.4% to Rs1006; Cipla was down by 1.4% to Rs174, Ranbaxy declined by 0.7% to Rs416 and Dr Reddy’s Lab edged lower by 0.5% to Rs647.
IT stocks were on the receiving end as rupee continued to strengthen against the USD. Satyam Computer slipped by 1.4% to Rs427, TCS was down by 1% to Rs1015, Rolta dropped by 4% to Rs480 and Mphasis declined by 3.2% to Rs282.
Realty stocks were in momentum. DLF gained by 2.7% to Rs635, Unitech advanced by 3% to Rs262 and Sobha was flat at Rs752.
Metal stocks continued to trade firm. Sterlite Industries gained by 2.3% to Rs624, Tata Steel gained by 0.5% to Rs711, JSW Steel advanced by 1.5% to Rs681 and Hindustan Zinc added 0.5% to Rs709.
Stocks In News
The EGoM approves gas pricing formula of RIL's KG Basin gas. The price is expected to be fixed at US$4.2/mmbtu vs US$4.33 at present.
SBI plans to raise Rs100bn through rights issue or a follow-on offer by December
2007.
ONGC is likely to increase its reserve estimates for its KG basin block.
Suzlon plans to invest about US$1.4bn to triple its production capacity by 2009.
Bombay Dyeing is likely to sell a little less than 15% stake to private equity players to fund its realty, retail and aviation businesses.
SAIL is planning to invest Rs490bn over the next three years to raise production
capacities and modernise mining work.
BPCL and Videocon have reportedly acquired a sizeable stake in Brazilian oil exploration
company, EnCanBrasil, a subsidiary of Canadian oil company Encana.
Lupin has won its patent challenge in US against King Pharmaceuticals and Sanofi-
Aventis for its blood pressure drug Altace.
Sun Pharma is likely to hike its bid price for acquisition of Israel's Taro.
Idea Cellular expects to announce a major organizational restructuring exercise.
COAI serves a legal notice to DoT for delay in allocation of spectrum to GSM players.
Gujarat Alkalies is investing Rs5bn in expanding capacities and setting up a captive power plant.
HDIL is setting up a Rs20bn IT park at Kalmassery near Kochi.
Fund Activity:
FIIs were net buyers of Rs3.18bn (provisional) in the cash segment on Wednesday and the local institutions pulled out Rs913.2mn. In the F&O segment, foreign funds were net buyers of Rs3.44bn.
On Tuesday, FIIs were net buyers to the tune of Rs4.46bn in the cash segment. Mutual Funds were net sellers of Rs1.79bn on the same day.
Major Bulk Deals:
Upper Circuit
Tanla, Marksans, Tourism Finance, Radha Madhav, Goldstone Tele, Gemini Communication, IID Forgings and Jai Corp.
Lower Circuit
Usher Agro