It's always a dilemma whether to follow or lead.
The Fed meet tomorrow is not the major dilemma. This is one of those times Dalal Street is looking closely at Mint Street on what Dr YV Reddy prescribes. Going by the lower inflation figure (WPI - 3.07%) and moderation in credit growth (23-24% YoY), there is a case for the central bank to maintain status quo on all fronts.
But given the Government's and the RBI's worries over robust foreign capital inflows and the disconcerting rise in the rupee, there may be a hike in the CRR yet again of around 50bps to suck out excess liquidity of around US$3.6bn from the system.
The RBI’s dilemma is to sterlise excess liquidity in the system, while guiding interest rates lower. These two objectives are contradictory as the first requires monetary tightening, which would necessarily push interest rates higher. The RBI could also opt for paying some interest to banks on the incremental CRR. A cut in the repo rate may allow the RBI to strike a balance.
Tomorrow, the Fed will review its monetary policy, and bets are that it will cut rates again to prevent further slowdown in the US economy. Only the size of the cut is what everyone is debating on. We see a flat opening but things could well cool down a bit till the RBI policy is announced.
A fortnight ago, the Sensex was speeding towards 20K when the P-Note bombshell set it back by a few thousand points. Bears found themselves corned again as the bulls accelerated to conquer Mount 20K. In early morning trade yesterday, the Hang Seng galloped by over 1,000 points to cross 31k. We had an intuition that it was just a day's work and the bulls could boost the Sensex past the 20k milestone. Luckily our forecast proved right.
Having said that we would like to add that it is really tough to predict daily movement in key indices. One should not get carried away by these numbers and the euphoria. Focus on your portfolio. Stay put in quality stocks and invest more in them at every fall. Use the rally to get rid of the laggards. The market these days is more like the F1 race. The movement, on either side, is quite rapid. We expect the choppiness to continue with a positive bias.
Prominent Results Today:
Adhunik Metaliks, Alstom Projects, Ashapura Minechem, Asian Electronics, Balaji Tele, Balkrishna Industries, Balmer Lawrie, Bharati Shipyard, Bilcare, BL Kashyap, Bombay Rayon, Bongaigaon Refinery, CEAT, Centurion Bank of Punjab, Chennai Petro, Crompton Greaves, DLF, Dolphin Offshore, EIH, Elder Pharma, Engineers India, Era Construction, Everest Kanto, Everon Systems, Gammon India, GHCL, Havells India, Indian Oil, Indotech Transformers, Indraprastha Gas, Jai Corp, Jindal Drilling, Karnataka Bank, Kesoram, Logix Micro, Man Industries, Maharashtra Seamless, Matrix Labs, Mirc Electronics, Nestle, Nitin Fire, ONGC, Prasvnath, Patni Computer, Purvankara, Pyramid Saimira, RPG Transmission, Sesa Goa, SpiceJet, SAIL, Strides Arcolab, Swaraj Mazda, Tata Chemicals, Tata Elxsi, Tata Power, Tata Tele, Torrent Pharma, Unitech and Varun Shipping.
US stocks rose for a second day after higher prices for oil and metals boosted producers of energy and raw materials.
The S&P 500 Index added 6 points, or 0.4%, to 1,540.98. The Dow Jones Industrial Average rose 64 points, or 0.5%, to 13,870.26. The Nasdaq Composite Index gained 13 points, or 0.5%, to 2,817.44. Benchmark indexes also rallied in Asia and Europe, while two-year Treasury note yields increased.
Exxon Mobil gained the most in three weeks after crude climbed to a record. A rally in gold to the highest since 1980 sent shares of Freeport-McMoRan Copper & Gold to an all-time high. Verizon Communications climbed to the highest since 2002 on earnings that beat analysts' estimates.
Wall Street is betting that the Fed policy makers will cut the target rate for overnight loans by at least 25 basis points, to 4.5%. The Fed cut rates last month for the first time in four years, lowering the fed funds rate by 50 basis points to 4.75%, amid worries that the financial market turmoil could hurt the US economy badly.
Recent economic reports suggest that not much has changed since then, and the risk of a recession still looms large. Accordingly, the market has raised the odds that the Fed will cut rates again, despite the recent spike in oil prices.
US light crude oil for December delivery rose $1.67 to settle at $93.53 a barrel on the New York Mercantile Exchange, a record close. Crude reached a record $93.80 during the session.
Market breadth was positive on Wall Street. On the New York Stock Exchange, winners beat losers nine to seven on volume of almost 1.22 billion shares. On the Nasdaq, advancers barely edged decliners on volume of 2.05 billion shares.
COMEX gold for December delivery rose $5.10 to settle at $792.60 an ounce. Treasury prices inched higher, with the yield on the benchmark 10-year note at 4.38%, little changed from late Friday. In currency trading, the dollar fell to another all-time low versus the euro and gained against the yen.
European shares also rose. The pan-European Dow Jones Stoxx 600 index climbed 0.7% to 386.60. The French CAC-40 was up 0.7% at 5,836.19, while the German DAX 30 gained 0.8% to 8,009.67 and the UK's FTSE 100 rose 0.7% to 6,706.00.
Brazilian and Argentine stocks finished at record highs. Brazil's Bovespa rose 1.2% to 65,044.31, surpassing a record high of 64,275.88 set on Friday. Mexico's IPC slipped 0.1% to 32,100.76. Chile's IPSA lost 0.3% to 3,487.26.
Argentina's Merval index rose 0.4% to 2,337.11, adding to its record close on Friday. On Sunday, voters elected Cristina Fernandez de Kirchner as president. The first woman to be elected president in Argentina, she will succeed her husband, Nestor Kirchner.
Asian markets were trading mixed this morning. The Nikkei in Tokyo was down 117 points at 16,580 while the Hang Seng in Hong Kong rallied 274 points to 31,861. The Straits Times in Singapore was down 16 points at 3803 and the Kospi in Seoul was down 9 points at 2054.
The Morgan Stanley Capital International Asia-Pacific Index slid 0.4% to 171.03 as of 10:33 a.m. in Tokyo, with eight of 10 industry groups declining. Benchmarks in South Korea, Australia, Taiwan, Singapore and New Zealand dropped, while China, Malaysia and the Philippines rose.
After opening with a positive gap up, markets constantly gained momentum as the session progressed. Buying across the board lifted the benchmark Sensex to hit the 20k milestone. After a record 1,000 points rally Sensex again covered the 19k-20k journey in just 11 trading sessions also recording its third biggest single day absolute points gain ever.
Today's rally was also backed by strong cues from the International markets especially the Hang Seng in
Finally, the 30-share Sensex rallied 734 points to close at 19,977. Nifty index rose 203 points to close at 5,905.
Mr. Mehraboon Irani, Sr. VP, Centrum Broking says that “even as we look set to go much higher, there could be corrections, of and on. At the moment, it’s a liquidity-driven market. If and when there is a slowdown in flow of funds to the market, there could be a fall though I don’t see that happening in the near future”.
Major contributors during the journey to 20k:
L&T was the top contributor, it contributed 322 points, ICICI Bank followed by contributing 246 points and Reliance Industries added 157 points.
L&T surged by over 10% to Rs4267 after reports stated that they would build two new ports at a total cost of Rs30bn on the west and east coast and a third shipyard; to float US$1bn infrastructure fund. The scrip touched an intra-day high of Rs4300 and a low of Rs3950 and recorded volumes of over 27,00,000 shares on NSE.
ONGC gained by over 7% to Rs1235 following reports that the company has planned an IPO of ONGC Petro-additions, the SPV formed for its Rs135bn petrochemical complex at Dahej in
BHEL jumped by over 7% to Rs2615 after reports stated that the company and the Tamil Nadu Electricity Board would set up Joint Venture for two 800MW supercritical power projects in the state at a cost of Rs85bn. The scrip touched an intra-day high of Rs2700 and a low of Rs2500 and recorded volumes of over 17,00,000 shares on NSE.
Power Grid Corp surged by over 2% to Rs143 after reports stated that the company in concert with Citadel Holdings, may acquire 10% in the government owned Philippines National Transmission Corporation The scrip touched an intra-day high of Rs147 and a low of Rs142 and recorded volumes of over 2,00,00,000 shares on NSE.
NTPC advanced 2% to Rs233 after reports stated that they have planned to diversify into hydroelectric generation and coal mining is likely to be delayed due to environment and land acquisition issues. The scrip has touched an intra-day high of Rs240 and a low of Rs231 and has recorded volumes of over 92,00,000 shares on NSE.
IVRCL Infrastructure gained by 3% to Rs504 after the company announced that they have secured order worth Rs346.8cr. The scrip touched an intra-day high of Rs520 and a low of Rs496 and recorded volumes of over 15,00,000 shares on NSE.
Maruti advanced by 0.6% to Rs1189 after the company’s Q2 net income rose 27.2% to Rs4.67bn and revenue rose 33.7% to Rs47.36bn. The scrip touched an intra-day high of Rs1248 and a low of Rs1175 and recorded volumes of over 10,00,000 shares on NSE.
Ashok Leyland gained by 1% to Rs40 after Nissan along with the company signed agreement for LCV Partnership. The scrip touched an intra-day high of Rs41 and a low of Rs40 and recorded volumes of over 65,00,000 shares on NSE.
Stocks in News:
Maruti plans to invest US$1.8bn to achieve its target of producing 1mn cars by 2010-11.
Reliance Industries has signed a production-sharing contract for two exploration blocks in northern Iraq.
Bajaj Auto is raising production of its XCD 125cc bike to 75,000 units a month from November.
Infosys has identified 3-5 potential acquisition targets, including a consulting company.
Hotel Leela plans to add 1,625 rooms through five new properties.
Bajaj Auto, Renault and Nissan plans to develop ultra-low-cost small car by 2010.
Duncan MacNeill group of the UK is likely to purchase the tea business of Balmer Lawrie in the UK.
Jet Airways is planning to launch a cargo airliner and to setup a MRO facility.
Wipro Technologies is broadening the segment focus of its technology vertical division to minimize exposure to telecom.
Coal India has expressed inability to supply requisite coal for Farakka and Kahalgaon Stage I and II super thermal power projects of NTPC.
L&T is likely to bag Rs50bn master contract for redevelopment of the Mumbai Airport.
Tatas have reportedly participated in second round of bidding for Land Rover and Jaguar.
Tata Chemicals plant to build a US$250mn soda ash plant along with the Tanzanian Government has hit a road block.
Arcellor–Mittal has been allotted one coal block each in Jharkhand and Orissa.
Hinduja Group is keen on picking up a majority stake in ONGC’s Kakinada refinery.
GAIL is planning to buy petrochemical plants in Qatar and Russia.
Tata Tea has decided to issue non-convertible debentures totaling Rs3.25bn through the book-building process.
Gujarat Fluorochemicals is diversifying into the power sector by investing over Rs60bn in the next five years.
Qatar is considering India’s proposal for supply of additional LNG to meet rising energy demand.
The Government is planning to relax ECB norms, remove restriction on deployment of pension and insurance funds and liberalizing the bond and the debt market for the infrastructure sector.
The RBI has allowed banks to raise Tier I and upper Tier II capital through preference shares.
The DoT plans to double the share of revenues paid as fees to the Government by wireless firms for the initial allocation of spectrum.
Hot rolled steel prices are expected to increase to US$700-800 per ton through 2008 against an earlier estimate of US$550 per ton this July.
Speciality and value added coffee exports from India have increased by 12.9% yoy during Oct-Sep’ 07.
Fund Activity:
FIIs were net sellers of Rs6.89bn (provisional) in the cash segment on Monday and the local institutions bought shares worth Rs6.34bn.
In the F&O segment, foreign funds were net buyers at Rs17.11bn.
On Friday, FIIs pulled out Rs2.57bn in the cash segment.