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Wednesday, November 21, 2007

Soft open likely; nothing predictable


Those who have knowledge, don't predict. Those who predict, don't have knowledge.

No amount of knowledge helps in accurately predicting markets. Generally its really tough to predict day-to-day movement in the stock market. Even the most seasoned traders and investors cannot pull it off regularly. And, we are no exception to this norm. Having said that, yesterday's market movement was pretty similar to what we had predicted in the morning. But, we would like to add a word of caution: past performance may not get repeated. Still, we have and we will endeavour to provide you with the best possible insight into the market.

Coming to today's market, we see another choppy day in store. A piece of news that may have some bearing on the sentiment is a report in a financial daily that the Finance Ministry is contemplating hiking the rate at which the Securities Transaction Tax (STT) is being levied.

The world markets, starting with key Asian indices rebounded yesterday after a weak start. In India too, the trend was the same, but for the sudden late selling induced by the FIIs. Today, though US shares managed modest gains amid hope that the Federal Reserve will cut rates again in December, Asian markets are sharply down again. European markets closed higher but emerging markets were mostly down. Oil prices briefly crossed the all-time peak above $99 per barrel.

The end will hinge on how markets in Asia, and later in the afternoon, in Europe, behave. One also has to bear in mind the big selling by FIIs yesterday. The intensity of the selloff in the last one hour took most players by surprise and will surely keep euphoria in the small and mid-cap stocks in check.

On the whole, we would advise caution at this stage as the near-term trend is still not clear and volatility has escalated. Fresh buying should be restricted to quality stocks for a fairly long-term investment horizon. The big event to watch out for now will be the Fed meeting on Dec. 11.

US stocks ended marginally higher on Tuesday, rebounding from three-month lows struck in the previous session, after record oil prices boosted energy companies and Credit Suisse said shares of Google may reach $900 in the coming year.

Exxon Mobil climbed the most in five years. Google rallied after a bullish note from Credit Suisse.

US stocks swung throughout the day, with the Dow Jones Industrial Average falling to a seven-month low after the Fed lowered its 2008 growth outlook and rebounding when Countrywide Financial denied speculation that it faced a funding shortage.

The Standard & Poor's 500 Index added 6 points, or 0.5%, to 1,439.7. The Dow rose 52 points, or 0.4%, to 13,010.14. The Nasdaq Composite Index added 3 points, or 0.1%, to 2,596.81.

Slightly more than one stock gained for every one that fell on the New York Stock Exchange.

US financial markets are closed Thursday for the Thanksgiving holiday, and will be open for half day on Friday.

The Fed policy makers slashed their GDP growth forecast for the US in October and worried about credit-market losses, even as they described the interest-rate cut as a close call, according to minutes of the Federal Open Market Committee's Oct. 30-31 meeting.

The US central bank cut its forecast for next year from 2.5-2.75% to 1.8% to 2.5%. The Wall Street is now betting on another rate cut in December. Still, traders cut bets of a 25-basis-point rate cut to 4.25% at the December policy meeting. Odds fell to 84%, down from 96% yesterday.

Homebuilding permits in the US slumped in October to their lowest level since 1993 and construction of single-family homes dived, indicating that there is more pain left in the housing sector.

Freddie Mac shares tumbled 29%, the biggest decline since it went public in 1988, as the second-largest US mortgage-finance company posted a record loss, warning of a possible dividend cut and the need to raise capital.

Crude oil rose 3.6% to $98.03 a barrel in New York after the dollar declined to a record low against the euro, increasing demand for commodities.

Bond prices declined slightly, with the 10-year Treasury down 4/32 to yield 4.09%. In currency trading, the dollar gained versus the yen and fell against the euro. COMEX gold for December delivery rose $16.50 to $794.50 an ounce.

European stocks closed higher in a volatile session. The pan-European Dow Jones Stoxx 600 index finished with a gain of 1.1% at 358.65. The UK's FTSE 100 added 1.7% to 6,226.50, the German DAX 30 advanced 1.6% to 7,630.31 and the French CAC-40 rose 1.4% to 5,506.68.

In the emerging markets, the Bovespa in Brazil was down 3.5% at 62,336 while the IPC index in Mexico fell by nearly 2% to 29,050. The RTS index in Russia rose 0.7% to 2180 and the ISE National-30 index in Turkey advanced 0.7% to 67,853.

Most Asian markets were trading in the red. The MSCI Asia Pacific Index lost 0.8% to 156.80 at 11:10 a.m. in Tokyo, with seven of its 10 industry groups falling. Japan's Nikkei was down almost 200 points at 15,015 while the Hang Seng in Hong Kong slumped by 735 points to 27,035.

The Kospi in Seoul dropped 25 points to 1846. All markets open for trading fell except New Zealand and Malaysia.

The yen rose against all of the world's 16 most-actively traded currencies as losses related to subprime mortgages widened, prompting investors to sell higher- yielding assets funded by loans made in Japan.

Can bulls bear weak Wednesday?

A see-saw trading session ended in negative territory marking its fourth straight session of losses. After hitting low of 19,714, benchmark index bounced back as buying at lower levels lifted the key indices in positive terrain in the afternoon trades. However, Late sell-off in the day dragged the markets to close in deep red.

Among the 30-scrips of Sensex Reliance Industries, ICICI Bank, Infosys, BHEL and ONGC are among the major laggards. However, Hindustan Unilever, Tata Motors and Ambuja Cement managed to hold on to their gains.

Among the non index losers Alok Industries dropped 8.5% to Rs73, Essar oil fell 8% to Rs187, Vijaya Bank slipped 6% to Rs78 and Triveni Engineering declined 6.5% to Rs149.

Finally, benchmark Sensex lost 352 points to close at 19,280. NSE Nifty closed 126 points lower at 5,780.

L&T slipped by 0.7% to Rs4334. The company entered in to MoU with Medium Multi Rile Combat Aircraft with Raythoen. The scrip touched an intra-day high of Rs4409 and a low of Rs4301 and recorded volumes of over 9,00,000 shares on NSE.

Dena Bank slipped 1.2% to close at Rs86, the scrip fell from a high of Rs94 after the company clarified on the news item that it had no discussion with SBI. The scrip touched an intra-day high of Rs94 and a low of Rs85 and recorded volumes of over 92,00,000 shares on NSE.

Bhagyanagar India gained 1.1% to Rs46 after the company announced that it has started Venture with IL&FS for Infrastructure. The scrip touched an intra-day high of Rs48 and a low of Rs44 and recorded volumes of over 83,000 shares on NSE.

GTL Infrastructure spurred by over 3% to Rs57 after the company declared that they have signed MoU with IDFC project equity and also announced that they may acquire telecom Tower companies. The scrip touched an intra-day high of Rs59 and a low of Rs54 and recorded volumes of over 69,00,000 shares on NSE.

Star rallied by over 10% to Rs293 after the company announced that they have entered in to partnership with South Africa’s Aspen and would acquire Aspen unit stake for Rs230mn. The scrip touched an intra-day high of Rs320 and a low of Rs264 and recorded volumes of over 3,00,000 shares on NSE.

Dewan Housing advanced 1% to Rs156 after the company announced that it approved buying 19.9% stake in Wadhawan Food Retail. The scrip touched an intra-day high of Rs164 and a low of Rs152 and recorded volumes of over 4,00,000 shares on NSE.

Maytas Infra dropped by over 9.5% to Rs971. The company announced that their group won Karnataka Airports Project. The scrip touched an intra-day high of Rs1121 and a low of Rs966 and recorded volumes of over 4,00,000 shares on NSE.

Gitanjali Gems lost shine, the scrip slipped 1.2% to Rs382. The company announced that they were entering in to Joint Venture with Armo. The scrip touched an intra-day high of Rs395 and a low of Rs377 and recorded volumes of over 3,00,000 shares on NSE.

Ashco Industries dropped 2.2% to Rs39. The company declared that they would merge with Niulab Equipment. The scrip touched an intra-day high of Rs42 and a low of Rs38 and recorded volumes of over 8,00,000 shares on NSE.

Stocks in News:

Mahindra Systems & Automotive Technology, M&M’s auto component division is in talks with S P Metal Forgings of South Africa, for an equity deal.

Tata Steel is launching a mega rights issue of Rs100bn to repay the bridge loans raised for funding the acquisition of Corus.

HPCL plans to spend US$4.5bn on exploration, gas marketing and petrochemicals by 2012.

Omaxe may tap West Asia as Indian real estate market cools.

Apollo Tyres plans new unit in Europe to expand its global footprint.

Chennai Petroleum seeks to set up a new wind power capacity.

Bisleri plans to launch an enhanced water product within a year.

JSW Steel has completed the land acquisition for its 10mn ton project at Midnapur in West Bengal.

Reliance Industries has signed production sharing agreements for two exploration blocks in Yemen.

ITC is likely to buy the confectionery business of Ravalgaon Sugar Farms.

French retail giant Carrefour has registered two companies in India. It has also decided to choose an Indian partner early next year and plans to launch a wholly-owned Indian cash-and-carry business in 2009.

Dabur India has commissioned a toothpaste making facility in Nigeria with an investment of US$4mn.

Dabur Pharma is planning to set up subsidiaries in Italy and Germany.

Vipul to invest Rs130bn in the next five years to develop real estate.

Lanco Infratech plans to enter businesses such as development of ports, power transmission and airport in next 6-9 months.

Essar Steel is likely to shelve its plans to construct a US$1.9bn plant in Indonesia following an adverse ruling by the country’s anti-dumping authority.

The Government has sought parliament approval to spend an additional Rs332.9bn, including Rs112.6bn oil bonds, till March 2008.

The Government does not plan to impose more curbs on inflows of overseas capital.

The petroleum and gas regulator says that the proposed 1,600km gas pipeline from Kakinada to Dadri is prima facie feasible.

The Government will soon meet Pakistan officials over the Iran-Pakistan-India gas pipeline.

The finance ministry is considering raising the rate at which securities transaction tax is being levied.

Maharashtra Government has effected duty cuts on imported spirits and raised excise duty on imported wines to 200%.

FII Investment Trend:

FIIs were net sellers of Rs18bn (provisional) in the cash segment on Tuesday while the local institutions pumped in Rs4.64bn. In the F&O segment, FIIs were net sellers of Rs42bn.

Foreign funds were net sellers of Rs268mn in the cash segment on Monday.