To see what is in front of one's nose needs a constant struggle.
The market has been on a rollercoaster ride over the past 3-4 months, primarily due to the subprime woes in the US, selling by FIIs and lack of major local triggers. The Sensex has fluctuated between 17,000 and 20,500 during this period. It went as low as 13,779 on Aug. 17 before rebounding from there to 19,977 on Oct. 29. After several attempts at crossing the 20k mark (in October and November), the Sensex finally managed to rise above the milestone on Dec. 11. Its closing high is 20,375, struck on Dec. 12 and intra-day high is 20,498, hit on Dec. 13. It started correcting again and went as low as 19,079, on Dec. 18, owing to resurfacing of subprime concerns and its fallout on the global markets. Yesterday, the Sensex shut shop at 19,091.
In a nutshell, though the bulls have managed to weather a lot of storms, the ride has not been smooth at all. There have been several bumps and roadblocks along the way. Volatility has increased manifold. The trend has been no different this month. After a positive start and crossing the 20k mark, the Sensex has been facing fresh selling pressure in the past couple of days on the back of weakness in the US and other global markets. FIIs have resumed their selling as well in the last few days. In fact, the trend in FII flows has been extremely unpredictable and erratic, making the main indices swing heavily. In the meantime, small- and mid-cap shares (including penny stocks) have captured the imagination of investors.
The picture may not change much today or over the next few days, as the near-term outlook is murky and the Indian market is dancing to the tunes of global indicators. FII selling has not been of much help either. But, despite the choppy trend, nothing is stopping investors from betting on small- and mid-cap shares. We expect the market to open on a cautious to slightly positive note, given the uncertainty prevailing in the global markets. Though the side counters (non-index stocks) may continue to hog the limelight and extend their gains, one must be careful as the rally in these shares is not real. Investors may indulge in select buying in quality stocks for long-term purpose or stay on the sidelines and wait for more signals on market direction.
US stocks closed mixed on Wednesday after a highly volatile session. Stocks were up in early trading as the Federal Reserve announced results for its first auction of $20bn, signaling strong demand for the plan aimed at defusing the stress in the credit markets.
But Morgan Stanley's $5.7bn subprime related writedown and credit market concerns brought up by Standard & Poor's warnings about bond insurers' credit ratings, dragged the markets down in the afternoon.
Target and Macy's led a gauge of retailers lower after ShopperTrak RCT Corp. said winter storms and rising gasoline prices hurt sales. Union Pacific, the biggest railroad, slid the most since August. Darden Restaurants posted its biggest drop ever after earnings missed analysts' estimates.
The S&P 500 dropped 2 points, or 0.1%, to 1,453. The Dow Jones Industrial Average lost 25 points, or 0.2%, to 13,207.27. The Nasdaq Composite Index increased 5 points, or 0.2%, to 2,601.01.
Market breadth was negative. About 15 stocks fell for every 14 that rose on the New York Stock Exchange.
Morgan Stanley posted a bigger-than-expected quarterly loss and said it would take an additional $5.7bn in writedowns on top of the $3.7bn it had already announced, due to the subprime mortgage mess. Morgan also announced that it will receive a $5bn capital investment from a Chinese state-run investment fund. Morgan shares were higher, along with other major banks including Lehman Brothers and JP Morgan.
In the latest bad news for the housing sector, the level of foreclosures was up 68% in November from a year ago, according to tracking service RealtyTrac. On the upside, foreclosures fell 10% from the previous month.
Thursday brings economic reports from the government on third quarter GDP and leading economic indicators. Also, Bear Stearns will report its earnings for the fourth quarter.
After the close of trade, software maker Oracle reported better-than-expected earnings and sales, giving the company's shares a boost in after hours trading.
Treasury prices rose, lowering the yield on the 10-year note to 4.03% from 4.14% late on Tuesday. US light crude oil for January delivery rose $1.16 cents to $91.24 on the New York Mercantile Exchange after the government's weekly report showed lower than expected crude supplies. In currency trading, the dollar gained versus the euro and the yen. COMEX gold for February delivery fell $2.00 to $805.40 an ounce.
European shares closed lower in another choppy session, with real estate and construction firms pacing the decline amid worries about housing markets. The pan-European Dow Jones Stoxx 600 index fell 0.5% to 358.47. The UK's FTSE 100 advanced 0.1% to 6,284.50, while the German DAX 30 slipped 0.2% to 7,837.32 and the French CAC-40 ended 0.2% lower at 5,497.42.
In the emerging markets, the Bovespa in Brazil gained 1% at 61,721 while the IPC index in Mexico was down 0.6% at 29,074. The RTS index in Russia declined 0.2% to 2264 and the ISE National-30 index in Turkey was down nearly 1% at 68,404.
Asian markets were trading mixed. The Nikkei in Tokyo was up 108 points at 15,139 while the Hang Seng in Hong Kong was almost flat at 27,023. The Kospi in Seoul was also static at 1861 and the Shanghai Composite index in china was up 37 points at 4978.
The MSCI Asia Pacific Index gained 0.4% at 152.58 at 11:00 a.m. in Tokyo, snapping a six-day losing streak. Stock exchanges in Singapore, Malaysia and Indonesia are closed for a public holiday.
The yen traded near a six-week low against the dollar on speculation that the Bank of Japan (BOJ) would leave the benchmark overnight lending rate at 0.5% today, and Governor Toshihiko Fukui will say there was no set time for raising interest rates.
Volatility to prevail
Bulls finally managed to end the day in green after struggling for four straight trading sessions. Volatility was the order of the day as benchmark Sensex and Nifty index gyrated over 500 and 160 points during the session.
After opening with a positive gap up, key indices erased all its gains in the afternoon trades on back of weak cues form the Asian and European markets. However, later in the day bulls fought back managing to end the day with modest gains.
Finally, 30-share Sensex closed flat at 19,091 hitting a intra-high of 19,397 and a low of 18,866 and Nifty closed flat at 5,751 touching an intra-day high of 5,840 and a low of 5,676.
Patel Integrated surged by over 15% to Rs99 after the company announced that it approved Rs1.8mn preferential share sale. The scrip touched an intra-day high of Rs102 and a low of Rs89 and recorded volumes of over 14,00,000 shares on NSE.
Aurobindo Pharma was down 1% to Rs526. The company announced that it secured approval for antibiotic cefdinir suspension. The scrip touched an intra-day high of Rs548 and a low of Rs523 and recorded volumes of over 2,00,000 shares on NSE.
India Cements advanced 2.2% to Rs301 after the company announced that would sell Rs20.8mn shares. The scrip touched an intra-day high of Rs308 and a low of Rs298 and recorded volumes of over 23,00,000 shares on NSE.
Kopran spurred by over at 4.5% to Rs40.20 as reports stated that the company is in talks to sell stake to domestic companies. The scrip touched an intra-day high of Rs40.45 and a low of Rs39.25 and recorded volumes of over 2,00,000 shares on NSE.
IOC dropped 1.2% to Rs632. Reports stated that the company had set aside US$3bn for overseas acquisition. The scrip touched an intra-day high of Rs664 and a low of Rs626 and recorded volumes of over 7,00,000 shares on NSE.
National Aluminum gained 3.2% to Rs427 after the company announced that they would spend Rs4.09bn to raise capacity and also declared expansion of Bauxite-mining capacity to 6.82mn tons. The scrip touched an intra-day high of Rs433 and a low of Rs419 and recorded volumes of over 3,00,000 shares on NSE.
DCM Shriram Industries marginally gained 0.6% to Rs126 after the company announced that they would sell 7 lac shares to founders. The scrip touched an intra-day high of Rs129 and a low of Rs120 and recorded volumes of over 18,000 shares on NSE.
Shringar Cinemas gained 0.5% to Rs102 after the company announced that they tied up with HDIL for multiplexes. The scrip touched an intra-day high of Rs109 and a low of Rs101 and recorded volumes of over 2,00,000 shares on NSE.
Suzlon Energy gained 2.5% to Rs1901 after the company announced that they would raise Rs21.83bn via share sale. The scrip has touched an intra-day high of Rs1919 and a low of Rs1875 and recorded volumes of over 9,00,000 shares on NSE.
L&T gained 0.6% to Rs3989 after the company declared that they secured Rs2.87bn elevated access road contract. The scrip touched an intra-day high of Rs4049 and a low of Rs3951 and recorded volumes of over 6,00,000 shares on NSE.
What the FIIs are doing
FIIs were net sellers of Rs14.54bn (provisional) in the cash segment on Wednesday while the local institutions pumped in Rs3.5bn. In the F&O segment, foreign funds were net buyers of Rs4.61bn.
On Tuesday, FIIs were net sellers of Rs24.5bn in the cash segment. Mutual Funds were net sellers of Rs3.81bn on the same day.
Stocks in News:
IFCI stake sale has been called off due to differences with Sterlite-Morgan Stanley consortium over management control. (ET)
Kingfisher and Deccan board approves merger. (ET)
Glenmark receives domestic patent for its asthma molecule, Oglemilast. (ET)
BHEL’s bid to build Rs84bn electricity-generation factory gets rejected. (FE)
Reliance Industries (RIL) is in talks with Tata Chemicals to sell KG basin gas. (ET)
Tata Power eyes shipping and logistics business and plans to raise Rs40bn from domestic and international market. (BL)
SAIL signs a pact with Rail Vikas for transportation of 5 lakh tons of imported coking coal per year. (BL)
Vale, world’s largest iron ore pellets manufacturer, is in talks with Tata Steel to set up a steel slab plant in Brazil. (BS)
Reliance Retail to enter food trading business as a part of major re-structuring of its food and grocery initiative. (ET)
Dabur India is planning acquisitions of an FMCG company in foods or personal care segment. (DNA)
Hero Honda forays into used two-wheeler trading business under the ‘Hero Honda SURE!’ brand. (ET)
Union Bank is planning to enter mutual fund business and venture capital business. (FE)
Welspun India buys 76% stake in Portugal-based company for Rs600mn. (ET)
MRF plans to spend Rs5bn towards setting up a greenfield two-wheeler and four-wheeler tyre facility in TN. (BS)
Rolta India plans to enter real estate business through a group company, Rolta Infrastructure. (DNA)
JK Tyres to hike tyre prices in next quarter. (BL)
EMCO promoters keen to raise stake in the company to 51%. (BS)
The telecom spectrum panel recommends the government to consider new allocation options, including auction. (ET)
Allahabad High Court asks UP Government to rework the cane state advisory price (SAP) fixed by it for purchase of sugarcane. (ET)
Chief Ministers of five mineral-rich states has urged the PM to make local value addition of minerals the prime objective of National Mineral Policy (NMP). (BS).