It is easy to be wise after the event!
Though the bulls managed to lift the Sensex and the Nifty above 20k and 6k, respectively, they could not hold those levels owing to some profit booking. The same scenario may play out this week as well. The undertone is largely positive, but the trend will remain choppy and the key indices are likely to consolidate after reaching new lifetime highs.
All eyes are on Tuesday's Fed meeting, where the US central bankers are expected to cut rates by 25 basis points, to stem the slide in the housing sector and prevent a further slowdown. Although worldwide, the markets have already discounted another easing by the Fed tomorrow, investors are keen on what hints the Fed policy makers will drop on future outlook on the US economy and interest rates.
With not-so-bad economic reports and a relief package already in place for some sub-prime borrowers, the Fed may signal that there won't be any further rate cuts unless the current mess in the housing sector worsens in the new year. The global equity markets may not like that outcome all that much, and there may be some softening post the FOMC meeting.
Today, we expect the key indices to be cautious to slightly higher at the opening bell, though the rally in small- and mid-cap shares may continue. But one has to be weary of the spurt in small- and mid-cap stocks, as a steep fall may leave one high and dry.
US stocks ended nearly flat on Friday despite a slightly better than expected November jobs report, as investors preferred to stay on the sidelines ahead of the Dec. 11 Fed meeting.
The Dow Jones Industrial Average was up 6 points at 13,626 and by 1.9% for the week. The S&P 500 index ended the week up 1.6% and the Nasdaq Composite index recorded a weekly rise of 1.7%.
Despite a seemingly upbeat jobs report, stocks showed little momentum throughout the session. Market breadth was mixed.
US employers added 94,000 jobs to their payrolls in November, following an upwardly revised 170,000 gain in October. The unemployment rate held steady at 4.7%, instead of rising to 4.8% as expected.
The report indicated that the world's largest economy is holding in the face of the subprime mortgage meltdown and tighter credit conditions. The jump in average hourly earnings could be seen as inflationary but could also be seen as a good sign for consumer spending.
The Fed policy makers are widely expected to cut the fed funds rate, a key short-term lending rate, by a quarter-percentage point to 4.25%, after cutting rates at the last two meetings. Some Wall Street observers have been hoping for a larger cut of 50 basis points.
However the November jobs report suggests that the Fed may not need to cut rates by the larger amount.
A separate report, the University of Michigan's consumer sentiment index, fell to 74.5 in early December from 76.1 in late November. Economists thought it would fall to 75.0.
Treasury prices slumped, boosting the yield on the 10-year to 4.1% from 4% late on Thursday. In currency trading, the dollar fell versus the euro and rose versus the yen.
US light crude oil for January delivery fell $1.95 to settle at $88.28 a barrel on the New York Mercantile Exchange. COMEX gold for February delivery fell $6.90 to settle at $800.20 an ounce.
The strength of any further gains this week will hinge on the Fed's outlook for the US economy and possible more bad news on the credit-market correction. Wall Street will receive a string economic reports this week, beginning with Monday's report on pending home sales and November wholesale and consumer inflation figures and retail sales later in the week. Lehman Brothers will kick off an early earnings season for the securities industry.
European stocks ended higher on Friday. The pan-European Dow Jones Stoxx 600 rose 0.8% to a one-month-high of 372.87. The UK's FTSE 100 closed up 1.1% at 6,554.90, while the French CAC 40 gained 0.8% to 5,718.75 and the German DAX 30 advanced 0.7% to 7,994.07.
In the emerging markets, the Bovespa in Brazil was down 0.2% to 65,638 while the IPC index in Mexico was flat at 31,268. The RTS index in Russia climbed 1.2% to 2285 and the ISE National-30 index in Turkey was up 0.5% at 71,958.
Asian markets were trading mixed this morning. The Nikkei in Tokyo was down 85 points at 15,871 while the Hang Seng in Hong Kong gained 218 points at 29,060. The Kospi in Seoul was almost flat at 1931 and the Straits Times in Singapore added 12 points to 3570.
Waiting for the Fed
It was a see-saw trading session as after opening with positive gap and touching new all time highs sharp selling in the Auto, Power and Oil & Gas stocks dragged the key indices from their respective highs. Even better than expected inflation figures had a minimal impact on the sentiments; India’s Inflation was at 3.01% for the week ended Nov. 24 against expectation of 3.22%.
However, markets recouped on back of late buying in the heavyweights like ICICI Bank, Infosys, HDFC and Bharti Airtel lifted the markets to close with smart gains. Finally, 30-share Sensex ended 170 points higher to close at 19,966 and Nifty closed at 5,974 adding 19 points.
Hindustan Unilever edged higher by 0.5% to Rs208 following reports that Middle East-based Switz Group, owned by Mumbai-based Khorakiwala family, is set to buy Modern Foods from Hindustan Unilever for Rs1bn. The scrip touched an intra-day high of Rs212 and a low of Rs207 and recorded volumes of over 13,00,000 shares on NSE.
Tata Motors was down 1% to Rs767. According to reports the company would invest US$43mn in a Thai factory to produce pick-up trucks. The scrip touched an intra-day high of Rs781 and a low of Rs760 and recorded volumes of over 11,00,000 shares on NSE.
Vikas WSP was locked at 5% upper circuit to Rs59.5 after the company announced that they have planned preferential share sale at Rs82.5 each. The scrip touched an intra-day high of Rs59.55 and a low of Rs58 and recorded volumes of over 20,00,000 shares on NSE.
Maharashtra Seamless was down 1.2% to Rs574. The company yesterday announced that they would acquire a Romania-based seamless pipes plant having a capacity of 20,000 ton per year. The scrip touched an intra-day high of Rs599 and a low of Rs560 and recorded volumes of over 1,00,000 shares on NSE.
Jubilant Organosys ended flat at Rs300. The company yesterday announced that it entered into an agreement with US-based Forest Laboratories for discovery of drug candidates for a metabolic disorder. The scrip touched an intra-day high of Rs310 and a low of Rs298 and recorded volumes of over 36,000 shares on NSE.
Reliance Communications gained 2.1% to Rs734 after the company secured all-India GSM license from DoT. The scrip touched an intra-day high of Rs754 and a low of Rs721 and recorded volumes of over 72,00,000 shares on NSE.
Bombay Dyeing dropped 4% to Rs727 after the company declared that the repeal of land act has no impact on Projects. The scrip touched an intra-day high of Rs774 and a low of Rs714 and recorded volumes of over 4,00,000 shares on NSE.
IT stocks were back in the limelight as rupee headed for a weekly gain on speculation overseas funds would increase holdings of equities. Index heavyweight Infosys was up 5.3% to Rs1722, TCS was up 2.6% to Rs1062, Polaris surged by over 9% to Rs124.
Eicher Motors rallied by over 7% to Rs542 after company declared that the Board of Directoprs of the company would meet on December 12 to mull strategic partnership for CV biz. The scrip touched an intra-day high of Rs588 and a low of Rs515 and recorded volumes of over 3,00,000 shares on NSE.
Alok Textile was up by over 3.5% to Rs82 after the company announced that they would set up Economic zone for Textile. The scrip touched an intra-day high of Rs84 and a low of Rs79 and recorded volumes of over 26,00,000 shares on NSE.
What the FIIs are doing
FIIs were net sellers of Rs2.54bn (provisional) in the cash segment on Friday while the local institutions pumped in Rs3.4bn. In the F&O segment, foreign funds were net sellers of Rs1.52bn on the same day.
On Thursday, FIIs pumped in Rs8.2bn in the cash segment. Mutual Funds were net buyers of Rs977mn on the same day.
Stocks in News:
DLF, GMR and L&T, amongst a dozen private players, are likely to have bid for modernization of Udaipur airport. (FE)Vodafone Essar, Idea and Bharti group to form Indus Towers to provide passive infrastructure to other mobile operators. (BL)
Godrej Consumer on lookout for acquisitions in hair colour business in developing markets. (BS)
Reliance Industries to supply KG basin gas to Mahagenco, the Maharashtra state owned utility, at US$4.34 per mmbtu. (BS)
Sesa Goa to invest Rs10bn to increase its pig iron capacity to 1mn tons in the next two years. (BL)
M&M may partner BAE Systems for a manufacturing JV in India (FE)
Suzlon plans to raise US$500mn from QIP route; its Belgium subsidiary Hansen raises Rs23bn from a London IPO. (BS)
RPG Enterprises to invest Rs140bn over the next three years in group businesses; power to account for Rs90bn. (FE)
Reliance Energy forms JV with five companies, including Arcelor Mittal and GMR, for coal mining in Orissa. (BS)
Indiabulls Real Estate's retail arm to buy Piramyd Retail, a Ashok Piramal group company; to pay Rs1.7bn for 84% stake. (BS)
Wockhardt to consolidate its global operations; its hospital chain arm to raise Rs10bn from an IPO in first quarter of 2008. (BL)
IOC has tied up with Egyptian General Petroleum Corporation to build refinery in Egypt. (ET)
UK based Stemcor and Ispat Industries form JV to set up a coke oven plant at latter’s unit. (DNA)
Bharti Airtel may list its hived-off tower arm Bharti Infratel. (ET)
GAIL has signed an agreement with Reliance Gas Transportation Infrastructure for transmission of natural gas from the Krishna Godavari basin. (ET)
Essar Shipping & Logistics to buy six ships from a Chinese manufacturer for US$390mn. (Mint)
Tata Motors to set up a unit at Dharwad to make buses. (BS)
Sun Pharma's attempts to acquire Israeli drug maker Taro Pharma delayed as latter postpones shareholders' meet. (BS)
NALCO plans to sign a MoU with Indonesian to build a smelter on Sumatra island. (TOI)
NTPC and BHEL may invite a private equity partner for their JV for engineering and construction work for power plants. (DNA)
Leading car makers to increase prices later this month or early next month. (FE)
Inflation rate slowed to 3.01% for the week ended November 24th on account of cheaper food items. (BL)
Innovative policy response needed to control capital flows without hurting growth and prices, says Mid-Term Review 2007-08. (BS)
22 fertilizer companies to get bonds worth Rs39bn. (ET)
RBI permits banks to invest in unrated bonds of infrastructure companies within the ceiling of 10% for unlisted non-SLR securities. (BL)
The Government asks Delhi International Airport Ltd. to freeze land development plans. (Mint)
GSM lobby group COAI walks out of the DoT spectrum review panel. (FE)
The Government to ask all states to reduce sales tax on ATF. (ET)