The beginning of true faith is the end of anxiety.
President George W. Bush’s freeze on some subprime mortgage rates could end up freezing the bears for a while. The anxiety if any for the bulls can wait till next week. On the domestic front, both, FIIs and local funds were buyers yesterday (provisional). Key technical indicators like volume and market breadth were also encouraging. The underlying sentiment appears positive and chances of the market going up seem better.
The bailout plan unveiled by the US Government for some sub-prime borrowers, coupled with the first rate cut by the Bank of England and expectations of a similar move by the Fed, on Dec. 11, are likely to keep the bulls in high spirits.
The Sensex and the Nifty may close above 20k and 6k, respectively today. Trading will be choppy as investors may develop cold feet with the indices at new lifetime highs. Small-cap and Mid-cap stocks will continue to hog the limelight. We expect another strong start and hopefully, a better closing than yesterday.
US stocks rallied on Thursday for the second day running, as investors welcomed the White House prescription to help troubled homeowners and braced for Friday's jobs report and next week's Fed policy meeting.
Also bolstering investor sentiment is an expectation of another interest-rate cut by the FOMC when the central bank policy makers meet on Tuesday. A 25 basis-point cut is a foregone conclusion. But, there's a camp that believes there's a possibility of 50 basis points.
Financial shares and home builders led the rally on expectations that the government plan to limit subprime mortgage defaults will boost bank profits and ease the housing slump. Countrywide Financial and Fannie Mae rallied after President George W. Bush said some borrowers will be able refinance or freeze interest rates on adjustable-rate loans.
Lennar Corp. and D.R. Horton led an index of builders to its biggest advance ever. Thirty-two of 34 energy companies in the Standard & Poor's 500 Index gained after crude-oil prices rebounded from a six-week low.
The S&P 500 added 22 points, or 1.5%, to 1,507.34. The Dow Jones Industrial Average climbed 175 points, or 1.3%, to 13,619.89. The Nasdaq Composite Index increased 43 points, or 1.6%, to 2,709.03.
Market breadth was positive. More than six stocks gained for every one that fell on the New York Stock Exchange.
The number of Americans filing new claims for unemployment fell last week by more than expected. However, the report was overshadowed a bit ahead of Friday's bigger monthly report.
Treasury prices fell, boosting the yield on the 10-year to 4% from 3.94% on Wednesday. A recent rally in Treasury prices has left the 10-year note yield now more than 50 basis points below the fed funds target rate of 4.5%.
In currency trading, the dollar gained versus the yen and fell versus the euro. US light crude oil for January delivery rose $2.74 to settle at $90.23 per barrel on the New York Mercantile Exchange. COMEX gold for February delivery rose $3.40 to settle at $807.10 an ounce.
Across the Atlantic, the Bank of England opted to cut interest rates by a quarter-percentage point to 5.5%, providing some encouragement to US investors ahead of next week's Fed meeting. The European Central Bank held rates steady though.
Stocks in the UK ended lower, as investors factored in a rate cut from the Bank of England, although a strong update from the Royal Bank of Scotland lifted banking stocks. The rate cut from the Bank of England was the first since August 2005 and came after five hikes since August 2006. The FTSE 100 index closed down 0.1% or 8 points, at 6,485.60.
Other European shares were mixed. The pan-European Dow Jones Stoxx 600 index gained 0.1% at 369.87, off earlier high as a 3.2% slide for Roche shares led healthcare stocks lower. The German DAX 30 dropped 0.1% to 7,940.58 and the French CAC-40 rose 0.3% to 5,673.76.
In the emerging markets, the Bovespa in Brazil advanced 1.3% to 65,790 while the IPC index in Mexico rose 1.6% to 31,257. The RTS index in Russia fell 0.1% to 2259 and the ISE National-30 index in Turkey gained 1.5% to 71,617.
Asian markets were trading mixed this morning despite the overnight rally on Wall Street. The Nikkei in Tokyo was up 147 points at 16,021 while the Hang Seng in Hong Kong rose 283 points to 29,642. The Kospi in Seoul dipped by 12 points to 1940 and the Straits Times in Singapore jumped 55 points to 3608.
Bulls may continue to reign supreme
It was a strong start to the day the Nifty index hit all time high and benchmark Sensex crossed the 20k mark. The rally was led by strong cues form the International markets and buying momentum in the index heavyweights like ICICI Bank, HDFC and Infosys.
However, markets turned choppy and bulls were unable to hold on to their early gains as key indices faced stiff resistance at higher levels. Traders preferred to book some profits as a sharp bout of selling dragged the benchmark Sensex to hit an intra-day low of 19,716. Finally, 30-share Sensex ended 57 points higher to close at 19,795 and Nifty closed at 5,954 adding 14 points.
Reliance Industries was down 1% to Rs2873. According to reports the company would make an acquisition in the energy sector for up to US$15bn and also plans solar power projects in Bengal, Rajasthan and Maharashtra reports said. The scrip touched an intra-day high of Rs2988 and a low of Rs2865 and recorded volumes of over 24,00,000 shares on NSE.
Maharashtra Seamless advanced by 0.5% to Rs581 after reports stated that the company is close to acquiring a plant in Romania for an estimated Rs2.5bn. The scrip touched an intra-day high of Rs610 and a low of Rs575 and recorded volumes of over 2, 00,000 shares on NSE.
Shiv-Vani Oil & Gas dropped 1.5% to Rs595. Reports stated that the Private equity firm Citi Venture Capital purchased a 7% stake in the company for Rs1bn. The scrip touched an intra-day high of Rs630 and a low of Rs590 and recorded volumes of over 3,00,000 shares on NSE.
Hindustan Zinc gained 0.6% to Rs822. The company announced that the company cut lead prices by 5.2%. The scrip touched an intra-day high of Rs842 and a low of Rs816 and recorded volumes of over 1,00,000 shares on NSE.
GVK Power spurred by over 8% to Rs845 after the company announced that it would split each stock in to 10. The scrip touched an intra-day high of Rs929 and a low of Rs790 and recorded volumes of over 4,00,000 shares on NSE.
Aegis Logistics declined 4.5% to Rs298. Reports stated that the company would set up 300 auto LPG stations. The scrip touched an intra-day high of Rs323 and a low of Rs292 and recorded volumes of over 63,000 shares on NSE.
Gayatri Projects surged 5% to Rs386 after reports stated that the company achieved financial closure for the outer ring road projects in Hyderabad. The scrip touched an intra-day high of Rs395 and a low of Rs375 and recorded volumes of over 1,00,000 shares on NSE.
Matrix Labs edged lower 0.5% to Rs223. The company yesterday announced that they secured US FDA approval for Aids drug. The scrip touched an intra-day high of Rs231 and a low of Rs222 and recorded volumes of over 42,000 shares on NSE.
What the FIIs are doing
FIIs were net buyers of Rs4.9bn (provisional) in the cash segment on Thursday while the local institutions pumped in Rs2.28bn. In the F&O segment, foreign funds were net sellers of Rs2.36bn on the same day.
On Wednesday, FIIs pumped in Rs10.8bn in the cash segment. Mutual Funds were net sellers of Rs1.9bn on the same day.
Stocks in News:
Eicher Motors could attract attention amid reports that it could form a JV with Swedish CV major Volvo.
Reliance Communications gets all-India GSM license from DoT. (ET)
Glaxo pulls-out patent applications of two anti-AIDS medicines in India. (ET)
Middle East-based Switz Group, owned by Khorakiwala family, is s et to buy Modern Foods from Hindustan Unilever for Rs1bn. (ET)
Infosys and Wipro drop out of the race to acquire the captive unit of the Europe-based publishing group Springer. (ET)
NTPC and Coal India to float a SPV to build two power plants of 1,500 MW and develop two coal mines in Jharkhand for an estimated cost of Rs80bn. (ET)
Unitech has earmarked Rs200bn to develop 48 malls and shopping centres across the country over the next six years. (BS)
Flag Telecom, a wholly-owned subsidiary of RCOM, has tied-up with US-based Glasshouse Technologies to provide IT services to global clients. (ET)
M&M on lookout for further alliances in passenger vehicles, trucks and busses segment. (ET)
Essar Power to divest 10% stake to private equity investors to raise up to US$700mn. (ET)
NTPC and Bharat Forge likely to form a JV to make power plant equipment, including turbine components and accessories through technological tie-ups. (FE)
Various PE players have approached the Wadia Group for picking up stake in GoAir. (ET)
BOSCH is likely to supply fuel-injections systems for the Bajaj-Renault sub US$3000 small car. (ET)
Tata Power, Monnet Ispat & Energy and Jindal Photo Film are forming a JV to develop a 290mn tone coal mine at Mandakini in Orissa. (ET)
Kuwait Petroleum in talks with Reliance Industries and IOC to set-up greenfield refinery-cum-petrochemical complex in India. (ET)
Mercator Lines, Singapore-based subsidiary would raise US$254mn through an IPO on the Singapore exchange.
Major infrastructure players like L&T, Reliance and GMR are among the 18 bidders for Rs300bn 1,047KM Ganga Expressway project in UP. (BS)
Jubilant Organosys has entered into an agreement with US-based Forest Laboratories for drug discovery candidates for a metabolic disorder.
Sintex to acquire three companies by next year and has earmarked Rs6bn capex in 2008. (BL)
Electrosteel Castings to raise US$25mn for backward integration program. (BL)
Peak custom duty on non-agricultural products is likely to be reduced to 7.5% from 10% in the Budget 2008. (ET)
The DoT set to issue letter of intent to 16 companies for starting mobile services. (ET)