Man is the only animal whose desires increase as they are fed…
Tuesday’s well-Fed bulls are now fed up with the small cut. Equity markets across the world are down after the Fed lowered its key interest rate by a quarter percentage point. The sharp fall was led by Wall Street, which was hoping for a wider 50 basis-point cut from Bernanke & Co. Is it the classic case of 'sell on news' or is there more in store? That's a million-dollar question.
It’s a no-brainer that the Indian market will also drop in tandem with its global counterparts. The bulls (mostly local) here will be disappointed after struggling to take the Sensex and the Nifty past 20k and 6k, respectively. This feat was achieved despite heavy selling by FIIs last month and modest buying so far this month. But, the market mood may improve if there is any rebound in Asian or European markets. While FIIs play will be closely watched, local operators appear adamant in taking charge for some time.
Some section of the market had already started feeling edgy following the recent spurt to all-time highs. A few foreign brokerages have already warned about overstretched valuations of the Indian stocks (which they have been doing from 10K onwards). Whether the bulls heed their calls remains to be seen. The small-cap and mid-cap stocks that have been on fire of late may cool down a little at the start, but may bounce back with the market.
Reliance Energy could rally after initial weakness as the company will announce issue of new FCCBs at a premium to the market price. Classic Diamonds will announce plans to raise funds. In a few days PSL will also announce plans to raise around US$1bn. We mentioned about Aptech a few days ago. The stock is roaring at a new high. Bharat Forge is another counter which could see action in the coming days along with other forging companies.
Attention will shift to Edelweiss Capital and Renaissance Jewellery which get listed today. Both the stocks are expected to do well given the strong response to their IPOs.
US stocks slumped and bonds rallied on Tuesday after the Fed cut its key short-term rate by a quarter-percentage point. Though the decision was in line with expectations, but it disappointed some investors who had been looking for a bigger cut.
Bank of America and Citigroup led all 93 companies in the S&P 500 Financials Index lower. Homebuilder shares fell the most ever, after the Fed said that the housing slump is getting worse. Washington Mutual posted its steepest drop in a month on plans to write down the value of its home-lending unit. Freddie Mac slid for a third day after forecasting a wider loss than analysts estimated.
The S&P 500 lost 38 points, or 2.5%, to 1,477.65. The Dow Jones Industrial Average dived 294 points, or 2.1%, to 13,432.77. The Nasdaq Composite Index slid 67 points or 2.5%, to 2,652.35.
Market breadth was negative. Almost 14 stocks declined for every one that rose on the New York Stock Exchange.
The Fed has cut the fed funds rate three times since Sept. 18, in an attempt to revive the tight credit market and protect the US economy from falling into a recession amid the current slump in the housing market.
In the accompanying statement, the FOMC altered the language to suggest that economic slowdown was more pronounced than it had been at the time of the last meeting at the end of October.
"Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending," the FOMC said.
US treasuries rallied the most in more than three years. Treasury prices surged, lowering the yield on the 10-year note to 3.97% from 4.15% late on Monday. The dollar gained versus the euro and the yen.
US light crude oil for January delivery rose $2.16 to $90.02 a barrel on the New York Mercantile Exchange. COMEX gold for February delivery added $3.60 to settle at $817.10 an ounce.
Citigroup announced that Vikram Pandit would take over the job of chief executive officer (CEO), over a month after former CEO Charles Prince stepped down.
European shares edged lower. The pan-European Dow Jones Stoxx 600 index fell 0.4% to 373.55, led lower by losses for property firms. The UK's FTSE 100 closed down 0.4% at 6,536.90, the German DAX 30 fell 0.3% to 8,009.42 and the French CAC-40 slipped 0.5% to 5,724.76.
Equity markets in Latin America ended sharply down. Mexico's IPSA dropped 2.7% to 30,327.36 while Brazil's Bovespa index fell 1.4% to 64,512.26. Argentina's Merval ended down, by 0.5% to 2,230.43. Chile's IPSA extended earlier losses to close with a 2.7% loss to 3,165.71.
In other emerging markets, the RTS index in Russia gained 0.5% at 2342 and the ISE National-30 index was down 0.4% to 71,855.
Most Asian markets were down sharply this morning, falling by 1-3%. The Morgan Stanley Capital International Asia Pacific index registered its biggest loss in three weeks, after the Fed said that US economic growth was slowing and Morgan Stanley said Japan too may slip into a recession.
Mitsubishi UFJ Financial led regional banks lower on speculation that a quarter-point cut by the Fed won't be enough to halt credit-market losses. Samsung Electronics and BHP Billiton fell on concern that demand for electronics and raw materials will reduce in the US, Asia's largest export market.
The MSCI Asia Pacific Index fell 1.5% to 162.81 as of 11:17 a.m. in Tokyo, set for its largest drop since Nov. 21. Almost seven stocks fell for each that gained among the benchmark's 1,140 members.
All eyes on Fed
It was a day of pouring gains as both the key indices finished at an all time closing high. He benchmark Sensex closed above the 20k mark and the NSE Nifty closed at an all time closing high. Markets constantly gained momentum as the day progressed as players expected that Fed would cur interest rates.
Among the 30-scrips of Sensex, ICICI Bank, Reliance Industries, Bharti Airtel and HDFC Bank were among the major gainers. However, DLF, Infosys and BHEL were among the major laggards.
Finally, 30-share Sensex ended 360 points higher to close at 20,290 and Nifty closed at 6,097 adding 136 points.
Maruti advanced 3% to Rs1077 after the company announced that it would increase capacity to 9.6 lakh cars per year by March 2010. Suzuki would invest 200bn Yen in Indian plants 2007-09. The scrip touched an intra-day high of Rs1085 and a low of Rs1040 and recorded volumes of over 7,00,000 shares on NSE.
Eicher Motors fell 1.6% to Rs469. Reports stated that AB Volvo is acquiring a 50% economic interest in the company’s commercial vehicles business, which is spun off into a Joint Venture company. The scrip touched an intra-day high of Rs504 and a low of Rs463 and recorded volumes of over 10,00,000 shares on NSE.
Essar Oil slipped 1.8% to Rs294. According to reports the company is close to sealing a deal to acquire a majority stake in Kenya Petroleum Refinery, one of the country’s oldest refinery complexes. The scrip touched an intra-day high of Rs304 and a low of Rs291 and recorded volumes of over 64,00,000 shares on NSE.
Pfizer rallied by over 8% to Rs776 following reports that the company is the first MNC to receive HIV drug patent in India. The scrip touched an intra-day high of Rs824 and a low of Rs740 and recorded volumes of over 92,000 shares on NSE.
Voltas advanced 2% to Rs249 after reports stated that the company would acquire stake in two companies, Universal Comfort Products and Saudi Ensas Company from its JV partners. The scrip touched an intra-day high of Rs255 and a low of Rs245 and recorded volumes of over 26,00,000 shares on NSE.
GAIL gained 4% to Rs519 after the company announced that it signed co-operation pact with Puducherry government. The scrip touched an intra-day high of Rs524 and a low of Rs505 and recorded volumes of over 30,00,000 shares on NSE.
Nicco Corp locked at 5% upper circuit to Rs41.45 after The company along with Prysmian to set up Joint Venture Nicco cables in which Prysmian would hold 60% and Nicco 40% in Joint venture. The scrip touched an intra-day high of Rs41.45 and a low of Rs40.50 and recorded volumes of over 5,00,000 shares on NSE.
Oil marketing stocks were in limelight following reports that the Government may consider a marginal hike in petrol and diesel prices with a simultaneous reduction in excise duty. BPCL rose over 3% to Rs439, IOC was up 2% to Rs630 and HPCL surged by over 6.5% to Rs329.
Sugar stocks turned sweeter after reports stated that sugar mills would get interest free loans to help them pay the dues of the farmers. Balrampur Chini was up by over 2.5% to Rs106, Renuka Sugar gained 2.2% to Rs841 and Bajaj Hindusthan added 0.3% to Rs238.
What the FIIs are doing
FIIs were net buyers Rs3.87bn (provisional) in the cash segment on Tuesday while the local institutions pumped in Rs3.4bn. In the F&O segment, foreign funds were net buyers of Rs10.38bn on the same day.
On Monday, FIIs pumped in Rs3bn in the cash segment.
Stocks in News:
Wipro is looking to earn one-sixth of its global revenues by March 2009 from system integration business.
Pfizer's patent for new HIV follow up treatment drug Celzentry in India may face opposition from patient groups and NGOs.
Marico is currently test marketing hair oil, gel and shampoo for children.
ITC to provide supply solutions to help small stores place orders over mobile phones.
TV18 Group to buy a majority 53% stake in Infomedia India.
Ansal API receives UP government’s approval for two SEZs.
Jindal Drilling plans to divest 10% stake to fund expansion plans.
Nalco is investing Rs300bn over the next five years for setting up smelter and power plant in Indonesia.
SBI expects slowdown in personal loans by 5-10% in second half of FY08.
Shriram Transport Finance is looking at the replacement market to sustain its loan growth at 50% in H2 FY08.
Idea Cellular offers Rs16.5bn for additional 4.4MHz spectrum.
Reliance Industries to spend US$12bn to develop three gas basins.
IOC says it would stop fuel supply to the railways if the latter continues to insist on discounts.
United Phosphorus is set to bid for Australia's largest agriculture chemical company, Nufarm.
Tata Steel has entered into a joint venture with SODEMI for the developing Mount Nimba iron ore deposits in Ivory Coast in West Africa.
Suzuki announces that Maruti Suzuki India will make its next global car, the A-Star.
Mercator Lines raises about US$142.5mn from its listing at the Singapore stock exchange.
Reliance Industries sings contracts for exploration in two oil and gas blocks in Colombia.
Reliance Energy led consortium will contest Sea King while bidding for the Mumbai Trans-Harbour link.
Reliance Energy’s 4,000MW Shahapur project gets environment clearance.
L&T acquires 26% stake in New Delhi based consulting and engineering firm Feedback Ventures for Rs400mn.
JSW Energy invites bids for BoP package for its proposed 3x400MW coal fired power plant in Ratnagiri.
Commerce Minister Kamal Nath rules out any possibility of relaxation of land rules for SEZs.
The RBI may soon tighten norms for foreign exchange derivatives.
The Government is likely to extend Software Technology Parks of India scheme only to Indian ITES/BPO firms beyond 2009.
The Petroleum & Natural Gas Regulatory Board has urged the petroleum ministry to offer targeted subsidy on petrol, diesel, LPG and kerosene.