Reality is that which, when you stop believing in it, doesn't go away.
After Wednesday's smart gains, the bulls decided to have a reality check and took a breather of sorts. Most global markets were down in red yesterday as nagging worries over the turmoil in world credit markets refuse to go away . Even a concerted effort led by the Federal Reserve to boost global liquidity failed to have any sobering effect on global markets. As a result, the Sensex and the Nifty slipped into the negative zone around noon and failed to recover . At the same time, small-cap and mid-cap shares continued their winning streak, which explains the positive market breadth.
The outlook for today is a cautious undecided start. The key indices will remain choppy, and the broader market will continue to attract buyers. Trends across the global markets will continue to drive sentiment here in India . A recovery in Asia or later in Europe could prop up the mood, but one should not read too much into that. Banking stocks are expected to see positive action in the coming days.
FIIs have been net sellers for the past couple of days. This could have a bearing on the undertone, especially they do not resume their buying spree. Being the last month of the year, historically, FIIs are not expected to be very active. Local Funds have been steadily picking up shares even as their overseas counterparts have turned net sellers.
We expect the market to be rangebound and sideways for the rest of the month. In the near year, the direction will hinge on latest quarterly results, pre-budget speculation, liquidity flows and of course the global markets. Till then, investors should remain on the fringes and do selective buying in quality scrips or in stocks where they have some firm information. Large, aggressive purchases can be postponed for a while. And, be careful of the almost non-stop movement in certain small-cap and mid-cap stocks . Book profit before you are refused an exit.
US stocks closed mixed after a late recovery on Thursday. Trading was choppy amid continuing worries about the state of the US economy. A report showed a big jump in wholesale prices. On the positive side though, a strong reading on retail sales cooled some concerns about consumer spending.
After dropping more than 100 points during the session, the Dow Jones Industrial Average gained 44 points, or 0.3%, to 13,517.96, led by a 5% rally in Honeywell International. The S&P 500 index finished flat at 1,488.41 and the Nasdaq Composite Index fell 3 points, or 0.1%, to 2,668.49.
Market breadth was negative. About three stocks declined for every two that rose on the New York Stock Exchange.
Financial shares remained under pressure on concerns that a coordinated attempt by central banks in North America and Europe to relieve the tension in the credit markets will fail. Bear Stearns, Goldman Sachs and Merrill Lynch led declines in brokerages after Lehman Brothers said some precautions against mortgage losses were ineffective.
JetBlue Airways shares surged over 14% on news that German carrier Deutsche Lufthansa will buy a roughly 19% stake in the discount air carrier for $7.27 per share, confirming earlier rumors. Dow Chemical said it will sell a 50% stake in five of its businesses to a Kuwaiti company for $9.5bn. Shares jumped 6%.
The Producer Price Index (PPI) jumped 3.2% in November, due in large part to a spike in energy prices, the government reported. PPI was well above forecasts and followed a rise of 0.1% in October. So-called "core" PPI, which excludes food and energy prices, also rose more than expected.
A separate report showed a stronger-than-expected jump in November retail sales and in sales excluding autos. Another report showed a bigger drop in weekly jobless claims than economists were expecting. Meanwhile, business inventories rose 0.1% in October, shy of forecasts.
Treasury prices slipped, raising the yield on the 10-year note to 4.2% from 4.09% late on Wednesday. In currency trading, the dollar rose versus the euro and yen. US light crude oil for January delivery fell $2.09 to settle at $92.30 a barrel in New York. COMEX gold for February delivery fell $14.80 to $804 an ounce.
Most Asian stocks fell this morning, led by raw material shares after metals and oil prices dropped on speculation that a US slowdown will slow demand for commodities. BHP Billiton and Rio Tinto led the decline.
The MSCI Asia Pacific Index fell 0.2% to 159.40 as of 9:50 a.m. in Tokyo, extending a two-day, 3.4% drop. Seven of the 10 industry indexes on the benchmark fell.
Japanese exporters rose, paced by Nintendo and Sony after the yen weakened against the dollar, boosting the value of overseas sales. The Nikkei in Tokyo was up 96 points at 15,632.
The Hang Seng in Hong Kong was nearly flat, down only 24 points at 27,720. The Kospi in Seoul fell 10 points to 1906 and the Straits Times in Singapore dropped 14 points to 3465.
European shares tumbled with banks such as HSBC bearing the brunt of the sell-off, amid growing doubts about a Federal Reserve-led move to boost global liquidity will ease the global credit crisis. The pan-European Dow Jones Stoxx 600 index lost 2.5% to 365.61. The UK's FTSE 100 closed down 3% to 6,364.20, while the German DAX 30 slid 1.8% to 7,928.31 and the French CAC-40 dived 2.7% to 5,590.91.
Brazilian stocks fell as the government failed to win an extension for a key tax measure. Mexican stocks too ended its session with losses. In Sao Paulo, the benchmark Bovespa index slid 2.9% to close at 62,861. In Mexico, the IPC index of 35 most-traded issues fell 0.8% to 30,088.04. Argentina's Merval stock index fell 1.3% to 2,196.48 and Chile's IPSA was down 2.6% at 3,009.55.
In other emerging markets, the RTS index in Russia was down 1.8% at 2317 and the ISE National 30 index in Turkey slumped 3% to 70,419.
All eyes on global markets
Markets opened with a positive gap hitting the days high of 20,498, thereafter key indices gradually lost ground snapping a three day winning streak. Markets lost ground as weakness in the Asian and the European markets dampened the sentiments of the traders on D-street dragging the benchmark Sensex over 400 points and Nifty index over 100 points from their respective highs. Finally, 30-share Sensex slipped 271 points to close at 20,104 and Nifty closed at 6,058 losing 101 points.
Kolte Patil Developers a real estate developer got listed at Rs230, translating into a premium of 58% or Rs85 against issue price of Rs145 per share on NSE. However, the stock was unable to hold on to its gains as it closed at Rs180, up 24%.
The company develops and constructs properties mainly in Pune and Bangalore. Since its incorporation in 1991, it has completed 25 projects, including 22 in Pune and three in Bangalore, covering 4.01mn sqft of saleable area. The scrip touched an intra-day high of Rs230 and a low of Rs176 and recorded volumes of over 1,00,00,000 shares on NSE.
Bharti Airtel slipped over 6.5% to Rs988. The company had its debt rating raised to investment grade by Standard & Poor's which cited stronger-than- anticipated earnings. The scrip touched an intra-day high of Rs1064 and a low of Rs983 and recorded volumes of over 39,00,000 shares on NSE.
Hindustan Zinc gained 1.1% to Rs822 after the company announced that it kept zinc prices unchanged and had cut lead prices to Rs1,15,900 per ton. The scrip touched an intra-day high of Rs847 and a low of Rs816 and recorded volumes of over 2,00,000 shares on NSE.
BHEL lost 2.1% to Rs2591. The company announced that it had won Rs1.2bn contract. The scrip touched an intra-day high of Rs2688 and a low of Rs2585 and recorded volumes of over 10,00,000 shares on NSE.
L&T was down 1.2% to Rs4239. Reports stated that the company is floating a JV with Technip a French company to expand its play in the offshore exploration sector and secure global orders. The scrip touched an intra-day high of Rs4334 and a low of Rs4221 and recorded volumes of over 4,00,000 shares on NSE.
Reliance Energy also fell 1% to Rs1912. The company yesterday bagged an EPC contract worth Rs37.25bn from Damodar Valley Corporation to set up 1,200MW coal based power station in West Bengal. The scrip touched an intra-day high of Rs1960 and a low of Rs1905 and recorded volumes of over 14,00,000 shares on NSE.
Ispat Industries gained over 6% to Rs76 after reports stated that the company would sign pact with MP Government. The scrip touched an intra-day high of Rs78 and a low of Rs71 and recorded volumes of over 9,00,00,000 shares on NSE.
Sterlite Industries was down 2.7% to Rs1074. Reports stated that the company’s power arm secured nod for 2400 MW. The scrip touched an intra-day high of Rs1115 and a low of Rs1061 and recorded volumes of over 25,00,000 shares on NSE.
JSW Steel surged by over 7.5% to Rs1336 after media reports stated that the company would launch Energy unit IPO before FY08. The scrip touched an intra-day high of Rs1389 and a low of Rs1252 and recorded volumes of over 16,00,000 shares on NSE.
What the FIIs are doing
FIIs were net sellers of Rs4.02bn (provisional) in the cash segment on Thursday while the local institutions pumped in Rs2.27bn. In the F&O segment, foreign funds were net sellers of Rs11.3bn on the same day.
Stocks in News:
Reliance Industries (RIL) is planning to directly market petroleum products in US and Europe. (FE)
Videocon Industries is planning to spin-off its energy business in to a separate company. (ET)
The DoT has cleared Idea, Vodafone Essar and Aircel requests for grant of 2G spectrum where they currently hold licenses; rejects Bharti and Idea's offer for buying additional spectrum. (ET)
AstraZeneca files litigation against seven drug makers, including Sun Pharma and Aurobindo to protect its rights over US$2bn cholesterol pill, Crestor. (DNA)
Lanco Infratech has secured a mandate to supply 390MW of power to Haryana and 600 MW to Madhya Pradesh. (BL)
GMR Infra mulls acquisition of coal mines which will be partly funded by the recent QIB issue. (BL)
SBI has asked prospective partners for its general insurance foray to pay Rs33.5bn as entry premium. (BS)
Tata Tele to invest Rs3bn to rollout mobile services in Assam and North East by April/May 2008. (ET)
Ispat Industries to invest Rs15bn in Madhya Pradesh for setting up a coke oven plant. (DNA)
Oman Oil in talks with Tata Group for jointly setting up industrial salt and soda ash plants in Oman. (FE)
TV18 Group to launch a business magazine in India in partnership with Forbes. (BS)
TVS Motors launches a four-stroke 125cc bike Flame at Rs45,000. (DNA)
Vivimed Labs is close to acquiring a Germany-based cosmetics chemicals manufacturing firm. (FE)
Ford looking to partner M&M all over again including for a possible alliance for passenger vehicles. (ET)
The Government is set to fix onetime spectrum fee for all new players planning to offer 2G mobile services. This will be in addition to Rs16.5bn entry fees. (ET)
The Government has proposed to raise expenditure on education to 19% of the planned outlay during the 11th plan (2007-12) (FE)
The Government has invited exploration bids for 57 oil & gas blocks under the seventh New Exploration Licensing Policy (NELP VII). (ET)
The Government may offer 51% stake in the proposed Delhi-Mumbai Industrial Corridor Development Corporation to financial investors. IDFC, IL&FS, Srei Capital and IFCI in talks to pick up stake. (ET)