The rate of interest acts as a link between income-value and capital-value.
The global recovery may bring the key indices into positive zone. But disappointment may be in store for the Indian markets which seem to have taken for granted that the RBI may follow the footsteps of the Fed. The RBI is likely to leave CRR rates unchanged and at best bring in a 25 basis point cut in repo rate. The bulls may have to look closer at what the Fed meet’s outcome will be on Wednesday.
The RBI's quarterly survey of the economy shows it is still worried about inflation. RBI Governor Dr. Y.V. Reddy has made no bones about his discomfort about the surge in asset prices. In a way, he may be happy with both real estate and stock markets going through a meaningful correction.
The RBI may prefer to wait and watch the Fed’s next move before upsetting the status quo. Still, with the Fed aggressively cutting rates to ward off a recession in the US and with concerns about a global slowdown intensifying, the RBI may have to relent, if not today then at a later date. Interest rates in the domestic markets may not stay where they are today for long. Some moderation is expected sooner than later. When that happens remains to be seen.
Today, we expect the market to rebound today given the strong closing on Wall Street overnight and a firm opening across Asian markets. Having said that, we have to see how long this bullish trend continues through the day or will the bears hit back. Things will remain volatile ahead of tomorrow's FOMC announcement (where it is likely to unveil another rate cut) and Thursday's F&O expiry. Friday will be another big day, as FIIs will be allowed short selling for the first time ever.
FIIs were net sellers of Rs10.38bn (provisional) in the cash segment on Monday. Domestic funds were net buyers of Rs5.98bn. In the F&O segment, FIIs were net buyers of Rs230.5mn. On Friday, foreign funds were net buyers of Rs6.69bn. They have pulled out over US$3bn in the past seven days (excluding Monday). Mutual Funds were net buyers of Rs2.21bn on Thursday.
Results Today: Adani Enterprises, Akruti City, Alps Industries, Alstom Projects, Asian Hotels, Asian Paints, Bilcare, Bombay Dyeing, Cinemax, Clutch Auto, Consolidated Construction, Dabur India, Dredging Corp, Eicher Motors, Elder Pharma, Elecon Engineering, Essar Oil, GSK Consumer, Godawari Power & Ispat, Godrej Industries, GE Shipping, GNFC, Havells India, Hindustan Oil Exploration, Hinduja Ventures, HMT, Indo Rama Synthetics, ITI, Indoco Remedies, JB Chemical, Jagran Prakashan, JK Cement, JK Tyre, Kalpataru Power, Karur Vysya Bank, Lanco Infra, Lumax Auto, MMTC, Mahindra Lifespaces, Maruti Suzuki India, Mcleod Russel, Mundra Port, NALCO, Nirma, Opto Circuit, Pioneer Embroideries, Piramyd Retail, Praj Industries, Prithvi Info, Sangam India, Sical Logistics, Simplex Projects, SAIL, Sterlite, Stone India, Subex, Suzlon, Syndicate Bank, Tata Power, Thermax, Torrent Power, Triveni Engineering, Voltamp, WWIL, Yes Bank and Zee Entertainment.
Most Asian markets are trading higher this morning. The Nikkei in Tokyo is up 241 points or 1.8% at 13,329 while the Hang Seng in Hong Kong rose 477 points or 2% at 24,531. The Kospi in Seoul added 9 points at 1636 while the Straits Times in Singapore advanced 12 points to 3053. The Shanghai Composite in China added 53 points to 4472 and the Taiex in Taiwan was down 11 points at 7474.
US stocks surged on Monday, as investors bet on further rate cuts from the Fed after the announcement of a weak new home sales report and mixed earnings news. Financial stocks were among the big gainers on the belief that lowered borrowing costs would boost their profits.
Bank of America, JPMorgan Chase and Citigroup led financial shares to their fourth advance in five days. Lennar Corp. and Centex Corp. rallied, sending homebuilders' shares to the highest level since October, as the prospect for lower interest rates overshadowed a government report showing the biggest yearly drop in new-home sales on record.
The S&P 500 Index added 23.36 points, or 1.8%, to 1,353.97. The Dow Jones Industrial Average rose 176.72 points, or 1.5%, to 12,383.89. The Nasdaq Composite gained 23.71 points, or 1%, to 2,349.91.
More than five stocks rose for every one that fell on the NYSE.
The S&P 500 rebounded 2.4% from its low of the day after the Commerce Department's report that new-home purchases slid to a 12-year low prompted traders to increase bets on a half-point rate cut by the Fed, on Wednesday.
Treasury prices slipped, raising the yield on the 10-year note to 3.58% from 3.56% late on Friday. In currency trading, the dollar inched higher versus the yen and fell versus the euro.
US light crude oil for March delivery rose 28 cents to settle at $90.99 a barrel on the New York Mercantile Exchange.
COMEX gold rallied $16.60 to settle at $927.10 an ounce, after touching an all-time high of $929.50 earlier.
European shares lost ground again on Monday. The pan-European Dow Jones Stoxx 600 index declined 1.1% to 318.70. But the regional indexes rebounded from earlier lows after grim data on US housing market helped bolster expectations of a half-percentage rate cut when the Fed meets later this week. The UK's FTSE 100 closed down 1.3% at 5,788.90 and the French CAC-40 dropped 0.6% to 4,848.30, while the German DAX 30 was flat at 6818.85.
In the emerging markets, the Bovespa in Brazil was up nearly 2% at 58,593 while the IPC index in Mexico gained 1.4% at 27,758. The RTS index in Russia slumped 2.7% to 1978 and the ISE National-30 index in Turkey was down 4% at 54,959.
Bulls ready for Reddy?
Markets started off the week with a negative bias continuing the downward trend as benchmark Sensex closed with losses of 1.1%. Markets fell again mirroring further selling in equity markets across Asia. After slipping over 700 points bulls fought back as markets gradually and slowly started recovering from its low on back of banking stocks. Even the Auto and select Mid-Cap stocks made swift recovery.
Among the BSE Sectoral indices, BSE Auto index (up 1.7%) and BSE Bankex index (up 1.2%) were among the major gainers. However, BSE Realty index was the top loser (down 4.5%), BSE IT index (down 3.6%) and BSE Capital Good index (down 2%).
Finally, the 30-share Sensex closed at 18,152, losing 208 points or 1.1%. The NSE Nifty slipped 109 points or 2% to close at 5,274.
Jindal Steel gained 1.3% to Rs2349 after the company announced its Q3 result with net profit at Rs3.19bn (up 68%) and revenue at Rs14.1bn (up 39.6%). The scrip touched an intra-day high of Rs2400 and a low of Rs2085 and recorded volumes of over 8,00,000 shares on NSE.
VSNL lost by over 5% to Rs526 after the company posted a net profit of Rs95.20mn for the quarter ended December 31, 2007 (down 93%) as compared to Rs1422.80mn for the quarter ended December 31, 2006. Total Income increased from Rs11122.50mn for the quarter ended December 31, 2006 to Rs11135.20mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs555 and a low of Rs495 and recorded volumes of over 2,00,000 shares on NSE.
Educomp slipped 5% to Rs3941. The company announced its Q3 result with net profit at Rs190.2mn (up 131%) and net sales at Rs715.2mn (up 159.4%). The scrip touched an intra-day high of Rs4175 and a low of Rs3700 and recorded volumes of over 93,000 shares on NSE.
L&T partially recovered from its early loses after the company announced its Q3 result with net profit at Rs4.82bn (up 40. 11%) and net sales at Rs63.8bn (up 55%). The scrip was quoting at Rs3861 down 4% after hitting a low of 3840 and a high of 3636 and recorded volumes of over 6,00,000 on NSE.
HDFC gained 2.6% to Rs2785 after the company announced that they secured IRDA approval to sell 26% in General Insurance unit to Ergo. The scrip touched an intra-day high of Rs2816 and a low of Rs2601 and recorded volumes of over 5,00,000 shares on NSE.
Videocon Industries was down 4.8% to Rs524. The company’s net profit was at Rs2.49bn (up 21%) and net sales were at Rs23.6bn (up 14.5%). The scrip touched an intra-day high of Rs545 and a low of Rs523.75 and recorded volumes of over 3,00,000 shares on NSE.
Tata Tea edged lower 0.3% to Rs791. The company announced its Q3 result with net profit at Rs588.8mn (down 37%) and net sales at Rs3.55bn (up 22%). The scrip touched an intra-day high of Rs800 and a low of Rs740 and recorded volumes of over 73,000 shares on NSE.
Cairn India dropped by over 4% to Rs191. Reports stated that the company may sign oil pipelines agreement on February 15, 2008. The scrip touched an intra-day high of Rs195 and a low of Rs184 and recorded volumes of over 17,00,000 shares on NSE.
Glenmark came off its days low and ended 2.7% higher to close at Rs515 after the company’s Baddi plant received USFDA approval. It touched an intra-day high of Rs525 and a low of Rs478 and recorded volumes of over 2,00,000 shares on NSE.
News Snippets:
Government has asked SBI to go slow on the merger with all its subsidiaries. (ET)
NTPC is looking to spend over $1 billion on buying coal assets abroad(BL)
Reliance Energy, BEST and Tata Power have sought a hike of 10-15% in tariff rates. (ET)
JSW Steel is planning to spin off its overseas mining assets in a new company and list it on the London Stock Exchange. (ET)
Kotak Mahindra Bank is all set to acquire a controlling stake in Ahmedabad Commodity exchange. (ToI)
Reliance Energy and Reliance Engineering Associates have put in bids for Mumbai’s monorail project worth Rs50bn. (ET)
ICICI and HDFC Bank have raised the two-wheelers down-payment to 30%. (BS)
Orissa likely to scrutinise permissions given to Reliance Retail for opening Reliance Fresh outlets in the state. (ET)
Phoenix Mills has upped its stake in Entertainment World Developers by picking up additional 8.3% stake for Rs1.5bn. (ET)
Indorama Thailand is acquiring close to 90% equity stake in Tuntex, a Thai manufacturer of polyester fibre and filament, for a sum of US$63.5mn. (ET)
HDFC is planning to list its mutual fund arm by the year end. (ET)
Rajesh Exports is likely to announce a buy back offer in the near term. (ET)
Wheels India and Sundaram Finance, both part of the TVS group, have formed a JV, Sundaram Hydraulics, to produce hydraulic cylinders. (BL)
Indo Tech Transformers will double its transformers manufacturing capacity to 7,450 MVA soon. (BL)
Lupin is talking to potential partners who may take its herbal and synthetic psoriasis molecules on to complete the cycle of drug development. (BL)
Coal Ministry is seeking tax breaks and concessional duty on import of equipment for Coal India. (ToI)
Indian Hotels has raised tariff of budget hotels by 50%. (ToI)
JSW Bengal Steel, a subsidiary of JSW Steel is plans to come out with a Rs35bn IPO next year to part finance its proposed 10mn ton steel plant in Salboni. (ToI)
IOC and Tata Power plan to form a JV to set up a 1,000MW power project at Mirthapur in Orissa. (Mint)
The merger of Neelachal Ispat Nigam with SAIL could be in trouble with MMTC, unwilling to sell its stake. (BS)
Tata Motors plans to launch high-end luxury buses of Spain’s Hispano Carrocera in the Indian market in the near future. (DNA)
IVRCL plans to bid for airport development projects in small cities and towns. (Mint)
Jet Airways aims to raise up to US$800mn, including a rights issue for half the amount which was approved in June FY07. (DNA)
Nissan Copper is planning backward integration with an estimated capex of Rs8bn. (BS)
Board of KEI Industries has approved setting up a subsidiary for the power generation business and entering into tie-ups for power generation through biomass-based power plant. (BS)
General Electric has put GE Money on the block. (ET)
Economic Snippets:
Government is planning a compensation package for states to reduce sales tax on ATF from 15% to 10%. (ET)
An eGoM will consider relaxing the 5,000 hectare land ceiling for SEZs, early next month. (ET)
RBI will sell two-year government bonds to suck out Rs30bn from market of January 31. (ET)
Public sector banks want the Government and the RBI to exert more pressure on the Fed for allowing acquisitions and branch expansion. (BL)
The government is proposing a hike of 1% in VAT rate. (FE)
Fertiliser plants will have the first right over domestic natural gas, followed by petrochemical and existing power units if the government approves a draft natural gas utilization policy. (FE)
Russia has lifted the ban on import of tea and coffee from India with immediate effect. (Mint)
Power ministry plans to float tender inviting firms to manufacture equipment based on super-critical technology for meeting the target of 78,000MW power generation during the 11th plan. (BS)
Insurance firms plan to invest US$5bn in the stock market by FY08. (BS)
Rubber production in January 2008 may increase by 14% yoy to 110,000 tons. (BS)