Price is what you pay. Value is what you get. – Warren Buffet
Market participants (can’t decide whether to say investors or traders) have been paying the price of lapping up stocks despite high valuations. Four big events will set the trend for the market in the near term. Besides, even pay-in is turning out to be a pain, which is closely watched.
Today, we expect a gap-down opening on the back of a fresh meltdown across global markets, especially in Asian markets. Expect wild intra-day gyrations through the day. It will be pretty risky to trade in this sort of a market. There is no other option but to wait for a clear trend. Long-term investors can continue to nibble in high-quality scrips at lower levels, though.
Among the events, one is of course tomorrow's RBI quarterly policy review. The second is Wednesday's FOMC meeting. Third, we have to grapple with the F&O expiry on Thursday. The fourth event on Friday (Feb. 1st) will be a big day for our markets, as FIIs will be allowed to short sell from that day.
As far as RBI is concerned, most expect a 25 bps cut in the repo rate to counter any threat to the Indian economy from a global slowdown and boost local demand. However, it remains to be seen whether Governor Y.V. Reddy does a Bernanke by giving into market demand. If he does, there could be a relief rally in our markets, led by the bank stocks of course. In any case, bank shares are poised to do better than most other sectors.
The Fed too is expected to announce a minor rate cut followed by last week's 75 bps cut. That may again cheer up the mood across global markets. Against this background, the derivative settlement is likely to be quite volatile. There are expectations that the F&O rollover may be lower than what it has been in the past few months. On Friday, one will have to see what the foreign funds do, as the short selling option will be available to them.
Asian markets have opened sharply down this morning. The Nikkei in Tokyo was down 354 points at 13,274 while the Hang Seng in Hong Kong slumped 1028 points at 24,093. The Kospi in Seoul was down 39 points at 1652 while the Straits Times in Singapore dropped 93 points to 3066. The Shanghai Composite in China shed 259 points to 4502 while the Taiex in Taiwan was down 163 points to 7576.
FIIs were net buyers of Rs2.08bn (provisional) in the cash segment on Friday. Domestic funds were net buyers of Rs2.48bn. In the F&O segment, FIIs were net buyers of Rs28.78bn buyers. On Thursday, foreign funds were net sellers of Rs13.51bn. With this, they have pulled out well over US$3.5bn in the past seven days (excluding Friday). Mutual Funds were net buyers of Rs3.46bn on Thursday.
Results Today: Adhunik Metaliks, Allied Digital, Apar Industries, Arvind Mills, Aztecsoft, BGR Energy, Bharati Shipyard, Britannia, Core Projects, Crew BOS, Deccan Chronicle, Diamond Cables, Divi's Labs, eClerx, Educomp, FDC, GHCL, Godfrey Phillips, Gokaldas Exports, Great Offshore, GSPL, GVK Power, HCL Info, Helios Matheson, HFCL, HM, HTML Global, Indian Hotels, Indo Asian Fusegear, Ingersol Rand, IOL Broadband, Jet Airways, Jindal Steel, JSW Steel, Kirloskar Electric, Kopran, Kolte Patil, L&T, M&M Financial, Max India, Mercator Lines, Nitin Fire, Prajay Engineers, RCF, Sadbhav Engineering, Shoppers' Stop, Shringar Cinema, Simplex Infra, Sundram Fasteners, Suven Life, Tata Tea, Venus Remedies, Videocon Industries, VIP Industries, Zensar Tech and Zylog.
US stocks tumbled again on Friday, as investors became more cautious after a two-session rally that followed a turbulent start to the week. However, on the week all the three major indices posted first weekly gain of 2008 after a surprise rate cut and the announcement of a stimulus plan.
The S&P 500 added 0.4% to 1,330.61 for the week. The Dow Jones Industrial Average climbed 0.9% to 12,207.17. The Nasdaq Composite posted its fifth straight weekly loss, declining 0.6% to 2,326.2 as shares of Apple lost 19%.
The rise, led by the biggest climb in almost five years for financial shares was limited as the S&P 500 slipped on Friday on concern that the Fed rate cuts won't be enough to lift the US economy out of the abyss.
The S&P 500 is still down 9.4% for the year, while the Dow has dropped 8%. Stock market volatility in the US climbed to the highest in five years on Jan. 22, a day after the MSCI World Index had its biggest rout since 2002 on concern global growth is slowing.
US shares rallied early in the morning on Friday, as investors looked to extend the rally, thanks to Microsoft's earnings and outlook. But the sentiment turned negative in the afternoon, with financials leading the downturn.
Treasury prices rallied, lowering the corresponding yields as investors again sought safety in government debt, as they had earlier in the week. The dollar was mixed versus other major currencies.
US light crude oil for March delivery rose $1.30 to $90.71 a barrel on the New York Mercantile Exchange. COMEX gold rallied $4.90 to $910.70 an ounce.
Market breadth was negative. On the NYSE, losers beat winners by 9 to 7 on volume of 1.88bn shares. On the Nasdaq, decliners edged advancers by 8 to 7 on volume of 2.64bn shares.
The two-day FOMC meeting, which ends on Wednesday, will be the focus of the week.
Late on Thursday, Microsoft reported higher second-quarter revenue and profit that topped Wall Street estimates. The software leader also forecast higher sales and earnings for the next two quarters and 2008 fiscal year. Shares of the Dow component initially jumped 3% before giving up those gains and turning lower.
European shares closed mixed on Friday. Key indices traded higher for most part of the session but became unstable as US markets dipped into the red and as insurers came under pressure on speculation about fresh profit warnings from the sector. The pan-European Dow Jones Stoxx 600 index inched 0.1% higher to 322.23. The French CAC-40 fell 0.8% to 4,878.12, while Germany's DAX 30 lost 0.1% at 6,816.74 and the UK's FTSE 100 closed down 0.1% at 5,869.00.
In the emerging markets, the Bovespa in Brazil surged by 6% to 57,463 while the IPC index in Mexico was down nearly 1.9% at 27,379. The RTS index in Russia gained 2.3% at 2033 and the ISE National-30 index in Turkey was up 0.7% at 57,433.
Bulls rely on Reddy, Fed
Bulls bounced back on Dalal Street on Friday with benchmark Sensex posted its biggest ever gain of 1,140 points. Once again global cues coupled with buying momentum in the index heavyweights like RIL, L&T, ICICI Bank Infosys and Bharti Airtel lifted the key indices higher. All the 30 scrips in the benchmark index rose. Banks and real estate stocks gained on hopes the Reserve Bank of India would cut interest rates at a policy review. Finally, the 30-share Sensex closed at 18,361, surging 1139 points (6.6%).. The NSE Nifty advanced 349 points or 6.9% to close at 5,383.
The BSE Realty, Metal and Bankex index were among the major gainers each gaining over 7%.Even the Mid-Cap and the Small-Cap stocks were back in demand as both the indices closed over 4% each.
Gujarat Industries gained 2.8% to Rs113 after the company announced its Q3 net profit at Rs371.20 down 4.05% and revenue at Rs2.49bn Vs Rs2.37bn. The scrip touched an intra-day high of Rs114 and a low of Rs105 and recorded volumes of over 2,00,000 shares on NSE.
GMR Infrastructure surged by over 19.7% to Rs194 after it posted a net profit from ordinary activities after tax of Rs156.8mn for the quarter ended December 31, 2007 as compared to Rs5.5mn for the quarter ended December 31, 2006. Total income increased from Rs64.7mn for the quarter ended December 31, 2006 to Rs235.4mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs197 and a low of Rs167 and has recorded volumes of over 1,00,00,000 shares on NSE.
Tata Steel advanced by 6.6% to Rs715 after the company announced its Q2 result with net profit at Rs33.08bn. Net income includes a one-time gain of Rs18.5bn from an increase in the value of investments held by the pension trust of Corus Group Plc, Sales were Rs324.25bn. The scrip touched an intra-day high of Rs719 and a low of Rs675 and recorded volumes of over 14,00,000 shares on NSE.
SBI gained 2.7% to Rs2407 after the company posted a 56.3% growth in net profit it was at Rs23836.60mn for the quarter ended December 31, 2007. Total Income increased from Rs170451.30 million for the quarter ended December 31, 2006 to Rs243809.90mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs2458 and a low of Rs2360 and recorded volumes of over 13,00,000 shares on NSE.
GTL Ltd spurred over 4% to Rs266. The company’s gross profit for the quarter was Rs1.15bn (25.56% of revenue) as against Rs648.4mn (22.09% of revenue) during the corresponding quarter in the previous year. The scrip touched an intra-day high of Rs270 and a low of Rs253 and recorded volumes of over 4,00,000 shares on NSE.
Reliance Industries gained 5% to Rs2615 it announced that it was in race for supplying 8mscmd of gas to Karnataka Power Corp’s 1,400MW power project at Bidadi according to reports. The scrip touched an intra-day high of Rs2625 and a low of Rs2525 and recorded volumes of over 29,00,000 shares on NSE.
Britannia Industries slipped 1.3% to Rs1477. According to reports the company has planned to enter ready-to-eat foods and strengthen presence abroad. The scrip touched an intra-day high of Rs1490 and a low of Rs1415 and recorded volumes of over 2,000 shares on NSE.
BEML ended flat at Rs1433. The Company announced its quarterly figures with a net profit of Rs592.4mn for the quarter ended December 31, 2007 as compared to Rs529.7mn for the quarter ended December 31, 2006. Total income increased from Rs5.59bn for the quarter ended December 31, 2006 to Rs6.4bn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs1492 and a low of Rs1411 and recorded volumes of over 68,000 shares on NSE.
TTML spurred by over 7% to Rs40. The company’s cash Profit for the year has gone up to Rs8mn against Rs4mn for the corresponding quarter in the previous year. Revenue touched Rs46mn for the quarter against of Rs36mn for the corresponding quarter in the previous year. The scrip touched an intra-day high of Rs40 and a low of Rs37 and recorded volumes of over 1,00,00,000 shares on NSE.
News Snippets:
Reliance Industries is all set to enter into building an engineering, procurement and construction services (EPC). (ET)
Seven promoters of Reliance Energy including Anil Ambani have raised their stake in the company by 2.37% to 35.66%. (FE)
ONGC to hire a deepwater rig for 2.3 meter water depth. (Mint)
Punjab National Bank plans to raise Rs15bn before end-March to fund business growth.(BL)
Kingfisher Airlines to buy around 40 Airbus planes in a deal worth about 5bn Euros.(FE)
CERC has adopted the Rs2.33296 per unit tariff quoted by Reliance Power for the 4,000MW Krishnapatnam power project in AP. (FE)
The Chhattisgarh Govt has cancelled the contract awarded to CMEC and has awarded the same to BHEL for a 600MW thermal power plant in Korba district. (BS)
Dr Reddy’s and US based Mylan are among six generic-drug makers to be sued by Forest Labs and Merz Pharma to block sales of lower-cost copies of the Namenda Alzheimer’s treatment.(FE)
Reliance Industries plans to invest in the petrochemical sector of Poland.(Mint)
SBI has received the US central bank’s approval to set up a new branch in New York.(FE)
Standard Chartered Bank is in talks with at least two leading Indian groups to sell its mutual fund business.(FE)
Welspun Gujarat is in talks to acquire Remi Metals Gujarat.(ET)
Nicholas Piramal India has signed a research agreement with France’s Pierre Fabre Laboratories.(BL)
GMR Infrastructure has bagged a 300-MW hydropower projects in Nepal.(BL)
HDFC Bank will set up over 250 new branches in next 2-3 months.(ET)
GSPC Pipavav Power Co has signed a Rs20bn loan agreement with Rural Electrification Corporation.(BL)
Jet Airways may invest US$8-10mn in its cargo airline by June 2008.(BL)
ICICI Venture will partner with the Indian Express Group for its Express Towers property.(FE)
Tata Motors is planning to provide loans for the Nano either through Tata Motors Finance (TMFL), a wholly owned subsidiary, or existing financing channels.(BS)
ICICI Securities aims to raise up to US$1bn through a pre-IPO placement of shares.(FE)
PTC plans US$1bn fund to acquire coal mines.(Mint)
ADAG firm signs US$100mn gaming deal with exclusive for three-years with Manchester United Football Club.(BS)
Voltas is planning for acquisitions in its electro-mechanical projects and services business with a view to accelerate growth.(BS)
Ultratech Cement has decided to acquire the 0.5mn ton Kankesanthurai cement plant in Jaffna that has been closed for more than 17 years. (BS)
Bhushan Steel Limited, which is setting up a 1.5mn ton steel plant at Meramundali in Dhenknal district, has closed down two of its four sponge iron making kilns following public agitation over pollution.(BS)
Bharati Shipyard Limited is focusing on building rigs with its plans to construct Rs6bn greenfield shipyard at Usagaon in Maharashtra.(FE)
IFCI has put on sale the Goa and Thane units of Vishawa Steels to recover debt.(BL)
Aditya Birla Group is picking up 5% stake in Core Projects & Technologies, for Rs135mn.(ET)
Shipping Corp to partner PSUs in manufacturing ship engines.(Mint)
HCC plans to partner with European companies in the engineering and design space as part of its plans to transform itself from a construction company to an integrated infrastructure player.(Mint)
BPL is exploring fund raising options to start services in 22 circles in the next two years.(BS)
Private equity firm Red Fort Capital plans to invest about Rs27bn in real estate by 2009, including acquisition of 2,500 acres of land in over 20 cities across the country.(BS)
Lupin is planning to acquire a mid-sized branded formulation company in the US.(BS)
Philip Morris International is in talks with Godfrey Philips India(GPI) to manufacture and market marquee cigarette brand Marlboro through GPI’s facility.(ET)
Tata group plans to buy a stake in a high-tech unit of Germany’s Deutsche Telekom.(ET)
GMR Infrastructure will bid for the modernization of Prague airport in Czech.(ET)
Jagson Airlines will start operations as a scheduled regional carrier in about three months.(ET)
HCL Technologies has signed a MoU with four colleges in Bangalore, as part of its Campus to Corporate career development programme to develop the next generation of corporate community.(BS)
Alembic to foray into US and European markets.(BS)
NY based hedge fund BlackRock Inc has acquired the 40% stake held by Merrill Lynch in mutual fund DSP Merrill Lynch Fund Managers.(BS)
Dutch brewer Heineken is set to buy UK-based Scottish & Newcastle’s (S&N) 37.49% stake in Vijay Mallya’s United Breweries. (BS)
Essar Steel to build a jetty at Hazira as its existing port facilities are unable to handle expansion pressure. (BS)
Volvo is taking a plunge into the used-truck market, similar to its competitors Tata Motors and Ashok Leyland. (BS)
Cipla to consider launching generic Tenofovir Disoproxil Fumarate, an HIV/AIDS drug, if Gilead Sciences does not challenge the decision to overturn its patent on the drug. (BS)
JSW group is close to roping in foreign partners for its Rs20bn plate mill project and Rs16bn shipyard at Ratnagiri in Maharashtra. (BS)
JSW group is planning to build a deep sea port in West Bengal. (BS)
Economic News
The government will discuss the 5,000-hectare restriction on building multi-product SEZs at the eGoM meeting, scheduled for Feb 4. (FE)
The proposed fourth commodity exchange, planned by Indiabulls and MMTC, may start functioning by November. (BL)
Sugar export may increase up to 3mn tons in 2007-08, according to National Federation of Cooperative Sugar. (ET)
RBI has asked NBFCs to obtain its prior approval for setting up subsidiaries, joint ventures and representative offices abroad. (BS)
Insurance companies will be allowed to invest in bonds floated by developers of SEZs, with IRDA giving its nod to broaden the definition of infrastructure. (ET)
The Government’s draft on gas allocation policy will be ready in the next couple of weeks. (BS)
21 oil and gas operators including BP, ENI, BG, Cairn, RIL and ONGC have decided to form a joint pool of scarce equipment and services to save cost. (ET)