It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price - Warren Buffett.
The thirst for liquidity remains. But hungry bulls could help themselves a little with a new plan to rescue US homeowners from defaulting and a lifeline offered by Warren Buffett to the struggling bond insurers. This seems to have perked up the mood across world markets.
We expect a slight bounce at the opening bell on the back of the overnight rally across Western markets and firm trend in Asian markets. Remember, we are certainly not out of the woods yet as the undertone remains quite subdued and investor confidence is at its lowest in recent years. How long this period (of consolidation/correction) is likely to last nobody can tell. So, it would be wise to just endure the pain for now and hope for the best.
Hindustan Unilever will announce its Q4 and CY07 results today. VSNL could see some action as the company announces its new identity - Tata Communication. A large corporate house (through its entities) is said to be active on the Bank Nifty in recent days. We also have another listing today as Cords Cable Industries makes its stock market debut.
Back home, we are going to have a government investigation into the recent volatility in the market and the near collapse of the IPO market. Also, market regulator SEBI is reportedly considering an overhaul of the F&O segment. In short, the governments and regulators have rolled up their sleeves and are ready to fight market demons - both internal and external. Where this will lead us is still not clear, but it may just improve the sentiment for the time being.
FIIs were net sellers of Rs4.98bn (provisional) in the cash segment on Tuesday. Local institutions were net buyers of Rs3.51bn. In the F&O segment, FIIs were net buyers of Rs5.58bn. On Monday, foreign funds pulled out a whopping Rs18.46bn ($457.5mn) from the cash segment. Mutual funds were net sellers of Rs5.71bn in the cash segment.
Most Asian markets are up this morning after the yen weakened against the dollar and Warren Buffett offered to assume some liabilities from US bond insurers. Sony and Honda led Japanese exporters higher on expectations a weak currency will boost the value of their US sales.
Mizuho Financial climbed for the first time in six days on speculation that Buffett's offer will help stem credit losses. BHP Billiton rose to a one-week high after metal prices gained for a fifth day in London.
The MSCI Asia Pacific Index added 0.5% to 140.28 at 9:49 a.m. in Tokyo, following a 0.2% rise yesterday.
The Nikkei in Tokyo was last up 180 points at 13,202, poised for its largest advance since Feb. 4. The Hang Seng in Hong Kong advanced 487 points to 23,408. The Kospi in Seoul gained 5 points to 1648 and the Straits Times in Singapore rose 59 points to 2985.
The Shanghai Composite in China was down 70 points at 4529 and the Taiex in Taiwan gained 60 points to 7613.
Blue chip US shares rallied on Tuesday after billionaire investor Warren Buffett offered to insure about $800mn in tax-exempt bonds and major banks announced a new plan that they say will help homeowners avoid foreclosures. But technology shares lost momentum by the close, leaving the Nasdaq virtually flat.
The Dow Jones Industrial Average rose 133.4 points, or 1.1%, to 12,373.41, paring an advance of as much as 229 points. The S&P 500 added 9.73 points, or 0.7%, to 1,348.86 after earlier gaining 1.7%. The Nasdaq finished unchanged at 2,320.04.
Market breadth was positive. About two stocks rose for every one that fell on the New York Stock Exchange.
After the close, Applied Materials reported lower quarterly sales and earnings that nonetheless topped forecasts. Shares jumped more than 4% in extended-hours trading. Dow component Coca-Cola reports earnings on Wednesday.
Wednesday's trade is also likely to be influenced by the January retail sales data due before the start. After the session begins, the December business inventories report is due, as well as the weekly oil inventories survey.
Buffet made the offer to the three big bond insurers, MBIA, Ambac Financial and FGIC. According to Buffett, one firm has already rejected the offer and the other two have not responded. Late on Tuesday, Ambac said it rejected the offer.
Critics argue that the deal is better for Berkshire Hathaway than for the bond insurers. Shares of both MBIA and Ambac declined.
Separately, Bank of America, Citigroup and four other lenders announced a plan to offer a 30-day freeze on home foreclosures while loan modifications are considered.
Treasury Secretary Henry Paulson and US Housing and Urban Development Secretary Alphonso Jackson said in Washington that Project Lifeline would help stabilize communities disrupted by mortgage defaults.
GM reported better-than-expected quarterly results. But it also indicated that it needs to keep cutting costs by offering buyouts to 74,000 employees, its entire US hourly workforce. GM shares ended lower, giving up gains.
Treasury prices fell, raising the yield on the benchmark 10-year note to 3.66% from 3.61% late on Monday. In currency trading, the dollar fell versus the euro and gained against the yen.
US light crude oil for March delivery fell 81 cents to settle at $92.78 a barrel on the New York Mercantile Exchange. COMEX gold for April delivery fell $15.60 to settle at $911.10 an ounce.
Across the Atlantic, shares in Europe surged. The pan-European Dow Jones Stoxx 600 index jumped 3.3% to 323.03, led higher by banks. The UK's FTSE 100 rose 3.5% to 5,910, while Germany's DAX 30 added 3.3% to 6,967.84 and the French CAC-40 gained 3.4% at 4,840.71.
Most emerging markets too finished sharply higher. The Bovespa in Brazil rose 1.9% to 61,805 while the IPC index in Mexico gained 0.3% at 28,869. The RTS index in Russia surged 3.3% to 1980 while the ISE National-30 index in Turkey soared 6.2% to 54,434.
Looking for some relief
It was a see-saw trading session which ended on a flat note as bulls ran out of steam towards the end. Alternate bout of buying and selling was witnessed on the bourses. Buying momentum went on to lift the benchmark Sensex above the 200 DMA (Day Moving Average) for some times, but investors and traders preferred to book profits at every rise.
The Banking stocks bucked the negative trend after Finance Minister P. Chidambaram asked state-run banks to boost home and consumer loans. ICICI Bank, Kotak Bank and Axis Bank were among the leading gainers.
Finally, the 30-share Sensex closed flat at 16,608 barely losing 22 points. The NSE Nifty closed at 4,838 losing 18 points.
Overall about 446 stocks advanced, 2,232 stocks declined while 31 stocks remained unchanged. Among the BSE 30 index only 5 stocks advanced and 25 stocks declined.
Everonn Systems was locked at 5% lower circuit to Rs699. According to reports the company acquired Patna- based Toppers Tutorial Pvt Ltd that operates in the IIT-JEE and AIEEE entrance exam coaching space. The scrip touched an intra-day high of Rs740 and a low of Rs699 and recorded volumes of over 5,000 shares on NSE.
J. Kumar Infraprojects, a civil engineering and infrastructure development company, got listed at Rs115 on the BSE against an offer price of Rs110 per share. Thereafter the scrip witnessed heavy selling pressure and immediately slipped in to negative territory. After falling over 20%, the scrip managed to stage a come back recovering almost 14% finally closing at Rs102 down 6%.
J Kumar, a construction company with operations in Maharashtra, focuses on building roads, flyovers, buildings and piling works. The company had entered capital market with a public issue of 65 lakh shares of Rs10 each at a price band of Rs110-120 per equity share. The offer proceeds (Rs72-78crore) are to be utilised for purchasing capital equipment and for working capital requirements. The company also announced that it secured an order worth Rs1.70bn from Municipal Corporation of Greater Mumbai. Following this order the order book position of the company, as on date, stands at about Rs6.31bn.
McNally Bharat gained 2.8% to Rs219 after the company announced that it received an order from SAIL for Expansion of IISCO Steel Plant - Raw Material Handling System Ore Handling Plant valued at Rs6.21bn inclusive of all taxes and duties. The scrip touched an intra-day high of Rs228 and a low of Rs208 and recorded volumes of over 1,00,000 shares on NSE.
NMDC was frozen at 5% lower circuit to Rs9774.15. The company announced its plans to raise production capacity by 10% in 2008-09. The company also announced that it was looking for cola mines in Australia. The scrip touched an intra-day high of Rs9774.15 and a low of Rs9774.15.
Elecon Engineering advanced over 2.5% to Rs224 after the company yesterday announced that it secured a Rs1.9bn order from SAIL for supply of equipment. The scrip touched an intra-day high of Rs231 and a low of Rs175 and recorded volumes of over 93,000 shares on NSE.
Thermax was down 1.6% to Rs580. The company announced that it entered in to a license agreement with Babcock & Wilcox. The scrip touched an intra-day high of Rs598 and a low of Rs567 and recorded volumes of over 75,000 shares on NSE.
PVR bounced slipped 3.5% to Rs227. The company agrees to entertainment venture with major Cineplex group. The scrip touched an intra-day high of Rs242 and a low of Rs224 and recorded volumes of over 3, 000 shares on BSE.
News Snippets:
Bajaj Auto says the feasibility study on a possible JV for its small car project would be completed by early March. (BS)
NTPC is in talks with GE, Kyushu Electric Power Co. of Japan and Brookfield Power Corp of Canada for a JV in renewable power generation. (FE)
M&M to sign a pact with Sri Lanka government to set up US$100mn IT SEZ. (ET)
TCS plans to reorganise its global operations into integrated, customer-centric units to enhance customer focus, drive operational agility and address growth opportunities. (BS)
L&T bags Rs14.4bn order from Netherlands to supply eight lift vessels. (ET)
Domestic airlines to increase air fares, in anticipation of a steep 40% rise in airport charges in Bangalore, Hyderabad, Delhi and Mumbai. (BS)
IOC will invest Rs35bn to lay 2,080 km crude oil and petroleum product pipeline by 2011-12. (BS)
JSW Steel is focusing on improving efficiency and profitability levels of the three companies it acquired recently in Texas, US. (BS)
ICICI Bank, HDFC Bank and IDFC in the race to acquire Sabre Capital's stake in Centurion Bank of Punjab. (ET)
Indus Tower, a JV between Bharti, Vodafone and Idea to tap capital markets in 3 years. (ET)
Thermax is strengthening its presence in the water treatment business; plans to look at opportunities in cities, SEZs and municipal facilities. (BS)
Thermax enters into a technical collaboration with Babcock & Wilcox Power Generation Group to foray into utility boilers of up to 800MW. (BS)
NMDC is expecting iron ore prices to gain up to 50% by April 2009. (BS)
HDFC Bank signs US$7.4mn, three-year strategic enterprise agreement with Symantec. (BS)
Asset Reconstruction Company (Arcil) has disposed of Rs39.2bn of securitised bad loans portfolio to Deutsche Bank. (FE)
Kingfisher may replace Deccan’s peak-hour flights on metro routes as part of the route rationalization program. (Mint)
Air Deccan and Kingfisher swap deal to be finalized by April. (BL)
Indo Tech Transformers has commissioned a plant to manufacture 220Kv and 400Kv class power transformers near Kancheepuram. (BS)
McNally Bharat wins an order worth Rs6.9bn from SAIL. (BL)
Pipavav Shipyard will deliver its first Panamax vessel to a Greek firm by March 2009. (BS)
GMDC plans to set up three plants to generate 4,500MW and invest around Rs200bn. (ET)
Wockhardt to launch Azithromycin anti infection tablets in US. (ET)
Hinduja Group plans to set up 1,600MW power plant in Vishakapatnam. (BL)
Vivemed buys UK based company for US$21.1mn. (BL)
Pyramid Samaria to acquire a UK theatre chain company. (BL)
Economic Front Page:
CBDT has sought an amendment to Section 115 AD of the I-T Act so that all FIIs pay capital gains tax on their profits in India. (BS)
The steel ministry’s meeting with major steel producers on price cut ended inconclusively. The two sides are expected to meet again. (BS)
The FM has asked PSBs to implement the interest-free loan package for sugar mills in letter and spirit and submit a report by Feb 22. (BS)
The government has told TDSAT that it would allot spectrum to all players with LoIs for starting telephone services, but a lot depends on defense services vacating radio frequencies for civilian use. (BS)
The FM has asked PSBs to lend more to housing and consumer durables borrowers at affordable cost. (BS)
RBI may regulate currency futures trading. (ET)
IIFCL may get US$250mn from forex reserve for funding infrastructure. (ET)
Government may use forex reserves to create price stabilization fund for petroleum products. (ET)
Container freight rates from Indian ports to key European ports will increase by US$100 per TEU from March 1. (BS)
The finance ministry has proposed withdrawing direct tax benefits to offshore banking units (OBU) on the profits earned from SEZs. (FE)
India’s exports to the US in steel containers fell 5.7% in the first 11 months of 2007 over the same period in 2006. (Mint)
Finance ministry is considering cutting duty to 8% from 16% on packaging material. (ET)