Don't curse the darkness, light a candle!
The reasons for a power failure can be a defect in a power station, damage to a power line or the overloading of electricity mains. After an overload of bids for the IPO, the Reliance Power stock sank to a low of Rs355 before closing 17% down at Rs372. The issue has brought to light that in markets besides frenzy a lot more matters.
Coming to today's market, we see some bounce back as global cues are not so bad. However, one should not get trapped by any rally, no matter how big it is. The near-term outlook remains uncertain given the anxiety over a US led global slowdown. Even our own economy is slowing. Watch out for the monthly industrial production figures at noon, which may confirm the ongoing moderation. If the Indian economy slows further, we may see the RBI relenting in the coming months. That, along with a 'good' budget, could perk up the mood in the market. But, that's just hope as of now.
Investors, especially the small ones, will take the longest to recover from the shocking events of the past few weeks. Their only hope is one Mr. P. Chidambaram, who will present the UPA regime's last full-fledged Union Budget at the end of this month.
Back to Reliance Power, (we know you wish to forget it) to be fair enough, the markets tanked, there was gloom all around and most stocks were beaten down, some even more than Reliance Power. But then for investors at large, this was an Ambani company. How could it fail? The fact remains that investors (we don’t’ have a word for the listing gains category) were mostly looking at just profiting on listing gains. Given the frenzy when the issue was open, people should have increased their holding below the issue the price if they believed the story.
A lot of introspection and post-mortem will surely take place after the dismal listing of RPower. The withdrawal of the two big IPOs will weigh on both, the primary and the secondary markets for some time to come.
FIIs were net sellers of Rs12.69bn (provisional) in the cash segment on Monday. Local institutions too were net sellers of Rs222.7mn. In the F&O segment, FIIs were net buyers of Rs6.17bn. On Thursday, foreign funds pulled out Rs5.28bn from the cash segment. Mutual Funds were net sellers of Rs2.12bn in the cash segment on Wednesday.
Shares of J. Kumar Infraprojects Ltd. will face the music as the company makes its debut on the bourses today.
Asian markets are trading mixed this morning. The Hang Seng in Hong Kong was up 373 points at 22,989 while the Nikkei in Tokyo was up only 15 points at 13,032. Tokyo markets were shut yesterday for a public holiday.
The Kospi in Seoul gained 7 points to 1648 while the Straits Times in Singapore added 35 points to 2903. But, the Taiex in Taiwan was down 109 points to 7564. The MSCI Asia Pacific Index rose 0.2% to 139.48, after earlier dropping 0.4 percent, at 11:54 a.m. in Tokyo.
US stocks ended marginally higher, with technology, retail and commodity shares sparking a broader advance. Investors shrugged off worries about AIG's worsening financials and Yahoo's rejection of Microsoft's proposed takeover bid.
All the three main indices had slumped in the morning after Dow component AIG's regulatory filing fueled concerns that the insurer will have to write off more bad bets on sub-prime mortgage debt.
But the tone improved in the afternoon with a variety of stocks bouncing back after last week's slump.
AIG said in a filing that the value of its risky debt portfolio has plunged more than it initially thought, and that it will have to change the way it values certain complex credit vehicles. AIG shares plunged 11.7% and weighed on other financial stocks.
Exxon Mobil and ConocoPhillips led energy producers to their third-straight gain. Chevron climbed after being added to the Dow Jones Industrial Average. Yahoo! shares rose to a three-month high following its rejection of Microsoft's $44.6bn takeover bid as too low.
The S&P 500 Index added 8 points, or 0.6%, to 1,339.13 after earlier falling as much as 0.8%. The Dow gained 58 points, or 0.5%, to 12,240.01, erasing a drop of as much as 113 points and rebounding from the worst week in almost five years. The Nasdaq advanced 15 points, or 0.7%, to 2,320.06.
Market breadth was positive. About nine stocks advanced for every seven that fell on the New York Stock Exchange.
Shares of Honeywell and Altria slipped on news that Dow Jones will be removing the two from the industrial average starting next week. The two companies will be replaced by Bank of America and Chevron.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.61% from 3.64% late on Friday. In currency trading, the dollar fell against the euro and the yen. COMEX gold for April delivery gained $4.40 to $926.70 an ounce.
US light crude oil for March delivery added $1.82 to settle at $93.59 a barrel in New York. Crude prices are being pressured by concerns that Venezuelan President Hugo Chavez will cut off his country's oil supply to the US after Exxon Mobile was authorized to freeze $12bn in assets belonging to Venezuela's recently nationalized oil interests.
European stocks slipped with banks under pressure after French bank Societe Generale announced a steeply discounted rights offering. Insurers fell after AIG was rebuked by its own auditor over how it valued derivatives. The pan-European Dow Jones Stoxx 600 index ended 0.9% lower to 312.59.
Germany's DAX 30 dropped 0.4% to 6,743.54, while the French CAC-40 slipped 0.6% to 4,682.70, while the UK's FTSE 100 shed 1.3% to 5,707.70 as producer price inflation touched a 16-year high.
In the emerging markets, the Bovespa in Brazil rallied 2.65% to 60,643 while the IPC index in Mexico jumped 2.1% to 28,789. The RTS index in Russia climbed 2.5% to 1917 but the ISE National 30 index in Turkey was down 1.4% at 51,270.
Further decline on cards
The bear attack continued as markets ended in red for fourth straight trading session. Weak global cues coupled with a poor listing of India’s largest IPO further dented the sentiments of markets players on D-Street.
The Power stocks were among the biggest losers. Among the other major losers in the Power index were Tata Power (down 12.2%), NTPC (down 7%), Power Grid (down 7%) and BHEL (down 6%). The IT stocks were the out-performers for the day as the index itself was up 0.13%. Heavyweights like Satyam Computer, Infosys and TCS were among the leading gainers.
Finally, the 30-share Sensex closed at 16,630 losing 833 points. It touched an intra-day high of 16,457 and a low of 17,427. The NSE Nifty closed at 4,857 losing 263 points after hitting an intra-day high of 5,126 and a low of 5,803.
Overall about 243 stocks advanced, 2,459 stocks declined while 35 stocks remained unchanged. Among the BSE 30 index only 5 stocks advanced and 25 stocks declined.
Among the 30-scrips of Sensex, Reliance Industries, REL, L&T, SBI and Rcom were among the major laggards. However; bucking the negative trend were Satyam, Infosys, Maruti, Wipro and TCS.
All the hype and hoopla surrounding the launch of Reliance Power vanished in a flash, as the stock got hammered right from the moment it listed. It just could not cope with the immense selling pressure after it managed to open at Rs525 on NSE.
The stock constantly lost ground and hit a low of Rs355. Finally, the stock managed to recoup towards the end to close at Rs372, translating into a discount of 17% on its debut.
The Rs125bn issue was subscribed 73 times. The QIBs was oversubscribed 82.5 times, Non Institutional Investors was oversubscribed 159.6 times and Retail investor was oversubscribed 13.6 times. The price band for the issue was fixed between Rs405 to Rs450 per share.
Reliance Power was expected to list around Rs500-550 as per the unofficial rates in the grey market. This itself was substantially down from the initial premium of around Rs900 when the company launched the IPO. The premium shrunk gradually due to weak market sentiment and after Wockhardt Hospitals and Emaar MGF withdrew their public issues.
Given the size of the issue, it was a no-brainer that Reliance Power would clock massive volume and turnover. Within first 10 minutes of trading, RPower accounted for almost 70% of the cash turnover on both the exchanges. Volumes recorded for the day were approximately over 130mn on the NSE and over 60mn on the BSE.
On the BSE RPower’s turnover was Rs26.4bn. The same on the NSE stood at a whopping Rs56bn, accounting for almost 40% of the total turnover on the exchange. In the F&O segment turnover was Rs15.4bn with an open interest position of 48,15,450 shares.
After hitting a high of Rs435 TV 18 slipped over 4% to close at Rs386 on back of profit booking. The scrip touched an intra-day high of Rs435 and a low of Rs323 and recorded volumes of over 6,00,000 shares on NSE.
Bank of India completely recovered from its days low and has gained by over 1.5% to Rs359 after the Bank announced that it cut home loan rates by 25bps to 9.75%. The scrip touched an intra-day high of Rs369 and a low of Rs339 and recorded volumes of over 13,00,000 shares on NSE.
Bharti Airtel lost over 4% to Rs884. The scrip touched an intra-day high of Rs944 and a low of Rs825 and recorded volumes of over 34,00,000 shares on NSE.
News Snippets:
The Bombay High Court will hear RIL-RNRL dispute on gas from Feb 25. (FE)
SBI and Canara Bank have cut their benchmark prime lending rate by 25bps. (BS)
Gayatri Projects is planning to offload up to 49% stake in its newly formed holding company Gayatri Infra Ventures Ltd. (FE)
Reliance Technology Ventures, a 100% subsidiary of Reliance Capital has acquired a 10% stake in French Wi-Max chipmaker Sequans Communications. (BS)
Nicholas Piramal is planning to become a leader in diagnostic products in the domestic market over the next two years. (BS)
Deccan is likely to scale down its metro operations. It has launched daily flights connecting Mumbai to Indore, Vishakhapatnam and Lucknow. (BS)
Vivimed Labs is acquiring James Robinson, a subsidiary of UK-based global chemicals major Yule Catto & Co.
Kingfisher Airlines will operate international flights between Bangalore and San Francisco, Bangalore-New York and Mumbai-London flights from August. (BS)
GHCL Global Sourcing, a 100% subsidiary of GHCL, has set a business target of over US$1bn in FY09. (BS)
SBI has received government approval to allot shares to its staff at Rs 1,590 a share, or the price of the bank’s rights issue offer. (BS)
Allahabad Bank plans to raise Rs3bn of perpetual bonds before end-March. (BL)
Everonn Systems has acquired Patna-based Toppers Tutorial that operates in the IIT-JEE and AIEEE entrance exam space. (BL)
Kansai Nerolac Paints has lined up a total of 45 ‘Impression Style Zones’ in Chennai, Bangalore and Hyderabad in six months. (BL)
NTPC has initiated a move to place letters of award for five projects with a total capacity of 5,300 mw. (FE)
Escorts Construction Equipment will enter the earth moving equipment business in FY09. (BL)
IOC plans to invest Rs90bn on improving the quality of petrol and diesel. (BL)
Bank of India may acquire a mid sized foreign bank in the next 2-3 months. (ET)
ICICI Bank plans to sell its small ticket personal loans portfolio worth Rs20bn. (ET)
DLF expects to list its US $1.5bn property trust IPO in Singapore in the second quarter of this year. (ET)
Reliance Industries and ONGC may not get special R&D status for their 17 blocks in the K.K. basin. (ET)
The delay in forest clearance for Reliance Power’s Sasan project has impacted a related transmission project to be built by Power Grid Corp. (Mint)
Indian Overseas Bank may cut select lending rates by up to 25bps, but will wait till March to reduce deposit rates. (ET)
Arcelor Mittal India has got provisional approval from the Orissa Government to acquire 7,750 acres of land for its steel plant. (ET)
Economic Front Page
GSM based mobile industry added 6.19mn users in January, taking their total mobile subscriber base to 178.4mn. (ET)
The Indian biotech industry is set to grow and occupy 140 million square feet by 2010. (BS)
The vanaspati industry has sought customs duty at Rs4,000 per ton for import of crude palm oil. (ET)
The DoT has mooted a proposal for increasing additional spectrum charges and has also suggested slashing of one-time fixed spectrum charges. (BS)
China is ready to join Pakistan and Iran to build a pipeline and purchase Iranian gas if India does not participate in the project. (BS)
The Tamil Nadu Government plans to incentivise industries to utilize captive power production units. (BL)
The current defence market for private sector firms in India is estimated to grow by 7% annually from the current US$700mn by 2010. (FE)
Power ministry has sought the Prime Minister’s intervention to get natural gas from PMT fields for NTPC’s power plants. (FE)
The aggregate revenue of the IT-BPO sector is expected to grow 33% to US$64bn in FY08, according to Nasscom. (FE)
The Government is considering a proposal to have a representation of the steel ministry with the ministry of mines while allocating iron ore mines. (ET)
The finance ministry has said that exemption from STT should not be provided in the case of International Financial Service Centres. (ET)