It is a mistake to try to look too far ahead. The chain of destiny can only be grasped one link at a time – Winston Churchill.
The important link to our markets remain the global cues. Talking about links, the ADAG group (consortium) added some power by bagging the Mumbai Trans Harbour Link, which will drastically cut travel time between Mumbai and Navi Mumbai. REL-led group has won the $1.5bn Mumbai sea-link. Nothing much has changed between yesterday and today except for oil prices rising further by a dollar. But then global cues look better and so we expect a better opening. However, issues like record-high crude oil prices, mounting inflation jitters and the populist stance adopted by the Government could limit the gains. So don’t look too far ahead. High risk short term investors can look at stocks which could gain from some budget-proposals
Wednesday's crack just goes to show how fragile is the market sentiment and investor confidence. Even one bad day in the US market is enough to set the cat among the pigeons. It also shows that one cannot take any rally for granted, as all the gains of a day or a week can easily be wiped out in a jiffy. As a result, one should be very careful at this stage and not get carried away by aggressively going long. We expect the market to be rangebound and volatile ahead of the budget, and may be even after that as the specter of US slowdown will continue to haunt the bulls.
One positive factor is that FII selling has ebbed considerably over the past few days. This needs to turnaround into sustained FII buying for the market to gradually start inching towards their previous peaks. Obviously, this will take some doing and could take a significant amount of time as the negatives still outweigh the positives (if there are any other than sustainable growth story). After the recent correction, valuations have turned quite cheaper, but one must do proper homework before picking any stocks.
FIIs were net sellers of Rs2.66bn (provisional) in the cash segment yesterday while local institutions were net buyers of Rs2.56bn. In the F&O segment, foreign funds were net sellers of Rs5.27bn. On Tuesday, FIIs pumped in Rs15.85bn in the cash segment. Mutual Funds were net sellers of Rs3.27bn on the same day.
Most Asian markets - barring China - are up this morning. The Nikkei in Tokyo was up 282 points to 13,592 while the Hang Seng in Hong Kong rose 290 points to 23,881. The Kospi in Seoul gained 11 points to 1699 while the Straits Times in Singapore advanced 35 points to 3061.
The Shanghai Composite in China was down 47 points to 4519 and the Taiex in Taiwan jumped 127 points to 8021.
US stocks jumped on Wednesday after the Federal Reserve reiterated its resolve to prevent the world's biggest economy from slipping into a recession. Investors chose to ignore a spike in crude oil prices to a record close of $100.74 a barrel.
Shares rebounded from earlier losses as banks rallied on hedge-fund manager William Ackman's plan to restructure bond insurers. Technology and energy shares advanced after Hewlett-Packard's profit topped analysts' estimates and crude oil climbed to a record for a second day.
Exxon Mobil and Chevron jumped to the highest prices in more than a month. Benchmark indexes extended gains after the Fed said that relatively low interest rates will be needed to boost economic growth.
The S&P 500 Index climbed 11 points, or 0.8%, to 1,360.03. The Dow Jones Industrial Average added 90 points or 0.7%, to 12,427.26. The Nasdaq Composite rose 21 points, or 0.9%, to 2,327.1.
Market breadth was positive. Five stocks advanced for every two that fell on the New York Stock Exchange.
Stocks had dropped earlier, led by telephone companies, after a bigger-than-expected rise in consumer prices last month spurred concern that faster inflation will give the Fed less leeway to lower borrowing costs.
The Fed released the minutes from the last two policy meetings. According to the minutes, the central bankers reckon that the US economy has weakened, conditions in the labor market has deteriorated and pricing pressures are growing.
In addition, the Fed released its updated economic outlook for 2008-2010. The bankers now expect a bigger 2008 slowdown than their last reported forecasts in October. Looking to 2009, they expect real GDP growth to accelerate and by 2010 for it to rise further.
The CPI rose 0.4% in January, matching December's rise and surprising economists who were looking for a gain of just 0.3%. The so-called core CPI, which eliminates volatile food and energy prices, rose 0.3% in the month, after growing 0.2% in December. Economists had predicted a gain of 0.2% in core CPI.
The CPI report, along with the recent run up in commodity prices, exacerbated worries that the slowing US economy may also have to contend with higher inflation.
Another report showed that January housing starts grew, although less than expected, while January building permits fell less than expected.
Oil retreated a bit off the highs for much of Wednesday's session, before gaining steam in the afternoon. Crude oil for March delivery hit a trading record of $101.32 on the New York Mercantile Exchange before ending just short of that at $100.70.
Treasury prices slipped, boosting the yield on the benchmark 10-year note to 3.97% from 3.9% late on Tuesday. In currency trading, the dollar fell versus the euro and the yen. COMEX gold for April delivery rose $8 to $937.80 an ounce.
European shares fell for the first time in three sessions. The pan-European Dow Jones Stoxx 600 index fell 1.2% to 320.33. The UK's FTSE 100 closed down 1.2% at 5,893.60, while the German DAX 30 fell 1.5% to 6,899.68 and the French CAC-40 declined 1.5% to 4,812.81.
Mexican and Brazilian stock markets closed higher. In Brazil, the benchmark Bovespa index closed 2.3% higher at 63,748. In Mexico, the IPC index rose 1.1% to close at 29,224.44. Argentina's Merval index gained 0.6% to end at 2,074.70. Chile's IPSA climbed 1.3% to 2,911.28.
Markets may be under pressure
It was a disappointing session on Wednesday, as markets tanked. Weak global cues coupled with selling pressure in the large cap stocks like ICICI Bank, RIL, HDFC and L&T dragged the benchmark Sensex to close below the 17k mark. While most stocks lost ground, the IT sector, led by Infosys and TCS bucked the trend after the rupee fell to Rs40.20, the lowest since September.
Finally, the 30-share Sensex closed at 17,617 losing 458 points. It touched an intra-day high of 17,991 and a low of 17,505. The NSE Nifty closed at 5,154 slipping 126 points after hitting an intra-day high of 5,267 and a low of 5,116.
Overall about 830 stocks advanced, 1,911 stocks declined while 54 stocks remained unchanged. Among the BSE 30 index only 5 stocks advanced while 25 stocks declined.
Among the BSE Sectoral indices, BSE Realty index (down 3.5%), BSE Bankex index (down 3.5%), BSE Capital Good index (down 2.8%), BSE PSU index (down 2.7%) and BSE Power index (down 2.3%)
Maruti Suzuki dropped over 5% to Rs769. Mundra Port and Special Economic Zone Ltd signed an agreement with Maruti for a mega car terminal at Mundra, District Kutch, Gujarat. This car terminal is expected to be operational by December 2008. The scrip touched an intra-day high of Rs808 and a low of Rs763 and recorded volumes of over 7,00,00 shares on NSE.
Wockhardt was down 1.3% to Rs340. The company posted a net profit of Rs1069mn for the quarter ended December 31, 2007 as compared to Rs870mn for the quarter ended December 31, 2006. Total Income increased from Rs5341mn for the quarter ended December 31, 2006 to Rs7657mn for the quarter ended December 31, 2007.
The scrip touched an intra-day high of Rs348 and a low of Rs338 and recorded volumes of over 41,000 shares on NSE.
Canara Bank declined by over 6% to Rs287. The bank announced that it further reduces its Prime Lending Rate by another 25bps. The scrip touched an intra-day high of Rs306 and a low of Rs285 and recorded volumes of over 8,00,000 shares on NSE.
Accentia Technology gained by 1.6% to Rs184 after the company announced that it entered into an accord with 5 US Hospitals. The scrip touched an intra-day high of Rs190 and a low of Rs179 and recorded volumes of over 13,000 shares on NSE.
Hexaware rallied by 8.8% to Rs72 ahead of the results to be announced on February 21, 2008. There were also media reports stating that there was a block deal of over 1.4 crore shares on BSE. The scrip touched an intra-day high of Rs75 and a low of Rs67 and recorded volumes of over shares 1,00,00,000 on BSE.
Welspun Gujarat was down 2.2% to Rs466. The company announced that they won orders worth Rs1.2bn. The scrip touched an intra-day high of Rs474 and a low of Rs460 and recorded volumes of over 2,00,000 shares on NSE.
Sun Pharma slipped by over 4% to Rs1071. The company said that it acquired Taro Pharma shares from Brandes. The scrip touched an intra-day high of Rs1138 and a low of Rs1051 and recorded volumes of over 3,00,000 shares on NSE.
News Snippets:
SBI, BoI, Union Bank and Canara Bank cut their benchmark prime lending rates (PLRs). (BS)
A consortium of Reliance Energy and Hyundai have bagged the contract for the Mumbai Trans Harbour Link (MTHL), edging out another consortium led by Mukesh Ambani. (BS)
Sun Pharma has acquired an additional 9.4% stake in Israel’s Taro Pharma for US$38mn, raising its total holding to 34.4%.(BS)
Reliance Communications has consolidated its global businesses into a newly-formed subsidiary, Reliance Globalcom. (BS)
Bharti Retail may not use the Wal-Mart name for its front end retail stores. (FE)
The Government plans to float special bonds which will be used to subscribe to the Rs167bn rights issue of SBI. (FE)
HC has allowed Dabur India to use the name Glucose-D as also the green colour for its packaging. (FE)
Tata Motors’ Nano rollout from its Singur factory would coincide with the Durga Puja in October. (BS)
Global private equity major Blackstone Group will invest around US$60mn in Allcargo Global Logistics. (BS)
HCL Tech has acquired CapitalStream, a US-based lending automation solutions provider, for Rs1.6bn in an all-cash deal. (BS)
GSPC is in talks with Adani and Essar groups for its upcoming 5-10 mtpa LNG terminal in Gujarat. (BS)
Indian Hotels has won the bid to develop a resort on Radhanagar beach at Havelock Island of Andaman & Nicobar. (BS)
Fiat's component arm Magneti Marelli has signed two JVs with SKH Metal and SKH Sheet Metal Components, part of the Krishna group, to manufacture automobile exhaust systems. (BS)
Essel Group is re-evaluating its plans to build the proposed special economic zone in Gorai, in suburban Mumbai, following agitation from local residents. (BS)
Economic Front Page
The Reserve Bank of India (RBI) has suggested that the government should auction surplus funds in the system rather than park it with RBI at the end of the financial year, a move aimed at easing liquidity crunch during financial year-end. (BS)
Strong demand for Dollars from importers and a lack of fresh inflow into the market led the spot Rupee to breach the crucial barrier of 40.00 and close at a five-month low of 40.21/22. (BS)
Foreign holding companies are likely to be allowed to invest in downstream ventures without prior permission of the Government. (FE)
Net direct tax collections rose 41% during the period April 1,2007 to February 15, 2008. (BL)
The DoT has approved to allow service provider to share active infrastructure. (ET)
Water bottles may be exempted from excise duty. (ET)
Private airlines may soon be allowed to fly to Mauritius. (ET)
Indo-US investment protection pact likely by year end. (ET)
Communications Minister says DoT to sign spectrum deals soon. (ET)
Centre weighs refund for exporters at state level. (ET)