He who has the pepper may season as he lists.
The market more or less resembles the popular Big Bazaar sale where huge discounts are offered. Future Capital, ( where Big Bazaar’s Kishore Biyani is also promoter) lists today. It’s one of huge IPOs along with Reliance Power which saw an overwhelming response, so much so that the issue dried up liquidity to some extent.
Despite a very smart recovery in the US markets, the excitement doesn’t seem to continue in the Asian markets. At a time when some IPOs have lowered their price bands, the grey market premium for Future Capital remained more or less steady. Many of the weak hands had their cheques bounced off. So a bright start awaits Future Capital. Can it improve the mood on the street? A day’s gain if it happens need not get you over excited. Leaving fundamentals and reasoning aside, the hope is there could be a turnaround before Reliance Power opens.
Today, we expect another lackluster opening, with global markets throwing up mixed cues.
Fears of a recession in the US have taken a heavy toll on equity markets across the globe. Even the aggressive rate cuts by the Federal Reserve and a stimulus package by the Bush government have been unable to ease the tension. Some concerns have also emerged on the economic outlook of countries such as Japan, the UK, Europe and China. At the same time, prices of various commodities remain quite high, leading to a unique situation that central bankers across the world may find difficult to tackle.
Here in India, things are not looking all that bad. The Government has actually revised upwards the GDP growth for FY07, from 9.4% to 9.6%. Economic growth is likely to be around 8.5-9% this year and the next. This is not bad considering the global outlook and the turmoil in the financial markets. So, the message is clear that India's long-term fundamentals are still in tact, and those who believe in the same should not be too perturbed by the recent upheavals.
Still, one cannot ignore market sentiment, which has taken a real pounding of late. Yesterday's F&O expiry too reveals that investors are bearish as of now, with Nifty rollover down from last month. Also, the open interest in February futures went up by more than 1 crore shares and the contract shut shop at a huge discount to the spot. According to reports, majority of the rolled over as well as fresh positions are on the short side. This shows the extreme lack of confidence among investors.
Herein lies the big problem, and unless there is a significant improvement on this front, the market will continue to struggle. The next big event will be the budget, which is expected to be a mix of populism and some pragmatism. But again, all the positive aspects about the economy are already known. What the market really is looking for is renewed buying from FIIs, who have pulled out around US$4bn in January alone.
Shares of Future Capital Holding will get listed today. The issue was subscribed by almost 133 times. The issue has been priced at Rs765 per share. The premium in the grey market is around Rs350-400. Meanwhile, the grey market for Reliance Power issue is now down to Rs150. The shares of the ADAG company are expected to list on Feb. 5. Reliance Power has fixed the issue price at Rs450.
Wockhardt Hospitals IPO did not open yesterday as the company didn't have the requisite permission from SEBI after cutting its price band. It will open today. Its revised price band is Rs225-260 and the issue will close on Feb. 5. Real estate major Emaar MGF has also slashed its IPO price band, from Rs610-690, to Rs540-630. This issue also opens today and will close on Feb. 6.
The sudden and swift correction in the secondary market has hit the primary market hard. IPOs, especially that of smaller, relatively unknown companies, struggling to find buyers amid lack of investor confidence. Wockhardt Hospitals and Emaar MGF have already trimmed their price bands, while grey market premium on Reliance Power has dropped sharply. The situation may prevail as long as the secondary market remains subdued.
Steel shares could gain amid reports of a price hike and auto stocks will be in focus as companies will report monthly sales volume. Banking and housing finance could attract some attention amid news that HDFC has slashed its PLR by 25 basis points.
US stocks rallied on Thursday, ending a miserable January on a high note, after bond insurer MBIA reassured Wall Street that it will be able to retain its AAA rating. Benchmark indexes rebounded from losses after MBIA CEO Gary Dunton's comments sparked a rally in bank shares.
Home Depot helped lead the Dow Jones Industrial Average to a 208-point gain after Deutsche Bank said shoppers will spend more as interest rates fall and the government mails out tax rebates. Pulte Homes pushed builders to a four-month high after forecasting a narrower loss than analysts estimated.
The S&P 500 added 22.69 points, or 1.7%, to 1,378.5, reversing an earlier 1.6% drop spurred by a steeper-than- forecast increase in jobless claims. The Dow gained 1.7% to 12,650.36. The Nasdaq Composite Index climbed 40.86, or 1.7%, to 2,389.86.
Market breadth was positive. Four stocks rose for every one that fell on the New York Stock Exchange.
US stocks suffered heavily last month on fears that the world's biggest economy is in a recession or is heading toward one amid the housing and credit market rout. The Nasdaq's January loss of 9.9% is the worst January on record for the tech index, going back to its inception in Feb. 1971. The Dow lost 4.6% in the month, its worst January since 2000, when it lost almost 4.9%. The S&P 500 lost 6.1%, its worst Jan. since 1990, when it fell 6.9%.
After the close, Google reported quarterly sales and earnings that were short of forecasts, sending its shares tumbling in extended-hours trading. Motorola shares rallied after the close after the company said it is thinking of spinning off its mobile unit. Friday brings the January employment report before the start of trading. The ISM Manufacturing Index is due, as well as the readings on consumer sentiment and construction orders. Exxon Mobil leads the list of companies expected to report earnings.
MBIA's big quarterly loss exacerbated worries that the fallout for bond insurers could be the next leg of the credit market crisis. But MBIA stock erased losses and turned higher after the company's CEO said that while it will see big losses this year, it has the resources it needs to maintain its current financial strength rating.
Treasury prices rallied, lowering the yield on the 10-year note to 3.59% from 3.68% late on Wednesday. In currency trading, the dollar gained modestly versus the yen and slipped versus the euro. US light crude oil for March delivery fell 58 cents to settle at $91.75 a barrel in New York. COMEX gold for April delivery rose $1.70 to $928 an ounce.
European shares finished virtually flat as strength in the mining and chemicals sectors helped offset sharp losses in financial stocks. The pan-European Dow Jones Stoxx 600 index closed virtually unchanged at 322.16. It was down more than 2% earlier on Thursday.
The UK's FTSE 100 reversed earlier losses to close up 0.7% at 5,879.80, helped by an 8% jump in shares of Carphone Warehouse on speculation that Best Buy may increase its shareholding in the mobile phone retailer. The German DAX 30 fell 0.3% to 6,851.75 and the French CAC-40 slipped 0.1% to 4,869.79.
In the emerging markets, the Bovespa in Brazil dropped 1.3% to 59,490 while the IPC index in Mexico rose 1.8% to 28,793. The RTS index in Russia slid 3.8% to 1906 and the ISE National-30 index in Turkey slumped 3.9% to 53,434.
Global cues hold the key
Finally the worst series for nifty came to an end with the index losing over 15.5% during the series. A highly volatile last session of the month ended almost on a flat note but with a negative bias. Markets extended its losing streak to fourth straight trading session with benchmark Sensex closing below the 18k mark for second straight day. Even the Fed decision to slash rates by 50 basis points was unable to cheer up the bulls as selling pressure was evident in the Realty, Banking and Power stocks. Finally, the 30-share Sensex closed at 17,648, losing 109 points. The NSE Nifty slipped 30 points to close at 5,137.
Hindalco further dropped by over 7% to Rs163 after the company earnings fell for the first time in two years. Net income dropped to Rs5.43bn in the quarter ended Dec. 31 from Rs6.44bn a year earlier. Sales fell 3% to Rs45.3bn. The scrip touched an intra-day high of Rs176 and a low of Rs155 and recorded volumes of over 58,00,000 shares on NSE.
L&T slipped 1.6% to Rs3646. The company announced its plans to start an asset management company. The company also plans to enter into an agreement with US based Travelers as its joint venture partner for its non-life insurance venture, according to reports. The scrip touched an intra-day high of Rs3754 and a low of Rs3600 and recorded volumes of over 12,00,000 shares on NSE.
HCL Infosystems was down 0.2% to Rs200. The company announced that it entered in strategic partnership with government of Punjab. The scrip touched an intra-day high of Rs219 and a low of Rs193 and recorded volumes of over 4,000 shares on NSE.
Tata Chemicals advanced by over 7% to Rs307. The company declared that it entered into an agreement to acquire General Chemical Industrial Products Inc. (GCIP), a US based chemical Company for US$1005mn. The scrip touched an intra-day high of Rs344 and a low of Rs295 and recorded volumes of over 14,00,000 shares on NSE.
Mphasis BFL marginally slipped by 2.7% to Rs225. The company posted net profit of Rs658.60mn, a jump of 153% for the quarter ended December 31, 2007 as compared to Rs259.50mn for the quarter ended December 31, 2006. The total income has gone up from Rs2737.70mn for the quarter ended December 31, 2006 to Rs4470.90mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs244 and a low of Rs214 and recorded volumes of over 2,00,000 shares on NSE.
Power Grid lost over 6.5% to Rs102. The company posted net profit of Rs3842.80mn, an increase of 14% for the quarter ended December 31, 2007 as compared to Rs3372.70mn for the quarter ended December 31, 2006. Total Income increased from Rs10048mn for the quarter ended December 31, 2006 to Rs11937.70mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs110 and a low of Rs101 and recorded volumes of over 2,00,00,000 shares on NSE.
SAIL was down by 2% to Rs214. The company signed a memorandum of understanding with Ranchi-based Heavy Engineering Corporation (HEC), the largest integrated engineering complex in the country, for supply of equipment for its ongoing modernisation & expansion programme. The scrip touched an intra-day high of Rs226 and a low of Rs211 and recorded volumes of over 8,00,000 shares on NSE.
Indraprastha Gas rallied by over 9% to Rs130 after the company announced its Q3 result with net profit at Rs450.2mn (up 27%) and net sales at Rs1.83bn (up 14.3%). The scrip touched an intra-day high of Rs135 and a low of Rs118 and recorded volumes of over 5,00,000 shares on NSE.
IOC surged by over 5% to Rs476 after the company announced its Q3 result with net profit at Rs20.9bn (up 17%) and revenue at Rs654bn (up 16%). The scrip touched an intra-day high of Rs499 and a low of Rs449 and recorded volumes of over 22,00,000 shares on NSE.
CESC came down 1% to Rs495. The company announced its Q3 net profit at Rs930mn (up 52.4%) and revenue at Rs7.03bn (up 6.14%). The scrip touched an intra-day high of Rs520 and a low of Rs481 and recorded volumes of over 5,00,000 shares on NSE.
Gitanjali Gems slipped 5% to Rs297. The company announced its Q3 FY08 performance overview as compared to Q3 FY07, net revenues were up 56.7% to Rs12,527.2mn from Rs7,995.0mn and PAT increases 61.1% to Rs505.2mn from Rs313.6mn. The scrip touched an intra-day high of Rs314 and a low of Rs290 and recorded volumes of over 4,00,000 shares on NSE.
FIIs were net sellers of Rs39.38bn (provisional) in the cash segment on Thursday. On the other hand, Domestic Institutions were net buyers of Rs21.6bn. In the F&O segment, foreign funds were net buyers of Rs1.28bn.
FIIs were net sellers of Rs6.11bn in the cash segment on Wednesday, taking their net outflows over the past 11 days to over US$4bn. Mutual Funds were net buyers of Rs4.16bn on the same day.
News Snippets:
Emaar MGF lowers price band of its IPO. (Mint)
Jaypee Group to bid for Greater Noida airport. (Mint)
Unitech in talks with two foreign telecom companies for mobile services. (Mint)
Tata Chemicals to buy US soda ash maker, General Chemical Industrial Products for US$1bn. (Mint)
Future Capital’s logistics fund slated for launch in March 2008. (Mint)
Videocon Industries is venturing into business of building and operating ports; bids for container terminal at Kerala port. (Mint)
IOC may get lower stake in Turkey refinery. (Mint)
Punjab government appoints Power Finance Corporation to help bid out a 2,000MW project using ultra mega power project model. (Mint)
HDFC cuts home loan rates by 25bps. (Mint)
GSK Consumer Healthcare plans to launch some of its global brands in India. (BL)
VSNL to start Wimax in 12 cities in 2009. (BL)
Puravankara plans to invest Rs10bn for setting up 4-5 hotels. (BL)
GMR Industries plans to raise Rs2.5bn through rights issue. (BL)
ONGC may give up two CBM blocks in the western region. (BL)
Lufthansa in talks with Jet Airways and Quikjet for cargo operations. (BS)
7:3 swap fixed for Kingfisher-Deccan merger. (BS)
Maruti Suzuki to increase price of all models by up to Rs12,000 wef February 2008. (BS)
Rajesh Exports bags Rs4,630mn export order of gold jewellery from Excel Goldsmiths. (BS)
JSW Steel and Chilean form JV to develop iron ore mines in South America including Chile. (BS)
Cairn sees 25% more oil output from Mangala field in Rajasthan. (BS)
Bajaj Auto to use its reserves to fund aggressive expansion and diversification plans. (ET)
Dabur Pharma secured approval from the Drug Controller General of India (DCGI) for its anti cancer drug Nanoxel. (ET)
TCS’ UK subsidiary Diligenta wins US$200mn order from Sun Life Financials, Canada. (ET)
SBI plans to add 500,000 Point of sale (POS) terminals in country in three years. (ET)
PNB launches a full fledged banking branch in Hong Kong. (FE)
Madras Cement approved proposal of buy back its own shares with a maximum price of Rs4,200 a share. (FE)
SAIL, Manganese Ores India Ltd (MOIL) to set up Ferro Alloy project in Bhilai in Chattisgrah. (FE)
Economic Front Page
Railways to issue Rs250bn tender for buying 1,000 electric locomotives over eight years. (Mint)
Sebi allows foreign funds to buy more debt. (Mint)
Government defers fuel price hike decision again. (Mint)
ATF prices decline, however airlines plan no rate cuts. (BL)
Lenders of securities under short selling to be exempted from STT. (ET)
Short selling could begin in the first week of February. (ET)
SEBI raises FII investment in government securities from US$2.6bn to US$3.2bn. (ET)
Finance Minister revises estimates to 9% growth rate this fiscal year. (FE)
Fertilizer subsidy may be restructured to maintain fiscal prudent. (FE)
RBI asks banks to adopt novel model in future to assess the credit risk. (FE)