After silence, that which comes nearest to expressing the inexpressible is music.
The resilient bulls have now become silent spectators to global cues. The only music bulls can hear is thumping steps of bears marching in. Markets across the world have tanked following the latest carnage on Wall Street. The ripple effect of the global mayhem will be seen in the Indian market today.
US stocks sank overnight after a grim report on the service sector revived fears over an impending recession. A Fed official's negative remarks on the bleak prospects for the US economy added fuel to the fire.
Weakness across global markets will overshadow the positive news on the FII money flows. We expect a gap-down opening and perhaps a weak close as well. Some recovery is not ruled out if global markets start looking up again. Long term investors, silently add sound stocks.
Foreign funds are showing some signs of coming back into the Indian market after beating a hasty retreat during last month's global meltdown. FIIs were net buyers of Rs3.12bn (provisional) in the cash segment on Tuesday. In the F&O segment too, they were net buyers of Rs622.4bn. On Monday, foreign funds poured in Rs38.1bn in the cash segment after being net buyers of Rs10.34bn on Friday.
Also, a financial daily reports that the government may allow overseas investors to enter the Indian market through third-party sub-accounts. The move - if it sees the light of day - could make life easier for unregistered foreign investors to invest in Indian shares.
Avoid trading in such a highly volatile and uncertain market as the mess in the US and other advanced economies is unlikely to be resolved anytime soon. And, the longer it lasts, the worse it is for global markets.
Meanwhile, Domestic Institutions were net sellers of Rs1.35bn in the cash segment yesterday. Mutual Funds were net buyers of Rs8.19bn in the cash segment on Monday.
In Asia this morning, stock indices in Tokyo, Hong Kong and Singapore got pounded following the steep losses in their US counterparts. The Nikkei in Japan was down 567 points at 13,178 while the Hang Seng in Hong Kong tumbled 1433 points at 23,375 and the Straits Times in Singapore was down 110 points at 2927.
MSCI's Asian benchmark slipped 2.1% to 143.98 as of 10:44 a.m. in Tokyo, set for its steepest drop since Jan. 28. All of its 10 industry groups declined.
The S&P/ASX 200 Index fell 2.4 percent in Australia, where Macquarie Group was poised for its biggest decline in two weeks following the retirement of its chief executive. Markets in China, South Korea, Taiwan and New Zealand are closed for holidays today, while Hong Kong and Singapore will shut after morning trading.
US stocks tumbled the most in 11 months after service industries contracted at the fastest pace since 2001, reinforcing concern that the world's biggest economy may already be in a recession. The Dow Jones Industrial Average had its biggest drop in nearly a year.
Exxon Mobil and GE led declines and all 10 industry groups in the S&P 500 declined after the Institute for Supply Management's index, which reflects almost 90% of the US economy, fell more than forecast. Citigroup led 91 of 92 financial shares in the S&P 500 lower after Fitch Ratings said it may downgrade the AAA insurance rating on MBIA Inc., the largest bond guarantor.
The S&P 500 lost 44.18 points, or 3.2%, to 1,336.64. The Dow slumped 370.03 points, or 2.9%, to 12,265.13. The Nasdaq Composite dived 73.28 points, or 3.1%, to 2,309.57. Almost 11 stocks fell for every one that rose on the New York Stock Exchange.
The ISM Service Sector report was released nearly an hour ahead of schedule, unnerving investors at the start of trade. The report countered last week's ISM reading on the manufacturing sector, which showed an expansion.
Richmond Fed President Jeffrey Lacker said that the report raises the risks of a recession. However, he said that inflationary pressures are also rising, which could limit further interest rate cuts. Lacker is an alternate member of the Fed's policy committee this year.
Treasury prices rallied, as investors sought safety in government debt, lowering the yield on the benchmark 10-year note to 3.56% from 3.64% late on Monday. In currency trading, the dollar gained versus the yen and the euro.
US light crude oil for March delivery fell $1.61 to $88.41 a barrel on the New York Mercantile Exchange. COMEX gold for April delivery plunged $19.10 to $890.30 an ounce.
After the close, Walt Disney reported lower quarterly earnings and higher revenue, both of which topped analysts' forecasts. Shares jumped more than 5% after the close. Companies due to report quarterly results on Wednesday morning include Sara Lee, and Time Warner.
European shares wiped out all of February's tentative gains after the dismal data on the US services sector dealt another blow to already fragile sentiment. The Dow Jones Stoxx 600 index fell 3.2% to 318.73. The index fell below its February open of 322.92. The French CAC-40 index fell 4% to 4,776.86, while the UK's FTSE 100 index closed down 2.6% at 5,568.00, and the German DAX 30 index lost 3.4% at 6,765.25.
Europe's service industries grew at the slowest pace in more than four years and retail sales dropped the most since 1995 after stock markets slumped, the US economy faltered and inflation accelerated. Royal Bank of Scotland Group Plc said its purchasing managers' index (PMI) for services dropped to 50.6, the lowest since July 2003, from 53.1 in December. A reading above 50 indicates growth.
Retail sales in the euro region declined 2% from a year earlier, a record, the European Union's statistics office in Luxembourg said yesterday. The weak data counters the view of European Central Bank (ECB) policy makers who say that the euro region is strong enough to cope with a cooling US economy. The ECB says that faster inflation prevents it from following the Federal Reserve in cutting rates aggressively.
The scene was equally bad across the emerging markets. The IPC index in Mexico was down 4.5% at 28,086 while the RTS index in Russia fell 2.3% to 1966 and the ISE National-30 index in Turkey was down 3.5% at 55,291.
Market likely to be choppy
After a strong fight on Monday bulls again showed strength towards the end on Tuesday as markets managed to end with marginal gains for third straight trading session. After opening in red markets turned choppy and lackluster and witnessed range bound trades. However, towards the fag end markets slightly gained momentum led by gains in the index heavyweights like Reliance Industries, HDFC Bank, L&T and Bharti Airtel. Finally, the 30-share Sensex ended flat at 18,663. The NSE Nifty gained 20 points to close at 5,473.
KEC International was down 2% to Rs729. Reports stated that the company formed a 50:50 joint venture with Power Engineers and floated a new firm - KEC Power. The scrip touched an intra-day high of Rs745 and a low of Rs675 and recorded volumes of over 5,000 shares on NSE.
Voltas slipped 1% to Rs203. Reports stated that the company is likely to bag a large overseas order worth Rs6-8bn. The scrip touched an intra-day high of Rs211 and a low of Rs201 and recorded volumes of over 5,00,000 shares on NSE.
Dewan Housing was locked at 5% upper circuit to Rs219.10 after the company declared that it plans to raise stake in Wadhawan Food-Retail. The scrip touched an intra-day high of Rs219.10 and a low of Rs214 and recorded volumes of over 45,000 shares on NSE.
Engineers India was up by 1% to Rs882 after the company announced that it would form a 50:50 joint venture with Tata Projects. The scrip touched an intra-day high of Rs897 and a low of Rs845 and recorded volumes of over 9,000 shares on NSE.
Parsvnath surged by over 3% to Rs296 as Parsvnath Hotels, a subsidiary of Parsvnath Developers, has signed a MoU with ITC’s Fortune Park Hotels to develop and manage 20 five-star, 20 four-star and 10 three-star and budget hotels across the country in five years. The scrip touched an intra-day high of Rs300 and a low of Rs284 and recorded volumes of over 19,00,000 shares on NSE.
After being the star performer on Monday, Rcom slightly cooled off and slipped 1.3% to Rs677. Reports stated that Reliance Infratel, the tower subsidiary of the company, proposed to raise Rs60bn through an IPO and has filed the DRHP with the SEBI. The scrip touched an intra-day high of Rs704 and a low of Rs664 and recorded volumes of over 1,00,00,000 shares on NSE.
Essar Shipping was locked at 5% upper circuit to Rs228.65 after the company announced that they would be raising ~US$1bn through a mix of equity and quasi-equity instruments. The scrip touched an intra-day high of Rs228.65 and a low of Rs215 and recorded volumes of over 5,00,000 shares on NSE.
GBN gained 2% to Rs1011 after the company announced that they have planned to raise Rs6bn via QIP. The scrip touched an intra-day high of Rs1034 and a low of Rs990 and recorded volumes of over 24,000 shares on NSE.
L&T gained 1.1% to Rs3856 after media reports stated that L&T has emerged the highest bidder for Navi Mumbai Sea wood project the company has bid Rs1,850cr for the project. The scrip touched an intra-day high of Rs3876 and a low of Rs3760 and recorded volumes of over 4,00,000 shares on NSE.
News Snippets:
HCL Tech is close to clinching a US$1bn outsourcing contract from a European telecommunications company. (BS)
Hero Group is in negotiations with French car major PSA Peugeot for a possible alliance for passenger cars. (ET)
Tata Power Company’s JV, Maithon power, has raised Rs31.2bn in debt to finance its 1,050MW power project. (ET)
JSW Steel’s steel production in January grew by 13% to 0.29 mn tones. (FE)
Canara Bank, Corporation Bank and Allahabad Bank have decided to lower interest rates on housing loans. (BS)
L&T expects sales to reach US$2bn in the Gulf region in the next two years. (BS)
Reliance Communications to test-launch its DTH services, Big TV, this week. (BS)
BPCL owned Bharat Oman Refineries is likely to come with an IPO next financial year. (DNA)
Maruti Suzuki denies low-cost small car plans. (ET)
BPCL, Nandan Bio and Shapoorji Pallonji to form JV for producing bio-diesel in UP. (FE)
GMR Infra to de-link its real estate project from the Delhi-airport upgrade plan. (BS)
GMR Infra plans to bid for modernization of Prague airport. (DNA)
Indiabulls Real Estate is planning a US$1.2bn IPO for its property trust on the Singapore stock exchange. (BS)
Suzlon's Australian unit wins an order for supplying 27 wind turbines. (DNA)
Crisil, Equifax and Tata Capital to set up a credit information company providing credit histories and checks on retail borrowers. (BS)
UB Group is planning to foray into development of luxury retail stores. (FE)
Petronet LNG awards US$250mn contract to a Japanese group for building two LNG gas storage tanks at Kochi. (BS)
Mercator Lines is planning to expand its business portfolio with an investment of around Rs60bn over next few years. (FE)
Aurbindo Pharma gets nod from US FDA for generic version of Fluoxetine. (BS)
Maytas Infra sells minority equity to Infinite India Investments for Rs6bn. (ET)
Godrej eying 10% market share in the AC market by next year by launching 25 models. (BS)
HDIL gets development rights of Bombay Oxygen Corporation’s land in Mulund, Mumbai for Rs2bn. (BS)
GTL enters into a strategic alliance with Ericsson UK for providing managed network infrastructure services in the UK market. (ET)
GTL is close to acquiring a US$200mn European company. (DNA)
Prakash Industries to set-up a 600MW thermal power station in Chattisgarh with an investment of Rs24bn. (BS)
Baja Hindustan to invest Rs2.75bn for setting-up a particle and fibre board unit in western Uttar Pradesh. (DNA)
Subex has bagged a contract from Slovenia-based telecom operator, Telecom Slovenije, to install solutions that will protect from various frauds. (ET)
Port of Singapore picks up 49% stake in ABG’s terminal. (ET)
Concor is looking at strategic alliances/equity JVs with private shipping companies to strengthen its interest in shipping business. (ET)
CEAT is close to finalizing Bhandup land sale deal worth Rs1bn. (DNA)
Engineers India get government’s nod to form a JV company with Tata Projects. (FE)
Prime Focus and Warner Brothers enters into an agreement to provide film makers access to their post-production services. (BS)
Phoenix Mills plans to enter in a strategic alliance with Entertainment World Developers Pvt Ltd by acquiring 42% in the company. (BS)
Aegis Logistics is expanding the capacity of its LPG storage facility in Trombay by about 50,000 kilolitres. (DNA)
Economic Front Page
FM approves the proposed increase in the price of petrol and diesel by Rs2/litre and Re1/litre respectively. (FE)
Trai is set to allow FM radio channels to broadcast news and current affairs. (ET)
Direct tax collections jump 40% to Rs2,185bn in the first ten months of the fiscal. (ET)
FM likely to prod banks to lower interest rates in his February 12 meeting with banks chiefs. (ET)
Steel imports rise 69% to about 5mn tons in the first nine months of the fiscal. (BS)
Cement firms to appeal against MRTPC order of cartelization in Supreme Court. (BS)
Government to soon finalize a plan for the proposed 1,000bn National Electricity Fund aimed at providing support to cash-strapped SEBs. (BS)
Government is considering a proposal to provide a separate exemption limit for long term savings instruments. (FE)