If we don't change direction soon, we'll end up where we're going.
The way the markets are moving neither the bull nor the bears seem to know where we are headed. The rebound did happen after a weak opening as rightly predicted yesterday. We also said don’t think the worst is over even if there is a rebound. The bounce back from the day's lows - at one point the Sensex was down over 600 points - was led more by short-covering rather than fresh buying. The bulls remain on the back foot right now amid continuing worries about the state of the US economy and its fallout on global economy and financial markets.
We expect a cautious to mostly lower opening today. Trading will remain choppy and the bias remains negative. Again, at lower levels some buying is bound to happen. But that need not rescue the indices, which will continue to dance to global tunes.
An emergency Fed rate cut is possible ahead of its next scheduled monetary policy meeting on March 18, according to a report. Goldman Sachs says the Fed would slash the benchmark federal funds target rate to 2% by late April from the current 3%, most likely in two 50 basis-point steps at the next two meetings. But, whatever action Bernanke & Co. takes won't be able to prevent an impending recession in the US - which many say has already begun. In short, the bad news from the global markets is not going to stop soon. This will continue to cast a shadow on Indian market despite all the talk about decoupling.
Lending and other financial activity across global markets have almost choked on account of the sub-prime mortgage led meltdown in the US housing sector. The situation has reached alarming proportions with large-scale ramifications for world financial markets.
Interbank lending rates climbed again in Europe and Asia and the world's top central bankers said they are on high alert. Bank-to-bank lending rates in euros climbed to their highest in almost two months. The rise in euro rates has seen three-month London Interbank Offered Rates (LIBOR) jump almost a fifth of a percentage point so far this month.
Credit and bond market liquidity is drying up and many bond funds that are facing redemptions are hoarding cash instead. The reduction in leverage in the financial system has resulted in forced liquidations. Banks are again struggling to preserve adequate capital ratios. ECB president Jean-Claude Trichet says significant market disruption and volatility are persisting. "The alertness of central banks is very important," he says.
FIIs were net buyers of Rs11bn in the cash segment on Friday. But, the provisional figures for yesterday shows they offloaded shares worth Rs12.48bn from the cash segment. In the F&O segment too, FIIs were net sellers of Rs10bn yesterday. Local institutions were net buyers of Rs7.59bn in the cash segment yesterday. Mutual funds were net sellers to the tune of Rs515mn on Friday.
Asian markets were trading pretty mixed this morning. The Nikkei in Tokyo was up slightly at 12,549 while the Hang Seng in Hong Kong was down 414 points or about 1.8% at 22,290. The Kospi in Seoul was nearly flat at 1623.
The Shanghai Composite in China was down 81 points at 4065 while the Taiex in Taiwan dropped 21 points at 8277. The Straits Times in Singapore fell 28 points at 2907.
US stocks slipped yet again on Monday amid persistent problems for the financial services sector and lingering concerns that upcoming economic reports will point to a recession. Rattled investors debated how much the Fed should cut interest rates and crude oil surpassed $108 a barrel for the first time.
The decline in banks deepened. Bear Stearns tumbled the most since 1987 on concern that the brokerage was facing financial difficulties, even after former CEO Alan Greenberg said the speculation was ridiculous.
Fannie Mae and Freddie Mac, the largest US mortgage finance providers, both lost more than 11% on expectations they will report more losses tied to the housing slowdown.
The S &P 500 declined 20 points, or 1.6%, to 1,273.37 and is down almost 19% from its Oct. 9 record. The Dow Jones Industrial Average slumped 153.54 points, or 1.3%, to 11,740.15. The Nasdaq Composite dropped 43.15 points, or 2%, to 2,169.34.
Five stocks fell for every one that rose on the New York Stock Exchange.
All 10 industry groups in the S&P 500 dropped on growing concern that the economy will slip into a recession after analysts forecast corporate earnings will decline this quarter and next.
Financial shares in the S&P 500 slid 3.1% as a group to the lowest level since May 2003 and contributed the most to the broader index's retreat.
Morgan Stanley slashed earnings estimates for Citigroup and other US banks, citing slower equity capital markets and a severe deterioration in credit conditions this year.
Mortgage lender Countrywide Financial tumbled 14% as it is under investigation by the FBI for possible securities fraud, according to media reports.
Shares of Lehman Brothers fell nearly 6% after a report that the Wall Street bank is planning to cut 5% of its workforce, or about 1,400 jobs. Lehman will report first-quarter results next Tuesday.
Private equity giant Blackstone said it swung to a fourth-quarter loss related to the company's investment in bond insurer Financial Guaranty Insurance Co. and weakness in the credit market.
The Commerce Department reported that wholesale inventories and sales grew in January. However, economists suggested that the rise in wholesale inventories could be due to inflation caused by a rapid increase in the price of some key commodities.
Crude oil surged, setting a new closing record of $107.90 a barrel and gas prices appeared set to break their previous record of $3.227 a gallon at the pump. Oil prices briefly traded at $108, setting a new trading record.
The dollar dived to its lowest level versus the yen in three years and fell against the euro. The US currency touched a fresh record low against the euro on Friday on the weak jobs report.
COMEX gold for April delivery rose $2.20 to $972.00 an ounce in New York following last week's run up. Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.45% from 3.54% late on Friday.
Tuesday brings a government report on export and import activity which could shed light on consumer confidence. A report will also be out from the Labor Department on initial claims for unemployment benefits.
Stocks in Europe fell for the eighth time in nine sessions. The pan-European Dow Jones Stoxx 600 index fell 1.2% to 304.15, with losses accelerating near the end of the day as oil soared to $108 a barrel, and metals and mining stocks declined.
The German DAX 30 fell 1% to 6,448.08, while the French CAC 40 dipped 1.1% to 4,566.99 and the UK's FTSE 100 shed 1.2% to 5,629.10.
In the emerging markets, the Bovespa in Brazil plunged 3% to 59,999 while the RTS index in Russia was down 1.8% at 2012 and the ISE National 30 index in Turkey fell 0.25% to 51,305.
Can bulls make it two in a row?
Despite a sharp fall in the early trades, markets staged a stellar come back. The benchmark Sensex recovered over 500 points and Nifty index recouped over 150 points from their days low. This swift recovery was seen after the momentum stocks like RPL, Bharti, ACC, Bajaj Auto and Rcom witnessed buying interest. Also a recovery in the Hang Seng index in Hong Kong lifted to sentiments partially. Finally, the 30-share Sensex closed at 15,923 losing 51 points. While the NSE Nifty added 29 points to close at 4,800.
Overall about 753 stocks advanced, 1,910 stocks declined while 44 stocks remained unchanged. Among the BSE 30 index 16 stocks advanced while 14 stocks declined.
Among the BSE Sectoral indices; BSE Metal index (up 2.2%), BSE Oil & Gas index (up 2%) and Auto index (up 0.5%). However, the BSE Capital Good index (down 4.8%) and the BSE Power index (down 2%).
Ceat rallied by over 12% to Rs140 after the company said that it would sell Mumbai Land for Rs1.3bn and would develop 6.91 acres of land with Ashford Infotech in Mumbai. The scrip touched an intra-day high of Rs150 and a low of Rs115 and recorded volumes of over 40,000 shares on BSE.
L&T plummeted by over 8% to Rs2728 after media reports stated that the company’s overseas arm may incur a loss of rs2bn from commodity trading. The scrip touched an intra-day high of Rs2950 and a low of Rs2610 and recorded volumes of over 34,00,000 shares on NSE.
Hindustan Zinc slipped by 3.5% to Rs575. The company announced that it increased lead prices by Rs1,300, or 0.9%, to Rs149,600 per metric ton from March 8. The price of zinc was left unchanged at Rs127,300 a ton. The scrip touched an intra-day high of Rs600 and a low of Rs558 and has recorded volumes of over 1,00,000 shares on NSE.
Mastek slipped by 0.5% to Rs264 as the company on March 08, 2008 announced that it acquired Systems Task Group (STG) International Ltd. This acquisition is the second such initiative by Mastek during the current financial year, and follows the acquisition of another insurance-focused IT Company Vector Insurance Services in July 2007. The scrip touched an intra-day high of Rs264 and a low of Rs247 and recorded volumes of over 15,000 shares on NSE.
Gitanjali Gems slipped by over 6% to Rs264. The company announced that it acquired "Renaissance Retail Venture Pvt Ltd" (RRVPL) through its wholly owned subsidiary Gitanjali Lifestyle Ltd. The company announced that it set up subsidiary for gold loans. The scrip has touched an intra-day high of Rs273 and a low of Rs258 and recorded volumes of over 2,00,000 shares on NSE.
UTV Software gained by 1.5% to Rs810 after the company announced that its founder Screwvala has raised stake in the company. The scrip touched an intra-day high of Rs810 and a low of Rs785 and recorded volumes of over 77,000 shares on NSE.
BEML also recovered by almost 3% from its lows and ended down by only 1% to Rs1118 after the company said that it would set up Assembly plant in Brazil for Earthmoving gear and its German Venture will build rail coaches, equipment. The scrip touched an intra-day high of Rs1150 and a low of Rs1072 and recorded volumes of over 16,000 shares on NSE.
KEC International jumped by over 13% to Rs770 after the company said they won US$120.7mn contract from Saudi Electric. The scrip has touched an intra-day high of Rs815 and a low of Rs617 and recorded volumes of over 16,000 shares on NSE.
Dr Reddy’s Lab gained by a percent to Rs575 after the company said that it entered into drug discovery collaboration with 7TM Pharma. The scrip touched an intra-day high of Rs579 and a low of Rs476 and recorded volumes of over 1,00,000 shares on NSE.
Gujarat Fluorochemicals surged by over 8% to Rs207 after the company said that it would consider buyback of shares ion March 21. The scrip touched an intra-day high of Rs220 and a low of Rs183 and recorded volumes of over 74,000 shares on NSE.
Aban Offshore was down by over 5% to Rs3461. The company said that it would raise Rs1.94bn selling shares. The scrip touched an intra-day high of Rs3612 and a low of Rs3399 and recorded volumes of over 1,00,000 shares on NSE.
Corporate Front Page
Private oil Companies, Reliance Industries, Essar Oil and Shell India, have filed a joint petition against the PSU oil companies for indulging in unfair and restrictive trade practices in the sale of transportation fuels. (FE)
Bajaj Auto Finance may spin off two-wheeler financing business as a subsidiary of Bajaj Auto. (ET)
Aban Offshore plans to raise funds to the tune of Rs1.94bn through issue of securities under private placement basis. (FE)
Videocon Industries is making an initial investment of Rs60bn for rolling out GSM services. (BS)
JSW Steel will issue one equity share for every 22 held in Southern Iron and Steel Co. for their merger . (ET)
Tata Chemicals plans to borrow US$850mn to fund purchase of US based General Chemical Industrial Products Inc. (DNA)
Sobha Developers plans to take up 12 million square feet of development during fiscal 2008-09 for about Rs22bn. (BS)
The Mukesh Ambani-controlled Navi Mumbai SEZ has been charged with indulging in illegal land-filling activity. (BS)
Cals Refineries is in talks with BP for a crude supply and product offtake deal. (BS)
Triton Corp is close to acquiring a UK based IT &Telecom services firm for a consideration of ~Rs4.8bn. (ET)
TVS Motor has re-launched Flame, a 125cc motorbike, with a single-spark plug ignition system. (BS)
Reliance Energy's Board has approved the change of the company’s name to Reliance Infrastructure Ltd. (BL)
The move to withdraw tax holiday to new refineries will result in lowering of profitability of IOC’s Rs240bn Paradip refinery. (ET)
Shah Alloys is reported to be in talks with Posco’s Indian subsidiary, Posco India, for a possible tie-up. (BS)
Ferro Silicon and Indsil Electrosmelts have entered into a JV with GoodEarth Group of companies to operate a mine in Indonesia. (DNA)
M&M group is close to finalizing a JV with an international fresh produce supply-chain heavyweight through Mahindra ShubhLaabh Services. (ET)
Electrotherm, an Ahmedabad-based manufacturer of steel and electric bikes, is embarking on a Rs3bn expansion plan. (BS)
Ceat expects to hike raise tyre prices by 2-3% in April to offset higher raw material prices. (FE)
Maruti Suzuki India has inked a pact with Shriram City Union Finance. (ET)
Country Club India is contemplating merging or acquiring its associate companies (BS)
Royal Orchid Hotels is all set to open the first Ramada hotel brand in India next month. (BS)
RCF plans to earn carbon credits from phospho-gypsum, a by-product of its manufacturing process. (BL)
Reliance General Insurance, the third largest player in terms of gross premium, clocked a 125% growth in business last year. (BL)
Taj-GVK Hotels would open a star hotel in Chennai, fifth for the Group, in May. (BL)
Congnizant has signed a US$05mn agreement with AstraZeneca. (ET)
Economic Front Page
The amount of loans to small and marginal farmers that commercial banks, cooperatives and regional rural banks have been asked to waive is likely to be slightly over Rs230bn less than half that estimated by Finance Minister P Chidambaram in his Budget speech. (BS)
Tractor manufacturers in north India have decided to increase prices in the next financial year. (BS)
The petroleum ministry has asked the finance ministry for clarification on the proposal to withdraw the 7-year income tax holiday on production of oil and gas with effect from April 1. (BS)
Telecom Minister A Raja has told Parliament that there is no “contractual agreement” between government and telecom operators to allot spectrum beyond 6.2 MHz. (BS)
The RBI has directed banks to permit customers of one bank free use of ATMs of other banks for all transactions from April 1, 2009. (BS)
Japan has extended a Rs70.7bn long-tenure loan at low-interest to fund India’s infrastructure investments. (ET)
New consumer price index is likely to be launched by May 2009. (Mint)
Finance Minister P Chidambaram has said he will inform the Parliament on Friday how the government would compensate banks for the losses incurred on account of the farm loan waiver worth Rs600bn. (FE)
The Government has postponed the last date of bidding for oil and gas blocks offered under the latest round of Nelp to April 25. (FE)
The Government is planning to fund the farm loan waiver package over the next 24 months and at least 25% of the total Rs600bn package will be met through government borrowings. (ET)
India's leading GSM-based mobile operators added 5.9mn users in February 2008. (ET)
The tax holiday for software technology parks is unlikely to be extended beyond March 2009. (ET)
Sugar production during Oct-Feb’08 remained almost flat at 16.9mn tons. (Mint)