'Tis one thing to be tempted, another thing to fall.
Those tempted to pick up stocks for the short term have ended up with a fall in their portfolio. In better times it made sense to think that a fall from higher levels make value attractive. But the world and the markets have undergone a sea change where most are left drowning. Those better off are frowning.
Global equity markets, particularly in India, may have over reacted to the emerging situation in the US. One is tempted to say this as blue chip shares on Wall Street managed to survive the mayhem despite what happened over the weekend, though technology stocks closed slightly lower. If one goes by what happened in the US market overnight, we are headed for some sort of a bounce back at the opening bell today. Thereafter, things may turn choppy and trend for the rest of the day will hinge, as always on global markets.
The undertone remains weak with the Sensex having lost more than 6,000 points in just two months. And, though valuations have fallen drastically, the bulls are extremely scared to venture into the market at this stage. If at all they do they are most likely to sell some of their existing holdings rather than make fresh purchases. Quite a few of them are still stuck with loss-making scrips and are unable to get rid of them. Even some of the blue chip stocks have got hammered out of shape. So, the crux of the problem is lack of buying. How long will the bulls stay away is anybody's guess.
Some say the market is oversold and that we in India are reading too much into the US imbroglio. Others say just like we witnessed excesses on the way to the all-time high, there has been too much selling on the down side. The Indian economy is perhaps the least dependent on the US. It is basically a domestic consumption led story, which remains largely in place. There has been a slowdown over the past few months, which again is more due to local issues rather than the US fiasco. Sure, some sectors and companies will get slightly affected, but still India should be able to clock 7-8% growth rate, which is not bad on a high base.
So, one can build a case for a rebound. Having said that, markets these days are driven much more by sentiment. Despite India's strong fundamentals, it will take a Herculean effort to lift the main indices to their previous lifetime highs. What is needed for that is sustained buying from all sections, good corporate earnings growth, political stability and consistency in policy making. Hopefully, we will have all of that and the market will gradually see some sanity shortly. The biggest issue remains lack of liquidity across global markets. Money has suddenly become a scare commodity. At the same time, those who have it are not ready to part with it.
Asian markets are trading mixed and a bit volatile this morning. The Nikkei was up 172 points or 1.5% at 11,959 while the Hang Seng in Hong Kong was down 137 points or 0.65% at 20,947.
The Kospi in Seoul added 3 points to 1577 while the Straits Times was more or less flat at 2786. The Shanghai Composite in China was down 1% at 3783 and the Taiex in Taiwan gave up 0.35% to 7977.
The MSCI Asia Pacific Index gained 0.8% to 133.30 as of 11:13 a.m. in Tokyo. The benchmark is still down 16% this year. An index of financial stocks increased the most today among the index's 10 industry groups.
US blue chip shares staged a smart rebound on Monday despite the Fed cutting the discount rate in a rare emergency weekend meeting and JP Morgan Chase agreed to acquire Bear Stearns for a song.
Bond prices surged, lowering corresponding yields, as investors sought the comparative safety of government debt. The dollar plumbed to a 13-year low versus the yen and hit another all-time low versus the euro.
The Dow Jones Industrial Average recovered from a drop of 194 points to finish higher, led by JP Morgan's biggest gain in almost two months. The S &P 500 Index dropped for a second day, sliding to within 2% of a bear market, as Lehman Brothers and Morgan Stanley tumbled.
The declines followed a selloff across Europe and Asia that pushed the Dow Jones Stoxx 600 Index to its lowest level since 2005 and the MSCI Asia Pacific Index to a third-straight drop.
The S&P 500 lost 11.54 points, or 0.9%, to 1,276.6 after falling as much as 2.4%. The Dow, which swung between gains and losses at least 27 times, advanced 21.16 points, or 0.2%, to 11,972.25. The Nasdaq Composite slid 35.48 points, or 1.6%, to 2,177.01.
The Dow and S&P 500 closed at all-time records on Oct. 9. Since then, the Dow has erased 15.5% and the S&P 500 has lost 18.4%. The Nasdaq is down nearly 24% since hitting its recent high on Oct. 31, which was not an all-time record.
Market breadth was negative. Almost four stocks fell for every one that rose on the New York Stock Exchange.
Eight of 10 industry groups in the S&P 500 dropped as the benchmark for US equities extended its decline from an Oct. 9 record to more than 18%. Energy shares lost 2.5% as a group after oil fell more than $4 a barrel on concern that the US economy has slipped into a recession.
Bear Stearns plunged or 84% to $4.81 after JP Morgan agreed to buy the securities firm for $240mn, or about $2 a share. The Fed is providing financial backing to JPMorgan for the deal. JPMorgan gained 10% to $40.31.
Lehman Brothers, the fourth-largest US securities firm, dropped 19% to $31.75. Goldman Sachs, the world's largest securities firm, dropped 3.7% to $151.02. UBS downgraded shares of Goldman and Lehman to neutral from buy, saying the liquidity squeeze will get worse before it gets better.
Morgan Stanley retreated 8% to $36.38. Merrill Lynch, the third-largest securities firm, dropped 5.4% to $41.18. Citigroup, the biggest US bank, declined 5.9% to $18.62.
The Federal Reserve is expected to cut the fed funds rate, a key overnight consumer lending rate, by a full percentage point when it meets on Tuesday. The fed funds rate currently stands at 3%.
On Sunday, the Fed cut the discount rate, a short-term bank lending rate, to 3.25% from 3.5%, in a bid to make more cash available to strapped banks. Still, some market watchers feel additional rate cuts won't be enough to calm markets.
US light crude oil for April delivery fell $4.53 to settle at $105.68 a barrel in New York after touching an all-time high of $111.80 in electronic trading. COMEX gold for April delivery added $7 to settle at $1,006.50 an ounce after hitting an all-time high of $1,033.90 an ounce earlier.
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.30% from 3.44% late on Friday. In currency trading, the dollar fell to a fresh all-time low versus the euro and again touched a more than 12-year low against the yen.
European shares fell sharply. The pan-European Dow Jones Stoxx 600 index fell 4.6% to 290.26, a level not seen since November 2005. UBS shares took a beating, down 12%, amid worries about the prospects for more asset write-downs after the Bear Stearns fire sale.
The UK's FTSE 100 fell 3.9% to 5,414.40, while the German DAX 30 dropped 4.2% to 6,182.30, and the French CAC-40 fell 3.5% to 4,431.04.
In the emerging markets, the Bovespa in Brazil was down 3.2% at 60,011 while the IPC index in Mexico fell 2.2% to 29,048. The RTS index in Russia tumbled 3.6% to 1990 and the ISE National 30 index in Turkey plummeted 7.4% to 49,107.
Pain may continue
The bulls which managed to close with positive gains on Friday, were unable to carry the momentum as Monday turned out to be a manic one for traders and investors on Dalal Street. Bears were back with vengeance as it ripped off the wind out of stocks cutting across sectors and dragged the benchmark Sensex to close below 15k mark.
The benchmark Sensex posted its second biggest single day point fall ion Monday after global markets sunk further following the Fed cutting its discount rate just two days ahead of its scheduled meeting. The Fed cut discount rate by 25 basis points to 3.25%.
Finally, the BSE benchmark Sensex plunged 951 points ending at 14,809 and the Nifty index lost 242 points ending at 4,503.
Overall about 283 stocks advanced; 2,403 stocks declined while 30 stocks remained unchanged.
Even the broader markets witnessed heavy selling as both the Mid-Cap and Small-Cap indices fell over 6% each. The advance:decline ratio was at 1:17.
Shares of Orchid Chemical fell by over 38% on NSE after heavy selling pressure was seen in the scrip. The scrip touched an intra-day high of Rs204 and a low of Rs120 and recorded volumes of over 1,00,00,000 shares on NSE.
Tanla Solutions was down by over 7.5% to Rs506. The company said that it would split each stock into two. The scrip touched an intra-day high of Rs549 and a low of Rs487 and recorded volumes of over 70,000 shares on NSE.
Pratibha Industries declined by over 3% to Rs299. The company announced that it would absorb units Pratibha Shareholdings, One Metro India. The scrip touched an intra-day high of Rs303 and a low of Rs281 and recorded volumes of over 11,000 shares on NSE.
Rcom slipped 7% to Rs481. The company has said that they have added 1.61mn users in February. The scrip touched an intra-day high of Rs505 and a low of Rs476 and recorded volumes of over 52,00,000 shares on NSE.
Tata Motors slipped by 4.4% to Rs609. According to reports the company is close to convincing Ford to supply Jaguar and Land Rover engines at a pre-agreed price under a long term contract. The scrip touched an intra-day high of Rs629 and a low of Rs597 and recorded volumes of over 7,00,000 shares on NSE.
Cummins India was down by over 13% to Rs273. The company said that it has signed a Memorandum of Understanding (MOU) with the Government of Maharashtra wherein the state government has offered "Mega Project" incentives to the company for its proposed expansion at Phaltan MIDC (Village Survadi, District Satara). The scrip touched an intra-day high of s309 and a low of Rs263 and recorded volumes of over 44,000 shares on NSE.
Sun TV was down by 3.4% to Rs291. The company announced that it launched FM station at Allahabad & Jabalpur. The scrip touched an intra-day high of Rs294 and a low of Rs280 and recorded volumes of over 2,00,000 shares on NSE.
Infotech Enterprises was down by 5% to Rs219. The company announced that it signed a new multi-year contract with digital map leader Tele Atlas to provide extensive map database and software development services. The scrip touched an intra-day high of Rs228 and a low of Rs215 and recorded volumes of over 3,000 shares on NSE.
Given the global scenario and sentiments, for tomorrow markets may continue to be under pressure. So it would be advisable to be on the side lines.
Corporate Front Page
ICICI Bank and ICICI Lombard have come under the scanner of fair trade practices body MRTPC for imposing “unfair and unjust” conditions on the insurance cover provided to the credit card customers. (BS)
Tata Steel may raise ~Rs40bn through an issue of non-fungible GDRs. (ET)
JSW Steel Group has signed a $2bn deal with a Japanese shipping firm for transportation of coal over ten years. (BS)
JSW Steel inaugurated a 1mn ton capacity cold rolling mill complex at its Vijayanagar works. (BL)
Expert Committee on Infrastructure development and Miscellaneous Projects has granted the Coastal Regulation Zone clearance to Reliance Power’s its 4,000 MW Krishnapatnam ultra mega power project in Andhra Pradesh. (FE)
China Light and Power Holdings has emerged the lowest bidder for setting up the 1,326 mw power generation project at Jhajjar in Haryana, ahead of Lanco Infratech. (BS)
BPCL has been slapped a penalty of Rs330mn by the income tax department (Mumbai) for non-payment of proper advance taxes for 2006-07. (BS)
Tata BP Solar, a venture of Tata Power and BP Solar have signed an agreement with Calyon Bank, BNP Paribas and others to raise US$78mn for expansion. (ET)
Godrej Industries has received shareholders approval for further investing up to Rs3.6bn in Godrej Consumer Products. (BS)
Dubai-based Emaar Properties is planning to launch private residences designed by Giorgio Armani. (BS)
Future Group is picking up a 70% stake in Aadhaar, Godrej Group’s rural retailing initiative. (ET)
ACC, Ambuja Cement and Lafarge are looking at buying the closed manufacturing facilities of Cement Corporation of India. (ET)
With the Ministry of Civil Aviation not indicating a fresh date for shifting of operations the new Rajiv Gandhi International Airport, the GMR Hyderabad International Airport is set to incur significant losses. (BL)
Delhi-based Selan Exploration Technology has roped in Malaysia-based Kejuruteraan Samudra Timur (KSTB) to provide land drilling rig services in Ahmedabad, Gandhinagar and Mehsana districts in Gujarat. (BS)
Union Bank of India has readied a reverse mortgage loan product, which will be launched in couple of weeks. (BL)
The Chhattisgarh government has denied that it has ever signed any pact with NTPC to draw water from the state’s resources for its 2,980-Mw Sipat power project in Bilaspur district. (BS)
In a strongly-worded letter, the CPI (M) has sought Prime Minister Manmohan Singh’s urgent intervention to shore up BSNL’s mobile capacity. (BS)
High coffee bean prices have affected the profit margins of Hindustan Unilever’s (HUL) beverage segment. (BS)
The steel ministry is considering withdrawal of SAIL and Rashtriya Ispat Nigam from the JV with NMDC for setting up a 4mn ton steel plant in Chhattisgarh. (ET)
Russian conglomerate, Sistema plans to invest as much as US$5bn in India over the next three years. (FE)
DHL Express plans to open 1,000 retail points across the country by 2010 up from current 150 centers. (Mint)
Signet Solar Inc, manufacturers of silicon thin film photovoltaic (PV) modules, will set up its first manufacturing plant at Sriperumbudur at an investment of Rs20bn and has signed an MoU with the Tamil Nadu government. (ET)
West Bengal Govt. plans to set up Rs4bn retail chain. (Mint)
Economic Front Page
Private equity and overseas venture capital investments in Indian Companies could soon be included in FDI caps for each sector. (FE)
After RBI, it is now the income tax authorities who have put banks and companies disclosing losses in their foreign exchange derivative structures under the scanner. (BS)
Non-food credit offtake in the fortnight ended February 29, 2008, has risen up by Rs400bn to Rs22,069bn, as against Rs7.9bn in the previous fortnight. (BS)
IIP’s Feb data may show manufacturing slump in February, as the output increase rate and new orders have been weakest in the last six months. (BS)
The number of POIs (points of interconnection) with congestion has fallen to 315 during the three-month period ended December 2007, compared with 348 registered during the same period ended September 2007. (BS)
The government has said that the country will have electricity on demand by 2012 and it needs nuclear energy to meet future demand. (BS)
The country’s power shortage rose to its highest level at 12.8% in January 2008 as compared to 12.51% in January 2007. (BS)
The scope of the Rs600bn farm loan waiver package will be extended and dry-land farmers having more than five acres will also be able to benefit from the scheme. (BS)
The Congress government in Andhra Pradesh today announced loan waiver for weaker sections, physically challenged persons, minorities and women, amounting to Rs16.9bn and covering about 4.38mn beneficiaries. (BS)
In a relief to direct-to-home (DTH) operators facing exorbitant pricing of channels from the broadcasters, the Punjab and Haryana High Court has directed the sector regulator Trai to decide on the pricing issue within eight weeks. (BS)
According to the Solvent Extractors Association of India (SEA), edible oil imports increased to 0.43mn tons against 0.15mn tons during the same period a year ago. (BL)
The Andhra Pradesh Cabinet on Monday approved the lowering of sales tax from 33% to 4% on ATF. (BL)
Telecom Regulatory body TRAI will impose a fine of up to Rs20,000 on service providers for non-compliance of its directive regarding unsolicited tele-marketing calls and messages. (ET)
China has authorized coal exports of 31.8mn tons in 2008. (Mint)