If we're growing, we're always going to be out of our comfort zone.
The bulls received a parting gift from RBI chief Y.V. Reddy as the central bank decided to leave key rates unchanged, and instead hiked the CRR by another 25 bps.As always, the latest move by Reddy & Co. surprised the markets, which were looking for a small increase in repo and reverse repo rates. The RBI's decision to maintain status quo on interest rates is aimed at curtailing inflation by sucking out excess liquidity. At the same time, the move will keep rates mostly stable, thus allowing the growth momentum to continue. Rates on auto loans are likely to rise, while home loans of up to Rs30 lakh may become a little cheaper. Banks will definitely be under pressure to maintain their margins amid slowing credit growth and high interest rates.
Stocks and bonds rallied following the RBI's announcement. The rally got further boost from the Finance Minister who decided to extend tax concessions to the IT sector under the STPI scheme for one more year. PSU oil firms too gained after their proposed refineries too received tax exemption. Today, the Fed will announce its policy on interest rates and provide some clues on the outlook for the US economy. Wall Street expects a 25 bps cut in the fed funds rate. Some experts also see the Fed signaling status quo for some time after today's decision. There is also a slim chance of no revision in rates. The Bank of Japan is also likely to keep its key rate unchanged today.
We expect the market to open flat to slightly up. Things may turn lackluster and choppy later on. The overall the mood is much brighter on the street and odds of a major downside are pretty slim. Still, one needs to be a little careful as there may be some cooling from higher levels.
FIIs were net buyers of Rs2.32bn (provisional) in the cash segment yesterday while the local institutions too pumped Rs4.03bn. In the F&O segment, foreign funds were net buyers of Rs8.03bn. On Monday, FIIs were net buyers of Rs812mn in the cash segment while Mutual Funds offloaded shares worth nearly Rs2bn.
Key Results Today: Aditya Birla Nuvo, Advanta, Alfa Laval, Amtek Auto, Amtek India, Aptech, Assam Co., BILT, Balrampur Chini, Bank of Maharashtra, Bank of India, Dabur India, Dena Bank, DLF, Genus Power, Gillette India, Great Offshore, Gujarat Alkalies, Gujarat Gas, Hindalco, HDFC, Info Edge, Jaiprakash Associates, Jindal Saw, Jindal Stainless, Kansai Nerolac, KEC International, MTNL, Moser Baer, Mphasis, Onmobile, Prime Focus, P&G Health, Puravankara, RCOM, Sintex, Spice Telecom, Sterling Biotec, Syndicate Bank, Tanla, Tata Elxsi and Videocon Industries.
Asian stocks were trading mixed this morning. Commodity producers were down after metals and crude oil prices declined and US consumer confidence sank to a five-year low.
BHP Billiton led declines after gold and copper slumped. Inpex Holdings, Japan's biggest oil explorer, and Woodside Petroleum of Australia fell as crude oil tumbled the most in a month. Honda slipped the most in a week.
The Nikkei in Tokyo was down 11 points at 13,883 while the Hang Seng in Hong Kong was down 80 points at 25,833. The Kospi in Seoul rose 5 points to 1816 while the Straits Times in Singapore was almost flat at 3174.
The Shanghai Composite in China rallied 93 points to 3616 while the Taiex in Taiwan advanced 26 points to 8917.
The MSCI Asia Pacific Index fell 0.6% to 150.12 as of 10:23 a.m. in Tokyo, the steepest drop since April 22.
An index of raw-materials producers had the biggest decline among the index's 10 industry groups, eight of which were down today. The measure is up 8% this month, poised for its biggest monthly advance since September 2005.
US stocks ended mostly lower on Tuesday. The technology sector got a slight boost from Corning's encouraging results, while the broader market remained cautious ahead of the Federal Reserve's policy announcement on Wednesday.
The mood was generally sour through the session as consumer confidence slid to a five-year low, property values slumped. Also, a drop in oil and metal prices pushed commodity producers lower.
Freeport-McMoRan Copper & Gold and Newmont Mining declined as gold and copper fell, while homebuilders dropped for the first time in four days on a report that housing prices plunged by the most on record.
Pharma major Merck tumbled the most in a month after failing to win approval for a cholesterol pill. Apple and Google advanced, leading the Nasdaq Composite Index to its fourth gain in five days.
The S &P 500 Index lost 5 points, or 0.4%, to 1,390.94, its second straight decline. The Dow Jones Industrial Average slipped 40 points, or 0.3%, to 12,831.94. The Nasdaq finished nearly unchanged at 2,426.1.
Market breadth on Wall Street was negative. About five stocks fell for every three that rose on the New York Stock Exchange.
US light crude oil for June delivery fell $3.12 to settle at $115.63 a barrel on the New York Mercantile Exchange, after a Scottish refinery resumed operation following a labor dispute. On Monday, oil hit a record $119.93 a barrel in electronic trading.
Meanwhile, the national average price for a gallon of regular unleaded gas hit an all-time record of $3.607, AAA reported.
COMEX gold for June delivery fell $18.70 to settle at a four-month low of $876.70 an ounce. The dollar rose versus the euro and fell versus the yen. Treasury prices were flat, with the yield on the benchmark 10-year note at 3.82%, unchanged from 3.82% Monday.
Wednesday could be a volatile day on Wall Street as the FOMC will announce its decision on interest rates at the end of a two-day meeting. But, the market will first have to digest the initial report on first-quarter GDP and another report on crude inventories.
The Fed is expected to cut rates by a quarter of a percentage. Investors will scrutinize the tone of the FOMC statement to determine whether or not additional rate cuts could be in the cards.
The New York-based Conference Board said its consumer confidence index dropped to 62.3 in April from 65.9 in March, reaching the lowest level since March 2003. But the decline was not as steep as economists had expected.
On the housing front, the S&P Case/Shiller Home Price Index showed that home prices posted record declines in February. In addition, foreclosure filings in the first three months of 2008 more than doubled from last year, according to industry group RealtyTrac.
Merck said late Monday that the Food and Drug Administration (FDA) is requesting more information regarding its cholesterol drug candidate Cordaptive. Merck shares fell more than 10%.
Visa reported a jump in quarterly profit late on Monday. Its shares rose about 4.5%. Troubled home lender Countrywide, which is in the process of being bought by Bank of America, reported a loss of nearly $900mn during the first quarter on higher housing-related credit losses.
Deutsche Bank, Germany's biggest bank, announced a $4.2bn writedown for the first quarter. The bank's CEO said financial market conditions during the quarter were the most difficult in recent memory.
On the upside, the world's largest maker of liquid crystal display glass, Corning reported that first-quarter profit more than tripled versus last year on strong demand for flat-screen TVs and computers. Its shares rose nearly 3%.
European shares broke a four-session winning streak. Michelin and Swiss chemical maker Ciba Holdings fell after cutting their 2008 outlook. However, strong results from BP and Shell cushioned the decline. The pan-European Dow Jones Stoxx 600 index lost 0.9%, ending at 320.67.
Germany's DAX 30 fell 0.6% to 6,885.34 and the French CAC-40 dropped 0.7% to 4,977.10. The UK's FTSE 100 held up better, ending the day virtually flat at 6,089.40.
In the emerging markets, the Bovespa in Brazil tumbled 2.8% to 63,825 while the IPC index in Mexico was down 1.15% at 30,270. The RTS index in Russia dropped 1.1% to 2126 while the ISE National 30 index in Turkey slid 1.4% to 53,853.
Bears CRRy...Sensex adds 362 points
RBI’s announcement today fired up bulls after RBI’s monetary Policy left the repo rate and reverse repo rate unchanged and hiked the CRR by 25 bps. NSE Nifty closed above the 200 DMA (daily moving average) for the first time in 40 days since February 29 (Budget Day). This resulted in banking stocks leading the rally with momentum in stocks like SBI, HDFC Bank and Axis Bank.
BSE IT index also showed strength after Finance Minister extended the income tax exemption for software companies by a year to March 31, 2010. Stocks like TCS, Wipro, Satyam Computers and Infosys were among the major gainers.
Metal shares too joined the party despite the Government scrapping customs duty on steel and imposing export duty on steel products. Other prominent gainers included Realty and Oil & Gas.
Finally, the BSE 30-share Sensex closed at 17, 378 up 362 points and NSE Nifty closed at 5, 195 up 105 points.
Satyam Computers surged by over 8% to Rs479 following reports stating that Mindtree Consulting and Satyam Computers bagged a three year contract from Arcelor Mittal. The scrip touched an intra-day high of Rs486 and a low of Rs439 and recorded volumes of over 24, 00, 000 shares on BSE.
TCS gained by over 3% to Rs910 following reports stating that the company bagged Rs4.5bn contract from Scottish Water, a UK based utility firm. The scrip touched an intra-day high of Rs933 and a low of Rs872 and recorded volumes of over 7, 00, 000 shares on BSE.
GAIL gained by 0.5% to Rs439 following reports stating that the company would be a part of the consortium building the US$7.6bn Turkmenistan-Afghanistan-Pakistan-India gas pipeline by 2015. The scrip touched an intra-day high of Rs447 and a low of Rs431 and recorded volumes of over 1, 50, 000 shares on BSE.
IOC surged by over 0.5% to Rs448. Reports said that the company will seek board approval for doubling of its borrowing limit to create a war chest of Rs800bn to fund a major acquisition in E&P sector. The scrip touched an intra-day high of Rs465 and a low of Rs439 and recorded volumes of over 1, 50, 000 shares on BSE.
Cairn India rose by over 0.5% to Rs261 after the company announced its Q1 results with profit at Rs116cr (up 205%) and net sales at Rs316cr (34%). The scrip touched an intra-day high of Rs264 and a low of Rs257 and recorded volumes of over 14, 00, 000 shares on BSE.
BPCL gained by over 1% to Rs395 after reports said that the company in collaboration with Shapoorji Pallonji and Nandan Biomatrix is forming a JV to cultivate, extract and sell jatropha based bio-diesel through its outlets. The scrip touched an intra-day high of Rs399 and a low of Rs389 and recorded volumes of over 50, 000 shares on BSE.
M&M increased by over 1% to Rs642. According to reports, the company entered spares, used-car markets and plans to invest Rs2.5bn approximately in this segment. The scrip touched an intra-day high of Rs646 and a low of Rs632 and recorded volumes of over 40, 000 shares on BSE.
Tata Motors gained by 1% to Rs639 following reports stating that the company is planning a new platform for a compact car code-named X4. The scrip touched an intra-day high of Rs648 and a low of Rs630 and recorded volumes of over 1, 50, 000 shares on BSE.
Corporate News
Reliance Power to spend US$650mn on Indonesian coal mine. (Mint)
Cairn India to start Bhagyam output in 2010; receives approval to develop field with peak output of 40,000 barrels per day. (DNA)
Grasim lines up Rs30bn spend for investments in cement, ready mix concrete and power capacity. (DNA)
Saroj Datta and five other Jet Airways executives resign. (Mint)
NTPC and BHEL to invest Rs50bn in a JV to execute EPC contracts. (DNA)
GVK group plans port close to SEZ in Tamil Nadu. (Mint)
NTPC mulls entry into cement manufacturing with private partners. (Mint)
Alstom Projects may join NTPC-BHEL JV to manufacture turbines and generators. (Mint)
Alibaba.com partners with Infomedia to tap SME’s. (Mint)
Berger Paints to buy Polish firm Bolix SA for US$38mn. (Mint)
Tata Finance refinances US$950mn loan. (BS)
UTV plans 18 films in a year; plans to invest Rs10bn. (BS)
Dish TV CEO Arun Kumar Kapoor quits. (DNA)
Reliance Industries controlled gas field in KG basin to go on-stream by August 2008. (BL)
M&M plans ultra low-cost rural tractor at a cost of around Rs0.2mn. (BL)
Satyam enters into agreement with Arcelor-Mittal for providing sub-contractor activities and help in overall business transformation. (BL)
BHEL to spend Rs5bn for research and development in FY09. (BL)
RNRL has filed a reply in Bombay High Court seeking the government appeal to be dismissed. (ET)
3i Infotech acquires 100% stake in Regulus a US based company for US$80mn.(BL)
TATA Power to refinance US$850mn worth of loans for funding its acquisition of 30% stake in Indonesioan thermal coal producer, PT Kaltime Prima Coal and PT Arutmin Indonesia. (ET)
Rajan Raheja Group is likely to get license for non-life insurance from IRDA. (ET)
SAIL to invest 50% in Steel Industries Ltd Kerala for manufacturing high quality steel with minimal carbon contamination. (FE)
Dhanus Technology signed a MoU with Kerala state private bus operator for providing tracker systems. (FE)
Pyramid Saimira has entered into an agreement with Sony to develop console game based for Sony Play Station2.(FE)
Economic News
Paint makers plan to increase prices next month. (DNA)
Housing loan limit with a lower risk weight of 50% enhanced to Rs3mn from Rs2mn. (BS)
Bad loan norms for infrastructure loans relaxed. (BS)
Government has decided to provide insurance and pension to 300mn workers under its social security scheme. (ET)
Banks to hike auto loan rates to retain margins. (ET)
Government has imposed US$200 per ton duty on basmati exports. (BL)
Finance Minister says PSU refineries to get tax holiday, if they commence refining before March 31, 2012. (BL)
Steel companies threaten to oppose government on steel prices. (FE)
Government imposed export duty of Rs8,000 per ton on basmati rice and lowered minimum export price to US$1,000 per ton from US$1,200. (BS)