When a person is down in the world, an ounce of help is better than a pound of preaching.
The local bulls seem to have got more than an ounce of help. A big rally on Wall Street and across most global markets is surely going to fire them up. Even the jobbers and arbitragers may not be able to resist the temptation, at least for the day. Though the key indices closed flat yesterday, volume came crashing down as the new STT regime kicked in. In a protest of sorts, jobbers and arbitragers stayed away from the market yesterday, pulling down volume substantially.
The combined cash market turnover of BSE and NSE dropped 23% to Rs157.18bn. Mumbai brokers met to discuss the ramifications of the withdrawal of Section 88E benefit on their business. Whether the agitation by jobbers and arbitragers coupled with the pressure tactics of the broker lobby leads to a rollback remains to be seen. Volume and turnover may remain subdued in the near term till there is more clarity on the STT issue.
Wall Street reacted to a raft of positive developments, including a stronger dollar, better-than-expected reports on manufacturing and construction, and signs that the hard-hit financial sector may be starting to turn the corner. Lehman Brothers' equity offering coupled with UBS' fresh capital raising plan raised hope that banks and brokerages are able to weather the turbulence in credit markets. As a result, US stocks surged, with the Dow Jones Industrial Average jumping close to 400 points on the first day of the new quarter.
All 30 components of the Dow ended higher, with shares of Citigroup leading the way, up 11.3%. All the three main stock indexes extended gains in the wake of US economic data that showed that the Institute for Supply Management's index inched up to 48.6% in March from 48.3% in February, topping the forecasts of a decline to 47%. Separately, the Commerce Department reported that US construction spending fell 0.3% in February, less than the 1% drop predicted by economists. Falling oil and gold prices also aided the equity markets advance. Whether the good times can continue will depend on quarterly earnings and economic reports, including Friday's March jobs report.
As far as the India is concerned, the worrying factor is the slowdown in the local economy due to high interest rates and of course the headline-grabbing inflation, which is at nearly a 14-month peak. The government has taken a series of steps, mostly on the fiscal front, in the past few days to curtail inflation and future expectations. But, they may not have any major impact on prices till global prices of various commodities start to moderate. Oil and gold prices have cooled off a little in the last couple of days. They need to correct more, as do other essential commodities, particularly food items, to have a sobering effect on local inflation, and therefore interest rates. For the long term, there is only one solution. Boost local production to meet the growing demand.
Asian markets are sharply higher this morning, led by banks on speculation that financial companies will be able to overcome credit market losses. The MSCI Asia Pacific Index added 3.3% to 143.19 as of 10:58 a.m. in Tokyo. All 10 industry groups advanced on the benchmark, which rose the most since March 25. An index of financial stocks led gains.
The Nikkei in Tokyo was up 3.3% at 13,079 while the Hang Seng in Hong Kong shot up 4.5% to 24,178. The Kospi in Seoul rose 2.2% to 1739 while the Straits Times in Singapore advanced 2.4% to 3120. The Shanghai Composite in China gained 2.7% to 3417 and the Taiex in Taiwan added 2% to 8581.
Back to the US stock market, the main stock indices posted solid gains after Lehman Brothers and UBS said they are raising $19bn to replenish capital, fueling some hope that the strained credit market is slowly on the mend. Lehman rose for the first time in seven days and UBS sparked a rally in Europe. GE and United Technologies led industrial shares higher after the Institute for Supply Management's manufacturing index contracted less than forecast.
The S &P 500 Index added 47.48 points, or 3.6%, to 1,370.18, rebounding from the worst quarterly performance since 2002. The index hasn't gained more on the first day of the second quarter since a 4.8% rally in 1938. The Dow surged 391.47 points, or 3.2%, to 12,654.36. The Nasdaq Composite Index gained 83.65 points, or 3.7%, to 2,362.75. Almost 10 stocks advanced for every one that fell on the New York Stock Exchange.
A big positive behind the impressive gains on Wall Street was the favorable reception to Lehman's offering. It was three times oversubscribed, which means that people are interested in investing in Lehman. Shares of the securities firm advanced 17.8% after the company announced plans to offer $4bn in convertible preferred shares. UBS shares gained 14.6% after the company disclosed $19bn in new write-downs and said it would issue another $15bn in shares. Germany's Deutsche Bank reported a $3.9bn write-off, mostly on leveraged loans, commercial real estate and alt-A exposures. Its shares rose about 4%.
On the downside, reports showed that US auto sales continued to slide in March, including Ford, which saw its US sales slump 14%.
The ISM's manufacturing index rose to 48.6 in March, from 48.3 in February, surprising economists who thought it would fall to 47.5, on average. Nonetheless, any reading below 50 indicates weakness in the sector.
Another report showed that construction spending fell 0.3% in February, after falling 1% in January. Economists thought spending would fall 0.9% in February.
A rising dollar sent oil and metal prices lower, providing investors with some relief on the inflation front. US light, crude oil for May delivery fell 60 cents to settle at $100.98 a barrel on the New York Mercantile Exchange. COMEX gold for April delivery fell $33.30 to settle at $882.90 an ounce.
The dollar rose versus the euro and the yen. Treasury prices tanked, raising the yield on the benchmark 10-year note to 3.56% from 3.41% late on Monday.
European shares started the second quarter on a strong footing. The pan-European Dow Jones Stoxx 600 index surged 3.3 % to end at 316.07. The UK's FTSE 100 jumped 2.6% to 5,852.60, while the German DAX 30 surged 2.8% to 6,720.33 and the French CAC-40 rose 3.38% to 4,866.
Major Latin American and other emerging markets also closed higher. The Bovespa index in Brazil opened the second quarter with a rise of 3% to 62,774.85. Mexico's IPC gained 2.8% to end at 31,787.68, its first closing above the 31,000-points level since Dec. 10. The RTS index in Russia was up 0.5% at 2063 and the ISE National 30 in Turkey jumped 4.6% to 50,728.
Market may stage recovery
Thanks to overnight gains in the US and the Asian markets, Indian bourses opened with a promising start hitting an intra-day high of 15,834. However, markets lost ground, and there on turned choppy despite a smart recovery in Asian markets, and a positive start in the European markets. Traders back home preferred to book profits at higher levels.
Further, another dampener was media reports stating, UBS, the European bank hardest-hit by the credit crunch, on Tuesday announced an additional US$19bn in writedowns related to the meltdown in the US subprime mortgages. The Swiss financial major also said that its Chairman Marcel Ospel will step down after reporting a first-quarter loss.
Finally, the BSE benchmark Sensex ended flat at 15,626 and the Nifty index ended at 4,739. Overall about 1,725 stocks advanced; 918 stocks declined while 51 stocks remained unchanged. Among the 30 stocks of Sensex 13 stocks ended in positive territory and 17 stocks ended in red.
Among the BSE Sectoral indices, the BSE Capital Good index (down 3.2%), BSE Metal index (down 1.5%) and BSE Auto index (down 1.2%). Among the gainers, BSE Oil & Gas index (up 3.3%) and BSE FMCG index (up 2%).
Among the 30-scrips of Sensex, L&T, BHEL, ICICI Bank and Bharti Airtel were among the major laggards. On the other hand, RIL, ITC and ONGC were among the major gainers.
Videocon Industries surged by 2.5% to Rs314 after the company said that it may make a bid for Motorola’s Handset unit. The scrip touched an intra-day high of Rs322 and a low of Rs305 and recorded volumes of over 4,00,000 shares on BSE.
RPL surged by over 7% to Rs167 after the company said that they would raise US$500mn for Jamnagar Refinery. The scrip touched an intra-day high of Rs168 and a low of Rs155 and recorded volumes of over 1,00,00,000 shares on BSE.
MTNL gained by over 3% to Rs99 after the company said that it received refunds from Income Tax Department for various assessment years. The total amount received from Income Tax Department amounting to Rs13.95bn out of which Rs1.66bn has been refunded towards interest on refunds. The scrip touched an intra-day high of Rs100 and a low of Rs96 and recorded volumes of over 13,00,000 shares on BSE.
Maruti Suzuki was down by 1.7% to Rs815. The company reported 2.1% decline in sales in March. The company sold 70,296 units last month compared with 71,772 a year earlier. The scrip touched an intra-day high of Rs841 and a low of Rs809 and recorded volumes of over 51,000 shares on BSE.
TVS Motors was trading higher by 1.7% to Rs35. The company announced its March sales fell 8% to 1,17,045 units. The scrip touched an intra-day high of Rs36 and a low of Rs34 and recorded volumes of over 2,00,000 shares on BSE.
BHEL slipped by over 8% to Rs1991, the most in two months on concerns that fourth-quarter profit may miss expectations. The scrip touched an intra-day high of Rs2088 and a low of Rs1881 and recorded volumes of over 4,00,000 shares on BSE.
Kale Consultants was down by a 1.5% to Rs43. The company announced that it secured order from Globalink Transportation. The scrip touched an intra-day high of Rs45 and a low of Rs42 and recorded volumes of over 25,000 shares on BSE.
Ambuja Cement edged higher by 0.5% to Rs121 after the company announced its March sales which rose 16% to 1.72mn tons and March production rose 23.7% to 1.77mn tons. The scrip touched an intra-day high of Rs123 and a low of Rs119 and recorded volumes of over 60,000 shares on BSE.
Accentia Technologies slipped by 2.5% to Rs140. The company announced that it acquired 51% stake in OAK Technologies. The scrip touched an intra-day high of Rs150 and a low of Rs136 and recorded volumes of over 14,000 shares on BSE.
After hitting an intra-day high of Rs38.50, Essel Propack pared all its intra-gains and finally slipped 3.3% to Rs35. The company announced that Tacpro Inc., USA, a subsidiary of Lamitube Technologies (Cyprus) Ltd, which in turn is a wholly owned subsidiary of the Essel Propack has intimated to the Company about the acquisition of 100% shareholding of Catheter and Disposables Technology, Inc., a Company based in Minneapolis, USA and in the business of Medical Devices. The scrip touched an intra-day high of Rs38.50 and a low of Rs35 and recorded volumes of over 81,000 shares on BSE.
Ruchi Soya India’s biggest edible oil importer also erased intra-gains and marginally slipped by half a percent to Rs86. The scrip hit an intra-day high of Rs94 on reduction in edible oils duty. The scrip recorded volumes of over 71,000 shares on BSE.
Pratibha Industries dropped by 2.4% to Rs321. The company said that it secured a contract for construction of a commercial building "SUNSHINE TOWERS" at Dadar (West) Mumbai from Sunshine Housing Development Pvt. Ltd. The value of the contract is Rs370.3mn. The project involves 'construction of a commercial building of basement + 41 floors in structural steel work'. The project is to be executed in 18 months. The scrip touched an intra-day high of Rs334 and a low of Rs315 and recorded volumes of over 2,000 shares on BSE.
Power Grid edged higher by half a percent to Rs98 after the company announced that it would add 8,000km of power lines by March 2009 and would raise Rs45bn via bonds, loans this year. The scrip touched an intra-day high of Rs99 and a low of Rs97 and recorded volumes of over 10,00,000 shares on BSE.
Sunil Hi-Tech rallied by over 8% to Rs206 after the company said that it won Rs1bn order from NTPC and JSW Steel. The scrip touched an intra-day high of Rs209 and a low of Rs194 and recorded volumes of over 16,000 shares on BSE.
Corporate News
Gail signs contract to sell total gas produced in PMT fields. (Mint)
Essel Propack buys a US medical devices firm in an all cash deal. (Mint)
PowerGrid will add 11% power lines in 2008. (Mint)
The IT department gives MTNL Rs13.95bn refund. (BS)
Cairn India to raise US$250mn loan from IFC. (BS)
Maruti’s vehicle sales decline by 2% yoy in March 2008 to 70,296 units. (BS)
Novartis challenges National Pharmaceutical Pricing Authority (NPPA) over Voveran price fixing. (BS)
Bharti Airtel successfully tests 3G applications with various equipment suppliers. (BS)
Provogue sells 27% stake in real estate arm for Rs4,570mn. (BS)
Emaar MGF lines up US$400mn for four hotels in a tie-up with Marriott. (BS)
Arvind Brands, the apparel and retail division of Arvind Mills, plans to open multi-brand outlets. (BS)
Tata Motors vehicle sales up 6% yoy in March 2008 to 66,495 units. (BL)
M&M auto sales up 20% yoy and tractor sales up 8% in March 2008.
Reliance Petroleum to raise US$500mn. (BL)
Bajaj Auto plans to launch four new 125cc motorcycles in FY09. (BL)
Reorganisation of Glenmark Pharma’s business into speciality and generics has been implemented. (BL)
Cairn India’s Bhagyam field development gets clearance. (BL)
Great Offshore buys back shares not exceeding Rs750 per share. (BL)
DLF and Hilton Hotels sign management pacts for seven new hotel developments in the pipeline. (BL)
Gujarat Ambuja Exports’ new plant in Uttrakhand goes onstream. (BL)
Bosch Chassis withdraws delisting plans. (BL)
Videocon likely bid to acquire the hand-set business of Motorola. (ET)
Reliance Industries strikes new gas in Krishna Basin. (ET)
DLF in talks with The Central Group, Thailand for an alliance. (ET)
Ranbaxy Labs to acquire UK business of Dowpharma Small Molecules, a unit of Dow Chemical. (ET)
Tata’s likely to secure GSM spectrum on a Pan-India basis, under the dual technology license. (ET)
IOB ties up with Annapurna, Pune for micro lending. (ET)
Reliance Money enters into agreement with Canadian firm, Recognia to offer technical analysis and price forecasting services. (ET)
TCS to set up Global engineering centre in Pune. (FE)
Tata’s AMC partners with UK-based New Star to extend benefit of investing in Indian equity markets. (FE)
Economy News
Government to tell steel manufacturers to cut prices by 10-20% in a month. (BS)
Airlines opt for differential pricing after fuel price hike. (Mint)
Rates for 192 drugs fixed; that for 35 others revised. (Mint)
Merchandise exports grow by 35% during February 2008. (BS)
General insurance industry posts 12% growth April 2007-February 2008. (BL)
Indian Railways has awarded Bharti Airtel to provide services to its 100,000 employees. (BL)
Government may allow Sugar mills to sell 2mn tons freely in the local market. (ET)
Underwriting to become mandatory for all IPO’s. (ET)
DoT plans to allot start-up spectrum to nine new telecom license holders by April-end. (ET)
The Communication Ministry approves TRAI’s recommendation to let service providers share active infrastructure. (ET)
Exports record a surge of 35% in February 2008 to US$14.23bn. (ET)
Petroleum and Natural Gas Regulator Board says city gas distribution to be awarded on the basis of network tariff, CNG compression charge and length of pipeline proposed to be laid. (ET)
Finance Minister extends service tax refund on three more export related services. (FE)
Twenty-eight companies lined up for developing and running two coal blocks of MahaGuj Collieries Ltd in Orrisa. (FE)
Airline Companies set to hike fares following an increase in jet fuel prices. (FE)