The minute you settle for less than you deserve, you get even less than you settled for.
After falling for four consecutive days, the market managed to rebound, mainly due to short-covering in the F&O segment ahead of today's expiry. What's more, the indicators from the derivative side of the market. Nifty futures expiring in May saw huge unwinding of shorts, with the near-month contract ending the day at a premium of 18 points as against a discount of 13 points the previous day. Also, Nifty futures for the June series witnessed strong addition in open interest with the contract erasing its discount to the spot index. Nifty futures still have around 20mn shares outstanding in the near-month series. As a result, we'll have an action-packed settlement day. What should also please the bulls is the fact that global markets are smiling again, led by the US market.
On the whole, we expect the key indices to extend yesterday's gains, helped by further short-covering in the F&O space. However, the broader market may remain subdued amid lack of investor interest in the small-cap and mid-cap stocks. Also, today's gains may not sustain if tomorrow's GDP data and weekly inflation numbers turn out to be disappointing.
Select sector-centric and stock specific action will continue. Notwithstanding the positive outlook for the day, we remain cautious in the near-term as the number of negatives far outweigh the positives, which are almost nil. The market is looking for direction as we are in a consolidation phase. Commodity prices in particular seem to be directing the day-to-day direction of the stock market. Investors are worried as to how high oil prices will go, and what impact it will have on corporates and consumers.
Key Results Today: Adlabs, Aegis Logistics, Anant Raj Industries, Banswara Syntex, Cinemax, HPCL, IPCA Labs, Lanco Infra, L&T, National Fertilizers, NTPC, Orchid Chem, Power Grid Corp and TN Newsprint.
FIIs were net sellers of Rs8.83bn (provisional) in the cash segment on Wednesday while local institutions were net buyers of Rs5.28bn. Foreign funds were net buyers of Rs15.01bn in the F&O segment yesterday.
On Tuesday, FIIs offloaded Indian shares worth Rs3.54bn from the cash segment. Mutual Funds were net sellers of Rs945mn.
Asian stocks rose the most in two weeks today after an unexpected gain in US durable-goods orders boosted regional exporters of electronics and autos. Higher oil prices lifted energy companies.
Toyota and Samsung Electronics both climbed to the highest this week. Toyota also gained as the weaker yen lifted the profit outlook for overseas sales.
BHP Billiton advanced after the price of crude rose back above $130 a barrel.
The MSCI Asia Pacific Index advanced 1% to 148.31 as of 9:50 a.m. in Tokyo, the biggest gain since May 16. All 10 industry groups climbed.
Japan's Nikkei 225 Stock Average climbed 1.9% to 13,973.79, and benchmark indexes also increased in Australia, New Zealand and South Korea.
US stocks managed modest gains on Wednesday after a fairly volatile session where investors considered fluctuating oil prices, fresh woes for the financial sector and a smaller-than-expected decline in durable goods order.
The Dow Jones Industrial Average rose 45.68 points, or 0.4%, to end at 12,594.03, with 17 of its 30 components trading higher. The S&P 500 index gained 5.49 points, or 0.4%, at 1,390.84, and the Nasdaq Composite was up 5.49 points, or 0.4%, at 1,390.84.
Stocks rose in the morning on lower oil prices and a smaller-than-expected decline in durable goods orders. But investors struggled to sustain those gains throughout the session as oil prices see-sawed. A late-session advance in select shares helped the major gauges close higher.
Financial shares were under pressure after Citigroup said AIG may need to raise more capital and regional bank KeyCorp. warned that it will have to write off more loans that haven't been repaid than it initially thought.
After rising from mid-March to mid-May, US stocks have been struggling of late, as market participants look for more clarity on the economy and the outlook for inflation. There are still a lot of uncertainties, with consumers getting hit by the credit crunch and higher fuel prices.
Market breadth was positive. Three stocks gained for every two that fell on the New York Stock Exchange.
Oil prices moved higher despite a stronger dollar and softening US demand for oil products in light of a sluggish economy and record energy prices.
Crude oil fell nearly US$3 earlier in the day, but rebounded after Morgan Stanley's co-head of global economics, Richard Berner, said crude prices could easily reach US$150 a barrel this year, and that high prices will not be enough to curb demand in developing countries.
Light, sweet crude oil for July delivery rose US$2.18 to settle at US$131.03 in New York. The contract fell US$3.34 on Tuesday, and was about US$4 off its all-time high of US$135.09 a barrel, which it hit last Thursday.
Gas hits 21st record high: The national average price for a gallon of regular unleaded gas rose to a record US$3.944 from the previous day's record of US$3.937, AAA reported.
Gold retreated in response to the stronger dollar. COMEX gold for August delivery fell US$7.80 to settle at US$905 an ounce. The dollar gained versus the euro and yen. Treasury prices tumbled, raising the yield on the 10-year note to 4% from 3.92%.
Orders for manufactured goods fell 0.5% in April, after dropping a revised 0.3% in March. The decline was smaller than the 1.5% economists were expecting. Thursday brings readings on GDP growth, the weekly jobless claims and the weekly oil inventories report.
European shares advanced on Wednesday. The pan-European Dow Jones Stoxx 600 index climbed 1% to 320.24. The UK's FTSE 100 closed up 0.2% at 6,069.60, while Germany's DAX 30 advanced 1.1% to 7,033.84 and the French CAC-40 rose 1.3% to 4,971.11.
In the emerging markets, the Bovespa in Brazil jumped 3% to 73,153 while the IPC index in Mexico was up 0.7% at 31,647. The RTS index in Russia rose 0.3% at 2396 while the ISE National 30 index in Turkey dropped 2.3% at 47,841.
F&O expiry, global cues hold key
A choppy and a dull day ended with positive gains as short-covering ahead of expiry aided the recovery in the late afternoon trades. Also a positive start in the equity markets across Europe coupled with media reports stating the government's decision to relax its stand on ban of cement exports took the Nifty to close above the 4,900 mark.
FMCG, IT, metal and even the banking stocks were in demand. The fertilizer stocks were in action for second straight session. Among the losers were Realty, power and capital goods stocks. Even the Mid-Cap and the Small-Cap stocks attracted buying interest.
Finally, the BSE benchmark Sensex ended 249 points higher to close at 16,549 and the Nifty index gained 58 points to close at 4,518.
Overall about 1,312 stocks advanced; 1,356 stocks declined while 88 stocks remained unchanged. Among the 50-Nifty 14 stocks ended in red and 36 stocks ended in green.
IOC staged a bounce back after slipping to a low of Rs415. The stock ended at Rs425 gaining a percent. The stock had slipped on poor Q4 earning. The company posted a net loss of Rs4.14bn for the quarter ended March 31, 2008 compared to a net profit of Rs15.03bn in the same quarter last year. Total income for the quarter has increased to Rs717.93bn from Rs538.19bn in the quarter ended March 31, 2007.
IOC's Board of Directors at its meeting held today has recommended dividend @ 55%. The scrip touched an intra-day high of Rs430 and a low of Rs415 and recorded volumes of over 2,00,000 shares on BSE.
Bajaj Finserv rallied by over 15% to Rs640 on back of huge volumes. The scrip touched an intra-day high of Rs665.60 and a low of Rs564 and recorded volumes of over 38,00,000 shares on BSE.
M&M slipped by 0.5% to Rs641 after the company announced that posted a net profit of Rs2.211bn for the quarter ended March 31, 2008 as compared to Rs2.552bn for the quarter ended March 31, 2007. The total income has increased from Rs 27.588bn for the quarter ended March 31, 2007 to Rs 31.754bn for the quarter ended March 31, 2008. The scrip touched an intra-day high of Rs654 and a low of Rs626 and recorded volumes of over 1,00,000 shares on BSE.
Infosys gained by 2% to Rs1912 after the company said that "BBVA and Finacle from Infosys signed a strategic global partnership". The scrip touched an intra-day high of Rs1920 and a low of Rs1870 and recorded volumes of over 3,00,000 shares on BSE.
Minda Industries gained by 5% to Rs309 after the Company announced that it bagged orders to the tune of Rs500mn from Volkswagen for the supply of headlamps and rear combination lamps for its upcoming models in India. The orders also include supply of rear combination lamps for the global model being manufactured in Russia. The Company will supply these from its existing facility at Chakan, Pune. The scrip touched an intra-day high of Rs309 and a low of Rs295.
Jet Airways gained by a percent to Rs536. There were reports stating that the company won the ‘Best Cargo Airline of Central Asia’ at the prestigious Cargo Airline of the Year Awards, held at the Royal Lancaster Hotel, London. The scrip touched an intra-day high of Rs543 and a low of Rs530 and recorded volumes of over 17,000 shares on BSE.
Fertilizer stocks once again for second day in a row got a boost following media reports that the government would ensure fertilizer companies are given priority in the supply of natural gas. Chambal Fertilizer surged by over 16% to Rs88, GNFC was up by over 8.5% to Rs158, Deepak Fertilizer advanced by over 6% to Rs108 and RCF is locked at 5% upper circuit to Rs71.45.
Corporate News
IOC to ration supplies in order to cut revenue losses. (BL)
Tata Motors plans 3 types of rights issue having differential voting rights as part of its plan to raise Rs72bn for the Jaguar-Land Rover acquisition. (BL)
ITC raises the prices of 3 of its cigarette brands by 10%. (BS)
Sun Pharmaceuticals’ US$454mn proposal to acquire Israeli drug-maker Taro has been called off. (BL)
Ranbaxy gets mixed verdict on Pfizer’s Lipitor in Australia. (BL)
Tata Steel-Corus raised prices for structural sections by £90 per ton from its Europe operations. (BL)
Unitech is in final stages of negotiation with Lehman for a US$500mn PE investment in its two commercial projects in Mumbai. (BL)
ONGC may reimburse part of service tax to shipping companies. (BL)
Tata Power to invest Rs5bn for wind power expansion. (BL)
GMR to set up ONGC’s proposed refinery in Kakinada. (BL)
HPCL-Mittal energy JV has approached the Petroleum Ministry to seek tax incentives.
Infosys Technologies to implement Finacle Universal Banking Solutions at BVA. (BS)
RIL and HPCL bid for control of three state-run sugar factories in Bihar. (BS)
Orbit Corp to foray in beachfront projects through SPV. (BS)
Reliance Communication to start due diligence of MTN.(BS)
Parsvnath to buy 30% stake in Nano City. (BS)
Adani Energy has been slapped with legal proceedings claiming US$100mn in losses by Petronas for violating an agreement to buy and sell LNG. (Mint)
Baring Asia has picked up 12% stake in Sharekhan at Rs17bn. (BS)
Cipla has filed pre-grant oppositions for over 50 drugs. (ET)
Air India is expected to reduce basic fares from Kerala and Andhra Pradesh by up to 83% after the two states reduced sales tax on aviation turbine fuel to 4%. (ET)
BSNL will be exempted from taking part in the auction of spectrum for 3G mobile services. (ET)
BSNL has sought exemption from Trai from paying any entry fee or license fee for its upcoming WiMAX as it planned to provide these services largely to rural India. (ET)
Airbus maker EADS to shift some manufacturing to India. (BL)
Economic News
PMO asks RBI to relax restrictions on ECBs imposed last year. (FE)
The government decided to give fertiliser sector top priority in allocation of natural gas to be produced from the gas fields. (FE)
The RBI fixes the marked-to-market spread for valuation of oil bonds at 25 basis points over sovereign borrowings. (BL)
RBI raises the spread for interest cost on trade credit, easing norms for foreign currency loans. (BS)
DoT has summoned executives from RIM to demand an explanation over its recent communication to its customers that it would be unable to accommodate any request for a copy of a customer’s encryption. (ET)
DoT approved unlimited number of bandwidth resellers in the country. (BL)
Trai invites consultation process to create a revenue share for Value added service providers. (FE)
The Cabinet Committee on Economic Affairs to Bengal projects in today’s meeting. (FE)
The Department of Atomic Energy to commercialise all uranium mines discovered by Atomic Minerals Division. (BS)
Rs95bn Dharavi makeover project to be delayed by a few months. (BS)
Government tightens norms for import of cars and sports utility vehicles. (BS)
The Union Cabinet is expected to take up a bail out package for oil companies which could include price hike, duty reductions and additional bonds. (ET)
The Punjab government cleared six industrial and five agro-industrial projects to be set up at a total cost of Rs111.7bn. (ET)
Interest coverage ratio for India Inc has declined from 11.6 times in the quarter ended March 2007 to 10.4 times in the quarter ended March 2008. (ET)
Carbon credit prices have hit an all time high as expensive natural gas pushes European power plants to shift to cheaper but dirtier coal which raises the demand for pollution offsets. (ET)