The hardest thing to learn in life is which bridge to cross and which to burn.
When it comes to gains and pains, the markets these days ensure both are taken care of; though in a range. We mentioned soaring temperatures and spiraling inflation on Tuesday. While the first one doesn't have much of a bearing on the market, the second factor has continued to haunt the market over the past 2-3 months. Inflation is likely to remain the single-biggest challenge for governments, companies, individuals and markets across the globe for quite some time.
A confluence of fundamental issues are behind the current price increases across various commodities. And, while the Government and the RBI have taken certain measures to address the menace, it will take a while for inflation to soften. Also, some of these steps are highly politically motivated, and could cost the economy dear in the medium to long term.
GDP growth too has slowed on the back of a sharp fall in industrial activity. In short, there are considerable challenges ahead, both for the Indian as well as the global economy. Though the market has rallied over the past one and a half months, the near-term looks highly uncertain and hazy. In this context, be very cautious and refrain from aggressive buying.
Today, we expect a weak opening given the grim scenario across the world. Since our markets were already down yesterday, we do not rule out some rebound later.
FIIs were net sellers of Rs3.21bn (provisional) in the cash segment on Tuesday while local institutions were net buyers of just Rs3.9mn. In the F&O segment, foreign funds were net sellers of Rs9.91bn. On Friday, foreign funds were net buyers of Rs570mn in the cash segment. Mutual Funds pumped in Rs2.28bn on the same day.
Key Results Today: Alfa Transformers, Bajaj Auto Finance, Gabriel, Gammon Infra, HDIL and Thermax.
Asian stocks are mostly down this morning, dragging a regional benchmark index to its steepest fall in five weeks, on concern that widening credit losses will erode bank earnings and slowing growth in Chinese demand will hurt raw-materials producers.
Mitsubishi UFJ Financial Group dropped the most in almost a month in Tokyo after forecasting profit will be little changed this year. BHP Billiton led declines among mining stocks after Morgan Stanley said weaker demand from China may result in soft metals prices.
China's CSI 300 Index sank for a fifth day on concern that record oil prices will fuel inflation, prompting the government to accelerate steps to cool growth.
The MSCI Asia Pacific Index fell 1.5% to 151.25 as of 11:06 a.m. in Tokyo, with more than five stocks dropping for each that climbed. Nine of the index's 10 industry groups retreated, with financial stocks as the biggest drag.
Japan's Nikkei 225 Stock Average was down 2% at 13,880.88, while China's CSI 300 Index retreated 2.4%, the region's biggest drop. All benchmarks in Asian markets declined.
US stocks slumped on Tuesday, with the Dow Jones Industrial Average losing nearly 200 points, as crude oil continued to climb while a bigger-than-expected jump in a key inflation measure rattled investors.
With oil near US$130 per barrel, many Wall Street watchers feel the Federal Reserve will have limited head room for cutting rates further. One Fed official signaled that the central bank may be done with cutting rates.
Oil surged to a new record of US$129.60 a barrel, buoyed by bullish calls by brokerages, weakness in the dollar and supply concerns. Consumer-related stocks were among the worst decliners early on.
US light crude oil for June delivery rose US$2.02 to settle at a record US$129.07 in New York. Some experts said the contract's imminent expiration sparked volatility.
The national average price for a gallon of regular unleaded gas rose to a record US$3.80 from the previous high of US$3.794, according to AAA. It was the 13th straight record high.
COMEX gold for August delivery rose US$14.40 to settle at US$924.60 an ounce. The dollar fell sharply versus the euro and yen. Treasury prices gained, lowering the yield on the 10-year note to 3.78% from 3.83% late on Monday.
The S &P 500 Index fell from a four-month high, as analysts forecast more credit losses and spiraling inflation and record oil prices threatened to erode profitability.
Citigroup, Bank of America and JPMorgan Chase led financial shares to a third straight decline as Oppenheimer said banks may write off more than US$170bn of additional reserves by the end of 2009.
AIG slid to the lowest level since 1998 on plans to raise more capital. Home Depot had its worst tumble in nine months after profit slumped 66%.
The S&P 500 lost 13.23 points, or 0.9%, 1,413.4, its biggest drop since May 7. The Dow sank 199.48 points, or 1.5%, to 12,828.68. The Nasdaq Composite Index dropped 23.83 points, or 1%, to 2,492.26.
Market breadth was negative. More than two stocks retreated for each that rose on the New York Stock Exchange.
The Producer Price Index (PPI), gained 0.2% in April, short of economists' expectations and following a rise of 1.1% in the previous month. But prices excluding food and energy costs rose 0.4%, twice what was expected.
After the close, Dow component Hewlett-Packard reported a small rise in quarterly profit that matched preliminary figures it announced last week.
Wednesday morning brings earnings from a few retailers and the release of the weekly oil inventories report. The minutes from the last Federal Reserve meeting are due for release Wednesday afternoon.
Europe's four-session winning streak came to an end yesterday. The pan-European Dow Jones Stoxx 600 index fell 2.1% to close at 325.97, matching levels last seen on Thursday. UK's FTSE 100 slid 2.9% to 6,191.60, while the German DAX 30 dived 1.5% to 7,118.50 and the French CAC-40 slid 1.7% to 5,054.88.
In the emerging markets, the Bovespa in Brazil was up 0.1% at 73,516 while the IPC index in Mexico was down 0.85% at 31,526. The RTS index in Russia gained 1.4% at 2453 while the ISE National 30 index in Turkey fell 3.3% to 50,741.
No breakthrough in sight
After enjoying a week of gains, bulls were unable to carry forward the momentum. Bears were back on the bourses right from the first minute on back of negative cues coming in from the Asian markets coupled with selling pressure in the index heavyweights like Reliance Industries, Bharti Airtel and ICICI Bank.
The Banking, Realty, PSU and Pharma stocks were on the receiving end. However, on the other hand consumer durables and select metal stocks bucked the negative trend lifting the Nifty index to recover over 30 points and the benchmark Sensex recouped around 80 points from day low.
Finally, the BSE benchmark Sensex ended 204 points higher to close at 17,230 and the Nifty index lost 52 points to close at 5,104.
Among the BSE Sectoral indices, The BSE Realty index was the major loser (down 2%), BSE PSU index (down 2%) and BSE Bankex index (down 2%). On the other hand, BSE Consumer Durable index (up 2.4%) and BSE Metal index (up 0.5%). Also the Small-Cap index ended in positive terrain adding half a percent.
Overall about 1,431 stocks advanced; 1,292 stocks declined while 66 stocks remained unchanged. Among the 50-Nifty 38 stocks ended in red and 12 stocks ended in green.
Videocon Industries rallied by over 17% to Rs410 after reports stated that the company would also make mobile phone handsets now. The handsets would be manufactured at its new plant in Kashipur, Uttaranchal. The scrip touched an intra-day high of Rs414 and a low of Rs348 and recorded volumes of over 32,00,000 shares on BSE.
Mercator Lines gained by half a percent to Rs116 after the company said that it entered into coal mining business through its subsidiary in Singapore. The scrip touched an intra-day high of Rs120 and a low of Rs113 and recorded volumes of over 34,00,000 shares on BSE.
Peninsula Land slipped by 1.5% to Rs94. The company said that it formed Joint venture with Arrow Webtex Ltd to enter into Hospitality Business. A SPV will be created which will be held 50-50 by both the JV partners to build Business Hotels.
In the 1st phase, an equity infusion of about Rs1bn is envisaged by both the JV partners in equal proportion; and the JV intends to build 10 Hotels of 100 rooms each, aggregating to 1000 rooms. The Company plans to enter into the state of Maharashtra in cities such as Mumbai, Pune, Nagpur, Nashik, Kolhapur, the state of Gujarat in cities such as Ahmedabad, Surat, Jamnagar, Mundra port and the state of Goa. The scrip touched an intra-day high of Rs97 and a low of Rs93 and recorded volumes of over 2,00,000 shares on BSE.
Dr Reddy’s Lab declined by 2% to Rs638 after the company announced its Q4 result with net profit at Rs1.03bn (down 68.3%) and also sales fell 14.7% to Rs13.3bn. The scrip touched an intra-day high of Rs656 and a low of Rs634 and recorded volumes of over 94,000 shares on BSE.
Max India ended on a flat note at Rs167. The company announced that it posted a net profit of Rs202.20mn for the quarter ended March 31, 2008 as compared net loss of Rs38.30mn for the quarter ended March 31, 2007. Total Income has increased from Rs522.50mn for the quarter ended March 31, 2007 to Rs1114.30mn for the quarter ended March 31, 2008. The scrip touched an intra-day high of Rs172 and a low of Rs166 and recorded volumes of over 27,000 shares on BSE.
BSEL Infrastructure surged by over 7% to Rs54 after the company said that they signed an MoU with Federal Government's Statutory body Iskandar Regional Development Authority (IRDA) wherein BSEL has committed to make investment in Iskandar Malaysia to the tune of RM 15,000,000,000 (Malaysian Ringgit Fifteen bn) over a period of twelve years.
The company collaborated with IRDA to develop Iskandar Malaysia, designed to be Southern Peninsular Malaysia's most developed region. IRDA will help BSEL seek approvals and permissions from various authorities for facilitating its development process. The scrip touched an intra-day high of Rs55 and a low of Rs51 and recorded volumes of over 6,00,000 shares on BSE.
Corporate News
GMR Infrastructure has decided to merge GMR Aviation with the company as part of a move to foray into the aviation business.
Tata Teleservices Maharashtra Ltd. (TTML) will be action post announcement of its results.
Satyam Computer may attract some attention as it has forged an alliance with GE for providing IT services to the healthcare sector.
Suzlon Energy is considering the sale of part of its stake in REpower. (FE)
The Government takes back 5 oil exploration blocks in Kerala-Konkan basin from Reliance Industries, as it failed to meet minimum work programme. (ET)
ACC could increase prices once the three month voluntary freeze expires. (FE)
Bharti Airtel in an alliance with IOC to access 18,000 retail outlets and 5,500 Indian distributors. (ET)
GAIL plans to supply 4.67 MMSCMD gas to Tata Power and HPCL. (FE)
Cairn India to explore oil and gas in Rajasthan Hadauti region. (ET)
Reliance Industries doubles its employee base to 25,000 people in past two fiscal years. (FE)
Educomp Solutions acquires 51% stake in US based Learning.com for US$24.5mn. (FE)
L&T bags orders worth Rs6.35bn from UAE and Oman. (FE)
IOC plans to enter retail marketing business in Turkey along with setting up a 15 mtpa greenfield refinery and a petrochemicals complex. (FE)
Kotak Mahindra Bank is seeking overseas acquisitions. (BS)
Jet Airways enters into a strategic tie-up with United Airlines. (ET)
Healthcare Investment, a Mauritius based firm to pick up 8.5% stake in Apollo Health Street for Rs610mn. (ET)
M&M may buy partner Hitachi Metals stake in Mahindra Hinoday. (ET)
Bharat Forge to raise Rs4bn via right issue. (BL)
Suven Life Science gets two product patents in South Africa and China. (BL)
The Poonawala Group has picked up 7.22% stake in Orchid Chemicals. (BS)
Peninsula Land to foray into hospitality sector with a JV with Arrow Webtex. (BS)
Unity Infrastructure wins order worth Rs3.8bn from Haryana State Roads and Bridges Development Corporation. (BL)
Mercator Lines plans to acquire more oil rigs. (BL)
Tata Tea seeks to buy Turkey based Dogus Cay. (DNA)
Kesoram Industries plans to spend Rs25bn for expanding its tyre and cement capacity by 2009. (DNA)
Lanco Infratech to form a holding company for its power business. (DNA)
PSL expects to begin with Pipavav SEZ in August. (DNA)
Reliance Retail in talks with US based Neiman Marcus for a strategic alliance. (ET)
Areva T&D to invest Rs7bn in 7 months for three manufacturing facilities and a R&D Centre. (BS)
The IT department issues notice to AT&T for details of Idea stake sale. (DNA)
Arcelor Mittal to buy Bulgarian steel company Kremikovtzi controlled by Pramod Mittal. (ET)
Economic News
Finance Ministry is considering to exempt SEZ from payment of export duty of steel. (FE)
FMCG sector to witness 16% in FY09, says FICCI. (DNA)
RBI Governor indicates further measures to rein in inflation. (BL)
RBI says current inflation levels totally unacceptable. (BL)