Knowledge is the only instrument of production that is not subject to diminishing returns.
Recent gains have diminished, with or without knowledge. Contrary to popular perception, the bulls failed to extend the one-month rally last week with the Sensex and the Nifty losing about 5% each. Record high crude oil prices - which crossed $126 per barrel - and rising local inflation were among the key factors behind the decline. Also, a weaker rupee (though good for exporters), coupled with lack of buying support (especially from FIIs) also added to the bulls' woes. Most market observers are surprised by last week's move, and are thus extra cautious about the market's near-term direction. The Nifty has fallen below its 200 day moving average (DMA) as well as the key 5000 mark. Stock futures saw a lot of unwinding on Friday. The premium on the Nifty May futures has also shrunk with a corresponding rise in open interest, which indicates build-up of short positions. Still, the 5000 put options continue to hold firm, which makes it even more difficult to predict the near-term market direction.
Today, the Government will release its provisional industrial production data for March. The data will have some bearing on sentiment, though the market has already factored in a deceleration in economic growth, especially on the manufacturing side. Though there is a case for a technical rebound (which need not be today) after last week's drubbing, one should use the rally to cut down one's long positions rather than build fresh ones. Arvind Mills could be in action as the company will announce some strategic initiatives later today.
Rising inflation and the Government's obsession with it (given that its an election-heavy year) is also a major issue, as this will hurt India Inc's financial health. The best way to avoid the ongoing uncertainty and volatility in the market is to take a stock specific approach. Here too, we would advise one to stick to quality companies and avoid the so-called momentum plays. We expect the market to open on a flat note, as global cues are pretty mixed. The bias remains negative, though the bulls may stage a brief comeback.
Results Today: Blue Star, Dewan Housing Finance, Graphite India, Indiabulls Real Estate, RCF and Unichem Labs.
FIIs were net sellers of Rs6.19bn (provisional) in the cash segment on Friday while local institutions poured in Rs1.8bn. In the F&O segment, foreign funds were net buyers of Rs1.22bn. On Thursday, FIIs were net sellers of Rs4.02bn. Mutual Funds were net sellers of Rs934mn.
Asian stocks are mostly down this morning, set for their longest losing streak in more than two months, on concern that rising prices of raw materials will erode earnings.
The MSCI Asia Pacific Index retreated 0.2% to 148.66 as of 10:33 a.m. in Tokyo, the fourth day of losses and its longest consecutive period of declines since March 5. The Nikkei 225 Stock Average fell 0.3% to 13,612.06.
China's CSI 300 Index tumbled 2.7%, the region's biggest drop. Markets are closed today in South Korea and Hong Kong. Australia's S&P/ASX 200 Index rose 0.4% to 5,796.80.
US stocks fell on Friday, with the major indexes all hit with weekly losses of 1% and more, after AIG reported a $7.8bn loss and Citigroup unveiled plans to shed about half a trillion dollars in assets.
The Dow Jones Industrial Average fell 120 points, or 0.9% to close at 12,745.88. For the week, the Dow lost more than 300 points, or 2.4%. The S&P 500 Index fell 9.4 points to 1,388, for a weekly loss of 1.8%. The Nasdaq Composite Index dropped 5 points to 2,445 and lost 1.3% over the week.
Market breadth was negative and volume was moderate.
Record oil and gas prices exacerbated fears about the threat of inflation. Crude for June delivery rose as high as $126.25 a barrel on the New York Mercantile Exchange Friday, before closing at $125.96, up $2.27 on the session.
The national average price for a gallon of regular unleaded gas rose to a record $3.671 from $3.645 the previous day, according to AAA.
COMEX gold for June delivery rose $3.70 to $885.80 an ounce. The dollar fell versus the euro and the yen. Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.77% from 3.78% late on Thursday.
AIG reported a steeper-than-expected quarterly loss late on Thursday, and said it will look to raise $12.5bn in capital. The news revived worries about the credit crisis, sending AIG shares down 8.8%.
Citigroup said on Friday that it plans to sell off around $500bn in assets, or 20% of its total, over the next two to three years as a means of becoming more "fit" and profitable. The company plans to sell off non-core businesses in stages. Shares slipped 2.8%.
The US trade deficit shrank more than expected in March, as the demand for imports fell at a faster pace than the demand for exports, due to the impact of the weak dollar.
Wal-Mart, JC Penney, Kohl's and Nordstrom are among the many retailers due to report quarterly results this week. Earnings are also due from Hewlett-Packard, Sprint Nextel and Freddie Mac.
Economic reports are due on retail sales, business inventories, consumer prices, manufacturing and housing.
European shares fell sharply on Friday as financials came under renewed pressure after AIG's big loss and oil futures continued to surge. The pan-European Dow Jones Stoxx 600 index fell 1.3%, to 324.85, with declining stocks overtaking advancing issues more than 4 to 1.
The UK's FTSE 100 declined 1.1% to 6,204.70 and Germany's DAX 30 dropped 1% to 7,003.17. The French CAC-40 slipped below 5,000 for the first time since May 1, down 1.9% to 4,960.56.
In the emerging markets, the Bovespa in Brazil was down 0.1% at 69,645 while the IPC index in Mexico dropped 0.25% to 30,674 and the ISE National 30 index in Turkey 0.5% to 51,794.
Bulls look for a rebound
Markets ended on a negative note as bears onslaught continued for fifth straight day. Weak close in the equity markets across Asia and intensified selling witnessed in scrips across the sectors dragged the markets to close in deep red. Sentiments further dampened as the European markets also started off with a negative bias.
Apart from the global weakness on concerns that IIP numbers to be announced on Monday will not be up to the mark added further pressure to the markets.
All the key Sectoral indices ended in red with BSE Oil & Gas index leading the fall. The index fell 4.87%. Heavyweights like RIL, ICICI Bank and HDFC Bank were among the major laggards dragging the Nifty index to close below the 5k mark.
Finally, the BSE benchmark Sensex ended 343 points lower to close at 16,737 and the Nifty index lost 98 points to close at 4,982.
Overall about 703 stocks advanced; 2,020 stocks declined while 61 stocks remained unchanged. Among the 50-Nifty 41 stocks ended in red and 9 stocks ended in green.
Nagarjuna Fertilizers slipped by 7% to Rs42. The company plans to set up overseas plants and foray into complex fertilisers to encourage growth that is currently restricted by government controls, said reports. The scrip touched an intra-day high of Rs46 and a low of Rs42 and recorded volumes of over 34,00,000 shares on NSE.
MIC Electronics edged higher by 0.5% to Rs905 after the company announced that the board of directors of the company would meet on May 19, 2008 to consider stock split. The scrip touched an intra-day high of Rs960 and a low of Rs880 and recorded volumes of over 49,000 shares on NSE.
Kotak Mahindra slipped by over 5% to Rs737 after the company announced that clients MTM derivative loss was Rs6.12bn. The company posted a net profit of Rs2401mn for the quarter ended March 31, 2008 as compared to Rs1703.30mn for the quarter ended March 31, 2007. Total Income increased from Rs14232.77mn for the quarter ended March 31, 2007 to Rs18625.08mn for the quarter ended March 31, 2008. The scrip touched an intra-day high of Rs799 and a low of Rs727 and recorded volumes of over 9,00,000 shares on NSE.
Everonn Systems was locked at 5% lower circuit to Rs849.20. The company announced that it would raise Rs940mn selling securities. The scrip touched an intra-day high of Rs905 and a low of Rs886 and recorded volumes of over 3,00,000 shares on NSE.
ACC was down by 4% to Rs712. Responding to concerns expressed by the Government, ACC, has decided to hold its cement prices over the coming 2-3 months. While ACC has been taking all steps necessary to ensure that production is maintained at peak levels at all its plants and will continue to improve further operational efficiencies, this price freeze will erode the company’s margins. During this period, ACC will engage in an open dialogue with the Government to explore viable solutions to combat inflationary trends that have disproportionately increased its input costs, reports stated. The scrip touched an intra-day high of Rs739 and a low of Rs709 and recorded volumes of over 1,00,000 shares on NSE.
Infotech Enterprise was down 1% to Rs260. The company announced that it secured 3 data management contracts from Powercor Australia, Citipower. The scrip touched an intra-day high of Rs277 and a low of Rs252 and recorded volumes of over 9,000 shares on NSE.
Texmaco advanced by over 4% to Rs1510 after the company announced its plans to split its stock. The Board of Directors of the company would meet on May 16, 2008. The scrip touched an intra-day high of Rs1639 and a low of Rs1470 and recorded volumes of over 10,000 shares on NSE.
Crompton Greaves was down 1.5% to Rs243. According to reports, the company is set to take over power distribution in Nagpur. Electricity Regulatory Commission, state power regulator in Maharashtra on Thursday gave its final approval for appointing private franchise for Nagpur, reports added. The scrip touched an intra-day high of Rs251 and a low of Rs241 and recorded volumes of over 53,000 shares on NSE.
Corporate News
India’s largest DTH company Dish TV to offer free set-top boxes.(BS)
Ranbaxy is likely to announce a drug discovery research tie-up with US drug manufacturer Merck.(BS)
M&M announces an upward revision of vehicle prices in the range of 1.5-2.5%.(BL)
NTPC on the look out for coal mines abroad.(BL)
Heidelberg consolidates its cement business in India.(BS)
DLF Assets is likely to launch an IPO of its office trust in Singapore by June to raise US$2 billion.(BS)
Bharti Airtel-MTN alliance talk gets a boost as a key investor backs the deal.(BL)
Spencer's Retail, a RPG group company, to invest Rs15bn to open 250 new retail outlets within a year.(BS)
SBI to add 1,000 branches in rural and semi-urban areas in the current fiscal.(BL)
Reliance Communications awards US$400mn deal to Alcatel-Lucent for network managed services.(Mint)
Great Offshore to acquire SeaDragon Offshore for US$1.4bn.(BS)
Idea Cellular may withdraw from Indus Towers.(FE)
Thermax India plans to invest Rs2bn on expansion in the current fiscal.(ET)
GMDC on the look out for coal mine partners in Africa; to set up three power projects.(BL)
Essar Power gets government approval to operate as a holding company and infuse up to Rs80bn as FDI.(BS)
Hungarian firm MOL Hungarian Oil and Gas Plc acquires a 35% stake in onshore exploration block of ONGC in the Himalayan foothills.(FE)
Kotak Mahindra Bank makes a provision of Rs860mn in the March quarter for potential losses from derivative transactions of its clients.(BS)
Telcel, Emirates Telecommunications and Altimo are in race to pick up equity worth US$1bn in Tata Teleservices.(ET)
BPCL, Indian Oil seek a relook into the impact of 10% ethanol blending.(FE)
Satyam Computer draws up capital expenditure of US$125mn to develop four SEZs.(BL)
GVK Power & Infrastructure gets in-principle approval to generate gas-fuelled power of 1,500MW.(Mint)
Idea Cellular cuts STD and roaming rates.(ET)
Reliance Industries to use closed fuel outlets for malls and multiplexes; earmarks Rs50bn for the project.(BS)
Health insurer Apollo DKV plans to invest up to Rs5bn in the next five years.(FE)
ADAG may pick up a stake in AB Corp.(ET)
Blackstone, New Vernon and ADAG pick up stake in Everonn Systems.(TOI)
Lafarge discusses with L&T to acquire the latter’s ready mix concrete business for Rs12bn.(ET)
Infotech Enterprises receives a three year contract from Powercor Australia.(DNA)
BHEL has formally taken over Bharat Heavy Plate & Vessels.(ET)
Vishal Retail plans to raise Rs24bn over the next three years for its expansion.(DNA)
Tata Power to raise Rs14bn through issue of shares to its promoters.(ET)
Bennett, Coleman & Co, India’s largest print media company, plans an IPO.(BS)
Barclays to set up a 5,000 seat captive BPO unit in India.(ET)
BSNL has set a slew of stiff conditions for companies who want to participate in its Rs400bn tender for a 93mn GSM lines.(ET)
ONGC has put its plans on hold to roll out fuel retail outlets.(TOI)
Reliance Money has tied up with Sify Technologies to sell its financial products.(ET)
Economic News
Higher prices of fruits and manufactured goods like locomotives and non-ferrous metals push WPI to 7.61% for week ended April 26th, the highest since November 2004.(BL)
Non-life insurance companies may get approval to change the coverage, wordings, terms and conditions of policies.(BS)
Bank credit for the fortnight ended April 25th declines by Rs 120bn.(BL)
Government notifies export duty of up to 15% on various steel products to contain price rise of the alloy.(BS)
Cement prices decline by Rs6 per bag to Rs210 in Gujarat. (DNA)
Government to seek annual fee from successful bidders of non-metro airports.(BL)
GMR and GVK plan to increase landing and parking fees at the airport.(ET)
3G players not suited for India, TRAI cautions finance ministry.(FE)
Steel companies may roll back prices as government has notified export duty on steel items.(ET)
Union government plans to open a national chain of generic drug stores, one in each district, to sell inexpensive, unbranded medicine.(Mint)
The Supreme Court will decide how coal companies should conduct e-auction.(ET)
Japan to invest Rs85bn to develop nine infrastructure projects in India.(ET)
Civil aviation ministry is considering a capital infusion of Rs10bn in Air India.(ET)