Whenever you find that you are on the side of the majority, it is time to reform.
The bulls, who were in form last month, may soon need to reform. The worries are slowly catching up. Crude oil has been hitting record highs for the past few days and $150 seems realistic. With too much concentration on US market closings and Asian openings, there seems to be no time to sit back and think much about the local market scenario. It's still not too late to take a summer holiday. The recent run-up should have given one ample opportunities to exit some shaky counters. While mid-cap and small-cap shares may have outperformed, remember, on the downside they are the ones which get battered out of shape. We reiterate that one should selectively allocate larger portion of one's funds to large caps and ride the smaller stocks for short periods only. One should avoid aggressive buying at this juncture and should lock in some gains at every rally as the short-term outlook still remains murky.
Today, we see the market extending this week's fall due to weakness in US and Asian stocks, and oil prices hitting new record high. Indian ADRs tumbled, losing between 2-6.5%. The dearth of any near-term positive triggers coupled with erratic movement in FII flows and local inflation concerns would also keep the bulls on tenterhooks. The market is likely to consolidate for a while before breaking out on either side. We maintain that the key indices will remain rangebound within a few hundred points in the near term, as investors take stock of the situation after last month's rally. A major crash may not happen unless we get fresh bout of bad news from overseas or local markets. A stock specific approach is perhaps the most prudent way of tackling the current uncertainties.
FIIs were net buyers of Rs883mn (provisional) in the cash segment yesterday while local institutions too pumped in Rs2.35bn. In the F&O segment, foreign funds were net sellers of Rs2.33bn. On Tuesday, FIIs were net sellers of Rs7.29bn in the cash segment. Mutual Funds were net sellers of Rs265mn on the same day.
Results Today: Ashok Leyland, Birla Corp, Electrotherm, GIC Housing Finance, Hindustan Motors, JB Chemicals and Voltamp Transformers.
Asian stocks are mostly down this morning, led by financial companies. Mizuho Financial Group, Japan's third-largest publicly traded bank, and Kookmin Bank, South Korea's biggest bank, led the declines among regional lenders.
The MSCI Asia Pacific Index lost 0.8% to 150.35 as of 10:22 a.m. in Tokyo, with more than twice as many shares retreating for each that gained. Financial shares were the biggest drag among the benchmark's 10 industry groups.
The Nikkei in Tokyo was down 123 points or 0.9% at 13,978 while the Hang Seng in Hong Kong shed 88 points or 0.3% to 25,522. The Kospi in Seoul was flat at 1853 while the Straits Times in Singapore lost 37 points or 1.15% to 3191.
The Shanghai Composite in China was down 14 points to 3565 while the Taiex in Taiwan dropped 50 points or 0.6% to 8875. Australia's S&P/ASX 200 Index gained 48 points or 0.85% to 5716.
US stocks declined the most in a month, with the Dow Jones Industrial Average losing over 200 points. Crude oil prices rose above US$123 per barrel to a new record, heightening worries about the impact on consumers as well as the overall economy.
The S&P 500 slumped 25.69 points, or 1.8%, to 1,392.57. The Dow slid 206.48 points, or 1.6%, to 12,814.35. The Nasdaq Composite Index dropped 44.82 points, or 1.8%, to 2,438.49.
Market breadth was negative. Five stocks fell for each that rose on the New York Stock Exchange.
Financial shares fell on concern that new disclosure requirements for investment banks will limit their profits. Merrill Lynch and Lehman Brothers sent brokerages and lenders tumbling after the SEC said it will require Wall Street firms to disclose capital and liquidity levels.
The move comes after the market regulator was criticized for regulatory lapses in the wake of the Bear Stearns' collapse. Equity market losses accelerated after the SEC's announcement.
US light crude oil for June delivery settled at a record US $123.53 a barrel on the New York Mercantile Exchange, after hitting a trading high of US $123.75 a barrel earlier. Prices had been volatile after the weekly inventories report showed a surprise rise in both crude and gas supplies.
The national average price for a gallon of regular unleaded gas rose to US $3.618 from US $3.610 the previous day, according to AAA.
The dollar rose versus the euro and slipped against the yen. COMEX gold for June delivery fell US $6.7 to settle at US $8.71 an ounce. Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.84% from 3.92%.
Economic reports showed further weakness in housing and some strength in worker productivity. The productivity report's inflation component eased, but with record oil and gas prices, worries about pricing pressure remain a drag.
Fourteen of 15 homebuilders in S &P indexes fell on a National Association of Realtors report that fewer Americans bought previously owned homes in March.
The Federal Reserve said that consumers took on more debt in March, adding on US$15.2bn during the month, or a 7.2% annual rate, to US$2.56 trillion. According to some analysts, the data shows a big run-up in credit card debt.
Walt Disney shares gained 2.9% after the entertainment giant reported a 21% rise in profit for the second quarter of fiscal 2008.
Clearwire and Sprint Nextel are combining their wireless units to create a new company called Clearwire. The US $14.55bn deal is backed by Intel, Google, Comcast, Time Warner Cable and Bright House Networks, and will give the companies a stake in the new venture.
Signs that the world's largest economy has turned a corner, or is very close to doing so, have reassured investors of late, as have indications that the worst of the financial market mess may be over.
The Wall Street will probably stick to a trading range over the next few months. Thursday brings reports on March wholesale inventories and the weekly jobless claims. There are no market-moving earnings due in the morning.
European equity markets ended firm. Strong gains for technology companies and automakers helped shares build on early momentum generated over favorable earnings reports. The pan-European Dow Jones Stoxx 600 index rose 0.8% to 329.35, moving higher after two days of losses. Germany's DAX 30 advanced 0.8% to 7,076.25, while the French CAC-40 rose 0.7% to 5,075.31 and the UK's FTSE 100 added 0.7% to 6,261.
In the emerging markets, the Bovespa in Brazil was down 1.7% at 69,017 while the IPC index in Mexico fell 1.5% to 30,762. The RTS index in Russia rallied 2.2% to 2201 and the ISE National 30 in Turkey gained 0.9% at 53,602.
Sideways movement to continue
Markets ended on a flat note as bulls managed to make a come back towards the last hour of the trading session. It was the positive cues coming in from the European markets and media reports stating that monsoon is likely to hit Kerala coast by May 20-25 lifted the sentiments on Dalal-Street.
However, despite a come back the Nifty index was unable to breach the 200 DMA as again it faced stiff resistance. With crude oil trading at an all time record high US$123 per barrel, oil exploration companies like Cairn India, Hind Oil Exploration recorded smart gains. The IT and FMCG stocks closed with marginal gain. However, Capital Good and Realty stocks were under pressure.
Finally, the BSE benchmark Sensex ended 33 points lower to close at 17,339 and the Nifty index lost 9 points to close at 5,135.
Overall about 1,167 stocks advanced; 1,534 stocks declined while 63 stocks remained unchanged. Among the 50-Nifty 29 stocks ended in red and 21 stocks ended in green.
Gokaldas Exports 12% to Rs232. The company clarified that the said news report "Blackstone Group mulls taking Gokaldas Exports private" is purely speculative. There are no such discussions in the Board and no official of Gokaldas Exports Ltd & Blackstone have given any Press statements of this nature. Company made this announcement with reference to the news item appearing in a leading financial daily titled "Blackstone Group mulls taking Gokaldas Exports private"
The scrip touched an intra-day high of Rs248 and a low of Rs219 and recorded volumes of over 1,00,000 shares on BSE.
Tata Steel gained b a percent to Rs824. The company announced that along with Brazilian mining giant Vale and other JV partners it would undertake a massive expansion of the Carborough Downs Coal Mine in Australia for about US$379.4mn.The commencement of construction is scheduled for May 2008 and commissioning of the new mining equipment (Longwall) is expected by mid 2009." The scrip touched an intra-day high of Rs839 and a low of Rs812 and recorded volumes of over 20,00,000 shares on BSE.
Ashok Leyland slipped by 2.2% to Rs41 after the company’s April sales slipped 2.5% to 5705 units. The scrip touched an intra-day high of Rs43 and a low of Rs41 and recorded volumes of over 21,00,000 shares on BSE.
Power Grid slipped by 1.5% to Rs103. There were, reports stating that the company is looking for consultancy business in Nigeria and Dubai; plans capital expenditure of Rs80.4bn in current fiscal year. The scrip touched an intra-day high of Rs105 and a low of Rs102 and recorded volumes of over 8,00,000 shares on BSE.
Glenmark Pharma surged by over 5% to Rs672 after reports stated that the company launched its antifungal cream Onabet in India. The scrip touched an intra-day high of Rs697 and a low of Rs642 and recorded volumes of over 3,00,000 shares on BSE.
Union Bank of India was up by a percent to Rs173 after the company announced its FY08 net profit at Rs13.9bn (64.4%). The company also said that it would pay 40% dividend. There was also a buzz that it plans to issue shares on right basis and has sought permission from the government. The scrip touched an intra-day high of Rs177 and a low of Rs172 and recorded volumes of over 8,00,000 shares on BSE.
The IT stocks further gained momentum as the rupee further depreciated against the US Dollar hitting a high of Rs41.31 per dollar. Index heavyweight TCS was up by 3% to Rs966, Infosys gained by 1.2% to Rs1843, Hexaware advanced by 0.2% to Rs71 and Wipro added 0.2% to Rs499.
The Metal stocks lost their shine after the government asked steelmakers to cut prices by Rs4,000 per ton. SAIL slipped by 3.3% to Rs173, Sesa Goa declined by 5.5% to Rs3992, Gujarat NRE Coke dropped by over 3% to Rs149 and Ispat Industries lost by 2% to Rs34.
Corporate News
The Government to divest residual 26.12% stake in Tata Communication (erstwhile VSNL). (BS)
The MTN Group to seek a non-compete agreement with Bharti Airtel. (BS)
Tata Steel and Vale to invest Rs15.6bn for the mega expansion work planned in Australia, starting later this month. (BS)
RIL and Essar Oil to bid for ONGC's unviable Kakinada refinery. (BS)
UB group drags Heineken to court, seeks termination of special grants given to foreign company. (ET)
LIC to dilute it’s holding in IFCI and is awaiting cues from the government on its future strategy. (BS)
RIL in talks with power and oil distribution companies for lease of optic fibre network. (ET)
L&T moves the SC challenging the Delhi High Court order that directed ONGC to consider Malaysia-based Ramunia Fabricators' bid for development of an oil field in Mumbai offshore. (Mint)
Cadila Pharmaceuticals to set up eight units in its upcoming Pharma SEZ near Ahmedabad. (BS)
Solar Semiconductor forms strategic partnership with Motech Industries of Taiwan for supply of PV cells worth about US$360mn. (BS)
Infosys BPO to set up KPO hub in Gurgaon. (BS)
The Centre may clear Essar Power's Rs80bn FDI plan. (ET)
GMDC plans to leverage its coal-control capabilities into a four-way business foray into cement, power, SEZ and port in Gujarat. (BL)
United Spirits to launch refurbished flagship brand McDowell's No 1 in Maharashtra. (ET)
Consortiums lead by Videocon Industries to set up a multi-product industrial park and a 1,320 MW thermal power plant in the West Godavari District of Andhra Pradesh. (BL)
Promoters of DLF Assets, lend more than Rs11bn worth of interest-free loans to help the arm pay for properties bought from the listed company. (Mint)
Economic News
The steel industry agreed to cut prices by Rs4,000 a ton on flat products and Rs2,000 a ton on long products with immediate effect. (BS)
The Forward Markets Commission suspended futures trading in four commodities namely potato, soya oil, chana and rubber for four months. (BS)
TRAI to revive implementing of carrier access code (CAC) system, allowing subscriber to choose long distance operators of there choice. (FE)
Government may charge 12.5% tax on aviation turbine fuel drawn by airlines. (FE)
The net oil import bill in 2007-08 is likely to rise by around 41% over 2006-07 on account of the surging demand in India. (BS)
Centre ups e-sale quota of coal by 5 times. (BL)
625 companies have borrowed ~US$31bn through ECBs during 2007-08. (BL)
RBI prefers safety over returns from forex pulls out funds parked with many high-street banks. (ET)