Democracy means government by discussion, but it is only effective if you can stop people talking.
While we did expect a bounce back among extreme pessimism, the temporary upsurge in sentiment and the key indices on Thursday was much more than expected. Loud voices of inflation are set to climb and the negative impact of fuel price hike seemed to fall on bulls’ deaf ears for the moment. The rally was restricted to only the large caps while the broader market remained subdued.
Looks like the upbeat mood may continue for one more day at least given the strong show by the US stocks overnight. Asian markets this morning are also up sharply. The bad news is that crude oil has gained over $5 to cross $128 per barrel. Also, the weekly inflation number will continue to cast its spell on the market. In a related development, RBI Governor YV Reddy has hinted that the central bank may go for another round of monetary tightening to contain inflation. And, there's speculation that the RBI may even tinker with policy rates to anchor inflationary expectations.
IT, Power, FMCG, Banking, Pharma and Metals were the top gainers. Real Estate was the biggest loser while Oil & Gas, Capital Goods and Auto shares were mixed. The market breadth was negative though traded volume and turnover were pretty good. Some amount of short-covering coupled with healthy global markets helped the bulls recoup some of the losses of the previous day.
Meanwhile, to mitigate the fallout from the fuel price hike, the Government has asked all the ministries and the bureaucrats to curtail wasteful expenditure. It expects to save $1.4bn from the austerity drive. States have also chipped in by announcing cut in sales tax, while the Railways says it will absorb the entire increase in diesel. Oil marketing companies have lowered the ATF price by over 4%, though the airlines are unlikely to pass this on to the consumers. It remains to be seen how effective the Government will be in cutting spending.
Berger Paints, Dhanlakshmi Bank, Hindustan Oil Exploration, Kalyani Steels, Karur Vysya Bank, Peninsula Land and Sundram Fasteners will declare their results today.
FIIs were net sellers to the tune of Rs14.18bn (provisional) in the cash segment yesterday while the local institutions poured in Rs5.7bn. In the F&O segment, foreign funds were net buyers at Rs10.54bn. On Wednesday, FIIs were net sellers of Rs8.25bn in the cash segment. Mutual Funds were net buyers of Rs1.85bn.
Zandu Pharma's Board will meet today for considering the proposal for issue of equity shares / warrants / other convertible instruments to promoters, their relatives, associates, other investors on preferential basis.
The Government of Sri Lanka has awarded an exploration license to Cairn India to search for oil and natural gas in the Mannar basin. The block is offshore northwest Sri Lanka and covers about 3,400 Km in water depths of 200 metres to 1800 metres.
HEG's Board has approved expansion of capacity from 60,000 TPA to 80,000 TPA at a cost of Rs1.9bn at its graphite plant at Mandideep. With this expansion the company will become as the world's largest graphite electrode producer at a single location.
Asian stocks advanced, led by oil producers and Japanese companies reliant on US sales, after crude prices surged the most in two months and the yen weakened to a three-month low against the dollar.
BHP Billiton and Inpex Holdings gained. JFE Holdings led steelmakers higher after Nucor Corp., the largest US steel maker, boosted its second-quarter profit on rising global demand. Toyota rose on expectation that a weaker yen will boost the value of US sales.
The MSCI Asia Pacific Index added 0.8% to 150.14 as of 10:42 a.m. in Tokyo, with about three stocks climbing for each that declined. All 10 industry groups advanced on the regional benchmark, which gained 0.1% this week after ending May little changed.
Japan's Nikkei 225 Stock Average rose 1.4% to 14,534.36, set for its highest close since Jan. 9. Benchmarks climbed in other Asian markets open for trading apart from China. South Korea is closed for a holiday today.
US stocks rallied on Thursday, with the Dow Jones Industrial Average jumping by over 200 points, as investors cheered a surprise dip in weekly jobless claims, stronger-than-expected retail sales and a mega merger in the telecom sector.
The Labor Department reported that first-time claims for unemployment benefits fell by 18,000 last week to their lowest level in more than a month. The government will report monthly figures on non-farm payrolls Friday morning.
After a three-day decline, the Dow Jones climbed 213.97 points, or 1.7%, to 12,604.45, with 27 of its 30 components ending higher. The S&P 500 index climbed 26.85 points, or 2%, to 1,404.05, with the energy sector up 4%. The Nasdaq advanced 46.8 points, or 1.9%, to 2,549.94.
US stocks rose modestly in the morning, but picked up the pace as the session wore on, thanks to the mix of economic and company news, and a technical bounce following several down sessions.
According to some market watchers, the better-than-expected retail sales results from discounters such as Wal-Mart and Costco fueled the rally. However, the improved sales were largely on account of the economic stimulus package, instead of any improvement in consumer sentiment.
Still some analysts suggest the worst for the US market could be over, but until there's some positive news on inflation and economic growth, the main indices are likely to remain range bound and volatile.
Wal-Mart shares added 3.7% after the world's largest retailer reported same-store sales increased 3.9% for May. American Express rallied for a second day, up 3.9%, after the company reiterated expectations that earnings would grow 4% to 6% this year.
Verizon Wireless' plan to buy privately held Alltel Corp. for US$28bn boosted telecom shares. The deal will create the largest US wireless carrier. Verizon Communications gained 5.4%.
Continental Airlines, the fifth-largest American airline announced plans to cut about 3,000 jobs and reduce its fleet size. Shares of Continental closed 4.8% higher.
The monthly non-farm payrolls report will be out before the start of trade on Friday. Employers are expected to have cut 60,000 from their payrolls in May, after cutting 20,000 in April. The unemployment rate, generated by a separate survey, is expected to have risen to 5.1% from 5% in April.
US light crude oil for July delivery rose US$5.49 - the biggest single-day price gain ever - to settle at US$127.79 a barrel in New York, after having slid for the past few sessions. Because oil is near record levels, the gain is not close to being the biggest advance on a percentage basis.
The national average price for a gallon of regular unleaded gas rose to US$3.989 from US$3.983 the previous day, AAA reported. It was the 28th record in 29 days.
The dollar slipped versus the euro, after rising for the past few sessions. The dollar gained versus the yen. Treasury prices fell, lifting the yield on the 10-year note to 4.05% from 3.97%. COMEX gold for August delivery fell US$8.30 to US$875.50 an ounce.
European shares ended marginally lower. Miners lost ground and exporters were hit after European Central Bank (ECB) President Jean-Claude Trichet hinted that euro-zone interest rates could rise.
The Stoxx 600 index fell 0.1% to 316.61. Germany's DAX 30 fell 0.3% to 6,941.83, while the French CAC-40 lost 0.2% to 4,907.06. The UK's FTSE 100 closed up 0.4% at 5,995.30.
A pickup in inflationary pressures meant that policymakers at both, the Bank of England (BOE) and the ECB voted to leave rates on hold, at 5% and 4%, respectively.
In his monthly news conference following the ECB's decision, Trichet said a small increase in interest rates is possible next month, but not certain. The central bank remained on heightened alert over inflationary pressures, he added.
The emerging markets were pretty mixed. The Bovespa in Brazil was nearly flat at 71,247 while the IPC index in Mexico rose 0.9% to 31,726. The RTS index in Russia dropped 0.1% to 2351 while the ISE National 30 index in Turkey climbed 1.6% to 49,050.
The momentum may continue
Market snapped a three days losing streak as bulls staged a strong come back in the last hour of the trading session. It was a steady start to the day, after which key indices turned highly volatile and witnessed wild gyrations during the session. The benchmark Sensex fell sharply to hit a low of 15,314 in the mid-afternoon trades. However, a sudden bout of buying was followed which saw the benchmark index to surge to an intra-day high of 15,479.
The IT stocks were in the limelight with heavyweights like Infosys, Satyam and Wipro leading from front. Also Power, FMCG and select telecom stocks were in demand. The Nifty gained over 130 points from its days low and Sensex advanced over 450 points from its days low. Finally, the BSE benchmark Sensex ended 254 points higher to close at 15,769 and the Nifty index gained 91 points to close at 4,676.
Mercator Lines rallied by over 10% to Rs116 after the company announced that it took delivery of double hull crude carrier. The scrip touched an intra-day high of Rs118 and a low of Rs105 and recorded volumes of over 36,00,000 shares on NSE.
Ashok Leyland slipped by 2.5% to Rs32 after the company’s May sales declined for second straight month. The company announced that its May vehicle sales were at 5,576 units (down 4%). The scrip touched an intra-day high of Rs33 and a low of Rs31 and recorded volumes of over 9,00,000 shares on NSE.
Sahara Housing Finance was frozen at 5% lower circuit to Rs178 after the central bank banned Sahara India Financial Corp. Ltd. from accepting deposits for violating rules including failing to pay minimum interest rates. The scrip touched an intra-day high of Rs180 and a low of Rs178 and recorded volumes of over 3,000 shares on BSE.
PVR rallied by over 9% to Rs184 after the company announced that JP Morgan Mauritius Holding IV Ltd and ICICI Venture Funds Management Company Ltd acting as the investment manager for M/s. India Advantage Fund have agreed to invest Rs600mn each aggregating to Rs1.20bn in company's wholly owned subsidiary i.e. PVR Pictures Ltd.
PVR Pictures is engaged in film production and distribution. Both the investors and PVR Ltd. have therefore executed Share Subscription Agreement and Shareholder Agreement on June 04, 2008. The scrip touched an intra-day high of Rs184 and a low of Rs166 and recorded volumes of over 1,00,000 shares on NSE.
NTPC gained momentum and ended higher by 5% at Rs166 after media reports stated that 23 lakh NTPC shares changed hands at Rs160 per share on BSE. The scrip touched an intra-day high of Rs167 and a low of Rs157 and recorded volumes of over 50,00,000 shares on NSE.
NIIT Ltd advanced by over 5% to Rs109 after the company announced that it secured new orders to impart computer education to 1.9 million school students in Bihar and Maharashtra".
"NIIT Ltd, the leading Global Talent Development Corporation has received the mandate for providing computer and computer aided education to 1.9mn students in 900 State Government Schools in Maharashtra and Bihar. As per two back to back orders bagged by its School Learning Solutions Business, NIIT will train nearly 1.3mn students in 500 State Government Schools in Maharashtra, and 600,000 children in 400 Schools in Bihar, in the next five years. The scrip touched an intra-day high of Rs110 and a low of Rs102 and recorded volumes of over 1,00,000 shares on NSE.
Karnataka Bank advanced by 1% to Rs187 after the company announced that the board of directors would meet on June 12th 2008 to consider right issue. The scrip touched an intra-day high of Rs200 and a low of Rs184 and recorded volumes of over 50,000 shares on NSE.
M&M ended lower by a percent to Rs562. The company announced that it signed an agreement with Engines Engineering S.p.A., agreeing to acquire 100% stake in Engines Engineering S.r.l, the new legal entity which will be formed by transferring the business of Engines Engineering S.p.A. The scrip touched an intra-day high of Rs571 and a low of Rs557 and recorded volumes of over 58,000 shares on NSE.
Jaihind Projects was locked at 5% upper circuit to Rs112.75 after the company announced that it secured an order worth Rs7.60cr from Karnataka Urban Water Supply & Drainage Board for Construction of manholes, providing and laying of stone ware and RCC Pipe lines (Zone 4). The scrip touched an intra-day high of Rs112.75 and a low of Rs102 and recorded volumes of over 16,000 shares on NSE.
Tanla Solutions gained by 3.5% to Rs267 after the Board of Directors of the Company at its Meeting approved acquisition of Openbit Oy, Finland by its subsidiary Tanla Mobile Asia Pacific Pte. This transaction is valued at $US18.60mn.
Openbit Oy would be acquired by Tanla Mobile Asia Pacific Pte Ltd., Singapore a subsidiary of Tanla Solutions Ltd. Tanla Mobile Asia Pacific Pte Ltd would initially acquire 85% of the total shareholding of Openbit Oy. The scrip touched an intra-day high of Rs279 and a low of Rs250 and recorded volumes of over 68,000 shares on NSE.
Punj Lloyd edged higher by half a percent to Rs278 after the engineering, procurement, construction specialist, signed a collaboration agreement with Singapore Technologies Kinetics Ltd, for the manufacture of defence equipment.
Punj Lloyd has been issued a license by the Government of India for the manufacture of guns, rockets and missile artillery systems and related equipment in addition to other defence equipment. Under this agreement, both ST Kinetics and Punj Lloyd will be pooling their resources in the execution of supply contracts for the Ministry of Defence, Government of India. The scrip touched an intra-day high of Rs286 and a low of Rs275 and recorded volumes of over 10,00,000 shares on NSE.
Corporate News
ADAG plans entry into aviation and has initiated talks to buy SpiceJet. (Mint)
Piramal Life looks to sell 9-10% to private equity players. (Mint)
Sun Pharma to challenge Taro Pharmaceuticals’ intention to sell its Irish operations. (Mint)
Punj Lloyd has signed an agreement with Singapore Technologies Kinetics for the manufacture of defence equipment. (Mint)
Petronet LNG has resumed imports of LNG from the spot market after a nine-month halt. (Mint)
ONGC shuts operations of Panna and Mukta fields after an explosion in one of the processing platforms. (Mint)
BSNL pulls out of Singapore cable project. (Mint)
Tata Chemicals opens unit in Netherlands. (BS)
Sun Pharma buys Able Labs unit for Rs1040mn. (BS)
M&M is developing a small engine for a smaller version of its UVs. (BS)
Reliance Infrastructure has received regulatory approval to raise power tariff in Mumbai by 10.22%. (BS)
Lebanon based M1 CEO Azmi Mikati gives approval for a possible merger of RCom and MTN. (BS)
Allahabad High Court stays RBI order against Sahara taking deposits. (BS)
Apollo Hospitals intends to foray into pharmaceuticals. (BL)
Essar Oil may go cautious on Vadinar expansion. (BL)
Sail may increase prices after July. (BL)
JV of Tata Steel and Sail is asking Coal India to transfer three coal blocks to them. (BL)
ONGC to supply gas to NEEPCO’s power plant. (BL)
GMR group has chosen China’s Shangdong Electric Power Corporation as EPC contractor for 1,050MW power project in Orissa. (BL)
BSNL may get relief from rural phone burden. (BL)
HCL Tech along with Germany based SAP has developed solutions for the SMEs in the metal industry. (FE)
Archidply Industries announced a price band of Rs70 to Rs80 for its forthcoming IPO. (FE)
Rolta to foray into high-end security system, EPC and ERP implementation for engineering companies. (FE)
BSNL pulls out of Rs15bn Singapore undersea project. (FE)
SBI in JV with SocGenerale arm for custodial services. (FE)
ICICI Bank increases interest rates on one year NRE deposit to 3.16%. (FE)
Videocon Industries to cut workforce by 50%. (FE)
ACC enters into separate business of alternative fuels and raw materials to cut cost. (FE)
ACC to extend waste management services to multinational companies in India. (FE)
The Union Law Ministry gives approval on the proposed merger of Bhavnagar-based State Bank of Saurashtra with SBI. (FE)
Hindustan Aeronautics to design and manufacture 1,873.5 tonnage class helicopters. (FE)
Jindal Stainless files petition challenging the DGEP circular. (FE)
Reliance Industries goes ahead with gas sale purchase agreement term sheet notwithstanding court orders. (FE)
Tatas and Mahindras been approached by merchant bankers for takeover of General Motor’s Hummer. (ET)
Pantaloon Retail signs 50-50 JV with French apparel firm Celio. (ET)
Kitply Industries secures title sponsorship right for Bangladesh ODI series. (ET)
MTNL wants government to allow access to BSNL’s network to compete with private operators. (ET)
Suzlon buys out Areva’s 30% stake in REpower for a capital gain of over US$540mn. (ET)
Economic News
States start reducing sales tax on fuel. (BS)
RBI will use forex reserves to manage oil shock. (BS)
Iron Ore offtake may fall 10-15% due to China’s import curbs. (BL)
Railways examining further cut in freight rates. (BL)
DoT to allow non-licensees to bid for 3G -spectrum. (FE)
DGEP issue circular saying service tax exemption cannot be availed if services were not rendered from within the SEZs. (FE)
Agricultural minister Sharad pawar to meet PM on commodity trading tax. (ET)
Government to ask SEBI to relax listing norms for SMEs. (ET)
Committee of state finance ministry to meet on June 16 to consider lowering sales tax floor rate for petrol, diesel and LPG. (ET)
Oil companies reduced jet fuel prices by over 4% across the country. (ET)