Steam is no stronger now than it was a hundred years ago but it is put to better use.
Bulls may lack the steam but after yet another tumultuous week, they would fell better seeing some green ticks across most global markets. Sentiment could also shore up from the fact that FIIs were not big sellers in the cash segment on Friday and were in fact net buyers on the F&O side. For the market to reverse the current bearish trend and sustain better levels for a long period of time, the overseas investors have to resume their shopping spree. That may take a while to happen as macroeconomic fundamentals have turned weak over the past few months and may remain so for the near term.
Things may start looking up post monsoon (which may well be good). Prices of key commodities (especially that of crude oil) have to soften to ease the cost pressure for companies as well as individuals. Inflation, which is at a 7-year high of 8.75%, could soon touch double-digits. This will continue to cause headache for the policy makers as well as for the markets till inflation peaks out. A good harvest will be a major boon for the Indian economy, as well as the Government and of course the markets.
For now though, one may have to deal with lots of volatility in a narrow band. The bias remains negative, though there is a chance of a short-covering led rally as the market appears to be oversold from higher levels. This, one must add may not last long, as the bulls still lack confidence following the recent carnage and weakening economic fundamentals (both local and global). Any advance should be used as an opportunity to shed excess baggage.
Lots of stock specific activity is expected. Watch out for RCOM in the wake of RIL's opposition to the MTN deal. Ranbaxy could also remain in the limelight due to talk of Pfizer announcing a counter bid. Sterlite may be under pressure as it is also facing a counter bid for Asarco. Steel and iron ore companies will attract attention after the Government announced changes in duties. Car makers may be hit due to the increase in excise duty on big cars, MUVs and SUVs. Vikas WSP could see action as it announces its results today.
FIIs were net sellers of Rs1.16bn (provisional) in the cash segment on Friday while the local institutions poured in Rs4.57bn. In the F&O segment, foreign funds were net buyers of Rs6.25bn.
On Thursday, FIIs were net sellers of Rs11.42bn in the cash segment. With this, they have pulled out over $5.4bn from the Indian market this year so far. Mutual Funds were net buyers of Rs2.28bn on the same day.
Asian stocks rose for a second day, led by automakers and technology companies, as the yen weakened against the dollar and crude oil prices retreated.
Toyota climbed to a one-week high in Tokyo. Samsung and LG rose in Seoul. Korean Air Lines jumped after South Korea allowed its two biggest carriers to increase fuel surcharges.
The MSCI Asia Pacific Index added 0.5% to 141.32 as of 9:33 a.m. in Tokyo, rebounding from its largest weekly drop in 10 months. More than two stocks advanced for each that retreated among the benchmark's 991 members.
Japan's Nikkei 225 Stock Average added 1.2% to 14,140.21, extending its June 13 gain of 0.6%. Indexes advanced in other Asian markets open for trading, except for Australia which was little changed.
US stocks rallied on Friday, with a stronger dollar and weaker oil prices giving investors a reason to snap up some recently beaten-down shares. The Dow Jones Industrial Average gained 1.4%, while the broader Standard & Poor's 500 index gained 1.5% and the Nasdaq Composite climbed 2.1%.
US shares rose modestly at the open but picked up pace later on, despite a report showing a big jump in consumer inflation. Investors took advantage of some lower stock prices, following a tough period on Wall Street.
Lehman Brothers shares jumped 13.7%, bouncing back after a tough week in which the investment bank announced a stunning $2.8bn quarterly loss and a management shakeup. Lehman recovered on reports that BlackRock bought its shares in a stock offering earlier this week.
A variety of other financial stocks jumped too.
Yahoo remained in focus on news that it has partnered with Google on an online advertising deal, in lieu of the Microsoft takeover. And Anheuser-Busch was in focus again on reports that it is in talks with Grupo Modelo to ward off InBev.
The Consumer Price Index (CPI) rose 0.6% in May after rising 0.2% in April, reflecting the spike in oil and gas prices, and bringing the annual rate to 4.2%. Economists had expected a rise of 0.5%.
The so-called core CPI, which strips out volatile food and energy prices, rose 0.2% in the month, as expected, after rising 0.1% in April.
The University of Michigan's June consumer sentiment survey fell to 56.7 from 59.8 in May, reflecting the increase in commodity prices and turmoil in the economy. Economists thought sentiment would fall to 59, on average.
The housing market was dealt another blow after a report showed a big jump in foreclosures in May. Approximately 73,000 families lost their homes to bank repossessions last month, a jump of 48% from the year-earlier period, according to RealtyTrac, an online marketer of foreclosed properties.
US light crude oil for July delivery fell $1.88 to settle at $134.86 a barrel on the New York Mercantile Exchange. Gas hits new record: The national average price for a gallon of regular unleaded gas rose to a record high of $4.066 from the previous day's record of $4.060, AAA reported.
In currency trading, the dollar gained versus the euro and the yen. COMEX gold for August delivery rose $1.10 to settle at $873.10 an ounce. In the bond market, Treasury prices slumped, raising the yield on the benchmark 10-year note to 4.26% from 4.21% late on Thursday.
There may be some relief for the global economy as far as the cost of energy is concerned. Saudi Arabia, the world's biggest oil producer, plans to hike its oil production by 200,000 barrels per day (bpd) next month.
Saudi Arabia's oil minister apparently told this to U.N. chief Ban Ki-moon over the weekend, according to international reports. The U.N. secretary-general met Saudi oil minister Ali al-Naimi in the port city of Jiddah during a one-day trip to the world's largest oil producer.
Al-Naimi is learnt to have told Ban that Saudi Arabia would increase oil production by 200,000 bpd from June to July. In May, the kingdom increased its production by 300,000 bpd. By July, production should be at 9.7mn bpd, Al-Naimi is believed to have told the U.N. chief.
The surge in commodity prices threatens to undercut economic expansion and increase inflationary pressures worldwide, the Group of Eight (G8) finance ministers said in a statement on Saturday.
High prices for oil and food "pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable, and may increase global inflationary pressure," the ministers said in a communiqué marking the conclusion of their two-day meeting in Osaka, Japan.
Market to turn sideways
A volatile trading session ended in negative terrain as bulls were unable to carry their momentum further. Key indices started off on flat a flat note, however lost ground after India’s Inflation figures accelerated at fastest pace in almost 7 years. Inflation based on the wholesale price index (WPI), rose to 8.75% in the week ended May 31 from 7.24% in the previous week, much higher than average forecast of 8.25-8.35%. Government also said that Inflation rate for the week through April 5 has been revised to 7.71% from a provisional figure of 7.14%.
Among the 30-scrips of Sensex, 21 stocks ended in red and only 9 stocks ended in positive terrain. Finally, the BSE benchmark Sensex slipped 60 points to close at 15,189 and the Nifty index slipped 22 points to close at 4,517.
Educomp ended on a flat note at Rs3450. Reports stated that the company would implement computer-aided learning in select schools in Andhra Pradesh. The scrip touched an intra-day high of Rs3510 and a low of Rs3405 and recorded volumes of over 25,000 shares on NSE.
Jet Airways gained by half a percent to Rs546. According to reports, the company pulled out of negotiations to buy a strategic stake in SpiceJet. The scrip touched an intra-day high of Rs565 and a low of Rs543 and recorded volumes of over 15,000 shares on NSE.
Sun Pharma edged lower by 0.4% to Rs1471. Reports stated that Sanofi-Aventis has sued Sun Pharma for infringement of a US patent for Uroxatral. The scrip touched an intra-day high of Rs1489 and a low of Rs1445 and recorded volumes of over 45,000 shares on NSE.
IOC gained by 2.3% at Rs372 after the company said that it plans to set-up mini liquefaction plants to source gas from the marginal fields, stated reports. The scrip touched an intra-day high of Rs385 and a low of Rs363 and recorded volumes of over 13,00,000 shares on NSE.
L&T marginally gained by 0.3% to Rs2710. According to reports, the company said that it would invest US$6bn in the power generation business over the next five years. There were also reports stating that the company has postponed listing of its infotech business to the second half of 2009-10. The scrip touched an intra-day high of Rs2744 and a low of Rs2688 and recorded volumes of over 3,00,000 shares on NSE.
Idea ended 0.5% higher to close at Rs108 after media reports stated that Telekom Malaysia would pick up additional 15% stake in Idea. Telekom Malaysia-Idea deal to be at over Rs150 per share. The scrip touched an intra-day high of Rs112 and a low of Rs104 and recorded volumes of over 50,00,000 shares on NSE.
GHCL surged by over 13% to Rs71 on back of huge volumes. The scrip touched an intra-day high of Rs72 and a low of Rs64 and recorded volumes of over 94,00,000 shares on NSE.
Container Corporation gained 1.5% to Rs754. The company announced that it posted a net profit of Rs7.522bn for the year ended March 31, 2008 as compared to Rs7.038bn for the year ended March 31, 2007. Total Income increased from Rs31.419bn for the year ended March 31, 2007 to Rs35.117bn for the year ended March 31, 2008. The scrip touched an intra-day high of Rs765 and a low of Rs733 and recorded volumes of over 2,000 shares on NSE.
Corporate News
Reliance Industries sends letter to MTN; says it has the first right of refusal to buy the controlling interest in Reliance Communications.(FE)
JSW Steel plans to invest Rs800bn to add 20mn tonne capacity.(BL)
Idea Cellular to buy Spice Comm. in a three stage deal in which minority shareholders of latter can swap their shares for Idea’s shares or sell them in an open offer.(BS)
Goldman Sachs to pay Rs7bn for a minority stake in M&M.(TOI)
Hindalco Industries considering various options including rights issue to repay a US$3bn bridge loan it took to finance the acquisition of Novelis Inc.(BL)
Telekom Malaysia is understood to have picked up ~15% stake in Idea Cellular at a price of Rs158 a share.(DNA)
Videocon to roll out its GSM services from Chennai on August 15th of current year.(ET)
Vedanta Resources bid for US copper firm Asarco faces a roadblock.(Mint)
Hinduja Group to finalise a strategic investor to offload 15% stake in the 1,040MW coal fired project at Vizag in Andhra Pradesh.(FE)
Wipro Technologies pulls out of its JV with Motorola.(ET)
SBI decides against raising interest rates for the time being.(BS)
ONGC Videsh, Indian Oil and Oil India together expect to spend US$3bn if they get the right to develop the Farsi block in Iran.(BS)
The New York Times Company in discussion to acquire a 5% equity stake in Sieger Solutions, a 100% subsidiary of Deccan Chronicle Holdings.(BL)
Reliance Power emerges as the lowest bidder to build two power projects in the Allahabad district of Uttar Pradesh.(BS)
3i Infotech completes the acquisition of US based Regulus Group for US$100mn.(DNA)
TPG Newbridge may invest US$150mn for a 49% stake in a company that will hold 100% equity capital of Shriram City Union Finance.(BL)
Pipe manufacturer PSL secures Rs 1.2bn order from BPCL.(BL)
Spice Comm. promoter B K Modi in negotiations to acquire 39% stake in Sony Entertainment Television.(BS)
Reliance Retail will soon enter into a 51:49 JV with US-based Avery Dennison Corp.(ET)
Philips Electronics India decides to buy back shares for Rs1.8bn at Rs260 per share.(DNA)
Maharashtra government decides to allot 25 acres of land in Nagpur to Mahindra Lifespace Developers.(ET)
Ultra mega power project in Tilaiya, Jharkhand to be awarded in November; eleven companies short listed for the project.(BS)
MAN Infraprojects, subsidiary of MAN Industries, to invest Rs10bn in real estate (DNA).
Indo Asian Fusegear forms JV with a Spanish firm to manufacture wiring devices for home automation.(Mint)
Lehman Brothers to invest Rs7.5bn in Unitech’s 97 acre project in North Mumbai.(ET)
JK Tyres to set up a greenfield site for passenger car tyres.(ET)
Sarswat Cooperative Bank has made a fresh application to the RBI to acquire the ailing South Indian Cooperative Bank.(ET)
Economic News
Inflation rises to 8.75%, a seven year high on dearer primary goods for week ended May 31st.(BL)
State governments are planning to cap sales tax on jet fuel at 12.5%.(ET)
Government raises export duty on iron ore and long steel products; imposes fresh excise duty on large cars and SUVs.(BS)
Cement output in May 2008 fell marginally to 14.89mt against 15.02mt in April according to Cement Manufacturers’ Association.(BL)
Drug price regulator has introduced pro rata pricing for injectibles in addition to oral liquids, tablets and ointments.(ET)
Due to slowdown in passenger traffic and high ATF costs, airline companies are canceling or cutting deliveries due this year or sub-leasing them to other carriers globally.(BS)
Government withdraws 5-15% export cess imposed on variety of steel products including hot and cold rolled coils, steel pipes and tubes and galvanized sheets.(ET)
DoT may impose eligibility conditions for 3G spectrum auction.(BL)
Cable operators may be allowed to build an optical fibre infrastructure.(ET)
Government approves 13 FDI proposals worth Rs 15bn including one by steel major ArcelorMittal for its operations in India.(FE)
Mining ministry to buy a Rs4.5bn deep-sea research vessel for seaboard mapping.(ET)
Government is contemplating ban on maize exports to reduce price in the domestic markets.(ET)
Empowered group of state finance ministers likely to discuss today Center’s proposal to reduce sales tax on petrol, diesel, cooking gas and jet fuel.(ET)