When you stand at the edge of the cliff, jump to fly, not to fall.
Our request not to get alarmed didn’t seem to go well as the Prime Minister’s signal of a fuel price hike increased worries about inflation. As a result, after a positive start, the key indices suddenly fell from the cliff. Sentiment also dipped (for lack of other reasons) after the RSP - member of the Left Front - decided to pull out from the UPA-Left coordination committee. Such political developments need not cause much worry but the bulls seem to take it as an indication of further trouble for the fragile Congress-led coalition in the run up to next year's general elections. Then there were fresh worries over the global financial turmoil after UK lender Bradford & Bingley revised its rights issue at a 33% discount and warned that conditions were getting worse. Later in the evening, US shares slipped after S&P slashed its ratings and outlook on top Wall Street firms. Management shakeup at Wachovia and Washington Mutual also stoked renewed worries about the health of the global financial sector.
We expect our market to extend yesterday's selloff, given the plethora of negative factors, both local and global. Also, technical and F&O indicators are far from positive, and signal more pain in the immediate future. Select buying may always take place at lower levels. Review your financial comfort before adding stocks. Remain cautious at this juncture as the undertone has suddenly taken a reverse swing. FIIs continue to be net sellers. Supporting the market at this juncture is not on anyone’s agenda. 4800 was seen as a big support for the Nifty. But, that level was breached quite easily yesterday. The put-call ratio of option contracts expiring in June is also indicating further slide. Nifty futures continues to trade at a discount to the spot index and saw addition in its open interest, suggesting fresh build up in short positions. It remains to be seen if these shorts will get covered over the next few days or will there be further increase. Given this backdrop, one has no choice but to stay on the sidelines before there is more clarity on the market's direction.
DLF and Engineers India will declare their results today.
Asian stocks declined for the first time in four days, led by banks, on concern that credit-market losses will widen as the US housing market deteriorates and global growth slows.
Macquarie, Australia's No. 1 investment bank, and Nomura Holdings, Japan's biggest, dropped after S &P lowered its debt ratings on three of Wall Street's biggest securities firms. Babcock & Brown declined in Sydney after Wachovia ousted its CEO and Washington Mutuals' CEO relinquished his role as chairman.
The MSCI Asia Pacific Index lost 1% to 150.35 as of 10:54 a.m. in Tokyo, ending a three-day, 3.4% rally. An index of financial companies was the biggest drag among the benchmark index's 10 industry groups.
Japan's Nikkei 225 Stock Average fell 1.9% to 14,172.13. Kajima Corp., Japan's largest general contractor, led declines after Credit Suisse downgraded its shares. Asian equity markets open for trading retreated apart from Malaysia and China, which were little changed.
US stocks fell for the first time in five days amid renewed worries about the financial sector after S&P cut its debt rating on a number of banks, and Wachovia and Washington Mutual announced management shakeups.
Wachovia slid to the lowest level since 1995 after saying Kennedy Thompson will step down. Morgan Stanley, Merrill Lynch and Lehman Brothers tumbled after S&P said the firms will be forced to report more writedowns.
Marriott International spurred declines in consumer shares as the largest hotel chain said lower US demand is hurting revenue growth.
The S&P 500 Index lost 14.71 points, or 1.1%, to 1,385.67. The Dow Jones Industrial Average dropped 134.50 points, or 1.1%, at 12,503.82. The Nasdaq Composite Index slid 31.13 points, or 1.2%, to 2,491.53.
Market breadth was negative. Three stocks dropped for each that rose on the New York Stock Exchange.
Tuesday brings the April reading on factory orders, while reports are due later in the week on employment, productivity and the services sector of the economy.
Tuesday morning also brings a speech from Federal Reserve Chairman Ben Bernanke on the economic outlook. Bernanke is speaking at the International Monetary Conference in Madrid.
The CEO of Wachovia has been asked to step down by its board, following what the company termed as a series of setbacks that have weighed on performance. Shares fell 1.7%. Washington Mutual said its CEO will no longer be its chairman, as the company struggles to return to profitability. Shares were flat.
The Institute for Supply Management said manufacturing activity contracted in May for the fourth straight month. However, the index still showed more strength than what economists had expected. The ISM index rose to 49.6 in May versus forecasts for a decline to 48.5.
Construction spending fell 0.4% in April, the government reported, after dropping 0.6% in March. Economists had forecast a decline of 0.6%.
US light crude oil for July delivery rose 41 cents to settle at $127.76 a barrel on the New York Mercantile Exchange.
The national average price for a gallon of regular unleaded gas held at $3.975, AAA said, matching Sunday's record. That breaks a streak of 26 days of gains and 25 days of record highs.
The US dollar rose versus the euro, continuing its recent recovery. Against the yen, the dollar slipped. Treasury prices rose, lowering the yield on the 10-year note to 3.96% from 4.06% late on Friday. COMEX gold for August delivery rose $5.50 to settle at $897 an ounce.
European shares dropped, retreating for the first time in five sessions after British lender Bradford & Bingley cut the amount of money it will raise via a share issue and issued a profit warning.
The pan-European Dow Jones Stoxx 600 index fell 1.1% to 318.44 in Monday dealings, dragged lower by banking-sector losses as well as drops for automakers. The French CAC-40 dropped 1.6% to 4,935.21, while Germany's DAX 30 declined 1.2% to 7,008.77 and the UK's FTSE 100 lost 0.8% to 6,007.60.
Brazilian and Mexican stocks ended lower as well. Brazil's Bovespa fell 0.7% to 72,051.49 while Mexico's IPC fell 1.1% to 31,636.21. Among the other emerging markets, Russia's RTS index was down 0.3% at 2452 while the ISE National-30 index in Turkey was up 0.6% at 48,788.
More pain likely
Key indices fell sharply in the late afternoon trading session, dragging the BSE 30-share Sensex below 16k levels during intra-day trade. Concerns over the rising inflation and uncertainty over the interest rate scenario continued to keep bulls under pressure. Further, reports that Left constituents RSP has threatened to withdraw from UPA Left Coordination Panel created doubts in the minds of traders and investors.After a positive opening, markets eventually closed near day’s low on back of selling across-the-board. All the major sectoral indices closed in red. However, auto stocks survived the carnage on back of impressive monthly auto sales numbers.
Among the index heavyweights, RIL, HDFC, Hindalco and Tata steel were among the major losers. With European markets opening lower in the range of 1-2%, markets fell in a heap from day’s high. Finally, the Sensex closed at 16063 down 2% and Nifty fell by 2.68% to close at 4739.6
Punj Lloyd stock closed at Rs287.05 down by 10.5%. The company posted quarterly revenues of Rs23467, up by 38% yoy and PAT up 32% to Rs1177 yoy. The scrip touched an intra-day high of Rs325.05 and a low of Rs280 and recorded volumes of over 25,61,499 shares on BSE.
Sterlite Industries was up by 2.8% to Rs934.9 after the company announced to buy operating assets of Asarco, a US based mining, smelting and refining firm for US$2.6bn. The scrip closed at Rs916.7 around 1.95% down before touching an intra-day high of Rs955 and a low of Rs910 and recorded volumes of over 2,39,105 shares on BSE.
Essar Oil surged 6% to close at Rs236 as the company reportedly bids for an offshore block in Australia and is in talks with foreign companies to explore oil in Egypt and Yemen. Essar Oil also announced that it would raise fresh debt of up to US$5bn through ECB. The scrip touched an intra-day high of Rs243 and a low of Rs225 and recorded volumes of over 77,69,633 shares on BSE.
Among the auto stocks, Hero Honda and Bajaj Auto were the major gainers after the auto companies announced their monthly sales figures. Bajaj Auto posted 7.6% growth in motorcycles sales in May and Hero Honda motorcycles sales growth rose 9.5%
Corporate News
Tata Motors has acquired the Jaguar Land Rover business from Ford Motor for a net consideration of US$2.3bn. (ET)
Bharti Airtel and US based VeriSign enter into 3 year arrangement for developing security solutions for Indian corporates. (ET)
Infosys has bagged patents for mobile tech, holography from the US Patent and Trademark Office. (ET)
Axis Bank and Yes Bank are securitizing loans worth over Rs10bn that were extended to HPCL and BPCL. (BS)
Ambuja Cement is set to buy a stake in ACC’s ready-mix concrete subsidiary – ACC Concrete. (ET)
ICICI Bank has raised interest rates on credit cards. (BL)
The financial closure of the Krishnapatnam UMPP of Reliance Power would be achieved in the coming three months. (BL)
SBI has launched its Agriculture Debt Waiver and Debt Relief Scheme-2008 in Jamli village near Indore. (BS)
GAIL India says its 100% subsidiary GAIL Gas will take up city gas distribution projects in 17 cities in the first phase. (BL)
IOC is in initial phase of discussions with ITC for merchandise supplies from the latter’s Choupal Sagar stores for its 2,050 kisan seva kendra (KSK) outlets across the country. (FE)
Videocon-promoted Datacom will invite bids for rolling out 70mn GSM mobile lines envisaging an investment of over Rs120bn in the next four years. (ET)
Jet Airways, SpiceJet, Kingfisher and other airlines have told the government they would curtail services frequency and air routes to cut losses after oil companies raised ATF prices by 18.5%. (BS)
The Kingfisher-Deccan combine has decided to increase fuel surcharge by Rs300-550. (BL)
Jindal Steel & Power is planning to build a Rs50bn, 1,080-mw, coal-fired captive power plant in Orissa. (BS)
Hexaware has appointed Mr P.R. Chandrasekar as the CEO and Vice-Chairman and Prateek Aggarwal as the CFO of the company. (BL)
HCL Info, HP, LG and Zenith are raising prices of personal computers (laptops and desktops), LCDs and plasma TVs, and IT peripherals by up to 13%. (BS)
The Allahabad Bank board has approved the proposal to raise about Rs1.5bn from selling rights shares to stakeholders. (BS)
Emami and a string of entities acting in concert purchased 23.6% stake from one of the promoter groups of Zandu Pharma at Rs6,900 per share for Rs1.3bn. (BL)
The Parikh family, co-promoters of Zandu Pharma is not in favour of selling its stake to Emami. (ET)
Dabur Group and the US-based Liberty Mutual Group have announced their plan to form a non-life insurance company. (BL)
The department of fertilizers has asked RCF to go ahead with the pre-project and pre-investment activities for the revival of Hindustan Fertiliser Corporation’s (HFC) Durgapur plant and Fertiliser Corporation of India’s (FCI) Talcher unit. (FE)
As part of its diversification plans, Omaxe is eyeing the power sector through its new subsidiary Omaxe Power. (BS)
Indus Fila is planning to invest Rs2bn in retail and set up 30-40 retail outlets within a year. (BS)
Sobha Developers is foraying into Mysore realty market with three projects. (BS)
Logix Microsystems will soon open an advanced photography studio in Brussels as part of its plans to enter the European market. (BS)
TDSAT has restrained BSNL from disconnecting Tata Tele over non-payment of access deficit charge. (BS)
Tamil Nadu Newsprint and Papers plans to tie up with other paper mills to get the surplus pulp converted to paper. (BL)
Bharat Gears has wiped out all its accumulated losses and has drawn up capex plans to cater to higher demand as well as technological upgradation. (BL)
The Burmans (Dabur group) plans to foray into clinical services segment through OncQuest, a privately held company. (ET)
Spanco BPO, the hived-off BPO unit of Spanco Telesystems is on the lookout for a Rs1bn KPO buy. (DNA)
Phoenix Mills is in the process of forming a separate company to manage all its real estate assets. (ET)
Vodafone has offered SouthAfrica’s Telkom to buy a further 12.5% stake in mobile operator Vodacom for US$2.47bn. (ET)
Tata Sky has cut its subscription rates. (ET)