He that climbs the tall tree has won right to the fruit.
Any fall in the market often prompts one to do cherry picking. But given the continuous fall for almost half a year, investors have the luxury of choosing and picking low hanging fruits without worrying about climbing high. Delicious valuations did we hear! Use lower levels to add the large caps only even though the mid-cap and smaller stocks may have fallen more.
After a partial rebound from lower levels yesterday, we expect some bounce today. Barring European markets, which tumbled on bad set of economic data, most global markets ended flat to slightly negative. We see a cautious to perhaps a slightly higher opening in our market. Though a short-squeeze we predicted yesterday didn't fully materialise, the F&O segment did see some short covering. The Nifty June futures closed with a slight premium as against a discount of a few points. The open interest too declined substantially.
These factors point to short covering by the bears. More can be expected over the next couple days ahead of Thursday's settlement day. We will also have the outcome of the Fed meeting, where the US central bank is likely to keep rates steady while stressing on containing inflation.
On the political front, there hasn't been any significant new development, though some reports suggest that the UPA and Left may agree to some comprise formula to avoid early polls. A truce between the Congress and the red brigade could come as a welcome breather.
On the whole, the bulls may well have a good day in office after a four-day drubbing during which the Sensex has lost some 1,400 points. Much will hinge on global markets and F&O trends.
FIIs were net sellers of Rs6.66bn (provisional) in the cash segment on Monday while the local institutions poured in Rs917.5mn. In the F&O segment, foreign funds were net sellers of Rs1.66bn.
On Friday, FIIs were net sellers of Rs9.53bn in the cash segment. With this, they have pulled out almost $5.9bn from the Indian market this year.
Results Today: Amara Raja, Apollo Hospitals, Classic Diamond, Cyber Media, IndusInd Bank, Jet Airways, Patel Engineering, PSL, Ramsarup Industries, Sadbhav Engineering, Tata Chemicals and TV Today.
Shares of Rane Engine Valve Ltd. will get re-listed today.
US stock indices closed mixed on Monday. The Nasdaq slid while the broader market was mixed as investors grappled with the ongoing troubles for the financial and automaker sectors and high oil prices.
After the close, express delivery firm UPA cut its second-quarter earnings forecast, due to slower economic growth and higher fuel costs. Shares slumped more than 4% in after-hours trading.
The Dow Jones Industrial Average finished flat at 11,842.36, with 17 of its 30 components trading lower. The S&P 500 closed at 1,318, with the financial sector suffering the most, off nearly 3%, followed by consumer discretionary, down 2%.
The technology-laden Nasdaq Composite fell 20.35 points to 2,385.74.
A stronger dollar and two major deals helped stocks rise in the early going. But the undertone soon turned negative as concerns about bank and automakers resurfaced, giving investors a reason to stay cautious.
Market breadth was negative. On the New York Stock Exchange, losers beat winners two to one on volume of 1.08bn shares. On the Nasdaq, losers beat winners by over two to one on volume of 1.93bn shares.
The financial sector was hurt by reports of job cuts at investment banking divisions of Citigroup and Goldman Sachs, besides fresh downgrades of the financial and consumer discretionary sectors.
Banc of America Securities lowered second-quarter estimates for both Merrill Lynch and UBS, saying that mortgage-related exposures are likely to weigh on the bottomlines of both investment firms.
Oil prices were volatile as investors weighed a possible disruption in Nigerian supply with news that Saudi Arabia will boost daily output to 9.7 million barrels from the current 9 million barrels. August crude closed at $136.74 a barrel in New York, up $1.38, or 1%, for the session.
The national average price for a gallon of regular unleaded gas fell to $4.072 from $4.073 the previous day, according to AAA.
Meanwhile, on Capitol Hill, four energy analysts told Congress the price of gasoline could fall to about $2 a gallon within 30 days of passage of a law to limit speculation in energy-futures markets.
The Federal Open Markets Committee (FOMC) will gather today for a two-day meeting. Federal Reserve Chairman Ben Bernanke and is colleagues are widely expected to hold rates at 2%, amid mounting inflation pressures.
Tuesday also brings the June reading on consumer confidence from the Conference Board. The index is expected to have dipped to 56.0 from 57.2 in May.
Citi is about halfway through previously announced job cuts in its investment banking unit, according to reports, with the bulk of those cuts expected this week. The No.1 US bank had said earlier this year that it will cut 10% of the 65,000 employees in its investment banking unit. That news pressured other financial stocks.
The auto sector too remained under pressure. GM shares lost 6.4%, after nearing a 33-year low, on nagging worries about the industry's financial health. Separately, GM said it will offer 0% financing for 72 months on certain cars and trucks, as a means of unloading select 2008 vehicles. The company also announced prices increases on some 2009 models.
In related development S&P said it will probably cut GM, Ford and Chrysler's debt ratings and the debt ratings of the companies' finance units. Also, Moody's said Ford and Chrysler are in danger of being downgraded - a warning it already gave about GM earlier this year.
Republic Services, a disposal company, said it will buy rival Allied Waste Industries in a $6.1bn stock deal. Farm-products company Bunge is buying Corn Products for $4.8bn in stock and the assumption of debt.
In currency trading, the dollar gained versus the euro and the yen. In the bond market, Treasury prices rose modestly, lowering the yield on the benchmark 10-year note to 4.16% from 4.17% late on Friday. COMEX gold for August delivery fell $16.50 to settle at $887.20 an ounce.
European shares finished lower, as the outlook for a sluggish eurozone economy dragged on shares of construction firms and banks. The pan-European Dow Jones Stoxx 600 index fell 1.7% to 295.08, breaking below the 300 level for the second time in two days. UK's FTSE 100 closed down 1.5% at 5,620.80, while Germany's DAX 30 fell 2.1% to 6,578.44 and the French CAC-40 dropped 1.8% to 4,509.27.
In the emerging markets, the Bovespa in Brazil was nearly flat at 64,640 while the IPC index in Mexico fell 0.2% to 29,464. The RTS index in Russia slumped 1.8% to 2342 and the ISE National-30 index in Turkey dropped 0.6% to 45,739.
Looking for bounce
Markets continued their southward journey starting off the weak with a negative bias. Selling pressure, fueled by global weakness saw the Indian bourses take a nosedive in the morning trades, dragging the Nifty below the 4,300 level. However, in the mid-afternoon trades bulls managed to partially erase early losses, with the benchmark index recovering over 300 points and the Nifty managing to recoup over 90 points. But, the momentum was short lived as bears were back with a sudden bout of selling in the index heavyweights like Reliance Industries, Infosys and Tata Steel.
Among the 50-Nifty, 38 stocks ended in negative terrain and only 11 stocks ended in green. Finally, the BSE benchmark Sensex lost 277 points to close at 14,293 and the Nifty index lost 81 points to close at 4,225.
Reliance Industries, the index heavyweight fell to its lowest since September 12. The stock dropped below the Rs2,000 mark in the morning trades, losing over 3.5% to close at Rs2022. There were reports stating that, the company’s USA arm would invest US$215mn and create 200 new jobs at a newly acquired polyester plant in the US.
The scrip touched an intra-day high of Rs2083 and a low of Rs1984 and recorded volumes of over 16,00,000 shares on BSE.
Maharashtra Seamless was down by a 2% to Rs294. The company announced that they secured order worth RsUS$45mn. The scrip touched an intra-day high of Rs297 and a low of Rs282 and recorded volumes of over 6,000 shares on BSE.
DLF slipped 2.5 percent to close at Rs446. According to reports, the company will be getting around 5,000 acres near Greater Noida at less than market rate under the Taj Expressway Industrial Development Authority’s (TEA) scheme.
TEA will transfer the land to realty developers at acquisition cost from the farmers, which is likely to be much cheaper than the market rate developers have been paying privately. The scrip touched an intra-day high of Rs463 and a low of Rs438 and recorded volumes of over 11,00,000 shares on BSE.
Sterlite Technologies dropped by 5% to Rs198. The company announced two major contract wins with Indian telecoms giant BSNL. The contracts, which are for fiber optic cable and copper telecoms cable, respectively, are worth a total of Rs1.07bn to Sterlite Technologies. The scrip touched an intra-day high of Rs210 and a low of Rs197 and recorded volumes of over 64,000 shares on BSE.
Sayaji Hotels plunged by over 9% to Rs61.30. The company announced that it opened its seventh restaurant on June 21, 2008 at J P Nagar, Bangalore. The company is inaugurating the new restaurant at 67, Sarkki Industrial Layout, J P Nagar, Phase 3, Bangalore, with 168 covers of sitting capacity.
The seventh restaurant is being opened by the wholly owned subsidiary company Barbeque-Nation Hospitality Ltd and currently operating six restaurants at Jaipur, New Delhi, Lucknow, Chandigarh, Chennai and Ahmedabad. The scrip touched an intra-day high of Rs67 and a low of Rs61 and recorded volumes of over 17,000 shares on BSE.
Petronet LNG ended 3.2% to lower to close at Rs59. The company is taking participating interests in gas assets in Australia. The company is in talks with European and American firms with acreages in Australia. It is looking at gas fields with likely in-place reserves of 8-15 trillion cubic ft (TCF), according to the report.
PLL is also looking at coal bed methane (CBM) projects in Australia. The company plans to source around 7.5-10 million tonnes per annum of LNG. The scrip touched an intra-day high of Rs61 and a low of Rs59 and recorded volumes of over 4,00,000 shares on BSE.
Corporate News
GMR will replace ONGC in Rs310bn Kakinada refinery and petrochemical project in Andhra Pradesh. (BS)
Tata Power plans to invest Rs250bn to boost its capacity by six-fold to 12,800mw by 2013. (BS)
GIC and Temasek may be allowed to pick up 10% stake each in ICICI Bank. (FE)
GAIL will issue one bonus share for every two equity shares held by its shareholders. (BS)
Wipro has raised Rs14bn through external borrowings. (BS)
Tech Mahindra has bagged a US$24mn engagement to assist Telecom New Zealand overhaul its retail business. (BL)
SBI is likely to raise its PLR and is awaiting fresh monetary action from the RBI to finalise the extent of increase. (BS)
Reliance Industries USA has acquired a polyester manufacturing facility in North Carolina for about US$12.2mn from Unifi Kinston and plans to invest US$215mn in that company. (ET)
Tata Motors has decided to absorb a significant portion of the cost increase of its Nano vendors. (ET)
Reliance Globalcom, the global arm of RCOM is entering into an alliance with a VOIP exchange in the US. (DNA)
M&M’s used-car business, First Choice is likely to sell 10% stake to Phi Advisors for ~Rs800mn. (ET)
Nalco will resume full production from June 25 after a strike cut the supply of coal to its Orissa power station. (BS)
Binani Cement has lined up capex plans of Rs16bn to take its global capacity to 13mmtpa by 2011-12. (BS)
Binani Cement is close to acquiring an African cement company for ~US$100mn. (ET)
Kingfisher Airlines and Deccan have slashed over 10% of their total daily flights. (BL)
Saint-Gobain Glass India plans to invest Rs10bn on a 0.3mn ton a year greenfield float glass making plant in Bhiwadi in Rajasthan. (BL)
ONGC Tripura Power Co, a unit of ONGC has awarded a Rs22.07bn order to a consortium of BHEL and GE for its 720 MW plant in Tripura. (ET)
Unichem has received a certification from the European Directorate for the Quality of Medicines and Healthcare for its active pharmaceutical ingredients plant in Roha, Maharashtra. (BL)
Unichem Laboratories has got approval from the US Food and Drug Administration for its formulations plant in the northern state of Uttar Pradesh. (ET)
JK Tyre has acquired 100% shares of Tornel, the Mexican Tyre company, along with its subsidiaries, for Rs2.7bn. (ET)
JK Tyre & Industries will raise prices of tyres by August. (ET)
Lupin has entered into a promotion agreement with Ascend Therapeutics Inc to promote its Suprax 400mg tablets in the US. (DNA)
The Parikhs, co-promoters of Zandu Pharmaceuticals have sent a letter to SEBI to thwart Emami Group’s attempt to take over the company. (ET)
Reliance Brands have entered into a 50:50 JV with Italy’s luxury sportswear brand Paul & Shark. (ET)
Alok Industries will invest Rs400mn in expanding its retail venture in FY09. (BL)
Religare Enterprises plans invest over Rs1bn for setting up 200 retail stores in the personal finance space under the Finmart brand over the next one year. (ET)
Pyramid Saimira Group, Chairman and MD P. S. Saminathan is considering an open offer to consolidate his stake in the company. (Mint)
Vodafone Essar has secured Rs70bn loan from lenders led by State Bank of India. (DNA)
SpiceJet plans to cut 20 flights from July 1. (BL)
Economic News
Around Rs80bn worth of real estate projects covering over 40mn square feet are facing delays. (BS)
DoT has asked TRAI to review termination charges. (BS)
Advance tax collection for the June 15 installment is expected to have gone up 30% on a yoy basis. (BL)
The June 30 bid submission date for the seventh round of NELP will not be deferred. (BL)
Indian corporate houses have raised a record more than Rs1trn by issuing corporate bonds during FY08. (Mint)
The DoT committee, formed to recommend ways to allocate and price 2G spectrum for mobile services, is likely to hold its first meeting in the first week of July. (ET)
The Competition Commission of India has asked SEBI to make compliance with competition law mandatory for listing on stock exchanges. (ET)
Government has held discussions with Nigeria to acquire more oil and gas fields. (FE)
RBI has decided that, for the limited purpose of valuation, all special securities issue by GoI, directly to the beneficiary entities, which do not carry SLR status may be valued at a spread of 25bps above the corresponding yield on GoI securities. (FE)