Sometimes God calms the storm, sometimes He calms the sailor
The Gods may be on a vacation because neither the storm of bad news nor the nerves of the sailor (read market participants at sea) appear to calm down. How else does one explain Tuesday’s torrent which hit the market. Downgrades were more or less anticipated and Fitch revised the outlook on India’s Long-term local currency Issuer Default Rating (IDR) to Negative from Stable. Be prepared for more downgrades. The optimist may think by the time further downgrades come, it may be time for a reversal in fortunes.
After closing at its lowest level in 15 months, few are willing to bet their money at current declines. Those who get in will at best do so for some short term gains if any. Most people expect the pain to continue for a while.
For the day, we expect a flat to lower opening. The usual short-term pullback may be seen. Stay away even if there is a bounce. Nifty could test levels of 3,650 in the near term.
Parsvanath could see some short term gains as the company is set to make some announcement later in the day.
HDFC Bank, ICICI Bank and Axis Bank were among others, which achieved our lower targets.
Among the major bulk deals, Citigroup bought 90,000 shares of Educomp at an average price of Rs2,733. Fidelity sold over 1mn shares of ANG Auto at an average price of Rs75.
On the political front the drama continues with reports suggesting the UPA is banking on independents while regional parties are looking to strike some bargains. More action will be known especially over the weekend.
Meanwhile, Federal Reserve Chairman Ben Bernanke said growth and inflation risks are increasing adding that the economy is facing numerous strains resulting from the housing and financial markets, dollar weakness and surge in crude oil prices.
Asian Stocks fell yet again for a third day. The Nikkei was more or less flat at around 12,725.51 levels after being in the green. In the US market, stocks ended mostly lower despite oil crashing by the second-largest margin.
Investors feared a further decline in US demand after Bernanke said that high energy prices have helped to limit the purchasing power of U.S. households. He warned that High energy costs will remain a drag on the U.S. economy for the rest of the year. Following Bernanke's speech, prices fell over $9 from its high to below $136 a barrel. Light, sweet crude settle at $138.74 a barrel in trading on the New York Mercantile Exchange, down around US$6.
The Dow, which was down more than 225 points early in the session lost 0.8% and closed at its lowest point since July 21, 2006. The Standard & Poor's 500 index lost 1.1% and closed at its lowest point since Nov. 2, 2005. The tech-heavy Nasdaq composite gained 0.1%.
The dollar recovered after falling to a new low versus the euro. The dollar also fell against the yen.
We thought Ranbaxy could get some support at lower levels. Though few local punters are going long, looks like the money bags have been aggressively dumping the stock assuming its deal could run into real rough weather. Ranbaxy is to file all relevant information within a month after which the legal case initiated by the US Government is likely to be withdrawn, reports state.
Among other news, RIL to set to raise US$1bn for investing in the oil and gas business.
Tuesday thud… this was how the Indian bourses crashed hitting new 2008 lows extending losses to fourth straight trading session. Unabated selling in scrips across the sectors dragged the key indices to 15 month low. The Nifty Index breached its previous low of 3,848.25. The huge slide was led by intensified selling in the index heavyweight Reliance Industries, the stock was down 3.5%.
Apart from selling pressure, another dampener hit markets after Fitch Ratings revised the outlook on India’s Long-term local currency Issuer Default Rating (IDR) to Negative from Stable, while affirming the rating at ‘BBB-’ (BBB minus).
"The revision to the local currency Outlook is based on a considerable deterioration in the central government’s fiscal position in 2008-09 (FY09), combined with a notable increase in government debt issuance to finance subsidies not captured in the budget," said James McCormack, Head of Asia Sovereign ratings.
IFCI bounced back from its intra-day low, the stock gained by a percent to close at Rs37. The company is planning to buy non-performing assets (NPAs) of the IIBI Ltd, according to a report also plans to revive these assets and recover money from them to add to its net profit. The scrip touched an intra-day high of Rs38.5 and a low of Rs35 and recorded volumes of over 1,00,00,000 shares on BSE.
After hitting an intra-day high of Rs80.50 shares of ANG Auto pared its gains on back of heavy selling, the scrip ended at Rs74.05 losing 4%. ANG Auto had surged after 8.9% of equity changed hands on BSE. The scrip touched an intra-day high of Rs80.50 and a low of Rs74.05 and recorded volumes of over 11,000 shares on BSE.
Union Bank of India dropped by over 7% to Rs103. The bank announced that it has entered into a Memorandum of Understanding with KBC Asset Management NV (KBC AM), a leading Belgian asset manager with operations around the world. The banks first step to form a joint venture Asset Management Company in India. The scrip touched an intra-day high of Rs112 and a low of Rs103 and recorded volumes of over 1,00,000 shares on BSE.
Shares of Spicejet also erased early gains, however, managed to end with 2.1% gains to close at Rs28.55. The board of directors of the company announced that it principally accepted the offer of WL Ross & Co. LLC which will make available approximately Rs3.45bn to SpiceJet. The scrip touched an intra-day high of Rs32. 45 and a low of Rs29.30 and has recorded volumes of over 86,00,000 shares on BSE.
SRF slipped by a percent to Rs120. The company announced that it has entered into an agreement for acquisition of the belting fabrics business of Industex Technical Textiles (Pty) Ltd, a South African Company for ~Rs200mn.
The business unit has an annual production capacity of approximately 3,500tons of belting fabrics with annual sales of around Rs688mn. Presently; SRF has a capacity of 7,500 TPA belting fabrics which are manufactured in its plant at Trichy. The scrip touched an intra-day high of Rs124 and a low of Rs118 and recorded volumes of over 1,00,000 shares on BSE.
BEML declined by over 6.5% to Rs627. The announced that it secured export orders worth Rs345mn from African countries. The orders comprise of 35 equipments valuing Rs215mn received from Tunisia and 18 equipments valuing Rs130mn from Malawi. The Equipments range from small size bull dozers to Back Hoe Loaders, wheel loaders, hydraulic excavators etc. The scrip touched an intra-day high of Rs660 and a low of Rs625 and recorded volumes of over 66,000 shares on BSE.TRAI has directed all existing mobile operators to provide inter-connectivity to RCom for its GSM roll-out (BL)
- Tata Motors is considering the licensing route for mass manufacturing of Nano overseas (ET)
- Sun Pharma extends the last date for buying the outstanding shares of Taro Pharma to September 2nd 2008 (ET)
- Essar led consortium receives final approval for the Ratna and R-series discovered oil and gas fields (ET)
- BHEL in talks with ONGC and RIL for manufacturing offshore oil rigs (DNA)
- SAIL has agreed to a three-fold increase in prices of imported coking coal from Australia (DNA)
- New shipping norms to force ONGC and RIL to shut offshore operations (BS)
- L&T plans to form a Rs20bn forging venture with NPCIL (BS)
- BEML wins export orders worth Rs340mn from African countries (BL)
- Glenmark’s pain molecule is entering phase I clinical trials (DNA)
- ACC may invest Rs1.5bn in ready-mix concrete business (ET)
- JSW Steel may look at acquiring US-based United Coal Company having reserves in excess of 165mn tons (BS)
- Wilbur Ross to invest Rs3.45bn in SpiceJet (ET)
- Gammon India is seeking a majority stake in Italian power company, Sofinter (ET)
- Sintex Industries is eying US-based industrial composite molder, Continental Structural Plastics in a deal worth US$70-80mn (ET)
- Apollo Hospitals and Lupin to create first disease management programme for bronchial asthma (BS)
- Sona Group company is in talks with PE players to raise Rs3.1bn (ET)
- Jindal India Thermal Power mulls 1,200MW power plant in Chattisgarh (DNA)
- GNFC to launch specialty fertilizers (DNA)
- UCO Bank to set-up a financial services JV (DNA)
- Ashapura Minechem bauxite exports take a hit as the Gujarat Government delays permits for exports (DNA)
- Bank of Maharashtra hikes lending rate by 25 bps (ET)
- Bank of Maharashtra plans Rs4bn FPO (DNA)
- Rohit Ferro-Tech is scouting for chrome ore and manganese mines for acquisitions (DNA)
- Fitch revises India’s domestic credit outlook to negative (ET)
- Fitch expects Centre’s deficit to rise from 2.8% of GDP in 2007-08 to 4.5% in 2008-09 (BS)
- Government clears twelve FDI proposals worth Rs3.54bn (ET)
- Government likely to make mandatory for cable operators to obtain a five-year license by paying a one-time entry fee (BS)
- Leading soda-ash makers hike prices by 12% (BS)
- Government to increase the rate of DA for PSU staff by 5% to 84.3% (ET)
- Sugar output may fall as much as 25% next year as per National Federation of Co-operative Sugar Factories Ltd (DNA)