Better to be approximately right than precisely wrong – Dr. Reddy, RBI Governor.
We were approximately right on the surprise part but precisely wrong on the positive part. We had mentioned that the RBI Governor has a knack of surprising the markets. He did it again by jacking up repo rate by an unexpected 50 bps and raising the CRR by another 25 bps. We were hoping for a positive surprise, but what we got instead was an extremely hawkish quarterly review. In a meet soon after the policy which we attended, the RBI governor said he would like to reduce excess volatility but that need not mean stability. The markets and pundits were stunned as nobody was prepared for this negative surprise.
The bulls must be cursing their luck, for just when things were beginning to look up after a prolonged period of bearishness comes the big blow from the RBI. The central bank has also scaled back its expectations of economic growth, to 8% from 8.5%. This is still quite good considering the slew of headwinds (local as well as global) that we are grappling with. Whether we actually achieve this or not is a big question. The RBI wants to bring down inflation to 7% before the fiscal end. This is also much higher from its medium-term target of 5%. Given the spiraling cost pressures, the central bank will be fortunate if it meets its annual GDP and inflation targets. A good monsoon and a steep fall in crude oil prices (below $100/bbl) will surely help.
Talking of oil prices, crude futures in New York fell to a three-month low amid strengthening dollar, stable geopolitical situation and slowing fuel demand. What could also help the bulls recover is that US stock indexes ended at or near the day's highs after data showed a better-than-forecast rise in consumer confidence and crude oil fell by nearly $4 per barrel. European markets rose after a weak start while stock benchmarks also rallied in emerging markets like Brazil. Stocks in Russia sank due to lower oil prices. Asian markets have also opened higher, led by Hang Seng which is up by 1.8%.
So, we are looking at a higher opening on local bourses after yesterday's credit policy led sell-off. The rebound may not be very sustainable, as the latest increase in interest rates could worsen the macroeconomic scenario. Rates will go up across the board. India Inc will continue to feel the pinch from rising borrowing costs and slowing consumer demand for the next few quarters. Expectations on corporate earnings growth will have to be scaled down. The market may turn volatile after a good start ahead of tomorrow's F&O expiry.
FIIs were net sellers of Rs5.38bn (provisional) in the cash segment on Tuesday and the local funds offloaded shares worth Rs2.55bn. In the F&O segment, the foreign funds were net sellers of Rs14.57bn. On Monday, FIIs were net sellers of Rs6.09bn in the cash segment. Mutual Funds were net buyers of Rs2.04bn.
Key Results Today: ABG Shipyard, Allied Digital, Alok Industries, Ansal Infra, Asahi India, Asian Hotels, Avaya Global, Balmer Lawrie, Bata India, BGR Energy, Bongaigaon Refinery, CESC, DCB, Dishman Pharma, Everest Kanto, Geometric Software, Great Offshore, Gujarat Alkalies, GMDC, GNFC, Gujarat Gas, HCL Tech, ITC, Indiabulls Realty, India Cement, IVR Prime, IVRCL Infra, J&K Bank, Lanco Infra, Madras Cement, Maharashtra Seamless, M&M, Merck, Orchid Chem, Power Grid Corp., PNB, Puravankara, Pyramid Saimira, Radico Khaitan, Reliance Capital, SpiceJet, SREI Infra, Suzlon, Tata Chemicals, Tata Comm, Tata Motors, Torrent Power, Trent, Triveni Engineering, Unitech, Unity Infra, Usha Martin, Vishal Retail and Yes Bank.
Asian stocks rose after better-than- expected earnings from Matsushita Electric and oil prices at a 12-week low eased concern that slowing global growth will hurt earnings. The MSCI Asia Pacific Index gained 1.1% to 131.56 as of 10:57 a.m. in Tokyo. Five stocks rose for each that declined, with nine of the index's 10 industry groups advancing.
The Nikkei in Tokyo was up 1.2% at 13,315 while the Hang Seng in Hong Kong climbed nearly 2% to 22,688. The Kospi in Seoul gained 0.7% to 1578 while the Straits Times in Singapore rose 1.1% to 2917.
The Shanghai Composite index in China added 0.3% to 2857 and the Taiex in Taiwan rallied 1.1% to 7093. Australia's S&P/ASX 200 index in Sydney surged by over 2% to 4952.
Strong financial reports, rising consumer confidence and falling oil prices lifted US stocks on Tuesday. All the major indices advanced steadily throughout the day as consumer confidence got a surprise boost in July.
The US market opened with a gap after Merrill Lynch said it would take a $5.7bn writedown and sell off $11.1bn in mortgage securities in the current quarter. The brokerage also said it plans to raise $8.5bn through fresh share sale.
One will have to see if Wall Street can continue to rally on Wednesday, as investors will get a glimpse at the monthly ADP employment report ahead of Friday's US Labor Department report.
Crude oil prices fell $2.54 to end at $122.19 per barrel, the lowest settlement since May 6. Oil plummeted after OPEC President Chakib Khelil said oil was overpriced and could sink to $78 a barrel. Oil is down $25 a barrel since setting a record high of $147.27 on July 11.
But, some analysts say falling oil prices could also mean that the global economy is weakening.
Financials rallied, as investors hoped banks are positioning themselves to get out of the mess that they got into in the wake of the sub-prime mortgage meltdown and the consequent credit crunch.
Shares of Merrill Lynch rose 8%, but most other banks' stocks advanced by even more. Other investment banks fared well, too, with Goldman Sachs rising 5.1%, Morgan Stanley adding 4.4% and Lehman Brothers posting a 10.5% gain.
Government-backed mortgage finance giants Fannie Mae and Freddie Mac also rebounded after sharp losses Monday.
Citigroup also managed a 5.9% gain, even after Deutsche Bank analyst Mike Mayo forecasted that the bank will take an added $8bn in writedowns related to its collateralized debt obligations in its third quarter.
The average price of gasoline fell 1.7 cents to $3.941 per gallon in the US, declining for the 12th straight day. It was gasoline's lowest level since May 29.
In currency trading, the US dollar spiked against global currencies, jumping to a one-month high Tuesday versus the euro. COMEX gold for August delivery fell $11.20 to settle at $916.50 per ounce, after fluctuating above and below the breakeven point for much of the day.
Treasury prices fell, sending the yield on the benchmark 10-year note up to 4.05% from 4.01% late on Monday.
European stocks ended higher, erasing earlier losses. The pan-European Dow Jones Stoxx 600 index finished 0.3% higher, up 0.91 points, to 279.64. Germany's DAX 30 rose 0.8%, or 47.65 points, to 6,398.80, while the French CAC 40 ended the day down 0.1%, or 3.96 points, at 4,320.49. The UK's FTSE 100 shook off early losses to end just barely higher at 5,319.20, up 0.1%.
In the emerging markets, the Bovespa in Brazil jumped 2.06% to 58,042 while the IPC index in Mexico was up 2.2% at 27,318. The RTS index in Russia dived 1.7% to 1896 and the ISE National-30 index in Turkey surged 3.3% to 48,537.
It was a terrible Tuesday for the Indian markets as benchmark Sensex plunged over 550 points. Key indices which opened with a negative gap, further lost ground soon after the Reserve Bank of India announced that it had hiked the interest rates for the third time in two months as policymakers try to contain inflation, keeping it as high priority.
The RBI increased the benchmark repurchase rate by 50bps to 9% from 8.5% and also raised the cash reserve ratio by 25bps to 9% from 8.75%.
The banking and the realty stocks were badly beaten up with stocks like Axis Bank, ICICI Bank and realty majors DLF and Unitech slipping the most.
Among the 30-components of Sensex, 26 stocks were in red and only 4 stocks were in green. Reliance Industries, ICICI Bank, L&T and HDFC Bank were among the major laggards. On the other hand, Hindustan Unilever, Sterlite Industries, TCS and Infosys were among the major gainers.
Finally, the benchmark Sensex plunged 557 points to close at 13,791 and Nifty lost 142 points to close at 4,189.
HCC has slipped by 1% to Rs91. The company announced that, HCC-SEW-MEIL JV i.e. Hindustan Construction Co. Ltd (HCC), SEW Infrastructure Ltd and Megha Engineering & Infrastructure Ltd) (MEIL) secured a contract worth Rs6.39bn for construction of Barrage of around 3.5 km with Head Regulator across River Pranahita (PCLIS - Package-III) near Tummidi Hetti Village in Adilabad District of Andhra Pradesh, from Government of Andhra Pradesh, Irrigation and CAD Department. The scrip touched an intra-day high of Rs94 and a low of Rs89 and recorded volumes of over 7,00,000 shares on NSE.
Gail India slipped by 1.5% to Rs362. The company announced its Q1 results with a net profit of Rs8,968.7mn (up 31%) for the quarter ended June 30, 2008 as compared to Rs6,852.2mn. Total Income increased by 35% to Rs58,454.8mn for the quarter ended June 30, 2008 from Rs43,369.5mn for the quarter ended June 30, 2007
The scrip touched an intra-day high of Rs377 and a low of Rs355 and recorded volumes of over 4,00,000 shares on NSE.
Praj Industries sharply slipped by over 7% to Rs186 after the company announced that its Q1 net profit slipped 12% to Rs247.5mn for the quarter ended June 30, 2008 as compared to Rs283.5mn. Total Income increased by 10% to Rs1,567.9mn for the quarter ended June 30, 2008 from Rs1,412.3mn.
The scrip touched an intra-day high of Rs203 and a low of Rs184 and recorded volumes of over 1,00,000 shares on NSE.
Shares of Bharat Electronics declined by over 16% to Rs977 after the company’s Q1 net profit declined 90% to Rs25.1mn for the quarter ended June 30, 2008 as compared to Rs263mn. Total Income decreased from Rs4,731.6mn for the quarter ended June 30, 2007 to Rs4,450.8mn for the quarter ended June 30, 2008.
The scrip touched an intra-day high of Rs1165 and a low of Rs965 and recorded volumes of over 38,00,000 shares on NSE.
Essar Shipping was locked at 5% lower circuit to Rs113.75 after the company announced that it posted a net loss of Rs116mn for the quarter ended June 30, 2008 as compared to net profit of Rs711.5mn for the quarter ended June 30, 2007. However, total income increased from Rs2,176.1mn for the quarter ended June 30, 2007 to Rs3,416.5mn for the quarter ended June 30, 2008.
The scrip touched an intra-day high of Rs121 and a low of Rs113.75 and recorded volumes of over 41,000 shares on NSE.
Deccan Chronicle declined by over 5% to Rs111 after the company announced its Q1 results with net profit declining 27%. Net income declined to Rs609.8mn in the three months ended June 30 from Rs837.5mn a year earlier. The scrip touched an intra-day high of Rs118 and a low of Rs105 and recorded volumes of over 5,00,000 shares on NSE.
Shares of Ranbaxy sharply dropped by 3.5% to Rs474 after the company announced its Q2 net profit at Rs237.3mn (down 92%). However, revenues grew by 21.1% to Rs13.2bn. The scrip touched an intra-day high of Rs490 and a low of Rs468 and recorded volumes of over 11,00,000 shares on NSE.
Marksans Pharma surged by over 4% to Rs17.69 after the announced that it received Certificate of suitability for Metformin Hydrochloride drug substance from the European Directorate for the Quality of Medicines and Healthcare (EDQM).
With the grant of this certificate of Suitability for Metformin Hydrochloride drug substance by EDQM, the doors of European markets have opened for access for the Company's API business. The scrip touched an intra-day high of Rs17.81 and a low of Rs17.01 and recorded volumes of over 36,00,000 shares on NSE.
Government ends SBI’s monopoly in managing PF funds by allowing HSBC, ICICI Pru and Reliance Capital (BS)
L&T and Punj Lloyd join team to implement US$200bn Al Noor project (BL)
Nalco likely to shut down Orissa facility (BS)
IOC to set-up a maiden styrene butadiene rubber (SBR) project at Panipat with an investment of Rs7.61bn (FE)
Merck subsidiary plans to launch patented drugs (ET)
Tata Communications rolls out public telepresence service in collaboration with Indian Hotels, CII and Cisco Systems (ET)
ABB wins an order worth Rs4.55bn from Vedanta Aluminium (BS)
HCC JV bags order from Andhra Pradesh Government worth Rs6.39bn (BS)
TVS Motors is considering a plan to set-up a greenfield plant in China (BS)
Ashok Leyland is planning to replace its existing products with new ones by 2012-13 (BS)
Adani Group and Lanco wins Mahavitaran bids for purchasing 2,000 mw of power from independent power producers (BS)
MRPL may shelve plans to set-up a new refinery in Mangalore (BS)
Essar Steel is considering a bid for US-based United Coal Company (BS)
GCPL has decided to raise prices of soaps by 6-7% (DNA)
Educomp Solutions is setting-up centres to coach aspiring CAs through video conferencing (DNA)
Rolta acquires US-based WhittmanHart Consulting, a business intelligence consulting firm (ET)
NIIT join hands with SAS Institute to offer business intelligence technologies training to students and professionals globally (FE)
Moser Baer arm to raise US$50mn for expansion in the movie space (ET)
Balkrishna Industries is de-bottlenecking and expanding capacities at its Aurangabad plant (DNA)
Lakshmi Precision Screws is planning a facility at Uttarakhand by fiscal-end (DNA)
Economic Front Page
RBI raises repo rate by 50 bps and CRR by 25 bps (ET)
OPEC President, Chakib Khelil, says that crude oil prices could fall to around US$78/barrel (ET)
Government to introduce mobile number portability in metros by mid-2009 (ET)
Coal India may invite bids for re-opening 18 mines (BL)
Railway Minister expects profit to cross Rs1lakh crore in the next fiscal (FE)
India’s Gems and Jewellery exports are expected to grow by 15-20% in the current fiscal according to GJEPC (ET)
Engineering exports grow 24% yoy in the first quarter of FY09 to US$8.7bn (ET)
APDRP likely to miss the deadline yet again (ET)
Chennai Airport upgrade project gets clearance from PIB (BL)