Our natures are a lot like oil, mix us with anything else, and we strive to swim on top.
After nearly drowning in troubled waters, the bulls will be happy to swim on top. The burning issue has been oil among other things and the two-day slump in oil prices is sure to provide a soothing effect Crude futures in New York are down more than $9 per barrel in two days. Though oil prices are still pretty high, the decline is a big positive, at least in the short term.
Barring Europe, most world markets rallied on the back of sharply lower oil prices. The Federal Reserve's decision to extend its emergency lending facility to banks also helped allay some concerns over possibility of more asset write-downs. Of course there are different ways to interpret the Fed’s move. Asian markets are up by 1.5-3.5% this morning, with the Hang Seng leading from the front.
As far as the local situation is concerned, the political storm seems to have subsided with most events playing out as anticipated. The Left parties have finally called it quits from the UPA. But, the Congress appears confident as it has the support of the SP and other smaller parties. The fact that the Centre has called for the "Trust Vote" before the IAEA meet underlines the new-found confidence in the ruling coalition.
Still, the number game will be close and there could be some surprises. An early election is more or less out of the equation now. In politics and markets expect anything though. What remains to be seen is whether the nuclear deal can be finalised before the Bush regime is out of office.
The Indian market heaved a sigh of relief and recovered from the lows of the day. And, with the global markets rallying smartly, the bulls will seek to settle some scores with the bears. We expect a positive opening. What is not certain is whether the gains can be extended further. Fresh bad news can hit the markets anytime and reverse most of the gains. Much will hinge on a confluence of local as well as global factors, primarily crude oil prices and outlook for the western financial sector.
India Inc. will start rolling out their latest quarterly numbers. With expectations of further earnings slowdown already reflected in stock prices, the bulls may decide to chart their own course unless the results are really bad. Positive surprises will of course get a warm welcome.
FIIs were net sellers of Rs3.26bn (provisional) in the cash segment yesterday while local institutions poured in Rs4.27bn. In the F&O segment, the foreign funds were net sellers of Rs4.12bn. On Monday, FIIs offloaded shares worth Rs3.2bn in the cash segment.
US stocks rallied on Tuesday, spurred by a steep drop in oil prices, a stronger dollar and Fed chairman Ben Bernanke's assurance that the central bank will continue to support the financial sector through its direct loan facility.
The Standard & Poor's 500 Index jumped 21.39 points, or 1.7%, to 1,273.7. The Dow Jones Industrial Average climbed 152.25 points, or 1.4%, to 11,384.21. The Nasdaq Composite Index added 51.12 points, or 2.3%, to 2,294.44.
Market breadth was positive. Almost four stocks gained for each that fell on the New York Stock Exchange.
The major indexes were volatile in the morning on a weak housing report, earnings jitters and more worries about the financial sector's health. But Bernanke's remarks that the Fed is strongly committed to financial stability helped stocks rebound.
Investors responded to a more than $5-a-barrel decline in oil prices, sending shares of airlines and other companies that depend directly on fuel. The Dow Jones Transportation index was up by 5%.
Bank of America's shares advanced the most since 1990, leading financial shares to their best gain in more than three months, after JPMorgan's CEO Jamie Dimon said losses in credit markets will ease.
Fannie Mae and Freddie Mac rebounded from their lowest levels in more than 13 years after a regulator said that the mortgage-finance companies have enough capital to survive a slump in the housing market and meet new accounting rules.
US light crude oil for August delivery fell $5.33 to settle at $136.04 a barrel on the New York Mercantile Exchange, reaching the lowest level in nearly two weeks. The national average price for a gallon of regular unleaded gas held steady at a record $4.108 for a second day, according to AAA.
In the bond market, Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.88% from 3.90% late on Monday. In currency trading, the dollar rose versus the euro and the yen. COMEX gold for August delivery fell $5.50 to settle at $923.30 an ounce.
European stocks ended sharply down amid fresh concerns over the financial sector and bleak prospects for corporate profits, although a fall in oil prices helped limit losses. The pan-European Dow Jones Stoxx 600 index fell 1.5% to 278.96 but moved back from a three-year low. The French CAC-40 slumped 1.5% to 4,275.61, while Germany's DAX 30 dropped 1.4% to 6,304.41 and the UK's FTSE 100 closed down 1.3% at 5,440.50.
In the emerging markets, the Bovespa in Brazil was up 0.2% at 59,219 while the IPC index in Mexico rose 0.6% to 28,551. The RTS index in Russia dropped 0.6% to 2175 while the ISE National-30 index in Turkey was down 0.7% at 42,110.
Overnight losses in the US and the Asian markers coupled with selling pressure in the early trades dragged the Indian bourses at open. Markets witnessed another jerk after the Left parties decided to withdraw support to the UPA government. However, thereafter, key indices were on a recovery mode led by BSE Capital Goods index which recovered over 5% from its days low.
Markets erased significant portion of its losses led by gains in the index heavyweights like L&T, NTPC and BHEL which are likely beneficiaries of the Nuke deal. Finally, the BSE benchmark Sensex closed at 13,349 losing 176 points and the Nifty index slipped 41 points to close at 3,988.
The top gainers in Sensex were ACC (up 5.9%), NTPC (up 3.7%), SBI (up 3.1%), Hindalco (up 2.2%) and BHEL (up 2.1%).
The top losers in Sensex were Tata Power (down 5%), Wipro (down 5%), Tata Motors (down 3.8%), Infosys (down 3.5%) and Grasim (down 3.5%).
Sugar stocks fell sharply on concerns they would report losses after the Allahabad High Court set sugarcane price at Rs125/ quintal for FY08 increasing the minimum price millers have to pay to sugarcane farmers by ~13%.
The UP based sugar mills were badly hit. Balrampur Chini slipped by 4.5% to Rs72, Bajaj Hindusthan declined by over 5% to Rs154.
First Winner Industries Ltd, manufacturers and traders of wide range of textile products started trading at Rs101 on NSE against the issue price of Rs125 per share. The scrip finally ended at Rs89.2 per share translating into a heavy discount of 40.4% hitting an intra-day high of Rs129.9 and a low of Rs80.5 recording volumes of over 2,00,00,000 shares on NSE.
Suzlon gained by a 1% to Rs196 after reports stated that the company’s promoter would buy Chinese wind energy firm for US$500mn. The scrip touched an intra-day high of Rs202 and a low of Rs182 and recorded volumes of over 33,00,000 shares on NSE.
Siemens gained by a percent to Rs459 after the company announced that it secured Rs3bn order from Delhi International Airport for Terminal 3 Baggage Handling system at Delhi International Airport. The project is scheduled to be commissioned by March2010.
The stock also gained momentum as it would be one of the beneficiaries from the decision of Left Parties withdrawal of support to the UPA Government. The scrip hit an intra-day high of Rs473 and a low of Rs432 recording volumes of over 2,00,000 shares on NSE.
L&T recovered from its day’s low as it would be one of the beneficiaries of the Nuke deal. The scrip advanced 1.5% to Rs2400. The company also announced that it secured Rs10.47bn order from the Indian Railways for setting up a Cast Steel Wheel Manufacturing plant in Saran (Chhapra) District of Bihar. The plant will have the capacity to manufacture 100,000 Cast Steel Railroad Wheels per annum.
The project is to be completed within a light schedule of 2 yrs. The scrip touched an intra-day high of Rs2449 and a low of Rs2260 and recorded volumes of over 6,00,000 shares on BSE.
Shares of ACC gained by 6 percent at Rs527 following reports that the company is planning to set up its second wind power project in Rajasthan. The scrip has touched an intra-day high of Rs537 and a low of Rs482 and recorded volumes of over 2,00,000 shares on NSE.
RIL has signed an agreement with Peru-based Perupetro for oil exploration in Peru (BS)
L&T wins order from Railways worth Rs10.5bn (BS)
Tata Power may divest assets, holdings to part-finance capex (BL)
Patni Computers hands over pink slips to 400 non-performers (ET)
Adanis move to Supreme Court for lifting stay on SEZ (DNA)
Dr Reddy’s Labs has signed global distribution agreement for Ibuprofen API with US-based specialty chemicals company (DNA)
HCL Tech has signed a global system integration contract with VMware (BS)
Tata Motors to introduce a new range of Super Milo bus chassis across the country (BL)
NMDC JV with Spice International is close to acquiring two iron ore deposits in Armenia (BS)
Tata Power gets Supreme Court relief to supply electricity to small retail consumers in Mumbai (ET)
HDIL is looking at acquiring stakes in regional media and entertainment, multiplex and film production companies (BS)
Reliance Retail to open optical stores by September 2008 (BS)
Promoters not to exit SpiceJet while eye US$100mn funding (ET)
Lok Housing to raise Rs17bn from domestic and foreign markets (BS)
UCO Bank makes a provision of Rs1.3bn on account of marked-to-market losses on its bond portfolio (BS)
Welspun Retail to invest Rs1.5bn over next three years for setting-up 160 new stores under different formats (FE)
SAT dismisses SEBI order on Mysore Cements open offer (ET)
Economic Front Page
Steel prices have declined by Rs2,000/tonne in the past one week (BL)
Capital inflows in April-December FY08 touch US$83bn as per NCAER (ET)
DoT hikes reserve price for broadband services (BS)
PC sale registers 16% yoy growth in FY08 (FE)
Allahabad High Court restored Rs125-130 SAP for the 2007-08 season (BS)
Madhya Pradesh High Court has stayed the implementation of central government’s pricing policy on single super phosphate fertilizers (BS)