Danger and delight grow on one stalk.
This holds true for stocks also. It's been a week of mega deals. Infosys announced an all-cash deal for UK's Axon Group. Incidentally, ONGC Videsh made a formal bid for another British firm, Imperial Energy. Though there is a possibility that both these deals could face counter bids, they do reinforce the growing ambition and confidence of India Inc even in today's uncertain times. A slew of smaller deals appear to be in the pipeline from the likes of M&M, Pyramid Saimira, Marksans Pharma, Apollo Hospitals and Mercator Lines. But naturally, these stocks will be in focus, though one should not jump the gun and go overboard over the announcements.
Meanwhile, the current F&O expiry week has been one of the most lackluster in recent memory, with unusually low volume and low rollovers amid a murky outlook for the market.
Among the major events to keep an eye on will be inflation data for the week ended August 16. The range estimated by various economists is 12.75-12.9%. It could even be higher than that, which will once again trigger a sell-off and raise concern over further monetary tightening. Reports suggest that if the latest spike in sugar prices is taken into account, inflation could be much higher. Inflation will fall to 5-6% in the next 12 months, says Arvind Virmani, the finance minister's chief economic adviser. Annual WPI-based inflation rose to 12.63% in the week through Aug. 9.
Meanwhile, the Government will announce the preliminary GDP growth numbers for the first quarter of the current fiscal year. Economic growth in the April-June quarter is likely to dip below the 8% mark from 8.8% in the January-March quarter. GDP growth in the first quarter of FY08 was a strong 9.2%. So, a fall below 8% will be seen as substantial. The RBI expects annual GDP growth at 8%, which is down from 8.5% earlier. Many brokerages and economic think tanks see it falling under 8% for the full year, while the Finance Minister is much more gung-ho and expects 9% growth.
Coming to the market's outlook today, we expect another cautious opening and a choppy day. Global markets are mixed. While US stocks gained on the back of a positive durable goods order report even as crude oil inched higher on reports of another hurricane hitting the oil facilities in the Gulf of Mexico. Reports also suggest that OPEC members like Iran and Venezuela could pressure Saudi Arabia to cut its output in the wake of the recent slide in oil prices.
FIIs were net sellers of Rs324.9mn (provisional) in the cash segment on Wednesday. Local institutions were net buyers of Rs1.63bn. In the F&O segment, the foreign funds were net buyers of Rs8.48bn. On Tuesday, the foreign funds were net sellers of Rs5.06bn in the cash segment. Mutual Funds were net buyers of Rs871mn on the same day.
US stocks rose on Wednesday after a government report on the durable goods orders came in ahead of expectations. Energy shares advanced in line with the spurt in oil prices, as a tropical storm threatened output in the Gulf of Mexico.
The S&P 500 index added 10.15 points, or 0.8%, to 1,281.66, with 9 of its 10 main industry groups gaining. The Dow Jones Industrial Average climbed 89.64 points, or 0.8%, to 11,502.51. The Nasdaq Composite Index rose 20.49 points or 0.9% to 2,382.46.
Investors heaved a sigh of relief after oil prices cooled off from the day's high. Oil had rallied in the morning after a weak inventory report and in response to Tropical Storm Gustav, which is heading for the Gulf Coast.
Additionally, comments from Fed officials, both this morning and in recent days have suggested that inflationary pressures are waning and that the central bank won't have to raise rates in the near term.
In the last week or so, US stocks have been struggling in a narrow range as oil prices have moved back up. Thin trading volume is also adding to market volatility right now, with many Wall Street pros taking the last week of August off.
Wednesday was the lightest trading day of the year on the New York Stock Exchange, with just 820mn shares changing hands. Volume on the NYSE was 1.58bn, also low. On both the NYSE and the Nasdaq, market breadth was positive.
Both trading volume and the attention of investors will pick up after Labor Day weekend.
US crude oil futures settled up $1.88 at $118.15 a barrel on the New York Mercantile Exchange. Crude had traded as high as $119.63 a barrel during the session. Wednesday's settlement is the highest close since last week, when oil closed at $121.18 on Thursday, Aug. 21.
Retail gas prices continued to drop, extending the downward trend, according to a survey of gas station credit-card activity. Gas prices are down over 10% from all-time highs hit in mid-July.
In the bond market, Treasury prices inched higher, lowering the yield on the benchmark 10-year note to 3.76% from 3.77% late on Tuesday. The dollar was little changed versus the euro and the yen. COMEX gold for October delivery rose $4.50 to $828.70 an ounce.
The US government will release an update to the second-quarter GDP on Thursday. Economists are forecasting an increase of 2.7%, up from the 1.9% growth first reported last month. But, there are concerns that the world's largest economy will continue to be weak through the rest of this year and even into 2009.
Fannie Mae is among the stocks likely to be active on Thursday after the company announced late Wednesday the departure of three executives, including the chief financial officer and the promotion of three other executives.
European shares closed higher. The pan-European Dow Jones Stoxx 600 index rose 0.2% to 283.25. The commodity-heavy UK's FTSE 100 closed up 1.1% at 5,528.10. Germany's DAX 30 dropped 0.3% to 6,321.03, and the French CAC-40 reversed earlier losses to close up 0.1% to 4,373.08.
In the emerging markets, Brazil's Bovespa was up 2.1% at 55,519 while Mexico's IPC index rose 0.2% at 26,131. The RTS index in Russia advanced 0.6% to 1589 and the ISE National-30 index in Turkey was down 0.7% at 49,085.
Don’t expect major moves
Indian stock markets snapped three day winning streak on Wednesday on the back of weak global cues and a spike in the crude oil prices. The interest rate sensitive stocks like banking, realty yet again were under pressure ahead of inflation figures to be announced on Thursday.
All the BSE Sectoral indices ended in the red, BSE Realty index (down 3.5%), BSE Bankex index (down 2.1%) and BSE Power index (up 1.4%) were among the top losers. Even the Mid-Cap and the Small-Cap indexes witnessed offloading, the BSE Mid-Cap index fell 1.02% and the Small-Cap index lost 0.7%.
Among the 30-components of Sensex, 26 stocks were in red and only 4 stocks were in green. Reliance Industries, ICICI Bank, HDFC and SBI were among the major laggards. On the other hand, bucking the negative trend were, Infosys, Hindalco and Tata Steel.
Finally, the benchmark Sensex lost 185 points to close at 14,296 and Nifty ended 45 points lower to close at 4,292.
In the overall market, 1,022 stocks advanced and 1,582 stocks declined. Whereas, 103 stocks were unchanged.
Shares of Jyothy Laboratories lost ground significantly and slipped 6.5% to Rs444. The company announced that the board of directors of the company approved sub-division of existing equity shares of Rs5/- each into 5 equity shares of Rs1/- each.
The board also recommended dividend of Rs7.50 per equity shares of Rs5/- each for the financial year ended June 30, 2008. In addition the board of directors has recommended a special silver jubilee year dividend of Rs2.50 per equity share.
The scrip touched an intra-day high of Rs502 and a low of Rs437 and recorded volumes of over 23,000 shares on BSE.
Bartronics edged lower by 0.2% to Rs172. The company announced that it launched four smart card based products during the Smart Cards Expo at New Delhi. These products are targetted towards software development Companies to use for application development using smart cards manufactured by Bartronics. The scrip touched an intra-day high of Rs174 and a low of Rs171 and recorded volumes of over 38,000 shares on BSE.
Shares of Thomas Cook rallied by over 15% to Rs98 after the board of directors of the company approved to raise funds not exceeding Rs2bn by way of issue of equity shares to the existing equity shareholders of the company on a "Rights" Basis.
The rights ratio, price and other terms of the proposed issue would be decided at a later date. The earlier announced resolution, including the ratio of one equity share for every three equity share held as on the record date stands cancelled. The scrip touched an intra-day high of Rs102 and a low of Rs84 and recorded volumes of over 20,00,000 shares on BSE.
Reliance Capital ended 1% lower at Rs1278. According to reports, the company announced that it has taken a decision to spin off its home loans business into a new company. The scrip touched an intra-day high of Rs1310 and a low of Rs1271 and recorded volumes of over 17,00,000 shares on BSE.
SREI Infrastructure ended flat at Rs107. Reports stated that it has tied up with Waha Leasing to expand its business in Middle East.Report stated that London based European Bank for Reconstruction and Development has acquired 30% stake in Zao SREI, a subsidiary pf the SREI group. The scrip touched an intra-day high of Rs109 and a low of Rs105 and recorded volumes of over 74,000 shares on BSE.
Shares of Kilburn Engineering rallied by over 6% to Rs37 after the company announced that it received confirmed orders / Letter of Intent aggregating to Rs149mn. The scrip touched an intra-day high of Rs40 and a low of Rs35 and recorded volumes of over 60,000 shares on BSE.
Shares of Stone India gained by 0.4% to Rs53 after the company announced that it executed a MoU with RailRunner Inc., USA to introduce the latest intermodal freight cars and transportation technology & system in India.
Such a system will allow seamless point to point movement of containerized goods between road and railway in a very cost effective & environment friendly manner allowing container trains to run at passenger train speeds. The scrip touched an intra-day high of Rs56.05 and a low of Rs51.10 and recorded volumes of over 33,000 shares on BSE.
FIIs continue to be net sellers; nagging worries over local as well as global headwinds will keep investors on tenterhooks. Expect increased volatility on the back of F&O expiry. Bulls and the bears are pretty indecisive at this juncture. As a result, the market will continue to be sluggish in the near term.
M&M is in talks with Italian 2-wheeler major Malaguti Moto for a possible takeover. (ET)
Infosys to spend Rs10bn on SEZ in current fiscal for creating additional space. (BL)
Reliance Industries has increased the size of its 5-year loan by 20% to US$1.2bn after banks offered more than it sought. (BS)
BHEL blames government tender norms for losing orders of 18,000MW to Chinese competitor. (BS)
NTPC, Essar Power and Torrent Power Ltd are among the firms identified by the power ministry for buying natural gas from RIL. (Mint)
Infosys may win more orders from West Asia and India. (Mint)
NTPC is likely to venture into retail distribution of electricity through distribution in the upcoming industrial parks in Kerala. (BL)
NTPC is planning to source R-LNG on a single offer basis from GAIL, IOC and BPCL. (FE)
Jet Airways has decided to stop global expansion for a year starting November 2008. (Mint)
SAIL plans to expand mining capacity to service the demand arising from increasing output. (BS)
NDTV plans to foray into regional language space and bollywood entertainment. (BS)
IOC is raising Rs3bn through issue of bonds. (ET)
Pyramid Saimira is close to acquiring UK’s oldest theatre chain Reel Cinemas for a sum of Rs2bn. (ET)
Marksans Pharma has acquired UK based generic drug marketing and distribution company Relonchem for Rs1bn. (ET)
Reliance Retail will sell imported wine and beer brands through its format Fresh Signature stores. (ET)
Mercator Lines is planning to acquire a 50mn ton coal mine in Indonesia. (ET)
ECL Finance, a subsidiary of Edelweiss Capital has acquired 5.18% stake in Max India. (ET)
OBC raises BPLR by 25bps to 14%. (ET)
Apollo Hospitals is planning to acquire 30% stake in a 250 bed hospital company in Nigeria. (BL)
Hindustan Motors has suspended operation at its ambassador manufacturing unit in Uttarpara, West Bengal. (BL)
Adlabs plans to build 3 multiplexes in Chennai with 17 screens. (BL)
Trent is likely to invest Rs20bn in next 5 years to roll-out 50 star bazaar hypermarket stores. (BS)
PSL acquires 250 acres of land for its proposed SEZ near Pipavav in Gujarat. (BS)
All Indian Origin Chemist and Distributors has entered into an alliance with Sandoz and Lupin to distribute there repective drugs. (FE)
Mahindra Farm Equipments has launched its international range of tractors in Turkey. (FE)
Economy Front page
Economic intelligence unit has lowered its GDP growth estimate from 7.7% to 7.5% for 2008-09. (BL)
Government is considering interest payment on delayed reimbursement of Rs720bn farm loan written off by public sector banks. (ET)
Mineral production from mining and quarrying sector grew by 3.4% in May 2008 as compared to April 2008.
Public sector banks, Corporative banks and regional rural banks are likely to get their first round of reimbursement for the farm debt waiver scheme only after the first supplementary demand for grants for 2008-09 are passed by parliament. (BL)
India’s crude Oil production was lower by 3% yoy in the month of July 2008. (BL)
India buys raw sugar for first time in six years. (Mint)
WPI data to be released on a monthly basis October onwards. (BS)
Bank credit grew by 25.9% yoy till August 15. (BS)