It takes hundreds of nuts to hold a car together, but it takes only one of them to scatter it all over the highway.
Market players seem to be on a highway. Earlier, they just kept shifting lanes. The problem now is they are forced to change direction too often burning precious fuel and reaching nowhere. With fuel prices falling, ideally we should have a better opening. But with global markets waiting for the Fed signal, there is nothing much we can do but wait. It’s frustrating driving on a road in India and having signals controlled from abroad.
We may see a flat opening despite the 3% fall in oil prices overnight. The unusual weakness across global markets could dampen the mood. On the whole, we expect the market to remain volatile and rangebound for the rest of the month in the absence of any great triggers. The bias remains positive though, and the Nifty could rise a couple of hundred points provided there is some more cooling in crude oil and local inflation doesn't shoot up.
After a highly volatile day of trade, the frontline indices ended in the red. Weakness in Asian and later on in European markets weighed on sentiment. Like in a crowded highway where bigger vehicles are stuck, the small ones manage to wriggle ahead somehow. The interesting aspect of Monday's trade was the big gains in the small-cap and mid-cap shares. After a long time, the broader markets outperformed the main indices. This resulted in a positive market breadth, though turnover was still down, which is usually the case on Monday. One has to be careful while dealing with small-cap and mid-cap shares, especially with the market still grappling with quite a few uncertainties.
With almost all the big events out of the way, the market is now at the mercy of newsflow. The prominent developments that remain to be watched are the interest rate decisions in the US, UK and Europe this week. The Fed is widely expected to keep interest rates steady amid slowing economic growth and rising inflation. The Bank of England and the European Central Bank (ECB) also face similar dilemmas. They are also likely to maintain status quo. Global markets have already discounted these moves. As a result, they may not have any big impact on sentiment. What is keenly awaited are the remarks from all the three central banks on the situation in their respective economies.
Meanwhile, crude oil continues to be the key factor that could change the course of markets around the globe. It has slipped substantially from the all-time peak of around $148 per barrel. Yesterday it fell below $120 per barrel for the first time since May 5 and closed at a three-month low. Some analysts and market experts see oil prices falling further. We would not like to take a call on the levels of the crude oil, but will only say that any cooling in it is good news for the global economy and markets. India has much to benefit from a sharp drop in oil prices, as it imports nearly two thirds of its annual requirement.
FIIs were net sellers of Rs5.08bn (provisional) in the cash segment on Monday and the local funds pulled out stocks worth Rs469.7mn. In the F&O segment, the foreign funds were net sellers of Rs6.32bn. On Friday, FIIs were net sellers Rs3.42bn in the cash segment. Mutual funds were net buyers of Rs2.26bn.
Asian stocks fell for a third day on Tuesday, as a drop in commodity prices pushed down metal and oil companies. Consumer electronics manufacturers and automakers gained.
BHP Billiton dropped as copper plunged to the lowest in six months and crude oil slipped under $120 a barrel. Canon and Toyota climbed in Tokyo on speculation that lower energy costs will bolster consumer spending. Korea Electric Power Corp. led gains among power companies.
The MSCI Asia-Pacific Index slipped 0.5% to 127.90 as of 10:16 a.m. in Tokyo, poised for the lowest close since October 2006. Indices tracking energy and mining companies had the biggest declines among the 10 industry groups making up the benchmark index, which fell 2.9% in the previous two days.
US stocks ended lower on Monday, though off earlier lows, as a slide in oil prices hit energy and commodities-related stocks, a day ahead of the Fed decision on interest rates. Concerns about the health of the US economy continued to cast their shadow on Wall Street.
While the drop in crude and other commodities is good news, the US market is awaiting the outcome of the FOMC meeting on Tuesday. The market will be focused on the central bank's statement to see if the language gives any indication on the timing of a possible rate hike.
The Standard & Poor's 500 Index lost 11.29 points, or 0.9%, to 1,249.02. The Dow Jones Industrial Average slipped 42.17 points, or 0.4%, to 11,284.15. The Nasdaq Composite Index sank 25.40 points, or 1.1%, to 2,285.56.
More than two stocks dropped for each that rose on the New York Stock Exchange.
In the day's economic news, the Commerce Department reported that personal spending and income edged higher in June. Separately, the government reported that factory orders jumped in June on higher oil prices and demand for military equipment.
Oil prices fell as traders responded to reports that a tropical storm in the Gulf of Mexico is loosing steam. Light, sweet crude for September delivery fell $3.69 to settle at $121.41 a barrel on the New York Mercantile Exchange, after being down as low as $119.50.
Crude oil futures were also being pressured by signs of softening demand, which outweighed concerns about possible supply disruptions due to a tense political situation with Iran.
Bond prices mostly fell. The benchmark 10-note shed 3/32 to 99 13/32, its yield held steady at 3.94%, unchanged from Friday. Gold for December delivery fell $9.60 at $907.90 an ounce in New York.
The dollar was mixed against other currencies. The euro rose to buy $1.5589, up from $1.5541 on Friday. But the dollar gained against the Japanese yen, climbing to ¥108.19 from ¥107.75 last week.
HSBC, one of Europe's largest banks, reported a sharp decline in quarterly profit due to difficult financial markets. HSBC said its first-half net profit fell 29% to $7.72bn due to higher loan impairment charges and other credit risk provisions. The profit broadly matched analyst expectations.
HSBC's biggest losses were in the North American market, where a subsidiary that was heavily exposed to the subprime mortgage market. Shares of the British bank fell 1.5%.
Weakness from miners and banks dragged European shares into the red. However, strength from some more defensive stocks helped arrest the slide. The pan-European Dow Jones Stoxx 600 index ended 0.9% lower to 277.59.
UK's FTSE 100 ended 0.6% lower at 5,320.20, while the French CAC-40 dipped 0.8% to 4,280.63 and Germany's DAX 30 fell 0.7% to 6,349.81.
In the emerging markets, the Bovespa in Brazil slumped 3.5% to 55,609 while the IPC index in Mexico was down 1.75% at 26,487. The RTS index in Russia slid 2.4% to 1895 and the ISE National-30 index in Turkey rose 0.14% to 53,513.
Waiting for the Fed
Markets ended in negative terrain after fetching gains for three straight trading sessions. The benchmark Sensex gyrated over 200 points and Nifty swung over 70 points between their respective high and low’s. Selling pressure was witnessed in the Capital Goods, Power and Oil & Gas stocks. On the other hand, bucking the negative trend were, Metal, Pharma and Realty stocks. Finally, the benchmark Sensex ended 78 points lower to close at 14,577 and Nifty slipped18 points to close at 4,395.
Among the 30-components of Sensex, 14 stocks were in green and 16 stocks were in red. Reliance Industries, L&T, BHEL and HDFC were among the major laggards. On the other hand, Infosys, Tata Steel and Grasim were among the major gainers.
BHEL ended lower by a 2.3% to Rs1714. The company announced that it won Rs2bn order to set up equipment for a hydroelectric project in Vietnam. BHEL secured orders from Nam Chien Hydropower Joint Stock Co. of Vietnam. The company would design, manufacture and install two hydroelectric units of 100MW each.
The scrip touched an intra-day high of Rs1789 and a low of Rs1700 and recorded volumes of over 4,00,000 shares on BSE.
ICRA slipped by 1.5% to Rs656. The company announced that it has signed a MoU with Canara Bank under which ICRA will assign ratings to the Banks loans and its other exposures under the standardized approach of RBI's New Capital Adequacy Framework for Basal-II.
ICRA's ratings for the standardized approach would be carried out under its "Line of Credit" rating service and would enable Canara Bank to assign the new risk weights applicable to its borrowers under Basel-II. The risk weights would be linked to the various rating categories and would be as per RBI's Basel II guidelines.
The scrip touched an intra-day high of Rs700 and a low of Rs1640 and recorded volumes of over 2,000 shares on BSE.
Gayatri Projects gained by 1.2% to Rs252 after the company announced that it would invest Rs2bn in Gayatri Infra Transportation. The scrip touched an intra-day high of Rs257 and a low of Rs246 and recorded volumes of over 63,000 shares on BSE.
Shares of Action Construction rallied by over 10% to Rs81 after the company announced that it has signed MoU with Chinese Company. The scrip touched an intra-day high of Rs87 and a low of Rs69 and recorded volumes of over 6,00,000 shares on BSE.
Wipro was edged lower by half a percent to Rs430. The company announced that its unit Wipro Infotech has won a five-year multi-million-dollar order from Spencer's Retail Ltd., a unit of RPG Enterprises. The scrip touched an intra-day high of Rs438 and a low of Rs424 and recorded volumes of over 1,00,000 shares on BSE.
Thermax surged by over 3% to Rs451 after the company announced that it received an order of Rs4.15bn, for setting up a captive power plant for their upcoming blast furnace complex on an EPC basis. The captive power plant will use the waste gas from the furnace to produce power. The scrip touched an intra-day high of Rs456 and a low of Rs434 and recorded volumes of over 21,000 shares on BSE.
Shares of OK Play surged by over 4% to Rs47.7 after the company announced that it secured a rate contract for the supply of water storage tanks worth Rs327mn from the Government of Haryana which is valid till March 31, 2009. The scrip touched an intra-day high of Rs52 and a low of Rs46 and recorded volumes of over 10,000 shares on BSE.
Apollo Tyres marginally slipped by half a percent to Rs29.4. The company’s plans to build a factory in Gyongyos, central Hungary, will be delayed by difficulties related to purchasing the property, Napi Gazdasag reported. Production at the 200mn-euro (US$311.7mn) plant will probably begin in June 2010 instead of June 2009 as originally planned, reports added.
The investment was delayed after one of the parties in the Gyongyos city council rejected the terms of sale for the 45 hectare (111 acre) property, said reports. The scrip touched an intra-day high of Rs30 and a low of Rs29 and recorded volumes of over 4,00,000 shares on BSE.
Indiaco Ventures was locked at 5% upper circuit to Rs413.55 after the company announced that IndiaCo Venture's Technology division, 'Venturing Group' entered into an alliance with California based 'The Aerospace Corporation' by virtue of MoU for collaborative R&D and technology licensing. The scrip touched an intra-day high of Rs413.55 and a low of Rs387.
Era Infra slipped 1% to Rs515. The company announced that it has secured a contract worth Rs351.7mn for construction of additional general pool office accommodation at Kavadiguda, Secunderabad. The scrip touched an intra-day high of Rs530 and a low of Rs512 and recorded volumes of over 8,000 shares on BSE.
TRAI has asked GSM mobile service providers to provide interconnectivity to RCom for starting its services in dual technology. (BS)
RCom to float a US$500mn tender for GSM 3G networks. (ET)
Hindalco to restate Novelis FY08 results. (BS)
Hindalco may cut its Rs50bn rights issue by ~15-20%. (ET)
Daiichi gets SEBI nod for Ranbaxy open offer. (BS)
Reliance Power to raise Rs25bn from IDBI. (BS)
NTPC in negotiations to buy at least one coal mine in Indonesia and taking a long lease on another. (ET)
SAIL tests dual pricing system to up realisation. (BL)
BHEL to get preference over others during the international competitive bidding process for manufacturing 660MW supercritical units. (BS)
IOC, BPCL and HPCL are together losing Rs6bn per day on fuel sales. (ET)
Apollo Hospitals to spin off pharmacy business. (BS)
Apollo Hospitals to buy a Delhi based pharmacy chain for ~Rs200mn. (ET)
KEC International plans to foray into new businesses, including railway projects, construction of telecommunication towers and designing of substations. (BS)
IFC to invest US$14mn in Delhi based Rockland Hospital. (ET)
RCom to take GSM route for 3G rollout. (BS)
ONGC and GSPC have revised their estimates of gas reserves in their blocks off the country’s east coast by nearly three times. (BS)
Tata Motors is in talks with a Norway-based company, Miljobil Grenland to develop an electric car. (ET)
Andhra Pradesh Cabinet has approved the selection of the Nava Bharat-Maytas consortium as the developer for the Hyderabad Metro Rail project. (BS)
Yes Bank intends to launch three PE funds over the next 18-24 months, a US$300mn Clean Energy fund, a US$500mn Infrastructure fund and a US$75mn Social Enterprises fund. (BS)
Orient Paper & Industries plans to foray into newer domestic markets for its cement business and to set up plants in West Bengal, Orissa, Rajasthan or Karnataka in FY09. (ET)
Essar’s Aegis BPO to buy the Nasdaq listed off-shoring firm PeopleSupport Inc for US$250mn. (BL)
Ceat has re-negotiated prices for a bulk of its existing export orders for the next 4-5 months on steep surge in cost of inputs such as rubber and carbon black. (BL)
Apollo Tyres to invest a total US$320mn on expansion by building plants in India as well as South Africa. (ET)
Essar Steel has appealed to the petroleum ministry to consider it on par with fertilizer units for gas allocation for the purpose of gas utilization policy. (FE)
SEL Manufacturing has outlined an inorganic growth plan of Rs15bn. (ET)
General Atlantic LLC (GA) is likely to pick up a ~20% stake in Wockhardt Hospitals for US$80-100mn. (FE)
Toyota Kirloskar Motor plans to double the production at its second plant from current 100,000 units in the near future. (ET)
Economy Front page
The RBI has recommended that foreign venture capital investments be restricted to nine sectors (investment in other sectors being treated as foreign direct investment). (ET)
The Government is considering a proposal to bring iron ore under price control in an attempt to check steel prices. (ET)
The Finance Ministry has asked state governments to consider increasing the 4% VAT on intermediate goods by 1% from 2009-10. (FE)
The Government extends export ban on rice and other foodgrains till November end. (BS)
The mutual fund industry witnessed an ~6% drop in its AUM for the second consecutive month in July. (BS)
The finalisation of the two-year-old draft pharma policy is likely to be delayed further. (BS)
The Government has decided that the three UMPPs, with a total capacity of 12,000MW, would be located in Tamil Nadu, Maharashtra and Orissa in the 12th Five-year Plan (2012-17). (BS)
Gujarat government officials and industry players estimate sugarcane production in 2008-09 likely to dip by around 20-25% in 2008-09 on account of lower plantations. (BS)
Ministry of Defence has unveiled revised policy for defence purchases, which succeeds DPP 2006 will come into effect from September 1. (ET)
India’s coffee exports rose by 6% yoy in January-July’08 to 0.15mn tons. (ET)
The Government plans to allow private developers and JV firms to develop terminal side infrastructure at non-metro airports. (FE)
The Government has decided to withdraw the benefit under which exporters earned interest on Exchange Earners’ Foreign Currency accounts from November 1. (FE)