…Be slow to form convictions, but once formed they must be defended against the heaviest odds.
The bears have succeeded in delivering some punches and bringing down the morale of the bulls. Investors can learn a lesson or two from the defensively accurate Moldovan, Gojan Veaceslav who beat India’s aggressive Akhil at the Beijing Olympics boxing competition.
We expect the market to open a little soft again due to weak global cues. US market was down sharply overnight. But, Europe was more or less flat. Asian markets are down between 0.5-2%, with Tokyo shares pacing the decline. Markets in Hong Kong haven't fallen much while stocks in Shanghai have rebounded. Crude oil remains under pressure due to concerns over slowing demand and rising dollar. There may be a bounce back later in the day after four days of losses. Stick to the defensives like IT and FMCG for the time being.
The bulls are feeling a bit tired after a sharp bounce back from the lows hit in mid July. After sliding close to 12,500 on July 16, the Sensex crossed 15,500 on August 11. The Nifty, on the other hand has turned around from below 3800 to around 4650. The rebound has been quite swift, taking most market players by surprise given the kind of headwinds the market was facing. One factor has been instrumental in improving the sentiment. And, no prices for guessing that. It's crude oil, which has slumped from an all-time high of around $147 per barrel to $112 a barrel at present.
But, the outlook on the macro-economic front and the global side has not changed much in the interim. Inflation has actually climbed to a 16-year peak. Interest rates have inched up further. The Government's finances are in a disarray due to off-budget items, farm loan waiver and pay commission largesse. Concerns have increased over the credit market crisis in the western world and its impact on the large economies of the US and Europe. Even Japan is feared to be heading towards a recession. These factors seem to resurface every now and again, stopping the bulls in their tracks. This is what appears to have happened over the past four trading sessions.
The momentum has dissipated a bit, putting the strength of the recent rally in doubt. Global markets too have not been all that supportive. Today is no different, with the US market leading a worldwide fall amid fresh concerns over the health of the government-backed mortgage lenders - Fannie Mae and Freddie Mac. There is growing speculation that the Bush administration could bail them out. There are also reports that Lehman Brothers could suffer more losses.
Meanwhile, shares bought on Monday should not be sold today due to a bank holiday today. Trades done on both these days will be settled together on Wednesday.
TCS will be in focus amid reports that it is the front-runner for acquiring Citi's Indian BPO arm. Ambuja Cement and other cement shares could gain on speculation of a price hike. Sobha Developers is another stock that might gain as a newspaper report suggests that it is selling stake in three SPVs.
Punj Lloyd is reportedly in the race for bagging an order in Singapore. HEG's Board will meet today to consider buy back of shares. ITC might attract some attention as ITC Infotech (USA) Inc. has acquired Pyxis Solutions LLC, a New York limited liability company. Opto Circuit could be another stock in positive action later in the day.
FIIs were net sellers to the tune of Rs4.75bn (provisional) in the cash segment on Monday. Local institutions were net buyers of Rs1.29bn. In the F&O segment, the foreign funds were net buyers of Rs4.3bn. On Thursday, the foreign funds were net sellers of Rs3.96bn while Mutual Funds offloaded shares worth Rs4.19bn.
Asian stocks fell, driving the region's benchmark to a two-year low, on renewed concerns that credit-market turmoil will hurt bank profits and curtail global economic growth.
The MSCI Asia Pacific Index lost 1.7% to 122.95 as of 10:57 a.m. in Tokyo, set for the lowest close since July 26, 2006. Financial companies were the biggest drag, accounting for more than a quarter of the benchmark index's retreat.
The Nikkei ended the morning session down 363.96 points at 12,801.49. Hong Kong's Hang Seng dropped 0.6% in early minutes.
US stocks slumped anew on Monday amid fresh concerns over the state of the financial sector, as speculation grew about a bailout for Fannie Mae and Freddie Mac, whose shares tumbled to their lowest levels in more than 17 years.
Fannie Mae and Freddie Mac shares tumbled after financial weekly Barron's suggested that the mortgage finance firms won't be able to raise the capital they need and that a government takeover is inevitable.
Lennar Corp. and Ryland Group led a 5.5% drop by builders. Hershey retreated the most since 2002 after the chocolate maker said price increases will curb growth.
The S &P 500 Index lost 19.60 points, or 1.5%, to 1,278.60 as 23 of 24 industry groups declined. The Dow Jones Industrial Average fell 180.51 points, or 1.6%, to 11,479.39 as all 30 companies fell. The Nasdaq Composite Index slumped 35.54 points, or 1.5%, to 2,416.98.
Market breadth was negative. Seven stocks dropped for every two that advanced on the New York Stock Exchange.
Stocks had been under pressure throughout the session, as the dollar slid and oil prices fluctuated amid worries about a tropical storm approaching the Gulf Coast. But the selloff accelerated in the afternoon, led by the financial sector.
In another troubling sign for the US housing market, an industry report showed that homebuilders' confidence held at a record low in August for the second month in a row.
Additionally, the Wall Street Journal reported that Lehman Brothers could end up reporting a big third-quarter loss, rather than the currently expected profit. Lehman shares lost 7%.
Crude oil for September delivery fell 90 cents to settle at $112.87 a barrel on the New York Mercantile Exchange, a 3-1/2 month low. Prices were volatile during the session as Tropical Storm Fay approached Florida.
US stocks were mostly upbeat last week, boosted by falling oil prices and a rallying dollar. That trend of weaker commodities, stronger currency is likely to continue through the rest of the summer, according to some analysts.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.81% from 3.84% late on Friday. In currency trading, the dollar fell against the euro and the yen. COMEX gold for October delivery rose $13.40 to $801.80 an ounce.
Miners and oil producers moved higher in Europe, helping offset weakness in exporters and airlines. The pan-European Dow Jones Stoxx 600 index slipped 0.1% to 286.95. The French CAC-40 was down 0.1% at 4,448.84, while the UK's FTSE 100 fell 0.1% to 5,450.20. Germany's DAX 30 dropped 0.2% to 6,432.88.
In the emerging markets, Brazil's Bovespa slid 1.7% to 53,326 while Mexico's IPC shed 2% to 26,777. The RTS index in Russia fell 0.4% to 1778 and the ISE National-30 index in Turkey was down 0.7% at 51,928.
Technical bounce back likely
Markets started off the week with negative bias. Indian markets extended its losing streak to fourth straight trading session on the back of fresh spike in inflation and concerns over economic slowdown.
An absolute dull session ended in the red led by selling witnessed in the Oil & Gas, Metal and Power stocks. Only the IT stocks were in demand, the BSE IT index was up 0.75%.
Finally, the benchmark Sensex slipped 78 points to close at 14,645 and Nifty ended 37 points lower to close at 4,393.
Among the 30-components of Sensex, 21 stocks were in red and only 9 stocks were in green. Reliance Industries, ITC, ICICI Bank and RCom were among the major laggards. On the other hand, HDFC, HDFC Bank and L&T were among the major gainers.
In the overall market, 930 stocks advanced and 1,668 stocks declined. Whereas, 78 stocks were unchanged.
Shares of Hindalco dropped by over 6% to Rs129 after the company announced that it would sell shares to existing shareholders at below market prices to repay debt used to fund its US$6bn takeover of Novelis Inc. last year.
Hindalco will sell shares at Rs96 each, a 29% discount to the closing price on Aug. 14, 2008. Shareholders would be offered 3 shares for every 7 held. The scrip touched an intra-day high of Rs136 and a low of Rs128 and recorded volumes of over 19,00,000 shares on BSE.
Shares of SAAG RR Infra was locked at 5% upper circuit to Rs66.35 after 1.64% shares of the company changes hands in 2 trades on BSE. The scrip touched an intra-day high of Rs66.35 and a low of Rs63 and recorded volumes of over 2,00,000 shares on BSE.
Apollo Tyres slipped by 1.5% to Rs35.4 after the company announced that they dropped plan to build a 200mn euro factory in Hungary because of local opposition at the planned site in Gyongyos. The scrip touched an intra-day high of Rs35.9 and a low of Rs34 and recorded volumes of over 2,00,000 shares on BSE.
Aries Agro gained by 2.5% at Rs114 after the company announced that it would be inaugurating its sixth manufacturing unit at Ahmedabad, Gujarat on August 19, 2008. With this unit, the total manufacturing capacity for micronutrients will be enhanced to 73800 MT per annum.
In addition this unit will also mark the entry of the company into an entirely new range of Bio-fertilizers. The scrip touched an intra-day high of Rs120 and a low of Rs106 and recorded volumes of over 7,000 shares on BSE.
Rain Commodities edged higher by 0.6% to Rs223 after the company announced that the board of directors would meet on September 01, 2008 to consider buy-back of equity shares. The scrip touched an intra-day high of Rs238 and a low of Rs220 and recorded volumes of over 7,00,000 shares on BSE.
Subex slipped by over 2.5% to Rs109. The company clarified to the exchanges that the Subex is unaware of the contents referred in the news item and does not have any information on the same. The scrip touched an intra-day high of Rs113 and a low of Rs106 and recorded volumes of over 28,00,000 shares on BSE.
Shares of Bartronics surged by over 1.7% to Rs173. The company announced that that it secured a contract worth over Rs4bn, for providing Smart Cards by the Employees State Insurance Corporation.
The contract is for district-wise operation of Smart Cards under the RSBY Scheme covering 609 districts across the country. The scrip touched an intra-day high of Rs187 and a low of Rs173 and recorded volumes of over 10,00,000 shares on BSE.
M&M slipped 2.5% to Rs568. According to media reports, the company is likely to acquire 51% stake in Chinese Tractor Company, Kianbsu Yueda Yancheng. The scrip touched an intra-day high of Rs587 and a low of Rs557 and recorded volumes of over 1,00,000 shares on BSE.
ICICI bank has sold ~US$275mn from its credit derivatives portfolio in its foreign branches. (ET)
TCS is close to acquiring Citigroup’s captive BPO arm, Citigroup Global Services (formerly e-Serve) for ~US$500-550mn. (ET)
M&M is working on an electric car that will be bigger than the Reva brand, expected to hit the market by 2010. (FE)
IOC, BPCL and HPCL have seen revenue losses on sale of petrol, diesel, LPG and kerosene coming down to Rs4.5bn per day from Rs6bn per day. (ET)
ONGC exercised its right to pick up an additional 30% in CB-ON-7 in the South Pramoda Development Area in the Cambay basin. (BL)
Satyam Computer has delayed the payout of annual performance-based salary raises and expects the increases to be smaller than last year. (Mint)
International Finance Corp (IFC) has sold its 7.75% stake in Dabur Pharma Ltd. to German pharma major Fresenius Kabi. (BL)
Ambuja Cements has decided to raise cement prices by Rs20 per 50kg bag in two tranches. (ET)
Government asks NTPC to cut land need for building townships. (BS)
BSNL places orders for 3G equipment. (BS)
Subhash Projects and Emco will jointly pick up 83% stake for Rs3bn in PT Bism mine. (Mint)
Apollo Tyres to withdraw its planned facility at Gyongyos, Hungary. (ET)
Idea Celluar will not seek promoter funds to bid for the Rs400bn worth 3G spectrum. (ET)
Leela Venture to invest US$500mn for expansion. (BS)
The Government may reimburse NMDC the duty paid on exports to Japan and Korea. (ET)
Berger Paints has acquired BolixSA of Poland, a leading provider of external insulation systems from Advent International, a global private equity group.(FE)
Crompton Greaves may quit Nagpur power project, for which it had entered into a MoU with the Maharashtra State Electricity Distribution Company. (FE)
Bajajs has increased their stake in Mukand by 2% to 43%. (ET)
The Aditya Birla group plans to increase production at its copper concentrate mines at Nifty and Mount Gordon in Australia. (ET)
Punj Lloyd is in the race to build Singapore’s maiden liquefied natural gas (LNG) import terminal. (ET)
Punjab Chemicals to raise Rs2.5bn via GDR. (BS)
GAIL India may take over natural gas marketing from ONGC. (BS)
Haldia Petro to invest Rs700mn in power venture.
NTPC’s 980 MW power plant at Dadri is expected be commissioned according to schedule. (BL)
Trent to launch 16,000 sq ft value apparel format store this fiscal. (BL)
Toyota Kirloskar Motors plans to set up an engine manufacturing facility in India. (FE)
Titan Industries has set a US$1bn revenue target for FY09. (FE)
Economy Front page
Spot rupee fell to a 17-month low of 43.70 against the dollar. (BS)
TRAI tells Government to ease norms for internet calls. (BS)
Allahabad High Court has ordered sugar mills to pay farmers SMP fixed by the Centre. (BS)
CMIE in its monthly report says the Indian economy would continue to clock a robust over 9% growth in FY09. (BS)
SEBI eases disclosure norms for debt issues. (BS)
FIIs may get to invest in Indian Depository Receipts (IDRs). (ET)
Sugar prices may shoot up during the coming festive season, unless at least 5mn tons of sugar is released by the Government in the open market. (ET)
The Government plans to launch special pharma outlets, which will sell generic medicines at affordable prices to poorer sections of the society. (ET)
Banks trim sales force by 15-25% as credit growth slows down. (BS)
Domestic passengers at Hyderabad airport to pay user fees. (BS)
Revenue Dept tells FIPB to reject telecom FDI from tax havens. (BS)
The country’s fertilizer subsidy bill is likely to treble to Rs1,197.72bn in FY09 from Rs403.38bn in FY08. (FE)