Reality is the leading cause of stress amongst those in touch with it.
We may have had a long weekend, but the reality is that the fresh spike in inflation, coupled with concerns over economic slowdown could offset positives such as falling oil prices. We are in for a rollercoaster week after the three-day weekend. Bulls and bears will continue their battle for supremacy. Though the bulls do have an edge at this stage, we cannot rule out a comeback by the bears going by last week's sudden reversal in trend. The key indices may witness sideways movement this week, as there are no clear signs on the market's immediate direction. Rate sensitive sectors like banks and realty will come under pressure after inflation rose to a 16-year high.
The market will face resistance at every rise amid persistent worries over weak macro-economic factors. Inflation will continue to be the biggest bugbear for not only India, but for the entire world. Major economies are slowing and are staring at a potential recession, even as inflation continues to rise. The only encouraging aspect right now is the recent correction in commodity prices, as the dollar has strengthened against its major rivals. This trend could continue in the foreseeable future, which will keep the bulls cheerful. But, the flip side is that falling commodity prices is also a pointer to softening demand amid economic downturn.
So, there is a possibility that fundamentals may again catch up with the markets, and stocks might resume their slide after a while. For the day, we expect a cautious to weak start and a choppy day. A technical bounce back is not ruled out though after Thursday's steep losses. But, one should be careful in building fresh long positions.
Adhunik Metaliks is one of the stocks that could rally as it is coming out with an IPO of its subsidiary, Orissa Manganese & Minerals Ltd. RCOM might be under some pressure amid reports that it has put on hold the proposed IPO of its tower infrastructure arm Reliance Infratel.
FIIs were net sellers to the tune of Rs5.74bn (provisional) in the cash segment on Thursday. Local institutions were net buyers of Rs233.2mn. In the F&O segment, the foreign funds were net sellers at Rs6.76bn. On Wednesday, the foreign funds were net sellers of Rs6.46bn.
Asian stocks advanced for the first time in five days, led by industrial and materials companies, after analysts raised their ratings for Komatsu and Sumitomo Metal Industries.
The MSCI Asia-Pacific Index added 1.2% to 126.39 as of 10:54 a.m. in Tokyo, halting a four-day, 3% drop. The index is down 20% this year as soaring inflation slowed global economic growth and the world's largest financial companies posted writedowns and credit losses of more than $500bn.
Japan's Nikkei 225 Stock Average added 1.7% to 13,240.95. Benchmarks rose in most other Asian markets open for trading except China. Indonesia and the Philippines are closed for holidays.
The Dow Jones Industrial Average and the S&P 500 index rose while the Nasdaq slipped on Friday in a choppy session. Oil prices flirted with three-month lows, the dollar rallied, and technology stocks declined.
The Dow and the S&P 500 both gained around 0.4% each while the Nasdaq finished nearly unchanged.
US light crude oil for September delivery touched a more than three-month low of $111.34 per barrel on the New York Mercantile Exchange, before recovering to settle at $113.77 per barrel, a loss of $1.24. Oil prices have plunged around 23% since peaking above $147 in mid-July. Other commodity prices have been falling too, including gold, silver, aluminum and platinum.
The selloff in crude oil over the last few weeks has had a mixed impact on US stocks. Weakness in the energy and financial space has overshadowed gains in other sectors like technology, retailers and consumer oriented stocks in the S&P 500.
The US dollar hit a two-year high on Friday versus the pound, and also gained against the euro and yen.
Ambac Financial and MBIA both gained after Standard & Poor's took the companies' bond insurance arms off negative watch and affirmed their AA ratings. The companies remain on "negative outlook."
Wachovia has agreed to buy back $8.5bn in auction-rate securities, joining four other banks that have settled with the New York attorney general.
Design software maker Autodesk reported higher sales and earnings that topped forecasts, and said third-quarter sales will beat expectations. Shares gained 11.7% in unusually active Nasdaq trade.
Retailers Kohl's, Nordstrom, Abercrombie & Fitch and JC Penney all reported earnings that were better than what analysts expected. JC Penney, however warned that current-quarter results won't meet forecasts.
In economic news, the August New York Empire State index, a regional read on manufacturing, showed a surprise jump vs. forecasts for a further slowdown. A separate report showed a rise in July capacity utilization that was in line with forecasts, as well as a rise in industrial production that was stronger than expected.
Another report showed the August consumer sentiment index from the University of Michigan rose to 61.7 from 61.2 in late July. Economists had forecast an improvement to 62.
COMEX gold for October delivery fell $22.30 to $788.40 an ounce. In the bond market, Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.84% from 3.89% late Thursday.
A weaker euro helped European shares eke out marginal gains on Friday. The pan-European Dow Jones Stoxx 600 index rose 0.5% to 287.25, with euro-sensitive exporters leading the advance. The UK's FTSE 100 closed down 0.8% at 5,454.80, while Germany's DAX 30 inched 0.1% higher to 6.446.02, and the French CAC-40 gained 0.7% to 4,453.62.
In the emerging markets, Brazil's Bovespa rose 1.6% to 54,244 while Mexico's IPC added 0.3% to 27,340. The RTS index in Russia fell 0.55% to 1785 and the ISE National-30 index in Turkey was up 1.3% at 52,290.
Selling pressure may persist
Markets ended the week on a negative note posting third consecutive day of losses. Friday’s trading session was completely dominated by bears as weak global cues coupled with a sharp rise in crude oil prices dragged the markets. Heavy selling was witnessed in interest rates sensitive stocks like Realty, Banking and the Auto stocks. However, bucking the negative trend were the IT stocks on account of depreciating rupee. Finally, the benchmark Sensex dropped 358 points to close at 15,734 and Nifty ended 98 points lower to close at 4,430.
Sun Pharma gained by 1% to Rs1447 after the company announced that the U.S. Federal Trade Commission (FTC) granted early termination of the antitrust waiting period under the Hart-Scott-Rodino Act (HSR) for the previously announced Tender Offer by Alkaloida Chemical Company Exclusive Group Ltd. (Alkaloida), a subsidiary of Sun Pharma, for all outstanding Ordinary Shares of Taro Pharmaceutical Industries Ltd. (Taro). The scrip touched an intra-day high of Rs1454 and a low of Rs1430.
SBI declined by over 6% to Rs1458. The company announced that the Ministry of Finance: Department of Financial Services, Government of India passed an order for acquiring of State Bank of Saurashtra. This will come into effect on the effective date as may be notified by the Govt. of India in the official Gazette. The scrip touched an intra-day high of Rs1550 and a low of Rs1453 and recorded volumes of over 7,00,000 shares on BSE.
Shares of Hindustan Zinc slipped by 1% to Rs554 after the company announced that it cut Zinc prices by Rs2,400 per ton to Rs81,100 per ton and reduced Lead prices by Rs10,500 per ton to Rs90,400 per ton. The scrip touched an intra-day high of Rs570 and a low of Rs550 and recorded volumes of over 17,000 shares on BSE.
BILT edged lower by Rs33. Media reports stated that it would raise prices of uncoated paper by 2% or Rs800 per ton from September 1 to offset input cost push and on firm demand.
The company will also increase prices of the coated variety, used in premium magazines, photographs and packaging, by 3 % or Rs 1,500 a tonne from Aug 15, reports added. The scrip touched an intra-day high of Rs34 and a low of Rs33 and recorded volumes of over 1,00,000 shares on BSE.
I-Flex ended 1.3% higher to close at Rs1340 after the company announced that Bank SNORAS, a leader in the retail banking sector in Lithuania chose FLEXCUBE Universal Banking release 10.0 as the core banking solution for managing business processes and services in the Bank SNORAS group. The scrip touched an intra-day high of Rs1365 and a low of Rs1325 and recorded volumes of over 34,000 shares on BSE.
Essar Shipping was down by 4% to Rs109. The company announced that it has added two modern Supramax Dry Bulk Carriers to its fleet. The two ships named 'M V Malathi' and 'M V Malavika' are dedicated to perform a Contract of Affreightment (COA) of three million tonnes of coat over a period of five years.
The additions of these two ships will lift the Company's EBITDA by US$ 100 million over a period of five years. The scrip touched an intra-day high of Rs116 and a low of Rs109 and recorded volumes of over 49,000 shares on BSE.
Shares of Global Vectra declined by 3.5% to Rs73. The company clarified that it has not discussed / informed about "Stake Dilution" and the company deny any such statement by the company. The scrip touched an intra-day high of Rs83 and a low of Rs71 and recorded volumes of over 1,00,000 shares on BSE.
ICICI Bank decides to introduce floating rates of interest for two-wheelers.(BS)
Jindal Steel and Power to invest Rs183bn in Chattisgarh to set up a steel unit and a 1,000MW captive power plant.(DNA)
Assessment of commerciality and development plan of Gujarat State Petroleum Corp. KG Basin gas find is likely to be completed by next month.(BL)
Essar Oil has said its exploration blocks in Vietnam and Madagascar have shown an initial indication of gas reserves of 2-3tn cubic feet and around 1bn barrels of oil, respectively.(BS)
M&M plans to enter the US market with its diesel-powered trucks and SUVs.(ET)
Punj Lloyd, which is constructing two LNG tanks for Petronet LNG in Gujarat, may not meet its October deadline.(Mint)
Bharti Airtel says it has crossed the 75mn customer mark to become the fourth largest in-country mobile operator in the world.(FE)
Tata Steel has kicked off fresh talks to sell the aluminum smelting business of Corus Group.(ET)
Hotel Leelaventure plans to increase its room tariffs.(DNA)
Ispat Industries and Bhushan Steel out of the race to get the iron ore mines in Kawardha district of Chattisgarh.(BS)
Idea Cellular to launch wireless telephony services in Mumbai soon.(ET)
Tata Power, CESC, DLF, amongst others respond to the EOI floated by Andrew Yule to divest up to 57.2% in DPSC.(ET)
Indraprastha Gas and two other companies have asked oil regulator to reject Reliance Industries EOI for six cities.(ET)
Reliance ADAG lines up Rs1bn for advertising and promotional campaign for DTH roll-out.(ET)
Idea Cellular defers its open offer for an additional 20% stake in Spice Communications following a delay in approval.(FE)
Government plans to rope in DLF, Omaxe and Rahejas for Delhi slum redevelopment.(ET)
Goa-based Dempo Group plans to divest 40% in a company that will house its 100mn tonne iron ore reserve.(BS)
Fortis Healthworld will acquire pharmacy retail chain CRS Health as part of expansion.(Mint)
GSM operators to defy TRAI’s directive to give links to connect Reliance Communication’s new network by August 21.(BL)
Tata Power planning and studying a minimum US$3bn foray into nuclear power.(ET)
JSW Steel, which is setting up a 2mn tonne per annum coking coal facility in Mozambique, might not be able to complete its project on time.(DNA)
Seshasayee Paper and Boards plans to invest Rs3bn to double its printing writing paper production capacity to 225,000 tonnes. (BS)
GMR group plans two SEZs at Hyderabad airport.(TOI)
Country Club India has earmarked Rs2.5bn investment for its foray into the wellness tourism segment.(ET)
IFC weighing option to part-finance GSPC Gas Company’s US$140mn city gas distribution project in Gujarat.(FE)
ONGC will set up an integrated offshore supply base and processing unit in Andhra Pradesh.(BL)
PNB is in talks with Visa to start its independent credit card business and is likely to launch the service by October.(FE)
Reliance Industries looking at exporting diesel from its upcoming refinery at Jamnagar in Gujarat to Pakistan.(ET)
L&T in talks with Germany-based Voith to export paper machinery. (BL)
BHEL announced an investment of US$2.5bn in the next four years to ramp up capacity to meeting the growing electricity needs.(FE)
Indian Hotels has earmarked Rs18bn for funding inorganic growth in the next three years.(ET)
TRAI to ask DoT to take action against GSM operators if they fail to connect their networks to Reliance Communications GSM network by August 21, 2008.(ET)
Nuclear Power Corp. shortlists four suppliers for reactors.(BL)
Kingfisher Airlines plans to launch its first international flight on September 3.(ET)
Air India plans to save Rs10bn this fiscal by cutting operational costs.(Mint)
BSNL plans to offer bundled CDMA handsets.(ET)
BHEL is the best bidder in 2,400MW Debrand project of Tata Power and in the 1,050MW Orissa project of Monnet Ispat.(BL)
EIH plans to set up hotels in Bangalore and Goa for an investment of Rs6.5bn and has secured land in both the locations. (ET)
Economy Front page
Government may exempt value added steel from the purview of export duty if products out of imported raw material.(TOI)
DoT seeks PMOs approval to raise 2G spectrum usage charges for telecom operators.(ET)
DoT rejects Samajwadi Party leader's formula for levying a charge on GSM-based mobile operators with excess spectrum over 6.2MHz.(FE)
PSU general insurers may be allowed to tap market for additional funds.(DNA)
TRAI questions DoT’s mobile number portability methodology.(TOI)
Duty-free export of steel items may get government approval.(ET)
DoT says it is open to auctioning 3G spectrum for CDMA.(BS)
Hotels across cities to hike tariffs by 10-50%.(ET)
Excise duty waived for goods used in ultra mega power projects.(BL)
Indirect tax collection increase 13.5% YoY in July.(FE)
FDI in Q1 FY09 exceeds total inflows in 2005-06.(Mint)
Government has initiated a new scheme of generation based incentive (GBI) for wind power generation.(ET)
India Infrastructure Finance Company, the SPV floated by the government, will raise US$1.2bn from foreign lenders.(BS)
Cement prices are likely to go up in the next one or two months due to increasing input costs, especially in wages, salaries and coal.(BL)
A single excise duty will be levied on all foreign liquors, irrespective of the prices, in Maharashtra.(ET)
Government may sell 4mn tonnes of wheat to reduce prices.(BS)
CERC proposes a new tariff scheme for power generated from hydroelectric stations whereby the risks associated with changes in water flow would now be borne by producers instead of buyers.(BS)
World Bank will provide a US$600mn loan to India to part finance a $10.7bn education programme.(FE)
DoT invites proposals for 3G e-auction agency.(ET)
Government issues show cause notice to 252 sugar mills for failing to submit monthly returns regarding dismantling of sugar buffer stocks.(BS)
Exporters may have to settle for a lower duty drawback rates for 2008-09.(BL)
IRDA plans to frame guidelines for insurance companies’ valuation. (ET)
Commerce Ministry likely to propose reduction in iron ore export duty.(FE)
Ethanol producers are demanding double the current prices for the by-product.(DNA)
Government announced an average increase of 21% in salaries of 5mn government employees wef January 1, 2006.(FE)