Better an ounce of luck than a pound of gold.
Investors are making a beeline for safe-haven assets like government bonds and gold. The bewildered bulls seem to be running out of luck in the equity markets. The mayhem is going to continue on local bourses, as global conditions remain fragile despite efforts by governments and central banks to stem the carnage.
There is talk of more failures in the western financial space, which may lead to further bailouts or M&As. Morgan Stanley is reportedly in talks for a partner, while Washington Mutual has also put itself up for sale. Barclays is acquiring Lehman Brothers' core businesses in North America. Lloyds TSB of London is buying embattled British home mortgage lender HBOS.
Despite the US government's rescue of insurance giant AIG, sentiment across global markets continues to be extremely nervous amid heightened fears of more trouble ahead. The inter-bank market in the west has seized up as banks refuse to lend to each other. Trust is hard to come by these days even as cost of borrowings has shot up. Oil prices have climbed as back-to-back hurricanes have hit US oil and refining facilities.
US securities regulator, the SEC, has come down hard on short sellers to prevent the slide in financial stocks. And, the IMF chief warns that the worst of the global financial meltdown may still lie ahead.
Asian stocks this morning have tumbled to the lowest in three years. European shares ended Wednesday with big losses for the third straight session. In Russia, the regulators halted stock market trading for a second straight day on Wednesday.
Confidence in the global economy has been shaken as the financial turmoil in the US worsens. Risk aversion has increased. No market or asset class is being spared, as investors' confidence is at an all-time low and plunging further.
We expect another weak opening for the Indian stocks amid the worldwide gloom. Any possibility of a rally will hinge on a recovery in global markets, even though the Prime Minister has expressed confidence in the Indian economy yet again. Of course, the inflation guessing may again cause some last half an hour swings.
After a day of relief, US stocks got pounded again on Wednesday, as investors feared that the ongoing financial turbulence might lead to more government bailouts and further consolidation among desperate banks and securities firms.
The Dow Jones Industrial Average skidded to its lowest close since late 2005 amid a virtual strike in the inter-bank market. Down more than 800 points, or 7%, so far this week, the Dow slid 449.36 points, or 4.1%, to finish at 10,609.66, its lowest closing level since Nov. 9, 2005.
All 30 of the blue-chip indexes' components finished in the red.
The S&P 500 index declined 57.2 points, or 4.7%, to 1,156.39, with financials leading sector losses among the index's 10 industry groups, off 9.2%.
The Nasdaq Composite index dived 109.05 points, or 4.9%, to end at 2,098.85, its first triple-digit decline since the first day of trading after the Sept. 11, 2001 terrorist strikes in New York.
Year-to-date, all three major gauges are down more than 20%.
Selling pressure eased somewhat in the mid-afternoon, as the jump in oil and gold prices boosted the underlying stocks. But the rear-guard action lost steam and the market finished the session just above the worst levels of the day.
Shares of Morgan Stanley and Goldman Sachs suffered their biggest one-day losses ever, falling 27% and 19%, respectively, as federal regulators rushed to tighten rules against short-selling to avoid another major collapse.
In a bid to protect investors from so-called "naked" short selling of securities, the Securities and Exchange Commission (SEC) asked short sellers and their broker dealers to deliver securities by the close of business on the settlement date.
Also weighing on stocks was the Commerce Department's report showing that the estimated count of new building permits for single-family homes fell to a 26-year low last month.
The Treasury Department said that it would sell US$40bn of debt for the Fed to help the central bank deal with the huge cash crunch in the wake of the credit crisis.
Meanwhile, a measure of corporate borrowing costs surged to levels not seen since around the time of the crash of 1987, as the three-month treasury bill rates fell to multi-year lows.
The TED spread measures the difference between what the Treasury pays for three-month loans and what banks charge each other. This shows that banks are charging each other a bigger premium than money lent to the US government.
US light crude oil for October delivery rose US$6.01 to settle at US$97.16 after settling at a seven-month low on Tuesday. Oil prices have plummeted since peaking at US$147.27 a barrel on July 11, as investors have bet that sluggish global growth will diminish oil demand.
Gasoline prices rose overnight, gaining for the 8th day in a row, according to a national survey of credit card activity.
Treasury prices rallied as investors sought safety in government debt, lowering the yield on the benchmark 10-year note to 3.41% from 3.49% Tuesday. In currency trading, the dollar gained versus the euro and the yen.
COMEX gold for December delivery rallied US$70 to settle at US$850.50 an ounce.
European shares continued to tumble for the third straight session. The pan-European Dow Jones Stoxx 600 index finished 2.1% lower at 258.04, its third day of losses in excess of 2%. Banks were by far the worst performers.
The UK's FTSE 100 closed below the 5,000 mark for the first time in three years, dropping 2.3% to 4,912.40. Germany's DAX 30 fell 1.7% to 5,860.98 and the French CAC-40 lost 2.1% to 4,000.11.
In the emerging markets, the Bovespa in Brazil plunged 6.7% to 45,908 while the IPC index in Mexico fell 4.7% to 23,456. The ISE National 30 index in Turkey was down 3.4% to 40,521.
Trading in Russia's major exchanges was suspended for a second day and the finance ministry moved to lend the three largest banks up to $44bn. Trading on the RTS exchange, where listings are denominated in dollars, came to a halt after a morning plunge of more than 6%.
Bulls to dance to global tunes
A turnaround of the early rising trends on the other Asian bourses and a weak opening in equity markets across Europe on concerns over the health of US financial institutions also dampened sentiments on Dalal Street.
Offloading was witnessed all over, especially in the Realty, Bankex and Metal stocks dragging the NSE Nifty index below the 4,000 levels in intra-day. Finally, the BSE benchmark Sensex ended 256 points lower at 13,262 and the NSE Nifty index ended at 4,008 losing 67.
Among the BSE Sectoral indices, BSE Realty index was the top loser (down 4.1%), BSE Bankex index (down 3.8%), BSE Metal index (down 3.5%) and BSE FMCG index (down 3.1%). Even the broader indices i.e. the BSE Mid-Cap and the Small-Cap indices lost over 1% each.
Market breath was weak, 1,740 declined against 886 advances, while, 86 stocks remained unchanged.
Shares of McNally Bharat gained by 1.6%Rs107 after the company announced that it received an order worth Rs871.2mn from Damodar Valley Corporation for design, engineering, supply, erection, testing and commissioning of combined ash slurry disposal system for both coal based Bokaro TPS 'A' 1x(500 MW + 20%) and 'B' (3x210 MW). The scrip touched an intra-day high of Rs110 and a low of Rs106 and recorded volumes of over 4000 shares on BSE.
Shares Hydro S&S Industries ended flat at Rs41. The board of directors of the company approved buy back of equity shares not exceeding maximum buy back price of Rs60/- per equity share under.
The Board had also appointed M/s Keynote Corporate Services Ltd as Managers to the proposed Buy Back Scheme and also to appoint other intermediaries in this regard. The scrip touched an intra-day high of Rs46.7 and a low of Rs40 and recorded volumes of over 14,000 shares on BSE.
Shares of Aurobindo Pharma gained by half a percent to Rs310 after the company announced that it received the tentative approval to manufacture and market Abacavir Sulfate tablets 60mg from the US Food & Drug Administration (USFDA).
The company had earlier received tentative approvals to Abacavir Sulfate Tablets 300mg and Abacavir Sulfate Oral Solution 20mg/ml. This is Aurobindo's 77th ANDA approval from USFDA." The scrip touched an intra-day high of Rs313 and a low of Rs305 and recorded volumes of over 14,000 shares on BSE.
Shares of Surana Telecom rallied by over 14% to Rs32 after the after the board of directors of the company fixed Sept 30 as the commencement date for the buyback of equity shares and end date of buyback as April 20, 2009 or when the company has completed buyback to the extent of 18,00,000 shares under the offer at a maximum price of Rs50/- per share. The scrip touched an intra-day high of Rs33.5 and a low of Rs26 and recorded volumes of over 1,00,000 shares on BSE.
US FDA has banned the entry of over 30 medicines manufactured by Ranbaxy. (ET)
ONGC to invest US$5.3bn in developing gas finds in two of its eastern offshore KG basin blocks. (FE)
Aban Offshore wholly owned subsidiary, Aban Singapore Pte considering listing in Oslo stock exchange. (BL)
RIL to start D6 block gas output in November. (BL)
Infosys partners with Wartsila to service multi-year transformation of its product. (BL)
Wipro Technologies acquire a US based mortgage solution provider Gallagher Financial System. (BS)
PNB to raise Rs5bn by selling bonds. (BL)
Dena Bank to raise Rs3bn through lower Tier II bonds. (BL)
Videocon Industries set to acquire 10% stake in Thomson SA of France. (BS)
RIL files petition against Maharashtra government’s decision to hold a referendum in 22 villages for its 10,000-hectare SEZ in Raighad. (BS)
PSTL JV with Longzhe Culture and Theatre launches first Cineplex in China. (ET)
BHEL to raise power capacity to 20,000MW in three years. (DNA)
Aurobindo Pharma receives a US FDA approval to manufacture and market Abacavir Sulfate tablets. (BL)
PSTL plans to invest Rs1.5bn in next six month for expansion in China. (ET)
TCS signs 5 year contract with Ericsson in Sweden. (ET)
Telecom-Italia acquires 49% stake in Unitech’s telecom arm for US$2bn. (ET)
Jindal Stainless to float a wholly owned subsidiary, JSL Ventures PT in Singapore to control all overseas mining operations. (ET)
Sanghi Industries to commission the first part of its Rs2.5bn captive thermal power project in November. (ET)
Jindal Stainless not to cut stainless steel prices. (BL)
Novartis launches health care projects for rural markets. (BL)
RIL to set up its first solar power project of 5MW capacity in Nagaur. (BL)
NHPC signs pact with Myanmar government to develop two hydel power projects. (BL)
Glodyne Technoserve secured a contract worth Rs2.8bn from Bihar’s State Electronics Development Corporation. (BS)
IDBI seeks RBI’s approval for Rs15bn PE fund. (BS)
Gujarat NRE Coke plans to float a right issue with differential voting rights to ward off takeover threat. (BS)
ONGC finds traces of uranium in some of the 9,500 wells it has dug. (DNA)
Zensar Technologies launches infrastructure management unit. (BL)
GSPC plans to raise US$1bn in initial share sale by January 2010. (DNA)
Dewan Housing to raise Rs1.5-2bn by end of March 2009 via equity issuance. (DNA)
PSTL puts domestic expansion plans on hold. (DNA)
Mastek clarifies it doesn’t depend on Merrill Lynch or Lehman Brothers for any part of its revenue. (FE)
Economy Front page
DoT to consider a proposal for allowing foreign telecom company to bid as 100% entities in upcoming 3G auction. (ET)
Indian ship owner seeks approval from RBI to enter International freight derivatives market or forward freight agreement. (ET)
PM says India to grow at 8% in FY09 despite global slowdown. (ET)
Centre has no plans to review custom duty on Agriculture product. (ET)
Government may consider relaxing ECB norms by this month end. (DNA)
Government approves FDI worth Rs140bn. (FE)