When you go to buy, use your eyes, not your ears
President Bush and the leaders of both parties were in for a rude shock after the US government failed to win an approval for its mega rescue plan. The Dow Jones Industrial Average on Wall Street had its biggest single-day point loss ever. The S&P and the Nasdaq too came in for some harsh punishment. European shares tumbled to their second-worst single-session loss amid desperate government bailouts of banks across Europe. Among the emerging market indices, the Bovespa in Brazil (we know a lot many of you see some correlation with Indian market) ended down 9.3% overnight. Asian stocks too took a beating this morning, but have since recovered some lost ground.
There's hardly any good news, barring the steep fall in crude oil, which again (like we told you earlier) is linked to apprehensions of a substantial slowdown in global energy demand amid the unprecedented financial crisis. Global investors are rushing to buy safe-haven Bonds and Gold.
Predictably, we expect a gap-down opening in the wake of global carnage and anxiety surrounding the fate of the US economy and its wider global fallout. Things on the macro front are not too encouraging either. Interest rates are at a six-year peak. Inflation is hovering above the 12% mark. The rupee is losing ground steadily, and hit a five-year low on Monday. The Indian government and the RBI too could announce some more measures if the markets here do not recover.
Amidst all the gloom, some flowers may bloom. A bounce back is not ruled out later in the day. You will hear rumors and whispers of margin calls being triggered if stocks come crashing substantially. Close your ears for now and open your eyes to opportunities for the medium to long term.
For those happy hunting for mid-cap bargains, avoid the temptation and stick to the large caps. Don’t go overboard as the near term outlook remains hazy. Add some stocks at lower levels today for quick gains during a bounce back. If you don’t have the money and the appetite, just say good bye!
US stocks plunged on Monday after the much-touted bailout package for America's troubled financial system was voted out by the House of Representatives, sparking fears of more pain for the world's biggest economy.
The Dow Jones Industrial Average suffered its worst point drop on record, knocking off a mind-boggling US$1.2 trillion in market value, the first such instance ever in the history of Wall Street.
The Dow slumped 777.68 points, surpassing the 684.81 loss on Sept. 17, 2001 - the first trading day after the September 11 attacks. However, the 7% decline does not rank among the top 10 percentage declines.
The S&P 500 index nose-dived 106.59 points or 8.8%, to close at 1,106.42. It was its seventh worst day ever on a percentage basis and the biggest one-day percentage drop since the crash of 1987, when it lost 20.50%.
The Nasdaq Composite index slid nearly 200 points or 9.1%, to shut shop at 1,983.73. This was its third worst day on a percentage basis and also its worst decline since the crash of 1987.
Market breadth was negative. Twenty-five stocks fell for each that rose on the New York Stock Exchange (NYSE), as two billion shares were traded on the floor, up 35% over the three- month average.
US stocks tumbled ahead of the vote and the selling accelerated on fears that Congress would not be able come up with a fix for nearly frozen credit markets.
There was also news that troubled Wachovia had to sell its banking assets to Citigroup. A number of European banks also collapsed and had to be rescued by their respective governments and regulators.
But the possibility that the House won't pass the bailout plan caused stock losses to accelerate. Although another version of the plan will likely go before Congress, investors are skeptical whether it would be enough to avert the crisis.
Meanwhile, the Federal Reserve and other central banks around the world announced steps to make billions available to troubled banks.
The TED spread hit a more than 26-year high of 3.58% before dipping back to 3.54%. The TED spread is the difference between what banks charge each other to borrow for three months and what the Treasury pays.
The three-month Treasury bill, seen as the safest place to park money in the short term, fell to 0.34% from 0.83% late on Friday. Earlier this month, the three-month bill fell to a 68-year low around 0% as panic gripped financial markets.
Long-term Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.58% from 3.82% late on Friday.
US light crude oil for November delivery fell $10.52 to settle at $96.37 a barrel, in the second-biggest one-day plunge ever. COMEX gold for December delivery rose $5.90 to $894.40 an ounce.
In currency trading, the dollar gained against the euro and fell against the yen. Gas prices fell for the 12th day in a row, according to a nationwide survey of credit card activity.
Apple shares slumped almost 18% after RBC and Morgan Stanley analysts downgraded the stock to "neutral" from "buy" saying the consumer spending slowdown will hurt profits.
European shares slid, as financial market turmoil led to bailouts of financial institutions in Belgium, Britain, Germany and even Iceland. The pan-European Dow Jones Stoxx 600 index skidded 5.5% to 251.37, a three-year low, as metals extractors, financial services firms and banks paced a decline.
The UK's FTSE 100 dropped 5.3% to 4,818.77, while Germany's DAX 30 shed 4.2% to 5,807.08 and the French CAC-40 dived 5% to 3,953.48. The AEX was down 8.8% to 323.55 in Holland and the ISEQ was down 12.7% to 3,303.62 in Ireland.
In the emerging markets, the Bovespa in Brazil was down 9.4% at 46,028 while the IPC index in Mexico slid 6.4% to 23,955. The RTS index in Russia slumped 7.1% to 1194 while the ISE National 30 index was down 1.6% at 45,472.
Global cues to drive sentiments
Weak global cues coupled with heavy selling in the scrips all over dragged the BSE benchmark Sensex and the Nifty index below the 12,500 and 3,800mark.
Market sentiments were again hit as concerns continue to surface whether the US$700bn bailout would ease the global credit crunch. The BSE benchmark Sensex slipped 506 points to close at 12,595 and the NSE Nifty index fell 135 points to close at 3,850.
Among the 30 components of the Sensex, 29 stocks ended in the red and only 1 stock i.e. Hindustan Unilever ended with positive bias. ICICI Bank, Infosys and L&T were among the major laggards.
Among the BSE Sectoral indices, BSE Bankex index (down 6%), BSE Consumer Durable index (down 5.6%), BSE IT index (down 5.5%) and BSE Realty index (down 5.2%).
Nagarjuna Construction announced that M/s. A V S R Holdings Pvt. Ltd an investment company belonging to the promoters group has acquired during the period September 19, 2008 to September 26, 2008. 509,743 equity shares of Rs2/- each of the company in the aggregate (Equivalent to 0.22% of the paid-up capital) through purchases from the Market.
With the aforesaid acquisition, the holding of the promoters group in the company has gone up to 23.29% of the total equity of the Company.
Shares of Nagarjuna Construction plunged by over 11% to Rs95 touching an intra-day high of Rs109 and a low of Rs92 and recorded volumes of over 2,00,000 shares on BSE.
Shares of ICICI Bank plunged by over 12% and slipped below the Rs500 mark on the back of heavy selling. The stock has declined by over 65% from its 52-week high of Rs1,465.
The stock finally ended at Rs493 touching an intra-day high of Rs569 and a low of Rs483 and recorded volumes of over 58,00,000 shares on BSE.
Shares of Subex ended on a flat note at Rs77. The company announced that BT (British Telecom) signed a three-year framework contract at an estimated value of US$ 50mn, for Subex to provide the company with products and services in the domains of revenue assurance, fraud detection, interconnect billing and event integrity.
Shares of Gwalior Chemicals declined by over 9% to Rs66 after 5.8% equity changed hands on the BSE. The scrip touched an intra-day high of Rs72 and a low of Rs65 and recorded volumes of over 14,00,000 shares on BSE.
Shares of Orchid Chemicals gained by 1% at Rs214 after the company announced that it would collaborate with Merck to develop novel Anti-Infective drugs. The company would get US$100mn milestone payment from Merck and would also get royalties on net sale. The scrip touched an intra-day high of Rs217 and a low of Rs198 and recorded volumes of over 2,00,000 shares on BSE.
Shares of HCL Tech declined by over 8% to Rs195 after the company offered to buy Axon Group Plc, countering a bid from Infosys.
The company had announced in the previous week that it offered to buy Axon for 650 pence per share. The price was 8.3% higher than an offer from Infosys. The scrip touched an intra-day high of Rs213 and a low of Rs188 and recorded volumes of over 1,00,000 shares on BSE.
RIL has offered to sell diesel from the company’s refinery in India if the government removes double taxation of the fuel. (BS)
The Government may not allow RIL to supply KG basin gas to RNRL and NTPC in violation of the gas utilization policy, which accords priority to the fertilizer sector. (ET)
Subex has bagged a US$50mn contract from British Telecom. (ET)
British Telecom has put the sale of its stake in Tech Mahindra on hold. (ET)
Tata Motors has stepped up production of Indica at its Tata-Fiat JV plant at Ranjangaon and may start Nano production also at this plant. (ET)
Maruti to increase it’s yet to be launched new compact car A-Star’s production by 50,000 units. (ET)
Aurobindo Pharma has received USFDA approval for marketing Cyclobenzaprine hydrochloride tablets. (ET)
Sterlite Industries to start mining bauxite from Niyamgiri hills in Kalahandi district within a year. (BS)
IVRCL Infrastructures and Projects Ltd bagged a Rs4.2bn lift irrigation scheme in Madhya Pradesh. (BL)
Suven Life Science has got DCGI approval for Phase I clinical trials of SUVN-502, a product used in the treatment of Alzeimer disease. (ET)
TIG Capital plans to invest over US$400mn for a substantial stake in Kingfisher Airlines. (ET)
Union Bank of India, which had extended a credit line of Rs3bn and term loan of Rs1bn to DSP Merrill Lynch, has put both the deals on freeze. (ET)
NHPC may delay its initial public offer due to market turmoil. (ET)
Orchid Chemicals has entered into strategic research collaboration and licensing agreement with Merck & Co Inc. (FE)
The boards of MindTree and Aztecsoft have approved a share swap ratio of 2:11 for their merger. (ET)
Area T&D and GE Consumer have jointly announced a strategic alliance. (FE)
Aksh Optifibre has entered into a three-year agreement with Sony Pictures Entertainment. (FE)
Mahindra Holidays & Resorts India to spend Rs3.5-4.0bn to double its capacity to 1,500 apartments over the next one year. (BS)
Jet Airways Chairman Naresh Goyal to sell up to 10% of his stake in the company. (BS)
Adani Enterprise entered in a JV with Chemoil for marine fuel supply. (BS)
Economic Front Page
The rupee hit a five-year low of 47.115 against the US Dollar in intra-day trade, before recovering to close at 46.97, the lowest since July 19, 2006. (BS)
Nasscom may cut software exports growth forecast downwards by few percentage points for 2008-09. (ET)
Banks have made a strong representation to RBI to release more cash into their system. (ET)
The Home Ministry and the Department of Industrial Policy and Promotion have denied DoT’s plans to let foreign telcos bid for 3G spectrum without an Indian partner. (ET)
The Government is likely to allocate start-up GSM technology spectrum in the Maharashtra circle to new telecom licensees. (ET)
The Government has revived the proposal for allowing 100% FDI in electronics and sports goods retail. (ET)
Indian banks plan to stop loans to local arms of crisis-hit US companies, this may result in cancellation of deals worth ~Rs20bn. (ET)
India and the European Union have agreed to conclude a broad-based Trade and Investment Agreement by 2009 and double their trade turnover to e100bn in the next five years. (ET)
The Supreme Court has approved smoking ban in public places from October 2. (ET)
The Petroleum Planning and Analysis Cell has made a strong pitch for a judicious mix of reduction in excise duties and state taxes along with a gradual increase in prices to bring the price of automotive fuels at par with international prices.(FE)
Union food and agriculture minister Sharad Pawar has rejected duty free imports of raw sugar. (ET)
Indian tea production in January-July 2008 increased by 17mn kgs to 476.6mn kgs compared to same period last year. (ET)
Manmade fibre textile exports increased by 35% yoy in Apr-Jul’08. (FE)