Do not follow where the path may lead. Go, instead, where there is no path and leave a trail.
The bulls continue to get blasted from all corners. We are not talking just of the Delhi blasts. We expect a soft opening mainly due to renewed concerns over the health of the financial sector in the US and its worldwide fallout. The trend will hinge on the movement in global markets. The undertone will remain edgy despite crude falling below $100, inflation slipping a bit and better than expected IIP numbers.
Coming to crude, it is now trading below $100 a barrel. Hurricane Ike has inflicted less than expected damage to the oil production facilities. Oil prices fell below $99 a barrel on Sunday in a special early-start session. The market is still waiting for more updates on damage from the Gulf of Mexico. Ike has hurt the demand side for crude more than the supply side, according to some oil market analysts. Oil was recently trading at $99.54 a barrel after falling as low as $98.55 in electronic trading.
Ideally, this should be music to the ears of the bulls, at least in India. However, that doesn't seem to be happening, with markets in Taiwan and Singapore down well over 2% this morning. The growing nervousness is with regard to news that Lehman Brothers is planning to file for bankruptcy as it has failed to find any buyers. Even the US government has refused to lend any support to the beleaguered securities firm. The dollar has tumbled and US stock futures have taken a beating. When reports last came in, Dow futures were down over 300 points.
Markets in China, Hong Kong, Japan and Korea are shut for public holidays. Stock benchmarks in Europe and emerging markets like Brazil also rallied. The main events to watch out for will be the announcement from Lehman Brothers, AIG's restructuring plans, Bank of America's acquisition of Merrill Lynch and the Fed meeting on Tuesday.
On the local front, there aren't too many positive triggers. So, the action will be stock and in some cases even sector specific. One should remain cautious, as there are still a lot of uncertainties, both globally and locally. FIIs have stepped up their selling of late, which is another major cause for worry. And, with the rupee weakening against the dollar, they may not resume their buying spree anytime soon.
FIIs were net sellers of Rs14.98bn (provisional) in the cash segment on Friday while the local institutions pumped in Rs6.95bn. In the F&O segment, the foreign funds were net sellers at Rs7.77bn. On Thursday, FIIs were net sellers of Rs14.1bn in the cash segment.
US stocks closed flat on Friday despite lower crude oil prices, as investors chose to focus more on the financial turmoil. Uncertainty about whether Lehman Brothers and Washington Mutual are likely to find buyers and whether AIG will shed its sour mortgage-related assets took precedence over falling oil prices.
The broad financial sector problems were countered by strength in oil services and other commodity stocks and the automakers. Oil prices seesawed to a higher close as Hurricane Ike headed toward the Texas Gulf Coast.
The Dow Jones Industrial Average lost 12 points, while the Standard & Poor's 500 index and the Nasdaq Composite index both just about managed to close in the positive territory.
All three major stock gauges had been on both sides of unchanged throughout the session.
Market breadth was negative.
The US credit squeeze has brought on a "once-in-a-century" financial crisis that is likely to claim more big firms before it eases, former Federal Reserve chief Alan Greenspan said on Sunday. Greenspan told ABC's "This Week" show that the situation is in the process of outstripping anything he has seen.
He added that the financial contagion is still not resolved and has a way to go. Greenspan predicts that the housing-led malaise would stabilise early next year and says that the odds of a US recession have gone up in recent months.
US insurance giant American International Group (AIG) plans to unveil a restructuring plan as soon as Monday that will include selling off part of its business to raise cash and boost investors' confidence, according to the Wall Street Journal.
Another major development that is likely to change the US financial landscape, Bank of America is expected to announce the acquisition of Merrill Lynch for roughly $44bn. The boards of the two companies approved the deal Sunday evening, according to reports.
Hopes for a buyout of beleaguered Lehman Brothers faded after Bank of America and British bank Barclays, both viewed as potential white knights, pulled out of deal talks, according to reports.
Top Wall Street officials and federal regulators remained in talks in the hope of devising a plan to save Lehman and allay fears that threatened to roil US and global financial markets when trading resumes on Monday.
Meanwhile, the Federal Reserve stepped in late Sunday night to try to calm the markets by announcing that it was expanding its lending to the banking industry.
The week ahead brings quarterly results from Goldman Sachs and Morgan Stanley among others.
On the economic front, the big event of the week is the Federal Reserve policy-setting meeting on Tuesday. The central bank is expected to hold rates steady at 2%, but it could begin lowering rates by the end of the year due to the continued economic slowdown.
Gasoline prices rose overnight, climbing for the third day in a row as Hurricane Ike strengthened, according to a national survey of credit-card activity.
In the bond market, Treasury prices tumbled, raising the yield on the benchmark 10-year note to 3.72% from 3.64% late on Thursday. The dollar fell versus the euro and rose against the yen. COMEX gold for December delivery rose $19 to $764.50 an ounce.
European shares snapped a three-session losing streak on Friday on the back of a rebound for commodity stocks. The pan-European Dow Jones Stoxx 600 index rose 1.7% to 280.41 led by shares of hard-hit mineral extractors and oil companies. The French CAC-40 added 2% to 4,332.66, while the UK's FTSE 100 rose 1.8% to 5,416.70 and Germany's DAX 30 gained 0.9% to 6,234.89.
In the emerging markets, the Bovespa in Brazil gained 2.2% at 52,392 while Mexico's IPC index added 0.1% at 25,588. The RTS index in Russia jumped 3.4% to 1341 while the ISE National-30 index in Turkey was down 0.9% at 45,846.
Can the bulls bounce back?
Despite a strong start markets immediately slipped into the red on the back of weakness in the Asian markets. The slide further was boosted after a foreign brokerage said that Infosys might miss the Q2 earnings dragging all the IT stocks.
However, markets staged a come back post announcement of IIP numbers which beat the market estimates. But once again, heavy selling, mainly in the IT and realty stocks, saw the index slide below the 14k levels. Finally, the BSE benchmark Sensex plunged 323 points to close at 14,000 and the NSE Nifty index slipped 62 points to close at 4,228.
Shares of Infosys slid by over 6% to Rs1644 after media reports stated that the company's Q2 earnings might be affected by the dollar's gain versus the UK pound over the past few days. An Infosys executive was quoted as saying that it was too early to revise FY09 US GAAP earnings forecast.
The scrip touched an intra-day high of Rs1753 and a low of Rs1637 and recorded volumes of over 35,00,000 shares on the NSE. Infosys had hit a 52-week high of Rs2141 on October 10, 2007 and 52-week low of Rs1212 on January 22, 2008.
Bharti Airtel was among the few gainers in the Sensex index. The scrip was up by 0.5% after reports stated that the company launched Rs2bn venture fund to promote content and technology development. The scrip has touched an intra-day high of Rs792 and a low of Rs744.
Shares of Greenply Industries rallied by over 5% to Rs154 after media reports stated that the promoters of the company might sell 5% stake via private placement. The scrip touched an intra-day high of Rs172 and a low of Rs138.
Shares of Union Bank of India have advanced by 1.6% to Rs151 after the bank announced that it launched Wealth Management Services to its High Net worth clients at Mumbai. The bank has tied up with Edelweiss Securities Ltd- part of Edelweiss Group, The scrip touched an intra-day high of Rs154 and a low of Rs147.
Recently listed Austral Coke gained by over 6% to Rs252 on the back of huge volumes. The scrip touched an intra-day high of Rs255 and a low of Rs237 and recorded volumes of over 55,00,000 shares on NSE.
Recently listed Resurgere continued to slide lower, the stock slipped below the issue price of Rs270 down 17%. Resurgere declined by over 9% at Rs220 touching an intra-day high of Rs252 and a low of Rs220 and recorded volumes of over 19,00,000 shares on NSE.
Hydro S&S declined by over 7% to Rs42.9 on the back of profit booking. The stock had gained by over 25% in previous two trading session after the board of directors of the company announced that they would meet on September 16, 2008 to consider buyback of equity shares. The scrip touched an intra-day high of Rs48.5 and a low of Rs42 and recorded volumes of over 24,000 shares on NSE.
SAIL surged by over 3.5% to Rs140 on the back of huge volumes. The scrip has touched an intra-day high of Rs142 and a low of Rs136 and has recorded volumes of over 67,00,000 shares on NSE.
Ratnagiri Gas & Power plant at Dabhol to start generating additional 600MW by month end.(BL)
ICICI Venture and US-based PE fund Providence may jointly bid for Firstsource Solutions.(ET)
BT may sell its stake in Tech Mahindra to TCS.(Mint)
Satyam Computers could potentially downsize its workforce by 9%.(TOI)
NTT DoCoMo in advanced stage of talks to buy about 25% in Tata Teleservices.(BS)
Indian Oil Corp. indicates that it could take 2mn tonnes of the crude Cairn India plans to produce at its Barmer oil field in Rajasthan, as long as it is offered at a discount.(BL)
NMDC says it will invest Rs199bn by 2014 to raise its iron ore production and build its first steel plant.(FE)
TPG picks up 49% stake in Shriram Retail Holdings for Rs5.3bn.(BL)
NHPC plans to float its IPO in October to raise Rs17bn for ongoing expansion work.(TOI)
Bajaj Auto is considering launching a sub-brand for its low cost bikes.(Mint)
Indian Hotels Company’s voting power in Orient Express Hotels will increase if shareholders approve reclassification of shares.(BS)
International Tractors plans an IPO by year end.(ET)
Lanco Infratech in talks with European and US based engineering procurement contractors for its foray into nuclear power generation.(BL)
Reliance Infrastructure enters steel EPC business, signs deal with China Metallurgical Group Corporation.(ET)
Overseas arm of Wadia-owned Bombay Burmah Trading Corporation is raising US$200mn from international markets.(ET)
Tata Motors to take a final decision on the location of the ‘Nano’ project by September 15 and would convey this to all its ancillary suppliers.(DNA)
Government is unlikely to allow Reliance Industries to export LPG from its greenfield refinery at Jamnagar SEZ.(ET)
Arvind Ltd is investing Rs6bn in to retail and brand expansion.(Mint)
NHPC plans to enter into the proposed power exchange as a stakeholder.(FE)
Maharashtra government decides to carry out a referendum in 22 villages covered under the Reliance Industries’ SEZ in Navi Mumbai.(BS)
NM Rothschild, on its own, appears to be actively scouting for potential buyers for four divisions of Corus Group, owned by Tata Steel.(Mint)
SEBI clears the open offer from Emami group for Zandu Pharmaceutical Works.(BL)
Jindal Saw to invest Rs10bn to build new steel plant at Mundra, Gujarat.(ET)
Tata Motors’ Nano’s petrol and diesel variants to be launched in a month and a year respectively.(BS)
Power Grid Corp. to buy 26% in IL&FS power SPV.(ET)
Adani Group looking to buy palm oil plantations abroad.(BL)
GSPC may downsize IPO to Rs35bn.(BS)
BSNL to share roaming network with private telecom operators.(Mint)
Ambuja Group plans to invest Rs10bn over the next five years to develop resorts and hotels in West Bengal.(BL)
Maharashtra government approves Ispat Industries’ proposal to set up a Rs15bn captive jetty in Sindhudurg.(ET)
MindTree Consulting draws up plans for engineering services.(BS)
DLF, Gera Developers and Parsvnath plan to develop office-cum-shopping malls in Goa.(ET)
Indian Oil Corp. under-recoveries have nearly halved to Rs2.2bn a day in the first fortnight of September.(BL)
Sahara India Investment Corp. has voluntarily exited the non-banking financial business.(DNA)
Greenply Industries to set up a Rs2.5bn MDF facility in Uttarakhand.(BL)
Tata Chemicals has shown interest in buying stake in Poland’s state owned soda-ash maker.(DNA)
Cargo carriers like Blue Dart and UPS may get ground handling freedom at airports.(BS)
Orient Craft plans Rs21bn textile SEZ.(BS)
JetLite to spend Rs50mn for voluntary separation scheme to 750 employees who have been with the airline for up to one year.(BS)
DoT seeks revenue ministry’s views on auctioning 773 acres of land of VSNL (now Tata Communications) in four cities.(ET)
Bhushan Power threatens to scrap Jharkhand steel project after its surveyors were assaulted by villagers.(BS)
M&M keen on Italian scooter maker Malaguti.(DNA)
Bharti Airtel plans to offer software applications on a pay-per-use model to small and medium businesses and enterprises.(BL)
Power Exchange of India, a JV between NCDEX and NSE, to start trading in October.(BL)
Satluj Jal seeks JV with Nuclear Power Corp. for nuclear foray.(BS)
Tatas move court to block Singur contract release.(BS)
Essar Oil to raise US$5bn from four banks to fund expansion of its refinery in Gujarat.(BL)
Tata Motors’ ‘Nano’ may still roll out from Singur.(BS)
Economy Front page
Forex reserves declined by US$6.5bn in the week ended September 5 to US$288.8bn.(BL)
Union Minister for IT and Communications to seek extension of concessions to Software Technology Parks for one more year.(ET)
Sugar export subsidy to cease.(BS)
DoT ignores finance ministry suggestion to raise the reserve price for 3G spectrum to Rs25bn.(Mint)
Industrial growth touches a 5-month high of 7.1% in July.(DNA)
Petroleum Ministry is looking into a dual pricing policy for diesel that would entail charging bulk users a higher price for the subsidized fuel.(FE)
Government has cut stamp duty on P-notes and debentures.(ET)
DoT decides to allow operators to separate their revenues from 2G and 3G services respectively for calculating the annual spectrum charges.(BL)
RBI has initiated a review of the benchmarking system for pricing floating rate loans.(BS)
Ministry of Power has asked central and state public sector utilities to increase their power output by at least 10%.(BS)
Merchant mining companies seek export duty concession.(Mint)
Maharashtra fixes March 2009 deadline for running Dabhol units at full capacity.(BS)
Voting rights in private banks to equal share holding level.(FE)
Enhanced duty entitlement pass book rate for exporters is likely to continue for another six months.(ET)
Government is planning a bailout package to the tune of Rs45-50bn for all domestic carriers.(ET)
Government's revenue from indirect tax touches Rs 1.1tn by August-end, achieving over 35% of the budget estimates for the current fiscal.(FE)
NELP crude oil may attract special tax.(ET)
DoT eases roll out obligations for WiMax players.(BL)
Government to set up regulatory body to enhance Warehousing Act.(ET)