A wise person can see more from the bottom of a well than a fool can from a mountain top.
Well we’ve had enough of weakness for some time and bulls are just waiting for some excuse to lift themselves. Contrary to expectations, no buying was seen towards the end. Today, hopefully will bring in the bulls at least in select counters. With inflation dipping to 12.1% and crude oil close to breaching the key $100 per barrel, the market may turn higher after three successive days of losses.
One school of thought believes that the RBI may not jack up rates given the moderation in inflation and sliding global commodity prices. That could prove to be a bit of a plus for the Indian market. The overnight rally in the US market and positive trend in Asian markets (barring Hang Seng) could help improve the sentiment. The icing on the cake would be a better than expected IIP number.
It will be interesting to see how Reliance Industries performs after falling under the Rs2,000 mark on Thursday. Falling oil prices is being seen as negative for the company, as its refining margins may come under pressure. Companies like ONGC and Cairn could also be hit once crude slips below $100. At the same time, oil marketing companies - IOC, HPCL and BPCL - may do well. One should also keep an eye on metal stocks, as global commodity prices have come under pressure due to the global economic slowdown.
The Nifty is likely to trade within the 4200 and 4600 range. On the whole, the undertone remains sluggish amid persistent concerns over the state of the advanced economies and the gloom prevailing in the western financial sector. In the meantime, much of the action will remain stock specific, as the bulls lack conviction to take bigger bets on the market's near-term direction. Despite the slump in crude oil prices and the consequent moderation in inflation, investors remain wary of the grim global situation. As a result, any rally will be short-lived and will be checked by profit booking.
The downside will hinge on daily newsflow emanating from the global markets. Much will depend on the movement in commodities (particularly crude oil prices), and the renewed pain in the US financial sector. Things are also starting to turn sour for the EU and Japan, with these economies too now in danger of slipping into recession. May be a desperate rate cut by the Federal Reserve will yet again cheer up the global markets. Whether Bernanke & Co. oblige the markets is a big question though. The Fed policymakers are scheduled to meet next week to take a call on interest rates and review the economic conditions.
FIIs were net sellers of Rs15.07bn (provisional) in the cash segment on Thursday while the local institutions poured in Rs5.87bn. In the F&O segment, the foreign funds were net sellers of Rs19.28bn. On Wednesday, the FIIs were net sellers at Rs8.7bn in the cash segment. Mutual Funds were net buyers at Rs1.15bn on the same day.
US stocks advanced on Thursday amid growing speculation that Lehman Brothers will be sold to a larger rival amid lingering doubts over its solvency. Transportation companies rallied on lower oil prices, while banking shares staged a comeback in the last half hour of trading.
The S&P 500 added 17 points, or 1.4%, to 1,249.05. The Dow Jones Industrial Average jumped 164.79 points, or 1.5%, to 11,433.71, erasing a 170-point drop. The Nasdaq Composite Index increased 29.52 points, or 1.3%, to 2,258.22.
Trading volume has been improving of late and that it will be important to see if that continues, as higher volumes are seen as a sign of greater conviction among investors. Market breadth was negative. About three stocks rose for every two that fell on the New York Stock Exchange.
The S&P 500 flirted with its 2008 lows and then managed to bounce back. The S &P 500 rebounded from a 1.7% fall and financial shares reversed a tumble of 4.2% to end the day 1.5% higher.
Washington Mutual and Wells Fargo led the gains in banks as prospects of a Lehman takeover eased concern of more bank failures.
In early trading, the S&P 500 fell below its lowest closing level since 2005 as Lehman slumped as much as 48% and dragged down all 87 financial companies in the index on worries about their financial health.
Meanwhile, a steeper-than-expected jump in the US trade deficit and a weak jobless claims report added to recession fears.
While bank shares remained under pressure in the afternoon, the selloff in oil prices gave a lift to companies that benefit directly from lower fuel prices, including transportation stocks. Consumer stocks benefited too, on lower inflation expectations.
But the market spiked heading into the close after the Wall Street Journal Web site reported that Lehman is actively shopping for a buyer, including Bank of America. The report boosted a number of bank stocks, but failed to lift Lehman, which slumped almost 42% on the session.
After the close, the Washington Post reported that the Treasury Dept. and the Fed are putting together a sale of Lehman through a group of private firms, with a deal expected to be announced this weekend. The US government and the Fed had also teamed up to engineer the rescue of Bear Stearns in March.
Washington Mutual sought to reassure investors that its capital position and credit outlook were stable, amid escalating worries. Following the announcement, ratings agency Fitch downgraded the company's debt rating.
Light, sweet crude for October fell $1.71 to settle at $100.87 a barrel on the Nymex, its lowest close since March 24. Oil prices have fallen nearly 32% since their peak at $147.27 on July 11. Gasoline prices rose overnight, climbing for the second day in a row as Hurricane Ike strengthened.
In the bond market, Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.64% from 3.63% late on Thursday.
In the currencies market, the euro broke through its psychologically important level of $1.40. The dollar is also trading near its strongest level against the British pound in more than two years. The dollar rose to its highest level in nearly a year against the euro, even as the US trade deficit for July soared. Falling oil prices helped support the greenback. The US currency is up 13% since its bottom against the euro of $1.6038 on July 15.
Gold futures, suffering from the longest losing streak in eight years, dropped below $750 an ounce for the first time in nearly a year - and analysts say the price of the precious metal may have finally bottomed. Gold for December delivery fell $17, or 2.2%, to close at $745.50 an ounce on the Comex division of the New York Mercantile Exchange, the first time the metal closed below $750 since last October. After market closed, it moved higher in electronic trading.
European shares declined for the third straight day dragged down by banks. The pan-European Dow Jones Stoxx 600 closed slightly lower, falling 1.69 points, or 0.6% to 275.66. For the year, the index has dropped more than 24%. Germany's DAX 30 fell 31.42 points, or 0.5%, to 6,178.90, while the French CAC-40 dropped 34.59 points, or 0.8%, to 4,249.07 and the UK's FTSE 100 lost 47.80 points, or 0.9%, to 5,318.40.
In the emerging markets, Brazil's Bovespa rallied 3.3% to 51,270, while Mexico's IPC index fell 0.3% to 25,552. The RTS index in Russia was down 2.7% at 1298 and the ISE National-30 index in Turkey was down 5.1% at 46,269
Macro data, global cues to weigh
Markets ended with a deeper crack on Thursday as the NSE Nifty index close below the 4,300 mark. It was the third straight trading session where bears reigned supreme.
Along with weak global cues data released on Wednesday showed that core sector growth for July slipped to 4.3% from 7.2% last year which dampened the sentiment. In addition, traders and investors opted to stay light ahead of the announcement of Inflation and IIP data.
Among the 30 components of the Sensex 28 stocks ended in the red and only 2 stocks ended in positive terrain with only Tata Motors and Ranbaxy closing in green. Index heavyweights like Reliance Industries, Bharti Airtel and ONGC were among the major laggards.
Finally, the BSE benchmark Sensex closed at 14,324 plunging 338 points and the BSE Nifty index slipped 109 points to close at 4,290.
Market breath was weak, 1,786 declined against 854 advances, while, 74 stocks remained unchanged.
Shares of Reliance Industries, India’s most valuable company sharply fell below Rs2000 levels on back of sustain selling. The scrip ended lower by 4% at Rs1997, hitting an intra-day high of Rs2071 and an intra-day low of Rs1983. Reliance Industries ended below Rs2,000 levels for the first time since July 16.
Reliance Industries had hit 52week high of Rs3,298 on January 15 2008 and a 52-week low of Rs1,920 July 16 2008.
Shares of Apollo Tyres ended higher by 1.3% to Rs38 reports stated HDFC Standard life Insurance Co Ltd bought an additional 0.6% stake, increasing its holding to ~5%.
~20.01 lakh and 10.03 lakh shares of the company changed hands at Rs38 and Rs38.5 a piece respectively. The scrip touched an intra-day high of Rs39.9 and a low of Rs37.2 and recorded volumes of over 62,00,000 shares on BSE.
Shares of Mphasis closed at Rs249 gaining 1.5% after 2.3% of equity changed hands in two block trades. ~3.41mn and 1.29mn shares of the company were traded at Rs250 per share. The scrip touched an intra-day high of Rs253 and a low of Rs244 and recorded volumes of over 55,00,000 shares on BSE.
Asahi India Glass surged by over 8% to Rs58 after ~1.7% of equity changed hands in a single trade on BSE. ~2.7mn shares were sold at Rs55.45 per share. The scrip touched an intra-day high of Rs59.5 and a low of Rs52 and recorded volumes of over 32,00,000 shares on BSE.
Raj Television rallied by over 19% to Rs116 as the company is reportedly planning to enter the print business and is open to acquiring existing regional newspapers.
The company is looking to raise up to Rs1bn from PE firms, and would offer as much as 10% stake in the company, added reports. The scrip touched an intra-day high of Rs117 and a low of Rs100 and recorded volumes of over 6,00,000 shares on BSE.
Shares of Glodyne Technoserve have rallied by over 15% to Rs651. The scrip touched an intra-day high of Rs660 and a low of Rs565 and recorded volumes of over 82,000 shares on BSE.
Shares of IFCI ended trading higher by 1.4% to Rs48.1 on reports that the board of director of the company would meet on September 19, 2008 to initiate the process of introducing a strategic investors in to the company. There were also reports stating that IFCI has internally fixed Rs67 as the base price for all discussion for stake. The scrip touched an intra-day high of Rs48.5 and a low of Rs46 and recorded volumes of over 15,00,00,000 shares on BSE.
NTPC to set-up a power project in Bihar in JV with the state body (ET)
Rocksource to pick-up 10% stake in ONGC’s Cauvery deepwater block (ET)
Cairn India to invest US$110mn in Sri Lanka through a subsidiary (BS)
Essar Oil may raise US$5bn to fund expansion of its refineries in western India (BS)
Tata Tele, Datacom, Unitech and Swan gets GSM spectrum for offering services in Mumbai (ET)
Hindustan Zinc reduces lead prices by Rs3,400/ton while keeps zinc prices unchanged (BL)
NALCO lowers aluminium prices by 3%, a fourth reduction in two months (BL)
Infosys to participate in bids for public sector deals (ET)
Reliance Power to tap export credit route for financing its planned foray in nuclear power generation (ET)
GMR Energy plans to invest Rs100bn for setting-up a 2.000-3,000MW nuclear power plant in next 5-7 years (BS)
HPCL and Renuka Sugars to set-up an integrated sugar mill in Maharashtra (BL)
Bharti Airtel launches a Rs2bn venture fund to promote content and technology development (ET)
Wockhardt CFO held guilty for insider trading (BS)
LIC renewed its group insurance policy for Infosys employees with a sum assured of Rs240bn (ET)
GMR Energy is looking at acquiring coal mines in Indonesia and Africa to feed its plants in India (DNA)
Wipro opens second centre in Uttarakhand (BL)
Satyam Computers extends its strategic alliance with MSC.Software Corporation (BL)
Suzlon Energy’s overseas arm secures an order from Romania for supplying turbines (BL)
India Hotels launches The Gateway Hotels chain (BS)
Glenmark files its first individual molecule for Phase-I trials with US FDA (ET)
The promoters of Gujarat NRE Coke plans to raise stake in the company to 50% in three years from existing 40.7% (BL)
Simplex Infra expect 50% revenue growth in FY09 from projects in India & abroad (DNA)
Omaxe in talks for diluting 10% in NAFHIL project (DNA)
Indian Hotels has hiked ARR by 8-10% with effect from September 1 (DNA)
Parsvnath to invest Rs1.2bn for setting up a mall at Haryana (DNA)
Orchid Chemicals plans to sell stake in its research unit in 2009 (BL)
Era Infra bags Rs2.09bn contract from Naya Raipur Development Authority (DNA)
Dalmia Cements has started acquiring land in Himachal Pradesh for setting-up a cement plant (ET)
Ramco Systems cuts rights issue size to Rs1.31bn (BL)
Punjab Chemicals is scouting for acquisitions in the US and Europe (BL)
Economy Front page
Inflation dips for third week in a row to 12.1% for the week ended August 30th (ET)
Rupee falls to Rs45.50 on dollar demand (ET)
Government revises 11th five-year plan power capacity addition target to 90GW (ET)
CDMA operators will get 3G spectrum in the 800 MHz frequency through auction (ET)
RBI is considering easing participatory notes norms (BS)
Union Cabinet has approved a policy that aims to achieve 20% bio-fuel blending in all the auto fuels used in the country by 2017 (DNA)
Government relaxes norms for FM radio companies with respect to business restructuring (BL)
Sugar mills threatens to halt ethanol production after oil marketing companies denied a hike in ethanol procurement price (BS)
Hotel industry has hiked tariffs by 8-15% from September 1st (BL)
GSM client base rises by 6.3mn subscribers in August 2008 (BS)
Credit growth may slow down to 20%, as per S&P (BS)
Listed companies with low public float may have to hike public shareholding to minimum threshold level of 25% (ET)
Air passenger traffic falls 18% in August (ET)
India PC market record shipments of 2.08mn units in Q2, a growth of 8.1% yoy (ET)
IT end-user spending in India is expected to record a CAGR of 14.8% over 2007-12 and reach US$110bn, as per Gartner (ET)
National Mineral Policy (NMT) is set to delay as the Ministry of Mines seeks state’s views on the draft amendments to the MMDR Act (ET)
Government is planning to allow PIOs to buy property in India without mandatory RBI approval, Visa (ET)
The tussle between mining firms and steel producers over raw material pricing may end soon (ET)