Human science is an uncertain guess.
With inflation remaining unchanged at 12.14% (lower than expectations), and most players focussed on the upcoming results, the market may remain choppy and rangebound. Developments in global markets, especially in the US, will continue to drive the sentiment here. The anxiety over the fate of the Bush government's major rescue program for the troubled financial sector may keep a lid on the progress of the key indices. One should lock in whatever gains one gets in these uncertain environment.
Another major cause of concern is the continuous selling by the FIIs, who net sold more than Rs10bn worth of Indian shares on Thursday. This trend may not change much over the next few weeks and perhaps months, unless the global risk aversion subsides. Some relaxation in the investment regime for FIIs by SEBI could perhaps do the trick for the Indian market.
Today, we expect the market to open a tad higher given the bullish close on Wall Street, which welcomed the in-principal agreement struck by the lawmakers on the massive package to rescue the beleaguered US financial system. However, the Asian markets don't seem to be that excited by the prospect of a final green light to the Bush regime's $700bn bailout plan, possibly over the weekend. Most Asian stock benchmarks are in the red this morning, falling in a broad range of 0.5-2.5%. Shares in Europe, though saw a strong rally on Thursday, with the key national indices gaining more than 2% each. Most emerging markets too ended sharply higher.
Meanwhile, the derivative side of the market shows that the bulls are likely to hold an upper hand in the near term. Firstly, the rollover of September Nifty futures was lower than the last three months' average. This shows that the bears have let their shorts expire instead of carrying them over to the next series. At the same time, the October Nifty futures have witnessed quite a strong build up, and the premium on these contracts has also increased steadily. This indicates that most of the buildup was on the long side. Trend on the options front signals a range of 4100-4300 on the Nifty with a positive bias.
Coming back to Wall Street, stocks surged on reports that US lawmakers were close to an agreement on the extraordinary rescue package for the battered financial sector, helping offset grim economic data, including a slump in new-home sales.
The US market remains hopeful that something will come out sooner rather than later. The perception is that White House is close to getting the plan passed and that is definitely a short-term positive for the market.
Some Wall Street analysts say US stocks will probably see a bigger advance after a deal is signed, sealed, delivered, but any reaction is likely to be short-lived, as has been the market's recent history.
Once the euphoria is over Wall Street will have to come back to the harsh reality of slowing global and domestic economic growth and sluggish corporate earnings.
The Dow Jones Industrial Average jumped 197 points or 1.8% to end at 11,022. It was up as much as 304 points earlier in the day. The Standard & Poor's 500 index gained 23 points or 2% to close at 1,209. The Nasdaq Composite climbed 31 points or 1.4% at 2,188.
Dow gainers also included General Electric (GE), up 4.4%, after the company cut its earnings view for the year and halted a stock buyback, citing its financials business and the need to maintain a AAA credit rating.
Key Congressional leaders said they have come up with a bipartisan agreement in principle on a $700bn plan to let the Treasury buy bad mortgage assets from banks as a means of getting them to start lending again.
The deal would include many of the provisions lawmakers had been pushing for over the last few days, including help for homeowners, a limit to executive pay packages for participating companies and oversight of Treasury actions.
Yet, credit markets showed little reaction, with short-term borrowing rates spiking as banks clung to cash. The dollar fell versus other major currencies and oil and gold prices fell.
In the day's key economic reports, new home sales fell to a 17-year low, weekly jobless claims hit a seven-year high and durable goods orders showed a big drop.
The three-month Treasury bill, seen as the safest place to park money in the short term, rose to 0.75% from 0.35% earlier in the session following news that the rescue plan is progressing. Last week, the three-month bill fell to a 68-year low around 0% as panic gripped financial markets.
Longer-term treasury prices also fell Thursday, raising the yield on the benchmark 10-year note to 3.85% from 3.80% late on Wednesday.
US light crude oil for November delivery rose $2.29 to settle at $108.02 a barrel on the New York Mercantile Exchange after tumbling in the morning.
Oil prices had plummeted over $55 after peaking at $147.27 a barrel on July 11, as investors bet that sluggish global growth will eat into oil demand. But prices have soared in the last few weeks as the financial crisis has intensified and investors sought to put their money into hard assets.
COMEX gold for December delivery fell $13 to settle at $882 an ounce. In currency trading, the dollar fell against the euro and the yen. Gasoline prices fell for the eighth day in a row, according to a nationwide survey of credit card activity.
European shares rose in a volatile session. The pan-European Dow Jones Stoxx 600 index rose 2% to 271.01. The French CAC-40 index advanced 2.7% to 4,226.81, while Germany's DAX 30 traded up 2% at 6,173.03, and the UK's FTSE 100 gained 2.2% at 5,197.02.
Among the emerging markets, the Russian RTS index fell 0.8% to 1,304.99 while the Bovespa in Brazil surged nearly 4% to 51,828. The IPC index in Mexico climbed 2.8% to 25,645 and the ISE National 30 index in Turkey shot up by 4.4% to 45,855.
Market to remain sideways
Markets which started off the day with a slightly positive bias, were unable to hold on to their gains on the back of selling witnessed in the IT, realty and power stocks. However, key indices managed to stage a comeback as buying was witnessed at lower levels. Finally, The BSE benchmark Sensex declined 152 points to close at 13,540 and the NSE Nifty index fell 50 points to close at 4,110.
Among the 30 components of the Sensex, 23 stocks ended in the red and only 7 stocks ended with positive bias. Reliance Industries, Bharti Airtel, ITC and Infosys were among the major laggards. Bucking the negative trend were, HDFC Bank, L&T, ONGC and NTPC.
Shares of Tata Steel ended flat at Rs485. In the early trades ~1 crore equity shares of the company changed hands at an average price of Rs487 per shares on the BSE. The scrip touched an intra-day high of Rs492 and a low of Rs480 and recorded volumes of over 1,00,00,000 shares on BSE.
Shares of Opto Circuits slipped 1.1% to Rs264. According to reports the company’s wholly owned subsidiary Eurocor GmbH has received registration for its drug eluting balloon Dior in India. The scrip touched an intra-day high of Rs273 and a low of Rs261 and recorded volumes of over 95,000 shares on BSE.
Suzlon Energy declined by 7% to Rs182. The company announced that the board of directors would meet on September 27, to consider the proposal to undertake a rights issue of its equity shares to an extent of Rs18bn. The scrip touched an intra-day high of Rs201 and a low of Rs181 and recorded volumes of over 48,00,000 shares on BSE.
Balaji Telefilms slipped by 3% to Rs142. According to reports, INX Media Pvt. might sell significant stake in its flagship regional general entertainment channel 9X to Balaji. The scrip touched an intra-day high of Rs154 and a low of Rs140 and recorded volumes of over 1,00,000 shares on BSE.
ONGC gained by 1% to Rs1071 after the company announced that it was looking for acquisition in Latin America, West Africa and former Soviet Union countries. The scrip touched an intra-day high of Rs1082 and a low of Rs1034 and recorded volumes of over 3,00,000 shares on BSE.
Market may remain under pressure and would turn sideways in the coming days. Given the market conditions, do not go overboard at such signs. Fresh, sustained buying is needed to push the market further near earlier highs.
Tata Motors to sell stake in six arms (ET)
Unitech secures spectrum in Gujarat and UP (ET)
ONGC may enter into JV with foreign strategic partners for three deepwater blocks within a month (BL)
Maruti in mulling CNG variants for its offerings in the compact car segments (BL)
BHEL is seeking EoIs from transmission equipment firms for an equity JV (DNA)
ONGC looking at acquiring oil and gas assets in Latin America and West Africa (DNA)
Dr Reddy’s forays into inhaler segment (ET)
The Government not to raise prices of gas produced by ONGC and OIL (ET)
PFC and IDBI may arrange Rs130bn loan syndication for the Krishnapatnam UMPP (ET)
Hindustan Zinc cuts lead prices by Rs500/tonne while keeps zinc prices unchanged (BL)
NTPC and Inland Waters enters into MoU for exploring possibility of transporting imported coal (DNA)
NMDC and Steel Ministry at loggerheads over iron ore exports duty; company seeks abolition of the 15% ad valorem levy (DNA)
Wockhardt to open seven hi-tech hospitals across the country (BS)
Indiabulls Financials rejigs structure of life insurance JV (ET)
Glenmark gets US FDA approval to market anti-inflammatory drug (ET)
Aurobindo Pharma gets US FDA nod for generic drug (BS)
Edelweiss, Oriental Insurance and AIMC enters into three-way MoU for providing motor insurance to truckers at 25% discount (ET)
Shyam Telelink to get a pan-India license to roll out telecom services from September 30th (ET)
Man Industries secures order worth Rs11bn for spirally-welded pipes (DNA)
Garware Offshore plans to purchase two specialized PSVs for US$150mn by FY09-end (DNA)
UCO Bank to raise Rs5-6bn through FPO (FE)
Suven Lifesciences gets DCGI nod for Phase I trials of Suvn-502 (ET)
REC plans to raise US$250mn via ECB (DNA)
Adlabs in talks with theatres for cinema distribution via cable (FE)
Arvind Mills expects 30-35% revenues from Megamart (BS)
Info Edge has invested Rs200mn for 49% equity stake in eTechAces Marketing and Consulting Pvt Ltd (FE)
Religare AEGON secures SEBI approval to launch mutual fund business (BL)
Binani Cement plans to raise prices by Rs3-5/bag of 50kg (DNA)
Staff of Century Textiles refuse to accept company’s pre-retirement scheme (ET)
Saksoft plans to acquire a US-based software testing company (BL)
Economic Front Page
Directorate of Advertising and Visual Publicity (DAVP) has increased the advertisement tariff by 24% (DNA)
Cement companies plan to cut dealer margins by as high as 50% due to rising input costs (BS)
Railways to levy surcharge of 5-7% on transportation of all products (ET)
DoT has decided to hold 3G and WiMax auctions simultaneously (BL)
Rice output estimated higher at 83.25mt in FY09 (BL)
Fertiliser subsidy bill soars to Rs1,250bn from budgeted estimate of Rs310bn (DNA)