I believe in the 'Big Bang' theory. God spoke and 'BANG', it was.
Scientists are set to smash protons together in a 27-kilometre tunnel deep underground. They are hoping to detecting 'dark matter' and the mysterious Higgs boson what is otherwise known as 'God particle.' These experiments are designed to re-create what happened immediately after the Big Bang.
For our markets, even the God's seem to be away. Bulls banged the bears on Monday after India pulled off a historic triumph at the NSG and the US announced bailout of Fannie Mae and Freddie Mac. But their joy, as expected seemed short-lived as the euphoria lost steam on Tuesday and stock benchmarks across the world lost ground in the absence of fresh catalysts.
The market is currently at the mercy of daily triggers, local or global. On days when there is no market moving news, the main indices tend to turn choppy and rangebound. Ecstasy turns into agony, as fundamentals (which are still fragile across world equity markets) resurface to haunt the bulls.
Another trend that is visible is that the large caps are hogging the limelight. The small and mid-cap shares seem to have gone out of favour. This trend is likely to continue, as the frontline stocks have historically led any major change in market trend. Stick to the big stocks in the current uncertain times. Be very careful while making any investments in small or mid-caps.
Today, we see another weak opening. US stocks slumped overnight. Asian markets too are down 1-2%. Any recovery in global trend could swing the mood in favour of the bulls.
Crude oil is hovering around $104 per barrel mark. OPEC members have agreed to roll back production quotas to September 2007 level of 28.8mn barrels per day, a cut of more than 500,000 barrels a day in what the oil producers' cartel calls "overproduction." An Associated Press (AP) report cited OPEC president Chakib Khelil as saying that the quota meant that member countries have agreed cut back production by 530,000 bpd.
Meanwhile, the new RBI governor is still bullish on the India growth story, which he says remains in track. Duvvuri Subbarao sees FY09 GDP growing at 8%. On inflation, he is less hawkish, but adds that it is too premature to say if inflation has peaked out.
On the rupee, Subbarao says it cannot defy underlying economic fundamentals. Expect the local currency to weaken, as deficits are on the rise, the dollar is strengthening and FIIs remain negative on Indian stocks. A moderation in inflation due to falling commodity prices could lead to some improvement in the macro outlook.
Indian Hotels could witness some action, as it is set to make a strategic announcement on Thursday. United Breweries will declare interim dividend today.
US stocks ended sharply lower on Tuesday, as falling oil prices revived worries over economic downturn and amid heightened anxieties over the financial condition of Wall Street major Lehman Brothers.
Rekindling concerns about the impact of the credit crisis on the world's largest economy, shares of Lehman Brothers plunged 44.6% after hopes of a capital injection from Korea Development Bank were dashed.
After chalking up its largest one-day gain in a month, the Dow Jones Industrial Average nearly wiped out the prior day's gains, dropping 280.01 points, or 2.4%, to end at 11,230.73, with 24 of its 30 components finishing in the red. Financials weighed heavily on the blue-chip barometer. Concerns about Lehman Brothers' ability to raise capital rattled financial stocks.
The S &P 500 Index slumped 3.4%, its biggest drop since February 2007, a day after the US government's bailout of Fannie Mae and Freddie Mac sparked the best rally in a month. The S&P 500 decreased 43.28 points to 1,224.51. Energy and financials gave up the most ground among the S&P's 10 industry groups, with the former off 8.3% and the latter down 6.1%.
The Nasdaq Composite Index sank 59.95 points, or 2.6%, to 2,209.81. Small caps were hit too, with the Russell 2000 index falling 3.5%. The day's decline was in reaction to the previous day's huge rally, when the Dow had jumped 290 points.
Market breadth was negative. About 10 stocks dropped for each that rose on the New York Stock Exchange.
Lehman Brothers said it will announce its Q3 results a week ahead of schedule on Wednesday before the US market opens. It will also key strategic initiatives for the firm. Shares of Lehman Brothers, which had been scheduled to report results on Sept. 18, fell about 45% on Tuesday, to $7.79. It was the company's biggest one-day percentage decline ever, dragging the share price down 85% from a year ago.
The sell-off in Lehman Brothers shares accelerated on reports that talks aimed at securing an investment from government-owned Korea Development Bank have fallen through without reaching an agreement. Ratings agency S &P put Lehman's debt on CreditWatch Negative. The company is expected to post a loss of between $2 billion and $4 billion.
A weak reading on pending home sales in July demonstrated the persistent problems in the housing market, while the battering of AIG and Lehman Brothers shares reminded investors that the credit crisis is far from over.
Meanwhile, regional banks and insurers tumbled in the wake of the government takeover of the two mortgage giants. Rating agency Standard & Poor's (S&P) said that Fannie and Freddie will be removed from the S&P 500 index after the close of trade on Wednesday. The news is likely to send these stocks lower, as managers of index funds need to dump the stocks and buy their replacements.
Also after the close, FedEx lifted its fiscal first-quarter earnings forecast, saying it now expects to earn $1.23 per share versus current expectations for a profit of 95 cents. Shares gained 5% after the close.
US light crude oil for October delivery slid $3.08 to settle at $103.26 a barrel on the New York Mercantile Exchange, the lowest close since April 1. Prices have fallen more than $40 a barrel from a record high of $147.20 in July.
Gas prices declined for a ninth straight day, according to a national survey of credit-card activity.
In the bond market, Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.59% from 3.67% late on Monday. The dollar slumped versus the yen and was barely lower versus the euro. COMEX gold for December delivery fell $10.50 to $792 an ounce.
Apple announced a new version of iTunes and new models of its iPods. But shares tumbled on the announcement. Dell founder Michael Dell bought $100mn of Dell shares last week, it was announced after the close of trade on Monday. Shares of the PC-maker ended lower, giving up morning gains.
McDonald's said that August sales at its stores open a year or more rose 8.5% in the month, topping forecasts. Shares gained 1.6%.
Across the Atlantic, European stocks couldn't hold early gains, with a big decline in the commodity shares pacing a downturn. The pan-European Dow Jones Stoxx 600 index ended 0.6% lower to 279.59. Germany's DAX 30 fell 0.5% to 6,233.41, while the French CAC-40 dropped 1.1% to 4,293.94 and the UK's FTSE 100 ended 0.6% lower to 5,415.60.
Bulls may turn to global cues
Markets had a weak start mirroring losses in the Asian markets. The banking, realty and capital goods stocks were among the major laggards in the early trades. However, after hitting an intra-day low of 14,714 the BSE benchmark index gradually gained momentum led by the oil & gas, IT and select telecom stocks.
As the day progressed, a sharp recovery in European markets and a sudden slide in crude oil prices lifted the sentiments. The BSE benchmark Sensex recovered over 280 points and the NSE Nifty index recouped 50 points from their respective lows.
Finally, the BSE benchmark Sensex closed at 14,900 losing 44 points and the NSE Nifty index gained 13 points to close at 4,468.
Shares of Sterlite Industries fell over 7.5% to Rs575 as the demerger was perceived to be negative for the company. The aluminium and the power assets which were seen as major driver for future earnings growth have been hived off to its aluminium subsidiary Madras Aluminium Co. Ltd. (MALCO). Also, the share exchange ratio with its other subsidiary THL KCM is higher than expected.
However, MALCO on the other hand surged by over 17% to end at Rs214. The stock recovered smartly after falling initially post the announcement of the restructuring. Click here to read more...
Meanwhile, oil marketing stocks were in momentum after crude oil prices fell amid market speculation that OPEC would leave production unchanged at its meeting in Vienna today. Prices also declined amid expectations that Hurricane Ike will lose its strength as it hurtles towards the US gulf coast. A strong dollar continued to have a sobering effect on oil prices.
Crude oil for October delivery fell as much as US$1.57, or 1.5%, to US$104.77/bbl in electronic trading on the New York Mercantile Exchange and traded at US$104.51. Oil is down 29% from the record US$147.27 reached on July 11. HPCL, BPCL and IOC were among the major gainers.
Shares of RPower recovered from its day’s low gaining by 0.5% to close at Rs169.4 as the NSE announced that Reliance Power would be replacing Dr Reddy's Laboratories in the S&P CNX Nifty index with effect from September 10. Similar changes will be made in the CNX 100 index as well. The scrip touched an intra-day high of Rs171 and a low of Rs164 and recorded volumes of over 58,00,000 shares on BSE.
Shares of Tech Mahindra surged by over 3% to Rs796 after reports stated that the company secured system integration 5 year deal worth US$250mn contract from existing US client. The scrip touched an intra-day high of Rs809 and a low of Rs765 and recorded volumes of over 1,000,000 shares on NSE.
Shares of Shreyas Shipping surged by over 7.5% to Rs54.7 after the company announced that it sold its vessel 'M V OEL India' for consideration of US$28.5mn. The scrip touched an intra-day high of Rs56 and a low of Rs50 and recorded volumes of over 44,000 shares on NSE.
Shares of Stone India further gained ground and was locked at 10% upper circuit to Rs64.9 after the company announced that it was eyeing an acquisition in Europe. The target company manufactures products for the railways, stated reports. The scrip touched an intra-day high of Rs64.9 and a low of Rs62 and recorded volumes of over 1,00,000 shares on NSE.
Blue Bird was up 2.5% to Rs35.9 after the company received an order worth US$4.40mn for export of notebooks to USA. The Company expects to complete these orders by the end of the current financial year. The scrip touched an intra-day high of Rs37.9 and a low of Rs35.5 and recorded volumes of over 3,00,000 shares on NSE.
Reliance Industries to set up wholly owned subsidiary in London and Singapore to sell petroleum product abroad. (BS)
Telenor, a Norway based Telecom firm is likely to pick up 26% stake in Unitech’s Telecom arm for US$500mn. (ET)
Vedenta revamps its corporate structure by consolidating its copper, zinc, aluminium and iron ore under separate verticals with Sterlite Industries operating copper and zinc businesses. (ET)
Malco to be renamed Sterlite Aluminium, to be listed on NYSE exchange. (ET)
IT majors like Infosys, Satyam, HCL Tech and TCS bids for Rs5bn deploying ERP solutions for BSNL. (BL)
Vedanta plans to invest US$9.8bn to increase its aluminium capacity to 2.6mn tons by 2012. (BL)
Unitech and Datacom has been allotted spectrum in four circles including Mumbai, Maharashtra, Punjab and Uttar Pradesh (East). (BS)
BHEL wins Rs22bn turnkey project for setting up a combined cycle power plant in Tripura. (ET)
Tech Mahindra bags two multi-year contracts worth US$250mn. (BS)
L&T, NPCIL enters into a JV for making forging equipments for nuclear power plants. (DNA)
Satyam Computer has given pink slips to 150 experienced employees at the Hyderabad centre. (FE)
Japan’s NTT DoCoMo and France Telecom short listed as a strategic partner in Tata Tele Services. (ET)
Oil India in talks with Coal India to set-up a US$1.5bn plant to extract oil from coal in Assam. (ET)
3i-Infotech has bagged large contract from various state government to set up 12,000 kiosks across the country. (ET)
Mauritius Investment Company buys 17% stake in BPL Mobile. (ET)
IOC raises bonds worth Rs15bn. (BS)
Punj Lloyd gets order from Singapore worth Rs1.67bn. (BS)
GlaxoSmithKline files lawsuit against Lupin for infringing a patent for AIDS drugs Combivir in US. (BS)
Dolphin Offshore in advanced talks with Brunei based company to form a JV and acquire two offshore support vessels. (DNA)
HCL Tech in talks with banks to raise US$1bn for future acquisition. (BS)
GVK Power to buy reactors and equipment from GE and Westinghouse Electric Company. (BS)
GVK Power plans to sell 20% of its electricity business to fund expansion. (BS)
Swan Telecom has finalized a deal to offload 51% equity stake to Etisalat. (FE)
Hero Honda forms a JV with OMVL, an Italian manufacturing company to make an alternate fuel kits in India. (DNA)
BEML bags order worth Rs310mn from Indian Railways. (DNA)
KEC International expects order from nuclear power plants to double its transmission lines business in next two years. (DNA)
Economy Front page
DoT plans to increase the spectrum usage charges for all Telecom companies planning to offer 3G services. (ET)
Government has frozen its plan to amend export duty structure of steel product. (ET)
Steel Minister is rooting for a hike in export duty on iron-ore to 20% from current 15%. (ET)
Gold imports in August rose 47% MoM to 100 tons. (BL)
Maharashtra Government could alter its sales tax incentives for the wind energy projects in the near future. (BL)