There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction – John F Kennedy.
The bulls seem to have second thoughts about the success of the series of actions aimed at combating the credit crisis and restoring confidence in the banking system. Comfortable inaction may be key to market participants for the time being as things continue to remain uncertain. The gains in recent days causes worry of a sudden slide again. Our market could not hold on to the morning's gains, though the key indices did manage a modest rally after Monday's stupendous advance. A similar trend played out on Wall Street and this morning, most Asian markets too are in the red. The only exception is the European markets, which were up 2-3%. Russian stocks surged by nearly 10% after several days of vicious declines. Shares in emerging markets like Brazil, Mexico and Turkey too managed to build on Monday's rally. However, stock market in Iceland was not so lucky as it crashed by an unprecedented 76% after a three-session halt in trading. US stock futures were pointing to another weak opening, though things may change by the time the opening bell rings on Wall Street later today.
Coming to our market's outlook today, we expect a cautious to flat opening given the reversals in global markets and skepticism over the string of bailout plans. We also have to factor in the substantial weakness in the domestic economic fundamentals and a slowdown in the earnings growth momentum. Also, experts are not sure whether world stock markets hit a bottom last week, and if the global economy can avert a recession. Nouriel Roubini, the professor who predicted the financial crisis in 2006, says that the US will suffer its worst recession in 40 years, driving the stock market further down. Former Fed chairman Paul Volker says the US is already in recession. Singapore slipped into one last week. Europe and Japan are also staring at one notwithstanding the bank bailout plans. The latest version of the US government's rescue package for banks may also not lead to a quick turnaround in its economy.
Stay cautious and not get carried away by any sort of a rally like on Monday. Moreover, do not get lost in the maze of ‘expert views’ and daily movements in the markets. Stick to basics and take your call based on your own risk appetite, long-term goals and of course purchasing power. To put it simply, if you have the money and the time to wait, go ahead and purchase at lower levels.
Given that there is still considerable amount of uncertainty, traders who have been turned into investors…. and investors who have been turned into traders, should lock in gains at higher levels, as the upside appears to be capped. In case one cannot resist the temptations of buying, stick to the large caps as they are most likely to lead any turnaround. The small and mid-caps, though compelling are just not worth the risk.
FIIs were net buyers of Rs8.98bn (provisional) in the cash segment on Tuesday while the local institutions pulled out Rs2.5bn. In the F&O segment, the foreign funds were net buyers at Rs17.47bn. On Monday, FIIs were net sellers of Rs8.42bn in the cash segment, taking their total outflows this year to more than $10.8bn.
Key Results Today: CMC, CONCOR, Electrosteel Castings, HCL Tech, ICSA, Kavveri Telecom, LG Balakrishnan, L&T, Sanwaria Agro and TTK Prestige.
US stocks failed to extend their biggest rally since the 1930s, with the main indices ending in the red on Tuesday, led by the technology space. Poor outlook for earnings growth offset the euphoria over the US$2 trillion global push to shore up the battered banking system.
The US government's plan to spend US$250bn and pick up stakes in banks failed to enthuse investors, who continue to fret about the strength of the world's biggest economy. Shares of consumer-discretionary and technology companies were among the worst hit.
Credit markets eased a bit, with a key overnight bank lending rate falling. Treasury prices slumped, raising the corresponding yields. The dollar fell against the euro and the yen. Oil, gold and gasoline prices eased.
The Dow Jones Industrial Average lost 76 points, after having fallen as much as 302 points in the afternoon and having risen as much as 406 points in the morning. The decline was equal to 0.8%.
The Standard & Poor's 500 index lost 0.5% after having been on both sides of unchanged throughout the session.
The Nasdaq Composite tumbled 3.5%, with some of its large technology shares slumping after the previous session's advance. The Nasdaq had been higher in the morning and lower in the afternoon.
The S&P 500 Index slipped 5.34 points to 998.01 after gaining 12% on Monday. The Dow decreased 76.62 points to 9,310.99 after a 936-point rally on Monday. The measure swung more than 700 points from its low to its high today. The Nasdaq declined 65.24 points to 1,779.01.
After the close, Intel reported higher quarterly earnings that edged Wall Street estimates on higher revenue that was short of forecasts. The chipmaker also reported a bigger-than-expected rise in gross margins. Shares gained 5.5% in extended-hours trading.
US stocks rallied in the morning as the US government unveiled the details of its bank bailout plan. But the early advance fizzled out as investors showed some caution after Monday's huge rally.
The Dow rallied 936 points on Monday - its best one-day point gain ever and best day on a percentage basis since 1933 - on hopes that the worst of the financial crisis is over.
Investors welcomed more specifics on the US$700bn bank bailout plan as well as a series of global initiatives aimed at loosening up credit. The S&P 500 rose 104 points, its best single-day point gain ever. The Nasdaq's jumped nearly 195 points, its 10th best ever.
In the short term, market experts will be looking for signs as to whether last week's lows marked a bottom for the bear phase. The US stock market is not out of the woods yet, according to some. Economic reports are likely to remain weak and third-quarter results will reflect that.
The next few weeks of trading will tell if indeed Wall Street and global markets have bottomed out. Some analysts expect several sessions of flat to modestly lower trading and a few good days in between.
Dow component Johnson & Johnson reported quarterly earnings that rallied from a year earlier and topped estimates. The healthcare company also boosted its full-year profit forecast. Shares gained 2%.
PepsiCo reported lower quarterly earnings that missed estimates, warned that 2008 profits won't meet forecasts, and said it was cutting jobs as part of a global cost-cutting plan. Shares fell 12%.
A variety of financial services stocks gained. JPMorgan Chase defied the trend, sliding ahead of its quarterly earnings due out Wednesday morning. Wells Fargo is also reporting Wednesday morning.
European shares rose, building on the previous session's sharp gains, as efforts to rescue distressed banks and limit the fallout to the economy gathered pace around the globe. The Dow Jones Stoxx 600 index closed up 3% at 232.17, helped by big gains from oil producers and strength in banking and technology stocks.
The UK's FTSE 100 ended up 3.2% at 4,394.21, while the French CAC-40 climbed 2.8% to 3,628.52 and Germany's DAX 30 advanced 2.7% to 5,199.19.
Iceland's OMX 15 share index dropped 76.2% to 716.27 points when it restated trading. The all-share index fell 65.6% to 953.14 points. Last week, trading was suspended after the country's Financial Supervisory Authority took control of Kaupthing Bank, Landsbanki Islands and Glitnir Bank.
In the emerging markets, the Russian markets rallied almost 10% to 869. Elsewhere, the Bovespa in Brazil was up 1.8% at 41,569 while the IPC index in Mexico rose 0.7% to 22,274 and Turkey's ISE National 30 index jumped 5.5% to 38,940.
After a strong start markets were unable to hold on to their gains led by selling witnessed in the metals and the PSU stocks. The BSE benchmark Sensex lost over 400 points and the NSE Nifty index fell over 150 points from their respective day’s high. Finally, the BSE benchmark Sensex ended 174 points higher to close 10,483 and the NSE Nifty index was up 27 points to close at 3,518.
Among the 30 components of the Sensex, 19 stocks ended in the green and 11 stocks ended with negative bias. ONGC, HDFC Bank, RCom and NTPC were among the major laggards. However among the major gainers were, Infosys, Reliance Industries and ICICI Bank.
Shares of Sonata Software was locked at 20% upper circuit at Rs21.4 after the company announced its Q2 results with net profit at Rs216.3 (up 81.3%) and net sales at Rs4.19bn (up 25.4%). The scrip touched an intra-day high of Rs21.4 and a low of Rs18.5 and recorded volumes of over 1,00,000 shares on BSE.
McLeod Russel gained by 1% to Rs67 after the company announced that it acquired Vietnam-based Phu Ben Tea company for ~US$7mn. The scrip touched an intra-day high of Rs71.9 and a low of Rs66 and recorded volumes of over 1,00,000 shares on BSE.
Orbit Corp advanced 2% to Rs102 after the company announced that it posted a consolidated net profit of Rs137.1mn for the Q2 ended September 2008. The total revenue on consolidated basis stands at Rs740.7mn. The earnings per share on consolidated basis is Rs3.78 per equity share for Q2 FY09. The scrip touched an intra-day high of Rs117 and a low of Rs100 and recorded volumes of over 3,00,000 shares on BSE.
California Software announced a multi-level partnership with Ixia, to make a joint investment to establish an Ixia Center of Excellence (COE) in Chennai, India. The COE will be an R&D lab focused on jointly developing solutions for the global market.
It will be equipped with the latest Ixia IP test hardware and applications and will be staffed by Calsoft development, quality assurance, and support engineers. Calsoft will staff the center with 100 engineers over the next twelve months.
California Soft slipped by 6% to Rs50.1 touching an intra-day high of Rs55 and a low of Rs48 and recorded volumes of over 3,000 shares.
Reliance Infra plans to raise Rs25bn via loan in the current fiscal for reality, rail and road projects. (BS)
OVL, a subsidiary of ONGC is likely to bid for 8 oil and gas blocks auctioned in Iraq. (BS)
Jet Airways has decided to lay off over 800 of its employees. (BS)
Dabur India is in talks to acquire Fem Care Pharma for Rs2.7-3bn. (ET)
RIL plans power foray with mining and coal-to-oil projects. (ET)
Tata Motors acquires 50.3% in Norwegian e-vehicle major Miljo Greenland for Rs94mn. (ET)
G R Gopinath is believed to be considering an offer to buy-back Air Deccan. (ET)
Zydus Cadila gets WHO nod to sell rabies vaccine to UN agencies. (ET)
Emami Group is close to buy-out owner’s stake in Zandu Pharma. (ET)
Kingfisher Jet Airways deal is on MRTPC radar. (ET)
NTPC officials may discuss the possibility of an out-of-court settlement with RIL. (ET)
DLF defers buy back offer, due to open on October 15th. (BS)
Elecon Engineering bags order worth Rs517mn. (BS)
Hero Honda resumes production at its Dharuhera plant. (BS)
Pirmal Life Sciences defers fund raising plans. (BS)
Colombia takes back a part of OVL oil field. (BS)
Bharti Airtel enters into agreement with Infosys for DTH roll-out. (BS)
Reliance Capital buys 15% stake in Hong Kong Mercantile Exchange. (BS)
Corporation Bank raises deposit rates by 50 bps. (BS)
JSW Steel may cut steel prices by end of this month. (DNA)
SCI buys two large vessels from Hyundai Samho Heavy Industries a Korea based company. (DNA)
Subhash Projects JV bags order worth Rs960mn. (DNA)
GMR Infra acquires 50% stake in Netherlands based InterGen for US$954mn. (DNA)
Dr Reddy’s arm launches dermatology product in US (BL)
Spicejet is considering a cut in fares to stimulate demand (BL)
Bank of Baroda and Union Bank of India to slash home loan rates by 25 bps (FE)
Bank of India to invest Rs1.5bn in HCC Lavasa project (FE)
Indian Hotels to develop a 200-room hotel in Kochi (FE)
Wadia’s to get ICICI funds for Danone. (ET)
Economic Front Page
Government is considering a proposal to hike insurance cover on bank deposits. (ET)
Power companies to buy 20mn tons coal from overseas in FY09. (ET)
India’s crude oil import bill double’s in April-August. (ET)
Government is considering relaxing the 3G auction guidelines to make it easier for telecom companies to pay large sums. (ET)
Government to meet steel producers on Oct 18th to consider their demand to waive import and export duty on some products. (BS)
Government plans to introduce competitive bidding for allocation of coal blocks. (BS)
India’s Jewellery and Gem exports rise 18% in April-September. (BS)