What a blessing it would be if we could open and shut our ears as easily as we open and shut our eyes!
The rupee has just crashed to the 50 level mark against the dollar even as the RBI meets later in the day. Confusing statements and interpretations over the FIIs' lending and borrowing of PN shares to overseas clients took its toll on traders yesterday. It pays to close your ears to these developments unless it comes officially.
We expect another day of wild swings with a negative bias as the bloodletting continues across global markets. The main focus of Indian market would be on the mid-term review of the monetary policy by the RBI. The central bank may not tinker with policy rates or the CRR/SLR given the fact that it has (along with the Government) already taken extraordinary steps to shore up liquidity in the local markets. These measures take time to work their way through the economy. It is quite likely that the RBI Governor Duvvuri Subbarao and his colleagues at Mint Street will keep rates and CRR steady for now. Anyways, in the current unprecedented environment, the regulators are not waiting for scheduled meetings for making their moves. So, don’t be surprised if the RBI doesn't do anything today. But expect some more easing in interest rates and CRR over the next weeks if inflation continues to moderate. On the whole, we see a weak opening and another volatile day.
News about troubles in countries like Argentina, Russia and a few others seem to have negated any positive gains from the global initiatives to revive the credit markets. The risk of corporate defaults spiked to record levels on Thursday amid worsening outlook for the global economy and the consequent impact on corporate earnings. South Korea's economy expanded at the slowest pace in four years last quarter, sparking concern the nation is headed for its first recession since requiring an International Monetary Fund bailout 10 years ago. Meanwhile, OPEC is holding a meeting today and is most likely to cut production in light of the steep drop in crude oil prices.
Risk aversion is the name of the game right now. Anything even remotely risky appears to be untouchable. Though the unprecedented actions taken in recent times have led to some softening in the crucial inter-bank lending markets, the latest fears among investors is over earnings growth over the next few quarters.
Although US stocks managed to claw their way back in late trades, stocks elsewhere in the world continue to slump amid concerns that a global economic downturn will hit corporate earnings. Asian stocks fell today for a third day after Sony slashed its earnings forecast and South Korea's economic growth weakened. Sony shares plunged 11% to its lowest level since 1995. Samsung Electronics slumped 3.3% after posting its biggest quarterly profit drop in more than three years.
The MSCI Asia Pacific Index declined 2.7% to 82.97 as of 10:10 a.m. in Tokyo. The gauge is set to lose 4.4% this week, the seventh drop in eight weeks, and trades at its lowest level since May 2004. Japan's Nikkei 225 Stock Average slipped 4% to 8,126.71. South Korea's Kospi index fell 2.4% and is set for its biggest weekly slump since October 2000. Standard & Poor's 500 Index futures in the US were down 0.6%.
FIIs were net sellers of Rs8.1bn (provisional) in the cash segment on Thursday while the local institutions poured in Rs6.2bn. In the F&O segment, the foreign funds were net sellers at Rs1.35bn. On Wednesday, FIIs were net sellers of Rs2.73bn in the cash segment, taking their total outflows this year to above $12bn.
Key Results Today: ABB, Aditya Birla Nuvo, Alstom Projects, Ambuja Cements, Asian Paints, Balaji Tele, Bank of Maharashtra, BEL, BHEL, BPL, Colgate India, CRISIL, Dewan Housing, Dish TV, Dishman Pharma, Engineers India, Gammon India, Gammon Infra, GSK Consumer, GSK Pharma, Godrej Consumer, GE Shipping, Great Offshore, GMDC, Gujarat State Petronet, Gujarat Industries Power, Hexaware, Hindustan Unilever, HCC, HTMT Global, ITC, IDBI Bank, Indraprastha Gas, IRB Infra, Jain Irrigation, JSW Steel, Kalpataru Power, Lupin, Mahindra Lifespaces, Maruti, Monsanto, Moser Baer, NTPC, Oracle Financial, PVR, REC, Redington, Tata Steel, TV 18 and Vishal Retail.
US stocks closed mixed on Thursday, with the blue chip shares managing decent gains while the technology space came under pressure amid mounting worries over corporate earnings growth going ahead.
After triple-digit rises and falls, the Dow Jones Industrial Average, climbed 172.04 points, or 2%, to finish at 8,691.25. The S&P 500 index rebounded from a five-and-a-half-year low, gaining 11.33 points, or 1.3%, to end at 908.11.
The Nasdaq Composite index declined 11.84 points, or 0.7%, to close at 1,603.91. It recovered a little after touching a new bear-market low of around 1,533 during the session.
The blue chip indices cut their losses in the last hour of trading to end mostly higher after another wild day in which a late-rally in utilities and energy shares overtook a slide among financials and technology shares.
The earlier fall in stocks was led by financial and consumer shares after home foreclosures surged to a record and the credit crisis hammered earnings at asset-management and real-estate companies.
Stocks gained in the morning on some of the commentary out of the House hearing on the credit crisis. But the advance was short-lived, and stocks turned volatile through the rest of the session.
On Wednesday, the S&P 500 index closed at the lowest level since April 2003 and oil futures touched the lowest since June 2007 on concern that a deepening global economic slump will hurt corporate profits.
The dollar's strength against most rivals (barring the yen) helped commodities rebound off session lows.
After tumbling to 16-month lows on Wednesday, benchmark crude oil futures closed at US$67.84 a barrel, up US$1.09, or 1.6%, for the session. Gold futures fell, at one point declining to under US$700 an ounce, to end US$20.50 lower at US$714.70 an ounce.
Gasoline prices fell another 3.6 cents overnight, to a national average of US$2.822 a gallon. It was the 36th consecutive day of decline. During that time, prices have fallen by over US$1 a gallon.
Treasurys were mostly lower, with the benchmark 10-year note yields up 3 basis points to 3.627%. In currency trading, the dollar rose against the euro and fell against the yen.
Lending rates showed little movement, after improving over the last week or so.
In the day's economic news, the number of Americans filing new claims for unemployment last week jumped 15,000 to 478,000, topping forecasts for a smaller rise to 465,000.
FDIC chairwoman Sheila Bair told a Senate committee that a new plan is on tap to help homeowners avoid foreclosure, if possible. Her comments came after a new indication of weakness in the housing market, with 81,312 homes lost to foreclosure in September.
Former Federal Reserve chairman Alan Greenspan told a House committee that the US is in the midst of a once-in-a-century credit tsunami, but that the world's largest economy will emerge from it with a sounder financial system.
In corporate news, General Motors (GM) hinted that it would need to announce more job cuts as part of a broad and ongoing restructuring program aimed at cutting costs.
Goldman Sachs will cut about 3,260 jobs or roughly 10% of its work force, due to rough financial market conditions, according to reports. Xerox will cut 3,000 jobs worldwide as part of its restructuring plan.
Late on Wednesday, Amazon.com reported higher quarterly earnings that topped estimates, on higher sales that missed estimates. But it warned that 2008 revenue won't meet forecasts because the critical fourth quarter is not shaping up as well as had been forecast.
Amazon shares ended little changed, erasing losses by the close.
After the close, Microsoft reported quarterly sales and earnings that topped forecasts. But the software leader also warned that sales and earnings for the fiscal second-quarter and the full year won't meet forecasts due to the slowing economy.
European shares fell for the third straight session. The pan-European Dow Jones Stoxx 600 index fell 0.4% to 208.68, paring earlier deeper losses thank to a recovery in energy shares. UK's FTSE 100 index reversed earlier losses to close up 1.2% to 4,087.83 and the French CAC-40 index gained 0.4% to 3,310.87. Germany's DAX 30 index lost 1.1% to 4,519.70.
Emerging markets closed down. The Bovespa in Brazil was down 3.6% to 33,818 while the IPC index in Mexico slid 5.3% to 17,798. The RTS index in Russia slipped 4.4% to 636 and the ISE National 30 index in Turkey was down 2.3% at 31,176.
Overnight losses in the US and the Asian markets sparked selloff on Dalal Street at open. Markets however, picked pace in the afternoon session after SEBI asked the FIIs to reverse short-selling, said that finance minister addressing to the media. However, the rally was short lived as traders and investors used every rise to sell stocks.
The metal stocks suffered the most with the index dropping over 11% followed by the auto and the oil & gas index dropping over 5% each.
Index Heavyweights witnessed sharp selling, Reliance Industries, Bharti Airtel, HDFC and ICICI Bank were among the major laggards.
The BSE benchmark Sensex lost 398 points or 4% to close 9,771 and the NSE Nifty index declined 122 points to close at 2,943.
Among the 30-components of Sensex, 24 stocks were in the negative terrain and 6 stocks ended in the green. Reliance Industries, Bharti Airtel and ICICI Bank were among the major laggards. On the other hand, bucking the negative trend were, Grasim, BHEL, L&T and HDFC Bank.
TCS ended flat at Rs547. The company announced consolidated results for the Quarter ended September 30, 2008
The group posted a net profit of Rs12709.9mn (up 1.5%) for the quarter ended September 30, 2008 as compared to Rs12516mn for the quarter ended September 30, 2007.
Total Income increased by 17.7% to Rs67844.5mn for the quarter ended September 30, 2008 from Rs57618.2mn for the quarter ended September 30, 2007. The scrip touched an intra-day high of Rs586 and a low of Rs497 and has recorded volumes of over 7,00,000 shares on BSE.
Shares of BHEL advanced by 2% to Rs1170 after the company announced that it received order worth Rs14.7bn for 660MW Steam turbine generator from NTPC. The scrip touched an intra-day high of Rs1219 and a low of Rs1072 and recorded volumes of over 9,00,000 shares on BSE.
DLF ended 1.3% lower at Rs268. DLF clarified that the company has no plans to layoff. There have also been rumours doing the rounds that DLF has defaulted in its repayment obligations to banks and / or MFs. The Company further clarified that there is no truth in such rumours. The scrip touched an intra-day high of Rs278 and a low of Rs257 and recorded volumes of over 17,00,000 shares on BSE.
Wall Street Finance fell sharply to 5% lower circuit at Rs38.40 hitting an intra-day high of Rs42.40 and a low of Rs38.40 and recorded volumes of over 12,000 shares on BSE.
The company announced that the board of directors would meet on October 30, 2008, to consider and explore the possibility of significantly expanding the business of the company through Organic or Inorganic route or through various options which may be available, either through strategic tie ups and / or growth through acquisitions and / or merger and amalgamation route.
RPL dropped by over 10% to Rs89.7 following the news. The scrip touched an intra-day high of Rs98 and a low of Rs88 and recorded volumes of over 1,00,00,000 shares on BSE.
Shares of Monnet Ispat rallied by over 11% to Rs176 after the company announced that board of directors of the company approved the proposal to buy back shares. The maximum limit of buy back would be Rs750mn which is 7.02% of the paid-up capital & free reserves.
The maximum buy back price is Rs 300/- which is at a premium of 188.56% & 188.73% on the basis of closing prices on October 22, 2008 on BSE & NSE respectively.
The scrip touched an intra-day high of Rs183 and a low of Rs145 and recorded volumes of over 1,00,000 shares on BSE.
The macro-economic picture continues too remains grim, with the PM saying that FY09 GDP growth would be lower from last year and the FM saying that the targets on fiscal deficit will be missed. A weakening rupee is only adding to the pressure on the domestic liquidity situation and worries for the policymakers. We would continue to recommend caution.