There is no security on this earth, there is only opportunity.
The crash may tempt those with cash to jump in right now. After all, how low can we go? Friday's big crash in our market, coming a week after a global rout, must have unnerved even the strongest of bulls. Especially, as many market players believed that world equity markets had placed a bottom on Oct. 10. However, the late afternoon meltdown on Friday proved the most optimistic of bulls wrong. The key indices fell to two year lows, with the BSE Sensex sliding below the 10,000 mark. It just goes to show that looking for a bottom in this kind of an environment is a futile exercise.
Though, the market looks highly oversold, and a bounce back is on the cards on "not-so-bad" global cues, one should wait for things to settle down. Staying on sidelines for a while won't do one any major harm. One must remain on guard even if there is a relatively strong rebound, as the bulls may not be out of the woods completely. The brave heart bulls can use these opportunities to pick up some crown jewels, but only for long-term purpose (at least two years). We would caution against any bottom fishing attempts for short-term gains.
We expect a firm opening, partly in reaction to the massive selloff on Friday and partly because of some semblance of stability in world markets. But, don't get too excited, as the bears may still stage a comeback having already thrashed the bulls over the past few weeks.
For India, the big concern remains the incessant selling by FIIs. The Government may try and perk up the inflows from other sources, like FDI and ECB. The RBI will hold its half-yearly review of the monetary policy on Friday. Hopes are that the central bank may ease the repo rate now, after having slashed the CRR substantially and giving leeway on the SLR front. But we think nothing really will happen to coincide with the review. The market will of course get some boost if Mint Street indeed announces a cut in short-term rates.
Expect some more market friendly action from other global central banks and policymakers as well. Meanwhile, India Inc will continue to rollout its report card, which is unlikely to be too pleasing given the slew of headwinds confronting them. One more factor that could have some bearing on the Indian markets over the next few weeks is politics, with several state polls lined up in November and December.
The global newsflow continues to be poor, what with Pakistan almost on the verge of a default and South Africa having to announce a bank bailout plan of its own. Last week's economic reports from the US and Europe too was not at all inspiring, underscoring a growing fear that a protracted and painful global recession is imminent. Dutch financial giant ING is set to receive $13.4 billion in new capital from the Netherlands government. China, which is so used to nothing up double-digit GDP growth, has seen its economic expansion slide to 9% in the July-September quarter.
FIIs were net sellers of Rs9.15bn (provisional) in the cash segment on Friday while the local institutions poured in Rs7.13bn. In the F&O segment, the foreign funds were net sellers at Rs1.69bn. On Thursday, FIIs were net sellers of Rs19.11bn in the cash segment, taking their total outflows this year to above $11.56bn.
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US stocks closed lower on Friday after another highly volatile day, as investors remained apprehensive about the future prospects of the world's leading economy amid a fresh set of disappointing data points.
Profit-taking set in ahead of the close, capping a day that sent the S&P 500 Index swinging between gains and losses at least 28 times, as worsening consumer confidence and housing data overshadowed Warren Buffett's advice to buy shares.
Treasury bond prices advanced, lowering the corresponding yields, and the dollar gained versus other major currencies. The credit market showed some signs of loosening, as several key lending rates declined.
The Dow Jones Industrial Average climbed more than 300 points before surrendering gains in the final hour of trading. The Dow retreated 127.04 points, or 1.4%, to 8,852.22 to cap its best week since 2003.
The S&P 500, which rose as much as 4%, ended down 5.88 points, or 0.6%, at 940.55, trimming its best weekly advance since February. The Nasdaq Composite Index slipped 0.4% to 1,711.29.
Market breadth was mixed. Four stocks fell for every three that gained on the New York Stock Exchange.
US stocks seesawed throughout Friday as a report showing housing starts at a 17-year low was countered by Internet giant Google's strong quarterly performance and bullish comments from Buffett.
Markets were also impacted by the monthly options expiration, which can cause increased volatility in the underlying equities.
Despite the extremely volatile week, US stocks managed to end with gains for the five-session period, which included the Dow's biggest one-day point gain ever on Monday and the second-biggest point loss ever on Wednesday.
For the week, the Dow and S&P 500 both added 4.7% and the Nasdaq gained 3.6%.
The advance last week added US$500bn in market value, according to gains in the Dow Jones Wilshire 5000, the broadest measure of the stock market. Overall, the tone of the market seemed to be better this week, compared to last week, with perhaps the exception of Wednesday's big slump.
Many Wall Street experts feel that Oct. 10 lows could potentially represent a bottom for the current bear market. During last week's topsy-turvy ride, the major indices did get close to those lows, but managed to bounce back.
Lending rates improved last week, as a slew of government initiatives around the globe started to bear some fruit. Treasury prices rose, lowering the yield on the 10-year note at 3.97%.
US light crude oil for November delivery rose US$2 to settle at US$71.85 a barrel on the New York Mercantile Exchange after ending the previous session at a 13-month low. Oil prices have slid since hitting an all-time high of US$147.27 a barrel on July 11.
Gasoline prices fell another 4.4 cents overnight, to a national average of US$3.04 a gallon. It was the 30th consecutive day that pump prices have decreased - in the past month alone, they are down more than 81 cents a gallon.
Over the weekend, the price of regular gasoline at US filling stations fell below $3 a gallon for the first time in eight months.
COMEX gold for December delivery slumped US$16.80 to settle at US$787.70 an ounce. A variety of other metals declined as well. In currency trading, the dollar rose against the euro and the yen.
European shares surged on Friday, bucking the generally weak trend across other global equity markets, with a regional stock benchmark logging its biggest weekly gain since March 2007.
The Dow Jones Stoxx 600 Index had its biggest two-day rally on record, before posting the steepest two-day slump since 1987 even as the cost of borrowing dollars in London fell on a weekly basis for the first time since July.
The pan-European Stoxx 600 index added 3.8% on Friday to 214.23, closing an eventful week on a positive note, as 15 of 19 industry groups increased. The index gained 4.5% last week, the first such advance since Sept. 12.
National stock benchmarks increased in 14 of the 18 western European markets. The UK's FTSE 100 index jumped 5.2% to 4,063.01, while Germany's DAX 30 index climbed 3.4% to 4,781.33 and the French CAC-40 index advanced 4.7% to 3,329.92.
Russian shares extended the recent sell-off on Friday, with the dollar-denominated RTS stock index dropping 6.5% on the day, after Goldman Sachs slashed its 2009 economic growth forecasts for the federation. The RTS index fell 46 points to end at 667.62 points.
Among the other emerging markets, the Bovespa in Brazil was nearly flat at 36,399 while the IPC dropped 0.7% to 20,312. The ISE National 30 index in Turkey plunged 7.5% to 32,334.
Bulls look for resurrection
Indian markets ended the week with a deeper cut with the BSE benchmark Sensex sliding below the 10,000 mark for the first time since July 2006. Likewise, the broader NSE Nifty index also declined below the 3,100 mark. Markets witnessed intensified selling after starting off the Friday’s session with a positive bias extending previous day’s pull back. However, intensified selling in the index pivotal like Reliance Industries, L&T, Infosys and SBI dragged the key indices lower.
Massive selling was witnessed on the FII front, on provisional basis FIIs sold nearly Rs1,000cr on Friday and during the week FIIs were net sellers to the tune of Rs5,000cr.On the other hand, DIIs turned out to be net buyers, and bought stocks worth Rs712cr on Friday (prov).
Finaly, the BSE benchmark Sensex plummeted 606 points or 5.7% to close 9,975 and the NSE Nifty index dropped 194 points to close at 3,074.
All the 30-components of Sensex were in the red, Reliance Industries, SBI, Bharti, Infosys and HDFC Bank were among the major laggards.
Among the BSE Sectoral indices, BSE Capital Goods index (down 12%), BSE Power index (down 8.5%), BSE Metal index (down 7%) and BSE Bankex index (down 6.3%). Even the Mid-Cap and the Small-Cap indices declined over 3% each.
HDFC announced that it posted a net profit after tax of Rs5342.3mn for the quarter ended September 30, 2008 as compared to Rs6463.9mn for the quarter ended September 30, 2007.
Total income has increased from Rs18925mn for the quarter ended September 30, 2007 to Rs26205.9mn for the quarter ended September 30, 2008.
HDFC was down by 1.3% at Rs1776 hitting an intra-day high of Rs1860 and a low of Rs1751 and recorded volumes of over 4,00,000 shares on BSE.
Shares of Mphasis erased early gains and lost ground by 2.5% to Rs173. The company announced that it posted a net profit after tax of Rs1127mn (up 128.7%) for the quarter ended September 30, 2008 as compared to Rs492.7mn for the quarter ended September 30, 2007.
Total Income increased from Rs4124.1mn for the quarter ended September 30, 2007 to Rs6539.3mn (up 58.7%) for the quarter ended September 30, 2008. The scrip touched an intra-day high of Rs193 and a low of Rs172 and recorded volumes of over 99,000 shares on BSE.
Satyam announced that it posted a profit after taxation of Rs5974.3mn (up 43.2%) for the quarter ended September 30, 2008 as compared to Rs4171.5mn for the quarter ended September 30, 2007.
Total Income increased by 3.5% from Rs20564.4mn for the quarter ended September 30, 2007 to Rs27839.8mn for the quarter ended September 30, 2008.
Shares of Satyam Computer ended lower by 2.6% to close at Rs265 hitting an intra-day high of Rs285 and a low of Rs263 and recorded volumes of over 13,00,000 shares on BSE.
Shares of HCC have gained by 1.3% to Rs48.3 after the company announced that it won two orders worth Rs16.9bn from the government of the Southern Indian state of Andhra Pradesh. The scrip has touched an intra-day high of Rs50.6 and a low of Rs47.7 and has recorded volumes of over 11,00,000 shares on NSE.
Shares of Elecon Engineering also erased early gains and slipped sharply by 6% to close at Rs47. The company announced that it secured order worth Rs177mn from Techpro Systems Ltd, Chennai Supply of an Unidirectional Stacker cum Reclaimer & Slewing Boom Stacker. The scrip touched an intra-day high of Rs55 and a low of Rs46 and recorded volumes of over 1,00,000 shares on BSE.
Market players would keep a close track on the further measures to be taken by the Indian central bank on October 24th. Traders and investors are hoping for an interest rate cut from the RBI which could be a positive trigger for the Indian markets. However, having said that staying cautious is what we would advice.