Focusing your life solely on making a buck shows a certain poverty of ambition. Because it’s only when you hitch your wagon to something larger than yourself that you realize your true potential- Barack Obama.
All said and done, Obama has won. The fact of the matter remains, investors and traders are in the market to make some bucks. That doesn’t seem to come easy for quite some time. Looks like the world markets are following the Indian market, as most global equity benchmarks tumbled on Wednesday amid mounting worries over the fast spreading economic gloom.
The main US indices are down over 5% each as a couple of grim economic reports took some shin off Barack Obama's historic win in the presidential election. Asian markets are down 5-6% this morning, with Shanghai stocks falling to the lowest level since September 2006. One exception was Europe, where the fall was relatively less (2-3%) than in other markets.
Key Indian indices slid by nearly 5% on Wednesday despite a healthy trend in other Asian markets. The sudden and sharp sell-off came after a 2,000 point rally in the Sensex over the previous five sessions.
In fact the fall coincided with Obama’s speech where he said, “Let us remember that if this financial crisis taught us anything, it's that we cannot have a thriving Wall Street while Main Street suffers….”The coincidence may be just incidental as the buzz is that some local operator had gone heavily short on the Nifty around that time. Selling pressure on Reliance by large funds added to the pressure.
Meanwhile, ArcelorMittal announced a steep cut in global production due to falling demand and prices. Back home, Tata Motors said it will shut its Jamshedpur CV plant for three days to align production with dwindling demand. Auto parts makers are also mulling output cuts to tackle the slowdown in demand for new autos.
Shipping companies are in trouble due to a sharp dip in trade for commodities. Several other industries like airlines and real estate are also facing headwinds. Growth in direct tax collection has slipped to 11% in October. Though this may be an aberration, the fact is that the economy is slowing rapidly.
Given this bleak economic background, both globally and locally, stocks are unlikely to rise too much from current levels. There may be some more room on the upside, but there will be selling after every spurt. A sudden and sharp sell-off like Wednesday is not ruled out. Today, we expect another weak opening on the back of the global meltdown. From there on, the trend may turn choppy and will hinge on news flow. Take a break and wait for lower levels to resume your buying.
FIIs were net buyers of Rs2.16bn (provisional) in the cash segment on Wednesday while the local institutions pulled out Rs1.68bn. In the F&O segment, the foreign funds were net buyers at Rs9.12bn. On Tuesday, FIIs were net sellers of Rs930mn in the cash segment.
The euphoria of having elected the first ever African-American president faded fast, with US stocks suffering their biggest post-election slump in history amid lingering worries over the worsening economic situation.
Investors booked profits from the Election Day rally, as another round of bleak economic reports heightened fears of a protracted recession in the wake of the biggest financial crisis since the Great Depression.
The selling began early after a report showed that the US service sector contracted in October, falling at the fastest pace since records began in 1997, and accelerated in the final minutes. Downbeat news on the labor market hit sentiment ahead of Friday's monthly jobs report.
At the close, the Dow Jones Industrial Average was down 486 points, or 5.1%, at 9,139.27. The broader Standard & Poor's 500-stock index declined 52.98 points, or 5.3%, to end at 952.77, erasing yesterday's 4.1% rally.
Financials, materials and consumer discretionary shares fronted the losses in the S&P's 10 industry groups.
The Nasdaq Composite Index shed 98.48 points, or 5.5%, to 1,681.64. The Russell 2000 Index of small US companies fell 5.7% to 514.64. The MSCI World Index of 23 developed markets decreased 2.5% to 982.98.
Market breadth was negative. Volume were exceedingly light, with 1.3bn shares traded on the New York Stock Exchange, where four stocks were on the decline for every one on the rise. On the Nasdaq, 902mn shares traded, and decliners surpassed advancing stocks, by a roughly 10-to-3 margin.
Declines were broad based, with all 30 Dow components falling, led by Bank of America, Citigroup, Intel, Merck and Boeing.
Wall Street analysts said that a potentially deep US recession and a global financial crisis will give Democrat president-elect Barack Obama little time to bask in the glory of his historic win in the US presidential election.
Job cuts announced by US employers rose to 112,884 in October from 95,094 in September, according to outplacement firm Challenger, Gray & Christmas. That marked the highest number of layoffs in almost four years.
In another report on the sensitive jobs market, the ADP index of private employment showed that US companies shed 157,000 jobs in October, with the report seen as a preview of sorts of Friday's non-farm payrolls for the month.
That report is expected to show that employers cut 200,000 jobs from their payrolls in October. Meanwhile, the unemployment rate, which is generated by a separate survey, is expected to rise to 6.3% from 6.1% the previous month.
The Institute for Supply Management reported non-manufacturing sectors of the U.S. economy contracted sharply in October, with its index falling to 44.4% from 50.2% in September.
This week has already brought stark signs of the recession, including dour reports on manufacturing and factory orders, and the worst monthly auto sales in 25 years.
The dollar gained against the euro and fell versus the yen. Gold futures fell, snapping a two-day winning streak, down US $14.9 to close at US $742.40 an ounce.
US light crude oil for December delivery fell US$5.23 to settle at US$65.30 a barrel on the New York Mercantile Exchange. Losses accelerated after the weekly inventories report showed crude stockpiles were unchanged from the previous week.
Gasoline prices fell another 2.6 cents to a national average of US$2.365 a gallon. The decline marks the 49th consecutive day that prices have decreased. During that same time period, prices dropped by US$1.49 a gallon, or 38.6%.
The credit market continued to improve. The 3-month Libor fell to 2.51% from 2.71% Tuesday, hitting its lowest point in almost four years. Overnight Libor fell to 0.32% from 0.38%. Libor is a key interbank lending rate.
The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, fell to 0.39% from 0.47% Tuesday, with investors preferring to take a small return on their money than risk the stock market. Last month, the 3-month yield reached a 68-year low around 0% as investor panic peaked.
Treasury prices rose modestly, lowering the yield on the benchmark 10-year note to 3.68% from 3.72% Tuesday.
European shares ended their best winning streak of the year on Wednesday. The pan-European Dow Jones Stoxx 600 index declined 2.3% to 228.14, halting a six-session winning streak that had seen it gain 17%. The UK's FTSE 100 index declined 2.3% to 4,534.09, while Germany's DAX 30 index fell 2.1% to 5,166.87 and the French CAC-40 index lost 2% to 3,618.11.
Economists expect the ECB to cut its key rate by 50 basis points, to 3.25%, when the central bank announces its decision later today. The Bank of England's rate-setting Monetary Policy Committee is also likely to cut rates.
In the emerging markets, the Bovespa in Brazil was down 6.1% at 37,785 while the Bolsa in Mexico slumped 5% to 20,446. The RTS index in Russia was, however up 3.4% to 829 and the ISE National 30 index in Turkey plunged 5.3% to 35,612Markets snapped its five days winning streak, as the benchmark Sensex on Wednesday fell over 500 points in a volatile trading session. The fall was led by heavy selling in the oil & gas stocks.
Overnight gains in the US markets and a strong start to equity markets across Asia lifted the Indian bourses with a positive gap. However selling pressure coupled with weak cues from the European markers dragged the markets to end with a deep cut.
The BSE benchmark Sensex lost 511 points or 4.8% to close 10,120 and the NSE Nifty index was down 147 points to close at 2,994.
Among the 30-components of Sensex, 27 stocks were in the negative terrain and 3 stocks ended in the green. Reliance Industries, HDFC, L&T, Bharti Airtel and RCom were among the major laggards. Bucking the negative trend were Wipro Satyam and Maruti.
Shares of DLF declined by 9% to Rs264 after reports stated that Lehman Brothers sold stake in DLF Assets to Symphony Capital Partners. The scrip touched an intra-day high of Rs309 and a low of Rs259 and recorded volumes of over 39,00,000 shares on BSE.
Shares of GMR Infrastructure rallied by over 4.5% to Rs60 following reports that the company was close to acquiring Indonesia-based PT Barasentosa Lestari coal mine for over US$100mn. The scrip touched an intra-day high of Rs66.2 and a low of Rs58 and recorded volumes of over 51,00,000 shares on BSE.
Zen Technologies was frozen at 10% lower circuit at Rs109.3 after the company announced that it would purchase own fully paid equity shares of Rs10/- each at a maximum price of Rs110/- per equity share. The scrip touched an intra-day high of Rs132.3 and a low of Rs109.3 and recorded volumes of over 6,000 shares on BSE.
Himatsingka Seide rose over 3% to Rs27. 5 after reports stated that the company was planning to aggressively enhance its retail presence. The scrip touched an intra-day high of Rs28.5 and a low of Rs27.5 and recorded volumes of over 21,000 shares on BSE.
Shares of IVRCL Infra have rallied by over 20% to Rs146 after the promoters of the company purchased ~29,500 equity shares of the company through open markets in the month October. The scrip has touched an intra-day high of Rs152 and a low of Rs126 and has recorded volumes of over 50,00,000 shares on NSE.
Sugar stocks were in demand after government said that mills will be allowed to export without its prior approval from the government till the end of this year.
"The government has decided to extend the allowance of not requiring release orders for exports under the open general license up to Dec. 31, 2008, or till further orders," the food ministry said in a notification on its Web site.
Sugar exports have come to almost a standstill, S.L. Jain, director general of the Indian Sugar Mills Association, said last month.
Production may drop to 20mn tons in the year ending September 2009, lower than the August forecast of 22mn tons, he said.
The telecom stocks were on the receiving end after reports stated that the government agreed to hike spectrum user charges for all existing telecom operators both using CDMA and GSM technologies.
HDFC-HDFC Bank merger possible says HDFC Chairman Deepak Parekh. (FE)
Reliance Industries may restart polyester units at Patalganga this month. (BS)
Bharti Airtel has sought government approval for buying 65% stake in Bharti Teleports, a newly formed uplinking company. (ET)
Bharti Telesoft, a subsidiary of Bharti Airtel has entered into an alliance with MTN group. (BS)
French oil major, Total is set to acquire stakes in ONGC-Mittal’s Nigerian oil blocks. (ET)
SBI looks at a 40% growth in H2 FY09 net profit. (BS)
GAIL may me nominated as the sole agency to sell natural gas from Reliance Industries KG-D6 field to fertilizer units. (ET)
Tata Motors to shut plant in Jampshedpur for 3 days. (ET)
S&P keeps junk rating – “BB” on Tata Motors. (FE)
RCom is in talks with overseas operators to offer international roaming on its mobile communication network. (DNA)
Bajaj Auto to kick start low cost bikes priced around Rs30,000. (DNA)
Unitech claimed that vested interests of competing forces were creating entry barriers for global telecom majors in Indian markets. (ET)
Sun Pharmaceuticals announced that USFDA has granted approval for ANDA to market generic tablets. (FE)
DLF has no plans to cut its work force. (BL)
Oman Government Fund to pick up 24.5% stake in Ansal Township. (ET)
Omaxe promoters buy 51% stake in NAFIL, housing subsidiary of Omaxe. (ET)
Great Offshore completes acquisition of two Andhra Pradesh based companies KEI-RSOS Maritime Ltd and Rajamahindri Shipping and Oilfield Services Ltd. (BL)
GMR Infra is eyeing a coal mine in Indonesia. (BL)
Toshiba – JSW to set up a plant to manufacture super critical power boilers. (BL)
10 firms are vying for a majority stake in Deccan Charger, IPL team owned Deccan Chronicle group. (BS)
Jet Airways may layoff 100 out of 240 expat pilots. (BS)
NHPC ipo unlikely this fiscal. (FE)
Kalpataru Power Transmission logistic arm plans to set up 41 agri logistic parks across the country. (DNA)
Economic Front Page
Four PSU banks cut PLR by 50-75bps. (BS)
Finance Ministry has asked the telecom department to go ahead with the auction of 3G airwaves even in those zones where radio frequencies are not available. (ET)
CCEA is considering a proposal to allow FIIs to hold stake over and above the sectoral FDI ceilings for Indian companies. (ET)
FDI inflows were at US$2.56bn in September 2008, showing an increase of 259% yoy. (ET)
Direct tax collection grew by 11% yoy to Rs197bn in October 2008. (ET)
Government has authorized CMIE for collecting data for new IIP series. (ET)
DoT may slap curbs on mobile companies’ merger with virtual network operators in the same circle. (BL)
Private sector and foreign banks have assured the government that they will consider a rate cut. (BL)
Fertilizer ministry pushes for gas pacts with suppliers, ask oil ministry to facilitate contracts. (BL)
Airline companies might have to axe 8,000 ground staff, if the government implements new ground handling policy. (BS)
Government is planning to put successful bidders of 3G spectrum in waiting list for issuing spectrum in nine circles. (BS)
Stainless steel importers have opposed import duty levied on alloys saying that the move is aimed at benefiting a single producer. (BS)
The tourism ministry has suggested hoteliers to cut room tariffs by 10-15%. (FE)
Textile ministry seeks government initiatives to avoid layoffs. (FE)
Petroleum ministry expresses inability to direct OMCs to procure ethanol at pre-determined price. (FE)
Bank credit rises by 28% yoy in October. (FE)
Cabinet may approve a new highway toll policy fixing toll rates across the country. (Mint)
Oil ministry is pitching for three oil blocks in Siberia. (Mint)