It is the mark of an educated mind to be able to entertain a thought without accepting it.
The bulls may have enjoyed the strong bounce back on Friday after a seven-day rout. Don’t accept it as yet though we could see a few hundred point gains intra-week for the Nifty. This week may be a bit heavy in terms of news flow. Trading may be a lot more volatile given the F&O expiry on Thursday and anxiety over the Q2 GDP data, to be unveiled on Friday. The reports of the Government planning a mega fund for financing key infrastructure projects may provide some more succor to a battered market. But, what the market seems to be eagerly awaiting is another round of rate cuts. The RBI governor will meet top bankers on Nov. 28 to assess the local situation. With inflation cooling substantially from August's peak, and expectations of further moderation on the cards, the central bank may well oblige the markets and India Inc. What is uncertain at this point in time is the timing and the size of the revision in policy rates.
One good thing for global bulls is that the US markets will be shut on Thursday due to Thanksgiving Day, and will have only half-day on Friday. But, before that one will have to contend with some more grim data on the health of the world's biggest economy, including the revised Q3 GDP data. Reports of a tacit agreement between Citigroup and the US government on a bailout, coupled with Barack Obama's scheduled announcement of his crack economic team later today might boost sentiment. In the meantime, the UK will announce its own stimulus package today while the European Commission (EC) will unveil plans to help the eurozone recover from the unprecedented financial crisis. OPEC is to hold an emergency meeting on Nov. 29, to discuss the sharp cut in oil prices. The largely Arab-dominated oil producers' cartel might also consider fresh steps to arrest the slide in crude prices.
Coming to today's trade, we see a cautious opening after Friday's big rally. Also, Asian markets are down 1-2% this morning. The Japanese markets are shut today. We expect the market to be more sideways and choppy. The downside may be capped unless the economic reports (global and local) turn out to be really awful. Any other negative news from global markets could add pressure. The crisis of confidence is still in place, as global fund flows are drying up in the face of the massive de-leveraging process.
Though stocks may have fallen to attractive levels, the pain in the real economy could last much longer than one can imagine. Long-term investors can, however can dabble in stocks from time to time (and take home money in the short term too). Opportunities to buy will be many over the next few months.
FIIs were net sellers of Rs7.05bn (provisional) in the cash segment on Friday while the local institutions pumped in Rs462.2mn. In the F&O segment, foreign funds were net buyers of Rs3.23bn. On Thursday, FIIs were net sellers at Rs6.5bn in the cash segment. Mutual Funds net sold Indian shares worth Rs987mn on the same day.
US president-elect Barack Obama is scheduled to formally announce formation of his crack economic team later today. US stocks rallied on report that Obama would nominate New York Federal Reserve Bank President Timothy Geithner to be the nation's Treasury secretary. The Dow Jones Industrial Average gained 6.5%, or 494 points, to close at 8,046. Obama on Saturday offered an outline of his economic recovery plan to create 2.5mn jobs by 2011, but details of the plan are still under wraps.
Citigroup and the Bush administration have reportedly reached an agreement over the troubled US banking major's bailout after its stock plunged 60% last week amid uncertainty surrounding its financial health. The plan will help remove billions of dollars in toxic assets from Citi's balance sheet, the Wall Street Journal (WSJ) reports. The agreement, which is still under discussion and could fall apart, the leading American financial newspaper adds.
Wall Street will have a truncated week due to the Thanksgiving holiday. Black Friday is the traditional start of the US Christmas shopping season. For a holiday-shortened trading week, there's a lot on tap, with a series of economic reports jammed in the day before Thanksgiving. The buffet includes revision of Q3 GDP data, reports on jobless claims, income and spending, manufacturing, housing and consumer sentiment.
According to the Stock Trader's Almanac, between the Wednesday before Thanksgiving and the Monday after, the Dow has gained in 14 of the last 20 years by an average of 470 points. But in a year in which seasonal factors haven't been relevant, the Thanksgiving cheer that often pushes stocks higher may not be in effect. Holiday trading weeks are typically low trading volume and that can exacerbate volatility.
Meanwhile, British Prime Minister Gordon Brown is also expected to unveil his big economic stimulus package, consisting largely of temporary tax cuts, today. "To do nothing ... would be irresponsible," Brown said Sunday. "To take action would be to prevent things getting worse."
Asian stocks declined today, as bank funding costs increased and Suncorp-Metway (Australia’s third-largest insurer) raised its forecast for bad debts, fueling concern that the credit crisis is hurting profits at financial companies. The yen has climbed against the dollar and the euro as discussions over a possible US government bailout of Citi prompted investors to shun higher- yielding overseas assets funded from Japan.
Most Asian markets fell, with Japan shut for a holiday. The MSCI Asia Pacific (ex-Japan) Index declined 1.1% to 205.90 as of 10:11 a.m. in Hong Kong. Financial stocks contributed the most to the drop. The index is down 61% this year. Australia’s S&P/ASX 200 Index fell 0.8% to 3,388.70. South Korea’s Kospi Index lost 2.4%. The Hang Seng was down 1.4%.
US stocks rallied Nov. 21, pushing the S&P 500 up 6.3%, after President-elect Barack Obama picked New York Federal Reserve Bank chief Timothy Geithner to head the Treasury. The Dow Jones Industrial Average rose 494 points, the fifth-biggest single-session point gain ever, according to Dow Jones. The Standard & Poor's 500 index gained 6.3% and the Nasdaq Composite added 5.2%.
Stocks rallied in the morning on reports that troubled Citi might put itself up for sale. But the company's CEO shot down the rumors in a call with senior managers, sending Citi's shares and the broader market lower.
The market managed to snap back in the last hour of trading as reports about the president-elect's cabinet appointment circulated. The Dow had been down around 32 points as of 3:00 p.m. ET and spiked as much as 519 points after the reports began to circulate.
US stocks had also been primed for a bounce back anyway, after the S&P 500 ended the previous session at an 11-1/2-year low and the CBOE Volatility index ended at an all-time closing high.
For the week, the Dow lost 5.3%, the Nasdaq lost around 8.5% and the S&P lost 8%.
US light crude oil for January delivery rose 51 cents to settle at $49.93 a barrel on the New York Mercantile Exchange, in the first day of trading for the new contract.
For the first time in 3-1/2 years, gasoline prices fell below $2 a gallon, losing 3.1 cents to a national average of $1.989 a gallon. Gasoline prices have been dropping for over two months. In that time, prices have lost $1.84 a gallon, or over 52%.
The dollar fell versus the euro and gained against the yen. COMEX gold for December delivery rallied $43.10 to settle at $791.80 an ounce.
Treasury yields bounced back on Friday after the two-year, 10-year and 30-year government bonds all finished the previous session at the lowest levels since the Federal Reserve started keeping records in 1962.
The yield on the 3-month Treasury bill hung close to 68-year lows of zero, versus a yield of 0.01% on Thursday. The 3-month - seen as the safest place to put money in the short term - last hit these levels in September as investor panic peaked. The low yield means nervous investors would rather preserve their money despite no interest rather than risk the stock market.
Borrowing rates worsened a bit. The 3-month Libor rate rose to 2.16% from 2.15% Thursday, while overnight Libor rose to 0.47% from 0.44% on Thursday. Libor is a key bank lending rate.
Stocks in Europe couldn't hold on to early gains on Friday. After early gains of as much as 1.9% on optimism over a report Citigroup may sell itself, the Dow Jones Stoxx 600 index ended 2.6% lower to 181.91. The French CAC 40 fell 3.3% to 2,881.26 and the UK's FTSE 100 dropped 2.4% to 3,780.96. Germany's DAX 30 slipped 2.2% to 4,127.41.
Indian shares bounced back with a vengeance, snapping a seven-session losing streak, as stocks across Asia and Europe rebounded amid reports that troubled Us banking major Citigroup was considering an outright sale. The New York Bank's board will discuss the proposal at a meeting later today.
Some analysts also attributed today's gains to a short squeeze after the key indices lost some 20% in seven successive sessions. The Prime Minister's reassurance that the Government will take every step possible to combat the fallout from the global financial turmoil also had some soothing effect on sentiment.
The BSE Sensex ended the day at 8,915, up 464 points or almost 5.5% from the previous close. It earlier touched a high of 8,988 and a low of 8,442. The Nifty surged by 140 points or 5.5% to close at 2,693 after being as high as 2,718 and as low as 2,539.
The BSE Small-Cap and Mid-Cap indices were not so lucky as their frontline peers. The two broader market indicators gained just 0.2% and 0.7%, respectively.
Barring Real Estate, all the BSE sectoral indices ended up, led by Power (6%), Oil & Gas (5.7%), Capital Goods (5.6%), IT (4.85%) and Banking (4.6%). The BSE Metals, Auto, Pharma, Consumer Durable and FMCG indices gained 1.5% to 3%.
The BSE Realty index ended down 2%, off the day's lows. At one point, it was down 9% after yesterday's rout. The sector continues to bear the brunt of the worsening outlook amid a supply glut, dwindling demand and liquidity crunch.
Within the Sensex, the big gainers were Reliance Infra (14%), RCOM (13.6%), Sterlite (9.1%), NTPC (8.8%), HDFC (8.5%), SBI (8.3%), TCS (7.9%), BHEL (7.3%), L&T (6.75%), RIL (6.5%) and ONGC (6.1%).
Maruti, Tata Motors, Infosys, ICICI Bank, Wipro, Bharti Airtel, HDFC Bank, Grasim and Hindalco were the other top gainers, rising by 3-6%. DLF (3.4%), Jaiprakash Associates (2%), ACC (2%) and Tata Power ended on the losing side.
GVK Power, Indo Tech Transformers, IVRCL Infra, Deccan Chronicle, NALCO, Jai Corp, Great Offshore, Jagran Prakashan, 3M India, LIC Housing, Ruchi Soya, KEC International, Indiabulls Realty and Suzlon were the notable gainers outside the main indices.
Ultratech, Usha Martin, Gujarat Fluro, Aptech, Finolex Cables, Amtek India, JSW Steel, Ashapura Minechem, KEI Industries, Unity Infra, Greaves Cotton, Dredging Corp., United Spirits, Future Capital, Everest Kanto, Jubilant Organosys, KLG Systel, Bhshan Steel and Megasoft were among the top losers.
The market breadth continued to be negative, as 1,177 shares advanced on the BSE and 1,293 shares declined, while 96 scrips remained unchanged.
Total turnover in the BSE cash segment was at Rs35.8bn compared to Rs28.99bn on Thursday. Traded volume too increased to 275.8mn shares from 221.7mn shares in the previous session.
On the NSE, the cash segment turnover was Rs94.85bn as against Thursday's Rs77.94bn. Traded volume stood at 594.79mn shares versus 483.6mn shares traded in yesterday's session.
FIIs were net sellers of Rs7.05bn (provisional) in the cash segment today while the local institutions pumped in Rs462.2mn. On Thursday, the foreign funds were net sellers at Rs6.5bn in the cash segment. Mutual Funds net sold Indian shares worth Rs987mn on the same day.