Whatever games are played with us, we must play no games with ourselves.
The games played in the stock market seemed to have given way for the day Dhoni’s dazzlers beat the sizzling Sensex! Dhoni & Co.'s historic win over Ricky Ponting-led Aussies seemed to outperform the events of the day. And rightly so, as we cannot ignore the fact that the rally (in the market) came on the worst traded turnover in 15 months. For the scores, the main indices surged by nearly 6% each, propelling the Sensex and the Nifty above 10k and 3k, respectively.
We’re back to the stock market game, which remains unpredictable till the end. There are no clear winners here as volatility rules. Today, we expect some cooling after Monday's strong rally, and weakness across global equities. Most players won't like to take undue risks at this stage, with Thursday being a public holiday, IIP data scheduled for tomorrow, and non-stop bad news coming from the global markets. Like in recent sessions, the markets could bounce back too. Wait for lower levels before buying. Don’t try match winning techniques for the day. Instead, look at long term strategies to win the championship, which means enhancing your portfolio value.
The dismal volume in the F&O segment on Monday was particularly disheartening. This shows that the bulls still don't have enough confidence to sustain any meaningful advance. What is needed is a strong comeback by the FIIs, which is not likely till risk aversion subsides substantially. This in turn hinges on how fast the global economy rebounds from what is now being seen as a long and painful recession.
Back home too, things are not looking all that rosy, what with reports emerging of the first drop in exports in five years in October. Reports say India's merchandise exports are likely to have dipped by 15% last month. The official data will be out on Dec. 1. Talking of macroeconomics, auto sales slumped in September, led by commercial vehicles. The IIP data for September will be out and expectations are that it could jump to 5-7% from August's paltry 1.3%. Like we mentioned yesterday, there is no dearth of bad news, both locally and globally, and it is not possible to dwell upon each one of them. All one can say in short is that we are in one of the worst economic and financial environment in decades. And, the troubles may not be over soon and will keep rearing the ugly head every now and again.
FIIs were net buyers of Rs923.3mn (provisional) in the cash segment on Monday while local institutions pumped in Rs3.77bn. In the F&O segment, they were net buyers at Rs2.09bn. On Friday, foreign funds were net buyers of Rs603mn in the cash segment. Mutual funds were net sellers at Rs817mn on the same day.
US stocks sank on Monday, as a raft of bad news hinting at a worsening economic situation offset China's big-bang stimulus package, and the Bush government's revamped bailout deal for insurance giant AIG.
The Dow Jones Industrial Average lost 73 points or 0.8% to end at 8,870.54 while the Standard & Poor's 500 index lost 12 points or 1.3% to close at 919. The Nasdaq Composite index shed 31 points or 1.9% to 1,616.
All three major US indices had risen in the early trading, before abandoning gains and turning lower.
Market breadth was negative. Almost three stocks dropped for each that advanced on the New York Stock Exchange.
The government said it was restructuring AIG's bailout plan, buying US$40bn in preferred stock, reducing its original US$85bn bridge loan to US$60bn, and cutting the interest rate by 5.5%. The total reworked deal is worth about US$152.5bn. The reworking acknowledges that the initial plan was insufficient to reverse AIG's slide.
Additionally, AIG reported a steep quarterly loss of US$24.5bn in the third quarter. Shares gained 8%.
Fannie Mae reported a steep quarterly loss of US$29bn. A large portion of the loss was due to a change in the way it accounted for tax credits. But even excluding that, results were far worse than a year ago, due to bad mortgage bets. Its shares fell 2.7%.
Citigroup is reportedly in talks to buy an unnamed regional bank, in the aftermath of its failure to buy Wachovia last month, according to The Wall Street Journal. Citi's shares fell 5%.
A number of financial stocks fell, including American Express, Goldman Sachs, Bank of America and Merrill Lynch.
Shares of leading automakers continued to plunge amid worries about their ability to stay afloat without government intervention. General Motors (GM) plummeted 23% and Ford lost 4.5%.
Both companies, along with Chrysler, are seeking help from the US government. On Friday, GM posted a steep loss and said it is running out of cash.
Deutsche Bank said shares of GM were likely worthless and that the company might not be able to fund its US business past December without the government's help.
Package-delivery firm DHL became the latest corporation to announce massive layoffs. DHL said it will cut 9,500 jobs as it ends air and ground operations within the US, focusing only on deliveries between the US and other nations.
Circuit City said last week that it would cut 17% of its domestic workforce and close 150 stores amid the sluggish economy and consumer spending slowdown. On Monday, the company filed for bankruptcy protection.
On the upside, McDonald's said worldwide sales at stores open a year or more jumped 8.2% in October, thanks to overseas consumers and demand for cheap food amid the recession. Shares gained 1.8%.
Telecom major Nortel Networks reported a quarterly loss versus a profit a year ago, and also said it was cutting 1,300 jobs. Shares fell 18.8%.
After the close, Starbucks reported weaker earnings and higher revenue, both of which missed estimates. Shares declined about 3% in extended-hours trading.
In global news, China announced a US$586bn stimulus package, aimed at tempering the impact of the global financial crisis.
The dollar gained against the euro and fell versus the yen. COMEX gold for December delivery rallied US$11.40 to settle at US$745.60 an ounce.
US light crude oil for December delivery gained US$1.37 to settle at US$62.41 a barrel on the New York Mercantile Exchange.
Gasoline prices fell another 1.9 cents to a national average of US$2.24 a gallon. The decline marks the 54th consecutive day that prices have decreased. During that same time period, prices dropped by US$1.61 a gallon, or 41.9%.
The credit market continued to improve. The 3-month Libor fell to 2.24% from 2.29% on Friday, a nearly four-year low. Overnight Libor inched higher to 0.35% from 0.33% Friday, after hitting an all-time low of 0.32% last week. Libor is a key inter-bank lending rate.
The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, inched lower to 0.21% from 0.26% on Friday, with investors preferring to take a small return on their money rather than risk the stock market.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.75% from 3.78% on Friday.
Mining companies led European shares higher on Monday. The pan-European Dow Jones Stoxx 600 index rose 0.8% to 220.96, amid strong gains from basic resources companies. The UK's FTSE 100 closed up 0.9% at 4,403.92, while Germany's DAX 30 climbed 1.8% to 5,025.53 and the French CAC-40 advanced 1.1% to 3,505.75.
The BSE benchmark Sensex ended above 10,500 levels following gains in the equities markets across US, Asian and Europe after China unveiled a US$586bn stimulus plan. Also the NSE Nifty index surged 175 points to close above the 3,100 mark.
The rally was led by the metal, Power and capital goods stocks. Finally, the BSE benchmark Sensex surged 571 points or 5.7% to close 10,536 and the NSE Nifty index was up 175 points to close at 3,148.
Among the 30-components of Sensex, 28 stocks were in the positive terrain and 2 stocks ended in the red. Reliance Industries, ICICI Bank, Bharti, Infosys and ONGC were among the major gainers. On the other hand, ITC and Maruti were among the major laggards.
Market breath was weak, 1,611 stocks declined against 892 advances, while, 81 stocks remained unchanged.
Gujarat NRE Coke surged by over 3% to Rs31.6 after reports stated that it the company is in the process of setting up a one-million-tonne coke making plant near Krishnapatnam in Andhra Pradesh. The scrip touched an intra-day high of Rs32 and a low of Rs31.2 and recorded volumes of over 7,00,000 shares on BSE.
Shares of Lanco advanced by 7.5% to Rs182 after reports stated that the company has emerged as the sole bidder for the Punjab government's 1,200 MW thermal plant at Rajpura. The scrip touched an intra-day high of Rs187 and a low of Rs171 and recorded volumes of over 88,000 shares on BSE.
Elder Pharmaceuticals gained by 1.6% to Rs256 after reports stated that the company has entered into a manufacturing and marketing agreement with Japanese pharma company, Daiwa Pharmaceuticals. The scrip touched an intra-day high of Rs263 and a low of Rs254.
Markets may look to extend gains atleast in the morning trades. However, having said that good times may not last too long, as the overall trend still remains negative due to the global economic gloom. Global cues would play an important role in providing direction to Indian bourses.