Most people ignore most poetry because most poetry ignores most people
The market conditions may make people turn to fiction and poetry for some time. Who wants to read crisis and job cuts all over. Even relatively positive news continue to get ignored. The market may have recovered towards the end of Monday but the outlook remains as murky and hazy as the Mumbai sky. IIP and inflation numbers were something to cheer about. But bulls chose to ignore the same. On Monday again, investors largely ignored the latest round of steps taken by the RBI to boost liquidity and spur lending by banks. Some soothing words from the Commerce Minister and expectations of a stimulus package from the Government too failed to lift the sagging spirits of the bulls.
The G-20 declaration too fell short of market expectations, as no concrete proposals came out of the much-hyped Washington summit. Perhaps further rate cuts could bring some temporary relief to the battered markets. Further rate cuts are inevitable, be it in India or elsewhere in the world, as the economic gloom is fast spreading its tentacles. One by one, the world's top nations are slipping into recession. So, if the eurozone fell into one last week, it was Japan's turn to make the dreaded announcement yesterday. The US, the UK and France too are on the brink of formally announcing a recession, though they may already have entered into one.
Adding to the grim situation are the daily announcements of job cuts. The latest, and perhaps the biggest one in the current crisis came from Citigroup on Monday. The New York bank is planning to lay off over 50,000 employees. The job losses are only going to mount going forward, as companies around the world move to cut costs amid gloomy prospects for future earnings. In the US, the Bush regime is debating a bailout for the Big Three automakers, as they slide towards bankruptcy, inflicting more damage to the already sinking economy.
A global recession was imminent, but no one knows how long it's going to last. For the short term, it makes sense to stay on the sidelines right now. We expect another weak opening given the fall across Asian markets and overnight losses in the US and Europe. And this time we aren’t recommending that you add some stocks. Volatility will remain high as has been the case in the past few sessions. The global de-leveraging process may continue for a while, as jittery investors run for cover amid no sign of a recovery in equity markets. Risk aversion is the name of the game today, and will continue till the blood-letting subsides.
FIIs were net sellers at Rs5.21bn (provisional) in the cash segment on Monday while the local institutions too pulled out Rs1.78bn. In the F&O segment, FIIs were net sellers at Rs1.06bn.
Foreign funds were net sellers of Rs5.64bn on Friday, taking it's total outflows in the year 2008 to US$12.8bn. Mutual Funds were net sellers in the cash segment at Rs3.05bn on Friday.
US stocks continued their descent on Monday, extending the big sell-off on Friday, as reports that Citigroup is planning massive job cuts and persistent weakness in the nation's manufacturing sector heightened concerns over deteriorating economic gloom.
US stocks tumbled through the morning but turned higher near midday before retreating again in the afternoon. Trading volume was light, with investors holding back ahead of some key economic reports due later in the week and the hearings on the future of the Detroit automakers.
The Dow Jones Industrial Average slid 223.73 points, or 2.6%, to 8,273.58, with aluminum producer Alcoa pacing the slide, off 10.8%. Of the blue-chip index's 30 components, 27 closed in the red.
The S&P 500 Index shed 22.54 points, or 2.6%, to 850.75, while the Nasdaq Composite Index lost 34.8 points, or 2.3%, to end at 1,482.05. Financials, consumer discretionary and materials led declines, which included all of the S&P's 10 industry groups.
Market breadth was negative. Three stocks fell for each that rose on the New York Stock Exchange.
Shares of Citigroup slumped 6.6% after the bank said it would cut about 50,000 jobs in the latest and perhaps the biggest round of layoffs in the battered financial sector. The New York-based bank has already slashed its payrolls by around 23,000 over the last year. In addition to job cuts, Citi is looking to cut expenses by about 20%, and that it has already cut its assets by over 20% since the first quarter of 2008.
GM shares were up 5.7%. The automaker - looking for a bailout from Washington - said it would raise US$232mn by selling a 3% stake in Japan's Suzuki Motor Corp.
On Capitol Hill, Democratic lawmakers and the Bush administration agreed on the need for federal help for GM, Ford and Chrysler. However, they failed to agree on details, including how much money should be involved or where the funds would come from.
US Congress is debating this week whether to bail out the hard-hit industry with an additional US$25bn in support on top of the US$25bn GM, Ford and Chrysler have already received. The money would come from the US$700bn bank bailout plan and a vote is expected as soon as Wednesday.
Over the weekend, Goldman Sachs said seven top executives, including the company's chief executive, have opted out of receiving cash or stock bonuses this year as a result of the ongoing credit crisis. Shares fell 6.4%.
UBS said that in 2008 it will stop making bonus payments to top executives and that next year it will not pay a bonus to its chairman. In addition, in 2009, top executives will be penalized if the bank performs badly. Shares gained 1.7%.
Retail major Target reported a steep decline in third-quarter earnings that met estimates and a rise in revenue that was short of forecasts. Like many retailers, the company has seen weaker sales amid a consumer spending slowdown. Its shares slipped 4%.
Another retailer, Lowe's too reported weaker quarterly earnings that topped forecasts.
In the day's economic news, the New York Empire State index, a regional reading on manufacturing, worsened to negative 25.4 in November from negative 24.6 in October. That was short of forecasts for a reading of negative 26 but still brought the index to the lowest point in its seven-year history.
Another report showed industrial production grew more than expected in October after September's drop-off, the worst in 62 years. Capacity utilization increased a bit short of forecasts.
Reports are due later in the week on producer and consumer prices, housing starts and building permits, leading economic indicators and the minutes from the last Federal Reserve meeting.
The US is already in a recession and likely to stay in a recession for quite some time, according to a majority of economists surveyed by the National Association for Business Economics. Over the weekend, Japan said it is in recession, joining Europe and other nations.
The dollar fell against the euro, but gained versus the yen. COMEX gold for December delivery fell 50 cents to settle at US$737.40 an ounce.
US light crude oil for December delivery eased US$2.05 to settle at US$54.95 a barrel on the New York Mercantile Exchange, the lowest close since January 2007.
Gasoline prices dipped another 1.8 cents to a national average of US$2.087 a gallon. The decline marks the 61st consecutive day that prices have decreased. During that time, prices dropped by US$1.77 a gallon, or 45.8%.
Treasury prices gained, lowering the yield on the benchmark 10-year note to 3.67% from 3.72% late on Friday.
The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, fell to 0.09 from 0.12% on Friday, with investors preferring to take a piddling return on their money than risk the stock market. In September, the 3-month yield reached a 68-year low around 0% as investor panic peaked.
European shares declined for the fourth time in five sessions. The pan-European Dow Jones Stoxx 600 index fell 2.6% to 200.37. The UK's FTSE 100 closed down 2.4% at 4,132.16, while Germany's DAX 30 dropped 3.3% to 4,557.27 and the French CAC-40 declined 3.3% to 3,182.03.
In the emerging markets, the Bovespa in Brazil was down 0.20% at 35,717 while the Bolsa index in Mexico fell 0.75% to 19,562. The RTS index in Russia tumbled nearly 6% to 605 and the ISE National-30 index in Turkey slid 5.8% to 30,525.
Indian stocks managed to engineer a smart recovery in late afternoon trade, but still ended lower for a fourth consecutive day. Mounting concerns over a deepening global economic slump countered new measures by the RBI to shore up liquidity and pump-prime the credit markets.
A possible relief package for the troubled exporters later today also failed to improve the sentiment, as data released today showed that Japan has entered into a recession. Last week, eurozone slipped into a recession, led by Germany and Italy. Hong Kong too slipped into a recession last week.
The G-20 group's resolve to fight off the unprecedented financial crisis through more coordinated efforts also didn't have any positive effect on Indian stocks. Britain's biggest business lobby said that the UK recession may be deeper than earlier predicted.
After yet another volatile day, the BSE Sensex closed at 9,291, down 94 points or 1%. It had earlier been as low as 8,956 and as high as 9,435. It opened at 9,396 as against Friday's close of 9,385. The index has lost 54% in 2008, making it one of the worst performers in Asia.
The BSE Small-Cap and Mid-Cap indices fared worse, falling by 2.75% and 2.5%, respectively.
The NSE Nifty shut shop at 2,799, down 0.4% after touching a low of 2,694 and a high of 2,835. This was the Nifty's lowest close since Oct. 29.
The market breadth was negative on the BSE, with 1800 shares declining and 679 shares advancing.
Total turnover in the NSE's cash segment was at Rs89.02bn versus Friday's Rs107.77bn. Traded volume stood at 5567.96 lakh shares versus 6,299 lakh shares on Friday.
Real Estate (5.2%), Banking (3.9%), Consumer Durable (3.3%) and Metals (3%) were among the biggest losers among BSE sectoral indices. FMCG (1.9%), auto (1.4%), Power (1.3%), Capital Goods (1.2%) and Pharma (1%) were the other notable losers.
BSE Oil & Gas index lost relatively less ground, on account of gains in public sector oil companies, even as Cairn, Gail, Essar Oil and RNRL came under pressure. IT stocks outperformed the market, led by gains in Wipro and Infosys. Satyam, TCS and Tech Mahindra still ended lower.
Within the Sensex, the top losers included HDFC Bank (7.7%), Reliance Infra (6.2%), Tata Steel (4%), DLF (3.9%), HDFC (3.8%), Satyam Computer (3.7%) and Hindalco (3.3%). Tata Power, ITC, M&M, ICICI Bank, TCS, Jaiprakash Associates and Ranbaxy lost 1-3%.
The list of big gainers was led by Wipro (4.6%), ACC (4.3%), Tata Motors (2.6%), Maruti (2.45%), Bharti Airtel (2.3%), NTPC (1.2%), Infosys (1.2%) and BHEL (1%). ONGC ended marginally higher while Hindustan Unilever was almost flat.
Outside the main indexes, the big losers were Lanco Infra, Great Offshore, Amtek Auto, Jai Corp., Chambal Fertilizers, Pantaloon Retail and Jindal Saw, losing between 10-20%.
HCC, Kotak Bank, Mercator Lines, GE Shipping, Godrej Ind, NIIT, Thermax, JSW Steel, Axis Bank, Indiabulls Realty, NMDC and GMDC were the other prominent losers.
Among the biggest gainers outside the indices included Rolta, NALCO, Indiabulls Financial, EIH, ACC, Ambuja Cement, BPCL, Power Grid Corp, MTNL, HPCL, Bombay Dyeing, IOC, Idea, TTML, Bajaj Holdings and Mundra Port.
Kingfisher Airlines' shares rose 6.6% to end at Rs28.15 amid reports that the company is seeking the Government's approval to sell a 25% stake to a foreign airline. It touched a day's high of Rs31.60 after opening at Rs27.50.
Shares of other airlines were also up after public sector oil marketing companies cut jet fuel prices by 12% over the weekend. SpiceJet ended flat at Rs12.96 after touching a peak of Rs14. Jet Airways fell 1.1% to Rs179.50 after being as high as Rs193.
State-run oil marketing companies' shares advanced as crude oil continued it's descent, but Cairn India shares declined.
Shipping shares came under pressure after charter rates for the largest commodities ships slid to a record low.
Real estate developer Unitech fell 6.6% on worries about a Rs3.5bn debt to Indiabulls Financial Services due on Monday.
Unitech said in a statement to the stock exchange issued half an hour before the close that it had repaid the entire debt.
Godrej Consumer Products rose 1.% after the FMCG company said its board will meet Nov. 25 to consider a share buyback.