In the business world, the rearview mirror is always clearer than the windshield – Warren Buffet.
Headwinds are leaving their ugly mark on the windshields of the investors. The rearview brings some hope that measures in the recent past are slowly bringing in the desired results. At least on paper! After a welcome break, the bulls have something to cheer about. A major source of relief for the battered and bruised stocks will be the unexpected sharp drop in inflation. The positive surprise has triggered speculation about further easing in monetary policy, as policymakers attempt to bolster growth in the face of a severe economic downturn worldwide. The expected announcement from the RBI could come over the next few days (may even happen over the weekend). The impending policy measures, coupled with the rebound across worldwide equity markets could well ensure a happy ending to an otherwise turbulent and highly volatile week.
Like we said, the windshields don’t offer a clear view as yet. Do not overlook the raft of grim news (both economic and corporate) over the past several days, including Thursday when our markets were shut. They point to a rapidly worsening economic and business climate around the globe. Global recession is more or less factored in but the crux of the matter is the crisis appears to be worsening by the day. The slew of steps taken by global policymakers to stem the tide do no appear to have bore fruit as yet, except for the softening in Libor rates. When will this bloodbath end? No one really has the answers. Coming to today's trade, we see a strong opening, and if all goes well, a bright day for the bulls. But, as usual, we continue to advocate caution.
FIIs were net sellers of Rs7.35bn (provisional) in the cash segment on Wednesday while local institutions pumped in Rs2.15bn. In the F&O segment, they were net sellers at Rs3.9bn. On Monday, foreign funds were net buyers of Rs1.35bn in the cash segment. Mutual funds were net buyers at Rs5.05bn on the same day.
Leaders of G-20 - a group of leading developed and emerging nations - are scheduled to meet today in Washington to discuss the financial meltdown and the global economic slump, along with fresh remedial measures. The yen rose against the dollar and the euro on speculation that the G-20 summit will fail to reach a consensus on how to kick-start the global economy. Under debate are proposals ranging from curbing executive pay and restraining hedge funds to raising capital requirements for banks and subjecting credit-rating companies to stiffer oversight.
China's spending on factories and real estate cooled in the first 10 months, adding to weaker growth in industrial output, trade and inflation in signaling that a slowdown is deepening in the world's fourth-biggest economy. Europe's economy probably fell into its first recession in 15 years in the third quarter, paving the way for deeper cuts to interest rates and taxes amid the worst financial crisis since the Great Depression.
Oil prices rose for a second day in New York, extending its rebound from a 21-month low. Crude oil for December delivery rose as much as $1.72, or 3%, to $59.96 a barrel on the New York Mercantile Exchange. It was at $58.48 a barrel at 9:54 a.m. Singapore time. Prices have tumbled 60 percent from a record $147.27 on July 11.
US stocks bounced back with a vengeance on Thursday, with the Dow Jones Industrial Average posting its third best single-session point gain ever after wild swings in both directions.
The rally came even as the raft of bad news on the economy and earnings front continued unabated, with investors reeling in the face of rising unemployment claims and reduced outlooks from Intel and Wal-Mart.
After rising more than 100 points at the start, only to lapse below 8,000 for the first time since Oct. 10, the Dow traded up and down in a 911-point range to end at 8,835.25, up 552.59 points or 6.7%.
Twenty-two of the blue-chip index's 30 components gained ground. Blue-chip financial shares were among those tallying losses.
Intel shares gained 6.7% after it cut its outlook late Wednesday, warning fourth-quarter revenue would be as much as 17% lower than previously forecast due to significantly weaker-than-expected demand in all geographies and market segments.
GE shares ended lower by 4.2% amid talk of a government bailout of the beleaguered US auto industry. GE shares were up 3.5%, reversing course on declines that came on renewed speculation the industrial conglomerate may have to raise additional cash to cover higher debt costs.
Wal-Mart advanced 4.4% after the retailing giant reported a better-than-forecast 10% profit rise in the third quarter but lowered its 2008 earnings outlook.
After lapsing to a low not seen since early 2003, the S&P 500 turned upwards, climbing 58.99 points, or 6.9% to 911.29. Energy, financials and materials fronted the solid gains that included all 10 of the S&P's industry groups.
The technology-laden Nasdaq Composite surged 97.49 points, or 6.5%, to settle at 1,596.70.
Market breadth was positive. More than 14 stocks rose for each that fell on the New York Stock Exchange, where almost 2 billion shares changed hands in the busiest trading session since Oct. 16.
US stocks had tumbled each day this week and through early Thursday afternoon. But the sell-off left the major indices at levels that many market analysts thought could represent a bear market bottom, at least in the near term.
As soon as the Dow fell below 8,000, we saw a rush of buying. It was the second time the market "retested" those lows, which were first hit around Oct. 10. The major indices slumped to around those levels at the end of October and now again in mid-November.
A key benchmark for tracking European shares moved modestly lower on Wednesday, as investors eyed more bad news on the global economy, although gains from Siemens and BT Group took the edge off losses.
The pan-European Dow Jones Stoxx 600 index dipped 0.6% to 204.08 and is now roughly 45% lower over the past year.
The French CAC-40 index advanced 1.1% to 3,269.46 and Germany's DAX 30 index rose 0.6% to 4,649.52, while the UK's FTSE 100 index fell 0.3% to 4,169.21. Austria's ATX tumbled 4.9% to 1,778.93.
After another volatile day of trade, the BSE Sensex closed at 9,536.33, down 303 points or 3% over the previous close. It touched a high of 9,928 and a low of 9,376 during wild intra-day swings. It had lost 6.6% on Tuesday.
On the other hand, the NSE Nifty shut shop at 2,848, down 90 points or 3%. It had been as high as 2,975 and as low as 2,794 in intra-day trading.
The BSE Small-Cap index and the BSE Mid-Cap index were down 1.9% and 2.25%, respectively.
In terms of sectors, the worst hit were Real Estate (down 7.3%), Banking (down 4.4%), Metals (down 3.7%), Capital Goods (down 3.6%), Power (down 3%) and Oil & Gas (down 3%). Auto, FMCG and Pharma stocks lost 2.3% and 1.4%, respectively.
Only the BSE IT index (down 0.08%) escaped unhurt from today's sell-off.
Within the Sensex, the biggest losers were Jaiprakash Associates (down 9.1%), DLF (down 8.3%), ICICI Bank (down 8%), Hindalco (down 5.6%), Hindustan Unilever (down 4.7%), Sterlite (down 4.5%), Reliance Infra (4.5%), M&M (4.3%) and L&T (4.1%).
Other big losers included Bharti Airtel, SBI, RIL, ONGC, Tata Steel, ACC, Tata Power, Ranbaxy, BHEL and Maruti.
TCS and Infosys bucked the negative trend, while fellow IT major Wipro ended flat. Satyam was down 1.6%.
Grasim ended marginally lower. HDFC and HDFC Bank were down over 1% each. ITC lost 1.4% and NTPC finished nearly unchanged.
Outside the main indices, the major losers were Mcnally Bharat, Indiabulls Real Estate, Great Offshore, Aban Offshore, Sterlite Technologies, Welspun Gujarat, Thermax, Zee Enterprise, Deccan Chronicle, IVR Prime, SAIL and Crompton Greaves.
Shares of Tata Teleservices (Maharashtra) jumped 7.6% to Rs17.99 after Japan's NTT DoCoMo said that it would buy a 26% stake in its parent, Tata Teleservices, for US$2.7bn. It will also make an open offer for another 20% shares.
Public sector oil marketing companies - IOC, HPCL and BPCL - were up as crude oil prices slipped to US$58 per barrel, almost a 20-month low. Meanwhile, Petroleum Minister Murli Deora said that the Government will consider lowering fuel prices when crude oil prices and the rupee stabilise.
Other prominent gainers outside the indices included the likes of Max India, Glenmark Pharma, Piramal Lifesciences, Allcargo Global, IOl Net Com, Madhucon Projects, Maytas Infra, Hindustan Zinc, Vijaya Bank, Cranes Software, Gujarat Gas and Tata communications.
In the day's crucial economic news, the IIP for September came mostly in line with expectations, as factories increased production ahead of Diwali. However, there are worries that the IIP for October and the coming months may throw up negative surprises.
The market rallied briefly after the release of the IIP data, but soon turned lower, as fears of a further slowdown in the Indian economy set in.