A weak man has doubts before a decision, a strong man has them afterwards.
Well, the outcome of the much hyped G-20 summit over the weekend was a bit of a damp squib. Leaders of the world's leading nations (advanced and emerging) failed to announce any major breakthrough initiatives, except for a symbolic appeal for a coordinated global action to tide over the unprecedented crisis. However, India can take some solace from the fact that the G-20 summit unanimously decided to shun protectionism and give more say to developing economic powers like China and India in managing the global financial architecture.
Back home, the RBI decided to take few more steps to limit the damage on the Indian economy. It has announced measures to boost dollar inflows by raising interest rates on NRI deposits. It has also decided to ease the liquidity pressure on Real Estate and NBFCs by lowering the provisioning and risk weight on loans to these battered sectors. The central bank will consider proposals for buy back of FCCBs, besides allowing registered housing finance companies to raise short-term loans overseas and extending the special repo for MFs and NBFCs.
The latest attempt by the RBI to ease the credit crunch is not a surprise given the extraordinary situation facing the Indian economy. It may at best bring some relief to the beleaguered financial markets, but is unlikely to lift the key stock indices beyond a few hundred points. The case in point is last week's trade, when the improved data on industrial production and a surprisingly sharp drop in inflation failed to perk up the markets. The fear is that the macro-economic numbers for the coming months may be even worse. The one bright spot could be further fall in inflation, could allow the RBI to announce more rate cuts.
Having said that, the recent past has shown that any measures announced by governments and financial regulators have had only a temporary effect on markets. The same trend may play out again today. The key indices might gain some ground after last week's rout (Sensex and Nifty down over 5% in four sessions!). But, one must be ready to see more red than green on screens, as the global economy is in dire straits, and may well remain bogged down for several months to come. For India, another factor could play spoilsport with markets; the slew of state polls in Nov-Dec and the general elections next year.
JSW Steel could see some action as it announces the formation of a joint-venture later in the day.
US stocks slumped on Friday, as the worst retail sales on record ignited fears of a long recession.
US stocks crumbled through the early afternoon as investors considered the bleak outlook for consumer spending. Selling pressure eased up in the middle of the afternoon and then returned near the close.
The Dow Jones Industrial Average fell 338 points, or 3.8%. Earlier, the blue-chip indicator had lost as much as 363 points and gained as much as 88 points. The Standard & Poor's 500 index skidded 4.1% and the Nasdaq Composite index shed 5%.
All three major stock indices slid on the week as well, with the Dow losing 5%, the S&P down 6.2% and the Nasdaq down 7.9%.
US sales in October posted the worst monthly decline since the Commerce Department initiated the current measurement standard in 1992.
The corporate news too was just as bad. Freddie Mac posted a big quarterly loss. Sun Microsystems announced massive job cuts and Citigroup is reportedly getting ready to announce layoffs.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by almost four to one on volume of 1.45 billion shares. On the Nasdaq, decliners topped advancers by more than three to one on volume of 2.31 billion shares.
After the close, Fidelity said it was cutting an additional 1,700 jobs in the first quarter of 2009 as part of an ongoing cost-cutting effort. A week ago the company said it was cutting 1,300 jobs.
Retailers J.C. Penney and Abercrombie & Fitch both reported lower quarterly earnings and issued bleak forecasts for the critical fourth quarter. Nokia said fourth-quarter sales for the broad mobile handset industry will decline, citing poor credit conditions and the weak economy.
A separate report showed a slight improvement in consumer sentiment, according to the latest survey from the University of Michigan. Sentiment rose to 57.9 in November from 57.6 in late October, versus forecasts for a decline to 57.
Investors were also gearing up for the Group of 20 meeting in Washington, which gathers leaders from around the world to address the global financial crisis. It kicks off with a White House dinner Friday.
The European economy is officially in a recession. Germany has already said it is in a recession. Hong Kong is also in a recession. And many economists think the US is in a recession, despite a lack of official declaration.
Federal Reserve chairman Ben Bernanke said that financial markets remain under severe strain. He pledged to continue working with central banks around the world and seemed to indicate the Fed could cut interest rates again at the December meeting.
The dollar gained against the euro, but fell versus the yen. COMEX gold for December delivery rallied $42.50 to settle at $742.50 an ounce.
US light crude oil for December delivery fell $1.20 to settle at $57.04 a barrel on the New York Mercantile Exchange.
Gasoline prices dipped another 2.6 cents to a national average of $2.152 a gallon. The decline marks the 58th consecutive day that prices have decreased. During that time, prices dropped by $1.70 a gallon, or 44.2%.
The cost of borrowing rose modestly, but remained near recently improved levels.
The 3-month Libor rose to 2.24% from 2.15% Thursday. Overnight Libor rose to 0.56% from 0.4% Thursday, and up modestly from 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, fell to 0.11% from 0.19% Thursday, with investors preferring to take a small 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.
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.72% from 3.86% on Thursday.
European shares gained ground on Friday, as oil producers put in a strong performance, although data showing that the euro zone tumbled into recession and a warning from Nokia served to underline the still-gloomy economic backdrop.
The pan-European Dow Jones Stoxx 600 index rose 0.8% to 205.76, paring losses over the past 12 months to roughly 45%.
The French CAC-40 index climbed 0.7% to 3,291.47, while Germany's DAX 30 index rose 1.3% to 4,710.24 and the UK's FTSE 100 index added 1.5% to 4,232.97.
Indian stocks ended lower for a third consecutive session on Friday, dragged down by sustained selling in index heavyweights, as investors ignored the surprising drop in inflation amid nagging worries over slowing economic growth.
The drop in Indian stocks was in contrast to gains across other Asian markets and a strong start to European indices following the rebound on Wall Street, though US stock futures were indicating a lower opening.
The key indices remained volatile due to growing pessimism over India's macro-economic fundamentals in the face of a global gloom.
At the 3:30 pm close in Mumbai, the BSE Sensex was at 9,385.42, down 150 points or 1.6% over the last close, after having rallied to a high of 9,836. It had touched an intra-day low of 9,267. The NSE Nifty closed at 2,810, down 1.3% over the last close. It had earlier been as high as 2,938, and as low as 2,778.
The BSE Small-Cap and Mid-Cap indices were down 1.3% and nearly 2%, respectively. Market breadth was highly negative, as 931 stocks advanced and 1,588 stocks declined on the BSE.
Within the Sensex, ACC was the top loser. The stock was down 8.9% at Rs418. Tata Motors was another big loser. The stock fell 8.5% to Rs136 after being as high as Rs159. Tata Steel, HDFC, Jaiprakash Associates, Reliance Infrastructure, L&T, BHEL, Sterlite and Maruti were down 4-6.5%.
M&M, Infosys, Wipro, ONGC, Grasim, DLF, Satyam and Reliance were down 1.3.5%.
Among the notable gainers included Bharti Airtel (3%), Tata Power (2%) and RCOM (1.9%). HDFC Bank, Hindustan Unilever, ITC and Hindalco finished almost unchanged.
Barring FMCG, all the BSE sectoral indices closed in the red. Capital Goods, Auto, Metals and Consumer Durables lost between 3.-4.5%. Power, IT, Real Estate, Pharma and Oil & Gas fell 1.-2.5%. The BSE Banking index was down 0.6%.
Outside the main indices, the top losers included Jai Corp, IVRCL Infra, Lanco Infra, GVK Power, Crompton Greaves, Oracle Financial, Mercator Lines, Zee, Praj Industries and LIC housing Finance.
Tata Tele (Maharashtra), HDIL, CESC, FT, HPCL, Tata Comm, MTNL, Idea and Cairn were the prominent gainers.