Life can be understood backward but must be lived forward.
Most people have yet to understand what went wrong in 2008. We can be creative enough to write and rewrite history and its impact. The fact remains that the year has come to an end but the worries have not. Thankfully, the year-end rally that seemed to be over last week found a new lease of life. The main indices have gained 4% each in the past two days, buoyed by a firm trend in global markets and expectations surrounding the new stimulus package. Media has been abuzz with speculation of another round of fiscal measures to give further fillip to a slowing economy. And, with inflation cooling off substantially, the RBI too is expected to trim key short-term rates and the CRR. An announcement on fiscal stimulus and rate cuts is expected soon.
Reports suggest that the Government may lower fuel prices next month before the Model Code of Conduct for the Lok Sabha elections comes into force. What has also spurred the bulls is the lack of bad news on the global front, barring the Israel-Hamas conflict. The toning down of war rhetoric by both India and Pakistan is another plus point.
The market may turn a bit choppy and sideways in the next couple of days as several key global markets will be shut on account of the New Year. Japan and Korea will resume trading only on January 5. Others may not see any meaningful trading till at least Monday. India Inc will start revealing its now much awaited report card in the next few sessions. Though the market has already priced in some bad news on this front, one cannot afford to ignore corporate earnings. Politics too will continue to be one of the dominant themes going ahead.
On the whole, the undertone doesn't appear to be too pessimistic as of now. The recent spurt, which took a bit of a breather last week, is likely to continue for a while unless we get fresh bad news (local or global). Today, we expect the bulls to remain in command, as most global markets are up.
Satyam will continue to hog the limelight as the promoters try to restore confidence and trust among various stakeholders. Its board will meet on January 10 to consider strategic options. Change in top management could be in the offing given the enormity of investor backlash. Meanwhile, reports suggest that another top global IT major is eyeing the software major.
FIIs were net buyers of Rs2.15bn (provisional) in the cash segment on Tuesday while the local institutions poured in Rs3.75bn. In the F&O segment, the foreign funds were net buyers at Rs6.44bn. The foreign funds were net sellers at Rs103mn in the cash segment on Monday while Mutual Funds, on the other hand pumped in Rs1.61bn.
US stocks ended the penultimate trading day of the year on a high, with the key indices notching up gains of over 2% each, as investors snapped up a slew of shares hit hard during this year's market meltdown.
A late rally in financial shares and the Bush government's US$6bn aid to General Motors' financial arm, GMAC, added to the bullish sentiment. Hope for the battered auto industry helped offset morning news that consumer confidence slumped to a record low.
The Dow Jones Industrial Average rose 184 points, or 2.2%, to 8,668, with 28 of its 30 blue-chip components advancing, led by a 5.5% gain in GM and a nearly 10% rise in shares of aluminum giant Alcoa.
The S&P 500 index gained 21 points, or 2.4%, to 890, and the Nasdaq Composite index advanced 40 points, or 2.7%, to 1,550.
All three major gauges jumped in the first few minutes of the session. The advance lost some steam after the release of weak economic reports, but then recharged as the session wore on.
With one session left, Wall Street is currently on track to close out its worst year since the 1930s. Year to date, the Dow industrials have slumped nearly 35%, the S&P 500 has lost 40%, and the Nasdaq Composite is off almost 42%.
Market breadth was positive. Trading volume remained very light, with many traders and investors absent in a holiday-shortened week.
GMAC, the lending arm of GM, said it will restart auto financing for more US customers because it has better access to funding after converting to a bank-holding company.
In addition, GMAC said it was receiving US$5bn from the government in exchange for preferred stock. GM could also get up to another US$1bn from the Treasury Department so it can take part in a deal to help GMAC raise more capital.
The latest round of funding for the stricken auto giant comes on top of the US$17.4bn in assistance the government agreed to provide GM and Chrysler earlier this month.
Shares of smaller rival Ford Motor rose more than 3%. Ford wasn't part of the federal assistance program.
The materials sector was among the leaders of the S&P 500, fueled by a 12% advance in shares of Rohm & Haas. Dow Chemical may be able to use a US$13bn bridge loan to fund its acquisition of Rohm & Haas, according to a report in the Financial Times.
On Monday, shares of both firms slid as the deal seemed in jeopardy after Kuwait pulled out of a joint venture with Dow Chemical. Both Moody's and S&P downgraded their credit ratings on the chemicals giant late on Monday.
In the day's economic reports, consumer confidence hit a record low in December, according to the monthly Conference Board index, as worries deepened about current business and labor-market conditions. The December consumer confidence index fell to 38 from a downwardly revised 44.7 in November. Economists had expected a reading of 45.8.
Separately, the S&P Case-Shiller index showed new home sales plunged 18% in October, a record decline. Prices in top 20 markets it measures have plunged for 27 months in a row.
The Chicago PMI, a regional reading on manufacturing, was little changed in December from November's recessionary levels. PMI rose to 34.1 from 33.8, versus forecasts for it to drop to 33.
The Wall Street Journal reported that home and auto insurer Nationwide Mutual Insurance Co. will close a US$2.48bn deal on Jan. 1 to buy back the 34% of Nationwide Financial Services that it doesn't currently own.
Treasury prices dipped modestly, raising the corresponding yield on the benchmark 10-year note to 2.28% from 2.25% on Monday. Yields on the 2-year, 10-year and 30-year Treasurys all hit record lows last week.
Lending rates were mixed. The 3-month Libor rate slipped to 1.44% from 1.46% on Monday. The overnight Libor rate edged up to 0.14% from 0.12%. Libor is a key bank lending rate.
The dollar fell against the euro and yen. COMEX gold for February delivery fell US$5.30 to settle at US$870 an ounce.
US light crude oil for February delivery fell 99 cents to settle at US$39.03 a barrel on the New York Mercantile Exchange, after gaining 13% over the previous two sessions in the wake of an intense military conflict between Israel and Hamas.
Gasoline prices fell 0.3 cent to a national average of US$1.616 a gallon, according to a survey of credit-card swipes released Tuesday by motorist group AAA.
European shares rose in thin trading on Tuesday. The Dow Jones Stoxx 600 index rose 1.8% to stand at 196.90.
Data showed the German inflation rate dropped to 1.1% in December, the lowest in more than two years, due to the slump in oil prices.
Other European economic data showed house prices fell sharply in Spain in the third quarter, dropping 3% on an annual basis. House prices had fallen just 0.3% in the second quarter.
Germany's DAX 30 closed up 2.2%, adding 105.34 points to reach 4,810.20 in a shortened final session of the year. The rally left the country's benchmark index down 40.4% over the course of the year - its first down year since 2002, when the index plunged around 44%.
The French CAC 40 climbed 2.8% to 3,217.13, while the UK's FTSE 100 index rose 1.7% to 4,392.68. Both markets will close early on Wednesday.
Firm cues from the Asian markets coupled with buying in index heavyweights lifted the markets in the early trades. However, key indices turned flat in the mid afternoon trades as Asian markets slipped in the red. From thereon, buying in scrips across the sectors along with positive cues from the equity markets across Europe lifted the Indian burses.
The interest rate sensitive stocks were in momentum on expectation that the RBI may announce another reduction in interest rates. Also the second rung stocks witnessed buying.
The BSE benchmark Sensex finally ended at 9,716 gaining 182 points and the NSE Nifty index ended at 2,979 advancing 57 points.
All the BSE Sectoral indices ended in the positive terrain with BSE Realty index (up 3.5%), BSE Auto index (up 3%), BSE Capital Goods index (up 3%) and BSE IT index (up 2.5%).
Market breath was positive, 1,644 stocks advanced against 810 declines, while, 82 stocks remained unchanged.
Among the 30-components of Sensex, 29 stocks were in the green and only 1 stock ended in the negative terrain. L&T, ICICI Bank, RCom and Satyam were among the major gainers. While, Grasim was the only loser.