Year’s end is neither an end nor a beginning, but a going on, with all the wisdom that experience can instill in us.
Experience has taught us the hard way and markets are showing signs of fatigue. Bulls will hope this is a lull before a brief storm. Today, we expect the market to trend lower again, at least on start given continued weakness in Asian markets. Stock benchmarks also declined in the US and Europe. A bout of short-covering ahead of tomorrow's derivative settlement could prop up the indices later in the day. (Thursday is Christmas holiday).
Markets in other parts of the world may see a steep fall in trading as many players could extend their year-end vacation. As a result, there is a fair chance that volatility may increase on lower volumes.
The overall outlook remains uncertain, as nobody wants to take undue risks at this stage with only a few sessions to go in the year. Most players will take a call on the market only next year. Though the recent spurt across global equity markets has provided a much-needed boost to the bulls, one cannot rule out another steep fall. It's anybody's guess if the key indices will test October lows again or gradually advance. Much will hinge on the trend in fund flows and how fast the global economy rebounds.
As far as India is concerned, we will need proof that the string of government measures are working. There are reports of a fresh round of stimulus package being unveiled soon, including further easing in monetary policy by the RBI. But, these tend to provide only a brief relief to the market. One will also have to watch out for quarterly earnings and of course the political drama that will unfold over the next few months.
FIIs were net sellers of Rs1.9bn (provisional) in the cash segment on Monday while the local institutions poured in Rs2.07bn. In the F&O segment, the foreign funds were net sellers at Rs3.9bn. On Friday, FIIs were net buyers at Rs4.63bn in the cash segment. Mutual Funds pulled out Rs2.95bn on the same day.
US stocks ended lower on Monday after the Big Three automakers had their debt ratings cut despite the bailout package unveiled by White House last week. Sentiment was also hit after Japanese auto major Toyota forecast a loss for the year.
The Dow Jones Industrial Average slipped 59.42 points, or 0.7%, to 8,519.69. At one point, it was down more than 200 points.
The Standard & Poor’s 500 Index retreated 16.25 points or 1.8% to 871.63, wiping out last week’s 0.9% gain. Energy, consumer discretionary and financials pacing the fall among the various sectors. All of the index's 10 industry groups slipped into the red.
Of the Dow's 30 components, 19 closed in the red, with the heaviest losses tallied by General Motors (GM), whose shares surrendered 21.6%. Shares of other automakers also were pounded, with Ford sliding 12.2% and the US-listed shares of Toyota declining 5.4%.
The technology-laden Nasdaq Composite Index slid 31.97 points, or 2%, to 1,532.35. The Russell 2000 Index of small companies declined 2.3 percent to 475.07. The MSCI World Index of 23 developed markets slumped 1.6 percent to 892.73.
Market breadth was negative. Declining shares outnumbered advancers by more than 2-to-1 with about 90 million shares changing hands on the New York Stock Exchange (NYSE).
A deteriorating outlook for corporate earnings and the housing sector offset expectations that government efforts to revive the economy will succeed.
Toyota forecast an operating loss for the current year, which would be a first for the Japanese automaker since World War II. Toyota blamed a slump in global demand and a sharp appreciation in the yen against other currencies.
Monsanto lost 7.5% after Goldman Sachs said the recession will hurt profit at the world’s largest producer of seeds. Walgreen, the second-biggest US drugstore chain, sank 4.2% after posting the slowest sales growth in at least 18 years.
MetLife, the insurer invested in US$36bn worth of commercial mortgages, tumbled 12% as analysts said the number of US non-residential properties at risk of default may triple.
US stocks languished for most of the morning before falling sharply in the afternoon as oil prices slid below US$40 a barrel. That sent shares of oil industry firms Chevron and Exxon Mobil lower and weighed on the Dow. But the major indexes recovered some ground near the closing bell.
The market could come under pressure in the coming weeks, as companies begin reporting fourth-quarter results, which are expected to remain soft. December and January are traditionally some of the best months for US stocks, and January sets the tone for the rest of the year.
Stocks may find some support early next year as details about President-elect Obama's stimulus plan become clear. Obama has called for an economic stimulus that would focus on rebuilding infrastructure and creating jobs.
Trading is expected to be volatile this week, with many market participants out for the Christmas holidays. Markets will close early on Wednesday and will remain closed on Thursday for the Christmas holiday.
Truck and tractor maker Caterpillar announced plans to lay off more than 800 employees at one of its engine plants and said it will take other steps to cut costs. The stock fell nearly 3%.
Moody's placed Alcoa's credit rating under review for a possible downgrade due to weakening demand and falling aluminum prices. Alcoa shares ended down 5%.
Insurance giant AIG said it will sell Hartford Steam Boiler, a subsidiary equipment insurer, to Munich Re Group for US$742mn in cash and US$76mn in stock. Shares of AIG were up about 3%.
Internet-tracking firm comScore said that spending by online shoppers fell 1% last week, with last-minute deals for free shipping before the holidays seemingly not enough to spur Web sales. Consumer spending makes up two-thirds of the US' overall economic activity.
Elsewhere in the world, the People's Bank of China lowered its benchmark one-year lending rates, besides cutting deposit rates and the banks' reserve requirement. Last month, China cut its key rate by more than a percent as part of Beijing's multibillion-dollar plan to keep its economy afloat.
Meanwhile, finance ministers in Ireland announced a US$7.7bn bailout of three of the country's leading banks. Under the terms of the bailout, the government will take a majority stake in Anglo Irish Bank and will inject capital into Allied Irish Banks and Bank of Ireland.
The yield on the benchmark 10-year note rose to 2.14% from 2.07% on Friday. The 10-year yield dipped below 3% in November for the first time since the note was first issued in 1962.
Lending rates were mixed. The 3-month Libor rate slipped to 1.47% from 1.49% on Friday. The overnight Libor was unchanged at 0.11%. Libor is a key bank lending rate.
The dollar was mixed versus the euro and gained against the pound and the yen. COMEX gold for February delivery gained US$9.80 to US$847.20 an ounce.
US light crude oil for February delivery was down US$2.45 to settle at US$39.91 a barrel in New York. Gasoline prices fell overnight to a national average of US$1.663 a gallon from US$1.668.
European shares declined in the first session of a holiday-shortened week. The pan-European Dow Jones Stoxx 600 index fell 1.6% to 193.32 in Monday's action. The French CAC-40 index declined 2.3% to 3,151.36, while Germany's DAX 30 index lost 1.2% to 4,639.02 and the UK's FTSE 100 index fell 0.9% to 4,249.16.
Weak global cues coupled with selling witnessed in the oil & gas, metals and banking stocks dragged the BSE benchmark Sensex to close below the 10,000 levels on Monday. Markets were lackluster in the first half of the day however, as the session progressed bulls were unable to hold on the 10k levels as traders and investors preferred to book some profits at higher levels.
Finally, the BSE benchmark Sensex ended at 9,928 losing 171 points and the NSE Nifty index ended at 3,039 losing 38 points.
Barring the Consumer Durables, FMCG and Realty index all the other BSE sectoral indices ended in the red.
Market breath weakened as the day progressed, 1,295 stocks advanced against 1,242 declines, while, 76 stocks remained unchanged.
KEC International has gained by 3% to Rs152 after the company announced that it received an order for Rs880mn from national electricity company of Tajikistan. The scrip touched an intra-day high of Rs156 and a low of Rs146 and recorded volumes of over 67,000 shares on BSE.
According to reports, Parsvnath Developers said that work on 12 of its proposed SEZs is proceeding at a slow pace as the land acquisition for those projects was not yet complete.
The stock ended flat at Rs50.05 hitting an intra-day high of Rs53 and a low of Rs49 and recorded volumes of over 84,00,000 shares on BSE.
Shares of BGR Energy surged by over 2.5% to Rs158 after the company announced that it has signed a pact for condensate polishing plants in India. The scrip touched an intra-day high of Rs168 and a low of Rs157 and recorded volumes of over 3,00,000 shares on BSE.
Shares of Nalco edged higher by 0.5% to Rs186 after reports stated that the company has entered into a JV agreement with United Arab Emirates government linked RAK Minerals and Metals Investment for setting up a 0.5mn ton smelter in Indonesia at a project cost of around US$4bn. The scrip touched an intra-day high of Rs192 and a low of Rs185 and recorded volumes of over 2,00,000 shares on BSE.
Tata Steel slipped by a 1.6% to Rs225. Reports stated THAT Liberia has cleared the company of all allegations and has invited it to join the bidding process for the Western Cluster iron ore project in that country. The scrip touched an intra-day high of Rs236 and a low of Rs223 and recorded volumes of over 26,00,000 shares on BSE.
Shares of Fortis healthcare gained by 4.5% to Rs73 after the company announced that it was planning to raise Rs18-20bn via rights or warrants issue, stated reports. The scrip touched an intra-day high of Rs74 and a low of Rs70 and recorded volumes of over 4,00,000 shares on NSE.
Shares of Wockhardt gained by 3.5% to Rs111 after reports stated that the company would raise Rs5bn via preferential allotment. The scrip touched an intra-day high of Rs115 and a low of Rs107 and recorded volumes of over 1,00,000 shares on NSE.
The Government and regulators have played their roles in perking up market sentiment by unleashing a string of fiscal as well as monetary steps. However, Volatility may inch higher ahead of Wednesday's F&O expiry which is a day earlier due to Christmas holiday on Thursday.