The great thing in this world is not so much where you stand, as in what direction you are moving.
The bulls and bears keep jumping lanes and sometimes signals. A sharper than expected fall in inflation has once again raised hopes of another round of measures, both monetary as well as fiscal, to revive economic growth. As a result, the market rallied on Thursday, with the Sensex ending above 10,000 for the first time in over a month while the Nifty finished above 3,000. Market breadth was strongly positive while traded volume and turnover were too sharply higher. However, foreign funds and local institutions were net sellers, raising some suspicion over the source of the heavy buying.
There are still some doubts over the revival in sentiment, as credit markets are jittery and risk aversion rules the roost. The Indian economy is also going through a bit of a rough patch. The only silver lining is a sharp fall in inflation. Recently, the market has ignored a slew of bad news and has rallied. It has been pretty resilient in the face of negative news. However, the euphoria may not last for longer.
Today, we expect a cautious to slightly weaker start. US stocks fell sharply overnight and Asian markets are down this morning. Do not go overboard and start loading up aggressively as things could turn ugly again. Any rise should be utilised to lighten one's position, especially from weak counters.
US stocks ended sharply lower on Thursday on account of a sharp sell-off in the last hour of yet another volatile session. Energy related shares took a pounding after crude oil fell to four-year lows and two of the nation's Big Three automakers said they would halt production.
Volatility increased ahead of the expiration of options and futures contracts on Friday, an event that is called "quadruple witching in Wall Street parlance.
After falling almost 300 points during the session, the Dow Jones Industrial Average ended at 8,604.99, off 219.35 points, or 2.5%. The S&P 500 Index dropped 19.08 points, or 2.1%, to 885.34, with the Nasdaq Composite Index finishing 26.94 points down at 1,552.37.
Market breadth was negative. On the New York Stock Exchange decliners beat out advancers 3 to 2 on a volume of 1.4bn shares. Meanwhile on the Nasdaq, decliners beat out advancers nearly 2 to 1 with a total market volume of 2.1bn shares.
Shares of Dow component General Electric (GE) fell 8.2% after Standard & Poor's lowered the rating outlook on the company's financial-services arm to negative from stable, citing its reliance on confidence-sensitive wholesale funding. S&P affirmed its AAA-long-term and A-1+ short-term counterparty credit ratings on GE.
Among blue-chip issues, General Motors (GM) was the biggest loser, off 16% after The Wall Street Journal reported that the company and Chrysler have reopened merger talks. However, a GM spokesman denied the report on Thursday morning.
Late on Wednesday, privately held Chrysler said it would idle all 30 of its plants for at least a month, in an effort to bring output closer in line with plunging demand for new cars and trucks.
Separately, shares of Ford Motor fell 9.6%. Reports said the automaker would shut down most of its North American assembly plants for an extra week in January.
All three indexes seesawed in early going. The market is typically more volatile ahead of "quadruple witching," when equity options, stock index futures, stock options and single-stock futures all expire on the same day. There are four such Fridays in the year, and they tend to be preceded by increased market volatility.
The Labor Department reported that the number of people filing for initial unemployment benefits totaled 554,000 in the week ending on Dec. 13. That was a decline of 21,000 from the previous week's 26-year high of a revised 575,000 claims. Analysts expected 558,000 claims for the current week.
Meanwhile, the leading indicators index fell by less than expected in November, according to a report from the Conference Board. The leading indicator fell by 0.4% compared to economists' expectations that it would dip 0.5%. In the prior month, the indicators fell 0.8%.
Also, the Philadelphia Fed Index, an indicator for regional manufacturing, came in with a reading better than expected. The Philly Fed reported that its index improved to negative 32.9 in December, from negative 39.3 in November. According to a consensus of projections, the index was expected to fall to negative 40.5. Any negative reading suggests weakness, but the rebound from November is a positive sign.
Oil prices fell below US$37 a barrel Thursday, reaching levels not seen since June 2004. Crude oil for January fell US$3.84 to settle at US$36.22 a barrel on Thursday. The Organization of Petroleum Exporting Countries (OPEC) announced on Wednesday that it will cut production by 2.2 million barrels a day in January.
The price of crude oil has fallen more than US$100 from the record highs hit over the summer, but as the global economy has slowed to a crawl, demand for energy has also slowed.
The dollar gained against other major currencies, with the yen just off the 13-year high it reached against the dollar on Wednesday. Meanwhile, the 15-nation euro and the British pound both lost against the greenback.
Treasury prices, meanwhile, continued to rally, sending yields to record lows. The benchmark 10-year note rose 1 5/32 to 114 31/32 and its yield fell to an all-time low of 2.07%, down from 2.18% late on Wednesday.
FedEx reported a better-than-expected fiscal second quarter, ended Nov. 30. FedEx reported a quarterly profit of US$1.58 per share, slightly better than the US$1.57 per share projected by a consensus of analysts. FedEx also said that it would be trying to cut costs in the face of economic headwinds.
After the market close, software vendor Oracle reported its second-quarter earnings were hurt by the stronger US dollar. Sales of US$5.6bn were just short of analysts' expectations and earnings of 34 cents per share, when adjusted for expenses, were in line with consensus expectation.
European shares inched lower on Thursday. The pan-European Dow Jones Stoxx 600 index declined 0.1% to 197.31 in another volatile session. Germany's DAX 30 index rose 1% to 4.756.40 amid a 12.7% rise for tire maker Continental. Continental is in the process of being bought by privately owned Schaeffler Group.
The UK's FTSE 100 index inched 0.2% higher to 4,330.66. The French CAC-40 index was down 0.2% at 3,234.15 amid losses for banking group BNP Paribas and retailer Carrefour.
Indian markets ended with gains on Thursday reversing previous day’s losses led by better than expected inflation data which further slipped to nine month low. The rally was led by the interest rate sensitive stocks also the broader indices like the mid-cap and the small-cap indices ended with gains.
Finally, the BSE benchmark Sensex ended at 10,076 surging 361 points and the NSE Nifty index ended at 3,060 adding 106 points.
All the BSE Sectoral indices ended in the green with the interest rate sensitive Power and capital goods stocks leading from the front. Market breath was positive, 1,487 stocks advanced against 967 declines, while, 93 stocks remained unchanged.
Shares of McNally Bharat sky rocketed over 11% to Rs41 after the company announced that it received 2 orders worth Rs2.44bn from Vedanta Group for 1.5mn tones per annum capacity Lead Zinc Beneficiation plant for Rampura Agucha Mines, Bhilwara (Rajasthan) and 1 Aluminium Handling package at Lanjigarh, Orissa. The scrip touched an intra-day high of Rs42 and a low of Rs36 and recorded volumes of over 1,00,000 shares on BSE.
Shares of IOC advanced by over 7% to Rs405 after the company announced that it formed a joint venture with Tata Power for a coal-based power plant. The scrip touched an intra-day high of Rs408 and a low of Rs382 and recorded volumes of over 4,00,000 shares on BSE.
Elecon Engineering announced that it won an order worth Rs1.2bn from Mundra Port and Special Economic Zone of Adani Group. The scope of order includes design, supply, erection, testing and commissioning of material handling system. The stock was however down by 3.5% to Rs35.5 after hitting an intra-day high of Rs38 and a low of Rs35.3 and recorded volumes of over 2,00,000 shares on BSE.
Shares of Titan Industries surged by over 5% to Rs955 after reports stated that the company was planning to spin off its precision engineering division into a JV. The scrip touched an intra-day high of Rs962 and a low of Rs886 and recorded volumes of over 4,00,000 shares on BSE.
MRF slipped by 1% to Rs1997 after the company announced that it called for a lock out at its Arakkonam manufacturing plant. The scrip touched an intra-day high of Rs2049 and a low of Rs1960 and recorded volumes of over 1,000 shares on BSE.
With inflation cooling off to 9 month lows and stimulus package to be announced later in the week bulls may look to carry the momentum at least in the opening trades on Friday. Although, looking at the trend in the recent past, markets may turn highly volatile and profit booking cannot be ruled out at higher levels as well as Nifty would be approaching 3,100 levels. So it would be advisable to use the early spurt to book some profits.
Also, cues from the international equity markets would add to the sentiment.
Events to watch out for,
- Initial Jobless Claims
- UK Retail Sales data