Wednesday, March 19, 2008
Turnover in F&O segment declines
Nifty March 2008 futures were at 4592, at a premium of 18.05 points as compared to spot closing of 4573.95.
The NSE's futures & options (F&O) segment turnover was Rs 46,365.04 crore, which was lower than Rs 47,532.30 crore on Tuesday, 18 March 2008.
Reliance Petroleum March 2008 futures were at premium at 152.20 compared to the spot closing of 151.10.
Reliance Natural Resources March 2008 futures were near spot price at 99.50 compared to the spot closing of 99.90.
DLF March 2008 futures were at discount at 616.50 compared to the spot closing of 626.85.
In the cash market, the S&P CNX Nifty gained 40.95 points or 0.90% at 4573.95.
Volatility on the bourses may rise next week ahead of the expiry of March 2008 derivative contracts on Thursday, 27 March 2008.
The US Federal Reserve on Tuesday, 18 March 2008 cut its key interest rate by 0.75%. Wall Street expects the Fed to cut interest rates further next month, but any future cuts are likely to be smaller.
Marketmen are keenly awaiting Q4 and full year March 2008 results from Indian corporates. Robust corporate advance tax payments in Q4 March 2008 indicate that corporate profit growth will be strong in the quarter. Advance tax figures showed banks, hospitality and software firms are doing better than sectors like automobiles and cement.
A torrent of bad news such as meltdown in global markets, earnings downgrade recently by brokerages of ICICI Bank and Larsen & Toubro, lower-than-expected industrial production data for January 2008 and a surge in inflation created havoc on the bourses recently. Hike in short-term capital gains tax and alteration of tax treatment of the Securities Transaction Tax (STT) in Union Budget 2008-09 announced on 29 February 2008 had dented the sentiment earlier.
Market suffered losses for third straight week ended Wednesday, 19 March 2008 as selling pressure continued for pivotals on one side following global sell-off and budget blues and lack of buying on the other. The BSE Sensex lost 765.69 points or 4.85% to 14,994.83 for the week ended Wednesday, 19 March 2008. The S&P CNX Nifty slipped 171.85 points or 3.62% in the week.
The BSE Mid-Cap index lost 619.35 points or 9.40% to 5,964.10 for the week ended Wednesday, 19 March 2008. The BSE Small-Cap index slumped 857.30 points or 10.61% to 7,222.20 in the week.
The BSE Sensex has now lost 6,211.94 points or 29.29% from its all time high of 21,206.77 hit on 10 January 2008.
At current 14,994.83, Sensex trades at a PE multiple of 14.28 to 14.99, based on projected FY 2009 EPS of Rs 1000-to-Rs 1050 for 30 Sensex companies.
Inflation has risen above the Reserve Bank of India’s caution limit of 5%. Annual inflation rate based on the wholesale price index increased to 5.11% for the week ended 1 March 2008. Inflation rate stood at 6.51% for the corresponding week in the previous year.
Downtrend continued to intensify during the week. Holiday shortened week as market will remain closed for 2 days on eve of Id and Good Friday. Week start of with big slide as indices slipped over 900 odd points. Bear sterns hit due to subprime mortgage which brought in some levels of concerns in Indian Markets. Second day witnessed a mixed trend with no trigger but indices ralied but tumbled to close flat. Advance tax payments for the final quarter have risen by 110% compared to last year, which indcates a good earnings from these Corporates. As fed cut the interest rate, markets across rejoiced as Asian ended in green. Indian indices opened strong but normally investors tend to book profits over weekends to avoid risks so preferred to book profit. The sentiments also remained weak and kept funds out of the market.
Yesterday, Fed cut the interest rate by 75 bps and gave the boost across the globe. The Fed also cut discount rate by 25 bps early this week. The efforts to save economy continues..but it will take time to bear fruits. The worries have now started extending to other parts of the world like Europe and Japan. We don't see condition improving in near term.
Left and UPA met to discuss on nuke deal..but outcome was zero. Both parties continue to maintain their stand. Left is unlikely to soften there stand and Congress would try to push the deal in full force as it has improved its image among mass through Budget 2008-09.
Sensex lost 4.5% while the Nifty lost 3.3% for the week. Small cap lost -10.5%, Midcap -8.5%. Gains were led by Ambuja +2.25%, Bharti +2.96%, Cipla +1.1%, Reddy +1%, Unilever +0.07%, Satyam +2.46%, Tata Mot +1.9%, TCS +0.65% and Wipro 1+.56%. Loss were extended by Hindalco -14.5%, ICICI -11%, Tata Power -10.8%, Tata Steel -11%, Reliance -7.2%, RPL -6.75%,. Other loser were BPCL -8%, Glaxo -9.5%, Grasim -8.8%, Hero -8.2%, HPCL -6%, HDFC -9.6%, REL - 6.9%, SBI -6.4% STER -7% Unitech -4.7%.
IT counter bounced..We believe that it was dead cat bounce. Fundamentally, things have not improved. Financial sector is US is bleeding and this is one of major client for Indian IT cos. Bear and Stearns (B&S) bail out by Fed actually shocked the global markets. B&S is one of the client for Satyam and TCS. Thought IT counter is bottomed out..Caution is advised.
Indian banks are not left out of the subprime woes. ICICI and SBI are said to have large exposure to forex uncertainties. This may continue to weigh on the Banks counter. Clarity on farm loan waiver has given some ease but no relief for now. With inching inflation probability of interest easing seems bleak in short term.
Our research: Spice Jet most affordable low-fare airline reported healthy numbers for the last quarter. Topline has almost doubled to Rs 408crore while at the EBIDTA level witnessed loss of around Rs 17.4 Crs which was mainly on the back of higher crude price (above USD 90-100/barrel) weighed negatively on the airlines profitability Capacity growth in the industry has also showed slower growth in the quarter which implies a cautious approach. Spice reported PAT was Rs 9.34 Cr in which includes profits from sale of Aircrafts. Valuations appears to be fine now but Crude weight on it however, we believe that this is one stock to have in the airline Industry if at all. Do have a look at our detailed research note.
A strong run up for the overseas markets, helped Sensex finished the day with 1%. Although, the day ended with gains, markets finished the day near the lows of the days trading range and that is not exactly a sign of strength. Both Sensex and Nifty are below their multi year trendline and charts are not yet suggesting any reversal in the trend. The immediate major resistance for the Sensex is placed at the gap area of 15800 and until markets close above this level with volumes, any bounce could remain just an oversold bounce. Support for the sensex exist at 14700 and below that downtrend can continue to 14100 levels
Weak global markets and heavy selling by foreign institutional investors led the market suffer losses for third straight week. Lack of buying at lower levels accentuated the fall. Volatility was high in the truncated week with only three trading sessions. The market remains closed on Thursday (20 March 2008) on account of Id-E-Milad and on Friday (21 March 2008) on account of Good Friday.
The BSE Sensex lost 765.69 points or 4.85% to 14,994.83 in the week ended Wednesday, 19 March 2008. The S&P CNX Nifty slipped 171.85 points or 3.62% to 4573.95 in the week.
The BSE Mid-Cap index lost 619.35 points or 9.40% to 5,964.10 for the week ended Wednesday, 19 March 2008. The BSE Small-Cap index slumped 857.30 points or 10.61% to 7,222.20 in the week.
The BSE Sensex is down 6,211.94 points or 29.29% from its all time high of 21,206.77 hit on 10 January 2008.
Trading for the week began on a bearish note as global markets suffered setback with the benchmark index BSE Sensex posting its biggest ever single-day point fall on Monday 17 March 2008. Sensex lost 951.03 points or 6.03% at 14,809.49 and the broader based S&P CNX Nifty tumbled 242.70 points or 5.11% at 4,503.10 on that day.
On Tuesday, 18 March 2008, the market registered small gains in highly choppy trade. The 30-share BSE Sensex rose 23.97 points or 0.16% at 14,833.46 and the broader based S&P CNX Nifty ended up 29.9 points or 0.66% at 4,533. Higher advance tax paid by top corporates in the fourth installment of 15 March 2008, indicating robust Q4 March 2008 results provided support to the market.
The market pared most of its early gains on Wednesday, 19 March 2008, as selling pressure emerged at higher levels. The market registered modest gains on that day. The 30-share BSE Sensex rose 161.37 points or 1.09% at 14,994.83. The broader based S&P CNX Nifty was up 40.95 points or 0.90% at 4,573.95. The market rose as fears of a global turmoil in credit markets eased after a steep 0.75% interest rate cut by the US Federal Reserve and following better-than-expected results from two major investment banks -- Goldman Sachs Group and Lehman Brothers Holdings.
Foreign institutional investors (FIIs) sold shares worth Rs 15,892.27 crore in the calendar year 2008 so far till Tuesday, 18 March 2008. Domestic mutual funds, on the other hand, pumped Rs 6,638.30 crore during the same period.
India’s largest private sector company in terms of market capitalisation and oil refiner Reliance Industries declined 9.14% to Rs 2159.05 in the week. The company has paid advance tax of Rs 443 crore in Q4 March 2008 as against Rs 118 crore paid in Q4 March 2007.
India’s largest engineering and construction firm by sales Larsen & Toubro (L&T) lost 3.44% to Rs 2839 in the week. L&T has paid Rs 170 crore as advance tax in the fourth installment this fiscal as against Rs 80 crore for the last quarter of the previous fiscal.
India's second largest power utility by revenue Reliance Energy (REL) tumbled 9.17% to Rs 1207.50 in the week. As per reports, the company is close to inking an agreement with Indiabulls Real Estate (IBREL) to jointly develop a 6,000-acre multi-product special economic zone (SEZ) in Maharashtra’s Raigad district.
India’s second largest telecom services provider by sales Reliance Communications (RCom) slipped 6.14% to Rs 506.45. The company is reportedly planning to acquire a European WiMax operator in a $300-400 million deal.
India’s largest private sector bank by net profit ICICI Bank slumped 12.90% to Rs 766.35 in the week. The company has paid Rs 250 crore as advance tax in Q4 March 2008 as against Rs 125 crore in Q4 March 2007.
India’s largest commercial bank by net profit State Bank of India (SBI) was down 11.34% to Rs 1602.85 in the week. SBI has paid Rs 1,148 crore advance tax in Q4 March 2008 as against Rs 690 crore in Q4 March 2007.
India’s largest truck maker by sales Tata Motors rose 5.55% to Rs 650.45 in the week. Tata Motors' advance tax outgo declined to Rs 75 crore in Q4 March 2008 compared to Rs 190 crore advance tax it paid in Q4 March 2007.
The world’s sixth largest steel maker Tata Steel declined 16.85% to Rs 637.30 in the week. The company paid advance tax of Rs 300 crore in Q4 March h 2008 compared to Rs 350 crore in Q4 March 2007.
Among the side counters, Orchid Chemicals & Pharmaceuticals (down 48.66% to Rs 116.15), Bajaj Holdings & Investments (down 69.22% to Rs 644.15), and Yes Bank (down 26.52% to Rs 137.15), slumped.
The United Progressive Alliance-Left Committee on the Indo-US civil nuclear cooperation on Monday, 17 March 2008, felt that further discussions were needed on the draft India-specific safeguards agreement that was negotiated with the International Atomic Energy Agency (IAEA). The next meeting of the committee will be held in April 2008.
Finance Minister P Chidambaram said on Monday, 17 March 2008, there is tremendous pressure on the government to fight inflation. The government's intention is to ensure and make all efforts to sustain growth of more than 8% and close to 9% in 2007/08, Chidambaram added.
On the global front, the fifth-largest US investment bank Bear Stearns said on Friday, 14 March 2008, its liquidity position had deteriorated significantly and a cash crunch forced it to turn to the Federal Reserve and JPMorgan Chase for emergency funds. JPMorgan said on Sunday, 16 March 2008, it would buy Bear Stearns in an all-stock deal, and that the Fed would fund up to $30 billion of Bear Stearns' less liquid assets.
The market sentiment remained upbeat for the second straight session, but gains tapered off after the Sensex rallied past 15,450 in early trades. On the back of firm international indices, the Sensex opened with a sharp positive gap of 492 points at 15,326 and moved up sharply to touch the day's high of 15,465. However, the market came under a sharp bout of profit taking and was 100 points away from slipping below the yesterday's close, with the index slipping to an intra-day low of 14,930. However, steady to firm buying in afternoon trades once again lifted the Sensex past 15,000, but selective profit taking saw it close at 15,022, up 189 points. The Nifty gained 53 points to close at 4,586.
The breadth of the market remained negative. Of the 2,749 stocks traded on the BSE, 1,900 stocks declined, 781 stocks advanced and 68 stocks ended unchanged. Except consumer durables , power and realty, all the eight sectoral indices ended in positive territory. The BSE IT index rose 2.14% at 3,370 and the BSE Teck index added 1.79% at 2,887.
Among the front-line stocks, Satyam Computers led the up-move and soared 5.24% at Rs389.95, Tata Motors rose 5.08% at Rs650.45, Wipro jumped 4.64% at Rs376.60 and M&M advanced 3.49% at Rs658.40. However, Hindalco dropped 4.09% at Rs154.95, HUL fell 2.49% at Rs225.30 and REL was down around 1.85% at Rs1,206.50.
IT stocks logged significant gains. Rolta India vaulted 2.53% at Rs260, NIIT flared up 2.37% at Rs99.45, HCL shot up by 2.33% at Rs255.05, Patni Computers advanced 2.25% at Rs207.15 and Infosys added 2.19% at Rs1,341.90. All the teck stocks also helped the Sensex to close in positive territory with Sun TV, Deccan Chronicle, Reliance Communications and Zee Enterprises gaining over 1-2% each.
Over 1.96 crore RNRL shares changed hands on the BSE followed by Ispat Industries (1.26 crore shares), RPL (1.07 crore shares), Essar Steel (0.83 crore shares) and Jaiprakash Associates (0.70 crore shares).
Battered Indian stock market got a modest lift today from the US Federal Reserve’s steep interest rate cut and better-than-expected results from two major US investment banks - Goldman Sachs Group and Lehman Brothers Holdings. However, the market breadth was weak indicating that confidence is low among investors. In fact, the trend on the bourses was similar to the one witnessed yesterday, 18 March 2008, when the market pared large part of its intra-day gains.
The Sensex fell below 15,000 mark in late trade. The market breadth turned weak during the course of the trading session compared to a strong breadth earlier in the day. Traders refrained from building large positions ahead of a long weekend. The market remains closed on Thursday (20 March 2008) on account of Id-E-Milad and on Friday (21 March 2008) on account of Good Friday.
Sensex rose 161.37 points or 1.09% at 14,994.83. It hit a high of 15,465.81 in early trade. At day’s high, Sensex rose a massive 632.35 points. Sensex rose 96.62 points at the day's low of 14,930.08 hit in late trade.
The broader based S&P CNX Nifty was up 40.95 points or 0.9% at 4,573.95.
Concerns of marked-to-market losses for firms on their foreign exchange derivatives exposure, meltdown in global markets, lower-than-expected industrial production data for January 2008 and a surge in inflation created havoc on the bourses recently. Hike in short-term capital gains tax and alteration of tax treatment of the Securities Transaction Tax (STT) in Union Budget 2008-09 announced on 29 February 2008 had dented the sentiment earlier.
In today's trade, IT and auto stocks gained even as realty stocks fell. Satyam Computer Services and Tata Motors were major gainers from Sensex pack. The BSE Mid-Cap and Small-Cap indices declined.
The BSE Sensex clocked a turnover Rs 5766 crore today 19 March 2008 compared to Tuesday 18 March 2008's turnover of Rs 6,971.56 crore.
Nifty March 2008 futures were at 4592, at a premium of 18.05 points as compared to spot closing of 4573.95.
The NSE futures & options (F&O) segment turnover was Rs 46,365.04 crore, which was lower than Rs 47,532.30 crore on Tuesday, 18 March 2008.
As per the provisional figures on NSE, foreign institutional investors bought shares worth Rs 30.54 crore today, 19 March 2008.Domestic funds bought shares worth Rs 142.19 crore.
The market breadth was weak: on BSE 752 shares advanced as compared to 1,920 shares that declined. 37 shares remained unchanged.
The BSE Mid-Cap index declined 1.16% to 5,964.10. BSE Small-Cap index was down 1.94% at 7,222.20.
BSE Power index (down 0.27% to 2,984.07), BSE HealthCare index (up 0.72% to 3,671.26), BSE Consumer Durables index (down 1.38% to 3,564.04), BSE Oil & Gas index (up 0.06% to 9,717.56), BSE Metal index (up 0.43% to 13,498.55), BSE Bankex (up 0.02% to 7,495.26), BSE Realty index (down 2.14% to 7,087.70) , BSE FMCG index (up 0.55% to 2,142.40), BSE PSU index (up 0.49% to 7,189.29) underperformed Sensex.
BSE IT index (up 2.14% to 3,369.63), BSE Capital Goods index (up 1.25% to 13,095.72) and BSE Auto index (up 1.36% to 4,398.25), outperformed Sensex.
India’s largest private sector company in terms of market capitalisation and oil refiner Reliance Industries rose 0.64% to Rs 2,159.05. It came off from its high of 2,244.90.
Realty stocks declined. Unitech (down 3.5% to Rs 267.30), DLF (down 1.85% to Rs 623) and Indiabulls Real Estate (down 1.82% to Rs 443.25) edged lower.
IT stocks rose. Wipro (up 4.64% to Rs 376.60), Satyam Computer Services (up 5.24% to Rs 389.95) and Infosys (up 2.19% to Rs 1,341.90) edged higher. Tata Consultancy Services declined 0.89% to Rs 810.
Auto stocks rose. Mahindra & Mahindra (up 3.49% to Rs 658.40), Tata Motors (up 5.08% to Rs 650.45), Maruti Suzuki India (up 1.26% to Rs 822.75) edged higher. But India’s largest motorcycle maker by sales Hero Honda Motors declined 5.52% to Rs 649.70.
From the sensex pack, ITC (up 2.26% to Rs 187.40), Bharti Airtel (up 2.59% to Rs 777.75), HDFC Bank (up 3.11% to Rs 1,270.05) , Larsen & Toubro (up 2.72% to Rs 2,839) and Ambuja Cements (up 3.11% to Rs 122.85) were major gainers.
Hindalco Industries (down 4.09%t o Rs 154.95), Hindustan Unilever (down 2.49%t o Rs 225.30), Reliance Energy (down 1.72%t o Rs 1,206.50), ICICI Bank (down 0.21% to Rs 766.35) and Grasim Industries (down 1.35% to Rs 2,595.05) were key losers from the Sensex pack.
India’s second largest telecom services provider by sales Reliance Communications (RCom) rose 1.82% to Rs 506.45. The company is reportedly planning to set up WiMax networks across 50 countries in the next three years to move into the global telecommunication market. To get a headstart, the telecom major is planning to acquire a European WiMax operator in a $300-400 million (Rs 1,200-1,600 crore) deal.
Reliance Natural Resources clocked highest volume of 1.96 crore shares on BSE. Ispat Industries (1.26 crore shares), Reliance Petroleum (1.07 crore shares), Essar Oil (83.54 lakh shares) and Jaiprakash Associates (70.54 crore shares) were the other volume toppers in that order.
Reliance Capital clocked highest turnover of Rs 316.67 crore on BSE. Reliance Energy (Rs 303.23 crore), GSS America Infotech (Rs 259.01 crore), Reliance Industries (Rs 210.87 crore) and Reliance Natural Resources (Rs 203.87 crore) were the other turnover toppers in that order.
The Dow Jones Industrial Average surged 420.41 points or 3.51% at 12,392.66 on Tuesday, 18 March 2008. The Nasdaq Composite Index soared 91.25 points or 4.19% at 2,268.26.
European markets were in red. France’s CAC, Germany’s DAX and UK’s FTSE 100 were down by 0.79% to 1.28%.
In Asia on Wednesday, 19 March 2008, key benchmark indices in Hong Kong, Japan, South Korea, Taiwan and China were up by 1.42% to 2.53%.
The US Federal Reserve on Tuesday 18 March 2008 cut its key interest rate by three-quarters of a percentage point. Though the cut was smaller than some market participants had expected, investors focused on the likelihood of future cuts. Wall Street expects the Fed to cut interest rates further next month, but any future cuts are likely to be smaller.
US investment banks Goldman Sachs and Lehman Brothers posted better-than-expected quarterly earnings, providing evidence that bank profits were intact despite the deepening credit crisis.
Back home, reports that top Indian corporates have paid higher advance tax in the fourth installment of 15 March 2008, has raised expectations of good Q4 March 2008 results.
The BSE Sensex is down 6,211.94 points or 29.29% from its all time high of 21,206.77 hit on 10 January 2008.
The Indian Market is likely to have a strong positive opening today due to due to favoring cues from the global markets. On Tuesday, the Indian market pared most of its gains and closed marginally higher. Though the market opened almost on a flat note but gathered the momentum towards the mid session as the buying intensified across the counters. From the sectoral point, Capital goods and Realty scrips remained the centre of attraction as most buying was witnessed from theses baskets. The BSE Sensex closed higher by 23.97 points at 14,833.46 and NSE Nifty grew by 29.9 points to close 4533. We expect that the bulls will rule the market during the trading session as the cues from the US market of an interest rate cut by Federal Reserve will give a boost to the market.
The US Federal Reserve''s Open Market Committee yesterday has cut the federal funds rate by 75 basis point to 2.25% from 3% earlier and this sharp interest rate cut was an attempt to restore confidence to tumbling financial markets and to give a boost to the economy. The Fed has now lowered rates six times since mid-September, with the economy reeling from the credit crisis.
On Tuesday, the US market closed mixed. The Dow Jones Industrial Average (DJIA) closed higher by 420.41 points at 12,392.66. The S&P 500 (SPX) index grew by 54.14 points to close at 1,330.74 and the NASDAQ Composite (RIXF) increased by 91.25 points to close at 2,268.26.
Today the major stock markets in Asia are trading strong. Hang Seng is trading higher by 552.76 points at 21,937.37 along with Japan''s Nikkei trading up by 328.57 points at 12,292.73 and Taiwan Weighted trading at 8,227.59 up by 169.77 points.
The FIIs on Tuesday stood as net seller in equity. The gross equity purchased was Rs3,807.30 Crore while the gross equity sold stood at Rs4,439.60 Crore. Therefore, the net investment of equity reported was (Rs632.40 Crore).
Today, Nifty has support at 4,516 and resistance at 4,742 and BSE Sensex has support at 14,792 and resistance at 15,746.
The benchmark indices, Sensex and Nifty, are expected to commence on a firm note and witness significant rally during intra-day trades, as international markets backed by firm US and Asian indices may help the sentiment remain buoyant. Among the Asian majors, Hang Sang has surged 3.07% at 22040 while Nikkei has scaled up nearly 2.75% at 12293. On the technical front, the Nifty could test in the 4600 on the upside and has supports in the 4450, while the Sensex has a likely support at 14677 and may face resistance at 15000.
US indices posted significant gains on Tuesday as investors' cheered the strong consumer confidence report. As a result, the Dow Jones close at 12393, up 420 points, while the Nasdaq added 91 points to close at 2268.
Barring Dr Reddy with the marginal gain at $13.59, rest of the Indian ADRs finished on a strong note. VSNL led the pack with gains of 25.74% followed by ICICI Bank (up 12.51%), HDFC Bank (up 12.08%) and MTNL (up 8.06%). Satyam, Infosys, Wipro, Tata Motors, Rediff and Patni Computers gained around 4-7% each.
Crude oil prices in the US market gained, with the Nymex light crude oil for April delivery raised by $3.74 to close at $109.42 a barrel and in the commodity segment, the Comex gold for April series gained $1.70 to settle at $1004.30 a troy ounce.
Market Grape Wine :
In House :
Nifty at a support of 4530 and 4450 with resis at 4610 and 4703. Any upside should be used as an opportunity to exit
Cash: Buy DIVISLAB above 1174 with a TGT of 1225 and a SL of 1160
Buy Reliance Ind above 2151 with a TGT of 2225 and a SL of 2119
F&O: Buy Tatamotor above 625 with a TGT of 640 and a SL of 617
Buy Indiacement above 174 with a TGT of 184 and a SL of 170
Out House :
Fed cutting Int Rate by .75 % just a damage control excercise for the US economy .
Selling to persist at higher levels as long week end ahead .
Markets at a support of 14678 & 14786 and resistance at 15215 & 15432 levels .
Buy : Ongc & Gail
Buy : RIL & Relcap
Buy : HLL & ITC
Buy : LT & Bhel
Buy : HDFC
Buy : Nalco & MTNL
Dark Horse : Rel , Aban , Skumar ONGC , Kohinoor , RIL , LT , ITC & HLL
Federal Reserve cuts fed fund rate by 75 points thereby helping Dow to post largest gain in five years
Better than expected earning reports from a couple of broker firms and Federal Reserve’s decision to cut fed fund rate by another 75 bps to 2.25% fuelled a strong rally in the US Market today, Tuesday, 18 March, 2008. All ten of the major economic sectors finished in positive territory. Financials posted the most impressive gain.
Helping to lift the market since the very morning was better than expected earnings reports from Lehman Brothers and Goldman Sachs. Both the firms posted dismal results compared to last year, but stellar results compared to expectations. After this, the market turned its full attention to the 2:15 ET FOMC announcement.
At 2.15 pm E.T, the Federal Open Market Committee (FOMC) announced it is cutting the fed funds rate and discount rates by 75 basis points. That left the fed funds rate at 2.25% and the discount rate at 2.50%. Market’s immediate response was negative, although the indices still held strong gains.
Dow gave up 100 points immediately after Fed’s announcement. That was mainly because market was looking for a 10 bps cut. Anyway, market once again picked up momentum in the final hour of trading. The Dow Jones industrial Average ended the day with a gain of 420 points at 12,392. The Nasdaq Composite Index, finished higher by 91 points at 2,268. S&P 500 finished higher by 54 points at 1,330.
The Fed cited slowing growth in consumer spending, and a softened labor market. The statement also pointed out the continued strains in the financial markets. The Fed said inflation has been elevated and some indicators of inflation have increased.
The gap in our economy is between what we have and what we think we ought to have - and that is a moral problem, not an economic one.
A gap up opening is in store. The problem, as seen in recent times, is that markets open with a gap and hardly give a chance to pocket quick gains. Face it. After losing money quickly, who doesn’t want an opportunity to make some quick bucks? We won’t debate on whether greed is a moral or economic problem. The Nifty futures trading in Singapore point to a gap-up opening. The bulls will hope to have a blast before one of the longest weekends in the market. Remain guarded in approaching today's trade. We are not sure if this is a dead cat bounce or resumption of another bull phase.
The Federal Reserve has slashed its benchmark interest rate by 75 basis points, which may be a little less than the 100 bps that many were looking for. Nevertheless, the Fed has signaled yet again that it is prepared to take any step to mitigate the damage from the US housing sector mess and the ensuing turmoil in credit markets. The rate cut is the latest in the series of measures taken by the US central bank since September 2007 to bring back sanity in financial markets and avoid a recession.
The Dow Jones has notched up a gain of over 400 points, sparking a rally across global markets. The worst fears of Lehman Brothers perhaps following fellow Wall Street firm Bear Stearns towards bankruptcy has been proved wrong. Lehman, along with Goldman Sachs have come out with decent set of results.
FIIs were net sellers of Rs10.11bn (provisional) in the cash segment yesterday. Local institutions were net buyers of Rs1.77bn. In the F&O segment, foreign funds were net buyers of Rs13.15bn yesterday.
On Monday, FIIs were net sellers of Rs6.32bn in the cash segment and Mutual Funds too offloaded stocks worth Rs1bn.
Most Asian markets are trading higher on the back of the overnight rally in US shares. The Nikkei in Tokyo rallied 328 points or 2.75% at 12,292 while the Hang Seng in Hong Kong jumped 613 points to 21,997.
The Kospi in Seoul rose 38 points to 1627 while the Straits Times in Singapore was up 55 points at 2889. The Shanghai Composite in China gained 94 points to 3762 and the Taiex in Taiwan surged 162 points to 8220.
US stocks soared on Tuesday, with the Dow Jones Industrial Average logging its fourth-largest point gain ever after earnings from Goldman Sachs and Lehman Brothers topped estimates and the Federal Reserve cut its key rate by 75 basis points.
Up nearly 300 points before the Fed announcement, the major stock indexes briefly trimmed their gains, only to accelerate towards the close of trade, with all the three indices ending at session highs.
The Dow surged 420 points, its biggest one-day point gain since July 2002, for a gain of 3.5%. The broader Standard & Poor's 500 index rallied over 54 points, its biggest one-day point gain since Jan. 2001, for a gain of 4.2%.
The tech-fueled Nasdaq Composite index shot up over 91 points, its biggest one-day point gain since May 2002, for a gain of around 4.2%.
The Fed cut the fed funds rate, a key short-term lending rate that impacts consumer loans, by 75 basis points, to 2.25%, belying some expectations for a full percentage point reduction.
Stocks had rallied ahead of the news as investors welcomed better-than-expected quarterly earnings from Lehman Brothers and Goldman Sachs. But the market stumbled in the minutes after the Fed announcement, before regaining the momentum.
Market breadth was positive. On the New York Stock Exchange, winners trounced losers 7 to 1 on volume of 1.95bn shares. On the Nasdaq, advancers topped decliners 3 to 1 on volume of 2.41bn shares.
In the accompanying statement, Fed policy makers acknowledged the continuing strain in the financial markets, softer consumer spending and a weakening labor market, and also talked about higher inflationary pressure.
In other economic news, new home construction fell in February to an annual pace of just over a million properties, beating forecasts for a bigger drop. Building permits, a measure of builder confidence, tumbled more than expected.
The Producer Price Index (PPI), which measures inflation at the wholesale level, rose as expected in February. But core PPI, which excludes volatile food and energy prices, came in higher than expected.
US light crude oil for April delivery climbed $3.74 to $109.42 a barrel on the New York Mercantile Exchange. Prices hit a record $111.80 in electronic trading Monday. COMEX gold for April delivery rose $1.71 to $1,004.31 an ounce. Gold hit an all-time trading high of $1,033.90 an ounce on Monday.
Treasury prices slumped, as investors cashed in after the previous session's big rally. The selloff raised the yield on the benchmark 10-year note to 3.47% from 3.30% late on Monday.
In currency trading, the dollar gained against the euro after hitting another all-time low on Monday. The greenback rallied against the yen after touching a more than 12-year low Monday.
European shares rebounded sharply. The pan-European Dow Jones Stoxx 600 index rose 3.6% to 300.57. The UK's FTSE 100 closed up 3.5% at 5,605.80, while the German DAX 30 climbed 3.4% to 6,393.39 and the French CAC-40 jumped 3.4% to 4,582.59.
Latin American equity markets too finished higher. Brazil's Bovespa index closed up 3.2% at 61,932.78 while Mexico's IPC rose 1.6% to 29,515.55. Argentina's Merval gained 1.2% at 2,081.67 and Chile's benchmark stock index ended 0.2% higher at 2,840.61.The RTS index in Russia was up 1.4% at 2018 while the ISE National-30 index in Turkey advanced 3.5% to 50,808
Bulls may attempt another rally
It was a volatile trading session which ended on a flat note with modest gains. After hitting an intra-day high of 15,164 thanks to a smart recovery in Asian markets and a strong start in the equity markets across Europe proved to be a sentiment booster. However, the markets were unable to hold on to their gains as intra-day traders preferred to stay light ahead of the FED meet.
Select pharma, FMCG, telecom and power stocks were in demand. However, Banking, Metal snd Oil & gas stocks saw some offloading towards the end.
Finally, the BSE benchmark Sensex ended flat at 14,833 and the Nifty index added 29 points ending at 4,533.
Overall about 753 stocks advanced; 1,916 stocks declined while 65 stocks remained unchanged.
The broader markets witnessed selling as both the Mid-Cap and Small-Cap indices fell over 1.5% each.
Among the BSE Sectoral indices, BSE Realty index (up 1.9%), BSE Capital Good index (up 1.7%) and BSE Teck index (up 0.83%). While, Metal index (up 2%) and BSE Bankex index (down 1%)
Mukand was up by 2% to Rs85 after reports stated that the company would raise alloy steel prices by Rs7,000/ ton, effective April 1. The scrip touched an intra-day high of Rs93 and a low of Rs82 and recorded volumes of over 37,000 shares on BSE.
Confidence Petroleum the flagship company of Confidence Group has spurted over 5% to Rs12.6 after the company declared that they have entered into a joint venture with Energtek Inc., world leaders in NG abd Adsorbed Natural Gas (ANG) Technology to provide clean and affordable pipeless Natural Gas supply to Automotive and Industrial Consumers.
The scrip touched an intra-day high of Rs13 and a low of Rs10 and recorded volumes of over 9,00,000 shares on BSE.
Bharat Forge lost 3% to Rs248. Reports that they would develop equipment for power plants. The company also said that t hey would diversify into aerospace, railway - reports and would invest Rs5bn. The scrip touched an intra-day high of Rs261 and a low of Rs245 and recorded volumes of over 1,00,000 shares on BSE.
L&T gained by 2.2% to Rs2763 after the company said that the company secured Rs28mn Euro coal Gasifier equipment contract. The scrip touched an intra-day high of Rs2809 and a low of Rs2690 and recorded volumes of over 2,00,000 shares on BSE.
RPL slipped by over 1.2% to Rs152 after media reports stated that SEBI would examine insider trading charge in the company’s shares. The scrip touched an intra-day high of Rs159 and a low of Rs145 and recorded volumes of over 20,0,000 shares on BSE.
According to reports, Tata Steel is planning to raise Rs40bn through an issue of non-fungible GDRs. The proposed issue is to part-finance its acquisition of the Anglo-Dutch steelmaker Corus. The scrip slipped by 3% to Rs639 after hitting an intra-day high of Rs667 and a low of Rs630 and recorded volumes of over 11,00,000 shares on BSE.
Infotech Enterprise was up by 3% to Rs225 after the company announced that they secured contract from Tele Atlas. The scrip touched an intra-day high of Rs230 and a low of Rs194 and recorded volumes of over 8,000 shares on BSE.
All eyes would be on FED’s decision. Bulls would look to stage another rally. However, cues coming in from the global equity markets would be watched closely.
Corporate Front Page
ICICI Bank seeks additional collateral from corporate borrowers of offshore finance. (ET)
HDFC to raise Rs40bn debt to finance stake purchase in HDFC Bank. (BS)
TCS opens its largest delivery centre in the US at Ohio having a capacity of 1,000 people. (ET)
Jaypee Group leads race for ICICI’s 45% stake in exploration firm Prize Petroleum. (ET)
Ranbaxy has signed a pact with CD Pharma to market dental drug brand INERSAN in India and Nepal. (BL)
Reliance Communications to buy Europe-based specialty WiMax operator. (DNA)
Maruti Suzuki to ramp-up its plant capacity in Manesar, Haryana, to 3lacs units per year by October 2008. (BL)
ICICI Bank has announced country’s largest securitization program of Rs58bn. (ET)
REL to hire more engineers and managers to execute contracts worth US$3.65bn. (BL)
Indiabulls Power, owned by Indiabulls Real Estate, has won the bid to set-up a 1,600MW Bhaiyathan power project in Chattisgarh. (ET)
RCF has lined up an investment plan of Rs76.4bn for setting up an ammonia-urea and phosphatic plant in Mozambique. (FE)
MTNL likely to offload 50% stake in Suntel, a Sri Lankan telco. (ET)
Reliance ADAG is setting up a cement unit in Madhya Pradesh. (DNA)
L&T wins contract worth Rs1.7bn from a Chinese firm to supply gasification equipments. (DNA)
Tata Motors to get US$3bn one-year bridge loan from Ctitgroup and JP Morgan to help finance potential purchase of Jaguar and Land Rover. (BL)
Vishal Retail signs an agreement with HPCL for opening stores at its selected outlets across the country. (BL)
Orient Global Tamarind has picked up nearly 1% in Axis Bank for Rs2.38bn in open market transactions. (DNA)
Allied Digital to raise utpo US$100mn through issue of securities in domestic as well as international markets. (DNA)
DCM Shriram acquires 49% stake in hybrid seeds business from its JV partner for US$13.3mn. (BS)
Sical Logistics plans to buy an Indian freight forwarding company. (DNA)
Barings PE buys 12% in brokerage firm Sharekhan for Rs2.4bn. (ET)
Economic Front Page
Corporate advance tax payments rise 110%. (ET)
GDP growth may slow down to 8% in 2008-09 says Mr. Montek Singh, Deputy Head of the planning commission. (ET)
MMRDA auctioned three plots in Bandra Kurla Complex for Rs13.2bn. The price was significantly lower than Rs27.9bn for a similar transaction three months back. (ET)
Government plans to scrap purchase preference policy from 1st April 2008 under which the CPSEs get 10% price preference for government contracts in various areas. (ET)
I&B Ministry favours 74% FDI limit for DTH. (BL)
Home loan rates have declined in last one year says FM. (BS)
Gems & jewelry exports grew 9.3% yoy during April-Feb 2008. (BS)
The Federal Reserve cut interest rates by three-quarters of a percentage point today. The stock market had anticipated a cut and the Dow Jones industrial average jumped over 300 points ahead of the announcement. But the Dow dropped about 100 from its high for the day after the Fed failed to cut rates by a full point, which many had expected.
The Fed`s target for the federal funds rate, the interest that banks charge each other on overnight loans, stood at 3 percent before the move, and was at 4.25 percent at the beginning of this year.
Markets posted strong gains before the Fed announcement after Lehman Brothers and Goldman Sachs reported better-than-expected results for the first quarter.
Federal Reserve Chairman Ben Bernanke and his colleagues have already been working overtime, employing a variety of novel approaches to keep the economy out of a recession or at least moderate the impact of any downturn.
Treasury Secretary Henry Paulson made the rounds of the morning TV shows Tuesday to underscore the administration`s commitment to keeping turmoil in the financial markets from worsening a struggling economy.
"The priority we have is a stable, orderly financial" market, he said on CBS` "The Early Show.
He said the focus of policymakers "is reducing the spillover into the real economy from the turbulence and disruptions in our financial markets."
To those who would complain that the administration is more interested in bailing out Wall Street than struggling homeowners, Paulson said the thousands of Bear Stearns employees likely to lose their jobs and life savings, and thousands of shareholders who have lost billions because of the company`s collapse, probably do not feel like they have been bailed out.
A cut in the funds rate will translate immediately into lower rates for consumers and businesses as banks cut their prime lending rate by a similar amount.
"There is no reason for the Fed not to be aggressive," said Mark Zandi, chief economist at Moody`s Economy.com. "The economy is in a recession, the financial system is in disarray and inflation is low."
However, a report Tuesday showed that wholesale prices rose by 0.3 percent in February, driven higher by rising energy costs.
Outside of food and energy, core inflation jumped by 0.5 percent, the biggest increase in 15 months and a possible sign that the relentless increase over the past two years in energy costs is making its presence felt in other sectors of the economy.
At the moment, Fed officials have said they are more concerned about weak growth than inflation. Another report Tuesday showed that problems in the housing industry continue, with construction of new homes falling by a bigger-than-expected 0.6 percent and applications for new building permits dropping to the lowest level in 16 years.
Gold closes higher but drops substantially in after hours trading
Precious metals closed marginally higher today, Tuesday, 18 March, 2008 but prices fell in the after hours trading in response to Federal Reserve’s 75 bps interest rate cut bring the rate down to 2.25%. Federal Reserve lowered U.S. interest rates less than some investors anticipated, bolstering the dollar and reducing the appeal of the precious metal. Silver prices fell substantially today.
Comex Gold for April delivery rose $1.7 (1.7%) to close at $1,004.3 ounce on the New York Mercantile Exchange, marking the second time the price has closed above $1,000. This year, gold prices have gained 18% till date. But in the after hours trading, gold futures for April delivery fell by more than $25 to $979 an ounce at electronic trading on the Comex division of the New York Mercantile Exchange. In January, prices gained 11%, the highest monthly gain since April 2006. For February, it gained 6%.
Comex Silver futures for May delivery fell 7 cents (0.3%) to $19.96 an ounce. Silver has gained 32% in 2008. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years. In January this year itself, prices climbed 14%. In February, it gained another 15%.
Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.
In the energy market on Friday, crude oil rose by more than $4 today and closed a little above $108/barrel.
The Fed action takes the federal funds rate target down to 2.25%, the lowest since December 2004. The Fed said the size of the rate cut was enough to promote growth. The Fed's move sent the dollar up the most in almost four years against the yen, and the euro dropped. The dollar index, which measures the U.S. unit against a basket of major currencies, rebounded after the Fed announcement to gain 0.1% to 71.58.
The dollar has been dampened since last year, more since start of FY 2008 after interest rates were cut twice in January, 2008. Gold, as a dollar-denominated commodity, suffers from dollar strength. On the contrary, gold prices rise with falling dollar as inflationary concerns boosts the metal's appeal as an inflation hedge.
Prior to today, the Fed had cut the federal funds rate to 3% this year from 5.25% in mid-September, 2007. January 2008 itself saw two rate cuts in a gap of ten days.
Gold witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. The Fed reduced federal funds rate three times in FY 2007. In 2006, silver had jumped 46% while gold gained 23%. Gold has tripled in five years as investment demand has soared and mine supplies have remained low.
At the MCX, gold prices for April delivery closed higher by Rs 25 (0.2%) at Rs 13,090 per 10 grams. Prices rose to a high of Rs 13,179 per 10 grams and fell to a low of Rs 13,034 per 10 grams during the day’s trading.
At the MCX, silver prices for May delivery closed Rs 64 (0.24%) lower at Rs 25,968/Kg. Prices opened at Rs 26,088/kg and fell to a low of Rs 25,815/Kg during the day’s trading.
Crude prices rose by more than $4 today, Tuesday, 18 March, 2008. Prices rose after the Federal Reserve decided to cut overnight lending rates by 75 bps to bring it down to 2.25% to strengthen the economy. Dollar continued to remain under pressure today because of this. Yesterday, crude suffered the biggest daily loss for crude in 17 years due to credit market concerns.
Crude-oil futures for light sweet crude for April delivery today closed at $109.42/barrel (higher by $3.74/barrel or 3.5%) on the New York Mercantile Exchange. They earlier dropped to $108 before Fed’s move. Crude prices are 92% higher on a yearly basis.
Crude prices, denominated in dollars, tend to rise when the greenback falls, as a weaker U.S. currency makes crude less expensive to buyers holding other currencies. It also lowers oil producers' dollar revenue and forces them to raise prices.
The Fed reduced its benchmark rate by 0.75 percentage point to 2.25%. The lending rate has been cut by 2 percentage points this year in the most aggressive easing since the late 1980s. The falling dollar has spurred traders to invest in commodities as it makes them cheaper for those who are holding other currencies. The Fed said the size of the rate cut was enough to promote growth.
Brent crude oil for April settlement today rose $3.81 (3.7%) to $105.56 on the London-based ICE Futures Europe exchange. The London benchmark rose 54% in FY 2007, the most since 1999 when prices more than doubled.
Natural gas remains steady
Natural gas advanced, led by higher crude prices, after a cut in U.S. interest rates prompted investors to buy commodities as a hedge against inflation and a weakening dollar. Gas for April delivery rose 31.4 cents (3.5%) to settle at $9.414 per million British thermal units.
Against this backdrop, April reformulated gasoline gained 15.58 cents to $2.66 a gallon, and April heating oil rose 6.95 cents to $3.1379 a gallon.
Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.
The International Energy Agency, cut its forecast for 2008 global oil demand for a second month as record prices curbed consumption in some parts of the world. The agency reduced its forecast by 80,000 barrels a day to 87.54 million barrels a day, leaving annual demand growth at 2%.
OPEC left production targets unchanged on its 5 March meeting at Vienna, giving 12 of its 13 members a combined quota of 29.67 million barrels a day.
At the MCX, crude oil for March delivery closed at Rs 4,292/barrel, higher by Rs 119 (2.8%) against previous day’s close. Natural gas for March delivery closed at Rs 375.1/mmtbu, lower by Rs 0.9/mmtbu (0.24%).
The Energy Information Administration will report last week's U.S. crude inventories tomorrow at 10.30 E.T am at Washington.
Turnover in F&O segment rises
Nifty March 2008 futures were at 4544, at a premium of 11 points as compared to spot closing of 4533.
The NSE's futures & options (F&O) segment turnover was Rs 47,532.30 crore, which was higher than Rs 40,058.11 crore on Monday, 17 March 2008.
ICICI Bank March 2008 futures were at premium at 784 compared to the spot closing of 768.20.
Essar Oil March 2008 futures were at premium at 208.75 compared to the spot closing of 206.70.
Steel Authority of India (Sail) March 2008 futures were at premium at 190.95 compared to the spot closing of 189.65.
In the cash market, the S&P CNX Nifty gained 29.90 points or 0.66% at 4533.