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Friday, November 28, 2008
Post Session Commentary - Nov 28 2008
The domestic market managed to end in green due to the buying support on key stocks led by better-than-expected economic growth data which stood at 7.60% for Q2. Earlier volatility was witnessed during the trading on the expiry day of derivative contracts for the November 2008 series along with terror attacks. Sentiments were already weak on global financial crises, which resulted heavy outflow of foreign capital. However, expectation of further rate cut by RBI gathered momentum. Recovery was also led by IT stocks on weaker rupee. Market opened on lower on the back of the terrorist attack in Mumbai and suddenly turned choppy due to the expiry of the November 2008 derivate contracts today. Further market continued to trade with instability and dropped in afternoon on reports of fresh firing outside the Chattrapati Shivaji Terminus (CST) rail terminus. Finally denial of this report along with recovery in Asian markets and slightly higher Dow futures boosted key benchmark indices to day''s high. NSE Nifty ended above 2,700 mark and BSE Sensex above 9,000 level. From the sectoral front, most of the buying was observed in IT, teck, Auto, FMCG and Bank stocks. However, Reality, Metal, PSU and Oil & Gas stocks contributed to the negative sentiments. Midcap stocks joined the upward journey while Small cap stocks remained out of favour.
Among the Sensex pack 16 stocks ended in green territory and 14 in red. The market breadth was negative as 1114 stocks closed in red while 915 stocks closed in green and 64 stocks remained unchanged.
The BSE Sensex closed higher by 66 points at 9,092.72 and NSE Nifty ended marginally up by 2.85 points at 2,775.10. The BSE Mid Caps ended with gain of 8.38 points at 2,885.76 while and BSE Small Caps closed with loss 10.28 points at 3,304.61. The BSE Sensex touched intraday high of 9,157.62 and intraday low of 8,889.18.
Gainers from the BSE Sensex pack are TCS Ltd (5.89%), BHEL (4.78%), Infosys (4.49%), M&M Ltd (4.47%), HDFC (3.34%), Satyam Computer (2.60%), Sterlite Industries (2.58%), Bharti Airtel (2.50%), Tata Power (2.18%), HDFC Bank (1.46%) and Hindalco (0.95%).
Losers from the BSE Sensex pack are Reliance infra (3.26%), L&T Ltd (3.14%), Grasim Indus (3.03%), NTPC Ltd (2.86%), Tata steel (2.55%), Tata Motors (2.43%), Ranbaxy Lab (2.05%), Relinace Communication Ltd (1.71%) and SBI (1.58%).
Indian economy grew at 7.60% for the second quarter of FY09 as against 9.3% (YoY) and 7.9% (QoQ). The services sector growth was at 9.6% from 10.5% in the year ago period. The construction growth for the second quarter stood at 9.7% from 11.8% of previous year.
The BSE IT index gained (3.67%) or 90.49 points to close at 2,558.94. Major gainers are Patni Computer (13.95%), TCS Ltd (5.89%), NIIT Ltd (5.56%), Infosys (4.49%), Moser Bayer (3.39%) and Oracle Fin (2.84%).
The BSE Teck index ended higher by (2.45%) or 47.80 points at 2,001.63 as Patni Computer (13.95%), TCS Ltd (5.89%), NIIT Ltd (5.56%), Infosys (4.49%), IBN18 (3.97%) and Moser Bayer (3.39%) ended in positive territory.
The BSE Auto index advanced by (1.43%) or 32.81 points to close at 2,330.56 Gainers are Amtek Auto (14.77%), Cummins Indi (5.22%), M&M Ltd (4.47%), Hero Honda Motors (3.37%), Maruti Suzuki (0.67%) and Exide Indus (0.64%).
The BSE Reality index ended lower by (0.97%) or 15.26 points at 1,561.01. Major losers are Unitech Ltd (10.81%), Ansal Infra (5.10%), Pheonix Mill (4.28%), Orbit Co (3.78%) and Mahindra Life (2.00%).
The BSE Metal index dropped by (0.84%) or 37.34 points to close at 4,383.38. Losers are Nalco (7.95%), Welspan Gujarat Sr (7.73%), Hindustan Zinc (3.10%), JSW Steel (2.82%), SAIL (2.77%) and NMDC Ltd (2.74%).
The BSE PSU index lost (0.77%) or 35.53 points to close at 4,585.53. Losers are Chennai Petroleum (5.89%), Neyveli LIG (5.80%), Allahabad Bank (3.85%), IDBI Bank (3.50%), Corporation (3.40%) and NTPC Ltd (2.86%).
Sensex shrugs terror threat; regains 9,000 mark in highly volatile trade
Key benchmark indices eked out modest gains in a highly volatile trading session on reports that the operation to flush out terrorists at three spots in Mumbai was nearing end. Volatility was intense ahead of expiry of November 2008 derivative contracts. Expectations of a further rate cut by the central bank also supported the market. The BSE Sensex regained the psychological 9,000 level in highly volatile trade
A denial by the Railways of shooting taking place near the Chhattrapati Shivaji Terminus (CST) station in Mumbai lifted the market in mid-afternoon trade. Earlier, two television channels had reported firing at the station which had pulled the market lower in afternoon trade.
After battling terrorists for two days at the Oberoi-Trident hotel in Mumbai, the National Security Guards today cleared the hotel of terrorists, killing two of them while six bodies were recovered from the premises. Reports suggest that the operation to flush out terrorist at two other spots viz. the Nariman House and at Taj Hotel near the Gateway of India, is at a final stage. The battle between the police and terrorists was still going on in these two spots, more than 36 hours after the terror attacks in Mumbai on Wednesday, 26 November 2008
But the market breadth was negative as the terror attacks weighed on the sentiments which has already been hit by heavy outflow of foreign capital as a result of the global financial crisis which has hit markets worldwide.
Expectations of further cut in interest rates in India gathered momentum after Finance Minister Palaniappan Chidambaram Monday, 24 November 2008, said monetary policy was biased towards stimulating growth and the Reserve Bank of India (RBI) was likely to lower rates further as inflation cooled. Lower interest rates boost stocks as lower borrowing costs help lift corporate profits.
With corporate India forced to compete with the government domestically for raising finance, interest rates cannot drop meaningfully till either growth slows and demand for credit cools or the RBI continues to provide liquidity to banks, aggressively cutting interest rates, the cash reserve ratio (CRR) - the percentage of deposits banks have to keep with the central bank and statutory liquidity ratio (SLR) - the percentage of deposits bank have to hold in government and other approved securities.
India's economy grew at 7.6% in the September 2008 quarter from a year earlier, at its slowest pace in nearly four years as it battered by high borrowing costs, data released today morning showed.
The slowdown in the Indian economy and reduced availability and rising cost of funds are taking their toll on the performance of the corporate sector. Moreover, companies which have resorted to substantial overseas borrowing are seeing increase in cost of servicing the loan due to depreciation rupee which hit a record low of 50.60 against the dollar on 20 November 2008. Some companies have cut production to avoid higher inventories.
Volatility was high. After an initial fall caused by the terror attacks, the market bounced back with the global rating agency Standard & Poor's (S&P) stating that attacks were an isolated case and that it does not expect any negative implications on India's macro economic activities or the government's fiscal position from the attacks.
After moving in a narrow range, the market weakened again in early afternoon trade before bouncing back in the green in afternoon trade as as the latest data showed the economy grew at a slowest paces in nearly years. The market once again weakened TV reports of firing outside CST rail station. Railways' denial of the firing at CST lifted the market again in mid-afternoon trade. The BSE Sensex swung 268.44 points between the day's high and low.
Adding to the volatility was the November 2008 derivatives expiry today, 28 November 2008. As per reports, the Nifty rollover of positions from November 2008 series to December 2008 series stood at 54% while marketwide rollover was 60%, by end of trading on Wednesday, 26 November 2008. The stock exchanges had to postpone expiry of November 2008 contracts as the markets were shut on Thursday after the terror attacks. The November contracts were to expire on Thursday. All the financial and commodity markets remained shut on Thursday, 27 November 2008, after the major terror strikes in India's financial capital.
European markets slipped as investors paused for breath following the stellar gains over the week. Key benchmark indices in UK, Germany and France slipped between 0.69% and 1.14%. Trading in US futures indicated the Dow could fall 40 points at the opening bell.
Asian markets rose on bargain hunting after recent heavy losses. Key benchmark indices in Hong Kong, Japan, Taiwan, Singapore and South Korea were up by between 0.15% and 2.48%. However China's Shanghai Composite slipped 2.44%.
The BSE 30-share Sensex was up 66 points or 0.73% to 9,092.72. The Sensex opened 137.54 points lower at 8,889.18, which was also its day's low. At the day's high of 9,157.62, the Sensex gained 130.90 points in mid-afternoon trade.
The S&P CNX Nifty rose 2.85 points or 0.10% to 2755.10, underperforming the Sensex, weighed by non-Sensex stocks. All the top 3 Nifty losers Unitech (down 11.30%), National Aluminium (down 7.74%), and Zee Entertainment (down 4.60%), don't form part of the 30-share Sensex pack.
The barometer index BSE Sensex is down 11194.27 points or 55.17% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 12114.05 points or 57.12% below its all-time high of 21,206.77 struck on 10 January 2008.
The market breadth, indicating the overall health of the market, was negative on BSE with 1258 shares declining as compared with 1061 that rose. 84 shares remained unchanged.
Among the broader indices, the BSE Mid-Cap index rose 0.29% to 2,885.76 while the BSE Small-Cap index fell 10.28 points or 0.31% to 3,304.61.Both these indices underperformed the Sensex.
The turnover was sharply down. The total turnover on the BSE amounted to Rs 2383 crore as compared to Rs 3233 crore on Wednesday, 26 November 2008.
Sectoral indices on BSE displayed mixed trend. However only the BSE FMCG index (up 0.82% to 1,936.60), the BSE IT index (up 3.67% to 2,558.94), the BSE Auto index (up 1.43% to 2,330.56), the BSE Teck index (up 2.45% to 2,001.63), outperformed the Sensex.
The BSE Oil & Gas index (down 0.53% to 5,618.16), the Bankex (up 0.44% to 4,645.40), BSE Realty index (down 0.97% to 1,561.03), the BSE Capital Goods index (down 0.28% to 6,387.32), the BSE Consumer Durables index (down 0.38% to 1,793.56), the BSE HealthCare index (up 0.30% to 2,887.83), the BSE PSU index (down 0.77% to 4,585.83), the BSE Power index (down 0.04% to 1,631.69), the BSE Metal index (down 0.74% to 4,383.38) underperformed the Sensex.
Among the 30-member Sensex pack, 16 advanced while the rest declined. NTPC (down 3.74% to Rs 158.15), Grasim (down 4.03% to Rs 880), and Ranbaxy (down 2.63% to Rs 207.60), edged lower from the Sensex pack.
Bharti Airtel (up 2.46% to Rs 670.80), Hindalco (up 1.81% to Rs 53.50), and Tata Power (up 1.20% to Rs 662.70), edged higher from the Sensex pack.
Most IT pivotals advanced on a weaker rupee. India's largest software services exporter TCS jumped 6.63% to Rs 561.95. It was the top gainer from the Sensex pack
Infosys Technologies (up 4.95% to Rs 1246), Satyam Computer Services (up 2.68% to Rs 243.20), rose. However India's third largest software services exporter Wipro was down 0.41% to Rs 240 after striking day's high of Rs 252.
The rupee weakened today, 28 November 2008 in the wake of terrorists attacks and heavy demand for the US currency from importers. The partially convertible rupee was at 49.72/74, compared with Wednesday's close of 49.89/90 per dollar. A weak rupee benefits IT firms as they derive a lion's share of revenue from exports.
India's top power equipment maker by sales, Bharat Heavy Electricals surged 5.65% to Rs 1374 on reports the company intends to acquire companies in the non-conventional energy and transmission businesses to more than double its turnover to Rs 50000 crore in the next five years.
India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) saw high volatility in late trade. It ended 0.10% lower at Rs 1136.15, after striking a high of Rs 1164.70. Earlier the stock rebounded sharply from the day's low of Rs 1037. Recent reports suggested the company wants to restart selling petrol and diesel after margins on the two fuels turned positive. The Mukesh Ambani-run company had reportedly shut all of its 1,432 petrol pumps around March 2008 after it could not compete with public sector companies, who sold fuel at rates much lower than their cost, as they got government subsidies.
Auto shares rose on hopes lower interest rates would spur demand which is mainly driven by finance. Mahindra & Mahindra (up 3.86% to Rs 280), and Maruti Suzuki India (up 1.07% to Rs 538), gained.
However India's largest commercial vehicle maker by sales Tata Motors lost 2.54% to Rs 136.20 on reports the company is shedding up to 3,000 temporary jobs at its Pune factory, weeks after its decision to cut production and dismiss a similar number of temporary workers at its Jamshedpur plant. The latest cuts could take the overall layoffs to around 6,000 workers.
Private sector banking shares reversed early losses on hopes of a rate cut by the central bank following a further fall in inflation. ICICI Bank (up 0.71% to Rs 353, off day's low of Rs 331), HDFC Bank (up 0.73% to Rs 913.85, off day's low of Rs 882.30), rose. However India's largest state-run bank by assets State Bank of India was down 1.85% to Rs 1083.90. The stock came off the day's low of Rs 1061.25
Inflation based on the wholesale price index (WPI) rose 8.84% in the 12 months to 15 November 2008, a tad below the previous week's annual rise of 8.9%, data released by the government on Thursday, 27 November 2008, showed. Inflation has been softening ever since it struck a 16-year peak of 12.91% on 2 August 2008.
India's largest copper maker by sales Sterlite Industries rose 0.97% to Rs 233.25, extending Wednesday's over 12% surge on recent reports the company is still eyeing Asarco, which operates three copper mines in Arizona, but an agreement could only be reached at a substantially reduced price. Sterlite originally offered $2.6 billion to buy Asarco but withdrew from the deal in October 2008 because of falling metals prices.
Steel shares declined after reports steel makers JSW Steel, Ispat Industries and Essar Steel are likely to slash prices of steel in the spot market by 5-6% or Rs 2,000 per tonne next month. India's largest private sector steel maker by sales Tata Steel slipped 2.87% to Rs 150.45. Sail (down 3.50% to Rs 66.25), JSW Steel (down 1.83% to Rs 190.05), Ispat Industries (down 1.08% to Rs 10.08), slipped.
Real estate stocks declined on reports property prices may remain soft as global economic crisis shatters home buyers' confidence. DLF (down 0.15% to Rs 198.10), Unitech (down 9.27% to Rs 23.50), and Ansal Infrastructure (down 1.89% to Rs 25.95), dropped.
Infrastructure stocks were pounded on reports technical evaluation will delay Rs 65,000 crore National Highway Authority of India projects. Reliance Infrastructure (down 2.41% to Rs 507), Larsen & Toubro (down 2.99% to Rs 728.10), and Lanco Infratech (down 1.60% to Rs 111.05), GMR Infrastructure (down 2.28% to Rs 53.55), slipped.
Hospitality shares dropped after the two main hotels -- Taj Mahal Hotel and Oberoi-Trident in Mumbai were hit by the terror attacks. Indian Hotels Company, which operates the Taj group of hotels, plunged 16.20% Rs 40.60. Advani Hotel (down 18.42% to Rs 26.35), Viceroy Hotels (down 4.84% to Rs 28.50), declined. However EIH, which operators the Oberoi group of hotels, gained 5.54% at Rs 98.05, after sliding to low of Rs 83.15.
Shares of Jet Airways, Kingfisher Airlines, and SpiceJet fell by between 4.63% to 6.82% on concerns terror attack on Mumbai could hit the tourism industry for at least next two to three months.
Multiplex chain operators slipped after the state government as a precautionary measure ordered all cinema managements to suspend screening of films till further notice, post the Mumbai the terror attacks late evening on Wednesday, 26 November 2008. PVR (down 11.36% to Rs 64), Fame (down 3.26% to Rs 14.85), and Adlabs Films (down 2.02% to Rs 152.45), declined.
Mumbai has 75 multiplexes and 20 single-screen theatres and the state government order would thus affect about 450 shows on a daily basis. Theatre owners stand to lose business worth around Rs 2 lakh per day from ticket sales alone. They will also lose substantial revenues from food and beverage sales, which account for a major chunk of their total collections.
Reliance Industries was the top traded counter on BSE with a turnover of Rs 239.40 crore followed by Educomp Solutions (Rs 147 crore), SBI (Rs 114.70 crore), bhel (Rs 106.60 crore) and ICICI Bank (Rs 103.90 crore).
Unitech led the volumes chart on BSE clocking volumes of 2.99 crore shares followed by GVK Power Infrastructure (1.16 crore shares), Suzlon Energy (99.35 lakh shares), Cals Refineries (90.50 lakh shares) and Reliance Natural Resources (40 lakh shares).
GTL Infrastructure surged 11.58% to Rs 45.30 at 15:30 IST on BSE, on reports the US-based American Tower Corporation (ATC) have earmarked an investment of about $500 million to acquire a stake in an small- and medium-sized Indian telecom tower company
Vishal Retail hit upper circuit of 5% to Rs 67.50 on recent reports it is planning a major rejig of the business to beat the slowdown. It will launch 60 new stores over the next few months, all of them would be franchises.
Educomp Solutions rose 9.82% to Rs 2,261.45 on reports the company is planning to enter the higher education space by setting up a private university in New Delhi
All the financial and commodity markets remained shut on Thursday, 27 November 2008, in the wake of the major terror strikes in Mumbai, India's financial capital late on Wednesday, 26 November 2008.
Mumbai terror attacks may dampen early sentiment
Key benchmark indices are likely to open lower today, 28 November 2008 in a knee-jerk reaction to terror attacks in Mumbai late on Wednesday, 26 November 2008 which reportedly claimed over 100 lives and injured over 300. Meanwhile, the SGX Nifty November 2008 futures were down 10 points. High volatility cannot be ruled out.
Sentiments remained fragile with stock exchanges remaining shut on Thursday, 27 November 2008. The Securities and exchange board of India (Sebi) Chairman CB Bhave, earlier today reportedly said that the stock exchanges have been asked to be ready to start trading. However, the final call on resuming trade will be taken later, the report added.
The GDP data for the July-September 2008 quarter due today, 28 November 2008 will be keenly watched.
The November 2008 derivative contracts which were to expire on Thursday, 27 November 2008, were also deferred till today, 28 November 2008. As per reports, the Nifty rollover of positions from November 2008 series to December 2008 series stood at 54% while marketwide rollover was 60%, by end of trading on Wednesday, 26 November 2008. The Nifty November 2008 futures ended 2757.85 on Wednesday, 26 November 2008, a premium of 5.60 points to spot closing of 2752.25.
Inflation based on the wholesale price index (WPI) rose 8.84% in the 12 months to 15 November 2008, a tad below the previous week's annual rise of 8.9%, data released by the government on Thursday, 27 November 2008, showed. Inflation has been softening ever since it struck a 16-year peak of 12.91% on 2 August 2008.
Asian markets were trading mixed today, 28 November 2008. China's Shanghai Composite was down 1.18% or 22.72 points at 1,895.14, Singapore's Straits Times declined 1.18% or 20.25 points at 1,690.27, Taiwan's Taiwan Weighted was down 0.03% or 1.14 points at 4,452.61. However, Hong Kong's Hang Seng rose 1.17% or 158.66 points at 13,710.72, Japan's Nikkei advanced 0.57% or 47.70 points at 8,421.09, South Korea's Seoul Composite added 0.80% or 8.54 points at 1,072.
Stock markets in US remained shut on Thursday, 27 November 2008 for Thanksgiving day.
The BSE Sensex gained 331.19 points or 3.81% to 9,026.72, and the NSE Nifty rose 98.25 points or 3.7% to 2752.25 on Wednesday, 26 November 2008, boosted by short covering of open positions and China's rate cut.
Pre Session Commentary - Nov 28 2008
Today markets are likely to open with a negative gap amidst concerns over the terrorist attack in the financial capital, Mumbai. The operation to flush out the terrorist is not yet over and hence the sentiments of trading would be very low. One could anticipate a thin trade today due to weak sentiments. Overall the roll over contracts today would decide the further sentiments of trading. After a negative opening in the morning we also anticipate a bounce back later. The inflation numbers look soft at 8.84% lower by 6bps from 8.90% in the week earlier.
On Wednesday, domestic markets managed to end with green numbers despite volatile trading session. The investors were optimistic on a rate cut from RBI as China''s central bank cut banks'' benchmark lending and deposit rates by 108bps, the fourth cut since mid-September. The one-year bank loans will fall to 5.58% from 6.66%, while the benchmark one-year deposit rate falls to 2.52% from 3.60%. Sensex ended with a gain of 3.81% whereas, Nifty closed with a gain of 3.70% respectively. Bankex, Oil & Gas and Metal gained by 5.96%, 4.41% and 3.66% respectively. During the trading session we expect the market to be trading volatile.
The BSE Sensex closed high by 331.19 points at 9,026.72 and NSE Nifty ended up by 98.25 points at 2752.25. The BSE Mid Caps ended with a marginal gain of 4.79 points however Small Caps closed with losses of 18.53 points at 2,877.38 and 3,314.89. The BSE Sensex touched intraday high of 9,061.72 and intraday low of 8,658.53.
On Thursday, the US markets closed with phenomenal gains. The October personal spending dropped 1.0% month-over-month, which met estimates. Despite the dour housing data, homebuilders rose 13.6%. The Fed’s $600 billion plan to support housing lending spurred a drop in the average 30-year fixed mortgage rate to 5.81% from 5.98%, according to BankRate.com, which gave a lift to housing related stocks. The number of new unemployment claims dropped 14,000 to 529,000 for the week ended Nov. 22. Although this was slightly better than the expected reading of 535,000, it still represents a very weak labor market.
The Dow Jones Industrial Average (DJIA) closed higher by 247.14 points at 8,726.61 NASDAQ index gained 67.37 points at 1,532.10 and the S&P 500 (SPX) also closed higher by 30.29 points to close at 887.68 points.
Indian ADRs ended mixed. In technology sector, Infosys gained by 5.06% and Wipro ended high by 4.18% followed by Satyam that ended high by 2.35% and Patni Computers closing high by 6.13%. In banking sector ICICI Bank was low by (3.15%), while HDFC Bank gained 0.41%. In telecommunication sector, Tata Communication inclined by 6.88%, while MTNL inclined by 2.68%.
Today the major stock markets in Asia opened mixed. The Shanghai Composite is trading low by 23.79 at 1,894.06 Hang Seng is high by 296.40 points at 13,848.48. Further Japan''s Nikkei is high by 42.01 points at 8,415.40. Straits Times is also trading low by 15.53 points at 1,694.99 and South Korea’s Seoul Composite is high by 10.85 points at 1,074.33.
The FIIs on Wednesday stood as net buyers in equity and debt. The Gross equity purchased stood at Rs 1384.20 Crore and gross debt purchased stood at Rs 179.70 Crore, while the gross equity sold stood at Rs 1,382.90 Crore and gross debt sold stood at Rs 37.80 Crore. Therefore, the net investment of equity and debt reported were Rs 1.30 Crore and Rs 142.00 Crore respectively.
On Wednesday, the partially convertible rupee ended at 49.48/50 per dollar, stronger by 0.9% on Tuesday’s closing at 49.93/95. The rupee gained strength on the back of huge dollar selling by corporate and phenomenal rally in the stock markets.
On BSE, total number of shares traded was Rs 25.57 Crore and total turnover stood at Rs 3,232.63 Crore. On NSE, total volume of shares traded was 51.77 Crore and total turnover was Rs 8,818.65 Crore.
Top traded volumes on NSE Nifty – Suzlon Energy with 49337802 shares, Unitech with total volume traded 45143845 shares, followed by SAIL with 11960100 shares, ICICI Bank with 11620249 shares and Reliance Comm with 11014088 shares.
On NSE Future and Options, total number of contracts traded in index futures was 1378947 with a total turnover of Rs 17,568.68 crores. Along with this total number of contracts traded in stock futures were 1370221 with a total turnover of Rs 13,562.58 Crore. Total numbers of contracts for index options were 1238249 with a total turnover of Rs 17237.53 Crore and total numbers of contracts for stock options were 44919 and notional turnover was Rs 520.17 Crore.
Today, Nifty would have a support at 2,590 and resistance at 2,700 and BSE Sensex has support at 8,560 and resistance at 8,935.
Panic opening…recovery later
Courage is resistance to fear, mastery of fear - not absence of fear.
Indian equities surged in late trades on Wednesday, enabling the key indices to close at day's high on hope that the RBI could soon announce a cut in interest rates. China on Wednesday cut it's lending and deposit rates, while also lowering the banks' reserve requirement. This was the fourth time that China slashed rates in the past 2-3 months to boost economic growth.
We expect the market's initial reaction to be down in the wake of the terrorist attacks in Mumbai. But, with US markets rising smartly on Wednesday and a follow up advance in other global markets, the sentiment may improve later in the day. However, Asian markets are trading mixed today. US markets were shut on Thursday due to Thanksgiving and will open only for half a day today.
Also, the government is scheduled to announce Q2 GDP numbers. Though, the figure is expected to moderate from Q1 growth of 7.9%, a better than expected reading could lift the mood on the street. On the flipside, a disappointing number could only add to the already mounting concerns over the economic slowdown.
We'll also have F&O expiry for the November series, which will add to the volatility. So, we advise investors to stay on the sidelines and not take undue risks till the dust settles on the terrorist strikes. However, history has shown that the markets do rebound after an initial knee-jerk reaction down post any such negative events.
Also, inflation has come down for the third successive week to 8.84% and is likely to fall further over the next few weeks. There have been expectations of further easing in monetary policy for some time after inflation fell into single digits. This may come true following the Mumbai terrorist attacks, as the government tries to shore up the market sentiment.
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China - crisis deepening
The impact of the global financial crisis on China's economy is deepening and a large interest rate cut announced Wednesday is essential to boosting slowing growth, the country's top planner said.
This crisis is spreading all over the world and its impact on China's economy is deepening," Zhang Ping, chairman of the Cabinet's National Development and Reform Commission, said at a news conference Thursday. Zhang said economic indicators for November were showing an "even faster decline," though he gave no details.
A 1.08 percentage point reduction in the country's key one-year lending rate announced late Wednesday — China's biggest rate cut since 1997 and the fourth in three months — is "one of the essential measures to stimulate our economic growth," Zhang said.
Zhang said a 4 trillion yuan (USD 586 billion), two-year government stimulus package announced Nov. 9 should add about 1 percentage point to China's economic growth rate. That was below the 2 percentage point increase that independent analysts have forecast.
China's economic growth is expected to fall to about 9 percent this year, down from last year's rapid 11.9 percent rate. That would be the fastest of any major economy, but Chinese leaders worry about rising job losses, especially in export industries, and possible unrest.
Zhang said the government would take steps to boost growth and ensure the economy continues to create jobs. But he did not respond to a question about whether Beijing is planning to enact additional stimulus plans.
A state newspaper reported last weekend that Zhang's agency is working on an additional stimulus package that is meant to supplement the Nov. 9 package with more spending on health, education and other social programs.
The main stimulus package calls for insulating China's economy from the global downturn by injecting money into the economy through higher spending on construction of airports, highways and other projects. It is meant to spur domestic consumption.
The cut in the one-year lending rate to 5.58 percent, effective Thursday, is aimed at encouraging consumers and businesses to borrow and spend, which is seen as a more effective way to fuel growth than government spending.
The stimulus package includes 1.8 trillion yuan (USD 263 billion) in spending on airports, highways and other, 370 billion yuan (USD 54 billion) to improve infrastructure in the poor countryside and 350 billion (USD 51 billion) for environmental projects, according to Zhang.
It also includes 280 billion yuan (USD 41 billion) for construction of low-income housing and 40 billion yuan (USD 5.8 billion) for health and education programs, Zhang said.
Zhang said the government is still working on how local governments will pay for their share of the stimulus spending. The central government is to supply 1.2 trillion yuan (USD 175 billion) of the total stimulus spending, with the rest coming from lower-level governments and state companies.
Inflation at 8.84%
The annual Wholesale Price Index-based inflation rose 8.84 per cent for the week ended November 15, marginally down from the previous week’s yearly rise of 8.90 per cent. The latest WPI inflation rate was the lowest reading since May 17 and well below early August’s peak of 12.91 per cent.
The official WPI for ‘All Commodities’ for the latest reported week rose by 0.04 per cent to 235.1 points, up from 235 points for the previous week. The annual rate of inflation, calculated on point-to-point basis, stood at 3.35 per cent during the corresponding week of the previous year.
Fish-Marine cheaper
The Primary Articles Group rose 0.1 per cent as the index for ‘Food Articles’ group rose by 0.1 per cent due to higher prices of moong, rice and bajra (3 per cent each), ragi (2 per cent) and masur, maize and fruits and vegetables (1 per cent each). However, the prices of fish-marine (12 per cent) and gram and tea (2 per cent each) declined.
Soyabean dearer
The index for ‘Non-Food Articles’ group rose marginally due to higher prices of soyabean (11 per cent), gingelly seed and castor seed (2 per cent each) and linseed (1 per cent). However, the prices of raw rubber (4 per cent), cotton seed groundnut seed and raw cotton (2 per cent each) and raw silk (1 per cent) declined.
The fuel, power, light and lubricants group index remained unchanged at its previous week’s level of 353.3 points. The Manufactured Products group rose by 0.05 per cent as the index for the ‘Food Products’ group declined by 0.1 per cent due to lower prices of cotton seed oil (5 per cent), imported edible oil (4 per cent), rice bran oil (3 per cent) and gur (2 per cent).
However, the prices of bran (all kinds) (5 per cent), gingelly oil (4 per cent), sooji (rawa) (2 per cent) and salt and atta (1 per cent each) moved up. The index for the ‘Textiles’ group rose by 1.0 per cent due to higher prices of cotton yarn-cones and hessian and sacking bags (4 per cent each), texturised yarn (2 per cent) and hessian cloth and cotton yarn-hanks (1 per cent each). However, the prices of synthetic yarn (2 per cent) declined.
The index for ‘Rubber and Plastic Products’ group declined by 0.2 per cent due to lower prices of PVC fitting and accessories (12 per cent). The index for ‘Chemicals and Chemical Products’ group rose by 0.3 per cent due to higher prices of acetylene (70 per cent) and oxygen (8 per cent). However, the prices of vitamin liquids (4 per cent) declined.
The index for the ‘Base Metals Alloys and Metal Products’ group declined by 0.6 per cent due to lower prices of ferro silicon (24 per cent), steel ingots (plain carbon) (16 per cent), basic pig iron and foundry pig iron (7 per cent each), zinc (3 per cent), steel sheets, plates and strips (2 per cent) and ms bars and rounds (1 per cent). However, the prices of joist and rolls and other iron steel (3 per cent each) moved up.
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