A groundless rumour often covers a lot of ground.
The R-related rally witnessed on Wednesday is set to fizzle out today. One reason is that RIL has already denied rumours of an out-of-court-settlement with RNRL on the raging gas row. A raft of bad news from across the globe will also serve as a grim reminder that the worst may still not be over. The macro-economic picture too remains murky. Though inflation is expected to fall further, it is more due to demand destruction in a slowing economy.
So, one should not rejoice if the RBI lowers key policy rates or the Government takes fresh steps to pump-prime the economy. Recent history has shown that these measures only perk up the sentiment for a while. The mood turns glum after a brief relief rally as the headwinds confronting the market remain very much in place.
Worries about the financial health of top global banks like Citigroup, Deutsche Bank, HSBC, Bank of America and JP Morgan have increased. There is no dearth of news on job cuts by corporates. The Fed’s Beige Book survey shows persistent weakness in the US.
Telecom equipment vendor Nortel Networks has filed for bankruptcy. Nortel is a client for Wipro, Infosys and TCS. While earnings risk remain, the impact will be limited as Nortel is known to be under pressure for sometime and growth expectations were anyways muted.
Deutsche Bank has warned of a massive Q4 loss. Citi is merging its broking arm with Morgan Stanley and may break itself up further. Reports say that Bank of America and HSBC are in dire need of more funds. JP Morgan is likely to report a loss as well.
Motorola is cutting 4,000 more jobs. Even Google, which usually is seen as a strong outfit, is cutting jobs to fight off the challenging times.
Sales at US retailers fell more than twice as much as forecast in December. Today, the European Central Bank is likely to cut interest rates by a further 50 basis points to 2%.
We expect the market to fall today in the face of weak global sentiment and nervousness about corporate earnings. US stocks were down 3-4% overnight, while the main European indices fell even more sharply, by 4.5-5%. This morning, the major Asian markets are down 4-4.5%.
Key Results Today: Bajaj Finserve, Bongaigaon Refinery, GTL, Hind Oil Exploration, Infotech Enterprise, JK Lakshmi Cement, IndusInd Bank, PFC, Rallis India and TCS.
US stocks slumped on Wednesday, as a disappointing retail sales data and a string of bad news on the banking sector heightened concerns over a deep and protracted global recession.
The depth of the recession could be seen in recent economic data as well. This week's reports on trade balance, retail sales and import prices makes one realize how deeply mired the US economy is in a recession.
US stocks have slipped through much of the first two weeks of the year as worse-than-expected economic and corporate news has caused investors to question the year-end rally.
Investors were reacting on Wednesday to the latest weakness in the global banking sector. Deutsche Bank reported a huge quarterly loss, HSBC and Bank of America may need to raise billions in new capital and JPMorgan Chase could report weak results.
Investors also took a sour view of news that Citigroup is selling a majority stake in its brokerage unit to Morgan Stanley, a move that would seem to indicate the beginning of the break-up of the troubled banking firm.
The CBOE Volatility index, or the VIX, has been rising over the last few sessions, suggesting investors are getting more jittery. The VIX jumped 13% to 49.14 in Wednesday trading. However, the VIX remains well below historic highs near 90, which it hit in November when the stock market bottomed.
Retail sales slumped 2.7% in December, the Commerce Department reported Wednesday morning. That was more than twice what economists were forecasting, as the recession took its toll on consumer spending in the critical holiday sales period. Sales fell 2.1% in the previous month. Sales, excluding volatile autos fell 3.1% versus forecasts for a drop of 1.4%. Sales excluding autos fell 2.5% in November.
Meanwhile, the retail industry's leading trade group said 2008 holiday sales fell 2.8% versus a year earlier, due to the recession and fewer shopping days. That surpassed the initial forecast for a drop of 2.2% in the combined November-December period.
In other retail sector news, regional department store chain Gottschalks has filed for bankruptcy protection. Clothing chain Goody's said it will liquidate its remaining 282 stores.
Investors got another dose of bad news with the afternoon release of the Federal Reserve's Beige Book reading on the economy. The Beige Book showed erosion over the last six weeks in nearly all of the nation's 12 districts.
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.20% from 2.29% on Tuesday. Yields on the 2-year, 10-year and 30-year Treasurys all hit record lows last month.
Lending rates improved. The 3-month Libor rate fell to 1.08% from 1.09% Tuesday, according to the British Banker's Association, marking a 5-1/2 year low. Overnight Libor held steady at 0.10%, a record low. Libor is a key bank lending rate.
US light crude oil for February delivery fell 50 cents to settle at $37.28 a barrel on the New York Mercantile Exchange, erasing earlier losses following the release of the government's weekly oil inventories report.
The dollar gained versus the euro and fell against the yen. COMEX gold for February delivery fell $11.90 to settle at $808.80 an ounce.
Gasoline prices rose two-tenths of a cent to a national average of $1.792 a gallon.
Motorola is also likely to be active on Thursday. The telecom said after the close that it will cut 4,000 jobs on top of the 3,000 job cuts it already announced in late 2008.
Germany's Deutsche Bank said it would post a steep fourth-quarter loss Wednesday of $6.4 billion. Morgan Stanley said that HSBC, Europe's largest bank, will probably need to cut its dividend in half and may need to raise up to $30 billion in capital.
In other company news, Nortel Networks, North America's largest telecom gear maker, filed for bankruptcy protection.
After the close, Apple CEO Steve Jobs said he is taking a medical leave through the end of the second quarter because his health-related issues are more complex than he thought. Shares tumbled 10% in after-hours trading after having been halted for the first hour of the extended session.
Thursday brings the weekly jobless claims report, two regional manufacturing reports and the producer price index (PPI) - a measure of wholesale inflation. JP Morgan Chase will report its results on Thursday. In an interview with the Financial Times, the company's chief executive Jamie Dimon said the US economy and the financial sector will worsen this year.
European shares fell back to levels last seen in 2008 on Wednesday. The pan-European Dow Jones Stoxx 600 index lost 4.4% to 192.87, the biggest one-day drop for the index this year. With this latest pullback, tentative gains made in the first sessions of 2009 have been wiped out.
The UK's FTSE 100 index closed down 5% at 4,180.64, while Germany's DAX 30 index dropped 4.4% to 4,422.35 and the French CAC-40 index skidded 4.6% to 3,052.00.
Markets bounced back on Wednesday snapping a four day losing streak. Buying was witnessed all over with the oil & gas, telecom and IT stocks among the major gainers. Index heavyweight Reliance Industries and the other ADAG stocks joined in the rally towards the end lifting the NSE Nifty index to close above the 2,800 mark.
Finally, the BSE benchmark Sensex ended at 9,370 surging 299 points and the NSE Nifty index advanced 90 points to close at 2,835.
All the BSE Sectoral indices ended in the positive terrain. BSE Oil & Gas index (up 7%), BSE IT index (up 5.1%), BSE Teck index (up 5%), BSE Metal index (up 4.5%), BSE Power index (up 4%) and BSE Pharma index (up 2.3%)
Even BSE Mid-cap index advanced 2.1% and BSE Small-Cap index gained 1.4%.
Market breath was positive, 1,398 stocks advanced against 984 declines, while, 100 stocks remained unchanged.
Shares of Reliance Industries rallied by over 9% to Rs1178 after the company’s promoters hiked their stake to over 49% as of the December quarter this financial year.
The promoters purchased 120mn shares or over 4% stake in the company during the period between September and December 2008. The promoters of Reliance Industries hold 49.03% stake in the company against a 44.80% stake.
Shares of Jet Airways and kingfisher Airlines surged after reports stated that government is considering a proposal to allow overseas airlines to own stakes in local carriers.
Jet Airways surged by over 7% to Rs153 and Kingfisher Airlines advanced by 6% to Rs35.4.
Shares of Infosys further surged by over 6% to Rs1304 after the company announced that it is currently negotiating about 10 contracts worth more than US$50mn each.
The company has announced its quarterly results on January 13, 2009 it reported a consolidated net profit of Rs16.41bn for the quarter ended December 31, 2008, versus Rs14.32bn in the previous quarter. This translates into a sequential growth of 14.59%.
The net profit for Q3 FY09 and Q3 FY08 includes a net tax reversal pertaining to earlier periods amounting to Rs620mn and Rs500mn, respectively. The year-on-year growth in net profit is at 33.3%. The scrip touched an intra-day high of Rs1313 and a low of Rs1230 and recorded volumes of over 8,00,000 shares on BSE.
Shares of NTPC gained by 2% to Rs171 after the company announced that it approved plans to spend Rs60bn on building thermal power plants. The scrip touched an intra-day high of Rs175 and a low of Rs166 and recorded volumes of over 9,00,000 shares on BSE.
GTL Infrastructure advanced by half a percent. The company announced its quarterly results. The company posted a net loss of Rs14.033mn for the quarter ended December 31, 2008 as compared to net loss of Rs160.082mn for the quarter ended December 31, 2007.
Total Income has increased from Rs450.844mn for the quarter ended December 31, 2007 to Rs754.737mn for the quarter ended December 31, 2008.