"The way to deal with these short-term problems is to jump in to the long-term" problems.
‘We will recover,’ said US President Barack Obama minutes ago in his first speech to a joint session of Congress. And that holds true even for our market. Spend India Spend, is what the UPA government seems to be telling, with its parting gift. There is scope for a brief rally if India Inc passes on the benefit of cuts announced by the government. The RBI’s much-anticipated rate cuts will provide a temporary booster too.
Today, we expect the market to continue Tuesday’s pull-back, as global markets are in buoyant mood. US stocks rallied overnight after Monday mayhem. But, European indices fell for a fifth session in a row. Asian markets are up 1-3% this morning.
The new stimulus plan doesn’t guarantee an immediate rebound in economic activity and partly hinges on the recovery in key global economies. Better late than never, that’s what we would like to call the rather belated announcement on the latest fiscal booster shot.
The S&P has cut its outlook on India’s sovereign ratings citing the mess in public finance. However, given the current dire economic environment, the government has very little choice. At the same time, one shouldn’t completely overlook the deteriorating fiscal situation.
US stocks rallied on Tuesday, reversing the previous day's sharp losses, after Federal Reserve Ben S. Bernanke allayed mounting fears over a possible bank nationalisation plan by the Obama administration.
Not surprisingly, the financial shares were among the biggest gainers, a day after the main indices fell to 12-year lows. Housing, retail, technology and energy shares too were among the big gainers.
The Dow Jones Industrial Average jumped 236 points, or 3.3%, to 7,350.94, its best day on a point basis in over a month. The Dow had ended Monday's session at the lowest point since May 7, 1997.
The S&P 500 index rose almost 30 points, or 4%, to 773.14 after ending the previous session at the lowest point since April 11, 1997.
The Nasdaq Composite index surged 54 points, or 3.9%, to 1,441.83 after ending the previous session at a three-month low. The Nasdaq has held up better than the broader market this year.
US stocks have tumbled for the last few weeks on worries that not even the many stimulus plans and bank relief packages will be sufficient to slow the recession. The declines left the Dow and S&P 500 at almost 12-year lows.
But, on Tuesday comments from Bernanke helped sustain advance, after the Fed chairman sought to downplay fears that the government was considering taking over struggling banks. Investors have been nervous that banks will have to be nationalised, which would wipe out all shareholder value.
At the same time, the market brushed aside the rest of the Fed chief's more dour congressional testimony, including his assertion that the recovery will take more than two or three years. Bernanke spoke before the Senate Banking Committee as part of his two-day semi-annual testimony on Capitol Hill. On Wednesday, he will address the House Financial Services Committee.
President Barack Obama was scheduled to address both chambers of Congress, discussing the economy, the $787bnstimulus package and his goal to cut the deficit in half by the end of his first term.
In the day's economic news, the S&P Case-Shiller National Home Price index plunged 18.2% in the fourth quarter versus a year ago, the biggest quarterly drop in the index's 21-year history. A monthly measure of 20 major metropolitan areas fell 18.55% in December versus a year ago, also a record.
The Conference Board's February Consumer Confidence index plunged to an all-time low, falling to 25 in the month from a revised 37.4 in January. The reading is the lowest since the Conference Board began tracking the index in 1967.
In company news, Home Depot reported weaker quarterly earnings that beat estimates, providing reassurance that some retailers are weathering the recession. But the home improvement retailer also said it plans to open fewer new stores in 2009 and that profit will fall for the third straight year due to the housing market collapse and the recession. Shares gained 10.5%.
Target reported weaker quarterly earnings that missed analysts' expectations. The retailer has suffered amid the economic downturn, with customers buying staples like food and cleaning supplies and eschewing pricier items like clothing and home decor. Shares fell 2%.
JPMorgan Chase said late on Monday that it was cutting its dividend by 87% to 5 cents per share, a move that it says will save it $5bn a year. Shares gained 7.7%.
Citigroup stock has been rising on reports that it will soon announce a deal with Treasury that would give the government a 40% stake in the bank. The Financial Times said on Tuesday that a deal could be announced as soon as Wednesday.
Treasury prices slipped, raising the yield on the benchmark 10-year note to 2.76% from 2.75% on Monday. Treasury prices and yields move in opposite directions.
US light crude oil for April delivery rose $1.52 to settle at $39.96 a barrel on the New York Mercantile Exchange.
In currency trading, the dollar fell versus the euro and gained against the yen. COMEX gold for April delivery fell $24.50 to settle at $970.50 an ounce.
European shares fell for the seventh time in nine sessions on Tuesday. The Dow Jones Stoxx 600 index declined 1.4% to 172.86.
The losses came as risk aversion and the weight of a global recession drove a broad sell-off that pushed U.S. stock indexes to levels not seen in more than a decade on Monday.
Germany's DAX 30 index lost 1% to 3,895.75, while the French CAC-40 index declined 0.7% to 2,708.05 and the UK's FTSE 100 index gave up 0.9% to 3,816.44.
Weak global cues dragged the Indian bourses to open with a negative gap. From there on markets were on a constant upswing. However, Standard & Poor’s announcement that it cut India’s credit rating outlook to negative from stable dampened the sentiments on Dalal Street.
But as the day progressed, the government decision of reducing central excise duty to 8% from 10% and extending excise cuts beyond March 31, 2009 saw the Indian bourses staging a smart come back. Finally, the BSE Sensex slipped 21 points to close at 8,822 and the NSE Nifty was flat at 2,733.
ONGC would review the viability of setting up a refinery in Rajasthan state, the government said.
The company would discuss with the state government regarding the fiscal incentives needed to make a refinery at Barmer, said the junior oil minister in the parliament. The feasibility and cost estimate of the project would depend on incentives from the state government, the minister said.
Shares of ONGC gained by a percent to Rs680. The scrip touched an intra-day high of Rs686 and a low of Rs656 and recorded volumes of over 1,00,000 shares on BSE.
Satyam Computer’s chairman, Kiran Karnik announced that they aim to start the stake sale process this week by inviting expressions of interest from potential investors once the company receives regulatory approval.
Satyam had earlier confirmed that it is back to its winning ways, riding on the relentless efforts of the newly constituted Board to restore stakeholder confidence and ensure business continuity. The stock down 3% to Rs43.9 after hitting an intra-day high of Rs47 and a low of Rs43 and recorded volumes of over 82,00,000 shares on BSE.
Shares of Hindustan Oil Exploration gained by 0.5% to Rs57.5 after the company announced that it entered into a loan Agreement with Eni Coordination Centre, S.A., Brussels (ECC) for availing a US Dollar denominated Term Loan by way of External Commercial Borrowing amounting to US$125mn to part finance the various development activities of the company including PY-1 Field. The scrip touched an intra-day high of Rs59 and a low of Rs55 and recorded volumes of over 6,00,000 shares on BSE.
Subhash Projects announced that it received a work order construction of "25 MGD Effluent Pumping Station at Rithala STP including P/L/J twin transmission mains for carrying 33.34 MGD treated effluent from EPS at Rithala to PPCL Plant at Bawana, on Design, Build and Operate (DBO) basis". The stock was down 5% to Rs39.1 after the scrip touched an intra-day high of Rs44 and a low of Rs38 and recorded volumes of over 51,000 shares on BSE.
Life Insurance Corp of India acquired ~22.8mn equity shares of ICICI Bank and increased its stake from 7.34% to 9.38%.
Shares of ICICI Bank erased early losses and ended flat at Rs335. The stock hit an intra-day high of Rs340 and a low of Rs318 and recorded volumes of over 49,00,000 shares on BSE.
Shares of Hotel Leela advanced by 0.3% to Rs18.1 after the company announced that it repurchased US$30mn of bonds. The scrip touched an intra-day high of Rs19.9 and a low of Rs17.3 and recorded volumes of over 4,00,000 shares on BSE.