It is easier to pull down than to build up.
The season of pulling down one another begins on the political front. As days progress, we will witness need-based ‘mergers and acquisitions’ of political parties. While action shifts to the political arena, another slide lays in store for the Indian stock market. A recovery is possible only if global markets oblige though no such signs are visible this morning.
With the schedule of the Lok Sabha polls formally announced,there is no scope for any fresh government measures to shore up the economy (or the market). Therefore, all eyes will be on the RBI to unveil fresh doses of monetary stimulus. The Q3 GDP data and the latest trade figures reveal further weakness in the macro picture. The Centre’s fiscal health too is worsening.Another negative is the slide in the rupee, which will only encourage further selling by FIIs. Though Feb. auto numbers have been better, the same trend is unlikely to remain for long. The mess in the western financial system will continue to hinder any recovery in the global economy. Lack of positive triggers will keep the domestic market subdued.
FIIs were net sellers in the cash segment on Monday at Rs5.8bn, while the local institutions pumped in Rs3.34bn. In the F&O segment, the foreign funds were net sellers at Rs455.7mn. On Friday, FIIs were net sellers in the cash segment at Rs2.7bn.
US stocks slumped on Monday, with the Dow Jones Industrial Average and S&P 500 index falling to new 12-year lows after insurance major AIG reported a massive quarterly loss, heightening worries about the financial sector and the economy.
The Dow tumbled 299.64 points, or 4.2%, to 6,763.29, its first close below 7,000 since May 1, 1997. The S&P 500 plunged 34.27 points, or 4.7%, to 700.82, while the Nasdaq Composite Index dived 54.99 points, or 4%, to 1,322.85.
The stock losses were in response to renewed troubles at AIG, but also a continuation of the worries about the financial sector and the state of the economy. Investors also remain wary about the various government initiatives to try to stem the recession, announced over the last few weeks.
AIG reported a US$62bn fourth-quarter loss, the largest in US corporate history, on turmoil in the credit markets and massive restructuring costs. For the full year, AIG lost US$99bn after reporting a profit of US$9.3bn in 2007.
The US government said it is revising its bailout for the third time and committing another US$30bn in exchange for cumulative preferred stock. The rescue plan now totals US$162.5bn.
US stocks tumbled on Friday after the government said it will control as much as 36% of Citigroup's common stock. Also, a government report showed last week that the world's largest economy shrank at its sharpest pace in 26 years in the fourth quarter of 2008.
Adding to the weakness was billionaire investor Warren Buffett's annual chairman's letter, in which he talked about the tough 2008 his Berkshire Hathaway company experienced. The influential investor admitted that he "did some dumb things in investments" during the year.
The Institute for Supply Management's manufacturing index rose modestly to 35.8 in February from 35.6 in January, after 12 months of declines. Economists expected a drop to 34. Despite the advance, the sector remains in a period of contraction, with any reading under 50 indicating weakness.
Another report showed that construction spending fell 3.3% in January after falling 2.4% in December. Economists thought it would fall 1.5%.
Personal income rose 0.4% in January after falling 0.2% in December. Economists thought it would fall 0.2%. Personal Spending rose 0.6% in January after falling 1% in December. Economists thought it would rise 0.4%.
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.87% from Friday's 3.01%.
In currency trading, the dollar gained versus the euro and fell against the yen.
US light crude oil for April delivery fell US$4.61 to settle at US$40.15 a barrel on the New York Mercantile Exchange.
COMEX gold for April delivery fell US$2.50 to settle at US$940 an ounce.
European shares slid, with banks taking another pounding, as HSBC became the latest lender to ask shareholders for cash to shore up its balance sheet.
The pan-European Dow Jones Stoxx 600 index plummeted 5% to 164.30, with the banking sector losing nearly 10%.
Shares of HSBC plunged 19% in London after the Anglo-Asian banking major said it intends to raise 12.5 billion pounds in the largest-ever rights issue by a UK company.
HSBC also reported that its 2008 net profit fell 70% to US$5.73bn and that it will largely shut down its HFC and Beneficial consumer-finance operations in the US.
Elsewhere in Europe, the UK's FTSE 100 index fell 5.3% to 3,625.83, while the French CAC-40 index dropped 4.5% to 2,581.46 and Germany's DAX 30 index lost 3.5% to 3,710.07.
It was the second straight trading session where Indian markets ended in the red. The sharp cut on the bourses was on the back of a global sell-off. Also dismal trade data further dampened the sentiment on Dalal-Street. India's merchandise exports fell 16% in January over the same period a year earlier, posting fourth straight month of decline. The banking, metals and the capital goods stocks were under pressure. However, the Autos were in demand on the back of good sales numbers.
The BSE Sensex slipped 284 points to close at 8,607 and the NSE Nifty was down 89 at 2,674.
Among the 30-components of Sensex, 29 stocks ended in red and only M&M ended in the positive terrain. Among the major laggards were, Reliance Infra, Tata Steel, ICICI Bank, RCom, JP Associates and TCS.
The board of directors announced that shareholders of RPL will receive 1 fully paid equity share of Reliance Industries for every 16 fully paid equity shares of RPL held by them on the record date to be fixed by the Transferee Company.
Shares of Reliance Industries slipped by a 3% to Rs1225 after hitting an intra-day high of Rs1262 and an intra-day low of Rs1213 recording volumes of over 1.6mn shares on BSE.
On the other hand, shares of RPL pared early gains and ended lower by 1.4% to Rs75 after hitting an intra-day high of Rs82 and an intra-day low of Rs70 recording volumes of over 8.9mn shares on BSE.
Edserv Softsystems Ltd., a web-learning, IT consulting and resource deployment company today was listed at Rs63 against its issue price of Rs60.
As the day progressed the stock climbed significantly and finally ended at Rs137 translating into a premium of 129% over its issue price. The scrip hit an intra-day high of Rs147 and an intra-day low of Rs55 recording volumes of over 34mn shares on the BSE.
It was the first IPO after a gap of nearly four months and the issue got subscribed 1.30 times.
Shares of Hindustan Dorr Oliver pared its gains and slipped by 1.1%. The stock had hit an intra-day high of Rs34.2 after the company announced that it bagged an order worth Rs240mn from M/s. HPCL-Mittal Energy Ltd for detailed engineering, shop & site fabrication, transportations and supply of Process Pressure Vessels weighing from 50 MT to 250 MT each. The scrip hit a low of Rs31.5 and recorded volumes of over 2,00,000 shares on BSE.
Shares of Aurobindo Pharma also erased its gains and ended 2% lower at Rs147 The company announced that its wholly owned subsidiary Aurobindo Pharma Australia Pty Ltd received it's first approval from Therapeutic Goods Administration (TGA), Government of Australia for the registration of Auro-Lisinopril 5, Auro-Lisinopril 10 and Auro-Lisinopril 20 tablets containing Lisinopril (as dihydrate) 5mg, 10mg and 20mg.
The scrip touched an intra-day high of Rs150 and a low of Rs146 and recorded volumes of over 7,000 shares on BSE.
Shares of Span Diagnostics reversed its gains and sharply plunged by over 11% to Rs36. The stock had hit an intra-day high of Rs45 after the board of directors of the company would meet on March 7, 2009 to consider the allotment of 1,57,500 Share Warrants convertible in to Equity Share of Rs 10/- each at the premium of Rs40.60 per share to promoters on preferential basis pursuant to in-principle approval. The scrip hit an intra-day low of Rs35 and recorded volumes of over 40,000 shares on BSE.
Looking at the sharp slide on Monday, bulls may continue to remain under pressure in the coming days as the macro-economic outlook is getting worse by the day, which is evident in the Q3 GDP data followed by weak trade data. Traders should have a cautious approach and be stock specific.