The trouble with normal is it always gets worse.
The bulls must be terrified at the prospect of further losses just as the cricketing world is stunned following the assault on Sri Lankan cricketers in Lahore. But then it could have been worse!
Though valuations have dropped to attractive levels, the complete lack of conviction and rising risk aversion will continue to play spoilsport. Today, we see another circumspect start, which may later turn into a lackluster day. The bias still remains negative given the fragile global sentiment.
Reasons are not new and have been well articulated. World economy continues to be in a bad shape, in the wake of the unprecedented financial crisis. India too is no exception, which is clear from the Q3 GDP numbers and other periodic data points. The rupee’s sharp depreciation versus the dollar has only made the matters worse for Indian stocks. A big negative fallout of this is accelerated selling by the FIIs.
Overseas investors have stepped up their selling in the past few days. Globally too, there is no respite for the equity markets. Collective outflows from EPFR Global-tracked equity funds during the fourth week of February reached levels last seen in mid-October.
FIIs were net sellers in the cash segment on Tuesday at Rs7.41bn, while the local institutions pumped in Rs5.23bn. In the F&O segment, the foreign funds were net buyers at Rs4.77bn. On Monday, FIIs were net sellers in the cash segment at Rs4.78bn.
US stocks slipped on Tuesday, with the Dow Jones Industrial Average and S&P 500 index ending at fresh 12-year lows, as Wall Street failed to rebound amid nagging worries about the financial markets and the recession.
The Dow fell 37 points or 0.6%, to 6,726.02 closing at the lowest point since April 18, 1997, when it ended at 6703.55. The S&P 500 shed 4.5 points or 0.6%, to 696.33 ending at the lowest point since Oct. 10, 1996, when it ended at 694.61.
The Nasdaq Composite index gave up nearly 2 points, or 0.1%, to 1,321.01. The tech-fueled index has held up better than the other major averages this year and remains above its close of 1,316.12 from last Nov. 20.
US stocks tumbled on Monday, with the Dow and S&P 500 falling to 12-year lows after American International Group's (AIG) huge quarterly loss exacerbated worries about the financial sector and the economy.
Trading was largely volatile as investors considered the latest comments from top government officials and weak reports on auto and home sales.
President Barack Obama said at this point, profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it. He was speaking to reporters after meeting with British Prime Minister Gordon Brown. He said that he is absolutely confident that credit will start to flow again, businesses will start to invest and hire and that the economy will recover.
At an earlier speech at the Department of Transportation, the President acknowledged the brutal fourth quarter of last year, in which the economy shrank at its sharpest pace in almost 26 years. He said that the first quarter doesn't look like it will be any better and talked about the need for unlocking credit markets.
Separately, the US Treasury and the Federal Reserve launched the much-awaited Term Asset-backed Securities Loan Facility (TALF), a lending program aimed at consumers and small businesses.
The $200bn TALF program will start making loans available on March 17. The government said a future expansion to $1 trillion could include some of the bad assets currently cluttering up bank balance sheets.
Fed chief Bernanke told the Senate Banking Committee that lawmakers need to move aggressively to get the economy out of its slump, even if it balloons the federal deficit. He said that stabilising the financial sector was key to a recovery.
Bernanke also defended the government's latest bailout of troubled insurance firm AIG, which received an additional $30bn on Monday. Bernanke said the government needed to step in because AIG's global reach means there is a contagion risk should it fail.
President Obama's 2010 budget was also in focus, as both Treasury Secretary Timothy Geithner and budget chief Peter Orszag spoke to house panels to defend the proposed $3.6 trillion budget.
US auto sales plunged 40% in February, the industry's worst monthly performance in 27 years. Ford Motor said sales plunged 48% in February, slightly better than the 50% drop forecast by sales tracker Edmunds.com. GM said sales tumbled 53% in the month, worse than the 47% drop analysts were expecting. Toyota said sales dropped 40% from a year ago, versus forecasts for a drop of 39%. Chrysler said sales fell 44%, versus forecasts for a drop of 55%.
Pending home sales sank to a record low in January, according to a National Association of Realtors report. Sales fell 7.7% versus forecasts for a drop of 3.5%, according to a consensus of economists. Sales rose a revised 4.8% in December.
Citigroup said it's CitiMortgage will lower home loan payments for three months and waive fees for some borrowers who are unemployed. The troubled financial company has received billions in federal aid and on Friday made a deal for the government to control as much as 36% of Citi's common stock. Shares gained 6.9%.
Blockbuster has hired lawyers to help it raise money and refinance debt, the video chain said, but it denied reports it was considering a bankruptcy filing. Shares plunged nearly 77% through the afternoon before being halted ahead of the news.
Treasury prices tumbled, raising the yield on the benchmark 10-year note to 2.9% from Friday's 3.01%.
In currency trading, the dollar gained versus the euro and the yen. COMEX gold for April delivery fell $26.40 to settle at $913.60 an ounce.
US light crude oil for April delivery rose $1.50 to settle at $41.65 a barrel on the New York Mercantile Exchange.
European shares slid again with a leading index briefly hitting a level not seen for more than 12 years.
The pan-European Dow Jones Stoxx 600 index fell 1.8% to 161.34, resuming Monday's downward trend, when stocks fell 5%. Although stocks bounced back a bit in early trading in Europe they couldn't hold onto gains and the Stoxx 600 quickly fell to levels not seen since late 1996.
UK's FTSE 100 index was down 3.1% to 3,512.09. Germany's DAX 30 index dropped 0.5% to 3,690.72 and the French CAC-40 index dipped 1% to 2,554.55.
It was the third trading session where markets ended with sharp losses. The slide could be attributed to a sell-off in the last hour of the trading session. The index heavyweights like Reliance Infra, ITC, Bharti, Infosys, HDFC and ICICI Bank suffered major losses dragging the benchmark Sensex to hitting an intra-day low of 8,393 its lowest in more than three years. However, stocks like ACC, Grasim and JP Associates were the top gainers in the Sensex. The BSE Sensex slipped 179 points to close at 8,427 and the NSE Nifty was down 52 at 2,622.
Shares of GMR Infra slipped 0.3% to Rs75. The company announced that its promoters raised stake to 74.2591%. The scrip touched an intra-day high of Rs78 and a low of Rs75 and recorded volumes of over 0.3mn shares on BSE.
Orissa Sponge was locked at 5% upper circuit to Rs342.8 after almost 5.7% of equity shares of the company were traded in 5 blocks. The scrip touched an intra-day high of Rs342.8 and a low of Rs342 and recorded volumes of over 1.1mn shares on BSE.
Shares of Subhash Projects surged by over 2.5% to Rs40 after the company announced that it received an order worth Rs693.7mn. The scrip touched an intra-day high of Rs41 and a low of Rs37 and recorded volumes of over 10,000 shares on BSE.
Shares of Aurobindo Pharma rallied by over 6% to Rs156 after Pfizer announced that it tied up with the company to commercialize medicines that are no longer patent protected, and have lost market exclusivity in the United States and Europe, further progressing its Established Products Business Unit strategy. The scrip touched an intra-day high of Rs163 and a low of Rs144 and recorded volumes of over 0.2mn shares on BSE.
Shares of Ambuja Cements surged by over 4.5% to Rs66 after the company’s sales last month rose 12% to 1.65mn metric tons from 1.48mn tons a year earlier. Production rose to 1.61mn tons from 1.44mn tons, translating into a growth of 11.8%.The scrip touched an intra-day high of Rs67.5 and a low of Rs63 and recorded volumes of over 0.5mn shares on BSE.
Shares of Grasim gained by 3% to Rs1362 after the company announced that cement sales in the last month rose 10.1% to 2.92nm tons. The scrip touched an intra-day high of Rs1392 and a low of Rs1308 and recorded volumes of over 0.1mn shares on BSE.
After three day’s of losses, bulls might get some relief as traders may consider the recent set back as overdone. Technically the Nifty index would see support at 2,524 levels. Global markets also performed relatively better today with the Nikkei index in Japan down only 0.7%. European markets in Germany and France rose marginally as well. However, FIIs are unlikely to resume its shopping spree in a big way anytime soon, this may continue to weigh on the sentiments unless the RBI decides to cut rates.