The nice part about being a pessimist is that you are constantly being either proven right or pleasantly surprised.
The recent rally has caught most market players by surprise, especially after the crash that preceded it. Risk aversion has receded a bit, underscored by the spike in emerging market currencies and commodities. FIIs have turned net buyers in the past few days. All this has happened on the back of a few encouraging news, particularly in the US. Back home too, few positive signs are emerging like the increase in sales of auto, cement and steel sectors.
However, one should not get fooled by the slight improvement in sentiment. A sustained recovery is still far away. What we have witnessed is just a pull-back rally in a bear market. There has to be incremental positive news, both locally and globally, to fuel further advance. April is likely to be critical in this context what with polls and earnings lined up as key events. Today, we expect some cooling as global cues are negative. Technically, 3150 (Nifty) is seen to be a crucial near-term level.
US stocks retreated on Friday at the end of what had been an otherwise strong week, extending the recent rally to three consecutive weeks. Investors chose to step back a bit after the recent spike.
The Dow Jones Industrial Average slid 148 points, or 1.9%, to 7,776.18. The S&P 500 index lost 17 points, or 2%, to 815.94. The Nasdaq Composite index dived 42 points, or 2.6%, to 1,545.20.
Gains earlier in the week were enough to boost the weekly tally. The US stock benchmarks have now posted gains for three consecutive weeks, the best stretch since May last year.
While the market could advance a little more from here, it is likely to soon fizzle out, especially if there is no further good news on the economy or corporate profits. There could be momentum in the short run, but this is a classic bear market rally, nothing more than that.
Financial and technology shares, which led the advance on Thursday, led the fall on Friday. But declines were broad based and 24 of 30 Dow stocks fell.
President Barack Obama met with executives from JPMorgan Chase, Citigroup, Bank of America and other large banks to discuss the financial crisis. The bankers gave their approval of Treasury's plan to strip bad assets off bank balance sheets. They also discussed the recent proposal to overhaul financial regulations.
On the downside, executives at JPMorgan and Bank of America said that March business conditions weakened after a more encouraging start to the year.
Since falling to more than 12-year lows on March 9, the Dow has gained 18.8% and the S&P 500 has rallied 20.6% as of Friday's close. Also on March 9, the Nasdaq touched a more than six-year low. Since then, it has gained 21.8%.
Better-than-forecast economic reports on housing and durable goods orders last week added to optimism about the state of the world's largest economy. Investors have also responded well to the latest plans from the government to stabilise the financial system.
On Thursday, Treasury Secretary Tim Geithner outlined a huge overhaul of the regulatory system. On Monday, he detailed plans to purge bank balance sheets of up to $1 trillion in bad debt that is limiting lending.
In the day's big economic news, personal income fell 0.2% in February after rising 0.2% in January. Economists had forecast a fall of 0.1%. Personal spending rose 0.2% in February after rising 1% in January. Economists had predicted a rise of 0.2%.
The University of Michigan consumer sentiment index rose to 57.3 in March from 56.3 in February, versus economists' forecasts for a reading of 56.8.
In corporate news Google said late on Thursday that it was cutting just under 200 sales and marketing positions worldwide. It is the second round of layoffs in Google history.
General Motors (GM) shares gained on published reports that the government could extend the automaker's restructuring deadline, giving it more time to gain concessions from unions and qualify for more taxpayer help.
The Wall Street Journal said that the government could extend the March 31 deadline by 30 days. On Thursday, GM said that 12% of its US workforce has taken its latest buyout offer. However, the company is still looking to work with the union to alter retiree health care benefits, among other things.
Treasury prices fell, raising the yield on the benchmark 10-year note to 2.76% from 2.73% on Thursday.
Lending rates declined. The 3-month Libor rate fell to 1.22% from 1.23% on Thursday. The overnight Libor rate fell to 0.28% from 0.29%. Libor is a bank-to-bank lending rate.
In currency trading, the dollar gained against the euro and fell against the yen.
US light crude oil for May delivery fell $1.96 to settle at $52.38 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery fell $16.90 to settle at $925.30 an ounce.
Indian markets extended their winning streak to fifth straight trading session as the BSE benchmark Sensex and the NSE Nifty index ended the week above the 10,000 and the 3,100 levels. The rally could be attributed to some short covering as the Nifty April Futures ended with a premium of 18 points.
The BSE Sensex gained 45 points to close at 10,048 and the NSE Nifty was up 26 points at 3,108.
Among the 30-components of Sensex, 23 stocks ended in positive terrain and only 7 stocks ended in red. Among the top gainers were Tata Steel, Tata Motors, RCom, Hindalco and Acc. On the other hand, top losers in the Sensex were, HDFC, Infosys, Reliance Industries and BHEL.
Among the BSE Sectoral indices BSE Metal index was the top gainer, the index surged 5%. Among the other major gainers were BSE Pharma index (up 3.1%), BSE Bankex index (up 2.6%) and BSE Auto index (up 2.2%).
Market breath was positive, 1,522 stocks advanced against 1,027 declines, while, 105 stocks remained unchanged.
After starting off with smart gains, the stock was unable to hold on to its gains and plunged sharply. The stock plummeted by over 86% to end at Rs19.9 from its high of Rs106 and recorded volumes of over 10.1mn shares on NSE.
Brandhouse Retails Ltd. (BHRL), a leading fashion retailer has received the permission for listing of its shares from BSE and NSE and the shares commence trading from 27th March. The Company’s shares listed are 5,19,94,195 equity shares of the face value Rs10 each.
Shares of ONGC slipped by 0.5% to Rs808 after reports stated that the January strike would impact the company’s output in the fourth quarter. The scrip touched an intra-day high of Rs819 and a low of Rs795 and recorded volumes of over 0.42mn shares on BSE.
Shares of SAIL surged by over 7% to Rs102 after reports stated that the company would not go slow on its plans to invest Rs500bn in increasing capacity by 10mn tones. The scrip touched an intra-day high of Rs103 and a low of Rs95.4 and recorded volumes of over 5.3mn shares on BSE.
Shares of HCL Tech advanced by 3% to Rs104 after the company announced that it got three-year contract from third-party logistics solutions player, MJ Logistics, for implementing integrated software solutions. The scrip touched an intra-day high of Rs105.8 and a low of Rs102 and recorded volumes of over 0.2mn shares on BSE.
The coming week is a holiday-shortened week. The start will hinge on how global markets behave. Thereafter, the market will take a closer look at the numbers of auto sales and cement dispatches. A negative inflation and expectations of a positive IIP augur well for sentiment though most people doubt the reliability of these base effect figures.