I think it's how someone becomes good at anything. You practice when nobody's watching - in the heat of the summer or even when its drizzling out.
The streets of Mumbai saw some drizzling even as the heat in the market appears to be slowly fizzling. Though the convincing win for the UPA has been greeted with cheers, the road to recovery will not be a smooth one. It will take some doing for the new regime to engineer the economic turnaround. A good monsoon will surely help with it will need some heavy rain of reforms in the UPA’s new reign.
Global economic conditions remain precarious. The Fed expects a full recovery in the US to be 5-6 years away. Singapore’s economy shrank by 10% in the first quarter. Japan’s economy contracted at a record pace of 15.2% in Q1. The yen has risen to a two-month high against the dollar on speculation that a recession in the US is far from over.
Today, we expect another cautious opening and sideways trading in the key indices. Though the broader market was on fire, one should be wary of the rally in the small-and mid-caps.
Key Results Today: Bajaj Auto, Bajaj Holding, Federal Bank, Gammon Infra, Inox, IRB Infra, Nitin Fire, Unichem Labs and Varun Shipping.
FIIs were net sellers in the cash segment on Wednesday at Rs9.85bn while the local institutions were net buyers of Rs49.9mn. In the F&O segment, the foreign funds were net sellers at Rs34.6bn. On Tuesday, FIIs were net buyers at Rs50.45bn in the cash segment. Mutual Funds were net sellers at Rs17.2bn on the same day.
US stocks ended lower on Wednesday, erasing earlier gains on the back of the Federal Reserve's grim economic. The Dow Jones Industrial Average fell about 50 points, or 0.6%, after gaining more than 100 points early in the session. The S&P 500 index fell 0.5% while the Nasdaq Composite lost 0.4%.
Stocks surged in early trading after Bank of America's $13.5 billion stock sale raised bets that the financial sector is stabilising. Energy stocks also rallied as oil prices rose to a 6-month high. But the market slumped in the final hour of trading after the Fed reduced its growth targets and raised unemployment expectations. The central bank also said it expects a recovery in sales and production to begin during the second half of the year.
Still, the overall tone remains relatively bullish. The CBOE Volatility Index, or VIX, which is considered a gauge of investor fear, fell further after ending at its lowest level since September on Tuesday. The VIX added 0.8% to 29.03. The gauge slipped below 30 for the first time in eight months a day earlier. It was at 25.66 on Sept. 12, the session before Lehman Brothers Holdings Inc. filed for bankruptcy.
According to the minutes from its last policy meeting, the Fed said it expects 2009 GDP to shrink between 1.3% and 2%. That compares with January's projection for a decline between 0.5% and 1.3%. The Fed's staff now expects the unemployment rate to rise to between 9.2% and 9.6%. In January, the jobless rate was forecast to rise to between 8.5% and 8.8%, but the unemployment rate topped that in April, hitting 8.9%. But the Fed also pointed to signs the pace of the recession is easing.
Treasury Secretary Tim Geithner told the Senate Banking Committee that stress-tested banks have set out to raise $56 billion to plug holes in their books. Geithner also said there are "encouraging signs the financial system is starting to heal." But he warned that "we're only beginning to lay the foundation for economic recovery."
After the close on Tuesday, Bank of America said it has raised $13.47 billion through a sale of stocks. The bank has issued 1.25 billion shares since Friday at an average price of $10.77. BofA, whose shares rose more than 2%, needs to raise $33.9 billion to meet the government's stress test requirements.
Congress passed a bill that imposes greater restrictions on the credit card industry for raising fees and interest rates. The approval came despite strong objections by banking industry advocates, who say it could result in tightened credit to Americans.
Separately, President Obama said the financial markets have improved recently, but he cautioned that unemployment will remain elevated for some time. The president's remarks came during a public meeting of his special economic advisory group, which is led by former Fed chief Paul Volcker.
Also, the Senate's Special Committee on Aging heard testimony that the agency that guarantees the nation's corporate pensions, the Pension Benefit Guaranty Corp., posted a record $33.5 billion deficit in the first half of the current fiscal year.
Retailer Target reported that first-quarter profit fell to 69 cents per share, a 7% decline from 75 cents a year earlier. The results topped analyst expectations of 60 cents per share. Target shares rose more than 2%.
Late on Tuesday, PC maker Hewlett-Packard (HP) reported quarterly results that were in line with Wall Street's estimates. The company also said it would cut 6,400 jobs, or 2% of its workforce. HP shares fell 5%.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.19% from 3.24% on Tuesday.
Crude prices rose to a six-month high, settling up $1.94 to $62.04 a barrel, after the government said US supplies of crude oil and gasoline fell more than expected last week. It was the first settlement above $60 for the active-month contract since Nov. 10; Wednesday was the first day that the July contract was the active month.
The dollar slipped versus major international currencies including the euro, the yen and the British pound.
COMEX gold for June delivery rose $10.70 to settle at $937.40 an ounce.
After an overwhelming rally post the Lok Sabha election results, bulls finally took a breather. The slide could be attributed to offloading witnessed in the index heavyweights like DLF, BHEL, ICICI Bank, Bharti Airtel, Sun Pharma and HDFC.
On the other hand, the BSE Mid-Cap index rose 6% and the BSE Small-Cap index surged 8.8%.
Finally, the Sensex slipped 241 points or 1.6% to close at 14,060 after touching a high of 14,406 and a low of 13,976. The index had opened at 14,230 against the previous close of 14,302. The NSE Nifty declined 48 points or 1.1% to shut shop at 4,270.
Among the BSE Sectoral indices BSE Consumer Durable index was the top gainer gaining 9.6%, followed by the BSE Metal index up 5.2%, BSE Auto index up 5%, BSE PSU index up 3% and BSE Pharma index gaining 2%.
On the other hand, the BSE Bankex index was the top loser declining 2.5% and BSE Oil & Gas index down 2%.
Shares of Tata Motors rose over 19% to Rs367 after reports stated that a credit ratings company said the company was planning to sell Rs42bn of debentures. The company plans to issue the debentures in four tranches aiming to refinance a bridge loan taken to buy Jaguar and Land Rover and SBI has guaranteed the debt, added reports.
Shares of Tata Steel rallied by over 13% to Rs371 after reports stated that the company has secured a Rs20bn loan from LIC, aiding the company make additional equity infusions into its UK subsidiary. The scrip touched an intra-day high of Rs378 and a low of Rs324 and recorded volumes of over 8.7mn shares on BSE.
Shares of Airline companies surged to higher altitudes as the operational costs for the domestic airlines’ could drop by as much as 8%, if the dollar continues to depreciate against the rupee. Almost one-third of their operational expenses are denominated in US dollars.
Reports also stated that the civil minister suggested the formation of a civil aviation policy, allowing foreign airlines to acquire up to 49% stake in domestic carriers.
Stocks like Kingfisher Airlines sky rocketed by over 27% to Rs56, Jet Airways rallied by over 14% to Rs278, Spice Jet shot up by over 18% to Rs18.6.
Shares of M&M surged by over 8% to Rs678 after reports stated that the Strike at the company’s Nashik plant has been called off, and it would re-start normal production in 2 days. The scrip touched an intra-day high of Rs684 and a low of Rs603 and recorded volumes of over 0.2mn shares on BSE.
The frenzy of Monday quickly dissipated and the benchmarks ended in the red led by selling in the heavyweights. Markets might further consolidate as traders and investors would be cautious after an overwhelming rally.