Take calculated risks. That is quite different from being rash.
Today we expect the key Indian indices to rally as risk appetite is holding up globally. World markets were up while we enjoyed a long weekend. The intermediate trend remains up as things are looking up globally as well as back home. But, there is a likelihood of correction after 7-8 week’s rally. The outcome of the Lok Sabha could provide a trigger for that. Another cause for concern is the spread of swine flu and its economic fallout.
US Treasury’s stress test results will be out later this week, which will reveal the health of the large American banks. Monthly labour report is also due on Friday in the US. On the whole, key global data points show continued signs of improvement, though the recovery is still fragile. There may be a few more hiccups going ahead but not as bad as the ones suffered in October-November and in early March. The upside will hinge on persistent improvement in economic conditions, pick-up in earnings and foreign capital inflows.
One also must not forget that the generous doses of fiscal stimulus administered by most governments could lead to its own set of problems. Running large fiscal deficits leads to inflation, higher interest rates and debt, besides crowding out private borrowing. Countries like Germany and New Zealand have already expressed concern on this front, so has the RBI Governor. In short, the recovery will not be a walk in the park and one should brace for a bumpy ride.
Key Results Today: Allahabad Bank, Century Textiles, HDFC and Indian Overseas Bank.
FIIs were net buyers in the cash segment on Wednesday at Rs3.65bn (provisional) while the local institutions were net sellers of Rs4.04bn. In the F&O segment, the foreign funds were net buyers at Rs12.96bn. On Tuesday, FIIs pulled out Rs1.74bn from the cash segment.
US stocks ended higher on Friday, as encouraging reports on manufacturing and consumer sentiment raised optimism that the worst of the global recession may be behind us. All the three major stock benchmarks closed up for the week as well as for April.
Stocks slumped in the morning, fluctuated in the afternoon and then made a run higher near the close. The Dow and S&P 500 have now gained for seven of the last eight weeks. The Nasdaq has gained for eight weeks in a row.
Last week's gains are a continuation of strong gains made in April amid growing expectations that the world's largest economy is close to stabilising. For the month of April, the Nasdaq gained 12.3%, the S&P 500 gained 9.4% and the Dow Jones gained 7.3%.
Market experts say this improved undertone should continue to benefit stocks in the weeks ahead, but there could be some hiccups next week. There are some concerns about the results of the banks' 'stress tests' and its implications for the market.
The results of the stress tests of the nation's largest banks are now expected late on Thursday, according to reports. Results were initially expected to be released on Monday.
In major corporate developments, auto major Chrysler filed for Chapter 11 bankruptcy protection after failing to reach a deal with some of its smaller lenders to cut debt. But a deal has been negotiated to combine the company with Italian automaker Fiat, allowing Chrysler to stay in business. Chrysler is privately owned. Shares of rivals General Motors (GM) and Ford Motor slipped Friday after rallying on Thursday.
Separately, Ford reported a 31.6% drop in sales versus a year ago, a steeper decline than expected. But the pace of the decline was smaller than a month ago. GM said sales fell 33.2% from a year ago, beating forecasts. But sales were an improvement after the 45% decline in March. Toyota Motor reported a worse-than-expected April sales decline of 41.9%. Toyota's March sales fell 30.9% versus a year earlier.
In the day's economic reports, the Institute for Supply Management's (ISM) manufacturing index rose to 40.1 in April from 36.3 in March beating forecasts for a rise to 38.4. The report was consistent with recent signs that the pace of the economic slowdown is easing.
Another report showed that consumer sentiment improved in April. The University of Michigan's consumer sentiment index was revised up to 65.1 from a previous reading of 61.9. Economists had forecast no change.
A third report showed that March factory orders fell 0.9% after rising 0.7% in February. Economists predicted a 0.6% fall, on average.
Dow component Chevron reported a big drop in first-quarter sales and earnings, that missed expectations, due to a steep drop in energy prices. Shares of the No. 2 oil services firm ended higher.
Fellow Dow component Exxon Mobil reported weaker sales and earnings on Thursday. Shares gained 2%. MasterCard reported weaker quarterly earnings that topped estimates on weaker revenue that missed expectations. Shares fell nearly 6%.
Citigroup is selling its Japanese retail brokerage business to Sumitomo Mitsui Financial Group in a deal worth US$7.9 billion. Shares fell 2.6%.
Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.15% from 3.14% on Thursday.
Lending rates were mixed. The 3-month Libor rate fell to 1.01% from 1.02% on Thursday. The overnight Libor rate rose to 0.24% from 0.23%. Libor is a bank-to-bank lending rate.
In currency trading, the dollar fell versus the euro and gained against the yen.
US light crude oil for June delivery rose US$2.08 to settle at US$53.20 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery fell US$3 to US$889 an ounce.
The majority of developed markets were closed on Thursday on account of Labour Day. Among the world markets that were open for trading, Japan's Topix added 1.1%, while the UK's FTSE 100 Index slipped less than 0.1%.
A sharp rally for European stocks on Thursday helped a key index to record its best-ever monthly performance in April. Trading over the 200-point mark for the first time since early February, the pan-European Dow Jones Stoxx 600 index jumped 1.5% to 200.23. This move brings gains for the month to 13.5% - the best monthly performance for the index since Stoxx started tracking the data at the end of 1986.
Germany's DAX 30 index rose 1.4% to 4,769.45, the UK's FTSE 100 index advanced 1.3% to 4,243.71 and the French CAC-40 index gained 1.4% to 3,159.85.
After a sharp cut on Tuesday, Indian markets staged a strong come back as bulls ended the week on a high. Strong cues from the Asian markets coupled with buying witnessed in the heavyweights lifted the key indices to end with healthy gains erasing previous day’s losses.
The BSE Sensex surged 401 points to close at 11,403 and the NSE Nifty rose by 111 points at 3,473.
Among the 30-components of Sensex, 29 stocks ended in the green and only Grasim ended in the negative terrain. Among the major gainers were ICICI Bank, Sterlite, JP Associates, Tata Power, Wipro and Reliance Infra.
Among the BSE Sectoral indices BSE Bankex index was the top gainer, the index gained 5%. Among the other major gainers were BSE IT index (up 4.4%), BSE Teck index (up 4%), BSE Oil & Gas index (up 3.7%) and BSE Power index (up 3.5%)
Market breath was positive, 1,406 advanced against 1043 declines, while, 90 remained unchanged.
For the week:
The BSE IT Index (up 4.2%): IT stocks were among the major gainers after the tech companies (both mid-caps and large caps) announced quarterly earnings without any major negative surprises.
The top gainers in the IT sector were TCS (up 6.8%), Wipro (up 6%), Infosys (up 4.2%) and Financial Tech (up 2.7%).
Patni surged 3% during the week. The revenues for the quarter stood at Rs79.54bn, a decrease of 11.4% as compared to Rs85.70bn in the earlier quarter. The operating income stood at Rs8.12bn, an increase of 7.7% as compared to Rs7.20bn in the earlier quarter.
The top losers were Sasken Communication (down 5.3%), Oracle Financial (down 1.7%) and Satyam (down 0.5%).
The BSE Consumer Index: The top losers in the consumer durables space were Videocon Industries (down 11.1%), Su-Raj Diamonds (down 1.8%), Titan (down 1.5%)
Blue Star surged 4.5% during the week.
The BSE Healthcare Index (up 0.1%): The top gainer in the Pharma space was Piramal Healthcare. The stock surged over 7% during the week. The net profit for the quarter increased by 59% at Rs1149mn as compared to Rs722.8mn.The total operating income was up by 9.3% to Rs8.5bn over Q4FY08.
Sun Pharma (up 6.9%), Lupin (up 1.6%), Astrazeneca Pharma (up 1.4%) and Panacea Biotec (up 0.9%) were among the major losers.
The top losers were Wockhardt (down 13%), Strides Arcolab (down 10.4%), Glenmark Pharma (down 9.1%), Orchid Chem (down 7.1%) and Ranbaxy Labs (down 5.6%).
The BSE Banking Index (up 1.7%): The top gainer in banking space was ICICI Bank. The stock was up 10.4% during the week. ICICI Bank posted a net profit of Rs7.44bn for the quarter ended March 31, 2009 compared to Rs11.5bn for the quarter ended March 31, 2008. Total Income decreased to Rs92.03bn for the quarter ended March 31, 2009 from Rs103.91bn for the quarter ended March 31, 2008.
Among the other major gainers were Bank of Baroda (up 7.1%), Axis Bank (up 5.2%), Federal Bank (up 5.2%) and Canara Bank (up 2%).
The top losers were Bank of India (down 12%), PNB (down 7.8%), Karnataka Bank (down 5.9%), IOB (down 5.5%) and Union Bank of India (down 4.2%).
The BSE Auto Index (up 0.7%): The top gainer in the auto space was M&M. Hero Honda gained 3.1% during the week. Hero group and Honda are reportedly considering plans to extend their 25-year-old partnership. Both the companies may look at sharing details of new products with each other, including engines, design sequences and vehicle platforms, says a financial newspaper.
Among the other major gainers were Eicher Motors (up 2.8%), Bajaj Auto (up 2.4%) and Swaraj Mazda (up 2.2%). The top losers were Ashok Leyland (down 5.7%) and Tata Motors (down 3.8%).