Management is doing things right; leadership is doing the right things.
After Monday’s magical gains the bulls have realised that even with a decisive win it would be tough for the UPA to pull off a swift economic turnaround. The tug of war with key allies over allocation of portfolios is proof enough. Although there is no real threat to the Government, the impasse needs to get over before the new Cabinet is sworn in later this evening.
The global picture doesn’t look all that pretty. Stocks across the globe slumped on Thursday after the S&P cut UK’s rating outlook to negative from stable. Sentiment was nervous already after the Fed said a full-fledge US recovery will take 5-6 years.
However, Asian markets are steady to flat. We expect a cautious to slightly positive opening and sideways trend. Given that Monday Mania was overdone there is scope for some more softening. Make sure your portfolio does not have stocks, which could be demanding on your money!
Key Results Today: CESC, Cinemax, Edelweiss, FDC, Federal Bank, Gujarat Flurochemicals, ITC, NTPC, Redington and Take Solutions.
FIIs were net sellers in the cash segment on Thursday at Rs21.4mn while the local institutions too pulled out Rs3.71bn. In the F&O segment, the foreign funds were net sellers at Rs11.29bn. On Wednesday, FIIs were net sellers at Rs2.34bn in the cash segment. Mutual Funds were net buyers at Rs2.4bn on the same day.
US stocks slid on Thursday after the S&P cut UK's outlook to negative, setting off speculation that a potential downgrade of the British credit rating could be on the cards. Mixed batch of economic reports also kept investors at bay a day after minutes from the Federal Reserve’s April meeting predicted a deeper recession.
The Dow Jones Industrial Average fell 130 points, or 1.5%, marking the third straight loss for the blue-chip measure. The S&P 500 index dropped 15 points to close 1.7% lower and the Nasdaq Composite index lost 1.9%.
The CBOE Volatility Index, or VIX, rose to 32.7 after falling below 30 for the first time since September earlier this week.
The tone on Wall Street turned bleak late on Wednesday after the Fed trimmed its 2009 economic growth targets and raised its unemployment forecast. The gloom was exacerbated after ratings agency S&P lowered its outlook for the UK.
Selloff gained momentum post the announcement of weekly jobless data and a worse-than-expected regional manufacturing report. US stocks have gained some 30% over the last few months amid signs the pace of the recession has slowed.
S&P affirmed the United Kingdom's top-tier credit rating but lowered its outlook for the country to "negative" from "stable." S&P said its revision was based on the possibility that the UK's debt burden could reach 100% of its GDP, despite the British government's "further fiscal tightening."
The news raised concerns that other major economies that have borrowed heavily to fund economic stimulus efforts, including the US, could face similar downgrades.
The Labor Department reported that initial jobless claims declined by 12,000 in the week ending May 16. The number of people filing for first-time jobless benefits totaled 631,000 last week, slightly more than expected. But those filing claims on an ongoing basis rose to 6.6 million, an all-time high.
Separately, the Conference Board's reading of leading economic indicators, which predicts economic conditions six to nine months in the future, rose 1% in April - slightly better than the 0.8% analysts expected.
The Federal Reserve Bank of Philadelphia said its index of manufacturing activity in the mid-Atlantic region improved to negative 22.6 in May from negative 24.4 in April. Economists had expected the index to improve to negative 18.
Auto finance firm GMAC is poised to receive a second bailout from the Treasury, according to the Detroit News. The newspaper said that the company is due to receive $7.5 billion more in aid.
In other auto news, the United Auto Workers union reached a deal with the Treasury Department and General Motors (GM) on changing its labor contract with the troubled automaker. The accord removes a major hurdle in GM's bid to avoid bankruptcy. GM shares rose more than 30%.
In one of the first Nasdaq IPOs of the year, OpenTable, which operates a restaurant reservation system, raised $60 million. The company priced its shares at $20 each, which was higher than expected, and rose 59% to $31.89.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.36% from 3.19% on Wednesday. The US government announced more than $100 billion worth of new issuance on Wednesday, raising concerns that supply will weigh on bond prices.
The dollar declined to the lowest level against the euro since January and dropped versus the yen as an increase in Treasury yields and gold prices indicated inflation may accelerate while the US budget deficit widens.
Sterling pound erased its decline versus the dollar on speculation a credit downgrade from Standard & Poor’s wasn’t imminent and two other rating companies affirmed the UK’s "stable" outlook.
Crude oil for July delivery declined 99 cents, or 1.6%, to settle at $61.05 a barrel at 2:42 p.m. on the New York Mercantile Exchange, the first drop this week. Prices are up 37 percent this year.
Gold rose to the highest price since March as the slump in global equity markets increased the appeal of precious metals as an alternative investment. Silver touched the highest since February. COMEX gold for June delivery rose $13.80 to settle at $951.20 an ounce.
No major economic reports or corporate results are due on Friday. US trading is expected to be quiet Friday with many market participants absent ahead of the Memorial Day holiday. The bond market will close early.
European shares snapped a five-session advance after the S&P announcement. The pan-European Dow Jones Stoxx 600 index dropped 2% to 207.57. Stock markets in several countries, including Switzerland and Sweden, were closed for the Ascension holiday.
UK's FTSE 100 index fell 2.8% to 4,345.47 and sterling declined 0.2% to $1.5714 against the dollar. Earlier it fell as low as $1.5515. Yields on 10-year U.K. government bonds rose 6 basis points to 3.64%.
Germany's DAX 30 index dropped 2.7% to 4,900.67 and the French CAC-40 index lost 2.6% to 3,217.41.
It was the second straight trading session of losses for the Sensex. Along with the index heavyweights even the mid-cap and the small-cap stocks witnessed some profit booking towards the end. Finally, the Sensex slipped 324 points or 2.3% to close at 13,736 after touching a high of 14,089 and a low of 13,704. The index had opened at 14,043 against the previous close of 14,060.
The NSE Nifty declined 59 points or 1.4% to shut shop at 4,211. Advance declined ended at 3:1 as compared to 10:1 in the morning trades
Shares of KS Oil allied by over 4% to Rs60 after reports stated that the company may get Rs4.5bn funding from PE investors, GDR and promoter funding for development, expansion and acquisition of agricultural assets in South East Asia. The scrip touched an intra-day high of Rs64 and a low of Rs57.5 and recorded volumes of over 3.4mn shares on NSE.
Shares of Pfizer gained by 1% to Rs730 as the company has reportedly inked entered into an agreement with Claris Lifesciences to market off patent injectibles. The scrip touched an intra-day high of Rs748 and a low of Rs721 and recorded volumes of over 7,000 shares on BSE.
Shares of Bajaj Auto surged by over 5.5% to Rs934 after the company posted a net profit of Rs1302.1mn up 8% yoy for the quarter ended March 31, 2009 as compared to Rs1207.9mn for the quarter ended March 31, 2008.
Total Income decreased from Rs20948.9mn for the quarter ended March 31, 2008 to Rs19063.2mn for the quarter ended March 31, 2009.
Shares of Aurobindo Pharma advanced by 6% to Rs344 after the company announced that it has expanded its partnership with Pfizer Inc, by executing licensing and supply agreements for several Solid Dosage and Sterlite products for a number of emerging market countries. The scrip touched an intra-day high of Rs348 and a low of Rs325 and recorded volumes of over 95,000 shares on BSE.
Shares of Opto Circuits rallied by over 8.5% to Rs157 after the California-based Mediaid Inc., the subsidiary company and its International Marketing arm has received Brazilian FDA agency - Agencia Nacional de Vigilancia Sanitaria (ANVISA) - approval for marketing and sale of the Mediaid brand of US FDA-approved Pulse Oximetry (SPO2) products (Patient Monitors & Sensors) in the Country and surrounding geographies.
Markets would continue to remain under pressure as the whole elections is a bit overdone. 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.