If you refuse to be made straight when you are green, you will not be made straight when you are dry.
After a flood of gains, we may have a brief dry spell in the market. We hear that the monsoon, like the economic progress, may be slow after an unexpected early start. We see a subdued start with profit-taking in most counters. Strong hands could however rescue select counters. Expectations have shot through the roof in the wake of the UPA’s massive electoral triumph. The UPA may be slower on reforms. Some expectations may not even be met. All eyes are therefore on the budget (for now).
Stocks have had a strong run in the past three months. Though the bias is positive, this leaves less headroom for major gains without a meaningful correction. Concerns remain on widening fiscal deficit, not just in India but globally. The loose monetary policy has led to a liquidity deluge. This may result in fresh asset price inflation. Crude oil has already shot up. Though there is talk of oil price deregulation, but it remains to be seen if Mr. Deora walks the talk given the political compulsion.
GMR Infra, Power Finance Corp. and Sundram Fasteners will announce their results today.
US stocks slipped on Wednesday, as investors locked in some gains after a four-session advance, after mixed readings on the US economy. Traders were also cautious ahead of reports on retail sales and labor market due later this week.
The Dow Jones Industrial Average lost 66 points, or 0.8%. The S&P 500 index fell 13 points, or 1.4%. The Nasdaq Composite index dipped 11 points, or 0.6%.
Reports on the job market, factory orders and the services sector of the US economy were in focus, along with congressional testimony from Federal Reserve Chairman Ben Bernanke.
Stock declines were broad based, with 24 of 30 Dow issues falling, led by oil companies Chevron and Exxon Mobil. Oil prices fell after the government's weekly inventory report showed a larger-than-expected build up in inventories.
Oil services firm Valero Energy tumbled 18% after warning that it would report a quarterly loss rather than a quarterly profit analysts expected. The company also said it will make an additional 40 million shares available.
A couple of reports showed the pace of job losses could be slowing.
Private-sector employers cut 532,000 jobs in May after paring 545,000 in April, according to payroll-services firm ADP. Expectations were for 525,000 cuts.
A separate report showed the number of job cuts announced in May fell for the fourth month in a row. According to outplacement firm Challenger, Gray & Christmas Inc., job cut announcements by US employers were 111,182 in the month, down from 132,590 in April. The figure was the lowest total since last September, but still up from a year earlier.
The reports set the tone for the broader May non-farm payrolls report due out Friday.
The Institute for Supply Management's (ISM) index on the services sector of the economy improved to 44 from 43.7 in April. However, that was short of forecasts for an improvement to 45.
Factory orders rose 0.7% in April after falling 1.9% in March. Economists thought orders would climb 0.9%.
Fed chief Bernanke told the House Budget Committee that while data show the pace of the recession is slowing, the US economy still has a lot of work ahead of it. In particular, he talked about the impact of the still-weak labor market and decline in household wealth.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.54% from 3.61% on Tuesday.
In currency trading, the dollar gained versus the euro and yen.
US light crude oil for July delivery fell $2.43 to settle at $66.12 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery slipped $18.70 to settle at $964.50 an ounce.
Losses for commodity-sector stocks and banks weighed on Europe. The pan-European Dow Jones Stoxx 600 index lost 2% to 209.90, down for the second straight session.
Eurozone GDP fell 2.5% quarter-on-quarter in the first quarter of 2009, data confirmed on Wednesday. The annual drop was revised down to 4.8%, from an earlier reading of 4.6%.
The UK-based FTSE 100 index declined 2.1% to 4,383.42, while the French CAC-40 index fell 2% to 3,309.65 and Germany's DAX index lost 1.7% to 5,054.53.
The Sensex ended flat at 14,871 after touching a high of 15,046 and a low of 14,733. The index had opened at 14,902 against the previous close of 14,874.
The NSE Nifty ended flat to shut shop at 4,520.
Volume buzzers in the Mid-Cap and Small-Cap zone, Alok Industries, Dish TV, Anu’s Lab, S Kumars Nationwide, Spice Jet and Hinachal Futuristic were among the top traded stocks.
Among the BSE Sectoral indices BSE Consumer Durable index was the top gainer surging 4.4%, followed by the BSE FMCG index up 4%, BSE Pharma index up 2.5%, BSE Metal index up 1.5% and BSE Power index up 1%.
The BSE Mid-Cap index was up 1.5% and BSE Small-Cap index added 2%.
Shares of Sundaram-Clayton have surged by over 5.8% to Rs160 after ~7.4mn equity shares of the company changed hands in a single transaction. The deal was at an average price of Rs165 per share on the BSE.
The scrip has touched an intra-day high of Rs166 and a low of Rs151 and has recorded volumes of over 7.5mn shares on BSE.
Shares of Tata Motors gained by over 3.6% to Rs362 after reports stated that Moody’s upgraded the outlook on Tata Motors from negative to stable. The scrip touched an intra-day high of Rs378 and a low of Rs355 and recorded volumes of over 1.7mn shares on BSE.
Shares of ACC surged by over 4% to Rs819 after the company announced that its cement dispatches were up 1.1% yoy to 1.82mn tones in May 2009. The scrip touched an intra-day high of Rs822 and a low of Rs792 and recorded volumes of over 1.7mn shares on BSE.
Shares of JSW Steel gained by 3% to Rs586. Reports stated that the company has deferred Rs350bn 10mtpa West Bengal project. The scrip touched an intra-day high of Rs591 and a low of Rs548 and recorded volumes of over 1.1mn shares on BSE.
Shares of MTNL gained by 3.5% to Rs110 after reports stated that the company was aiming at 300,000 subscribers for its 3G service. The scrip touched an intra-day high of Rs112 and a low of Rs107 and recorded volumes of over 0.9mn shares on BSE.
SEBI cleared the open offer for Satyam Computer Services by Tech Mahindra.
The regulatory body asked Tech Mahindra to share with the company’s stakeholders the information Satyam had provided to the bidders. The open offer commences on June 12 and closes on July 1, 2009.
Shares of Satyam Computer surged by over 7% to Rs67 after hitting an intra-day high of Rs68 and a low of Rs64 and recorded volumes of over 40mn shares on BSE.
Meanwhile, shares of Tech Mahindra shot up by over 18% to Rs658 after hitting an intra-day high of Rs679 and a low of Rs560 and recorded volumes of over 1.7mn shares on BSE.
Aptech Ltd completed the process of sale of its 50% equity interest in the China JV Company and has also received its 22% allotment of shares in the holding Company, Beijing Jadebird IT Education Company Ltd (BJBC).
In terms of the definitive agreements, company including its subsidiaries would also be entitled to receive, prior to the proposed Initial Public offering of BJBC, as much of its distributable profits as possible, subject to any legal, accounting or working capital requirements as may be determined by the Board of Directors of BJBC.
In this regard, the definitive agreements envisages payment of a one-time special dividend, which in any event shall not be less than RMB 193 mn (equivalent to approx. US$ 28 million /approx. Rs1350 mn), in which share of Aptech India including its subsidiaries would be 22%.
Shares of Aptech rallied by over 14% to Rs193 after hitting an intra-day high of Rs197 and a low of Rs170 and recorded volumes of over 1.5mn shares on BSE.
After hitting the 15k, markets would enter into a consolidation phase which is seen in the past couple of trading sessions. While stocks may remain firm in the near term, one must stay guarded given the euphoric rally.