Any time you think you have the game conquered; the game will turn around and punch you right in the nose.
Just when confidence was returning regarding the economic recovery comes a punch from the World Bank in terms of a grim forecast. It expects the global economy to shrink 2.9% this year versus its earlier prediction of 1.7%. However, there’s good news for India. The World Bank has lifted its GDP growth estimates for India for 2009 and 2010. A good monsoon season will be icing on the cake. Even if there are a few blips on this front, one shouldn’t get unduly perturbed, as India has enough foodgrain stocks. But then, we live in a correlated world and have to put up with the vagaries of the global marketplace.
Coming back to the markets, it is all red across the world. Asian markets are down sharply this morning following the overnight tumble on Wall Street. Stock benchmarks in Europe and elsewhere also slid on concerns about the health of the global economy. The Indian market surely will open weak. A bounce back could happen if global meltdown ebbs a little. Volatility is a given as we head into F&O expiry.
Market players should keep an eye on the record $104bn bond auction in the US this week. Bond yields in India too have been steadily rising on worries about Government’s massive borrowings. The Federal Reserve will hold a two-day monetary policy meeting on Tuesday and Wednesday with investors focusing on the central bank's guidance on growth and any potential hints on expanding its $300 billion programme of bond purchases.
Tech Mahindra and Punj Lloyd are likely to see some positive action.
FIIs were net sellers in the cash segment on Monday at Rs3bn while the local institutions pumped in Rs4.14bn. In the F&O segment, the foreign funds were net buyers at Rs8.63bn. On Friday, FIIs were net sellers at Rs262mn in the cash segment. Mutual Funds were net buyers of Rs4.08bn on the same day.
The yen today strengthened to a three-week high against the euro, as Asian stocks slumped on concern that the global recession will be prolonged, spurring demand for the relative safety of Japan’s currency.
US stock benchmarks tanked on Monday after the World Bank cut its forecast for the global economy. Commodities like oil, gold and metals came under selling pressure while the dollar held its own as investors turned cautious.
The Dow Jones Industrial Average fell 200 points, or 2.4%, to 8,339.01. The S&P 500 index slipped 28 points, or 3%, to 893.04 and the Nasdaq Composite index was down 61 points, or 3.4%, to 1,766.10.
The World Bank cut its 2009 forecast, predicting that global growth will shrink by 2.9% versus its earlier forecast for a 1.7% contraction. Global trade is expected to plummet 9.7% this year, it said. Developing countries have been especially hard, with the exception of booming China and India. Growth is expected to return in 2010 at 2%, less than the 2.3% forecast about three months ago.
Nouriel Roubini, the New York University economics professor who predicted the financial crisis, said that the global economy may suffer another slump due to higher oil prices and widening budget deficits. "I see the worry of a double whammy from energy costs and fiscal burdens, increasing the risk of a setback in the economic recovery," Roubini told a conference in Paris. Oil may rise to $100 a barrel, he said.
The benchmark index for US stock options jumped the most since April 20. The VIX, as the Chicago Board Options Exchange Volatility Index is known, increased 11% to 31.17. The index, which measures the cost of using options as insurance against declines in the S&P 500, is down from a record 80.86 in November yet above its 20 average over its 19-year history.
A three-month rally propelled the S&P 500 by as much as 40% off of 12-year lows. But the advance has lost steam lately amid growing worries that the worst global recession in several decades may not end as soon as had been anticipated earlier.
The S&P 500 has now lost 6.6% off the highs from two weeks ago. Stock declines on Monday were broad based, with 27 out of 30 Dow issues falling.
Apple said it sold more than one million copies of its new iPhone 3GS in the first three days it was on sale, in what was being described as the most successful launch of a smartphone ever. Apple shares fell modestly.
A number of financial stocks plunged, including American Express, Bank of America and JPMorgan Chase. The KBW Bank sector index fell 6.7%.
Walgreen shares slipped after it posted a bigger-than-expected drop in quarterly profits.
No economic reports were due on Monday, with readings on housing, consumer spending and the labor market due later in the week.
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.70% from 3.83% on Friday.
US light crude oil for July delivery fell to a two-week low, tumbling $2.62, or 3.8%, to settle at $66.93 a barrel on the New York Mercantile Exchange. The July contract expired on Monday. August becomes the active trading month on Tuesday.
COMEX gold for August delivery fell $15.20 to settle at $921 an ounce.
In currency trading, the dollar rose versus the euro and fell against the yen.
Gas prices retreated for the first time in 55 days, falling three-tenths of a percent to $2.69 per gallon, according to AAA. Prices had risen 32% since April 29.
European shares dropped sharply on Monday, with oil producers pacing the broad-based fall. The pan-European Dow Jones Stoxx 600 index declined 2.6% to 202.77 on a day when the US S&P 500 turned negative for the year. The Stoxx 600 is still in positive territory in 2009 with an advance of over 2%.
The UK's FTSE 100 index fell 2.6% to 4,234.05, the German DAX index lost 3% to 4,693.40 and the French CAC-40 index declined 3% to 3,123.25.
Markets ended with a sharper cut on Monday with the NSE Nifty index ending below the 4,250 levels. After a promising start, markets were unable to hold on to their gains as all round selling in scrips across the sectors dragged the key indices lower. Sentiments were also dampened after the European markets stated off with a negative bias.
The Oil & Gas, Power and the Metals stocks were among the major losers on the other hand bucking the negative trend were, the FMCG and the Capital Goods stocks.
Finally, the Sensex slipped 195 points or 1.4% to end at 14,326 after touching a high of 14,668 and a low of 14,269. The index had opened at 14,591 against the previous close of 14,522. The NSE Nifty declined 78 points or 1.8% to shut shop at 4,235.
Among the BSE Sectoral indices BSE Oil & Gas index was the top loser losing 4%, followed by the BSE Metal index down 3%, BSE Power index down 3%, BSE Realty index down 2.7% and BSE Consumer Durables index down 2.2%.
Shares of IRB Infrastructure advanced by over 3% to Rs140 after the company announced that it emerged as the lowest bidder for its first BOT project worth Rs12bn. The scrip touched an intra-day high of Rs142 and a low of Rs135 and recorded volumes of over 0.5mn shares on BSE.
Shares of UCO Bank edged lower by 0.5% to Rs39.9. Reports stated that the company proposed a 50bps reduction in its benchmark prime lending rate with effect from June 27. The scrip touched an intra-day high of Rs42 and a low of Rs39 and recorded volumes of over 0.33mn shares on BSE.
Shares of Titagarh Wagons were locked at 5% upper circuit to Rs383.05 following reports that the company plans to buy stake in the sick wagon unit of the S K Birla Group, Cimmco-Birla.
Dolphin Offshore received a LoI for Structural Modification work at unmanned platforms in MH worth Rs1.06bn for deployment of Modular rig on turn key basis by M/s. Instrumentation Ltd.Shares of Dolphin Offshore gained by over 3.5% to Rs269.
McNally Bharat received an order worth Rs306mn including taxes and duties. The project is to Design, Manufacture, Supply, Installation and Commissioning of 02 Nos, 3000 TPH capacity Reclaimers at Paradip, Dist: Jagatsinghpur, Orissa from Paradip Port Trust. Shares of McNally Bharat were locked at 5% upper circuit to end at Rs109.10.
Looking at the all round selling on the bourses, markets would further be under pressure. Another choppy day is in the offing, however, one cannot rule out a bounce back at lower levels. Technically, 4,200 is where the Nifty is finding some support, however, once breached would see the index slide to 4,100 levels in the coming days.