A tactical retreat is not a bad response to a surprise assault, you know. First you survive. Then you choose your own ground. Then you counterattack.
Who let the bears out? That may perhaps be the question uppermost on most players’ minds. The sell-off struck suddenly and came on higher volume. Even the breadth was bad. May be the market feels the Budget may be a non-event. A few economic reports globally served as a grim reminder that not all is hunky dory after all.
Today, we expect the market to open on a cautious note and turn sideways later. Stay guarded and resist the temptation of jumping the gun at least till the Budget. Be selective and do your homework before picking a stock. Given the outlook on India, and the recent rally, there appears little scope for further upside. To justify current valuations and keep the bulls interested India Inc. needs to come out with a strong report card.
FIIs are likely to be the jokers in the pack. Of late, this breed seems to have turned cautious. The flood of QIP issues may have prompted some of these funds to take profits. Interestingly, local and overseas funds were net buyers on Tuesday.
FIIs were net buyers in the cash segment on Tuesday at Rs1.08bn while the local institutions pumped in Rs1.98bn. In the F&O segment, the foreign funds were net sellers at Rs9.38bn. On Monday, FIIs were net buyers at Rs3.97bn in the cash segment.
US stocks slipped on Tuesday, at the end of the best quarter for the S&P 500 index in more than a decade, as a weaker-than-expected consumer confidence report and a slump in oil prices sparked fresh selloff.
The Dow Jones Industrial Average fell 82 points, or 0.9%, to end at 8,447. The S&P 500 index lost 8 points, or 0.9%, to 919.32 and the Nasdaq Composite index gave up 9 points, or 0.5%, to close at 1,835.04.
Wall Street gained on Monday as investors scooped up shares hit in the recent selloff. But the advance petered out on Tuesday at the end of a strong quarter. The S&P 500 gained 15.2% in the April through June period for its best quarter since the final three months of 1998.
Tuesday brought a reading that showed consumer confidence slipped in June after rising in the last two months. That setback was weighing on stocks. But, the weakness was also part of a broader pullback after the recent rally. The S&P 500 surged 40% after bouncing off 12-year lows hit March 9.
It is possible that the second-quarter earnings could give the market a lift. At the same time, US stocks could continue to consolidate sideways in the third quarter and then ramp up again in the fourth quarter.
The Dow gained 11% this quarter, posting its best three-month period since the second quarter of 2003. The Nasdaq has gained 20% and is on track to post its best quarter since the second of 2003. But weakness in the first quarter means first half of 2009 results are less upbeat. The Dow is down 3.8%, the S&P is up 1.7% and the Nasdaq is up 16.4%.
The June Consumer Confidence index from the Conference Board fell to 49.3 from a revised 54.8 in May, versus forecasts for a rise to 55.3.
The S&P/Case Shiller 20-city home price index fell 18.1% in April from a year ago versus forecasts for a drop of 18.6%. But on a month-over-month basis, the index showed some improvement. Prices fell 0.6% versus March, after posting a 2.2% drop in the previous month.
The Chicago PMI, a regional read on manufacturing, rose to 39.9 in June from 34.9 in May. Economists thought it would rise to 39.
In currency trading, the dollar rallied versus the euro and the yen.
US light crude oil for August delivery fell $1.60 to settle at $69.89 a barrel on the New York Mercantile Exchange.
Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.51% from 3.47%.
COMEX gold for August delivery fell $13.60 to settle at $927.40 an ounce.
European shares declined on the last day of a strong second quarter, with banks and oil producers leading the fall amid doubts about the health of the advanced economies such as the US, the UK, Europe and Japan.
Flat for much of the session, the pan-European Dow Jones Stoxx 600 index fell 1% to 205.83 after Wall Street opened lower.
Germany's DAX index was down 1.6% to 4,808.64, while the French CAC-40 index dropped 1.7% to 3,140.44 and the FTSE 100 index shed 1% to 4,249.21.
Indian markets ended in deep red on Tuesday amid all round selling witnessed over the bourses. Markets started off in line with the advance across other Asian and the US markets. However, were unable to hold on to their gains as most players opted to remain cautious ahead of the Union Budget, on July 6. The Economic Survey will be presented in parliament on Thursday while the Railway Budget will be announced on Friday.
The sentiment was affected amid concerns that the slew of QIP issues launched/announced by several Indian companies may prompt institutions (local and global) to divert their money from the secondary market. It may be recalled that barring an odd day, the FIIs have been net sellers over the past few days.
The BSE Sensex slipped 291 points or 2% to end at 14,493 after touching a high of 14,907 and a low of 14,420. The index had opened at 14,831 against the previous close of 14,786.
The NSE Nifty slipped 100 points or 2.2% to shut shop at 4,291.
Asia markets were mixed; the Hang Seng index slipped 0.8% at 18,378, Australia's S&P/ASX ended higher by 1.7% to 3,954. Nikkei index added 1.8% at 9,958.
Elsewhere in the Europe, stocks were trading with gains. The FTSE index was up 0.2% at 4,303. The DAX index was up 0.3% at 4,895. CAC 40 index gained 0.0.3% at 3,198.
Coming back to India, among the BSE Sectoral indices BSE Realty index was the top loser losing 7%, followed by the BSE Metal index down 3%, BSE Capital Goods index down 3% and BSE Power index down 3%.
Even the BSE Mid-Cap index ended lower by 3% and BSE Small-Cap index slipped 2.3%.
In the Sensex, the major losers were Sterlite Industries, DLF, RCom, Reliance Infra, JP Associates, ICICI Bank, L&T and Reliance Industries.
On the other hand, major gainers were TCS, HUL, Hero Honda and Tata Power.
Among the big losers in the broader market were Welspun Gujarat, Idea, RNRL, APIL, GVK Power, EKC and Moser Baer.
Outside the frontline indices, the top gainers included Tulip Tele, M&M Fin, Glaxo, Nestle, Piramal Health, Concor and BEML.
Almost half a dozen of Indian companies plan to sell shares to institutional investors, taking advantage of over a 50% rise in the key index this quarter.
Emami Ltd plans to raise upto Rs3.4bn in the share sale and it is said to sell shares at Rs310-Rs340 per share. While, Bajaj Hindusthan has set its minimum price at Rs203.8.
HCC also will sell shares. Real estate companies including HDIL and Sobha Developers filed share sale documents on Monday.
Hindalco Industries also announced that the Board of Directors approved QIP to eligible investors up to amount not exceeding US$500mn equivalent to Rs24bn.
GMR Infrastructure announced that it scrapped a US$500mn share sale due to lack of interest from investors. The company earlier cut the amount it was seeking to raise to US$100mn. GMR had joined Lanco Infratech and Emami in trying to raise funds from selling shares.
The stock was down by 9% to Rs142 after hitting an intra-day high of Rs160 and an intra-day low of Rs140 recording volumes of 8.1mn shares on BSE.
Shares of United Spirits slipped by 5% to Rs873 after nearly 12.4mn shares representing ~12.4% equity changed hands in two transactions on the exchanges.
United Spirits raised nearly Rs11bn selling treasury stocks, the deal was done with an aim to de-leverage its balance sheet.
In the two block deals, 5.26mn shares were sold at an average price of Rs900 per share and ~7.2mn shares were sold at an average price of Rs882 per share in the second block.
Reports stated that Reliance Mutual Fund has picked up shares worth Rs1bn from the blocks in the open market. United Spirits has an outstanding debt of Rs75bn and it has a debt equity ratio of 3.2. The company was planning to raise another US$200-US$250mn via QIP route, added reports.
Shares of Suzlon declined by over 11% to Rs104. According to reports, Essel Mining and Suzlon may settle lawsuit, seeking damages over technical problems in the wind mills set up by Suzlon, out of court. The scrip touched an intra-day high of Rs120 and a low of Rs102 and recorded volumes of over 24mn shares on BSE.
Hindalco reported 80% decline in full-year profit. Net income, including unit Novelis Inc., fell to Rs4.85bn in the year to March 31. On the other hand, sales rose 9% to Rs656.3bn.
The stock ended lower by 1.5% to Rs86.45 after hitting an intra-day high of Rs88.8 and an intra-day low of Rs85 recording volumes of 4mn shares on BSE.
Shares of Sakthi Sugars erased its early gains and ended lower by 2% to Rs57.4. The company announced that it has entered into a Master Restructuring Agreement with the Lenders in respect of restructuring of its debts under the Corporate Debt Restructuring Scheme announced by Reserve Bank of India.