Confidence is a very fragile thing.
The worst recession in several decades is moderating but it would be too early to withdraw the slew of government measures aimed at lifting the global economy, says the IMF. Group of Eight (G8) leaders endorse the IMF view saying that the economic recovery is too fragile to consider the so-called ‘exit’ strategies. Meanwhile, a top Democratic lawmaker has questioned if Obama’s economic stimulus plan is working as intended.
One of the key concerns is that the worldwide efforts to bolster growth could revive inflation and harden interest rates. India is no exception. Some experts are even worried about stagflation following the additional stimulus unveiled in the budget; especially, if monsoon plays truant and global commodity prices soar again.
Today, we expect a cautious opening with US markets ending flat and mixed indications coming from Asian markets. Shares in Europe fell for a fifth straight session. Tomorrow is a big result day, as Infosys will announce its Q1 results. The Government will come out with its latest IIP numbers. The near-term trend will remain hazy. Earnings, monsoon and global cues will continue to be the key drivers.
Results Today: Gammon India and Praj Industries.
FIIs were net sellers in the cash segment on Wednesday at Rs8.28bn while the local institutions poured in Rs5.94bn. In the F&O segment, the foreign funds were net buyers at Rs7.66bn.
US stock benchmarks reversed most of their losses by the close on Wednesday, as investors brushed aside concerns about the state of the economy to gear up for the starting of the quarterly earnings reporting period. Concerns that second quarter earnings will disappoint overshadowed a Treasury plan to remove as much as $40 billion in toxic assets from financial firms.
The Dow Jones Industrial Average gained 15 points, or 0.2%, to 8,178.41. The S&P 500 index finished nearly unchanged at 879.56. The Nasdaq Composite index ended just above the unchanged mark at 1,747.17.
US stocks slipped through most of Wednesday as investors remained nervous about the economy at the start of the quarterly reporting period. But after touching fresh multi-month lows in the afternoon, stocks bounced back.
Stocks have drifted lower since mid-June on worries that the US economy won't stabilise as quickly as hoped earlier. Those declines followed a three-month stock market rally that propelled the S&P 500 off of 12-year lows by about 40%.
Google said that late on Tuesday that it will challenge Microsoft's dominant Windows by launching a rival operating system called Chrome OS. The system will be available in the second half of 2010.
Google shares gained, but other big techs slipped including chipmakers Intel, AMD and Applied Materials. Bank of America, Morgan Stanley and Goldman Sachs were among the big bank decliners.
Among Dow movers, gains in Boeing, Johnson & Johnson and Wal-Mart Stores helped offset weakness in bank, tech and telecom stocks.
May consumer credit fell $3.22 billion versus a revised decline of $16.7 billion in the previous month. Economists had forecast a fall of $8.8 billion.
The International Monetary Fund (IMF) forecast that global GDP would shrink by 1.4% in 2009, versus its earlier forecast of 1.3%. However, the IMF also lifted its forecast for 2010 growth to 2.5% from 1.9% previously.
The leaders of the world's eight foremost industrialized nations (G8) met in L'Aquila, Italy to discuss the global economy, climate change and security issues. In addition to US President Barack Obama, the leaders of Japan, the UK, France, Italy, Germany, Canada and Russia are also due to speak.
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.31% from 3.45% late on Tuesday.
Energy prices slipped, with US light crude oil for August delivery falling $2.79 to settle at $60.14 a barrel on the New York Mercantile Exchange. A government report showed a bigger-than-estimated increase in US fuel supplies last week as the recession curbed demand.
In currency trading, the dollar gained versus the euro and fell versus the yen.
COMEX gold for August delivery fell $19.80 to settle at $909.30 an ounce.
After the close, Dow component Alcoa reported a quarterly loss of 26 cents per share as the global recession ate into the price and demand for its precious metals. But the decline was narrower than the loss of 38 cents per share analysts expected. Alcoa earned 66 cents a year ago. Alcoa shares gained 5% in after-hours trading.
But most quarterly reports are not due until later this month and the results are expected to be fairly grim. Profits for S&P 500 companies are expected to have fallen 36% from a year ago, according to the latest Thomson Reuters estimates.
European shares closed lower for the fifth straight session. The pan-European Dow Jones Stoxx 600 index declined 1.2% to 197.75, edging below 200 for the first time since mid-May. The index is still roughly 28% above its March low although shares haven't made much progress since the start of May.
The UK's FTSE 100 index fell 1.1% to 4,140.23, while the French CAC-40 index lost 1.3% to 3,009.71 and Germany's DAX index slipped 0.6% to 4,572.65, supported by gains for utility giant E.On and software firm SAP.
Indian markets were once again under the bear attack as the key indices reversed all the previous day gains on Wednesday. Bulls were unable to hold their composure as unabated selling throughout the day dragged the BSE Sensex and NSE Nifty below the 14,000 and 4,100 levels respectively.
The sharp sell-off could be attributed to weak cues from the international markets. Sentiments were further dampened after reports stated that monsoon rains have been 45% below average in the northwest region.
The decline was led by the interest rate sensitive stocks. Even the Mid-Cap and the Small-Cap stocks were not spared.
Technically, the NSE Nifty index has ended below the 4,080 levels which was a crucial support level for the index previously.
The heavy offloading in the past three days have seen the BSE Sensex losing over 1,100 points and the NSE Nifty nearly 350 points.
The Sensex lost 401 points or 2.8% at 13,769 after touching a high of 14,039 and a low of 13,701. The index had opened at 14,039 against the previous close of 14,170.
The NSE Nifty plunged 127 points or 3% to shut shop at 4,075.
Asian markets ended in the red; the Nikkei index in Japan slipped 2.3% at 9,420, Australia's S&P/ASX ended flat at 3,767. Hang Seng index fell 0.8% at 17,721.
Elsewhere in the Europe, stocks were trading mixed. The FTSE index was up 0.2% at 4,191. The DAX index was down 0.2% at 4,594. CAC 40 index was down 0.6% at 3,033.
Coming back to India, among the BSE Sectoral indices BSE Realty index was the top loser losing 8.5%, followed by the BSE Capital Goods index down 5%, BSE Metal index down 4.2% and BSE Bankex index down 4%.
The BSE Mid-Cap index lost 3.6% and the BSE Small-Cap index fell 3.7%.
In the Sensex, the major losers were Tata Steel, DLF, Reliance Infra, Sterlite, ICICI Bank, JP Associates, L&T and BHEL.
On the other hand, ACC, Maruti, Hero Honda, NTPC, Grasim and Tata Motors were among the top losers.
Outside the frontline indices, the top losers included Aban, Essar Oil, Suzlon, Jai Corp, Moser Baer, Canara Bank and IFCI.
Among the big gainers in the broader market were BEML, NMDC, Aditya Birla Nuvo, ZEE, BEL, Areva and APIL.
Cement stocks ended with smart gains due to increase in infrastructure allocation in Budget spending.
The Finance Minister in his Budget announced an increased spending allocation for commonwealth games to Rs347bn from Rs211bn and increase in infrastructure and housing spending through PPP model.
Suzlon Energy bagged new orders totaling to 114 MW in capacity. Suzlon Energy (Tianjin) Ltd., a subsidiary of the company further strengthened its presence in the Chinese wind energy market with another order for 48.75 KW.
The contract for 39 sets of S.64 - 1.25 MW capacity was signed with Datang Power Generation Co. The turbines under this order are expected to be delivered and commissioned by the third quarter of financial year 2009-10.
Suzlon Energy (Tianjin) got another Chinese order for 50 MW. The contract for 40 units of 1.25 MW capacity was signed with Honiton.
The company gets a repeat order for 10 units of S.82-1.5 MW turbine from KS Oils Ltd. The edible oil major started with a 2.5MW project in Madhya Pradesh with Suzlon and has placed 6 orders with Suzlon till date.
Shares of Suzlon Energy slumped by over 10% to Rs87 after hitting an intra-day high of Rs96 and a low of Rs87 and recorded volumes of over 10.7mn shares on BSE.
Refinery stocks also were in demand after crude oil prices fell to its lowest levels in over 4 weeks. Crude oil fell for the sixth straight day posting its longest losing streak since December 2008.
The government hiked retail fuel prices on July 2, 2009. It hiked retail prices of petrol and diesel. Petrol prices were hiked by Rs4 per litre while diesel prices have been raised by Rs2 a litre.
Lupin, Matrix Labs and Unichem Labs face European Union antitrust investigations of agreements that may have delayed market entry of a cardiovascular drug.
Others like Teva Pharmaceutical, Les Laboratories Servier, France and other generic-drug makers also are under the investigations.
The investigations concern agreements between Servier and generic-drug makers that may have hindered the market entry of generic perindopril, a cardiovascular medicine developed by Neuilly, France-based Servier.
The companies were probed as the commission said in a report that companies use a variety of techniques to delay the introduction of generics "for as long as possible."
Shares of Lupin slipped by 3% to Rs808, Unichem Labs was down by 3% to Rs203 and Matrix Labs ended flat at Rs206.