Don’t get adventurous

If life was easy where would all the adventures be?

Looks like the adventurous bulls could close a volatile week on a high, thanks largely to firm global cues. The US market ignored a surprising rise in weekly jobless claims and welcomed data on manufacturing and economic indicators. Commodity linked shares boosted European stocks. Asian markets too are mostly up, barring the Nikkei. We are in for a higher start, which should last till the close of the day, unless there is any untoward accident in world markets.

Back home, the monsoon seems to be making a gradual comeback after an unusually long hiatus. If the raingods remain generous for say a month or so, the grim agri picture could improve a little. Even if this does happen, farm output will be lower. Inflation will start spiking in a couple of months while interest rates could head north next year.

Basically, we will continue to see this sideways trend for a few more days. The Nifty could oscillate between 4350 and 4550. One will have to keep one’s ears to the ground and eyes wide open as the market’s direction will hinge on daily news and events.

FIIs were net sellers at Rs4.38bn in the cash segment on Thursday on a provisional basis while the local funds pumped in Rs4.89bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net buyers at Rs9.63bn.

China's resilient growth has been a key driver of flows into emerging markets equity funds in recent months. During the third week of August, however, doubts about the quality of the loans doled out at breakneck speed by Chinese banks during H109 prompted investors to book profits and take some of their recent gains off the table. EPFR Global-tracked China Equity Funds had their worst week since early Q108 while outflows from Asia (ex-Japan) and Global Emerging Markets (GEM) Equity Funds hit 24 week and year-to-date highs respectively.

US stocks rose on Thursday on the back of gains in financial and technology shares. A report showing surprise growth in the manufacturing sector and gains in overseas markets helped bolster the mood on Wall Street.

On top of that, news that AIG expects to repay the government and data on leading economic indicators added to evidence that things have stopped getting worse.

The Dow Jones Industrial Average climbed 71 points, or 0.8%. The S&P 500 index added 11 points, or 1.1%. The Nasdaq Composite index rose 20 points, or 1%.

Market breadth was positive. On the New York Stock Exchange, winners beat losers seven to three on volume of 1.05 billion shares. On the Nasdaq, advancers topped decliners eight to five on 2 billion shares.

A worse-than-expected jobless claims report unnerved investors early on, but the surprise rise in manufacturing reversed those losses.

Financial shares were buoyant, with the KBW Bank index gaining 2.9%.

AIG shares rallied 21% after the insurer's new CEO said he expects the company to pay back the billions in loans it has taken to stay afloat.

After topping out at fresh 2009 highs last week, investors have struggled to push stocks higher this week. Between the March 9 lows and last week, the S&P 500 rallied 50%. But bets that the economy is stabilizing have been offset partly by worries about the jobs market and its impact on the already hard-hit consumer.

The Philadelphia Fed index, a regional reading on manufacturing, climbed to plus 4.2 in August from negative 7.5 in July. Economists expected it to improve to negative 2. Any reading that is positive implies expansion in the sector.

Also on the upside, the Conference Board said its index of leading economic indicators (LEI) rose 0.6% in July after rising a revised 0.8% in June. LEI was expected to have risen 0.7%.

But the number of Americans filing new claims for unemployment rose last week versus forecasts for a drop. The Department of Labor reported 576,000 new claims last week from a revised 561,000 in the previous week. Forecasts were for claims to drop to 550,000, according to economists.

A report from the Mortgage Bankers Association said 13% of Americans are either late on their mortgage payments or in foreclosure, a record-high number.

Asian markets rebounded, reassuring investors after a plunge in China's main market on Wednesday. The Chinese market has lost about 20% over the last two weeks, raising worries about China's economy.

US light crude oil for September delivery fell 89 cents to settle at $72.94 a barrel on the New York Mercantile Exchange, after rising nearly 5% on Wednesday.

Treasury prices gained, lowering the yield on the benchmark 10-year note to 3.42% from 3.45% on Wednesday.

COMEX gold for December delivery fell $2.10 to settle at $942.70 an ounce.

In currency trading, the dollar fell versus the euro and gained against the Japanese yen.

European shares rose for the second time in a choppy week, led by strength in oil producers and miners. The pan-European Dow Jones Stoxx 600 index closed up 1.4% at 229.65, although the index is broadly flat for the week.

The UK's FTSE 100 index ended 1.4% higher at 4,756.58, while Germany's DAX index advanced 1.5% to 5,311.06 and the French CAC-40 index gained 1.6% at 3,505.32.

Indian markets ended with smart gains on Thursday mainly on the back of strong cues from the international equity markets. Especially the Shanghai SE Composite index in China was a major sentiment booster as the index staged a strong bounce back, adding over 4.5%. Even the European markets started off with smart gains.

The interest rate sensitive stocks were in demand, the Mid-Cap and the Small-Cap stocks also participated in the upsurge aiding the benchmark indices to end above psychological levels. However, the select Pharma and the FMCG stocks were under pressure.

The BSE Sensex gained 202 points or 1.4% at 15,012 after touching a high of 15,145 and a low of 14,928. The index opened at 14,930 against the previous close of 15,809. The NSE Nifty ended higher by 56 points to shut shop at 4,453.

In Asia, the Nikkei in Japan gained by 1.8% at 10,383 while Australia's S&P/ASX ended flat at 4,377. The Hang Seng index in Hong Kong gained 1.9% at 20,306. Shanghai index in China gained by 4.5% at 2,911.

In Europe, stocks were trading in green. The FTSE in the UK was up 1.4%. The DAX in Germany was up 1.5% and the CAC 40 index in France was up 1.5%.

Coming back to India, among the BSE sectoral indices, the Auto index was the top gainer, gaining 2.6%, followed by the Bankex index that was up 1.8%. The BSE Power index up 1.6% and the BSE IT index was up 1.5%.

The BSE Mid-Cap index gained 0.8% and the BSE Small-Cap index gained by 0.8%.

Within the Sensex, the major gainers were M&M, Maruti, Hero Honda, SBI, Grasim, HDFC Bank and Tata Power. Among the major losers were Bharti Airtel, Tata otors and Hindlaco.

Outside the frontline indices, the big gainers in the broader market were KSK Energy, Gujarat NRE, Aditya Birla Nuvo, Sintex Industries and Idea. On the other hand, losers included Glenmark, CESC, Mphasis, Adani Enterprise and Koutons Retails.

Shares of Adani Power had a subdued on debut on Thursday, the stock got listed at Rs105.15 per share as against its issue price of Rs100. The stock finally ended at Rs100 its issue price.

The company’s IPO of 248.8mn shares, which closed on July 31, was subscribed close to 22 times. The price band was between Rs90-Rs100. The company raised close to Rs30bn through the issue.

The retail portion was subscribed close to three times, the QIB portion by more than 39 times and high-net worth individuals 8.5 times. The issue, which was open to anchor investors, received bids for 9.4 crore shares against the 5.24 crore shares offered to them.

Sterlite Industries a subsidiary of Vedanta Resources plc announced that it is increasing its offer, for the purchase of substantially all of the operating assets of ASARCO LLC, by approximately US$500mn, and has proposed to support a plan of reorganisation that is intended to pay creditors in full their allowed amount of claims and full post petition interest.

With this improvement, the revised total consideration will increase to Cash at closing of approximately US$ 2.1 billion.

While there is an increase in the cash consideration, Sterlite will receive an approximately 72.5% interest in the Litigation Trust to be setup by the Debtor in Possession (Asarco LLC) at Closing of the transaction to pursue a judgement against Americas Mining Corporation awarded by the US District Court of Texas, Brownsville Division.

Shares of Sterlite Industries gained by 1.5% to Rs619. The stock opened at Rs615 and made an intra-day high of Rs627 and a low of Rs601. Total traded volumes stood at 0.7mn shares.