No force for bulls!

Perpetual optimism is a force multiplier.

India sure is a force to reckon with Force One F1 powering ahead to finish second in the Belgian Grand Prix on Sunday. But then China is something we cannot ignore. Despite perpetual optimism, the force may not be with the bulls at the start so to speak, as global markets are not doing well. A small pull-back is only to be expected after the recent advance. The recent bugbear - the Chinese market could yet again play party pooper. The Shanghai Composite has sunk by as much as 5%. Other Asian indices too are down 0.5-2%. On Wall Street, the Dow broke its eight-session winning sequence on Friday. As a result, we are likely to toe the global line and open in the red, though there is no need to panic as such. A small pull-back is only to be expected after the recent advance. The Q1 GDP data will be out today and could swing the game either way.

Despite the impending shortfall in farm output, the situation is not alarming as yet. The Finance Minister has reaffirmed that things are not so bad. One only hopes that the Centre manages the food supply situation well. Still, inflation is likely to present a few challenges down the line. If that happens, interest rates should also harden. One should brace for a few hiccups on the road to recovery.

The F&O rollover has been encouraging. It was the highest since February and much above the monthly average in recent history. However, other F&O indicators like the Put-Call ratio are pointing to some breather before the market kicks off another move up. The immediate resistance for the Nifty is placed at around 4800. The near-term support is seen at 4650-4680. Broadly, the index could swing between 4500 and 5000 in the next few weeks.

A factor that will play a crucial role in deciding the market's direction going ahead is fund flows and the mood of the overseas investors. This, in turn will hinge on how the situation shapes up on the local economic front and corporate results side. One will of course have to grapple with the daily developments across the global markets and economies as well.

FIIs were net buyers at Rs5.54bn in the cash segment on Friday on a provisional basis while the local funds pumped in a meager Rs54.6mn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net sellers at Rs1.61bn. On Thursday, FIIs were net buyers at Rs13.43bn in the cash segment. Mutual Funds were net buyers of just Rs167mn on the same day.

Chinese shares plunged early today on fears of weak bank lending in August and concerns of likely capital-raising issues that may sap market liquidity. The benchmark Shanghai Composite index ended the morning session down 5.4%.

The slump in Shanghai shares dragged on the Hong Kong market, where the Hang Seng Index fell 1.96% to 19,704 in latest trading, falling below the psychologically-important 20,000-point level as all of its constituents dipped into the red.

Japanese stocks gave up an early rally to turn negative in the first trading session after Japanese voters handed the opposition Democratic Party of Japan a landslide victory over the long-ruling Liberal Democratic Party. The Nikkei was down nearly 0.9% at 10,439.

US stocks ended lower, with the Dow Jones Industrial Average snapping an eight-session winning streak, as a disappointing report on consumer confidence countered positive news from jewellery retailer Tiffany and technology titans Dell and Intel.

Investors and traders turned cautious after pushing the three main indices to 2009 highs in the previous session. Friday's loss erased most of the gains for the week and led the Dow to its first negative close in nine days.

The blue chip index lost 36.43 points, or 0.38%, to 9544.20, putting its gain for the weak at just 0.4%. But it is up 4.06% for the month so far, and will likely close out on Monday its best August performance in nine years.

The Standard & Poor's 500 index fell 2.05 points, or 0.2%, to 1028.93, pulled down by a 0.91% drop in its health-care sector.

The tech-heavy Nasdaq Composite index, meanwhile, finished nearly unchanged at 2028.77, marking its highest close since Oct. 1. The index is on track for its sixth-straight monthly gain, its longest monthly winning streak since the seven months ended August 2003.

All three major indexes had gained in the morning, thanks to the upbeat commentary from Dell and Intel, but lost steam as the session wore on. Trading volume was light on the second-to-last trading session of August.

US stocks had managed slim gains on Thursday, with the Dow stretching its winning streak to eight straight sessions, its longest run since the period ended April 10, 2007. But the gains have been tepid this week on the back of a surprisingly strong summer advance. Between the March 9 lows and Friday's close, the S&P 500 gained 52%.

Chipmaker Intel boosted its revenue forecast for the third quarter, thanks to stronger PC demand, saying it expects sales of US$8.8bn to US$9.2bn. Previously, it forecast sales of US$8.1bn to US$8.9bn. Analysts surveyed by Thomson Reuters are currently forecasting sales of US$8.55bn. Intel, a Dow component, rallied 4%.

PC maker Dell reported weaker sales and earnings late on Thursday that beat expectations, sending shares 1.8% higher Friday. Dell also said that it is seeing signs the PC industry is beginning to recover.

Tiffany, meanwhile, rallied 11%, amid the outlook boost and as its fiscal second-quarter earnings topped Wall Street estimates.

Among the decliners were insurance company Cigna Corp., which dropped 2.9% and drug giant Bristol-Myers Squibb, which slid 2.9%.

In economic news of the day, personal income was essentially flat in July, the government reported, versus forecasts for a rise of 0.1%. Income declined 1.1% in June. But spending perked up, thanks to the government's Cash for Clunkers program. Personal spending rose 0.2% after falling 1.1% in June. The rise was in line with estimates.

The Reuters/University of Michigan reading of consumer sentiment was revised up to 65.7 in August from an earlier reading of 63.2. Economists expected a reading of 64. In July, sentiment stood at 66.

Apple signed a multiyear deal with China Unicom to bring the iPhone to China, the world's largest cell phone market. Apple shares were little changed.

Among the Dow's worst performers were pharmaceutical giant Merck, which dropped 1.7%, and aerospace company Boeing, which fell 1.5%. Still, that erases only a small part of Boeing's Thursday rally after it gave a rosy update on its much-delayed Dreamliner airplane. The stock closed up 11% for the week.

Shares of financial companies in which the government has intervened also rose sharply this week. Among them was insurance giant AIG, which closed up 5%. The stock climbed 53% this week alone after CEO Robert Benmosche's optimistic statements about the prospects for turning AIG around.

Government-backed mortgage lenders Fannie Mae and Freddie Mac were also among the financial stocks that rallied. Fannie Mae, whose total mortgage portfolio declined at an annualized rate of 18% in July, climbed 6.3%. It rallied 70% this week.

Freddie, meanwhile, rose 7.1%, and 39% for the week. Banking giant Citigroup rose 3.6%.

US light crude oil for October delivery rose 25 cents to settle at US$72.74 a barrel on the New York Mercantile Exchange.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.43% from 3.44% late on Thursday. Treasury sold US$109bn in debt this week to moderate demand.

COMEX gold for December delivery rose US$11.50 to settle at US$958.80 an ounce.

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



The expiry week saw the birth of a new high for the year. The Nifty closed at 2009 peak ignoring any possible fallout from drought, inflation, fund flows and of course global cues. Impressive rollover of derivatives contracts in the month of September boosted sentiment. Finally, the BSE 30-share Sensex and NSE Nifty closed the week higher by 4.5% each.

The BSE Sensex hit an intra-week high of 15,957.6 and low of 15,362. While, NSE Nifty hit an intra-week high of 4,743.7 and low of 4,536.9

The Foreign Institutional Funds purchased Rs20.76bn during the week and the Domestic Institutional Funds were net buyers to the tune of Rs13.88bn during the week.

The top gainers: The top gainers in the Sensex were Tata Motors (up 13.3%), Wipro (up 10.1%), L&T (up 9.1%), Reliance Capital (up 8.3%) and DLF (up 8.1%).

The Top Losers: The top losers in the Sensex were Tata Steel (down 1.4%), ONGC (down 1.1%), HDFC Bank (down 0.6%) and Hindustan Unilever (down 0.2%).

In Asia, the Nikkei in Japan gained by 0.5% at 10,534 while Australia's S&P/ASX ended higher by 0.8% at 4,489. The Hang Seng index in Hong Kong was down 0.8% at 20,098. Shanghai index in China fell by 2.9% at 2,860.

In Europe, stocks were trading in the green. The FTSE in the UK was up 1%. The DAX in Germany was up 1.3% and the CAC 40 index in France was up 1.4%.

Coming back to India, among the BSE sectoral indices, the Realty index was the top gainer, gaining 4%, followed by the Auto index that was up 1.3%. The BSE Capital Goods index up 1.1% and the BSE Bankex index was up 1.1%.

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

Among the 30-components of Sensex, 21 stocks ended in the green and 9 ended in the negative terrain. Among the major gainers were DLF, JP Associates, Bharti, Hindalco, Reliance Infra and Hero Honda.

On the other hand, ITC, Tata Power, Su Pharma, TCS and Wipro were among the major laggards.

Outside the frontline indices, the big gainers in the broader market were CESC, Voltas, Thermax, Praj Ind, IFCI and UCO Bank. On the other hand, losers included Biocon, Mundra Port, Koutons, Nestle and Concor.