Shaping up hope!

Let your hopes, not your hurts, shape your future.

The hurt bulls understand that recovery comes in different shapes and sizes. Some expect it to be ‘V’ shaped; others reckon it will be ‘U’ shaped; there are a few who believe it will be a ‘W’ shaped turnaround. In summary, we are on track for a slow and steady recovery rather than a swift one. Locally, a below par monsoon will negate the positive effect of the stimulus measures. The panic over the outbreak of swine flu is avoidable though.

Globally, the Fed is likely to maintain its accommodative stance given the fragility of the US economy. It is expected to repeat the phrase that ‘recession is moderating’. Inflation comes secondary for most central banks, though it will start to spike from later this year.

We expect a flat to cautious opening as global cues are indecisive. There could be a slight rebound after the recent reversals. We remain cautiously optimistic and see a choppy yet range-bound market.

For those who follow the Dow Theory, technical charts are throwing up bullish signals. Both the Dow and the Dow transportation index have topped their January highs. Still, many strategists are skeptical about any potential advance from this point.

As far as local stock indices are concerned, the Nifty levels to watch out for are 4400 on the downside and 4520 in the immediate future. It is reasonable for the market to take a breather after a sharp and strong advance like the one we have had since early March. One cannot expect a linear, one-way movement in key indices to last long. A little pause is normal and perhaps healthy.

FIIs were net sellers of Rs6.4bn in the cash segment on Monday on a provisional basis while the local funds pumped in Rs861.4mn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net buyers at Rs1.5bn. On Friday, the foreign funds were net sellers at Rs8.46bn in the cash segment. Their net purchases of Indian stocks have crossed $7.2bn year-to-date. Mutual Funds were net sellers at Rs2.76bn on Friday.

Mark Mobius said yesterday that global stocks will drop as much as 30% after advancing from multiyear lows and as companies increase share sales. The slide can happen anytime, probably this year, Mobius, the executive chairman of Templeton Asset Management Ltd., said in an interview in Kuala Lumpur. He said he was referring to shares “globally.”

Warren Buffett’s Berkshire Hathaway is buying corporate debt and securities issued by governments outside the US as the billionaire investor’s spending on stocks falls to the lowest in more than five years, according to an Aug. 7 regulatory filing.

US stocks fell on Monday, led by commodity producers and retailers, after four straight weeks of gains left the Standard & Poor’s 500 Index trading at the highest level relative to earnings since 2004.

The Dow Jones Industrial Average fell 32 points, or 0.3%, to 9,337. The Dow Transportation Average slipped 38 points, or 1%, to 3,710.

The S&P 500 Index dipped 3 points, or 0.3%, to 1,007, while the Nasdaq Composite Index lost 8 points, or 0.4%, to 1,992.

Four stocks fell for every three that rose on the New York Stock Exchange.

The S&P 500 climbed 2.3% last week, rising above 1,000 for the first time since November. Monday's pullback came after stocks hit fresh 2009 highs on Friday on data that showed a drop in the US unemployment rate.

Traders are betting the VIX, a gauge of expected stock swings, will increase 13% in the next five weeks. That’s the biggest spread since August 2008, right before the S&P 500 suffered the steepest two-month plunge in 21 years.

The Baltic Dry Index, which tracks the international shipping rates of dry bulk cargo, fell below 3,000 for the first time since May last week to close its worst week since October of 2008. On Monday, it tumbled another 135 points, or 4.6%, to 2,772.

A group of retailers, homebuilders, restaurant chains and other so-called consumer discretionary companies, which has gained 64% since March 9, fell 1.2% for the second-biggest decline among the 10 main S&P 500 industries.

Gold producers retreated with the price of bullion, which fell 1.3% to $946.90 an ounce in New York, the steepest decline since July 28. Producers of raw materials slumped 1.6% collectively, the steepest drop among 10 industries in the S&P 500. The group has rallied 23% in the past month.

Eli Lilly dropped 3% after Goldman Sachs downgraded the drugmaker to “sell” from “neutral” and added the stock to its “conviction sell” list, saying its “patent cliff” is the largest in the industry.

Best Buy slipped 5.3% after Goldman Sachs reduced its recommendation on shares of the world’s largest electronics retailer to “neutral” from “buy,” citing competition, “erosion” in entertainment software and “aggressive” spending to fuel growth.

Research In Motion, the maker of the BlackBerry smartphone, fell after it was downgraded to “neutral” from “buy” by a UBS analyst, who said the shares are expensive. The shares retreated 4.9%.

Freddie Mac jumped 128% after reporting its first profit in two years. The mortgage-finance company reported second-quarter net income of $768 million and didn’t ask the US Treasury for more aid.

McDonald’s added 1.9% for the best gain in the Dow after reporting global sales rose 4.3% in July, more than some analysts estimated, on demand for hamburgers and McCafe coffees.

Priceline.com Inc., an internet travel agency, advanced 14% after it forecast third-quarter profit above analysts’ estimates. The company said third-quarter earnings will be $2.70 to $2.85 a share, on an adjusted basis. The average of 13 analysts’ estimates is $2.57 a share.

Barnes & Noble Inc. rallied 4%, the highest closing price since June 4. The largest US bookstore chain agreed to buy Barnes & Noble College Booksellers Inc. for $596 million from Leonard Riggio, the retailer’s chairman and founder.

Shares of Royal Bank of Scotland and Lloyds Banking Group fell again in London. The FTSE 100 index declined 0.2%, giving up 20.97 points to 4,722.20. Other European shares were also lower to begin the week.

The pan-European Dow Jones Stoxx 600 index slipped 0.5% to 229.45. The Stoxx 600 index closed on Friday at its highest level since Nov. 4.

Germany's DAX index declined 0.8% to 5,418.12, and the French CAC-40 index lost 0.5% to 3,504.54.

Indian markets extended losses to third straight trading session on Monday on reports that monsoon rains might be the weakest in over half a decade having an impact over the economic revival. A virtual disappearance of rains is a big worry and a drought is the last thing that India needs at this crucial juncture.

The Indian Meteorological Department (IMD) on Monday cut its seasonal monsoon forecast due to the weakening of the rainfall activity over the past few days. Rains in the June-September season would be 87% of the long-period average (LPA) compared with 93% forecast made on June 24, Ajit Tyagi, the Director General of the IMD was quoted as saying. Actual rains can be 4% more or less than the forecast, Tyagi said.

In addition, growing concern over the outburst of the pandemic flu in India hit the sentiment on Dalal Street. The death toll due to the deadly Influenza A H1N1 (Swine Flu) virus has touched six in the country. The latest casualties are: a 35-year-old ayurvedic doctor and a four-year-old boy in Pune and Chennai, respectively. The doctor, Babasahib Mane, died in the Sassoon Hospital in Pune this morning, becoming the third person to succumb to swine flu in the leading industrial city of Maharashtra.

The Auto, FMCG and the Capital Goods stocks were among the heavily offloaded ones. On the other hand, bucking negative trend were the IT, telecom stocks.

The BSE Sensex slipped 150 points or 1% at 15,009 after touching a high of 15,417 and a low of 14,902. The index opened at 15,287 against the previous close of 15,160. The NSE Nifty ended lower by 44 points to shut shop at 4,437.

In Asia, the Nikkei in Japan ended higher by 1% at 10,524 while Australia's S&P/ASX ended higher by 0.2% at 4,304. The Hang Seng index in Hong Kong ended higher by 2.8% at 20,929. Shanghai index in China slipped by 0.3% at 3,249.

In Europe, stocks were trading lower. The FTSE in the UK was down 0.6%. The DAX was down 0.7% and the CAC 40 index in France was down 0.6%.

Coming back to India, among the BSE sectoral indices, the Auto index was the top loser, losing 4.5%, followed by the FMCG index that was down 3%. The BSE Capital Goods index down 2% and the BSE Realty index was down 1.6%.

On the other hand, BSE IT index ended with smart gains, up 2.6% followed by BSE Teck index up 1%.

The BSE Mid-Cap index ended lower by 2.3% and the BSE Small-Cap index ended lower by 2%.

Within the Sensex, the major losers were M&M, ACC, Hero Honda, HUL, Tata Motors, Maruti and Grasim. Among the major gainers were TCS, Wipro, Infosys, Tata Power, ONGC and Hindalco.

Outside the frontline indices, the big losers in the broader market were Educomp, Indian Hotels, Madras Cement, Chambal Fert and Nagarjuna Const. On the other hand, gainers included Mphasis, Torrent Power, Yes Bank, Apollo Hospital and Tulup Tele.

Shares of Cipla surged by over 3% to Rs281 in a weak market after the company’s Joint MD Amar Lulla said that Cipla has already received proposals from people on behalf of countries in Latin America, Mexico and Israel. “We have the capability to supply 1.5mn dosages of the drug within 4-6 weeks,” he was quoted as saying.

Cipla and other Indian pharma majors can now legally manufacture generic versions of Tamiflu after the patent office in Delhi last month rejected a patent application by Swiss company Roche, which markets the antiviral in India. With this, Indian companies can export the generic versions to countries where Tamiflu is not patented.

The swine flu outbreak that was first reported from Mexico has so far claimed over 100 lives and has now spread to Canada, parts of Europe, and at least five states in the US, where it has already been declared a public health emergency.

In India there have been six deaths so far from the deadly influenza virus. Cipla sells the drug at Rs1,000 for 10 days, which is much cheaper than the patented ones. Tamiflu (Oseltamivir Phosphate) is a drug developed by American company Gilead, and Roche has the marketing licence for the drug in India. Currently, Hyderabad-based Hetero has an agreement with Roche to develop and market generic Tamiflu.

Shares of Bharti Airtel slipped by 2.5% to Rs374 after reports stated that the company may increase its offer by 5-10% for a stake in MTN.

With the exclusive merger talks between both the companies being extended till August 31, reports stated that Bharti Airtel is working on a revised offer that might demand higher cash out flow and additional debt to be raised by the company to fund the transaction.

Shares of Glenmark Pharma gained by 2.5% to Rs259 after the company announced that Crofelemer, a potential first-in-class innovative drug for multiple indications including HIV-Associated Diarrhea completed the dose selection stage (Stage-I) of the Phase-III trial for the treatment of chronic diarrhea in people living which HIV/AIDS on antiretroviral therapies.

Shares of Mundra Port gained by 3.5% to Rs559 after the company consortium bags Mormugao Port coal terminal development concessions. The stock opened at Rs544 and made an intra-day high of Rs566 and a low of Rs542. Total traded volumes stood at 2.3mn shares.

Jaguar Land Rover, owned by Tata Motors has received a 3-year financing facility of as much as 75mn pounds from Burdale Financial Ltd., a member of the Bank of Ireland Group.

The package consists of a three year committed facility to finance Land Rover’s parts and accessories inventories and receivables in UK and US.

In April, JLR was granted a 340mn pound loan facility by the European investment bank but parent group Tata is still locked in talks with the Government over an underwriting of the finance.

Shares of Tata Motors ended lower by 3.2% to Rs400. The stock opened at Rs424 and made an intra-day high of Rs428 and a low of Rs394. Total traded volumes stood at 2mn shares.