Real strength is not just a condition of one's muscle, but a tenderness in one's spirit.
The muscle of liquidity seems so far so good. However, the key indices look to be struggling after having surpassed key levels recently. The market on the whole seems to be in a consolidation mode after a strong rally. Ditto goes for global markets, where key indices are exhibiting some signs of fatigue after touching new highs for the year. We expect another cautious start today. Given the circumspect mood across the globe, the market may not make much headway. A rangebound and choppy kind of trend is what we expect in the near term.
Friday’s monthly jobs data in the US could prove to be a catalyst. However, any advance could soon fizzle out after a strong run. Investors are looking to the third quarter with raised expectations that could be difficult to meet. In the absence of major positive triggers, liquidity will be a crucial factor that might drive the indices a little further up. But, don’t expect a runaway rally. There is bound to be some resistance though the fall should not be a big one. Any correction should be bought into as the medium to long term outlook is upbeat.
FIIs were net sellers of Rs6.9bn in the cash segment on Wednesday on a provisional basis while the local funds too pulled out Rs239mn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net sellers at Rs2.24bn. On Tuesday, the foreign funds were net buyers of Rs2.08bn in the cash segment. With this, their net purchases of Indian stocks have crossed $7.6bn year-to-date. Mutual Funds were also net buyers of Rs254mn on Tuesday.
Hong Kong shares were flat after opening lower. Shares in Shanghai are down sharply. There are concerns that Chinese regulators might fine-tune moderately loose monetary policy. Most banks declined. Except for the Nikkei, most Asian markets are trading in the red.
Nobel Prize-winning economist Joseph Stiglitz expects a “very slow recovery” in the US economy and that a replacement for Federal Reserve Chairman Ben S. Bernanke should be considered. US reports yesterday added to doubts that the recession in the world’s largest economy is easing, boosting demand for Japan’s currency as a refuge.
On the positive side, the yen fell for the first time in three days versus the euro and the dollar as Asian stocks advanced on speculation that Japanese companies will report stronger earnings, reviving demand for higher-yielding assets. The pound traded near a nine-month high against the dollar before the Bank of England’s policy-setting meeting. Economists say the UK central bank will leave its benchmark interest rate at 0.5%. Australia’s dollar approached the strongest level since October against the yen after the nation unexpectedly added workers in July.
The VIX Index, a measure of stock-market volatility known as Wall Street’s fear gauge, fell to as low as 24.86 yesterday, the least since July 28.
US stocks retreated on Wednesday as investors turned wary in the wake of some weaker-than-expected economic reports. The Standard & Poor’s 500 Index came off a nine-month high after reports on job losses and service industries were worse than economists estimated.
The Dow Jones Industrial Average shed 39 points, or 0.4%, the S&P 500 index lost 3 points, or 0.3%, and the tech-heavy Nasdaq Composite index eased 18 points, or 0.9%.
The fall reverses Wall Street's recent run, which has been spurred by better-than-expected second-quarter corporate results and signs of economic stabilization. Last month was the strongest July for the Dow and S&P 500 in two decades.
Paycheck processor Automatic Data Processing (ADP) said that private-sector employers cut 371,000 jobs in July, the smallest monthly total since October. Although the pace of job cuts is slowing, the number was higher than expected.
In addition, outplacement firm Challenger said that companies' planned job cuts rose 31% in July, indicating problems in the employment sector are far from over.
The reports come ahead of the US Labor Department's closely watched monthly jobs report, which will be released on Friday. That report is expected to show that the economy shed 328,000 jobs in July, less than the 467,000 reported for June.
A separate report showed that the US services sector contracted more than expected in July. The Institute for Supply Management's services index fell to 46.4 from 47 in June, shy of economists' forecast of 48. Any reading under 50 indicates the sector is contracting.
Meanwhile, a report from the Commerce Department showed a surprise uptick in demand for US-made manufactured goods. Factory orders increased 0.4% in June, while economists were bracing for a decline of 0.8%.
Consumer goods firm Procter & Gamble reported profits slightly higher than expected, although revenue declined as consumers moved away from its high-end product lines. Shares of Procter & Gamble lost 3%.
Kraft Foods reported an 11% jump in profit after U.S. markets closed Tuesday. Shares of Kraft ended nearly unchanged on Wednesday.
Shares of Whole Foods surged 16% after the gourmet food retailer turned a better-than-expected profit and a 2% rise in sales during its fiscal third quarter.
Shares of bailed out insurance giant American International Group (AIG) surged more 63% as the company brought on a new CEO, former MetLife chief Bob Benmosche. AIG is set to report its quarterly results Friday before the opening bell.
US light crude oil for September delivery settled up 55 cents at $71.97 a barrel. In its weekly supply report, the government said crude supplies rose by 1.7 million barrels last week, surpassing analysts' expectations of a 1.5 million barrel build.
COMEX gold for December delivery fell $3.40 to $966.30 an ounce.
Treasury prices fell, with the yield on the benchmark 10-year note jumping to 3.77%. On Wednesday, the government announced plans to auction $75 billion in US debt next week.
In currency trading, the dollar fell against the Japanese yen and the British pound and held nearly even with the euro.
On Thursday, the Labor Department reports on weekly jobless claims. The number of people who filed for first time benefits is expected to be 580,000, according to a consensus estimate, a slight decrease from the 584,000 who filed in the previous week.
Furthermore, sales figures for July from the nation's retailers are due throughout the morning.
European stocks finished lower. The pan-European Dow Jones Stoxx 600 index declined 0.4% to 226.93. The oil sector was the biggest contributor to its negative performance. The UK's FTSE 100 index fell 0.6% to 4,644.69, while Germany's DAX was down 1.2% to 5,353.01 and the French CAC 40 index slipped 0.5% to 3,458.53.
After losing ground in the previous trading session, Indian markets staged a come back on Wednesday led by gains in the Oil & Gas and IT stock. The heavyweights like Wipro, Infosys and Reliance Industries were the major gainers. Even the Small-Cap stocks were in demand unlike the Mid-Cap stocks which witnessed another day of offloading.
The media and entertainment stocks were back in action. Stocks like NDTV gained by 12% to Rs159, HT Media gained 11% to Rs115, Raj Tv was locked at 10% upper circuit to Rs55.40, ENIL surged 7% to Rs191 and Sun TV gained 3.6% to Rs274.
While, the Realty, Auto and the FMCG stocks were among the other major laggards.
The BSE Sensex gained 73 points or 0.4% at 15,903 after touching a high of 15,973 and a low of 15,695. The index opened at 15,882 against the previous close of 15,831. The NSE Nifty ended flat to shut shop at 4,685.
In Asia, the Nikkei in Japan ended down by 1.2% at 10,252 while Australia's S&P/ASX ended lower by 1% at 4,264. The Hang Seng index in Hong Kong ended lower by 1.4% at 20,494. Shanghai index in China slipped by 1.1% at 3,428.
In Europe, stocks were trading marginally higher. The FTSE in the UK was up 0.3%. The DAX was flat and the CAC 40 was up 0.7%.
Coming back to India, among the BSE sectoral indices, the IT index was the top gainer, gaining 2%, followed by the Consumer Durables index that was up 2%. The BSE Oil & Gas index up 1.8% and the BSE Teck index was up 1.1%.
The BSE Mid-Cap index ended flat and the BSE Small-Cap index ended higher by 0.9%.
Within the Sensex, the major gainers were ONGC, Wipro, ACC, Infosys, Sun Pharma, Reliance Infra and Reliance Industries. Among the major losers were Maruti, Hindalco, DLF, HDFC Bank, HUL, HDFC and RCom.
Outside the frontline indices, the top gainers included Godrej Industries, Glenmark, Aditya Birla, Moser Baer, Kotak Bank and Cadila.
Among the big losers in the broader market were Indiabulls Real Estate, Piramal Healthcare and United Phosphorous.
Shares of Infosys gained 2.5% to Rs2094 after the company’s arm won 5-year contract with T-Mobile. The stock opened at Rs2050 and made an intra-day high of Rs2105 and a low of Rs2050. Total traded volumes stood at 0.16mn shares.
Shares of Great Offshore shot up by over 10% to Rs559 as high stakes battle for the control of the company escalated further after ABG Shipyard raised the open offer price to acquire a 32.12% stake in the offshore service provider to Rs520 a share, according to a filing on the National Stock Exchange (NSE) today. On Monday, ABG bought 150,000 shares, or 0.4%, of Great Offshore from the open market at an average Rs498.39 a share and a maximum price of Rs519.94.
Last week, ABG had raised the open offer for Great Offshore to Rs450 a share. The open offer price prior to that was Rs375 a share. On July 29, ABG bought 5.3% stake in Great Offshore through a series of block deals taking its stake to 7.3%. It bought a further 212,348 shares of Great Offshore (0.6% stake) at Rs450 a share on the NSE, taking its total shareholding above 8%.
Bharati Shipyard owns 19.5% of Great Offshore and has announced an open offer at Rs405 a share. The two companies have time till August 24 to change their offer price.
Bharati Shipyard acquired a 14.89% stake in Great Offshore in May, at a price of Rs315 per share, from its vice chairman and managing director, Vijay Sheth, following an invocation of shares which he had pledged. This left Sheth with less than one per cent stake in the company and he lost control of the company. Bharati Shipyard needs just 6% to become a 26% shareholder and that will give it the power to block special resolutions.
Shares of NMDC ended at 5% upper circuit to Rs384.5 after the steel ministry approved a plan to sell 8.38% of the company.
"We have approved 8.38% disinvestment of government's stake in NMDC. We will be sending the proposal to the Disinvestment Department in a day or two (for initiating the process of equity sale)," Steel Secretary P.K. Rastogi said.
Government has already offloaded 1.62% stake in the listed entity. Post-disinvestment, government's stake in the iron ore mining company will be reduced by 10%--the minimum that is required to list shares of a company on the exchanges as per SEBI regulations.
Shares of Wipro gained by 3.2% to Rs498 after the company announced that it has entered into a 5-year strategic agreement with US-based multi-brand specialty retailer, Charming Shoppers, stated reports. The stock opened at Rs480 and made an intra-day high of Rs504 and a low of Rs478. Total traded volumes stood at 0.18mn shares.
Shares of Reliance Infrastructure gained by 2% to Rs1212 after the company in consortium with SNC Lavolin Inc. Canada and Reliance Communication were awarded Mumbai Metro-II Project on BOT basis for a concession period of 35 years with an extension clause of another 10 years.
The project has been awarded by Mumbai Metropolitan Region Development Authority through an international competitive bidding process. The estimated project cost is about Rs.110bn and is scheduled to be operational by 2015.
Shares of PVR shot up by over 10% to Rs122 after Reliance Cap Trustee’s Reliance Media and Entertainment Fund acquired ~0.5mn equity shares of the company at an average price of Rs103 per share.
The fund bought the shares from the open market on August 4, 2009. The stock has surged by over 15% from the funds purchase price.
On Wednesday the stock opened at Rs115 and made an intra-day high of Rs121.4 and a low of Rs115. Total traded volumes stood at 0.3mn shares.
The Promoters hold 41.2% stake in the company, while, institutional investors have 33.3% holding. Non-promoters have 4.2% while, public and others hold the remaining 21.23% in PVR.
Shares of Shriram Transport Finance surged by over 2% to Rs309 after ICICI Prudential Life Insurance acquired 2mn shares of the company from the open market. The shares were bought at an average price of Rs300 per share on the NSE on August 4, 2009.