Prosperity is not without many fears and distastes; adversity not without many comforts and hopes.
Ring out the old rules, bring in the new. That’s what leaders of G20 nations committed during the weekend. US President Obama said, "We brought the global economy back from the brink, we laid the groundwork today for longtime prosperity as well. Still we know there is much further to go." The G20 leaders also reiterated the pledge to maintain status quo on the unprecedented stimulus till there is absolute certainty that the world economy is out of the woods. So, premature withdrawal is out of question. A gradual and orderly exit is more likely.
Today, we expect the market to open strong due to healthy global cues. We have a truncated week with another holiday on Friday. The market is consolidating after the very nice recovery. It has turned choppy lately after the recent pull-back from multi-month highs. We could see a new push higher or some more selloff. Downside will hinge on whether there will be support on dips. The quarterly earnings will be crucial in deciding whether the rally gets another leg up.
There is action ringing on the telecom front in India with the 3G spectrum sale process beginning today. And of course we have a deadline on Wednesday for Bharti Airtel's proposed tie-up with South Africa's MTN Group.
The Indian market was spared the usual Monday Blues thanks to the festival of Dussera; and have woken up to an M&A Monday on Wall Street. Barely a week after Dell bid for Perot Systems, we now have Xerox, (earlier often used as a verb for making copies) saying it would buy Affiliated Computer Services Inc. for $6.4bn expanding its services into technology outsourcing and data management. While Xerox shares came tumbling down, Nasdaq moved higher expecting a round of consolidation in the IT space.
In other deal related news, Abbott Labs said it would buy the drug unit of Solvay for $6.6bn. US diversified health care company Johnson & Johnson has bought an 18% stake in biotech firm Crucell for 302 million euros ($444 million) as part of a flu vaccine development deal, the Dutch company said on Monday. The spate of big-ticket M&A news lately only adds to the theory that the world economy has stopped worsening and is ready to resume its northward journey.
The global economy may be bottoming out, but it is not expected to reach 3% growth until the end of 2010. A gradual move higher is more likely in the stock market than a big selloff. We are seeing continued choppiness in the economic numbers in the US and other developed economies, which points to the fact that the recovery in these parts of the world is still in the early stages. Valuation-wise, stocks may not be as cheap as they were six months ago. But if we get a better-than-expected recovery, stocks may be very attractive, especially relative to other alternatives.
Taking of alternatives, the World Bank president, Robert Zoellick, has warned that there will increasingly be other options to the US dollar. "The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency," Zoellick told an audience at Johns Hopkins University in Washington.
FIIs were net sellers of Rs37.2mn in the cash segment on Friday on a provisional basis. The local funds on the other hand were net buyers of Rs2.27bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net buyers at Rs9.89bn. On Thursday, FIIs were net buyers of Rs13.22bn in the cash segment. The net FII investments in Indian stocks this year have crossed $11bn. Mutual Funds were net sellers of Rs7.92bn on Thursday.
Caution was the mantra during the week as Indian bourses turned into a consolidation mode during the F&O expiry. The Nifty did manage to cross the crucial 5,000 mark for the first time in 2009. Markets continued to trade sideways on account of weak global cues and concerns on inflation. Anxiety about upcoming earnings also prompted investors to remain on sidelines. The Nifty and Sensex both ended the week down 0.3% managed to close at 4,959 and 16,693 respectively.
On Friday, the BSE Sensex slipped 88 points or 0.5% at 16,693 after touching a high of 16,812 and a low of 16,613. The index opened at 16,679 against the previous close of 16,781. The NSE Nifty fell 31 points to shut shop at 4,955.
In Asia, the Nikkei in Japan was down 2.5%, while Australia's S&P/ASX ended higher by 0.3% at 4,713. Shanghai SE Composite in China was down by 0.5% at 2,838. However, the Hang Seng index in Hong Kong ended flat at 21,024.
In Europe, stocks were mixed. The FTSE in the UK was up 0.5%, The DAX in Germany was flat and the CAC 40 index in France was flat.
Coming back to India, among the BSE sectoral indices, the Metal index was the top loser, shedding 2.2%, followed by the IT index that was down 2% and the BSE Teck index was down 1.4%.
Among the major gainers were, BSE Pharma index gained 5%, BSE Consumer Durables index up 0.8% and BSE Oil & Gas index up 0.8%.
The BSE Mid-Cap index gained 0.7% and the BSE Small-Cap index was up 0.9%.
Among the 30-components of Sensex, 20 stocks ended in the red and 10 ended in the positive terrain. Among the major laggards were ICICI Bank, Tata Steel, Wipro, Tata Motors and TCS.
On the other hand, Sun Pharma, Reliance Industries, ITC, ONGC and HDFC were among the major gainers.
Outside the frontline indices, the big losers in the broader market were Welspun Gujarat, Central Bank, HCL Tech and Yes Bank. On the other hand, gainers included GTL Infra, RCF, Biocon, IDBI Bank and Divi’s Lab.
The top gainers: The top gainers in the Sensex were Ranbaxy Labs (up 16.7%), HDFC (up 7.3%), Maruti Suzuki (up 5%), HDFC Bank (up 4.8%) and Cipla (up 3.1%).
The Top Losers: The top losers in the Sensex were Hindalco (down 7.1%), Infosys (down 5.1%), Tata Steel (down 4.3%), Bharti Airtel (down 4.2%) and ICICI Bank (down 3.8%).
The BSE IT Index (down 3.1%): The top losers in the IT sector were Patni Computer (down 7.7%), Infosys Tech (down 5.1%), Financial Tech (down 3.6%), Sasken Communication (down 3%) and HCL Tech (down 2.1%)