Keep your eye on the Big picture, but watch your step.
Caution is going to be the mantra for the next few days as the market digests the recent spurt and awaits fresh good news. Global cues are mixed. Today, we expect a cautious start after an extended weekend. Things will be volatile given that we have the F&O expiry on Thursday.
The outcome of the two-day Fed meeting will be announced on Wednesday (US time of course). It’s a no-brainer that the Fed won’t tinker with rates. What could, however, have a bearing on the sentiment is what the FOMC says about the road ahead and the state of the US economy. Then there is the G20 Summit scheduled for this weekend.
All these events will make it tough for the key indices to build on last week’s gains. Though the overall mood is positive, the road ahead will be bumpy. The fact that we have already traveled so much since early March could bring in some apprehensions. The results are just round the corner and expectations are on the positive side. Among the big risks will be inflation and its fallout on monetary policy. FIIs will continue to play a key role.
FIIs were net buyers of Rs14.86bn in the cash segment on Friday on a provisional basis. The local funds pulled out Rs5.05bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net sellers at Rs2.97bn. On Thursday, FIIs were net buyers of Rs26.63bn in the cash segment. The net FII investments in Indian stocks this year have crossed $9.8bn. Mutual Funds were net buyers of Rs1.01bn on Thursday.
The deal street is buzzing with lots of M&A action happening over the past few days. This is yet another sign of recovery in the global economy and business confidence. Bharti Airtel is leaving no stone unturned in order to clinch the multi-billion dollar cross border merger with South Africa's MTN. The two parties have set Sept. 30 as the deadline to reach an agreement after having extended the same twice before. Dell has decided to join the IT services bandwagon with the acquisition of Perot Systems.
US stocks closed mixed on Monday as commodity prices eased and financial shares weakened on speculation that a six-month rally has outpaced prospects for profit growth. European and Asian shares dropped, while oil and gold retreated as the dollar rose. Treasuries were little changed.
The Dow Jones Industrial Average lost 41 points, or 0.4%, to 9,778.86. The S&P 500 index shed about 4 points, or 0.3%, to 1,064.66. The Nasdaq Composite index gained 5 points, or 0.2%, at 2,138.04, ending at a fresh one-year high.
US stocks managed to hit fresh 2009 highs on Friday. Since bottoming at a 12-year low on March 9, the S&P 500 has gained 58% and the Dow is up 50%, as of Friday's close. After hitting a six-year low, the Nasdaq has gained 68%.
Stocks have risen during those 6-1/2 months due to slowly improving economy and unprecedented stimulus measures. But the rally has come too fast and too far ahead to leave any further room for comfort for the bulls.
The biggest catalyst in the next few weeks and month will be corporate earnings. There could be a modest pullback of 5% to 7%. But with a lot of money sitting on the sidelines, the downside will not be much.
The August index of leading economic indicators rose 0.6%, according to a report from the Conference Board released Monday. That was short of forecasts for a rise of 0.7%, according to a consensus of economists. LEI rose 0.6% in July.
PC maker Dell is buying Perot Systems, a provider of IT services, in a $3.9 billion all-cash deal. Dell shares fell 4% in Monday trading, while Perot Systems rose 65%.
AIG shares rallied 21% after a Congressional report said the company has stabilized although it was unclear whether it would ever be able to pay back its federal bailout. AIG received as much as $182 billion from Treasury and the Federal Reserve at different points in time over the last year.
Home builder Lennar reported a wider quarterly loss Monday morning, but also said it will be profitable next year if the economy remains stable. Shares fell 3%.
The dollar gained against the yen and euro, reversing its recent declines. The rising greenback pressured dollar-traded commodities such as oil and gold.
US light crude oil for October delivery tumbled $2.33 to settle at $69.71 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery fell $5.40 to settle at $1004.90 an ounce. Gold hit a record high of $1,020.20 last week.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.47% from 3.46% on Friday.
The Federal Reserve, meeting on Tuesday and Wednesday, is likely to hold short-term interest rates steady at historic lows near zero. Last week, Fed chief Ben Bernanke said that the recession is likely over but the labor market still has a long way to go.
Over the weekend, US President Barack Obama said that job growth won't kick in until the end of the recovery, sometime next year.
Also on Tuesday, the Federal Housing Finance Agency (FHFA) releases its July home price index. Prices are expected to have risen 0.5% after rising 0.5% in June. Reports on housing and consumer sentiment are due later in the week.
On Thursday, the Group of 20 leading developed and emerging countries will meet in Pittsburgh to discuss the global economy in the wake of the recession. Expect G20 leaders to take credit for saving the world economy from slipping into another Great Depression. Apart from that there is very little chance of any major breakthrough on how to reform the global finance and execute the so-called exit strategy.
Meanwhile, according to a top equity analyst, the biggest beneficiary of the loose monetary policies in the US and other western nations may be Asian assets.
Europe stocks declined on Monday due to weakness in resources space. Having climbed for four of the past five weeks and moved 55% above the lows of March, the pan-European Dow Jones Stoxx 600 index fell 0.8% to 243.05.
Germany's DAX index fell 0.6% to 5,668.65, the UK's FTSE 100 index was down 0.7% to 5,134.36 and the French CAC 40 index shed 0.4% to 3,812.16.It was a momentous day for the Indian markets as NSE Nifty hit the 5,000 levels for the first time since May 23, 2008. Bulls were indeed in high spirits in the morning trades led by firm global cues and buying witnessed all over. However, the joy was very short lived as index heavyweight Reliance Industries fell over 5% dragging the index by 103 points single handedly. Sentiments further got a hit after inflation broke in to positive territory fir the first time in 13-weeks.
The BSE Sensex fell nearly 110 points while, the NSE Nifty gave away nearly 40 points from their respective intra-day high’s.
Aviation stocks were in the linelight led by Jet Airways on speculation taxes on jet fuel may be cut. Shares of Jet Airways shot up by over 18% to end at Rs315, Kingfisher Airlines rallied by over 12% to end at Rs53 and Spice Jet surged over 7% to end at Rs33.6.
The BSE Sensex advanced 34 points or 0.2% at 16,711 after touching a high of 16,820 and a low of 16,636. The index opened at 16,686 against the previous close of 16,677. The NSE Nifty was up 7 points to shut shop at 4,965.
In Asia, the Nikkei in Japan gained by 1.7% at 10,443 while Australia's S&P/ASX ended higher by 1.4% at 4,714. The Hang Seng index in Hong Kong gained 1.7% at 21,768. Shanghai SE Composite in China gained by 2% at 3,060.
In Europe, stocks were in the green. The FTSE in the UK was up 0.9%, The DAX in Germany was up 0.6% and the CAC 40 index in France gained 0.6%.
Coming back to India, among the BSE sectoral indices, the Teck index was the top gainer, gaining 2%, followed by the IT index that was up 2%. The BSE Auto index up 1.5% and the BSE Bankex index was up 0.8%.
The BSE Mid-Cap index gained 0.3% and the BSE Small-Cap index gained 0.2%.
Among the 30-components of Sensex, 22 stocks ended in the green and 8 ended in the negative terrain. Among the major gainers were Hindalco, ACC, JP Associates, Bharti, Maruti and Grasim.
On the other hand, Reliance Industries, Tata steel, ITC, NTPC and Hero Honda were among the major laggards.
Outside the frontline indices, the big gainers in the broader market were Jet Airways, Proctor & Gamble, Essar Oil, HCL Tech and Indian Hotels. On the other hand, losers included EIH Ltd, EKC, Godrej Ind, IFCI and LIC Housing Fin.
India’s Inflation broke in to the positive terrain for the first time in over 12 months. The annual rate of inflation stood at 0.12% for the week ended August 5, 2009 over as compared to -0.12% for the previous week July 29, 2009 and 12.42% during the corresponding week August 06, 2008 of the previous year. The government announced that it revised inflation for week ended July 11 to -0.63% from -1.17%.
Reliance Industries announced that Petroleum Trust sold 10.5mn equity shares of the Company. Reliance Industrial Investments and Holdings Ltd, a wholly owned subsidiary of Reliance, is the sole beneficiary of the Trust.
The Trust will realize approximately Rs31.88bn, at an average price of about Rs2,125 per share. The shares are carried in the books at a cost of Rs158 per share by the Trust.
Petroleum Trust is a special purpose vehicle created for Reliance Industries holding in the earlier Reliance Petroleum when the company merged the latter with itself some seven years ago. The stake of the Trust rose again when IPCL merged with RIL.
DSP Merrill Lynch Limited and Citigroup Global Markets India Private Limited acted as joint arrangers for the seller.
Shares of Reliance Industries lost over 4.5% to Rs2086. The stock opened at Rs2169 and made an intra-day high of Rs2204 and a low of Rs2070. Total traded volumes stood at 10.2mn shares.
BHEL plans to spend Rs15.9bn to expand capacity to produce equipment capable of generating 20,000MW by March 2012.
Shares of BHEL ended flat at Rs2275. The stock opened at Rs2294 and made an intra-day high of Rs2314 and a low of Rs2265. Total traded volumes stood at 0.13mn shares.
Shares of Bharati Shipyard surged by over 2.6% to Rs214 after the company picked up an additional 3.01% stake, raising its holding to 22.48% for an amount of ~Rs3.05bn on acquiring its 22.48% stake in Great Offshore.
Bharati acquired 1.11mn shares at an average Rs558.81 per share through Dhanshree Properties Pvt. Ltd, a Bharati Shipyard unit, for a total of Rs624mn.
ABG Shipyard had proposed an open offer of Rs520 per share on August 5, 2009 for Great Offshore to lift its 7.87% stake.
Shares of Petronet LNG gained by 2.5% to Rs76.2 after the company announced its plans to raise Rs50bn in debt to build power plants. The company plans to borrow money from overseas and local banks by the end of 2010, Managing Director P. Dasgupta said. The company may raise an additional Rs20bn in 2011, selling shares to existing investors.
Petronet’s planned power plants will be built adjacent to its import terminals at Dahej in Gujarat state in western India and Kochi in the southern state of Kerala.
The plants will have the capacity to generate 1,200MW of electricity and may be completed in 2012.
Shares of Thermax advanced by 3.5% to end at Rs525 after the company announced its entry into the independent power producer segment by bagging an order worth Rs10.01bn for the turnkey supply of a 270 MW power plant being set up by a Hyderabad based Infrastructure Company.
The boilers for this project will be manufactured by Thermax using the circulating fluidized bed combustion (CFBC) technology Licensed from Babcock & Wilcox, USA.
Shares of Raymond were locked at 10% upper circuit to end at Rs204.85 after the company announced that the board of directors approved the proposal for commencement of Realty Development as new business.
Shares of Alstom Projects surged over 4% to Rs544 after the company and its *consortium partners have signed a signaling equipment and services contract worth Rs1.87bn with the Bangalore Metro Rail Corporation Ltd (Â"BMRCL") for the first two lines of the new Bangalore metro system in India.
(*The consortium is led by ALSTOM Projects India Ltd and composed of ALSTOM Transport SA (ATSA), Thales Security Solutions and Services and Sumitomo Corporation).
The contract also has a provision for BMRCL to exercise a firm option of value Rs1.41bn (out of which Alstom’s share is Rs500mn) within 15 days of the base contract coming into effect.