Tuesday Turnaround possible

The great thing in the world is not so much where we stand, as in what direction we are moving.

The world may be standing, sitting or sleeping but India sure is moving ahead. The Q1 GDP data revealed a resilient Indian economy. On a higher base and in the face of the global downturn, it was a commendable show. Given the trauma and turbulence the world economy has weathered, a GDP growth rate of 6% plus is acceptable. We expect a better opening on local bourses, as there is no China scare to haunt us today. Other Asian markets too are flashing the green light.

One also has to note that Monday’s sell-off was led more by the FIIs, and was restricted to the large caps. The broader market managed to hold its own. Today, the frontline counters may recover. As far as small- and mid-cap stocks are concerned, one should be careful in dealing with them. However, this space could still surprise on the positive side as these stocks had been under-performing the large caps lately.

In short, the outlook for today appears brighter, though overall things remain uncertain. Early gains may not sustain so one should be prepared for volatility at this juncture.

The shares of NHPC Ltd. will get listed today. A small premium is what the market observers are pricing in.

As on 27th August, rainfall as a whole was deficient by 24%, with 278 districts in 11 States being affected by drought. The Cabinet reviewed the prices of essential commodities. It noted that major areas of concern are prices of pulses and sugar.

The shortfall in kharif output will pose a few problems though, particularly on the inflation front. In fact, inflation, as measured by the various CPIs climbed in July over the previous month. The CPI for Industrial Workers for July is 11.89% compared to 9.29% in June. Inflation based on CPI for Agriculture Labourers rose from 11.52% in June to 12.9% in July, while the one based on CPI for Rural Labourers went up from 11.26% to 12.67% in July last year.

Global leaders are gathering in Los Cabos, Mexico today to discuss the next steps in a concerted campaign to counter tax evasion. The two-day meeting, organised by the OECD, will focus on improving transparency and exchange of banking and ownership information. Hopefully, even the Indian Government will be able to extract information on the billions of dollars of Black Money stashed away in Swiss accounts.

On Wall Street, US stocks closed lower after a big drop in Chinese shares heightened concerns that the world equity markets have risen too far, too fast. But August was a good month for Wall Street.

The Dow Jones Industrial Average shed 47 points, or 0.5%, on the last day of the month. The S&P 500 index lost 8 points, or 0.8%, while the Nasdaq Composite index slid 20 points, or 0.9%.

Despite Monday's weakness, the Dow and S&P turned in their best August performance since 2000. For the entire month, the Dow gained about 3.5% and the S&P added roughly 3.3%. The Nasdaq rose 1.5% in August.

Stocks opened sharply lower, following a 6.7% drop in the Shanghai Composite index. The selloff in China raised concerns about the global economy and prompted investors to shy away from risky assets.

Oil prices sank nearly 5%, falling below $70 a barrel. That dragged on shares of oil services firms. Industrial shares also fell sharply. Bank stocks, which have led the market higher in recent sessions, came under pressure.

The retreat came despite a pair of big corporate mergers and a stronger-than-expected regional manufacturing report. Wall Street analysts are of the view that the market is jittery heading into what is expected to be a volatile month.

September is historically the worst month for US stocks and market participants are bracing for a possible pullback following a surprisingly strong summer advance.

Between the March 9 lows and Friday's close, the S&P 500 gained 52%, as investors responded to stronger corporate results and improved economic data. For the year, stocks, as measured by the S&P 500 index, are up nearly 13%.

More concrete signs of economic growth are now necessary to keep the rally going. The fundamentals in the first week could set the tone for the entire month.

The ISM index of manufacturing activity and auto sales for August come out on Tuesday. On Friday, the Labor Department's monthly employment report is expected to show a slight increase in the nation's unemployment rate.

Walt Disney said it would acquire comic book publisher Marvel Entertainment for approximately $4 billion. Shares of Marvel surged 25%.

Oilfield services company Baker Hughes said that it would purchase rival BJ Services in a cash-and-stock deal worth approximately $5.5 billion.

A report showed manufacturing activity in the Midwest was stronger than expected during August. The Institute for Supply Management's Chicago PMI rose to 50 in August from 43.4 in July. Economists had forecast a reading of 47.2.

The report comes one day before the ISM releases its national manufacturing report, which is forecast to rise to a level signaling expansion for the first time since January 2008.

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

Oil for October delivery was down $3.07 to settle at $69.68 a barrel in New York.

Bond prices rose, with the benchmark 10-year note gaining 9/32 to 101-23/32. Its yield, which moves inversely, was 3.41%.

After a strong rally of 1,100 points or 7.5%, the Indian markets decided to take a breather. The key indices fell for the first time in seven trading sessions, with the sentiment hurt by yet another steep fall in the Chinese market. The first-quarter GDP growth, which was in line with expectations and better than the previous quarter, could not arrest the slide.

The Shanghai SE Composite tumbled by 6.7%, the most in over 12 months. China has played a party pooper several times over the past few days amid worries over its banking system and its fallout on its fast-growing economy. There have been reports recently that the Chinese government is trying to curb bank lending and rapid growth in infrastructure projects. The Shanghai Composite has dropped by over 20% from the year’s peak.

Barring the Realty and the Auto stocks, all the other major sectors were under the bear attack. However, the Mid-Caps and the Small-Cap were in demand. Major offloading was seen in the IT, Telecom and the Metal stocks.

Technically, on Friday, it was the fifth time the NSE Nifty was unable to absorb the selling pressure at around the 4720-30 levels. In the recent past after hitting the 4,730 levels, the Nifty has corrected nearly 8% in merely 10 trading sessions. Are we again in for an 8-10% downfall? Only time will tell.

India’s Q1 GDP grew 6.1% as against 7.8% in the same period last year. Markets players expected economy to grow 6.2% last quarter. In the fourth quarter of FY09, the Indian economy had grown by 5.8%. Agriculture rose by 2.4% versus 3% in the year-ago period. Industry grew 5% as against 6.1% in the same quarter last year. Construction grew 7.1% versus 8.4% in the same period previous year. While, services grew by 7.8% as against 10.2% in Q1 FY09.

Meanwhile, selling was not only seen in China and India but all over the emerging countries. Even European equity markets opened with a negative bias.

The BSE Sensex lost by 263 points or 1.6% at 15,659 after touching a high of 15,821 and a low of 15,589. The index opened at 15,812 against the previous close of 15,922. The NSE Nifty lost 74 points to shut shop at 4,658.

In Asia, Shanghai index in China plummeted by 6.7% at 2,667 sliding over 20% from its years peak. The Nikkei in Japan ended lower by 0.5% at 10,492 while Australia's S&P/ASX ended lower by 0.3% at 4,479. The Hang Seng index in Hong Kong was fell 2% at 19,724.

In Europe, stocks were trading in the red. The FTSE in the UK was closed. The DAX in Germany was down 0.8% and the CAC 40 index in France was down 0.8%.

Coming back to India, among the BSE sectoral indices, the Metal index was the top loser, shedding 2.3%, followed by the IT index that was down 2.2%. The BSE Teck index down 2.1% and the BSE Oil & Gas index was down 2%.

However, among the major gainer was the BSE Realty index up 2.1% and BSE Auto index up 1.5%. Even the broader indices outperformed, BSE Mid-Cap index gained 0.2% and the BSE Small-Cap index gained by 0.4%.

Among the 30-components of Sensex, 22 stocks ended in the green and 8 ended in the negative terrain. Among the major laggards were Reliance Industries, Infosys, L&T, ICICI Bank, ITC and Bharti.

On the other hand, M&M, DLF, HDFC Bank and NTPC were among the major gainers.

Outside the frontline indices, the big losers in the broader market were Welspun Gujarat, Fortis Health, GE Ship, M&M Finance and Bharat Forge. On the other hand, gainers included Godrej Industries, Gujarat NRE Coke, Renuka Sugar and Ackruti City.

Shares of Tata Motors ended with a negative bias after the company announced that the Group has posted a net loss of Rs(3,287.8)mn for the quarter ended June 30, 2009 where as the same was net profit at Rs7,196.9mn for the quarter ended June 30, 2008.

Total Income is Rs16,7180.7mn for the quarter ended June 30, 2009 where as the same was at Rs14,7406.5mn for the quarter ended June 30, 2008.

Shares of Maytas Infra were locked at 5% upper circuit at Rs112.80 after the board of directors of the company received a proposal to substitute existing promoter, they also got proposal to acquire management control.

The board has referred the proposal for new promoter to the company Law board. Salman Khurshid the Union minister of corporate affairs said, that IL&FS will be promoter of Maytas Infrastructure. IL&FS is currently the largest holder in Maytas and wants two of the government nominees to continue on board.

Earlier in the day ~1.7mn shares, or 2.8% equity shares of the Maytas, changed hands in five transactions.

While, shares of IL& FS shot up by over 15% to Rs265. The stock opened at Rs228 and made an intra-day high of Rs275 and a low of Rs223. Total traded volumes stood at 1.9mn shares.

Shares of Kingfisher Airlines have gained by 1% to Rs48.20 after the company announced that the board of directors passed an enabling resolution for an additional fund raising through various instruments including GDRs, upto an amount of US$100mn, subject to the approval of the shareholders.

This is over and above the decision taken at the last board meeting held on July 28, 2009 for induction of capital for an amount not exceeding Rs5bn by way of rights issue of Equity shares, as already intimated.

Shares of Cairn India surged by over 2% to Rs265 after Cairn India on Saturday started production of crude oil from it's Mangala field in Rajasthan. Mangala is the largest of 25 discoveries made by Cairn in the Barmer Basin in Block RJ-ON-90/1.

The Mangala field was dedicated to the Nation by Prime Minister, Dr. Manmohan Singh, at the Mangala Processing Terminal, Barmer, Rajasthan today in an inauguration ceremony attended by Central and State Government officials.

Shares of ITI surged by over 4.5% to Rs39.15 after the company announced that it secured Rs1.67bn order from BSNL. The stock opened at Rs37.45 and made an intra-day high of Rs39.20 and a low of Rs36.75. Total traded volumes stood at 0.49mn shares.