Fear and greed can be your greatest enemy or your greatest asset.
After the Monday Mayhem, we witnessed a classic Tuesday Turnaround. The rebound was largely led by short covering and buying in defensives like FMCG shares. Derivative indicators show that 4900 will remain a key short-term support. So what’s up on Wednesday? We expect to see a firm start as most world markets are up smartly. Commodities have too resumed their northbound journey while the dollar is getting pummeled.
Trading screens have turned green again after the recent retreat that had seen indices pull back from multi-month highs. In the near-term, the Indian market will swing to the beats of the global markets and corporate earnings. Though the overall trend appears positive, volatility will remain elevated.
Australia has already blinked by raising rates. The RBI chief too has been talking of an exit from the accommodative monetary stance. Watch out for the mid-term policy review. Inflation will continue to have a bearing on equities and interest rates are also set to harden.
Quite a few experts have lately cautioned on the sharp run-up in stocks and even commodities, citing an anemic recovery in the advanced economies. Data points released over the past few days have not quite been all that comforting. Consumer spending remains subdued and the crucial housing market too is lackluster at best. At the same time, concerns prevail on the persistent weakness in the jobs market.
The ferocious price war may keep telecom stocks under pressure. IT stocks could hog the limelight ahead of Infosys results on Friday and due to a rising rupee. Grasim and UltraTech might continue to see some action as the market tries to digest the proposed restructuring.
FIIs were net sellers of Rs1.57bn in the cash segment on Tuesday on a provisional basis. The local funds were net sellers of Rs7.67bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net sellers at Rs5.88bn. On Monday, FIIs were net sellers of Rs2.37bn in the cash segment. The net FII investments in Indian stocks this year have crossed $12.6bn.
US stocks closed higher on Tuesday, gaining for a second straight session as a weaker dollar boosted commodities and currency-sensitive stocks.
The Dow Jones Industrial Average rose 132 points, or 1.4%, to 9,731.25. The S&P 500 index gained 14 points, or 1.4%, to 1,054.72 and the Nasdaq Composite rose 35 points, or 1.7%, to 2,103.57.
The rally had been stronger through midday, but lost some steam as the dollar cut losses and financial shares turned mixed to negative. Gains were broad-based, with 29 of 30 Dow stocks rising. Materials and commodities stocks surged.
Worries that the rally had gotten ahead of the recovery caused the selloff at the end of the third quarter and start of the fourth. But that decline of just over 4% on the S&P 500 seemed to make stocks attractive for investors to jump back in.
Investors also welcomed reports that Australia became the first major economy to lift interest rates since the start of the financial crisis.
Meanwhile, the falling dollar boosted gold to an all-time high of $1,045 an ounce during the session and $1,039.70 at the close. The weak dollar was also good for the stocks of multi-national companies that benefit from a weaker dollar.
A weaker-than-expected response to a government debt auction dulled some of the shine on the rally.
An upbeat reading on the services sector helped spark Monday's advance, but there was little else on the docket until Wednesday when readings on consumer credit and the Treasury budget are due.
A rally in US stocks that started in March, petered out late September at the end of an otherwise upbeat third quarter. In the July-September period, the Dow and S&P 500 both jumped 15%, their best quarter in a decade, while the Nasdaq rose 15.7%, its best quarter in six years.
But the September selloff was modest amid the broader rally that's been in place since last March. Since bottoming at a 12-year low March 9, the S&P 500 has gained 56%, and the Dow has gained 49% as of Tuesday's close. After hitting a six-year low, the Nasdaq has gained nearly 68%.
Ahead of the first big batch of results, a few companies issued warnings about their just-completed quarter.
Dow component Boeing said it will take a $1 billion charge in the third quarter because of higher costs to produce its 747-8 airplanes amid rough market conditions. The stock was little changed.
St. Jude Medical warned that third-quarter results would miss earlier forecasts because hospitals bought fewer of its medical devices. Shares fell nearly 13% in unusually active New York Stock Exchange trading.
Global markets rallied after Australia became the first major economy to boost interest rates since the financial crisis began. Australia's central bank boosted its overnight lending rate by a quarter percentage point to 3.25%, saying it was time to start taking away the stimulus of low rates as the economy is no longer weakening.
The dollar tumbled versus the euro and the yen, resuming its recent plunge against a basket of currencies.
US light crude oil for November delivery settled up 47 cents to $70.88 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery rose $21.90 to settle at a record $1,039.70 an ounce, after rising as high as $1,045, an intraday record. The previous record close of $1,020.20 was set two weeks ago.
Treasury prices fell, raising the yield on the 10-year note to 3.25% from 3.22% late on Monday.
The government saw good, but not great, demand for its auction of $39 billion in 3-year notes. Treasury said the bid-to-cover ratio, which measures demand, was 2.76, short of the 3.02 ratio seen the last time it sold 3-year notes.
The third-quarter earnings reporting period unofficially kicks off on Wednesday with Dow component Alcoa. The aluminum maker is expected to post a loss versus a profit a year ago, demonstrating the weak quarter expected for the materials sector.
S&P 500 profits are expected to have dropped almost 25% from the third quarter of 2008.
European shares posted their largest one-day rise in six weeks, rising for the second straight session as a record high for gold futures boosted the mining sector and a broker upgrade helped the banking sector.
The pan-European Dow Jones Stoxx 600 index was up 2.1% at 241.13 in a broad-based advance, its strongest rise since Aug. 21. Germany's DAX index rose 2.7% to 5,657.64, the UK's FTSE 100 index climbed 2.3% to 5,137.98 and the French CAC-40 index advanced 2.6% to 3,770.21.
If Monday blues had the bulls running for cover, Tuesday witnessed a complete turnaround. Markets started off on a promising note tracking strong cues from the US and the Asian markets, but the up tick was short lived as telecom heavyweights like Bharti Airtel, RCom, Idea and MTNL plunged sharply after reports stated that TRAI may soon ask operators to compulsorily give the option of paying tariff based on usage per second instead of the current per minute pulse.
However, markets staged a V-Shaped recovery in the second half of the trading session led by the FMCG, Metals and the Banking stocks. The Mid-Cap stocks which were badly beaten down initially also attracted buying towards the end.
Technically speaking, the Nifty found strong support at the 4910-20 levels (its 21 DMA). Another positive signal is that the index managed to close above the 13 DMA and the 5,000 mark creating a hammer chart pattern (the Hammer indicates that the prior downtrend is about to end and may reverse to an uptrend or move sideways).
Finally, the BSE Sensex gained 92 points or 0.6% to end at 16,958 after touching a high of 16,988 and a low of 16,622. The index opened at 16,879 against the previous close of 16,866. The NSE Nifty added 24 points or 0.5% to shut shop at 5,027.
In Asia, the Nikkei in Japan was marginally up 0.2%, while Australia's S&P/ASX ended higher by 0.4% at 4,591. Shanghai SE Composite in China was closed on account of holiday. However, Hang Seng index in Hong Kong gained 1.8%.
In Europe, stocks were in the green. The FTSE in the UK was up 1.4%, The DAX in Germany was up 1.5% and the CAC 40 index in France was up 1.5%.
Coming back to India, among the BSE sectoral indices, the FMCG index was the top gainer, adding 3.5%, followed by the Metal index that was up 2.2% and the BSE Bankex index was up 2%. Even the BSE Mid-Cap index gained 0.2% however, the BSE Small-Cap index was down 0.7%.
BSE Teck index was the top loser, shedding 3.5% followed by BSE Realty and IT index down over 0.5% each.
Among the 30-components of Sensex, 16 stocks ended in the green and 14 ended in the negative terrain. Among the major gainers were Hindalco, HUL, Reliance Infra, ITC and BHEL.
On the other hand, RCom, Bharti Airtel, ACC and Wipro were among the major laggards.
The telecom stocks slumped after TRAI may ask operators to compulsorily give their customers the option of paying tariff based on usage per second instead of the current per minute pulse, sector regulator Trai said today.
"We may ask all the operators to consider per-second pulse as a mandatory tariff option along with their other tariff plans," Trai Chairman J S Sarma was quoted as saying. He said Trai may soon come out with a consultation paper on the subject and invite suggesstions about making it mandatory for operators to provide customers with this option.
The Trai chief further said that since the current regulations allow the operators to decide the tariffs on their own, "I cannot say whether the time has come to reconsider this particular clause."
L&T’s Buildings & Factories Operating Company - a part of its Construction Division - has bagged new orders aggregating Rs15.13bn during the second quarter of the year 2009-10 for the construction of high rise tower, luxury hotel, hospital & factory building projects.
Shares of L&T gained by 1.5% to Rs1680. The stock opened at Rs1655 and made an intra-day high of Rs1687 and a low of Rs1621. Total traded volumes stood at 0.37mn shares.
Shares of Prism Cement plunged by over 6.5% to Rs51 after earnings report. The Company posted a PAT of Rs349.7mn for the quarter ended September 30, 2009 as against a PAT of Rs150.1mn for the previous quarter ended and net sales increased to Rs2.28bn from Rs1.63bn during the corresponding quarter ended September 30, 2008.
The stock opened at Rs55.8 and made an intra-day high of Rs55.8 and a low of Rs48. Total traded volumes stood at 3.7mn shares.
Gammon Infrastructure announced that it has concluded the purchase of 2,28,77,500 equity shares of Rs10/- each of Vizag Seaport Pvt. Ltd. ("VSPL") from International Port Services Pvt. Ltd., the investment arm of Portia Management Services Ltd. of UK.
The shareholding of the Company in VSPL stand increased to 73.76%, making VSPL a subsidiary of the Company with effect from October 01, 2009.
Gammon Infra slipped by over 1.2% to Rs97. The stock opened at Rs99.9 and made an intra-day high of Rs99.9 and a low of Rs93. Total traded volumes stood at 15,000 shares.
Shares of Hindustan Dorr Oliver surged by over 5% to Rs137.6 after the company bagged an order from BALCO (a Vedanta Group of Company) worth Rs1.3bn for Design, Engineering, procurement, manufacturing, supply, civil works, erection/ construction, testing & commissioning of Fume Treatment plant for their Smelter Expansion Project at Korba. Fives Solios, France a world class expert in this field is the Technology partner for this project.
The total order value along with Fives Solios, France is worth Rs2.76bn. Execution of the said Project shall be completed within a period of 20 months.
The Company has already successfully completed similar project with Vedanta group for its existing smelter project at Jharsuguda, Orissa.