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Wednesday, March 04, 2009
Slightly up amidst volatility
The stock market witnessed strong volatility, swinging 128 points during intra-day trades, as shares gyrated sharply between zones. Taking cue from mixed global indices, Sensex started on a positive note at 8473, but failed to sustain its gains, as a sharp bout of profit-taking pulled the index below 8400 mark to an intra-day low of 8373. While the market remained lacklustre with a negative bias, Sensex rolled back to the green by mid-noon trades on renewed buying support and surged to an intra-day high of 8501. However, a fresh round of profit-taking towards the fag end saw Sensex pare its gains and end at 8446, up only 19 points, while Nifty added 23 points to close at 2645.
The breadth of the market was negative. Of the 2,537 stocks traded on the BSE 1,440 stocks declined, whereas 993 stocks advanced. One hundred and four stocks remained unchanged. Among sectoral indices, BSE Bankex dropped 1.50%, while BSE CD, the BSE CG and BSE Power also ended at lower levels. BSE Metal, BSE Oil & Gas and BSE HC gained around 1-2% each.
Select heavyweights edged higher on decent buying support. Reliance Infrastructure rose 4.56% at Rs457.60, Grasim Industries jumped 3.99% at Rs1,416.40, Tata Consultancy Services advanced 3.57% at Rs461.05, JP Associates added 3.56% at Rs65.45, Hindalco Industries gained 3.35% at Rs38.55 and Sterlite Industries gained 3.11% at Rs245.40. However, select frontline stocks came under selling pressure. ICICI Bank was the major loser and dropped 4.08% at Rs284.30. HDFC declined 3.24% at Rs1,161.60, Bharat Heavy Electricals dropped 2.37% at Rs1,332.65 and State Bank of India shed 1.88% at Rs957.55.
Over 1.55 crore shares of Cals Refineries shares changed hands on BSE followed by ICICI Bank (72 lakh shares), Satyam Computer Services (69 lakh shares), Gateway Distriparks (62 lakh shares) and Tata Steel (58 lakh shares).
RBI announces Further Monetary Stimulus
Since the release of the Reserve Bank's Third Quarter Review on January 27, 2009, the global financial and economic conditions have further deteriorated as revealed by the latest available information. The US real GDP contracted sharply at an annualised rate of 6.2 per cent in the fourth quarter of 2008 and the unemployment rate in the US has moved up to 7.6 per cent. The real GDP in the euro area also declined by 1.5 per cent in the fourth quarter of 2008. Reflecting deteriorating global demand, Japanese exports fell by 45.7 per cent (y-o-y) in January 2009. The Japanese economy also contracted sharply by 3.3 per cent in the fourth quarter of 2008. The fourth quarter real GDP numbers of several advanced economies have turned out to be worse than expected. The uncertainty, therefore, on global recovery has increased.
As a response, the governments all over the world continue to unveil expansionary fiscal policies. Central banks have also taken several measures to stimulate demand and moderate the impact of the global downturn and credit crunch on their economies. The US Fed and the Bank of Japan have increased quantitative and credit easing measures. The UK further reduced its policy rate by 50 basis points to 1.0 per cent. Among emerging market economies (EMEs), Korea, Indonesia, Thailand, Chile and Mexico reduced their policy rates.
India’s financial sector continues to be resilient in the face of global financial turmoil. Our financial markets continue to function in an orderly manner. India’s growth trajectory has, however, been impacted both by the financial crisis and the follow-on of global economic downturn. This impact has turned out to be deeper and wider than anticipated earlier. Concurrently, because of global developments coupled with supply and demand management measures at home, WPI inflation is on the decline along the expectations of the Third Quarter Review.
Reflecting these developments, the aim of various measures initiated by the Reserve Bank since mid-September 2008 has been to augment domestic and forex liquidity and to ensure that credit continues to flow to productive sectors of the economy. Notably, since mid-September 2008, the Reserve Bank has reduced the repo rate under the liquidity adjustment facility (LAF) from 9.0 per cent to 5.5 per cent, reduced the reverse repo rate under the LAF from 6.0 per cent to 4.0 per cent, the cash reserve ratio (CRR) from 9.0 per cent to 5.0 per cent of net demand and time liabilities (NDTL) and the statutory liquidity ratio (SLR) from 25.0 per cent to 24.0 per cent of NDTL.
The cumulative amount of actual or potential primary liquidity made available to the financial system through various measures initiated by the Reserve Bank is over Rs. 3,88,000 crore. Besides, the reduction in SLR by one percentage point of NDTL has made available liquid funds of the order of Rs.40,000 crore for the purpose of credit expansion. This sizeable easing has ensured a comfortable liquidity position. The overnight money market rate has remained near or below the lower bound of the LAF corridor since November 3, 2008.
Consequent to the announcement of fiscal stimulus packages, the market borrowing programme of the Central Government for 2008-09 was raised to Rs.3,42,769 crore (gross) and Rs.2,66,539 crore (net) as against the budgeted amount of Rs.1,76,453 crore (gross) and Rs.99,000 crore (net). Against this enhanced borrowing programme, market borrowing of the Central Government has been Rs.2,66,276 crore (gross) and Rs.1,92,315 crore (net) up to March 3, 2009. In terms of the amendment to the Memorandum of Understanding on Market Stabilisation Scheme (MSS) on February 26, 2009, an amount of Rs. 45,000 crore will be transferred in installments from the MSS cash account to the normal cash account of the Government of India by March 31, 2009. An equivalent amount of government securities issued under the MSS would now form part of the normal market borrowing of the Government of India. This arrangement should provide comfort to the market. Furthermore, the Reserve Bank has also conducted purchase of government securities under its open market operations (OMO). Such operations will be conducted as warranted by evolving monetary and financial market conditions.
The yield on the 10-year benchmark government securities, which hardened from 5.87 per cent on January 23, 2009 to 6.43 per cent on January 30, 2009, has since softened to 6.04 per cent on March 3, 2009. Taking the signal from the reductions in the repo and reverse repo rates in recent months, all public sector banks and several private sector and foreign banks have reduced their benchmark prime lending rates (BPLRs). Since the announcement of the Third Quarter Review, eleven banks have cut their BPLRs ranging from 25 basis points to 125 basis points. Several banks have also cut their deposit interest rates.
The Reserve Bank has been constantly monitoring global developments along with the domestic economic situation. On the positive side, inflationary pressures have eased significantly. Inflation as measured by year-on-year variations in the wholesale price index (WPI) has declined to 3.36 per cent as on February 14, 2009, down by about three-fourths from the high of 12.91 per cent as on August 2, 2008. However, consumer price inflation, as reflected in various consumer price indices, is in the range of 9.85-11.62 per cent as of December 2008-January 2009, has yet to show moderation. Consumer price inflation has remained at elevated level due to increase in primary articles prices. With WPI inflation having moderated significantly, consumer price inflation may also be expected to decline, though with a lag.
At the same time, there is evidence of further slowing down of economic activity. Exports registered negative growth for the four recent consecutive months, October 2008-January 2009. Overall exports growth during 2008-09 (April-January) at 13.2 per cent was significantly lower than 24.2 per cent during the same period of the last year. The index of industrial production (IIP) registered a negative growth of 2.0 per cent during December 2008, with the manufacturing sector returning a negative growth of 2.5 per cent. IIP growth during April-December 2008 at 3.2 per cent was about one-third of 9.0 per cent during the corresponding period of the previous year due to slowdown in all the major sectors. Real GDP growth in the third quarter of 2008-09 (September-December 2008) has been placed at 5.3 per cent by the Central Statistical Organisation (CSO). The services sector, which has been the main engine of growth during the last several years, has also been slowing down. Business confidence has been dented significantly and investment demand has decelerated.
Non-food bank credit growth reached a peak of 29.4 per cent (Rs.5,82,344 crore) on a year-on-year basis as on October 10, 2008 as compared with 23.3 per cent (Rs. 3,74,054 crore) as on October 12, 2007. Subsequently, year-on-year non-food bank credit growth decelerated to 24.3 per cent as on December 19, 2008, as credit expansion during the period between October 10, 2008 and December 19, 2008 at Rs. 30,889 crore was much lower as compared with Rs. 1,05,774 crore during the corresponding period of the previous year. According to the latest data, non-food bank credit has decelerated further to 19.7 per cent (y-o-y) as on February 13, 2009 as compared with 22.7 per cent as on February 15, 2008 as credit expansion during the period between December 19, 2008 and February 13, 2009 at Rs. 8,091 crore was sharply lower than that of Rs. 86,978 crore in the corresponding period of the last year. At this level, non-food bank credit expansion remains below the indicative projection of 24.0 per cent in the Third Quarter Review of the Monetary Policy. The total flow of resources to the commercial sector from banks and non-banks during 2008-09 so far (up to February 13, 2009) at Rs.4,98,136 crore was lower than Rs.6,08,351 crore during the corresponding period of the last year.
Even as some public sector and private sector banks have cut lending rates in response to the Reserve Bank’s monetary policy stance, concerns over rising credit risk together with the slowing of economic activity appear to have moderated credit growth. The Reserve Bank continues to urge banks to monitor their loan portfolio and take early action, to prevent asset impairment down the road and safeguard the gains of the last several years in improving asset quality. At the same time, banks should price risk appropriately and ensure that creditworthy enterprises continue to get funding.
On a review of the current global and domestic macroeconomic situation, the Reserve Bank has decided to take the following further measures:
Repo Rate
• To reduce the repo rate under the liquidity adjustment facility (LAF) by 50 basis points from 5.5 per cent to 5.0 per cent with immediate effect.
Reverse Repo Rate
• To reduce the reverse repo rate under the LAF by 50 basis points from 4.0 per cent to 3.5 per cent with immediate effect.
It is expected that the reduction in the policy interest rates will further encourage banks to provide credit for productive purposes at viable interest rates. The Reserve Bank on its part would continue to maintain ample liquidity in the system.
HDFC March 2009 futures at premium
Turnover declines
Nifty March 2009 futures were at 2625.90, at a discount of 19.30 points as compared to the spot closing of 2645.20. Turnover in NSE's futures & options (F&O) segment was Rs 40,624.43 crore, lower than Rs 41,297.48 crore on Tuesday, 3 March 2009.
Housing Development Finance Corporation (HDFC) March 2009 futures were at premium at 1163.95, compared to the spot closing of 1160.90.
Tata Steel March 2009 futures were at a slight discount at 156.05, compared to the spot closing of 156.65.
Bharat Heavy Electricals March 2009 futures were at discount at 1328 compared to the spot closing of 1333.10.
In the cash market, the S&P CNX Nifty gained 22.80 points or 0.87% at 2645.20.
Asian Markets Stage Retrieval
Shanghai led regional rally on hopes of another stimulus package
Stock market
in Asian region staged a recovery on Wednesday, 4 March 2009, on hopes of another stimulus package for China's economy, after opening in negative territory on the back of a weaker close in the U.S market last night.
On Wall Street, it was another session of losses that left the S&P 500 at a level not seen for more than 12 years. Bargain-hunters emerged early following the sell off a day ago, but their interest faded into mid session. However, stocks rallied again in the afternoon before slipping back in the final hour. The S&P fell 4.49 points, or 0.6%, to 696.33, its first finish below 700 since October 1996. The Nasdaq settled down 1.84 points, or 0.1%, at 1321.01. The Dow Jones Industrial Average declined 37.27 points, or 0.6%, to 6726.02.
On the economic front, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner spoke before elected officials. Geithner defended the proposed $3.6 trillion budget that seeks to reduce the federal deficit to $533 billion by 2013, and warned of the consequences of not reducing the deficit.
Federal Reserve Chairman Ben Bernanke was generally supportive of Obama's efforts to stimulate the economy. Bernanke told the Senate Budget Committee that Obama's recently enacted $787 billion stimulus package of increased federal spending and tax cuts should help revive consumer spending, boost factory production and mitigate the overall loss of employment and income that would otherwise occur.
In the commodity market, crude oil fell in New York after Australia’s economy unexpectedly shrank in the fourth quarter, adding to signs the deepening recession will limit fuel demand.
Crude oil for April delivery gained as $1.80, or 4.32%, to $43.45 a barrel in electronic trading on the New York Mercantile Exchange at 11:55 p.m. London time. Yesterday, April futures rose $1.50, or 3.7%, to settle at $41.65 a barrel in New York.
Brent crude oil for April settlement added 83 cents, or 1.9%, to $44.53 a barrel on London’s ICE Futures Europe exchange at 11:13 p.m. London time.
Gold tumbled the most in seven weeks, extending the longest slump since October, as a rebound in equities eroded the investment appeal of the metal. Gold futures for April delivery fell $26.40, or 2.8%, to $913.60 an ounce on the Comex division of the New York Mercantile Exchange, the biggest drop since 12 January 2009. Earlier, the metal touched $905.70, the lowest for a most-active contract since 10 February 2009. Gold fell $5.40, or 0.59%, to $908.20 an ounce at 10:55 a.m. in London time.
In the currency market, the Japanese yen was quoted at 98.49 against the US dollar.
The Hong Kong dollar was trading at HK$ 7.7596 against the dollar. Actually The Hong Kong dollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85 to the U.S. dollar.
In Sydney trades, Australia’s dollar fell against the greenback by the most in three weeks after the economy shrank for the first time in eight years, increasing pressure on the central bank to add to a record round of interest-rate cuts.
The Australian dollar reacted negatively to Australian economy’s contraction. The local currency was trading at $US0.6385 just before the data were released at 1130 AEDT, but fell to$US0.6292 shortly afterwards. The Australian dollar closed the day at US$ 0.6326, i.e. stronger than US$ 0.6390 registered yesterday.
In Wellington trades, the New Zealand dollar recovered from a slide to a seven-month low against its Australian counterpart after the Reserve Bank of Australia left its key cash rate at 3.25 percent on Tuesday. The NZ dollar ended the day at A78.10c from A77.60c yesterday.
The South Korean currency rose against the U.S. dollar for the first time in four sessions as foreign exchange authorities apparently stepped in to stem the won's sharp decline. The local currency ended at 1,551 won against the U.S. dollar, up 1.4 won from Tuesday's close of 1,552.4 won, on suspected government intervention.
In a reversal of the consecutive devaluation in the previous three trading sessions, the exchange rate of the New Taiwan dollar gained NT$0.079 closing at NT$35.095 yesterday. The appreciation was in step with the movement of other major Asian currencies, thanks to the joint intervention of the central banks of Taiwan, Korea, Singapore, and Japan.
The Taiwan dollar was trading at NT$ 35.0510 lower by NT$ 0.0044 from yesterday’s close of NT$35.095, as the joint intervention of the central banks of Taiwan, Korea, Singapore, and Japan helped to step up appreciation.
Philippines peso edged higher against the US dollar. The peso advanced to a 2-day high of 48.65 against the greenback in early trades today, compared to yesterday's close of 48.74. However, currently the dollar peso pair is trading at 48.7500.
Coming back in Asian equities, financial stocks continued to be the cause of concern and dragged the indices in early trade. However, commodity related stocks and manufacturing stocks led the recovery after an economic report from the Chinese Federation of Logistics and Purchases revealed that the Purchasing Manager Index rose for the third straight month in February, kindling hopes of an earlier-than-expected recovery in China.
In Japan, equity market climbed up o after dipping down yesterday. Japanese Nikkei 225 Stock Average index increased 61.24 points, or 0.85%, to 7,290.96, while the broader Topix added 5.24 points, or 0.72%, to 732.04.
In Mainland China, equity markets staged a tremendous rally to end up more than 6% as expectations that more government stimulus policies would be released soon. Chinese Federation of Logistics and Purchases also revealed that the Purchasing Manager Index rose for the third straight month in February, kindling hopes of an earlier-than-expected recovery in China. Strong gains in property, banks, airliners and auto pushed the Chinese markets up after a positive opening and market added to the gains throughout the day.
The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, gained 6.12% or 126.68 points to 2,198.11 points after hitting a high of 2,201.73.The Shenzhen Component Index on the smaller Shenzhen Stock Exchange increased 6.91% or 532.07 points to 8,227.69 points, after touching an intraday low of 7,742.67 points.
In Hong Kong, share prices extended gains to end the day higher amid hopes Beijing will unveil more measures to support the economy in the current legislative meeting. The Hang Seng Index ended jumped by 297.27 points, or 2.47%, to 12,331.15, while the Hang Seng China Enterprise Index, which tracks H shares of Chinese companies, added 330.80 points, or 5% to 6,948.37
In Australia, stock market tracked a new five year low, after the Australian economy registered its first contraction in eight years, extending economic woes of the investors and the policy makers. Financial stocks continued to bore the brunt of market mayhem as investors dumped the banking stocks. The benchmark S&P/ASX200 fall of 52.8 points or 1.6% ending the day at 3,166.40 – the closing level since November 2003. The broader All Ordinaries slumped 45.5 points or 1.4% closing at 3,125.90 – the lowest close since August 2003.
On the economic front, the Australian economy is odds-on to enter recession after contracting for the first time in eight years. According to the data release by the Australian Bureau of Statistics the real gross domestic product (GDP) fell by a seasonally adjusted 0.5% in the December quarter - the first negative quarter of economic growth since the December quarter of 2000, when the economy shrunk by 0.9%. Over the year to December 2008, GDP rose by 0.3%. The September quarter figures were unchanged at a 0.1% rise.
In another release, activity in the services industry showed a further contraction as the global financial crisis keeps consumers at home. The Australian Industry Group-Commonwealth Bank performance of services index (PSI) fell 8.8 index points in February to 32.2 points. It was the 11th straight month the index has come in below the key 50 levels that separates expansion from contraction.
Adding to the gloom, figures released today from the Federal Chamber of Automotive Industries show that new car sales slumped 21.9% in February compared with the same month last year. Today's data is the latest dose of bad news for the industry, which has been beset by problems both here and internationally.
Despite of all this gloom, the Reserve Bank of Australia (RBA) says 2009 is shaping as a very difficult year for the global economy but Australia is well placed to cope with the slowdown underway. RBA assistant governor of economics Malcolm Edey has told a business forum in Sydney that Australia is expected to suffer some significant short-term weakness due to the sudden deterioration in global conditions in the final three months of calendar 2008.
In New Zealand, equities climbed up after registering a downfall by more than 2.5% yesterday in line with most of the world markets. At the closing bell, the benchmark NZX50 increased 2.13% or 51.397 points to close at 2469.343. The NZX 15 rose 2.57% or 116.750 points to 4656.516.
In South Korea, stock market closed higher for the second straight session, on hopes for additional stimulus plans from China, with gains led by steel and shipbuilding issues including Hyundai steel and Daewoo Shipbuilding. The Korea Composite Stock Price Index increased by 33.69 points or 3.29% closing the day at 1,059.26, up from earlier near-2% losses to a low of 1,008.67.
On the economic front, according to estimates by seven local economic institutions, including the state-run Korea Development Institute (KDI), Asia's fourth-largest economy is projected to shrink between 5 – 8% in the current quarter from a year earlier.
In Taiwan, stock market continued its upward run, posting its best percentage gain in more than two weeks, as chip designer Mediatek led technology shares higher after the firm raised its first-quarter sales forecasts. The main Taiex share index continued gaining as it added 106.08 points or 2.39% at 4,541.42, posting the highest percentage gain since 13 February 2009 when market spurted by 2.82%.
On the economic front, the long-term unemployed population in Taiwan hit a four-year high of 87,000 in January this year, 26% of which has college or above education for the highest proportion among the other categories in educational level.
In Philippines, the stock market sustained its upward rally for the second consecutive day, buoyed by the positive investors sentiments in tandem with positive news of rate cuts by the monetary board. Moreover, massive gains in the services index also assisted the PSEi to scale up. The benchmark index PSEi ascended 1.39% or 25.94 points to 1,885.92, while the All Shares index rose 0.59% or 7.20 points to 1,212.44.
On the economic front, year-on-year growth rate of the General Wholesale Price Index (GWPI) continued to post a slower rate of 1.8 % in December from 4.4 % in November. This was effected by the negative annual growth rates correspondingly registered in the crude materials, inedible except fuels and mineral fuels, lubricants and related materials index at -1.7 % and -15.0 % in December from their respective November rates of -0.8 % and -3.7 %.
The average annual growth rate of the GWPI in 2008 accelerated to 11.9 % compared to 3.2 % a year ago. This was brought about by higher average annual growth rates registered in all the commodity groups.
In India, the key benchmark indices scored with small gains on rebound in world stocks. The BSE 30-share Sensex closed up 19.20 points, or 0.23%, to 8,446.49. At the day's low of 8,373.24 the Sensex lost 54.05 points in early afternoon trade, its lowest since 20 November 2008. The S&P CNX Nifty was up 22.80 points, or 0.87%, to 2,645.20.
Elsewhere, Malaysia's Kula Lumpur Composite index was down 0.21% or 1.81 points to 866.93, while Indonesia’s Jakarta composite increased by 24.56 points or 1.94% to 1,289.38. In Thailand, the Thai Stock exchange added 4.77 points or 1.15% to 417.86.
In other regional market, European shares swung higher in early trading Wednesday, partially rebounding from multi-year lows as commodity producers advanced. National equity markets were also higher, with the U.K. FTSE 100 index up 1.7% at 3,572.50, the German DAX 30 index up 1.8% at 3,756.89 and the French CAC-40 index up 1.8% at 2,599.80
Global stocks provide support
The key benchmark indices scored small gains on rebound in world stocks. Volatility was high and sentiment fragile. The BSE 30-share Sensex was up 19.20 points, or 0.23%, up close to 75 points from the day's low and but off close to 55 points from the day's high.
The market was choppy right from the onset of the trading session. Key benchmark indices opened firm tracking recovery in Asian stocks but soon slipped into the red for a brief period before regaining positive zone. The market weakened again in morning trade before cutting losses. It later moved between positive and negative zone. The market weakened again with Sensex hitting intraday low in early afternoon trade. The market soon cut loss. It later moved between positive and negative zone.
The market surged in afternoon trade as Chinese stocks soared. Market gave up all the gains to trade in red in mid-afternoon trade as the severe global economic crisis, a slowdown in the domestic economy, a weak rupee and sustained selling by foreign funds weighed on the investor sentiment. Stocks rose in choppy late trade as firm global markets.
There has been heavy selling by foreign funds this year. FII outflow in February 2009 totaled Rs 2707 crore. FII outflow in calendar year 2009 totaled Rs 8065.10 crore (till 3 March 2009). As per the provisional data on NSE, FIIs sold sares worth Rs 494.22 crore while domestic funds bought shares worth Rs 118.86 crore today, 4 March 2009.
Globally, investors are pulling out money from hedge funds, forcing hedge fund managers to dump assets. At the same time, global banks and insurers are selling assets after amassing $1.2 trillion of credit losses and writedowns since the start of 2007.
A steep slide in the rupee has added to the woes of FIIs. A fall in rupee reduces the valuation of the existing portfolio of foreign funds to the extent of the rupee's decline. The impact can be mitigated by hedging. Currently, foreign funds are dependent on the relatively less transparent over-the-counter markets for hedging. Foreign funds are not allowed to trade in currency futures market in India.
In fact, there appears to a vicious cycle - selling by foreign funds is pressuring the rupee which in turn is reducing FIIs' equity holding. That in turn is perhaps causing continued selling by FIIs so as to avoid further fall in valuation of the portfolio.
The Indian rupee settled firm but trading was choppy tracking domestic market which eked out small gains in a volatile trade. The partially convertible rupee settled at 51.52 compared with Tuesday's close of 51.95/97. The currency had on Tuesday hit a record low beyond 52. The rupee has declined sharply in the past few days.
Reserve Bank of India deputy governor Shyamala Gopinath on Tuesday, 3 March 2009, said the central bank is closely monitoring developments in the foreign exchange market and it will curb excessive volatility.
European equities rebounded on Wednesday after losses in the previous three sessions, with commodity shares gaining on firmer crude and metals prices, while banks advanced after recent declines. Key benchmark indices in France, Germany and UK were up by between 1.98% to 2.71%.
China's Shanghai Composite index was up 6.12% after the latest data showed the pace of contraction in the manufacturing sector eased in February 2009, signaling that government stimulus is taking effect. As per reports, China is set to announce a new stimulus package for the economy.
In fact, stocks were in green across Asia on optimism China and Japan will widen efforts to bolster growth in the region's two largest economies. Japan's lower-house of parliament today approved a bill that will free up about 5 trillion yen ($50 billion) for economic stimulus. Bank of Japan board member Miyako Suda said the central bank should signal that it's prepared to take bold measures to counter the recession. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 1.04% to 3.29%.
Trading in US index futures indicated the Dow could rise 112 points at the opening bell on Wednesday, 4 March 2009. Overnight, US stocks closed lower for the fifth straight session amid ongoing worries about the financial markets and the recession. The Dow Jones industrial average and S&P 500 ended at fresh 12-year lows, while the S&P 500 closed below the 700 level for the first time since 1996.
US economic data continued to surprise to the downside. US auto sales plunged in February 2009 and January pending home sales fell 7.7% verses an expected 3% fall. Federal Reserve chief Ben Bernanke painted a bleak picture of the US banking industry.
The BSE 30-share Sensex was up 19.20 points, or 0.23%, to 8,446.49. At the day's low of 8,373.24 the Sensex lost 54.05 points in early afternoon trade, its lowest since 20 November 2008. At the day's high of 8,501.46, Sensex rose 74.27 points in afternoon trade.
The S&P CNX Nifty was up 22.80 points, or 0.87%, to 2,645.20.
The Sensex is down 1,200.82 points or 12.44% in calendar 2009 from its close of 9,647.31 on 31 December 2008.
The BSE clocked a turnover of Rs 2,859 crore, higher than Rs 2,550.59 crore on Tuesday, 3 March 2009.
Nifty March 2009 futures were at 2625.90, at a discount of 19.30 points as compared to the spot closing of 2645.20. Turnover in NSE's futures & options (F&O) segment was Rs 40,624.43 crore lower than Rs 41,297.48 crore on Tuesday, 3 March 2009.
The market breadth, indicating the overall health of the market, turned weak from positive breadth in early trade. On BSE, 1,004 shares advanced as compared with 1,458 that declined. A total of 67 shares remained unchanged.
The BSE Mid-Cap index (down 0.33%) and BSE Small-Cap index (down 0.64%) underperformed the Sensex.
The BSE Metal index (up 2.8%), the BSE Oil & Gas index (up 1.15%), the BSE Healthcare index (up 1.05%), the BSE Auto index (up 0.92%), the BSE IT index (up 0.67%), the BSE PSU index (up 0.59%), the BSE FMCG index (up 0.47%), the BSE Realty index (up 0.35%), the BSE TECk index (up 0.34%), outperformed the Sensex.
The BSE Bankex (down 1.5%), the BSE Consumer Durables index (down 1.46%), the BSE Capital Goods index (down 0.34%), the BSE Power index (down 0.09%) underperfomed the Sensex.
From the 30 share Sensex pack, 22 stocks gained while rest fell.
India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 0.88% to Rs 1,209.60 on bargain hunting after a sharp slide in the past two days. However, the stock was volatile. It had lost 5.21% in last two trading sessions after the company set the swap ratio for merger of Reliance Petroluem slightly in favour of Reliance Petroleum before trading hours on Monday, 2 March 2009.
The board of Reliance Industries on Monday approved the absorption of its unit Reliance Petroleum (RPL) and set a share swap ratio giving it direct control of the world's largest refinery complex. Reliance Industries said it would issue one share for every 16 held in RPL, which runs a refinery. Reliance Petroleum rose 0.89%.
Oil exploration firm Cairn India gained 2.92% as crude oil prices rose nearly 4% on the New York Mercantile Exchange on Tuesday, 3 March 2009. India's largest oil exploration firm by sales ONGC rose 2.48%.
Crude oil rose for a second day as global equities rose on speculation China and Japan will widen efforts to bolster growth. Oil for April delivery rose as much as 70 cents, or 1.7 %, to $42.35 a barrel in electronic trading on the New York Mercantile Exchange.
Crude oil had rebounded on Tuesday as bargain-hunters capitalized on a sharp sell-off in the previous session. Light sweet crude finished at $41.65 a barrel on the New York Mercantile Exchange, up $1.50 for the session.
Rate sensitive realty stocks fell as falling property prices will hit profit margins. Peninsula Land, Ansal Properties, Housing Development & Infrastructure and DLF fell by between 0.24% to 3.17%. But Unitech and Indiabulls Real Estate rose 0.94% and 3.14% respectively.
Property prices have slumped in the past few months as buyers have postponed purchases anticipating further fall in prices.
Metal stocks surged after Shanghai copper rallied by its 5% upside limit supported by China's plans to boost spending. Hindalco Industries, Steel Authority of India, Sterlite Industries India and National Aluminum Company rose by between 0.64% to 7.36%. China is the world's largest importer of metals.
As per reports, China will boost spending in areas including infrastructure and manufacturing on top of the 4 trillion yuan stimulus package unveiled in November 2008.
Auto Stocks rose in volatile trade on improved sales in February 2009. India's largest motorcycle maker by sales Hero Honda Motors rose 2.76%. Hero Honda's sales rose 24% to 3,29,055 units in February 2009 over February 2008. India's largest car maker by sales Maruti Suzuki India rose 1.39%. Maruti during trading hours on Monday 2 February 2009 reported 24.1% rise in sales to 79190 units in February 2009 over February 2008.
TVS Motor Company rose 4.19% after its two wheeler sales rose 13% to 1,07,301 units in February 2009 over February 2008.
India's largest tractor maker by sales Mahindra & Mahindra rose 0.7% on reports the company is looking to grow business from the defence sector through global partnerships. Recently, M&M recorded 10.8% growth in total volumes to 29,017 units in February 2009 over February 2008.
India's largest commercial vehicle maker by sales Tata Motors rose 0.81% on reports the company plans to bring the Nano, the world's cheapest car, to Europe by 2011. Tata Motors will begin selling the Rs 1-lakh car Nano in India in April 2009.
Recently, Tata Motors reported improved vehicle sales. Tata Motors' total domestic sales for the month of February 2009 at 42,493 units, were the highest in the last 4 months. Domestic commercial vehicle sales at 23,454 units were the highest since September 2008 and domestic passenger vehicle sale at 19,039 units were was the highest since May 2008. The total domestic sales, however, declined 15% in February 2009 over February 2008.
Outsourcing focussed IT stocks rose on a recent sharp slide in rupee. A weak rupee boosts revenues of IT firms in rupee terms as IT companies earn a lion's share of revenue from exports. However, the stocks were volatile. India's third largest software services exporter, Wipro rose 2.67%. Its ADR gained 4.28% on Tuesday. India's largest software services exporter by sales TCS rose 3.57%. India's second largest software services exporter Infosys Technologies rose 0.03% to Rs 1,197.90. Its ADR rose 1.32% overnight.
IT firms derive a lion's share of revenue from exports to US. There have been concerns of cut back in technology spend by global firms amid a recession in the US economy and due to the global financial sector crisis.
Banking stocks fell in a choppy trade as fears of rising defaults in a weakening economy offset gains in American Depository Receipts (ADRs) overnight. India's largest private sector bank by net profit ICICI Bank fell 4.08% to Rs 284.30 on concerns the bank's Russian assets may be vulnerable as firms there struggle to stay afloat. Brokerage CLSA said in a recent note the Russian exposure under ICICI Bank Eurasia was $584 million, consisting largely of loans to customers and placements with banks. The subsidiary was formed in 2005 after ICICI Bank bought Russia's Investitsionno-Kreditny Bank.
Recently, Life Insurance Corporation of India hiked its stake in ICICI Bank by 2.04% to 9.38%.
India's largest bank in terms of assets and branch network State Bank of India fell 1.88%. The bank has reduced deposit rates by 40 to 50 basis points across maturities. The new rates would be effective from 9 March 2009. India's second largest private sector bank by operating income HDFC Bank gained 0.94%. Its ADR rose 2.85% overnight.
Despite a steep cut in policy rates by Reserve Bank of India (RBI) since October 2008, there has not been a commensurate reduction in lending rates by banks as fears of rising bad loans have made them cautious in increasing advances/lending. One reason why banks have not fully passed on the central bank rate cuts to customers is because higher bond yields are pushing up their funding costs. Bond yields and bond prices are inversely related.
After a steep decline in bond yields in Q3 December 2008, the yields have hardened considerably in calendar year 2009 on worries over government's borrowing programme. The yields have started easing since late last week buoyed by hopes the central bank will purchase more bonds at the buyback auction. The central bank is scheduled to buy back Rs 6000-crore of federal debt, with an option to buy an additional Rs 3000 crore on Thursday, 5 March 2009, ahead of a Rs 12000 crore government bond auction on Friday, 6 March 2009.
But a record government borrowing programme planned for the financial year starting from 1 April 2009, may continue to weigh on bond prices which in turn will cap gains in banks stocks.
Cement stocks extended gain on jump in February 2009 cement dispatches and on higher cement prices. Grasim Industries rose 3.39% while Ultratech Cement gained 3.53%. Aditya Birla Group said cement shipments rose 10.1% to 2.92 million tonnes in February 2009 over February 2008. Production for the month rose 9.5% to 2.92 million tonnes, the company said in a statement. The group's cement business includes flagship Grasim Industries and unit UltraTech Cement, with combined production capacity of 35 million tonnes a year.
India's largest cement maker by sales ACC rose 2.01% as cement dispatches were up 4% at 1.75 million tones (mt) in February 2009 over February 2008.
Ambuja Cement rose 2.73% as it reported 11.3 % increase in dispatches at 1.65 mt in February 2009 over February 2008.
As per reports, buoyed by an improved demand, cement makers have raised prices by Rs 5-8 per 50-kilogram bag in Mumbai and Gujarat from Sunday 1 March 2099. This has defeated the government move to pull down cement prices by cutting down excise duty.
Some of the FMCG stocks edged higher on defensive buying. Marico, Tata Tea, Nestle India, ITC, United Breweries rose by between 0.28% to 2.97%.
Some healthcare stocks rose on defensive buying. Cipla, Aurobindo Pharma, Pfizer, Ranbaxy Laboratories, Panacea Biotec, Sun Pharmaceuticals Industries rose by between 0.48% to 5.44%.
Capital goods stocks fell on worries a slowing economy will crimp orders. ABB, AIA Engineering, Bharat Heavy Electricals fell by between 1.3% to 3.39%. But India's largest engineering and costruction frm by sales Larsen & Toubro rose 0.97%.
Cals Refineries clocked the highest volume of 1.55 crore shares on BSE. ICICI Bank (72.95 lakh shares), Satyam Computer Services (69.35 lakh shares), Gateway Distripark (62.46 lakh shares) and Tata Steel (58.9 lakh shares) were the other volume toppers in that order.
Reliance Industries clocked the highest turnover of Rs 234.20 crore on BSE. Akruti City (Rs 229.61 crore), ICICI Bank (Rs 211.93 crore), State Bank of India (Rs 130.37 crore) and Educomp Solutions (Rs 119.57 crore) were the other turnover toppers in that order.
Satyam to invite bids
Satyam Computer board plans to invite bids for a strategic investor in the next few days and expects to pump in healthy amount as investment into the company, according to company chairman Kiran Karnik.
We have worked out the modalities for inviting bids in the next few days, which now needs SEBI approval- Karnik said.
The funding from this investor will lend further financial stability to Satyam, Karnik added.
Satyam is expected to submit its proposal to market regulator Securities & Exchange Board of India (SEBI) very soon.
The SEBI Board is likely to give its clearance without many changes, given that Satyam is a `special case`, a senior official working with the regulator had said last week.
A few companies such as Larsen & Toubro, the Hinduja group and the B K Modi-led Spice group, have already expressed their intent to invest in Satyam.
The company was also confident that it can provide an idea about the estimated value of the company in terms of receivables, fixed income, order book and clientele, he said.
Pre Session Commentary - March 4 2009
Today domestic markets are likely to open positive as a bounce back is likely to happen due to value buying in frontline stocks. After a brutal loss at the later trading session yesterday, we expect some fresh buying today on the heavy weight stocks as many of these have reached their 52 week lows. On the other hand the Asian markets have also opened positive showing signs of recovery. The US markets on the other hand closed with marginal losses which at this juncture is laudable. Amidst fresh buying we expect the markets to be trading positive with an essence of volatility. The sentiments would depend a lot on the movements of other markets around the world.
On Tuesday, the markets opened shy but later tumbled hugely in the southward direction. The fresh buying helped domestic markets gain some momentum in the early trade. The global cues were very discouraging, however investors showed some buoyancy buying in the frontline stocks. European markets also showed some sign of buying amidst mixed trade. However during the later trading session profit booking and fresh selling dragged the markets to low levels. Sectors like CD, FMCG, Tech, Bankex and Oil & Gas suffered huge blow as they lost 3.15%, 2.59%, 2.15% and 2.10% respectively. During the session we expect the markets to be trading positive with an essence of volatility.
The BSE Sensex closed low by 179.79 points at 8,427.29 and NSE Nifty ended low by 52.20 points at 2,622.40. The BSE Small cap and Mid Cap closed with losses of 43.85 points and 39.72 points at 2,657.13 and 3,009.56. The BSE Sensex touched intraday high of 8,635.20 and intraday low of 8,390.21.
On Tuesday, the US stock markets closed in red for the fifth consecutive session. There was no market moving news which left investors ponder. The sentiments were not that strong as such the markets closed with marginal losses. Despite housing stimulus provisions, pending home sales in January declined 7.7%. The consensus estimate called for a 3.5% decline. The data reflect the effects of ongoing job losses, lost wealth, and weak consumer confidence. Auto sales were very weak as Ford Motor reported February sales in North America fell roughly 48%, which is steeper than the 42% drop that was expected. General Motors on the other hand reported February sales sank nearly 53%, exceeding the 45% fall that was widely forecast. US light crude oil for April delivery rose by $1.50 to settle at $41.65 a barrel on the New York Mercantile Exchange. The crude prices rose on expectations that OPEC will again cut production.
The Dow Jones Industrial Average (DJIA) declined by 37.27 points to close at 6,726.02. The NASDAQ Composite (RIXF) index fell by 1.84 points to close at 1,321.01 and the S&P 500 (SPX) fell by 4.49 points to close at 696.33.
Today major stock markets in Asia are trading positive. Shanghai composite is up 55.12 points to 2,126.55 along with Hang Seng is trading higher by 89.85 points at 12,123.73 and South Korea''s Seoul Composite is up by 16.36 points at 1,041.93. Japan''s Nikkei is also up by 18.02 points at 7,247.74 and Singapore''s Straits Times is flat at 1,529.15.
Indian ADRs closed mixed. In technology sector, Wipro ended up by 4.28% along with Infosys by 1.32%. Further, Satyam lost 4.32% and Patni Computers closed down by 0.46%. In banking sector ICICI Bank and HDFC Bank gained 1.18% and 2.85% respectively. In telecommunication sector, MTNL lost 3.57% while Tata Communication advanced by 2.52%. Sterlite Industries increased by 4.22%.
The FIIs on Tuesday stood as net sellers in equity and net buyer in debt. Gross equity purchased stood at Rs 831.50 Crore and gross debt purchased stood at Rs 450.20 Crore, while the gross equity sold stood at Rs 1,309.40 Crore and gross debt sold stood at Rs. 201.70 Crore. Therefore, the net investment of equity and debt reported were Rs (477.90) Crore and Rs 248.50 Crore respectively.
On Tuesday, the Indian rupee closed at 51.95/97, 0.11% weaker than its previous close of 51.90/92. Sporadic dollar selling by the central bank helped curb the further downfall of rupee, as domestic stock markets are plummeting causing further concern of dollar outflow.
On BSE, total number of shares traded were 20.97 Crore and total turnover stood at Rs 2,550.79 Crore. On NSE, total number of shares traded were 48.24 Crore and total turnover was Rs 7,495.88 Crore.
Top traded volumes on NSE Nifty – Unitech with 32283274 shares, ICICI Bank with 24423234, Suzlon Energy with 20736791 shares, Reliance Petro with 17430393 shares followed by SAIL with 12145373 shares.
On NSE Future and Options, total number of contracts traded in index futures was 949457 with a total turnover of Rs 11,976.51 Crore. Along with this total number of contracts traded in stock futures were 392031 with a total turnover of Rs 10,400.93 Crore. Total numbers of contracts for index options were 1312770 with a total turnover of Rs 17,891.04 Crore and total numbers of contracts for stock options were 34513 and notional turnover was Rs 1,029 Crore.
Today, Nifty would have a support at 2,595 and resistance at 2,689 and BSE Sensex has support at 8,388 and resistance at 8,512.
Market may recover; upside capped
A recovery in Asian stocks may trigger a rebound on the domestic bourses after a sharp slide in the past few days. However, crisis in the global economy, a slowdown in the domestic economy, weak rupee and sustained selling by foreign funds may cap the upside.
From a recent high of 9,634.74 on 13 February 2009, Sensex tumbled 12.5% to 8,427.29 on 3 March 2009, its lowest close in more than three years.
Asian stocks staged an intraday rebound today, 4 March 2009. China's Shanghai Composite index was up 2.6% after the pace of contraction in the manufacturing sector eased in February 2009.
Crude oil eased in Asian trades Wednesday after rebounding overnight. Crude oil eased to $41.33 per barrel, down $0.32 or 0.77% from Tuesday's close. Crude oil rebounded on Tuesday as bargain-hunters capitalized on a sharp sell-off in the previous session. Light sweet crude finished at $41.65 a barrel on the New York Mercantile Exchange, up $1.50 for the session.
Overnight, US stocks closed lower for the fifth straight session amid ongoing worries about the financial markets and the recession. The Dow Jones industrial average and S&P 500 ended at fresh 12-year lows, while the S&P 500 closed below the 700 level for the first time since 1996.
US economic data continued to surprise to the downside. US auto sales plunged in February 2009 and January pending home sales fell 7.7% verses an expected 3% fall. Federal Reserve chief Ben Bernanke painted a bleak picture of the US banking industry.
Market may move sideways
The presence of a sharp intra-day volatile trend due to lack of clarity may see the market remain edgy and move on the either side of the zone. Mixed fund inflows into the domestic equities and the global market trend will be closely monitored for further direction. Among the key local indices, the Nifty has good support around 2600 and upside till 2645-2690 levels. The Sensex has a likely support at 8260 and may face resistance at 8550.
US indices ended negative on Tuesday as Wall Street failed to mount a rally amid ongoing worries about the financial markets and the recession.The Dow ended marginally down by 37 points at 6726, while the tech-laden Nasdaq declined to close 2 point lower at 1321.
Indian ADRs had a mixed outing on Tuesday. Rediff was the major loser amongst the ADRs and lost 7.84%, while Satyam, Dr Reddy's, MTNL and Patni Computer were down around 1-4% each. Among the gainers Wipro gained 4.28% and Infosys, Tata Motors, ICICI Bank, HDFC Bank and VSNL advanced around 1-3% each.
Crude oil prices in the international market edged higher, with the Nymex light crude oil for April delivery rose by $1.50 to close at $41.65 per barrel. In the commodity space, the Comex gold for April series lost $26.40 to settle at $913.60 a troy ounce.
Charges against Navin Chawla by Gopalswami
UP ASSEMBLY POLLS (2007): The CEC alleges Chawla tried to get polls postponed arguing that the UPA Govt had been asked by the Congress to impose President’s Rule in the state. He wanted the EC to seek legal opinion but was over-ruled. CEC claims EC S Y Quraishi knew that Chawla would convey the information to Congress leaders. “A minute before Commission meeting started at 4 pm, Dr Quraishi who arrived before Sh Chawla mentioned that he was contacted by two senior Congress leaders in regard to dates,” CEC’s letter says.
•DISSENT BY CHAWLA ON
KARNATAKA POLLS (2008): Chawla tried to stonewall EC’s efforts to complete the election process by May 29, 2008 deadline, opposed view of Commission’s law officer on how to prepare electoral rolls. And was overruled. CEC claims Quraishi told him “his name should not be taken as he was already under pressure”.
•PROCEEDINGS AGAINST SONIA GANDHI OVER BELGIUM TITLE (2007): While proceedings were on against Sonia Gandhi for having accepted title of Grand Officer of the Order of Leopold in 2006 from the Belgium Government, Chawla opposed move to What CEC accused Chawla of
issue a notice to Gandhi. He leaked information to PMO, after which Principal Secretary to PM met CEC to “persuade undersigned against giving an opinion for issue of notice”. “It would be rational to infer that he had passed on the information, about the imminence of a decision in this case, to the highest functionary of the government which resulted in a representative being sent to remonstrate with me,” the CEC writes.
•BHAGALPUR RE-POLL REQUEST (OCT-NOV 2005): Chawla tried to get the EC — B B Tandon was CEC then — to order re-poll in three villages which had boycotted elections after alleged derogatory comments — “this is Pakistan Mohalla” — of EC Adviser K J Rao. Even though video recordings showed Rao had said no such thing, Chawla was adamant, wrote a dissenting order, which he wanted to be kept under wraps.
•CONTROVERSIAL BJP CD CASE IN UP POLLS (2007): EC decided to file FIR against BJP chief and others, for releasing a propaganda CD containing “communally slanted” content on April 3, 2007. Chawla wanted freezing of BJP symbol as an interim step before April 14, the date on which nominations for last phase of polls were to begin. He also wanted continuous hearings in the matter. But, when, on April 8, BJP sought his recusal from the case due to his “bias,” Chawla changed his stand on the need to freeze the symbol. Despite suggestions from CEC, Quraishi, as well as EC’s legal adviser, Chawla refused to recuse.
•GUJARAT, HP POLL SCHEDULE ISSUE (2007): When EC wanted to hold three-phase polls in Gujarat and advance polling in Himachal to hold simultaneous elections to all 68 seats, Chawla leaked information to Congress. CEC claims to have received phone call from a Gujarat MP, “who was very high up in the Congress Party hierarchy in Delhi”, pleading against the EC’s still-to-be-finalised move. This MP also offered to get 150 companies of paramilitary forces more for Gujarat to enable EC to hold polling in two phases. Within 10 minutes, Union Home Secretary too rang up, offering 150 companies of paramilitary forces more. In a few minutes, Chawla told Deputy Election Commissioner in charge of Gujarat that the Home Secretary had spoken to him, offering additional force.
•PUNJAB ASSEMBLY POLLS (2007): After media reports that voter I-cards were being bought just before election date, state Chief Secretary called up CEC to seek relaxation of stipulation that voter I-cards be produced at polling station for identity purposes. Within minutes, then Chief Minister made the same request but it was rejected.
Within hours (late at night) Chawla called up Deputy Election Commissioner in charge of Punjab and sought information about use of I-cards. “.. it appeared hat he was trying to see if some infirmity could be found in the instructions on that same issue. The coincidence is too striking to go unnoticed,” the CEC writes.
•POSTPONEMENT OF BEAS (PUNJAB) POLLING (2007): After violence in the constituency, EC postponed polling. The Congress candidate challenged the decision in High Court, which ruled in his favour and ordered voting to be held before counting at other centres. Chawla opposed the decision to file an appeal in SC — which, incidentally, set aside HC order. “.. the reason he gave was that, in his opinion, EC should not go against the order of Chief Justice as in future it could be held against us (i.e. if EC were to approach the HC of Punjab in any other matter). Chawla’s plea was overruled.
•UP ASSEMBLY ELECTION: DEORIA LATHICHARGE CASE (2007): After lathicharge by police on Youth Congress workers, Chawla wanted District Magistrate and the police chief suspended and when this was not accepted, sought their transfer. “No rational explanation can be given for his seeking the suspension or transfer of SP and DM except for the fact that the incident involved Youth Congress workers, an evidence of his bias in favour of one party,” the CEC writes.
•GUJARAT POLLS: VIOLATION OF MODEL CODE BY SONIA GANDHI, NARENDRA MODI (2007): When the EC issued notice to Gandhi for her “Maut ka saudagar” statement, Chawla “tried” to give an impression that he had dissented, even though he had not.
•GOA BY-ELECTION (2005): When Goa Governor interfered in the electoral process, then CEC (Tandon) and Gopalaswami decided to pull up Chief Secretary Kiran Dhingra and write to the Governor that his instructions to officers amounted to interference in electoral process. Chawla tried to control the situation, offered to speak to the Governor.
•REGISTRATION OF INDIRA CONGRESS (KARUNAKARAN) (2005): Chawla tried to delay grant of sanction to K Karunakaran’s newly formed party to allow Congress to oppose the matter before the Commission. Passed on information to Congress functionaries.
appeared in Indian Express
FIIs step up selling
Outflow of Rs 477.90 crore on 2 March 2009
Foreign institutional investors (FIIs) sold shares worth a net Rs 477.90 crore on Monday, 2 March 2009, much higher than Rs 270.30 crore on Friday, 27 February 2009.
FII outflow of Rs 477.90 crore on 2 March 2009 was a result of gross purchases Rs 831.50 and gross sales Rs 1309.40 crore. The BSE Sensex lost 284.53 points, or 3.2%, to 8,607.08 on that day.
FII outflow in calendar year 2009 totaled Rs 7418.80 crore (till 2 March 2009).
There are a total of 1626 foreign funds registered with the Securities & Exchange Board of India (Sebi).
Asian stocks open mixed
Asian stocks opened mixed on Wednesday. Declines were led by banks and carmakers, as US auto sales plunged and Australia`s economy unexpectedly contracted, fueling concerns the global recession is worsening.
Toyota Motor and Honda Motor fell more than 2% after their US sales tumbled.
Japanese benchmark index Nikkei fell 59.55 points, or 0.82%, to trade at 7,170.17.
Hong Kong`s Hang Seng index gained 44.72 points, or 0.37%, to trade at 12,078.60.
China`s Shanghai Composite advanced 48.31 points, or 2.33%, to trade at 2,119.74.
Taiwan`s Taiex index climbed 70.68 points, or 1.59%, to trade at 4,506.02.
South Korea`s Kospi index rose 7.81points, or 0.76%, to trade at 1,033.38.
Singapore`s Straits Times declined 6.28 points, or 0.41%, to trade at 1,522.23. (8.25 a.m., IST).
Daily News Roundup - March 4 2009
Eight companies including RIL, GAIL, Cairn and IOC bid for supplying CNG and piped natural gas in six cities. (ET)
ONGC may bag US$8bn contract to clean up the oil spill created by US in Kuwait. (ET)
ONGC Petro-Additions Ltd is set to achieve financial closure for its Rs124bn petrochemical plant at Dahej SEZ. (BL)
ONGC to delist Imperial Energy at LSE on March 9. (FE)
BPCL defers plan for an IPO for its subsidiary, Bharat Oman Refineries. (ET)
M&M is in talks with Lockheed Martin and BAE for a naval JV. (ET)
SBI has signed an agreement with Mahindra World City to set up a 25-acre northern hub in Jaipur. (ET)
Tata-Sasol and JSPL get blocks for coal to liquid projects. (BL)
Pfizer to license 50 generics from Aurobindo. (BS)
Suzlon bags 100MW order from China. (BL)
Siemens VAI wins Euro200mn order from SAIL to build an LD converter steel mill at Bhilai. (BL)
Bajaj Auto’s XCD 135 is the second largest selling motor bike after Pulsar in the company’s portfolio. (BL)
Jet Airways plans to lease out more aircrafts. (BL)
JP Associates to hire 2,000 people in 2009 for its ongoing expansion projects. (ET)
Voltas entered into an alliance with Thies of Germany to sell and service Thies products in India. (FE)
Alcatel wins 7-year contract from Tata Teleservices to expand its network in 22 circles and improve voice data and voice services. (ET)
Dunlop to restart work at Sahagunj plant on Friday. (BL)
Unitech launched two new projects after a gap of nearly five months. (BS)
HCL Tech inks Rs4bn deal with National Insurance Company. (BS)
Oriental Bank reschedules loans worth RS10bn. (BS)
Hindustan Zinc plans to set up a metal park in Rajasthan. (BL)
Gammon India promoters have pledged 9.1% stake in the company with lenders. (ET)
BEML entered into an agreement with Sumber Mitra Jaya of Indonesia to bid for the upcoming contract mining businesses in India. (BS)
Bhushan Steel made an open offer of Rs330/share for 20% of Orissa Sponge. (BS)
Thomas Cook to cut staff and shut retail outlets to save costs. (BS)
Promoters of new telecom licensees like Unitech Wireless and others are now free to sell their stake. (FE)
IVRCL Infrastructure plans to acquire an European engineering company specializing in water technology for ~Rs5.1bn. (ET)
IVRCL bags seven projects worth Rs6.7bn from different agencies for construction related works. (BS)
Patni has tied up with SAP Japan for providing SAP services in Japanese market. (BS)
TV Today announces share buyback. (BS)
Subhash Projects bags an order worth Rs690mn for two water treatment plant projects in Karnataka. (FE)
Vishal Retail has successfully rolled over Rs400mn of short term debt and is in talks to negotiate the remaining Rs1bn. (BS)
V-Guard plans to enter the UPS business through a joint venture. (BL)
Satyam Computer board approaches SEBI to allow the successful bidder to take control of the company before completion of the open offer. (ET)
Truck and heavy vehicle sales dip by 53% in February. (BL)
Skoda plans to launch Yeti in India. (BL)
Central PSU’s shed 44,000 employees during FY08. (BS)
Rupee breaches 52-mark against the US$. (BS)
Service tax collection in Mumbai may go up by 20% at Rs220bn in the current fiscal. (ET)
Cement makers have raised prices by Rs5-8 per 50-kg bag in Mumbai and Gujarat. (ET)
RBI plans to put a Rs1,000 cap on transaction charges levied by banks on exporters availing dollar credit. (ET)
Branded fuel sales dip for the first time. (BS)
Fiscal deficit estimate is off the mark by Rs510bn. (BS)
Central government has objected to Maharashtra’s SEZ bill. (BS)
State highway projects under the PPP model get better response than NHAI. (BS)
Ministry of Defence and Civil Aviation has granted preliminary clearance to Bengal Aerotropolis Projects Ltd for setting up of an airport at Ludhiana. (BS)
CERC appoints ABPS Infra to prepare draft tariff regulation for renewable energy, which will be announced by July this year. (BS)
Mobile phone sales for 2008 are higher by 25.5% yoy. (BS)
Pharma exports during October 08 are lower by 2%. (BL)
Public-private partnership panel approves projects worth Rs52bn. (BL)
It could have been worse!
The trouble with normal is it always gets worse.
The bulls must be terrified at the prospect of further losses just as the cricketing world is stunned following the assault on Sri Lankan cricketers in Lahore. But then it could have been worse!
Though valuations have dropped to attractive levels, the complete lack of conviction and rising risk aversion will continue to play spoilsport. Today, we see another circumspect start, which may later turn into a lackluster day. The bias still remains negative given the fragile global sentiment.
Reasons are not new and have been well articulated. World economy continues to be in a bad shape, in the wake of the unprecedented financial crisis. India too is no exception, which is clear from the Q3 GDP numbers and other periodic data points. The rupee’s sharp depreciation versus the dollar has only made the matters worse for Indian stocks. A big negative fallout of this is accelerated selling by the FIIs.
Overseas investors have stepped up their selling in the past few days. Globally too, there is no respite for the equity markets. Collective outflows from EPFR Global-tracked equity funds during the fourth week of February reached levels last seen in mid-October.
FIIs were net sellers in the cash segment on Tuesday at Rs7.41bn, while the local institutions pumped in Rs5.23bn. In the F&O segment, the foreign funds were net buyers at Rs4.77bn. On Monday, FIIs were net sellers in the cash segment at Rs4.78bn.
US stocks slipped on Tuesday, with the Dow Jones Industrial Average and S&P 500 index ending at fresh 12-year lows, as Wall Street failed to rebound amid nagging worries about the financial markets and the recession.
The Dow fell 37 points or 0.6%, to 6,726.02 closing at the lowest point since April 18, 1997, when it ended at 6703.55. The S&P 500 shed 4.5 points or 0.6%, to 696.33 ending at the lowest point since Oct. 10, 1996, when it ended at 694.61.
The Nasdaq Composite index gave up nearly 2 points, or 0.1%, to 1,321.01. The tech-fueled index has held up better than the other major averages this year and remains above its close of 1,316.12 from last Nov. 20.
US stocks tumbled on Monday, with the Dow and S&P 500 falling to 12-year lows after American International Group's (AIG) huge quarterly loss exacerbated worries about the financial sector and the economy.
Trading was largely volatile as investors considered the latest comments from top government officials and weak reports on auto and home sales.
President Barack Obama said at this point, profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it. He was speaking to reporters after meeting with British Prime Minister Gordon Brown. He said that he is absolutely confident that credit will start to flow again, businesses will start to invest and hire and that the economy will recover.
At an earlier speech at the Department of Transportation, the President acknowledged the brutal fourth quarter of last year, in which the economy shrank at its sharpest pace in almost 26 years. He said that the first quarter doesn't look like it will be any better and talked about the need for unlocking credit markets.
Separately, the US Treasury and the Federal Reserve launched the much-awaited Term Asset-backed Securities Loan Facility (TALF), a lending program aimed at consumers and small businesses.
The $200bn TALF program will start making loans available on March 17. The government said a future expansion to $1 trillion could include some of the bad assets currently cluttering up bank balance sheets.
Fed chief Bernanke told the Senate Banking Committee that lawmakers need to move aggressively to get the economy out of its slump, even if it balloons the federal deficit. He said that stabilising the financial sector was key to a recovery.
Bernanke also defended the government's latest bailout of troubled insurance firm AIG, which received an additional $30bn on Monday. Bernanke said the government needed to step in because AIG's global reach means there is a contagion risk should it fail.
President Obama's 2010 budget was also in focus, as both Treasury Secretary Timothy Geithner and budget chief Peter Orszag spoke to house panels to defend the proposed $3.6 trillion budget.
US auto sales plunged 40% in February, the industry's worst monthly performance in 27 years. Ford Motor said sales plunged 48% in February, slightly better than the 50% drop forecast by sales tracker Edmunds.com. GM said sales tumbled 53% in the month, worse than the 47% drop analysts were expecting. Toyota said sales dropped 40% from a year ago, versus forecasts for a drop of 39%. Chrysler said sales fell 44%, versus forecasts for a drop of 55%.
Pending home sales sank to a record low in January, according to a National Association of Realtors report. Sales fell 7.7% versus forecasts for a drop of 3.5%, according to a consensus of economists. Sales rose a revised 4.8% in December.
Citigroup said it's CitiMortgage will lower home loan payments for three months and waive fees for some borrowers who are unemployed. The troubled financial company has received billions in federal aid and on Friday made a deal for the government to control as much as 36% of Citi's common stock. Shares gained 6.9%.
Blockbuster has hired lawyers to help it raise money and refinance debt, the video chain said, but it denied reports it was considering a bankruptcy filing. Shares plunged nearly 77% through the afternoon before being halted ahead of the news.
Treasury prices tumbled, raising the yield on the benchmark 10-year note to 2.9% from Friday's 3.01%.
In currency trading, the dollar gained versus the euro and the yen. COMEX gold for April delivery fell $26.40 to settle at $913.60 an ounce.
US light crude oil for April delivery rose $1.50 to settle at $41.65 a barrel on the New York Mercantile Exchange.
European shares slid again with a leading index briefly hitting a level not seen for more than 12 years.
The pan-European Dow Jones Stoxx 600 index fell 1.8% to 161.34, resuming Monday's downward trend, when stocks fell 5%. Although stocks bounced back a bit in early trading in Europe they couldn't hold onto gains and the Stoxx 600 quickly fell to levels not seen since late 1996.
UK's FTSE 100 index was down 3.1% to 3,512.09. Germany's DAX 30 index dropped 0.5% to 3,690.72 and the French CAC-40 index dipped 1% to 2,554.55.
It was the third trading session where markets ended with sharp losses. The slide could be attributed to a sell-off in the last hour of the trading session. The index heavyweights like Reliance Infra, ITC, Bharti, Infosys, HDFC and ICICI Bank suffered major losses dragging the benchmark Sensex to hitting an intra-day low of 8,393 its lowest in more than three years. However, stocks like ACC, Grasim and JP Associates were the top gainers in the Sensex. The BSE Sensex slipped 179 points to close at 8,427 and the NSE Nifty was down 52 at 2,622.
Shares of GMR Infra slipped 0.3% to Rs75. The company announced that its promoters raised stake to 74.2591%. The scrip touched an intra-day high of Rs78 and a low of Rs75 and recorded volumes of over 0.3mn shares on BSE.
Orissa Sponge was locked at 5% upper circuit to Rs342.8 after almost 5.7% of equity shares of the company were traded in 5 blocks. The scrip touched an intra-day high of Rs342.8 and a low of Rs342 and recorded volumes of over 1.1mn shares on BSE.
Shares of Subhash Projects surged by over 2.5% to Rs40 after the company announced that it received an order worth Rs693.7mn. The scrip touched an intra-day high of Rs41 and a low of Rs37 and recorded volumes of over 10,000 shares on BSE.
Shares of Aurobindo Pharma rallied by over 6% to Rs156 after Pfizer announced that it tied up with the company to commercialize medicines that are no longer patent protected, and have lost market exclusivity in the United States and Europe, further progressing its Established Products Business Unit strategy. The scrip touched an intra-day high of Rs163 and a low of Rs144 and recorded volumes of over 0.2mn shares on BSE.
Shares of Ambuja Cements surged by over 4.5% to Rs66 after the company’s sales last month rose 12% to 1.65mn metric tons from 1.48mn tons a year earlier. Production rose to 1.61mn tons from 1.44mn tons, translating into a growth of 11.8%.The scrip touched an intra-day high of Rs67.5 and a low of Rs63 and recorded volumes of over 0.5mn shares on BSE.
Shares of Grasim gained by 3% to Rs1362 after the company announced that cement sales in the last month rose 10.1% to 2.92nm tons. The scrip touched an intra-day high of Rs1392 and a low of Rs1308 and recorded volumes of over 0.1mn shares on BSE.
After three day’s of losses, bulls might get some relief as traders may consider the recent set back as overdone. Technically the Nifty index would see support at 2,524 levels. Global markets also performed relatively better today with the Nikkei index in Japan down only 0.7%. European markets in Germany and France rose marginally as well. However, FIIs are unlikely to resume its shopping spree in a big way anytime soon, this may continue to weigh on the sentiments unless the RBI decides to cut rates.
Crude manages to rise
Prices rise almost 4% after yesterday's drastic plunge
Oil prices ended somewhat higher on Tuesday, 03 March, 2009 after registering drastic drop yesterday. Oil prices rose today in synchronization with stocks at Wall street today.
On Tuesday, crude-oil futures for light sweet crude for April delivery closed at $41.65/barrel (higher by $1.5 or 3.7%) on the New York Mercantile Exchange. It also rose to a high of $42.07 and fell to $39.47 earlier during the day. Last week, crude ended higher by 12%. For the month of February, crude prices had ended higher by 1.5%.
Prices reached a high of $147 on 11 July, 2008 but have dropped almost 69% since then. Year to date, in 2009, crude prices are lower by 2.3%. On a yearly basis, crude prices are lower by 67%.
Fed Chairman Bernanke and Treasury Secretary testified in front of the Senate Budget Committee and House Ways and Means Committee respectively. While Geithner stated that long-term debt reduction is crucial for the economy, Bernanke stated that though the near-term outlook for the economy remains weak, a number of factors should promote the return of solid gains in economic activity in the context of low and stable inflation. Bernanke also indicated that the effectiveness of actions in restoring financial stability will be critical determinants of the timing and strength of a recovery.
Prices had been sliding since past couple of months after fear gripped the US economy that US banks might be nationalized.
OPEC has been trying to cut production consistently in order to step up prices from their current low levels. There has been conflicting reports in the market regarding the fact that OPEC is likely to reduce output in March, 2009. OPEC has already agreed to cut cartel quotas by 4.2 million barrels a day since September, equivalent to about 5% of global oil demand. The cartel is supposed to meet on 15 March at Vienna.
April reformulated gasoline rose 2.6% to $1.3194 a gallon and April heating oil gained 2.5% to $1.1796 a gallon.
Natural gas for April delivery added 3.3% to $4.287 per million British thermal units.
Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.
At the MCX, crude oil for March delivery closed at Rs 2,107/barrel, higher by Rs 1 (0.04%) against previous day's close. Natural gas for February delivery closed at Rs 219.8/mmbtu, higher by Rs 5.6/mmbtu (2.6%).
Bullion metals continue to drop
Gold drops for seventh straight day
Bullion metal prices ended lower for the seventh straight time on Tuesday, 03 March, 2009. Prices continued to fall as traders sold precious metals to cover for losses in other markets.
Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa.
On Tuesday, Comex Gold for April delivery fell $26.4 (2.8%) to close at $913.6 an ounce on the New York Mercantile Exchange. Earlier during the day, it touched a low of $905.7. Last week, gold ended lower by 6%. For the month of February, gold ended higher by 7.4%. For January, 2009, gold had gained 3.9%. Year to date, gold prices are higher by 3.3%.
On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (8%) since then.
On Tuesday, Comex silver futures for March delivery fell 35.5 cents (2.7%) to end at $12.715 an ounce. Prices fell to $12.43 earlier during the day. In February, 2009, silver had rose 4.3% after climbing 14% in January. Year to date, silver has climbed 15.5% this year. For 2008, silver had lost 24%.
In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.
Last year, the weakening dollar and higher global demand for raw materials had led to records for commodities including gold. Gold reached a record in March 2008 as a U.S. housing slump and credit crisis spurred the Federal Reserve to slash borrowing costs. In the last move, the Federal Reserve has cuts its target bank lending rate to 0.25% from 5.25% in September, 2007. The Fed did it in nine steps.
Prior to 2008, gold had witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Silver had climbed 16% in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.
At the MCX, gold prices for April delivery closed lower by Rs 538 (3.4%) at Rs 15,268 per 10 grams. Prices rose to a high of Rs 15,770 per 10 grams and fell to a low of Rs 15,130 per 10 grams during the day's trading.
At the MCX, silver prices for May delivery closed Rs 718 (3.2%) lower at Rs 21,922/Kg. Prices opened at Rs 22,526/kg and fell to a low of Rs 21,583/Kg during the day's trading.
PTC India
We recommend a sell in PTC India from a short-term perspective. The uptrend from the October 27 trough of Rs 43 was arrested at the 200-day simple moving average at Rs 75 and the stock has been declining since. The stock is currently halting at the short-term support at Rs 55. But the chart pattern over the last five sessions suggests that the stock can decline below this support towards the October lows again. 10-day rate of change oscillator is forming lower peaks and troughs in the negative zone and the 14-day relative strength index is declining after a failure to cross 43. The oscillator readings denote that the short-term outlook for the stock is negative. Investors can sell the stock with a stop at Rs 60.5. We expect a decline to Rs 50 in the upcoming sessions.
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