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Thursday, February 11, 2010

Hope is back, though not high!


Hope is the expectation that something outside of ourselves is going to come to our rescue and we will live happily ever after.

Looks like the stormy weather for world equity markets has eased a little bit amid speculation of an impending rescue of debt-laden Greece. Risk tolerance has improved just a tad as well. However, things remain murky and uncertain given a spate of concerns – local and global. We expect the Indian market to rise at start as global markets are mostly up. The Nifty may continue to swing in a range of 4700-4900 in the near term. For the Nifty to cross 5000 again the global sentiment should remain positive on a consistent basis. FII selling too has to abate.

On the whole, the market will remain in a consolidation mode till we approach the Railway Budget and Union Budget. The main indices could remain sideways and choppy during the summer depending on what the Finance Minister says in the Budget. Thereafter, the monsoon factor could have a significant bearing on sentiment. Among the other factors to watch out for going forward will be earnings, valuations, fund flows, inflation, interest rates, policy announcements (if any) and of course the ever changing global events.

FIIs were net sellers in the cash segment on Wednesday at Rs2.08bn on a provisional basis while the local funds were net buyers of Rs4.59bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net buyers of Rs10.41bn. On Tuesday, FIIs were net sellers of Rs3.95bn in the cash segment, while Mutual Funds were net buyers at Rs2.59bn, according to SEBI web site.

US stocks ended in the red on Wednesday as investors weighed the Greek debt situation, a strong dollar and Federal Reserve chairman Ben Bernanke's plan for executing 'exit' from an ultra-loose monetary policy.

The Dow Jones Industrial Average lost 20 points, or 0.2%, to end at 10,038.38. The S&P 500 index lost 2 points, or 0.2%, to close at 1,068.13 and the Nasdaq Composite index shed 3 points, or 0.1%, to finish at 2,147.87.

The dollar rallied versus the euro and the Japanese yen.

US light crude oil for March delivery rose 77 cents to settle at $74.52 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery fell 90 cents to settle at $1,076.30.

Treasury prices fell, raising the yield on the 10-year note to 3.68% from 3.64% late on Tuesday.

Market breadth was negative.

US stocks had rallied on Tuesday as growing bets that the European Union (EU) will rescue Greece from its debt problems reassured investors after a four-week selloff. But stocks were choppy on Wednesday on concerns that Greece could just be the first of many countries that are feeling the pressure of a growing fiscal deficit.

Stocks also remain vulnerable to a retreat in the aftermath of 2009's big rally, in which the S&P 500 gained 23%. In the last nine months of 2009, it gained 65%, bouncing off 12-year lows hit in March. Since hitting a rally high on Jan. 19, the S&P 500 is down almost 7%.

Bank shares bounced up after several down sessions, countering some of the broader weakness in the market. The KBW Bank index gained 1%.

Bernanke said that while the US economy continues to require the support of emergency programs unleashed at the height of the financial crisis in 2008, at some point the central bank will need to tighten financial conditions.

The Fed chief said that he will pull cash from the system before it lifts interest rates, and that its decision to boost the emergency discount rate is not the same as a shift in policy. The prepared testimony was meant to be delivered at a House Financial Services Committee hearing that was postponed due to snow.

Reports late on Wednesday said that France and Germany may present a rescue plan for Greece at Thursday's meeting of euro zone countries. Meanwhile, Greece has vowed to press forward with cutbacks, despite an ongoing worker strike.

A fresh financial crisis in Europe or elsewhere in the world would set back the still-fragile global economic recovery and hurt US financial institutions. Investors are also keeping an eye on the growing US budget deficit.

The debt crisis has sparked a flight from risk over the last few weeks, with investors choosing government bonds and the dollar over stocks. Investors have fled the euro in favor of the greenback and have sold dollar-traded commodities and commodity stocks.

The December trade gap widened to $40.2 billion in December from a revised $36.4 billion in November, the government reported Wednesday morning. Economists thought it would narrow to $35.8 billion. The widening reflected a pick-up in imports amid the recovering economy.

Walt Disney reported higher-than-expected quarterly earnings and revenue in a report released after the close of trading Tuesday. Disney shares rose 0.6%.

European shares gained, boosted by hopes that a solution will be soon be found for Greece's financial woes. Steel giant ArcelorMittal and carmaker Peugeot declined on disappointing earnings news.

After just scraping into the green to record a second straight day of gains on Tuesday, the pan-European Dow Jones Stoxx 600 index rose 0.6% to 240.69.

Greek lenders rose as speculation intensified that a European rescue plan is in the works. Representatives of Germany and other EU members were in discussion on Wednesday on stepping in to support Greece, ahead of a meeting of the top leaders on Thursday.

The ASE Composite climbed 2.4% to 1,940.82 in Athens and Greek government bond prices rebounded.

The UK FTSE 100 index rose 0.4% to 5,131.99, the German DAX index climbed 0.7% to 5,536.37 and the French CAC-40 index rose 0.6% to 3,635.61. All indexes closed off earlier highs.

After scaling back to the 16,000 levels in the previous trading session, bears yet again dragged the Sensex below the psychological level. This time Indian markets seemed to have ignored the positive cues spilling in from US, Asia and Europe.

On Wednesday, indices surrendered their gains in the last hour of the day as selling picked momentum. Barring the Consumer Durables and Realty index all the other sectoral indices ended in the red. The Capital Goods index was the top loser followed by PSU index losing 1%.

The BSE Sensex slipped 120 points to end at 15,922 after touching a high of 16,141 and a low of 15,892. The Nifty fell 35 points to end at 4,757.

Equity markets in Asia ended in the green. The Nikkei in Japan was up 0.3%, while Australia's S&P/ASX ended marginally higher by 0.2%. The Shanghai SE Composite ended higher by 0.4% and Hang Seng index in Hong Kong added 0.7%.

In Europe, stocks were trading higher as well. The DAX in Germany was up 1% and the CAC 40 index in France was up 0.8%. The FTSE in the UK was up 0.6%.

Coming back to India, among the BSE sectoral indices, the BSE Capital Goods index was the top loser, shedding 1.2%, followed by PSU index that was down 1% and BSE Power index was down 1%. The BSE Mid-Cap and BSE Small-Cap index both ended flat.

Among the 30-components of Sensex 21 ended in the negative terrain and 9 ended in the green. M&M, SBI, Tata Steel, Sun Pharma and L&T were among the top losers. On the other hand, major gainers were Hindalco, HDFC Bank, Sterlite, Grasim and Hero Honda.

Outside the frontline indices, the big losers in the broader market were Sun TV, Chambal Fert, Renuka Sugar, RCF and Jai Corp. On the other hand, gainers included Glaxo, REI Agro, IRB Infra and Voltas.

HCC announced that it received three letter of awards from NHAI to develop three contiguous sections of ~256 Kms length between Bahrampore to Dalkhola on NH-34 in the State of West Bengal on Design, Build, Finance, Operate and Transfer (DBFOT) Toll basis.

Shares of HCC advanced by 2% to end at Rs134. The scrip opened at Rs134.7 it touched an intra-day high of Rs137.5 and a low of Rs132.1 and recorded volumes of over 0.87mn shares on BSE.

BHEL secured a contract worth Rs4.5 for setting up a 330 MW (3x110 MW) Hydro Electric Project (HEP) in the state of Jammu and Kashmir. The turnkey order for the Kishanganga HEP of NHPC was bagged by Hindustan Construction Company (HCC) along with BHEL under stiff International Competitive Bidding (ICB), as its offer was found techno-economically the best.

BHEL ended lower by 1.3% to end at Rs2302. The scrip opened at Rs2341 it touched an intra-day high of Rs2346 and a low of Rs2290 and recorded volumes of over 63,000 shares on BSE.

Shares of Mcnally Bharat gained by 3% to end at Rs249 after the company received two orders, first to design, engineering, supply of equipment, underloading, storage, haqndling, erection testing & commissioning and structural work at site of an HDPS System for Aditya Aluminium Smelter Project of HINDALCO for a total value of Rs283.2mn; and

Also to Design, Engineering, Supply of Equipment, Underloading, Storage, Hanqndling, Erection testing & commissioning and Structural Work at Site of an HDPS System for Mahan Aluminium Smelter Project of HINDALCO for a total value of Rs283.2mn.

Shares of oil marketing companies were in demand after reports stated that the government would meet today to discuss panel recommendations on fuel pricing.

Implementation of the recommendations will result in an increase in gasoline, diesel and cooking gas prices, reports stated.

Shares of BPCL gained by 2% to end at Rs573, HPCL ended higher by 1.5% to end at Rs348 and IOC advanced 2% to end at Rs316.

The government rejected the first genetically modified food after protests by farmers. "There is no overriding food security argument for Bt brinjal," or genetically modified eggplant, Environment Minister, Jairam Ramesh was quoted as saying. "Our objective is to restore public confidence and trust in Bt brinjal." A moratorium will be imposed until safety studies are carried out "to the satisfaction of the scientific community," he said.

Monsanto, supplied the gene for the vegetable and introduced genetically modified cotton in India in 2002.

Shares of Monsanto India slipped by 6.5% to end at Rs1763. The scrip opened at Rs1899 it touched an intra-day high of Rs1899 and a low of Rs1755 and recorded volumes of over 12,000 shares on BSE.

Shares of Golden Tobacco were locked at 5% upper circuit to end at Rs135.35 after the company announced that the board of directors will meet on February 16, 2010 to consider a proposal to develop properties. The scrip opened at Rs135.35 it touched an intra-day high of Rs135.35 and a low of Rs134.5 and recorded volumes of over 53,000 shares on BSE.