Life is not about how fast you run, or how high you climb, but how well you bounce.
A bounce back is on the cards at start, thanks largely to a late session rebound on Wall Street. But then remember, bouncing is more like crashing….except you get to do it over and over again. Asian markets are mostly positive, barring the Kospi in Seoul, which is still reeling under the geopolitical tension. The European markets failed to benefit from the recovery in US stocks and ended sharply lower. In fact, markets in Italy, Portugal and Ireland joined Spain and Greece in bear-market territory. The FTSE 100 closed below 5,000.
German finance ministry is reportedly proposing extending the naked short-selling ban to include all German-listed stocks. The bill is due to be discussed next week. Italy has joined Europe's austerity club with deep spending cuts.
What this means is that unknown fears remain and randomness is the order of the day. Volatility is very high and so are uncertainties and risks. With the F&O expiry a day away it only gets wilder. Any sharp snap-back should be used to lighten your mental burden rather than adding positions.
Amidst all the gloom and doom, we can comfort ourselves with the fact that India’s macro-economic outlook is pretty sound though monsoon needs to be watched closely. Latest GDP data, which will be out on Monday will offer some more inputs of ground realities.
Though the markets across the world are looking oversold, it is premature to say whether we have seen the worst and are therefore ready to resume the ascent. Wait and watch is the right strategy to deal with the ongoing problems and endure the short-term pain. We cannot completely rule out that we will not see another Tuesday-like bloodbath. It may happen again as Europe is facing a major financial crisis and the euro is under pressure. Other key economies like China, Japan, the UK and the US also have their own set of issues to overcome.
So, the overall bias remains weak and may remain so for some time to come, though medium-to long-term investors can nibble in quality stocks at lower levels. FIIs remain net sellers and for the Indian market to sustain a bounce back from here will require a turnaround in fund flows from the overseas investors.
FIIs were net sellers of Rs14.64bn in the cash segment on Tuesday on a provisional basis, according to the NSE data. The local institutions were net buyers at Rs4.06bn on the same day. In the F&O segment, the foreign funds were net buyers of Rs10.38bn. On Monday, FIIs were net sellers of Rs8.82bn in the cash segment, according to the SEBI data.
Flows into and out of EPFR Global-tracked funds reflected the uncertainty and heightened risk aversion in the third week of May. Europe Equity Funds had their worst week since late April 2008. Overall, EPFR Global-tracked Equity Funds posted net outflows of over $12 billion while Bond Funds eked out inflows of $212 million.
Results Today: Asian Hotels, Bajaj Electricals, Bank of India, BHEL, Cinemax, Dalmia Cement, Emco, Ess Dee Aluminium, Everest Kanto, Godrej Industries, Gujarat Alkalies, GMDC, GNFC, HPCL, Indian Hotels, Mphasis, Mukand, Northgate Tech, Oil India, REI Agro and Tata Steel.
Grasim Industries shares will reflect the adjustment made for the proposed de-merger of the cement business into Samruddhi Cement, which will later be amalgamated with UltraTech Cement. For every 4 shares of Ultratech Cement you get 7 shares of Samruddhi Cement, which will list only sometime in June.
Based on the current market price of UltraTech Cement, the price of Samruddhi Cement should be Rs528.50, according to IIFL. Samruddhi Cement currently is part of Grasim and is getting carved out of Grasim and merged with Ultratech. So today, the price of Grasim should fall by Rs528.50. Grasim shareholders will be getting 1 share each of Samruddhi Cement. Also, Grasim will be replaced by Jindal Steel & Power from today.
US stocks managed to recover at the end of another volatile session as a rebound in materials, financial and consumer shares helped the Dow Jones Industrial Average recoup most of a nearly 300-point drop that had pushed it below the 10,000 mark.
Stocks erased most losses by the close, with the Dow ending down just 22 points, as worries about the global economy were tempered.
The Dow dropped 0.2% to close at 10,043.75. In the first hour of trading the Dow fell as much as 292 points to 9,774.48, the lowest level since Nov. 4 on fear over the impact of the sovereign debt crisis in Europe and tensions between North Korea and South Korea.
The S&P 500 index closed little changed at 1,074.03 and the Nasdaq lost 2 points, or about 0.1%, at 2,210.95. During the S&P 500 index, a broad market gauge, had fallen as low as 1,040, its lowest level since late November.
Still, for every stock on the rise, two lost ground on the New York Stock Exchange, where 1.9 billion shares traded.
The LIBOR rate, with the three-month US dollar London interbank offered rate hitting its highest level since July of last year.
On Tuesday, the euro briefly fell to levels just above a four-year low it hit earlier in the month. However, the euro cut its losses as US stocks recovered. The dollar dropped 0.4% against the yen.
The CBOE Volatility index (VIX), Wall Street's fear gauge, turned lower in the afternoon as stock selling eased. The VIX fell nearly 10% to 34.61 after rising earlier in the afternoon. But even the earlier advance was modest compared to a week ago when the stock selloff was more intense. Last Thursday the VIX jumped 30% to settle at a 14-month high of 45.48.
US light crude oil for July delivery fell $1.46 to settle at $68.75 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery rose $4 to $1,198 an ounce.
Treasury prices rallied, lowering the yield on the 10-year note to 3.16% from 3.23% where it stood late on Monday.
The list of worries included Europe's ability to stem its sovereign-debt trouble, which was further fueled by the Bank of Spain taking over a savings bank during the weekend, along with news that four other Spanish savings banks would merge.
Plus, tensions between North and South Korea escalated, with the two countries trading economic and political threats.
The Dow soared 71% between the March 2009 lows and highs hit in late April this year. In that same time period, the S&P 500 gained 80% and the Nasdaq gained 99%. Since those rally highs, the Dow lost 10.2%, the S&P 500 slipped 11.8% and the Nasdaq dropped 12.5% through Monday's close.
US stocks had been hit hard through the early afternoon, but began to recover late in the session, with investors nibbling at bank and select technology and consumer stocks.
Bank stocks bounced after the House Financial Services Committee Chairman Barney Frank said that a provision of the Senate's version of the bill that requires banks to spin off their derivatives businesses goes too far.
However, he added that another provision that stops banks from wagering with their own money is likely to go through. The House and Senate are in the process of reconciling different versions of the bill.
The steep losses on the major US stock indexes moderated some after economic data, which included a better-than-expected report on consumer confidence.
The Conference Board said its sentiment gauge rose to 63.3 in May from 57.7 the prior month, with the index up for a third consecutive month.
Less upbeat were reports on the US housing industry.
Home prices fell in the first part of 2010, although they are up from a year ago, according to the Case-Shiller 20-city home price index. The index fell 3.2% in the first quarter from the fourth quarter of last year, although it gained 2% versus a year ago.
The index dipped 0.5% in March from February's levels, but rose 2.4% from a year ago.
Separately, the Federal Housing Finance Authority reported US home prices fell 1.9% in the first quarter from the fourth quarter.
European stocks slumped to close at a level not seen for more than eight months, as mounting concerns about economic growth and bank balance sheets pummeled sentiment while pushing peripheral markets into bear-market territory.
After opening the week with a 0.4% advance, the Stoxx Europe 600 index nose-dived 2.5% to close at 232.11 - its lowest close since September 3.
Banks were slammed, with elevated interbank lending levels reflecting diminished investor sentiment. The Spanish government seized one of its savings banks over the weekend and four Spanish savings banks unveiled a merger deal late on Monday.
Asian shares ended with sharp losses amid rekindled political tensions on the Korean peninsula.
Equity indexes in there of the so-called PIIGS countries - Portugal, Ireland, and Italy - fell into bear-market territory. Greece and Spain had already retreated over 20% from peaks.
The Portugal PSI 20 dropped 2.8% to 6,632.32, the Irish ISEQ fell 3.9% to 2,772.52 and the Italy FTSE MIB lost 3.4% to 18,382.70.
The French CAC-40 index fell 2.9% to close at 3,331.29 and the German DAX index dropped 2.3% to end at 5,670.04.
The UK's FTSE 100 index also sank, falling 2.5% to settle at 4,940.68 and surrendering the 5,000 level for the first time since last November.
The European Commission on Wednesday will announce plans for an up-front levy on European banks to help protect against future failures, according to published reports.
The VStoxx volatility measure, a gauge of volatility using Euro Stoxx 50 options prices, surged 9.1% to 46.47. The VStoxx is the European equivalent of the VIX gauge.
The euro fell against the dollar, trading down 0.7% to $1.2259.
After Monday’s pause, many would have harboured the hope of a follow-through rally. But that was not to be, as the Indian market witnessed another major bloodbath, as investors thrashed equities worldwide amid concerns about the state of the Spanish banks and growing tensions in the Korean peninsula.
The BSE Sensex and the NSE Nifty broke below their psychological levels of 16,000 and 4,800 as global investors dumped risky assets and rushed to safe havens like the dollar, yen and bonds. The euro lost further ground against the US and Japanese counterparts while the South Korean won extended losses.
As if all the fuss about European debt crisis was not enough came reports that North Korea is getting ready for a possible military showdown with South Korea. Sentiment deteriorated amid news that four Spanish saving banks are merging to form the fifth largest lender of the debt-stricken euro-zone nation.
"Renewed weakness in the rupee added fuel to the fire, with the Indian currency touching an eighth-month low versus the dollar. A weak rupee is bad news for FIIs, as they get lesser returns from their investments in Indian assets", says Amar Ambani Vice President Research IIFL.
The metals pack was heavily offloaded followed by the Capital Goods and the Banking stocks. Even the second rung stocks were not spared. However, all said and done, the BSE Sensex and the NSE Nifty did manage to claw back some losses ending above 16,000 and 4800 respectively.
Finally, the BSE 30-share Sensex lost 447 points at 16,022 and NSE Nifty was down 137 points at 4,807.
Markets in Asia ended mixed; the Nikkei in Japan ended lower by 3%, Australia's S&P/ASX lost by 3%, while the Hang Seng index in Hong Kong fell 3.5% and Shanghai SE Composite declined 3.5%.
European indices were trading in the red, the DAX in Germany was down 3.2%, the CAC 40 index in France was down 4% and the FTSE in the UK was down 3.2%.
Among the BSE sectoral indices BSE Metal index was the top loser, the index was down 5.1%, followed by BSE Consumer Durables index was down 4.5% and BSE Capital Goods index was down 3%. Even the BSE Mid-Cap index ended lower by 3% and the Small-Cap index fell 3.5%.
Outside the frontline indices, the big losers in the broader market were Tulip, PTC, United Spirits and EKC. On the other hand, gainers included Godrej Cons, Piramal Health, REI Agro and Bosch.