Hope floats on D-Street

The most important thing about recovery is to pass the message on. - Maurice Gibb.

Monday’s late rebound from day’s low saved the day for the bulls. However, it is not clear whether the advance has enough steam left to lift the main indices near all-time highs. The start today is likely to be muted and choppy. Beware of the heightened volatility even as the near-term outlook remains murky in the face of a few headwinds (local and global).



Confidence and conviction seem to be in short supply following a couple of selloffs in recent history. Therefore, it would be prudent to remain cautious and not get tempted by any short-term spurts. Remember, Monday’s advance came on low volume though breadth was positive.

Monthly inflation data, to be released today, is a key macro-economic indicator given the lingering concerns over stubbornly high prices. There have also been reports of an impending fuel price hike as well.

The FOMC meet in the US on Tuesday and the RBI mid-quarter review are the key events that will have a bearing on sentiment. Advance tax numbers for Q3 FY11 will also be watched closely.

Shares of MOIL Ltd. will be listed on Wednesday.

FIIs have been net sellers in the past few sessions. Wait for the market to stabilise and stay up for a few sessions before taking a decisive call. We continue to advocate caution as far as Small-Cap and Mid-Cap stocks, particularly the ones with low liquidity and dodgy fundamentals.

For the Nifty 5940-5950 will be key levels to watch in the near term in terms of resistance. The next levels to keep an eye on will be 5990-6015. On the way down, the Nifty might get support at around 5840 and further at 5750.

The policy paralysis due to the wash out of the Winter Session of Parliament is definitely a cause for concern. The political scene is likely to remain tense and heated. One has to see what impact will the current impasse will have on the Union Budget.

Globally, investors will be keenly watching the progress on the tax deal in the US, apart from developments in the debt-strapped eurozone. Notwithstanding the status quo on interest rates maintained by the People's Bank of China last week, the pressure is still on the Chinese central bank to jack up borrowing costs, especially if inflation doesn't moderate.

FIIs were net sellers of Rs 2.87bn in the cash segment on Monday, according to the provisional NSE data. The domestic institutional institutions were net buyers of Rs 3.34bn. FIIs were net buyers at Rs 4.09bn in the F&O segment on the same day. The foreign funds were net sellers of Rs 9.66bn in the cash segment on Friday.

Asian Markets on Tuesday:

Asian stock indices were trading higher but not by a great deal in early morning trade on Tuesday with the regional benchmark index touching a five-week high. Higher commodity prices boosted raw material shares of the region.

Japanese exporters fell after the yen strengthened against the dollar.

Resources companies paced the rally on Monday after China's policymakers refrained from hiking the key policy rates despite inflation jumping to a 28-month high.

Copper prices reached a new record overnight. The red metal hit US$9,185 a tonne on the London Metal Exchange. A large majority of traders, investors and analysts expect the price to rise much further next year.

Crude oil prices also advanced.

The MSCI Asia Pacific Index was up 0.4% to 134.78, the highest since Nov. 9, as of 11:34 a.m. in Tokyo, with about five stocks advancing for every four that fell.

The gauge fell 0.3% last week amid mounting speculation of a rate hike by China’s central bank. The People's Bank of China instead increased lenders’ reserve ratio requirement.

The Asia Pacific gauge fell 0.6% last month, the first decline in three months, amid concern that China will intensify efforts to curb inflation, speculation Europe will fail to contain the region’s sovereign-debt crisis from spreading and as tensions in the Korean peninsula escalated.

The Nikkei in Tokyo was nearly unchanged at 10,293 after touching a high of 10,319. The S&P/ASX 200 index in Sydney was up 0.2% at 4,768 after being as high as 4,773.

The Hang Seng in Hong Kong was up 0.1% at 23,349 after touching a day's high of 23,451. The Shanghai SE Composite index in China was down 0.1% at 2,919 after being as high as 2,933 and as low as 2,914.

South Korea’s Kospi Index was up ~0.3% at 2,001. The Taiex in Taiwan was flat at 8,738 while the Straits Times index in Singapore lost 0.1% at 3,178.

The yen appreciated to 83.11 against the dollar, compared with 84.15 at the close of stock trading in Tokyo yesterday.

BHP Billiton climbed 0.6% while Rio Tinto gained 0.7%. OZ Minerals Ltd., an Australian copper and gold mining company, surged 5.2%. Korea Zinc Co., the world’s largest producer of refined zinc, advanced 3.3%.

Commodities rallied and the dollar weakened yesterday after China refrained from increasing interest rates.

The Standard & Poor’s GSCI Index of commodities advanced 1.3% at 5 p.m. in New York as copper futures surged to a record high in London.

Crude oil for January delivery increased 0.9% to settle at US$88.61 a barrel in New York, while the London Metal Exchange Index of prices for six industrial metals including copper, zinc and aluminum rose 2.2%.

US Markets on Monday:

US stock indices closed mixed on Monday at the end of a listless session as investors remained on the sidelines ahead of the Federal Reserve's policy meeting on Tuesday.

A spate of corporate deals and anxiety over the resolution on the tax-cut deal kept investors on tenterhooks. Global markets welcomed China's move to refrain from hiking interest rates in spite of inflation concerns.

The Dow Jones Industrial Average rose 18.24 points, or 0.2%, to end at 11,428.56. The S&P 500 index finished nearly unchanged at 1,240.46, led by energy and materials stocks.

The technology-oriented Nasdaq Composite index fell 0.5% to 2,624.91 after closing Friday at its highest level since December 2007.

Monday’s gains came after the People’s Bank of China chose not to raise interest rates following strong inflation data released over the weekend. On Friday, China had raised banks’ reserve-requirement ratio for the third time in a month.

US stocks rose last week, with the S&P 500 reaching its highest level in two years on Friday, amid upbeat economic news and a dividend hike by GE. The S&P 500 is up more than 83% from its 2009 low and is 11% higher for the year.

US policymakers appeared to be on the brink of reaching a compromise to extend Bush-era tax cuts for another two years. But House Democrats voted last Thursday against considering the tax package.

Shortly after the closing bell, the Senate voted to end debate on the compromise, according to reports. Despite the resistance from House Democrats, investors are still betting on an extension of the cuts.

Demand for US Treasurys rose, as the yield on the 10-year note fell to 3.286%. From its October low, the 10-year yield has climbed nearly 100 basis points.

The euro firmed to $1.3415, compared with $1.3228 late Friday in New York.

The dollar edged lower, with the U.S. dollar index, which tracks the US currency against a basket of six others, off 0.9%.

Crude-oil futures edged up toward $90 a barrel.

Gold futures for February delivery jumped $13.10 to settle at $1,398 an ounce.

Investors are also gearing up for the outcome of the Federal Reserve’s next policy meeting on Tuesday afternoon. But market participants expect little change from the central bank with respect to its near-term outlook for monetary policy or QE2.

General Electric shares slipped 0.6% after the conglomerate said it will offer $1.3 billion for Wellstream Holdings, a maker of flexible pipeline products for the oil-and-gas industry. The move fits with GE’s strategy to expand its industrial businesses with acquisitions.

Wellstream’s board of directors said it will recommend shareholders accept the deal.

Dell Inc. said it will buy Compellent Technologies Inc. for $27.75 a share, slightly more than it had originally indicated. Dell said last week that it was in exclusive talks to buy the data-storage provider. Dell shares slipped 3.9%, while Compellent dropped 2.5% to $27.98.

Thermo Fisher Scientific said it will acquire Dionex Corp. for $2.1 billion, expanding its presence in markets such as environmental analysis, water testing and food safety. At $118.50 per share in cash, the deal is at a 21% premium to Dionex's closing stock price on Dec. 10.

Thermo Fisher shares rose 4.8%, while Dionex surged 20%.

Huntington Bancshares Inc. said it plans to offer $920 million in common stock and $300 million in debt to help repay the $1.4 billion it received under the Treasury’s Troubled Asset Relief Program. Shares dropped 2.7%.

Shares of FedEx closed slightly higher on what was projected to be the delivery giant's busiest day of the year. The company expects to move nearly 16 million shipments around the world on Monday.

A raft of economic reports on unemployment, consumer prices and new home construction will be released later in the week.

European Markets on Monday:

European stock benchmarks extended their winning streak to a sixth consecutive trading session on Monday, as investors lifted mining shares after China's decision not to hike interest rates over the weekend and as several deals were announced.

The Stoxx Europe 600 index, which advanced 1.9% last week, closed at its highest level in more than two years on Monday, up 0.3% to 276.99.

Among the major indexes, France's CAC 40 added 0.9% to 3,892.44, Germany's DAX 30 gained 0.3% to 7,029.39, and the UK's FTSE 100 climbed 0.8% to 5,860.75.

Shares in Asia had rallied on Monday after the Chinese central bank did not hike its benchmark interest rate despite a surge in monthly inflation.

Spain’s Ibex 35 index gained 0.3%, and Portugal’s PSI 20 added 0.6%. Italy’s FTSE MIB rose 0.7% ahead of a make-or-break confidence vote for Prime Minister Silvio Berlusconi’s center-right government on Tuesday.

Data from the European Central Bank showed that the bank stepped up its bond-purchasing activity in the week to Dec. 10 to €2.667 billion from €1.965 billion a week earlier.

The spotlight could well return to peripheral markets later this week when European Council leaders meet to thrash out the details of the automatic debt-restructuring mechanism they’ve agreed on in principle.

Both Germany and France are likely to continue to resist the creation of European bonds and expansion of the stability fund. German Finance Minister Wolfgang Schäuble said that no country can be ejected from the euro zone.

A report from the Bank for International Settlements showed that banks reduced their exposure to Greek, Irish, Portuguese and Spanish debt in the second quarter.

Shares in Wellstream Holdings PLC surged 5.8% to 790 pence a share after General Electric Co. said it will acquire the British oil-services company for 800 million pounds ($1.3 billion).

Wellstream shareholders will receive 786 pence a share, including a 6 pence cash dividend, GE said in a statement.

In the UK, consumer-products champion Reckitt Benckiser Group PLC said it will buy India-based over-the-counter pharmaceutical firm Paras Pharmaceuticals for around £460 million. Shares of Reckitt rose 1.8% in London.

In Sweden, lock manufacturer Assa Abloy AB struck a deal to buy a 63.6% stake in industrial door and locks system group Cardo AB for roughly 11.3 billion Swedish krona ($1.6 billion). The offer sent Cardo shares up nearly 48%.

In the pharmaceutical sector, shares of Sanofi-Aventis SA fell 0.6% after the French drug maker extended the deadline for Genzyme Corp. shareholders to tender their stock to Jan. 21.

Sanofi’s offer for $69 a share was set to expire Dec. 10. About 2.2 million shares, or 0.9% of the stock outstanding, had been tendered by the deadline, Sanofi said in a statement.