Weekly Watch - July 28 2007
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Recommendations
Monday, July 30, 2007
Morning Call
Market Grape Wine :
In House :
Nifty at a supp of 4427 and 4378 with resis at 4478 and 4500
Intra day calls: Buy Essdee Aluminium above 531 with a TGT of 551 and a SL of 524
Buy PTC above 85.20 with a TGT of 93 and a SL of 82
F&O: Sell M&M below 764
Out House :
Markets at a support of 15015 & 15112 levels with resistance at 15414 & 15515 levels .
Markets to be very choppy and volatile maintain strict stop loss .
Buy : SBIN at dips
Buy : RIL at dips
Buy : ACC at dips
Buy : LNT at dips
Buy : Bilt & Sesasaee paper
Buy : Aban & IOLBroad
Buy : Unitech & IBulls at dips
Buy : NTPC at dips
Dark Horse : RIL , SBIN , Educomp , Skumar , Suzlon , HLL & ITC
Market may see further correction
The market is expected to see further correction today, 30 July 2007, after a sharp slump on Friday, 27 July 2007 when the Sensex plunged 541.74-point to 15,234.57, gripped by intense selling pressure following sharp fall in US and Asian stocks.
Value buying may emerge at lower level, cushioning a sharp correction.
As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 1475 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 727.32 crore on Friday, 27 July 2007.
Japanese shares fell sharply today, 30 July 2007, after the nation's ruling party suffered a major defeat in Sunday's parliamentary elections, with financial shares such as Mitsubishi UFJ Financial Group and Sompo Japan Insurance leading the decline. Japan's Nikkei plunged 1% at 17,111.17. Taiwan's Taiwan Weighted declined 0.65% at 9,102.31.
However, Hong Kong's Hang Seng (up 0.07% at 22,585.64), Singapore's Straits Times (up 0.15% at 3,497.91) and South Korea's Seoul Composite (up 0.19% at 1,886.71), edged higher.
Wall Street extended its steep decline for the second straight day Friday, 27 July 2007 pulling the Dow Jones industrials down more than 500 points over two days after investors gave in to mounting concerns that borrowing costs would climb for both companies and homeowners. The Dow slipped 208.10 points, or 1.54%, to 13,265.47. Broader stock indicators also fell. The S&P 500 ended down 23.71 points, or 1.60 %, at 1,458.95. The Nasdaq Composite index fell 37.10 points, or 1.43 %, to 2,562.24.
Oil prices were lower in morning in Singapore trade on Monday, 30 July 2007 on profit-taking even as key producer Iran expressed opposition to any hikes in OPEC crude output. New York's main contract, light sweet crude for September delivery, was down 35 cents at $76.67 a barrel from 77.02 dollars in late US trade Friday. Brent North Sea crude for September eased 41 cents to $75.85.
Market may remain uncertain
After Friday's carnage market may remain uncertain owing to lack of clarity and may witness sideways movement on the back of sharp intra-day volatility. Mixed fund inflows and global trend will be closely monitored for further direction. Among the local indices, the Nifty could test 4385 on the down side while on the upside it could find support at 4500. The Sensex is likely to get support at 15000 and may face resistance at 15450.
On the result front Andhra Bank, Asian Paints, Bhart Earth Movers, BHEL, Cairn India, Great Eastern shipping, Hinduja TMT, HPCL, I-flex solutions, India Infoline, India Cement, IOC, Jet Airways, Jindal Steel, M&M, Mirc Electronics, Nalco, NTPC, Oriental bank, Parsvanath Developers, Sun TV, Syndicate Bank, Tata Steel, Tata Teleservices and Wyeth are expected to announce the quarterly numbers.
Credit market worries followed by rising oil prices sent the US indices plummeting for the second straight session on Friday, while the Dow Jones declined by 208 points to close at 13265 and the Nasdaq also slipped 37 point at 2562.
The Indian ADRs also posted losses on the US bourses. MTNL lost over 4%, while Rdiff and Patini Computers fell over 3% each. Among other laggards, Infosys, VSNL, HDFC Bank, Tata Motors and ICICI Bank ended with losses of over 1-2% each.
Crude oil prices moved up, with the Nymex light crude oil for September series rising by $2.07 at $77.02 a barrel. In the commodity space, the Comex gold slipped by $2.80 to settle at $672.30 a troy ounce.
Research Calls
Godawari Power and Ispat
| Reco price: Rs 184 Current market price: Rs 178 Broking firm: IL&FS Invest Smart |
| Godawari Power and Ispat the manufacturer of sponge iron and steel billets has announced the impressive Q1FY08 results. The company reported 61.5 per cent y-o-y growth in top line and 72.9 per cent y-o-y growth in bottom line. The growth has been driven primarily by higher volume and realisations. |
| During the same period the operating margins improved by 350 basis points to 20.0 per cent. Going forward, IL&FS expects the company to continue reporting robust growth during FY08-09. |
| The commissioning of phase-II capacities will drive the growth during FY08, while a significant savings from captive iron ore mines will provide fillip to revenue in FY09E. At Rs 184, the stock is valued at a P/E of 4.2 times and 2.6 times its estimated FY08 and FY09 earnings, respectively. |
| Orient paper & Industries Reco price: Rs 463 Target price: Rs 560 Current market price: Rs 454 Broking firm: Emkay Share and Stock Broking |
| Orient Paper & Industries’ Q1FY08 net profit at Rs 44.6 crore is marginally below expectations primarily because of lower than expected profit of the paper division. |
| Revenues for the quarter grew by 13.4 per cent to Rs 293 crore driven by 20.5 per cent growth in revenues of cement division. The operating profit for the quarter grew by 45.6 per cent to Rs 77.7 crore driven by 55 per cent growth in EBIT of cement division. |
| With repayment of debt during the end of FY07 OPIL's interest charge for the quarter decline by a huge 40 per cent and hence its net profit for the quarter grew by a smart 73 per cent on y-o-y basis to Rs 44.6 crore. |
| The stock at recommended price trades 5.5 times its estimated FY08 earnings and 5.1 times its estimated FY09 earnings. Emkay believes the valuation for OPIL are undemanding and maintain “accumulate” rating on the stock. |
| ABG Shipyard Reco price: Rs 508 Target price: Rs 600 Current market price: Rs 526 Broking firm: Angel Broking |
| ABG Shipyard recently secured an order from Essar Shipping & Logistics, Cyprus worth Rs 618 crore, this coupled with the acquisition of Vipul Shipyard and good financial results in Q1FY08, the Angel broking puts a buy on the stock. |
| For the Q1FY08 the company recorded topline growth of 23 per cent to Rs 203 crore. On the operating front, OPM increased by 97 basis point to 27 per cent. During the same period net profit grew by 24 per cent to Rs 33 crore. |
| ABG Shipyard has a order book of Rs 5,560 crore. The company’s existing order book is 4.9x its estimated FY08 revenues. At Rs 508 the stock traded at 13.5 times FY08E and 8.5 times FY09E on fully diluted earnings of Rs37.5 and Rs59.5, respectively. |
| Maruti Udyog Reco price: Rs 841 Current market price: Rs 829 Broking firm: Edelweiss Securities |
| Edelweiss maintains “accumulate” on Maruti Udyog on the back of continued positive outlook on the passenger car industry. Maruti Udyog Ltd’s Q1FY08 net profit, at Rs 499 crore, was up 35.2 per cent on y-o-y basis from Rs 369 crore in Q1FY07. |
| During this period its EBITDA margin was steady, however up sharply on q-o-q basis by 220 basis points at 14.6 per cent, primarily due to improved product mix and a fall in other expenses by around 165 basis points. |
| The company is believed to benefit from the capacity ramp up at the new Manesar plant. On an estimated EPS of Rs 60.0 for FY08 and Rs 70.5 for FY09, the stock at recommended price is trading at 14.0 times FY08E and 11.9 times FY09E. |
| Suzlon Energy Reco price: Rs 1,299 Current market price: Rs 1,304 Broking firm: Prabhudas Lilladher |
| The broking firm maintains “outperformer” on Suzlon Energy. The company for the Q1FY08, reported a consolidated net sales growth of 81.9 per cent on y-o-y basis to Rs 1,940 crore. |
| Operating margins were down to 7.2 per cent as compared to 17.4 per cent in the corresponding quarter last year due to various reasons such as rupee appreciation, higher employee costs and loss of 100 MW of sales. |
| During the same period net profit was lower by 80.3 per cent to Rs 18.9 crore. The company has an order book of Rs 13,500 crore. Prabhudas Lilladher revised earning estimates downward by 22 per cent for FY08 and by 17 per cent for FY09. |
| At the recommended price of Rs 1,299, the stock trades at 32.6 times FY08E and 21.0 times FY09E consolidated earnings of Rs 39.9 and Rs 61.8 respectively. The stock is expected to be under pressure for the next few months, however continue to be positive on the long-term potential of the company. |
Bulls set to swing
Win as if you were used to it, lose as if you enjoyed it for a change.
On Wall Street, credit market fears once again wreaked havoc, while a surge in oil prices helped pressure stocks. The Dow Jones Industrial Average plunged further on Friday, falling more than 200 points, marking its worst week in over four years.
The Dow Jones slumped 208 points, or 1.5% to close at 13,265, leaving the 30-stock index up 6.4% for the year. Last week's sharp sell-off, which was the biggest percentage drop for the Dow since March 2003, comes just days after the blue chip barometer finished above 14,000 for the first time ever. The broader S&P 500 lost 1.6% to end at 1458 while the tech-fueled Nasdaq Composite index was down 37 points or 1.4% to 2,562.24.
Wall Street found some comfort though in a better-than expected second quarter GDP reading and comments by Treasury Secretary Henry Paulson that the US economy is the strongest he has seen in several decades.
Treasury bonds kept climbing after a big run-up in the previous session, as investors again sought shelter from falling stock prices. The 10-year note yield rose to 4.76%, down from 4.78% in the previous session.
The dollar gained versus the euro and was lower against the yen. COMEX gold for December fell $2.80 to $672.30 an ounce.
European stocks closed lower on Friday. The FTSE 100 in London lost 0.6% to 6,215.20. The German DAX 30 gave up 0.8% to finish at 7,451.68 while the French CAC-40 shed 0.6% to 5,643.96. The pan-European Dow Jones Stoxx 600 ended 0.5% lower at 372.69 and 5% lower for the week.
In Latin America, Brazil's Bovespa ended down 436 points, or 0.8%, at 53,457.39. Mexico's IPC, meanwhile, reversed a decline and ended 239 points, or 0.8%, higher at 30,235.17. Chile's IPSA ticked up 15 points, or 0.4%, to end at 3,292.29, but posted a 2.2% drop for the week. In Russia, the RTS index dropped 1.5% to close at 1967.
Asian markets were trading mixed this morning. The Nikkei in Tokyo was down 172 points, while the Hang Seng in Hong Kong was up 26 points at 22,596. The Kospi in Seoul was flat at 1882 and the Straits Times in Singapore was up 5 points at 3497.
The Morgan Stanley Capital International Asia Pacific Index lost 0.4% to 153.82 as of 10:48 a.m. in Tokyo, set for its lowest close since June 29. The regional stock benchmark dropped 3% on July 27, the most since March 5.
The Philippine Stock Exchange Index slumped 1.4%, the region's biggest decline. Benchmarks fell elsewhere, except in China. Thailand's stock market is closed for a holiday.
Horrific session ended terribly as bears were back with vengeance. BSE benchmark Sensex witnessed its fourth biggest single day absolute fall as global sell off dragged the markets from its peaks. Markets witnessed intense selling as both the indices fell sharply. Both the Sensex and NSE Nifty lost over 3.5% each.
All the key sectoral indices ended in negative territory. The Real Estate stocks crashed as the Realty index was down by over 5%. Others like Metal and PSU index also fell heavily. Even the Mid-Cap and the Small Cap indexes lost over 2.5% each dragging the benchmark Sensex to hit a low of 15159.
Sugar stocks which traded smartly throughout the day also pared its gains in last hour of the session. Even the FMCG index marginally lost ground towards the fag end. Finally, BSE 30-share Sensex lost 542 points to close at 15235. NSE-50 Nifty dropped 175 points to close at 4445.
RIL, ICICI Bank, L&T, HDFC and R Com were the top five lagging movers. On the other hand ITC, Ranbaxy, Ambuja Cement and Maruti were the top five leading movers.
MTNL declined nearly by 6% to Rs150 after the company announced disappointing Q1 result The company’s net profit was at Rs1.11bn (down 6%) and revenue (down 5.2%) at Rs12.8bn. The scrip touched an intra-day high of Rs158 and a low of Rs150 and recorded volumes of over 13,00,000 shares on NSE.
Titan dropped 5% to Rs1128. The company posted 209% growth in its Q1 profit. The company Q1 net profit was at Rs126.4mn (up 209%) and net sales at Rs6.67bn (up 48%). The scrip touched an intra-day high of Rs1187 and a low of Rs1116 and recorded volumes of over 4,00,000 shares on NSE.
NTPC declined by over 4% to Rs162. The company declared that it planned to set up 150MW Power Plant in Joint Venture with Rashtriya Ispat Nigam. The scrip touched an intra-day high of Rs167 and a low of Rs160 and recorded volumes of over 27,00,000 shares on NSE.
STAR edged lower by 0.7% to Rs299. The company announced its Q2 result with Group Profit at Rs115.8mn (up 108%) and Group net sales at Rs1.8bn (up 6%). The scrip touched an intra-day high of Rs308 and a low of Rs294 and recorded volumes of over 40,000 shares on NSE.
CESC declined by 4% to Rs492.The company announced its Q1 result with net profit at Rs820mn (up 49%) and net sales at Rs7.17bn (up 6.3%). The scrip touched an intra-day high of Rs503 and a low of Rs483 and recorded volumes of over 11,00,000 shares on NSE.
Sugar stocks were in action as reports stated that Government is likely to lift restriction on Sugar exports. Renuka Sugar advanced by 1.8% to Rs628, Bajaj Hindusthan was up by 1.2% to Rs156 and Balrampur Chini added 1.8% to Rs69.
Pharma stocks were also on the receiving end led by fall in frontline stock Dr Reddy’s Lab dropped by over 3.5% to Rs640, Cipla was down by 3.4% to Rs188, Wockhardt slipped by 3% to Rs382 and Sun Pharma declined 2.8% to Rs933.
FMCG index also pared its gains towards the end led by fall in heavyweight Hindustan Unilever lost by over 4.5% to Rs195, McDowell declined by over 4% to Rs1246, Dabur was down 4% to Rs100 and Colgate dropped 0.7% to Rs373. However, ITC surged by over 3%to Rs172 after the company’s result recorded better than market expectations The company’s Q1 profit was at Rs7.83bn (up 20%) and sales at Rs33.25bn (up 16.6%).
Realty stocks were the top losers as the index was down by over 5%. DLF lost by over 5% to Rs599, Unitech was down by over 6% to Rs559, Parsvnath dropped by over 6.5% to Rs359 and Sobha declined 2.3% to Rs890.
Metal stocks lost its shine led by fall in frontline stocks Tata Steel as the scrip dropped by over 7% to Rs651, Hindalco slipped by 5% to Rs173 and Sterlite Industries dropped by 4.8% to Rs623.
Results Today:
Aditya Birla Nuvo, Akruti Nirman, Andhra Bank, Asian Electronics, Asian Paints, BEML, Bharati Shipyard, BHEL, Cairn India, DCB, Divi's Labs, Dredging Corporation, Glenmark, Hinduja TMT, Hotel Leelaventure, HTMT Global, i-flex, India Cement, IOC, INOX, Jet Airways, Jindal Steel, NALCO, NIIT, NTPC, OBC.
Fund Activity:
FIIs were net sellers of Rs14.75bn (provisional) in the cash segment on Friday. On the other hand, local institutions were net buyers at Rs7.27bn. In the F&O segment, FIIs were net sellers at Rs53.44bn.
On Thursday, FIIs poured in Rs2.48bn in the cash segment. Mutual Funds were net buyers of Rs150mn.
Major bulk Deals:
There are no major bulk deals.
Insider Trades:
Action Construction Equipment Limited: JM Financial Mutual Fund through its various schemes has purchased from open market 33800 equity shares of the company on 25th July, 2007.
GlaxoSmithKline Pharmaceuticals Limited: Life Insurance Corporation of India has purchased from open market 36478 equity shares of the company on 24th July, 2007.
Lower Circuit:
Kothari Products, Zuari Industries, Prism Cement, Tanla, Aarti Industries, Marksons, Karuturi Network, Swan Mills.
Upper Circuit:
Ganesh Forgings, Jai Corp and Jaybharat Textile.
Delivery Delight (Rising Price & Rising Delivery):
Crompton Greaves, Federal Bank, ITC and Triveni Engineering.
Abnormal Delivery:
Dabur Pharma, Abhishek Industries, Bharti Airtel, Everest Kanto, Glenmark, Indiabulls, VSNL, RIIL, Punj Lloyd, Sadbhav Engineering and Tata Steel.
Major News & Announcement:
Inflation rate was 4.41% in week ended July 14 against expectation of 4.36%
Titan Q1 net profit at Rs126.4mn (up 209%) and net sales at Rs6.67bn (up 48%)
MTNL Q1 profit at Rs1.11bn (down 6%), revenue (down 5.2%) at Rs12.8bn
Colgate Q1 profit at Rs608.8mn (up 63.6%), net sales at Rs3.51bn (up 13.2%)
CESC Q1 net profit at Rs820mn (up 49%), net sales at Rs7.17bn (up 6.3%)
Tata Chemical Q1 net profit at Rs1.21bn (up 61%), net sales at Rs6.69bn (down 11%)
NTPC plans to set up 150MW Power Plant in Joint Venture with Rashtriya Ispat Nigam
Punj Lloyd gets order worth Rs4.98bn
HCC Q1 net profit at Rs349.8mn (up 39.2%), net sales atRs7.29bn (up 27%)
Moser Baer unit secures $880mn order from REC group
ITC Q1 profit at Rs7.83bn (up 20%) and sales at Rs33.25bn (up 16.6%)
Peninsula Land to split each share into five
Reliance earns record refinery margins in Q1
Reliance Industries Ltd, the nation's most valued company, made a record refinery margin of 15.4 dollars per barrel in the first quarter this fiscal as its Jamnagar refinery processed more complex crude oils.
The Mukesh Ambani-run company had recorded a gross refinery margin (revenue earned on processing of a barrel of crude) of 12.4 dollars per barrel in April-June last year, a company source said.
"This performance is a result of a highly complex refinery along with most efficient liquid port, location advantage and following sound economics of buying cheap and selling premium products," he said.
The complex refineries allows RIL to buy and process some of the heaviest and sour crude the world has seen and which only a handful of refineries have the capability to process. The refinery regularly tries out crude from new sources, which are both cheaper and challenging to process.
During the quarter, RIL tried out crude with an API of 21-24. API is an indicator of how heavy, sour and difficult the crude is to process. The differential in light and heavy margins has been growing in the past few quarters and today it stands at 5-5.5 dollars per barrel, the source said.
With the refinery converted into an export-oriented unit, the company has focused on exports with reducing sales in the local market where it is incurring losses as government refuses to give RIL subsidy at par with what it gives to the PSU oil companies.
The source said that for a long time now RIL has outperformed the Singapore complex benchmark GRM by a wide margin. "The factors that have contributed to high GRMs are cost of sourcing crude oil, manufacturing reliability and efficiency, ability to produce quality transportation fuels and flexibility of crude oil receipt and product evacuation infrastructure."
During the quarter, RIL processed four new crudes which it procured at a substantial discount, the source said.
The 33-million-ton Jamnagar refinery imports all of its crude oil requirement in VLCCs (very large crude carriers) capable of bringing up to two million barrels in each shipment.
"This reduces the freight costs considerably and optimises the overall landed cost of crude oil. The product evacuation infrastructure again provides the flexibility to evacuate the products in varying parcel sizes and optimises the supply chain costs of the buyers," the source said.
Indian Market - a laggard
Eye-popping gains over the past few months notwithstanding, the Indian stock market has not been among the star performers of 2007. And if share turnover velocity is any indicator of the breadth of activity and liquidity in the market, India fares poorly compared with other (both developed and emerging) markets.
Share turnover velocity is the ratio of traded turnover to market capitalisation. Higher the ratio, better the liquidity and more widespread the activity in the market. Globally, investors are attracted to markets with high share turnover velocity as it means lower impact costs (the cost of entering and exiting a stock).
In stock markets across the globe, share turnover velocity has been on the rise over the past one-and-a-half years. In India, the trend has been the opposite, with share turnover velocity declining steadily.
Experts attribute factors like concentration of trading in few stocks and high-promoter holding in companies to this trend.
The share turnover velocity on BSE was as low as 28%, while on NSE it was 59% in June 2007. In January 2006, these figures were 36% and 75%, respectively, as per World Federation of Exchanges’ data. Share turnover velocity in some of the developed world stock exchanges like Nasdaq, NYSE, Shenzhen Stock Exchange, Taiwan Stock Exchange, BME Spanish, Borsa Italiana, Tokyo Stock Exchange and Deutchse Borse is very high and in many cases runs to over 100%.
“Trading in Indian exchanges is very concentrated. Though we have progressed on market depth, market liquidity and market activities remain a concern. Though BSE has the largest number of shares listed on it, the top 5% companies in terms of market capitalisation account for over 80% of the trading volume. Though it is better in case of NSE, it is still not the best,” says Ajay Bagga, CEO, Lotus India AMC.
He says that there is very low market participation, restricting the trading concentration to a few players. This is also due to the fact that promoter shareholding is over 50% in Indian markets, compared with 10-15% in countries like the US. For example, in Korea, there is a huge domestic base of mutual funds and retail investors unlike India.
Expressing concern over the decreasing share turnover velocity, JR Varma of IIM-A says that “this is also probably due to the fact that retail investors are finding the market less attractive and are worried about valuations. Also, barring a few stocks, liquidity has not improved much. Also, we have a very active stock futures market, which attracts day traders as they prefer to trade in futures where it is available, which may not be the case with other countries. The best way for institutions is to split the order between two exchanges to avoid the high impact costs,” adds Mr Varma.
The fallout of the low share turnover velocity in the Indian market is that institutional investors stop looking beyond the top 100 companies. Of late, they have been showing a higher degree of interest in second-line shares. But market players feel it is not much.
“Brokerage houses do not cover more than 100 top companies. So if funds want stock ideas beyond these companies, they have to deploy their own people, which is a costly affair,” says Mr Bagga.
US Market witnesses its worst weekly drop in four years
Just the way deal-making news had taken the US Market to new highs, problems related to financing those deals pushed US Market to their lows for the week ended Friday, 27 July, 2007 and Dow Jones Industrial Average witnessed its worst ever weekly loss in last four years in percentage terms.
Investors digested mixed earnings results once again during the week but ongoing problems in housing and credit market added to the list which already had subprime issues heading it. Other than Apple, none of the earnings reports had any major positive impact on the market sentiments. Market even ignored the strong second quarter GDP numbers announced on Friday, 27 July, 2007.
Growing fears that private equity is having difficulties raising money for acquisitions they've already made was the biggest catalyst behind the week’s market crash.
The Dow Jones Industrial Average lost 586 points for the week. Tech heavy Nasdaq lost 125 points while S&P 500 lost 75 points. The Dow's percentage loss was its worst since March 2003, when it dropped 4.4%. The S&P 500's loss, in percentage terms, was its worst since September, 2003. The Nasdaq's percentage loss for the week was its worst since 2004.
The Materials sector turned in the worst performance followed by Utilities, Financial, and Consumer Discretionary. Materials were worst hit due to a bad earnings report from an important Dow component, Du-Pont. Exxon Mobil was the other biggie to come out with an earnings miss.
Among other names, Merck, AT&T and Amazon.com reported positive results. Ford Motors surprisingly reported its first quarterly profit in almost two years.
On Wednesday, 25 July, 2007, the National Association of Realtors reported that existing home sales, which represent approximately 85% of the housing market, fell 3.8% in June to a 5.75 million annual rate. That was a larger decline than expected and marked the lowest level in nearly five years.
On Thursday, 26 July, 2007, the Commerce Department showed sales of new homes dropped by 6.6% last month to an annual rate of 834,000, well below the consensus estimate of 900,000. The median home price also fell 2.2% to $237,900. That was the largest drop since April.
On Friday, 27 July, 2007, the Commerce Dept reported that the U.S. gross domestic product grew at a 3.4% annual pace in the second quarter, a strong rebound from the 0.6% gain in the first quarter of the year (against economists’ expectation of a 3.2% gain for the quarter).
Executive Summary
For the week, all the three indices registered substantial losses. DJIx is down by 4.41%, S&P 500 is down by 4.9% and Nasdaq is down by 4.7%. Housing and credit market problems continued to haunt stocks. Earnings misses from two big names – Du Pont and Exxon Mobil shook sentiments further.
The yield on the benchmark 10-year Treasury note fell to 4.74% from 4.96% during the end of the week. Crude prices soared beyond $77/bbl but it did not help Energy stocks any way which continued to bear the brunt of Exxon Mobil’s disappointing result.
For the year, Dow is up by 6.4%. Nasdaq is up by 6.1% and S&P 500 is up by 2.9%. With credit crunch hitting the market and housing problem still having a long way to go before soothing, market sentiment is presumed to remain a bit shaky in the forthcoming week too.
Sensex crash: 4th biggest or 64th?
As the Sensex bled 541.74 points in today’s bear attack, market watchers didn’t quite know whether to rate this casualty the fourth biggest or the 64th in the 21-year history of the benchmark index.
Today’s fall was the fourth biggest in terms of absolute value, but it did not figure even in the top 60 when considered in the percentage terms, which some observers said should be given preference as it takes into account the current high level of the market.
A fall of this magnitude would have been a major crash a few years back, when even a 100 point dip was considered as a major concern. However, with the market trading over a level of 15,000 points in terms of the Sensex value, a fall of 100 or 200 points hardly makes a dent, said a broker.
In terms of percentage, the Sensex today fell by 3.43% points, which is the 64th biggest in its history.
While the fall of 826.38 points on May 18, 2006 is widely known as the biggest ever plunge for the Sensex, in percentage terms it was only sixth biggest at 6.76% and occurred at a time when market was trading over 12,000 level.
The biggest ever fall so far in percentage terms occurred on May 17, 2004 when the Sensex slid 11.14%. It was a fall of 564.71 points -- the third biggest in absolute value terms -- and took place when the Sensex was trading just above 5,000-points level.
The second biggest percentage fall was of 8.3% on March 31, 1997, followed by falls of 7.2% on October 5, 1998, 7.1% on April 4, 2000 and 6.9% on April 17, 1999 -- all of which took place when the market was trading below 5,000-points level.
In terms of fall in absolute value of the Sensex, the 826-points fall on May 18, 2006 is the biggest so far, followed by 616.73 points on April 2, 2007, 564.71 points on May 17, 2004, today’s fall of 541.74 points and 540.74 points on February 28, 2007.
However, only two of the ten biggest falls in absolute value terms find place in the top-ten list of biggest falls in percentage terms.
Ever since the Sensex crossed the five-figure mark of 10,000 points, just one of the single-day falls have made to the list of top-20 biggest falls in percentage terms.
US Market continues to bleed
Stocks ignore strong economic data and focuses on credit market concerns
US Market continued with its downward journey even on Friday, 27 July, 2007. Strong economic data failed to cheer market sentiment as ongoing worries about deal-financing overshadowed largely positive economic data and continued to sweep Wall Street. Crude prices crossed $77/bbl but it was of no use to Energy stocks which continued to slip due to Exxon Mobil’s earnings miss.
Reports that Cadbury Schweppes delayed the potential $15 bln sale of its drink division due to "extreme volatility" in debt markets exacerbated the worst of the fears that had been haunting the credit market since the past couple of weeks.
The Dow Jones Industrials plummeted by a huge 208 points to close at 13265.47. Tech heavy Nasdaq shed 37.1 points to close at 2562.24. S&P 500 dropped by 23.71 points to close at 1458.95.
Twenty-six out of the thirty Dow stocks closed in red on Friday. American Express, AIG and Exxon Mobil headed the list of the Dow laggards. JP Morgan and P&G were the Dow winners along with Boeing and 3M which managed to register marginal gains for the day.
US GDP makes a strong rebound in Q2
In the morning hours, the Commerce Dept reported that the U.S. gross domestic product grew at a 3.4% annual pace in the second quarter, a strong rebound from the 0.6% gain in the first quarter of the year (against economists’ expectation of a 3.2% gain for the quarter).
The core consumer price index, rose 1.4% in the second quarter. But that core number, which excludes food and energy, was down from the 2.4% rise in the first quarter, a good sign for inflation. The good GDP numbers just had a momentary positive impact on stocks.
Crude futures climbed, with September crude closing at $77.02 a barrel, its highest level since mid-August of last year. The contract was up 2.8% for the session and 1.6% for the week as supply and demand concerns returned.
On the New York Stock Exchange, more than 2.2 billion shares were traded, while 2.7 billion shares were exchanged at the Nasdaq. At the NYSE, declining stocks beat advancers, 2-1, and by 11-5 on the Nasdaq.
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