Season to forget reason
Conscience is our magnetic compass; reason our chart.
A magnetic compass always points north. Or does it? What happens if you were at the north or south pole. Where would it point? From the limited knowledge that we have (we know limited knowledge is dangerous), the compass would spin freely. Our markets appear to be at a temporary north pole. And that perhaps will explain the free north south movement in the coming days.
Whenever the market falls, we look for reasons. Take for instance Thursday's drop. Weakness in Asian markets, meltdown in key metals on the LME, uncertainty over the Federal Reserve's stance, rich valuations and normal profit booking. The fact remains that the Indian market has rallied sharply in the last four years.
We see a cautious opening today in light of the mixed closing on Wall Street and weakness across Asian markets. The big positive, however is going to be the sharply lower oil prices. Tanla Solutions and Pyramid Saimira Theatres will make their debut today.
We expect the market to remain choppy in the next few days till the major IT results show direction. The RBI policy review and Budget will also have some bearing on sentiment. But, the biggest trump card will continue to be the FIIs. The money they allocate towards the emerging markets, and particularly to India will decide the fortunes of the market this year.
At current valuations, major stock indices appear richly valued. Even large caps outside the Sensex and the Nifty appear to have peaked out. Some pockets of the market like the small- and mid-cap shares do offer opportunities as they have not kept pace with their frontline peers since the crash in May and June last year. But, low liquidity and high volatility are major turn offs.
FIIs were net sellers of Rs2.31bn in the cash segment yesterday on a provisional basis. In the F&O segment too, they were net sellers at Rs2.03bn. On Wednesday, they pumped in Rs2.08bn in the cash segment. On Tuesday, they were net buyers of Rs33.53bn. Mutual Funds poured in Rs1.98bn on Wednesday.
US stocks ended higher for the first time in a week, spurred by late buying in technology shares though retailers were under pressure as they reported disappointing holiday sales.
Intel led the Nasdaq to its biggest gain in a month after Banc of America Securities raised its profit estimate for the world's No.1 chip maker. Biotech firm Amgen rose following an upgrade by Bear Stearns.
The Nasdaq added 30.27 points, or 1.3%, to 2453.43. The S&P 500 finished flat at 1418.34. The Dow Jones added 6 points to 12,480.69.
Oil dropped below $56 a barrel, the lowest in 18 months. Crude oil has tumbled 8.9% in the last two days to a level not seen since June 2005 as mild US weather curbed heating-fuel use. Futures fell 4.7% to $55.59 in New York.
In other markets, US Treasuries rose the most in about two weeks as growth in service industries slowed, while the dollar climbed to a two-week high against the euro. Gold fell for a second day.
Among the Indian ADRs, Patni was up over 1%, VSNL fell 2.6%, Dr. Reddy's gained 2.2% and MTNL was down 2.1%.
Asian stocks fell for a third day on Friday. BHP Billiton and Nippon Mining declined after crude oil plummeted to an 18-month low and copper and gold prices dropped. The Nikkei in Tokyo was down 261 points to 17,092 while the Hang Seng in Hong Kong advanced 28 points to 20,053.
China and New Zealand were the region's only markets to advance.
European shares dipped. The pan-European Dow Jones Stoxx 600 index declined 0.3% to 368.68. The UK-based FTSE 100 closed down 0.5% at 6,287.00 while the German DAX Xetra 30 lost 0.3% to 6,674.40 and the French CAC-40 fell 0.7% to 5,574.56.
In the emerging markets, the Bovespa in Brazil shed nearly 1% to 44,019 while the IPC index in Mexico lost 0.2% to 26,566 and the RTS index in Russia was up 0.6% at 1921.
Select buying was seen in sugar stocks following reports that Ethiopia will open a tender for 40,000 metric tons of sugar on Jan. 6, for delivery between April and June. The country imported 37,200 tons of sugar from India and Brazil last year. The new tender represents about 13% of expected national demand this year.
Major Bulk Deals:
SBI MF has bought Ansal Housing while Merrill Lynch has sold it; Citigroup and Merrill Lynch have sold Asian Electronics; Lotus Global has sold GV Films; Citigroup has purchased Gitanjali Gems; CSFB has sold GTL; UBS has sold JHS Svenguard; Goldman Sachs has sold Lakshmi Overseas; Morgan Stanley has picked up Lumax Industries and NRB Bearings; Kotak Mahindra Bank has sold NK Industries; Prudential ICICI MF has sold Viceroy Hotels; Citigroup has sold Wyeth.
Insider Trades:
Nilkamal Plastics Ltd: Sundaram BNP Paribas Select Midcap has purchased from open market 7000 equity shares of Nilkamal Plastics on 27th Dec 2006.
Market Volumes:
The turnover on NSE was up by 4.9% to Rs85.56bn. BSE FMCG index was the biggest loser and lost 2.08%. BSE Metal index (down 1.72%), BSE IT index (down 1.48%) and BSE Metal index (down 1.72%) were among the other major losers.
Volume Toppers:
IFCI, Nagarjuna Constructions, Polaris, HFCL, HCC, SAIL, ITC, DCB, HLL, Hindalco, Four Soft, GTL, BSEL Infra, NDTV, Ashok Leyland, Info Edge India, Mercator Lines and Deccan Aviation.
Delivery Delight:
ABG Shipyard, Aptech, Arvind Mills, Balaji Telefilms, Bank of India, Bharati Shipyard, Bombay Dyeing, Dr Reddys, Educomp, Goldiam International, Helios & Matheson, Hindustan Construction Co, HPCL, I-Flex, Indraprastha Gas Ltd, Jet Airways, L&T, ONGC, Sadbhav Engineering, SRF, Strides Arcolab, Tulip and Wockhardt.
Upper Circuit Filters:
Champagne Industries, Flex Industries, Goldiam International, Sonata Software, McNally Bharat, Sadbhav Engineering and Taneja Aerospace.
Brokers Recommendations:
Orchid Chemicals – buy from Religare Securities for target price of Rs305.
Long Term Investment:
Hindustan Construction
Major News Headlines:
Nicholas Piramal unit buys majority stake in Jankharia Imaging
JSW Steel hikes price of galvanised steel products
Citigroup raises stake in IVRCL Infra to 6.15%
Asian Electronics denies comment on reports of share buyback
Polaris wins a deal from a Global Top 10 bank
Cubex Tubings bags order from NTPC
Units of Aban Offshore ups stake in Norway’s Sinvest to 50.01%
Hindustan Zinc cuts zinc prices by 4.2% to Rs212000 a ton