Rough weather...avoid catching small fishes
The fishermen know that the sea is dangerous and the storm terrible, but they have never found these dangers sufficient reason for remaining ashore
There seems to be nothing pleasant about the weather these days. After a weak Wednesday, we seem to be heading for possible a terrible Thursday. If you've decided to take on the storm, do bottom fishing only with the large fishes. Avoid picking up similar business companies which are available in the smaller segments for now.
We expect the bulls to remain under pressure as global markets are down sharply and crude oil prices have also inched higher. There may be some short-term pain before the bulls fight back and lift the Sensex past its previous lifetime high. Liquidity will play a critical role. If FIIs continue to pour money, there should not be any major issues. However, one must factor in the global markets, as this year they are increasingly having a bearing on the local markets. We will also have a slew of public issues, especially the big-ticket ones from DLF and ICICI Bank to contend with.
The bulls got trapped badly in a late afternoon crash, possibly sparked by fresh fears of higher interest rates globally. Those concerns did turn out to be true as the European Central Bank hiked its key rate by another 25 basis points to 4%, the highest since Aug. 2001. Today, the Bank of England will announce its decision on interest rates. Though it may maintain a status quo, there is every likelihood of tightening in future to reign in inflation.
Goldman Sachs now doesn't expect the Fed to cut rates this year. Earlier, it had expected a 75 basis points rate cut. Fed chief Ben Bernanke and his colleagues have not given any concrete clues with regard to a reduction in borrowing costs as they are more concerned about inflation. As is the Chinese central bank, which may also have to resort to rate increases in order to cool down the over-heating economy there. Back home too, the markets are worried about some more monetary squeeze by the RBI though inflation has fallen sharply over the past several weeks.
Auto sales, especially the two-wheelers may crack further, amid reports that companies are cutting production and dealer inventories as rising interest rates hurt sales. Great Offshore and GE Shipping will hog the limelight as a financial daily reports that the Vijay Seth will take control of Great Offshore by paying Rs5.8bn to cousins - Bharat and Ravi. Cambridge Solutions will also be in action amid reports that Europe's largest private equity firm Permira has joined the race for buying the BPO firm. MTNL could buck the negative trend as it has reportedly emerged as the highest bidder for Sri Lanka's fixed-line operator Suntel.
Inflation concerns sent US stocks to their biggest two-day decline since March after first-quarter labor costs rose more than forecast. Federal Reserve Bank of Cleveland President Sandra Pianalto also joined Bernanke in warning that prices are rising too quickly.
The S&P 500 lost 13.57, or 0.9%, to 1517.38. The Dow average fell 129.79, or 1%, to 13,465.67. The Nasdaq Composite Index retreated 24.05, or 0.9%, to 2587.18.
Unit labor costs rose 1.8% versus the initially reported rise of 0.6%. Separately, Richmond Federal Reserve Bank President Jeffrey Lacker said that it is not clear whether so-called core inflation is moderating. Pianalto said that the long-term inflation trend remains too high.
Treasury prices inched higher, lowering the yield on the 10-year note to 4.96% from 4.99% late on Tuesday. Investors are keeping an eye on 5%, a key psychological level that the 10-year note yield has not surpassed yet this year.
In currency trading, the dollar rose versus the euro and fell versus the yen. COMEX gold for July delivery fell 50 cents to settle at $674.60 an ounce.
US light crude oil for July delivery settled up 35 cents to $65.96 a barrel in New York after the weekly inventories report showed a jump in gas supplies and a surprise fall in refinery activity, while a cyclone batters the Persian Gulf. The front-month contract was quoting 8 cents up at $66.04 a barrel in extended trading.
European stocks posted their biggest decline in more than two months on concerns that policy makers will keep raising interest rates to curb inflation. The ECB raised interest rates by a quarter percentage point to temper inflationary pressures in the expanding economy. That sent European stocks tumbling.
The pan-European Dow Jones Stoxx 600 index lost 1.6% to 390.41. The German DAX Xetra 30 closed down 2.4% at 7,730.05 , the UK's FTSE 100 fell 1.7% to 6,522.70 and the French CAC-40 dropped 1.7% to 5,977.87.
Most emerging markets too ended in the red. The Ibovespa in Brazil was down 2.1% at 52,049 while the IPC index in Mexico slid 1.8% to 31,681 and the RTS index in Russia gave up 0.5% to 1823.
Asian stocks fell for the first time in six days this morning after a higher-than-expected gain in US labor costs fueled concern that the Fed will follow Europe in jacking up interest rates to tame inflation.
The Morgan Stanley Capital International Asia-Pacific Index retreated from a record high, following declines in the US and Europe.
The MSCI Asian index lost 0.5% to 152.38 as of 10:45 a.m. in Tokyo, snapping a five-day, 3.3% rally. BHP Billiton led mining shares lower after metals prices fell. A measure of six metals traded on the London Metal Exchange (LME) lost 1.8% overnight. Copper slid 1.6%, zinc fell 2.7% and nickel dropped 1.5%.
Japan's Nikkei 225 Stock Average dropped 0.8% to 17,891.70. Benchmarks in other markets open for trading declined, except in China, where the CSI 300 Index advanced for a third day.
Markets registered poor close as bulls were shrugged off the bourses. Bears ruled as heavy sell of in the scrip’s across the bourses dragged the NSE Nifty to close below the 4200 mark and benchmark index Sensex to close almost 300 points lower. The upcoming DLF IPO and other public issues coming this month possibly will drive away money from the markets dampening the spirits of the bulls.
All the sectoral indices ended in red, even the Mid-Cap and the small cap index closed lower by 1.2% each dragging the benchmark index Sensex to post its biggest single day fall since April 27. Tata Tea, SAIL and Zee Telefilms were among the major losers, however, Hindalco, VSNL and Satyam Computer were the major gainers losers among the 50-scrip’s of NSE Nifty.
Finally, the 30-share Sensex dropped 279 points to close at 14255. NSE-50 Nifty was down 86 points to close at 4198.
BASF lost by over 7% to Rs253 after the company announced its Q4 result with net profit at Rs36.7mn (down 26%), however revenue at Rs1.62bn (up 10.2%). The scrip touched intra-day high of Rs278 and a low of Rs250 and recorded volumes of over 1,00,000 shares on NSE.
Praj Industries gained 1.4% to Rs499 after the Board of Directors of the company announced that they have approved bonus issue in ratio of 1:1. The scrip touched intra-day high of Rs513 and a low of Rs494 and recorded volumes of over 11,00,000 shares on NSE.
Cadila was down by 0.8% to Rs334. The company announced that they received approval for Topiramate tablets. The scrip touched intra-day high of Rs341 and a low of Rs332 and recorded volumes of over 15,000 shares on NSE.
Sunil Hitech slipped 1% to Rs138. The Company announced that they have secured orders worth Rs1.5bn. The scrip touched intra-day high of Rs147 and a low of Rs138 and recorded volumes of over 3,00,000 shares on NSE.
Auto stocks witnessed selling pressure. Tata Motors dropped by 3.2% to Rs688, Maruti was down 3% to Rs776, Bajaj Auto slipped 1.2% to Rs2218 and M&M lost 0.9% to Rs745, Amtek Auto edged lower by 0.5% to Rs414. The company announced that it acquired UK Based JL French's Witham Assets and Ashok Leyland slipped by 1.7% to Rs37. The company announced its May sales at 5804 units (up 3%)
IT stocks also pared its intra-gains despite rupee weakening to 40.70 per dollar. Infosys was down 0.6% to Rs535, Wipro slipped 0.6% to Rs532, Rolta declined 3% to Rs446 and NIIT Ltd plunged nearly by 8% to Rs911. The company yesterday declared 1:2 bonus issue and also announced that they would split each share into five.
FMCG stocks also ended lower. Tata Tea declined by 4.7% to Rs851, ITC was down by 2.5% to Rs157, Nirma slipped 1.8% to Rs185, McDowell edged lower by 0.6% to Rs1155 and Colgate dropped 0.6% to Rs358.
Pharma stocks were in bad health. Ranbaxy was down by 2.8% to Rs380, Sun Pharma slipped by 1.6% to Rs1075, Glaxo declined by 1.4%t o Rs1281 and Cipla slipped 1.2% to Rs213.
Insider Trades:
Igarashi Motors India Limited: M/s.T. Rowe Price Associates, Inc. & its affiliates has sold in open market 7179 equity shares of Igarashi Motors India Limited on 4th June, 2007.
Mahindra & Mahindra Ltd.: Nadir B. Godrej, Director has purchased 9500 equity shares from the market of Mahindra & Mahindra Ltd on 30th May 2007.
Titan Industries: Nihal Kaviratne, Director of the company from market has purchased 300 equity shares of Titan on 31st May 2007.
Lower Circuit:
Adhunik Metaliks, Tanla, Shaw Wallace and Tripex Overseas
Upper Circuit filters:
Shree Ashtavinayak, Geojit Financial, Dawn Mills, Mahindra Forging, Ruby Mills, and IID Forgings.
Delivery Delight (Rising Price & Rising Delivery):
Apollo Hospitals, Grasim Industries, Hindalco Industries, MPhasis BFL, NALCO, Polaris Software, Siemens, SRF, Tamil Nadu Newsprint & Papers, VSNL and Wockhardt.
Abnormal Delivery:
Aurobindo Pharma, Nagarjuna Fertilizers, Grasim Industries, Federal Bank, Ashok Leyland, Wipro, Lupin, Tata Power, Colgate, MTNL, Escorts, Thermax and Dr Reddys.
Major Bulk Deals:
Fnil A/C. Copthall has bought Bank of Rajasthan; Deutsche Bank has sold Core Projects; T Rowe Price has sold McDowell Holdings; Sundaram BNP Paribas has picked up Shreyas.
Major News:
Alstom wins signaling contract worth Rs2.55bn from Delhi Metro Rail Corp
Strides Arcolab gets two more NDA approvals from USFDA
Zydus Cadila Gets Tentative nod for Topiramate Tablets
BASF Q4 profit at Rs36.7mn (down 26%), revenues at Rs1.62bn (up 10.2%) and recommends 70% dividend
Sunil Hitech gets orders worth Rs1.5bn
GEI Industries secures orders worth Rs350mn
Rajesh Exports sets aside Rs10bn to buy Rivals Abroad
Suzlon gets order for 630MW Wind Turbine
NTPC mulling follow-on public issue: report
ISMT buys Structo Hydraulics AB