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Friday, August 17, 2007

Cheque de India


Politics is the art of looking for trouble, finding it whether it exists or not, diagnosing it incorrectly, and applying the wrong remedy. - Ernest Benn.

Besides the market mayhem, we also have to grapple with the relations between the Left parties and the Congress-led government reaching a flashpoint over the recently concluded civilian nuclear deal with the US. The recovery in the US markets may raise hopes that margin call pressures will be minimal. Else, brokers may well ask their over-leveraged clients for cheques.

The Dow made a stunning comeback, closing 8 points higher after plummeting 341 points earlier. But Asian markets have not reacted to Wall Street cues, and have extended their losses. The Nikkei and Hang Seng are down over 300 points and 600 points, respectively. The current crisis of confidence due to the sub prime woes in the US is still not over as yet.

Things will remain volatile with a negative bias in the near term, though long-term outlook continues to be upbeat. All the more reason for Indian bulls to stay on the sidelines for a while before the global carnage settles down. We expect a cautious to lower opening. A technical bounce back could well be on the cards, but volatility will reign supreme.

US stocks staged a remarkable comeback on Thursday in the closing hours of the day, buoyed by a recovery in banks and securities firms.

Bear Stearns climbed the most since 1998 on speculation that it may get an infusion of capital. Citigroup, Bank of America and JPMorgan Chase led to the biggest rally in a week for financial shares. There is speculation that the Fed may lower interest rates this year.

US stocks were sharply down for most of the day after Countrywide Financial, the biggest US mortgage lender, said it borrowed the entire $11.5bn available in a bank credit line as the global financial crisis curbed access to short-term financing.

The S&P 500 advanced 4.57 points, or 0.3%, to 1,411.27. The Dow Jones lost 15.69 points, or 0.1%, to 12,845.78 after earlier falling 344 points. The Nasdaq Composite Index slipped 7.76 points, or 0.3%, to 2,451.07.

Treasury prices rallied as investors sought safety. The dollar slumped versus the yen and fell versus the euro. Oil and gold prices tumbled.

Losses accelerated in the early afternoon after the release of a surprisingly weak Philadelphia Fed index. Around the same time, the New York Stock Exchange put in trading curbs to limit the market's downside.

Meanwhile, Moody's Investor Service said that the crisis could cause the collapse of a major hedge fund on the same scale as Long-Term Capital Management LP in 1998.

Also impacting Thursday's trading were reports showing that July housing starts and building permits have fallen to a decade low.

US light crude oil for September delivery fell $2.53 to settle at $70.80 a barrel on the New York Mercantile Exchange. COMEX gold for December delivery fell $21.70 to settle at $658 an ounce.

Treasury prices surged in a flight to quality, lowering the benchmark 10-year note yield to 4.65% from 4.71% late on Wednesday.

In currency trading, the dollar slumped versus the yen, but erased bigger losses accrued before the stock market turned around. The greenback inched higher versus the euro.

European shares sank in the worst one-day decline since the Iraq war. Metals producers and financial services firms bore the brunt of the selling as investors worried about the extent of current credit-market woes.

In London, the FTSE 100 closed down 4.1% at 5,858.90. The German DAX 30 slid 2.4% to 7,270.07 and the French CAC-40 fell 3.3% to 5,265.47. The DAX hasn't traded at around these levels since April, while the CAC is around levels not seen since last December. Broadly, the pan-European Dow Jones Stoxx 600 index dropped 3.6% to 352.37.

Bulls were trashed as global carnage spilled over to Indian bourses. Benchmark Sensex witnessed second biggest single day point fall as front liners like RIL, Tata Steel, Bharti Airtel, Reliance Communication and BHEL witnessed heavy selling pressure. Global subprime woes weighed all over as even the Asian and the European markets fell sharply. Japanese stocks dropped to the lowest since November as Nikkei 225 fell 2% while the Hang Seng in Hong Kong fell 3.29%. All the key constituents in the Sensex ended in red. Finally, the BSE 30-share Sensex closed at 14358 losing 642 points. NSE Nifty lost 191points to close at 4178.

Bharti Airtel plunged by over 6.5% to Rs801. India's largest mobile-phone operator announced it plans that it would spend $200mn in the next five years in Sri Lanka to tap users of South Asia's first high- speed wireless network. The scrip touched an intra-day high of Rs831 and a low of Rs795 and recorded volumes of over 20,00,000 shares on NSE.

Reliance Industries crumbled by 5% to Rs1739. Reliance Retail Ltd., a unit of India's most valuable company, plans to open 500 hypermarket stores by the end of 2010 as it seeks to gain a start over local and overseas rivals. The scrip touched an intra-day high of Rs1792 and a low of Rs1725 and recorded volumes of over 40,00,000 shares on NSE.

HDIL dropped by 7% to Rs506. Reports stated that Lehman Brothers Holdings Inc. may team with India's Housing Development & Infrastructure Ltd., to develop Mumbai's Dharavi slum. The scrip touched an intra-day high of Rs540 and a low of Rs502 and recorded volumes of over 17,00,000 shares on NSE.

Bhushan Steel was down by 2.6% to Rs630. Reports stated that the company has picked up 15% stake in Bowen Energy. The scrip touched an intra-day high of Rs638 and a low of Rs629 and recorded volumes of over 74,000 shares on NSE.

Gammon India declined 1.5% to Rs420. The company consortium announced that it has secured Container Terminal project. The scrip touched an intra-day high of Rs443 and a low of Rs401 and recorded volumes of over 1,00,000 shares on NSE.

Heavy selling pressure in the Metal stocks dragged the metal index lower, it fell the most, by 6.51%. Heavyweight like Tata Steel fell by over 10% to Rs575, Sterlite Industries plunged by 8% to Rs558, Hindustan Zinc slipped 2.7% to Rs691as the company announced that it lowered lead prices to Rs137,000 per ton. However, National Aluminum recovered 0.6% to Rs256.

IT stocks also were under the bear attack despite rupee weakening to Rs41.36 per US$. TCS dropped by 3.8% to Rs1088, Infosys was down by 2.3% to Rs1913, Wipro dropped 2.5% to Rs469 and Satyam Computer declined 1.8% to Rs467.

Realty stocks were also badly beaten up as the index was down by 5.56%. Unitech slipped 8% to Rs466, Parsvnath was down by over 8.5% to Rs301, Sobha declined by 5.6% to Rs743 and Akruti dropped 7% to Rs496.

Capital Good stocks also were brutally battered. ABB declined 4.6% to Rs1058, BHEL fell over 5% to Rs1603, Punj Lloyd was down by over 4% to Rs259 and L&T lost 4% to Rs2320.

Banking stocks also were among the major losers as the index was down by 5.42%. SBI slipped 5.8% to Rs1520, ICICI Bank was down by 5% to Rs832 and HDFC Bank lost 4.6% to Rs1094. Union Bank, Bank of India and Corp Bank were the major losers among the Mid- Cap stocks.

Fund Activity:

FIIs were net sellers of Rs31.08bn (provisional) in the cash segment on Thursday and the local institutions pumped in Rs13.99bn. In the F&O segment, FIIs were net sellers at Rs30.59bn. On Tuesday, foreign funds pulled out Rs1.28bn from the cash segment. Mutual Funds were net buyers at Rs1.52bn on the same day.

Major Bulk Deals:

Fidelity Indian MF has bought Alembic while Morgan Stanley has sold it; Reliance Capital has picked up Balmer Lawrie; Hsbc Financial has purchased Centurion Bank of Punjab while Hsbc Global has sold the stock; Merrill Lynch has sold Mangalore Chemicals & Fertilizers.

Insider Trades:

Jindal Saw Limited: Reliance Growth Fund, Reliance Equity Opportunities Fund, Reliance
Tax Saver (ELSS) Fund and Reliance Equity Advantage Fund - Scheme of Reliance Mutual Fund has purchased from open market 450000 equity shares of the company on 9th August, 2007.

IFCI Limited: Goldman Sachs Investments (Mauritius) I Limited (GSIMI) has purchased
from open market 2000000 equity shares of the company on 8th August, 2007
Reliance Capital Limited: (1) Morgan Stanley & Co International Ltd a/c Morgan
Stanley Dean Witter Mauritius Company Ltd has purchased from open market 50000 equity shares of the company on 9th August, 2007.

Cipla Ltd: Mrs. Geeta Amar Lulla (Wife of Mr. Amar Lulla, Joint Managing Director) has
purchased from open market 95000 equity shares of the company on 9th August, 2007.

Lower Circuit:

GTC Industries, Mangalore Chemicals, Radha Madhav, Prime Focus, Karuturi Networks, Silverline, Swan Mils, Nirlon, Yashraj Securities, IOL Broadband and Shaw Wallace.

Upper Circuit:

LML, Assam Company, Walchand Industries, Balasore Alloys, Jai Corp, Bank of Rajasthan, Kernex and Diamond Cables.

Delivery Delight (Rising Price & Rising Delivery):

Carborundum Universal, Century Enka, Gujarat NRE Coke, Kirloskar Electric and Axis
Bank.

Abnormal Delivery:

HDFC Bank, Tata Steel, Sesa Goa, Bharti Airtel and Reliance Capital.

Major News & Announcements:

Damodaran says hedge funds free to register with SEBI as FIIs

DLF agrees to buy 38 acres in Delhi for Rs16.75bn

LIC raises stake in IPCL to 14.02%

Gammon Consortium gets Container Terminal project

ONGC's output may rise 11% in next 3 years

POSCO, SAIL sign strategic alliance to exchange technology, information

Mangalam Cement commissions 17.5MW Captive Thermal Power plant

Sical Logistics acquires cutter section Dredger for $24.92mn

Hindustan Zinc lowers lead prices to Rs137,000 per tons.