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Thursday, August 02, 2007

Think Global, act local


The whole of the global economy seems to be based on supplying the cravings of five per cent of the world's population.

The long-term India story may appear intact. After a thrashing on Wednesday, the bulls will pray for a turnaround Thursday. According to a newspaper report some months ago, on a global scale, the average US citizen uses far more than his or her fair share of the planet's resources - consuming more than four times the worldwide average of energy, almost three times as much water and producing more than twice the average amount of rubbish and five times the amount of carbon dioxide. What is the relevance of all this you may ask? But the Indian markets are back to blindly following the global cues. Nobody has a clue how bad the trouble in the US housing market possibly is or how big will be its fall out on the world's largest economy and the rest of the world.

And then, one also has to keep an eye on the yen, which has started to rise. This might lead to the unwinding of the so-called 'carry trades'. The Japanese currency rose against the dollar and euro as local investors sold foreign-currency denominated assets during the current global meltdown. Private equity deals and the big-ticket M&As, backed by leveraged funding, is also likely to take a hit. Plus you have the highly risk-taking creatures called the hedge funds, some of whom are facing huge losses. Bear Stearns has seen two of its hedge funds collapse last month and has stopped redemptions in a third one. Australia's Macquarie Bank has also warned of losses in two of its funds. All these factors may affect investments to global equity markets, especially emerging markets like India.

Back to the Indian markets, the critical issue at this juncture is how FIIs react to the situation. If they continue to unload their investments, expect more pain. On the flip side, if they stay put, the market will find some support after a selloff of a few hundred points more. Trying to ascertain the direction of the market in the near term appears futile. Stay invested in quality stocks. In fact, if you have the money pick up more at dips.

And now what you would like to hear. We expect a bounce back, on the back of the 150-point rally in the Dow Jones. But, bear in mind that the sentiment still remains jittery. If one looks at the Asian markets this morning, they haven't quite set the counters on fire. So, it would be wise to just stay on the sidelines for a while before taking a fresh plunge.

US stocks rallied late in the session on Wednesday as a rally in computer and consumer shares lifted the Dow Jones Industrial Average 150 points in the last 20 minutes of trading. Apple and Cisco climbed and computer shares added the most to the advance in the Standard & Poor's 500 Index.

The Dow erased a 79-point drop spurred by concern that mortgage losses are spreading after Bear Stearns suspended withdrawals from a hedge fund. The S&P 500 climbed after falling below its 200-day moving average for the first time in a year.

The S&P 500 rose 10.54 points, or 0.7%, to 1465.81. The Dow added 150.38 points, or 1.1%, to 13,362.37. The Nasdaq Composite Index increased 7.6 points, or 0.3%, to 2553.87.

US stocks bounced into the black briefly after the Institute for Supply Management reported that nationwide manufacturing activity fell more than expected and the National Association of Realtors' pending home sales index jumped more than expected in June.

Oil prices weighed in following the government's weekly report on crude inventories, which showed a huge drop last week. US light crude for September delivery sank $1.68 to $76.53 a barrel after reaching a peak of $78.77. The front-month contract was trading 17 cents higher at $76.70 a barrel in the extended trading in Asia.

Treasury prices fell, raising the yield on the benchmark 10-year note to 4.79% from 4.74% late on Tuesday. The dollar gained against the euro and was little changed versus the yen. COMEX gold for December fell $3.40 to $675.90 an ounce.

The Chicago Board Options Exchange Volatility Index rose to 26.22, the highest since April 2003. Higher readings in the so-called VIX, derived from prices paid for S&P 500 options, indicate more risk in stocks and are sometimes read as bullish signs. The VIX ended the day at 23.67.

European shares posted sharp losses. The German DAX 30 closed down 1.5% at 7,473.93, the French CAC-40 tumbled 1.7% to 5,654.30, the UK's FTSE 100 shed 1.7% to 6,250.60. The pan-European Dow Jones Stoxx 600 index gave up 1.5% to 374.37.

Major Latin American equity markets closed mixed. Brazil's Bovespa finished up 51 points, 0.09%, at 54, 233.87. But Mexico's IPC index fell 611 points, or 2% to 30,048.37. The benchmark index, however, finished above its lowest levels.

Asian markets are very choppy this morning. The Nikkei in Tokyo is up 80 points at 16,951 while the Hang Seng in Hong Kong is down 70 points at 22,385. The Kospi in Seoul is down 4 points at 1852 and the Straits Times in Singapore was up 13 points at 3445.

Markets tanked wiping off its previous sessions gains as global markets crumbled on concerns over the subprime mortgages and credit markets in the US. Huge down fall in the Asian markets further dampened the sentiments as the Nikkei in Tokyo lost 377 points while the Hang Seng in Hong Kong closed 729 points lower dragging the benchmark Sensex to hit a low of 14910.

RIL, ICICI Bank, L&T, Bharti Airtel and Infosys were the major lagging movers. However, Dr Reddy’s Lab, Cipla, Maruti, Ambuja Cement and Bajaj Auto were the top leading movers among the 30-scrip’s of Sensex.

All the key sectoral indices ended in deep red. BSE Realty index was down 6.64%, BSE Metal index was down 4.81% and Capital Good index was down 4.69% were the top losers. Even the Mid-Cap and the Small Cap indices lost over 3%.

Finally, BSE 30-share Sensex plunged 615 points to close at 14935, recording its biggest fall since April 2. NSE-50 Nifty lost 183 points to close at 4345 touching an in intra-day high of 4532 and a low of 4339.

Indian Hotel pared its gains as the scrip lost by 2.3% to Rs136. The company has reported good set of numbers for the first quarter. The company announced its Q1 result net profit at Rs547.6mn (up 39%), revenue at Rs3.64bn (up 21.3%). It is also planning to raise funds for expansion, including a Rights Issue. The scrip touched an intra-day high of Rs144 and a low of Rs134 and recorded volumes of over 15,00,000 shares on NSE.

Bajaj Auto was down by 3% to Rs2286 after the company July sales fell by 7% to 185890 units. The scrip touched an intra-day high of Rs2350 and a low of Rs2271 and recorded volumes of over 2,00,000 shares on NSE.

TVS Motors slipped by 1.7% to Rs57 after the company’s July Motorcycles sales were at 44392 units (down 3.5%). The scrip touched an intra-day high of Rs58 and a low of Rs56 and recorded volumes of over 2,00,000 shares on NSE.

Maruti also was in reverse gear as the scrip was down by 2% to Rs829. The company announced its July sales at 57909 units (up 24.7%). The scrip touched an intra-day high of Rs835 and a low of Rs806 and recorded volumes of over 6,00,000 shares on NSE.

M&M lost nearly by 5% to Rs693. The company announced its July sales at 19163 units (up 45.8%). The scrip touched an intra-day high of Rs730 and a low of Rs690 and recorded volumes of over 13,00,000 shares on NSE.

Cadila was trading firm in a falling market, the scrip was up by 1.2% to Rs355 after the company yesterday announced its Q1 result with net profit atRs739mn (up 26.5%) and net sales at Rs5.72bn (up 28.2%). The scrip touched an intra-day high of Rs365 and a low of Rs347 and recorded volumes of over 1,00,000 shares on NSE.

Sugar stocks were under pressure on back of selling pressure. Renuka Sugar dipped by 6% to Rs588, Balrampur Chini was down 2.2% to Rs66; Bajaj Hind declined 1.8% to Rs151 and Sakhti Sugar declined by 3% to Rs79.

PSU oil companies lost ground as crude oil prices were ruling very close to record levels. Oil prices in New York climbed to a one-year high above $78 per barrel. BPCL lost by over 4% to Rs307, HPCL was down by over 5% to Rs244 and IOC slipped by 1.3% to Rs398.

Cement stocks sharply slipped on back selling pressure. Heavyweight ACC dropped by over 9.5% to Rs962, Ambuja Cement was down by over 2.5% to Rs128, Kesoram Industries lost by over 6% to Rs463 and Mangalam Cement slipped by 3% to Rs164.

Mid-Cap index slipped by 3.82%. Hexaware dropped by over 8.5% to Rs127, Crompton Greaves was down by 6% to Rs275 and Patni plunged by 7.5% to Rs436 were the top losers among the Mid-Cap stocks.

IT stocks also were on the receiving end led by fall in heavyweight Infosys as the scrip was down by 2.2% to Rs1932, Wipro lost over 4.6% to Rs474 and Satyam Computer was down by 2.5% to Rs470. Hexaware, Patni and HCL Tech were the major losers among the Mid-Cap stocks.

Realty stocks also were badly beaten up. DLF slipped by 4.3% to Rs585, Unitech dropped by 8.3% to Rs511, Sobha declined by over 5% to Rs845 and Akruti declined 1.5% to Rs506

Fund Activity:

FIIs were net sellers of Rs12.56bn (provisional) in the cash segment on Wednesday. At the same time, local institutions were net buyers of Rs9.35bn. In the F&O segment, FIIs were net sellers at Rs21.27bn.

On Tuesday, FIIs pumped in Rs4.34bn from the cash segment.

Major bulk Deals:

Reliance Capital has sold Ambika Cotton; Morgan Stanley has purchased Ansal Infrastructure, Apollo Hospitals, Aurobindo Pharma, GVK Power and Shriram Transport; Citigroup has picked up SMS Pharma while Morgan Stanley has sold the stock; Citigroup has sold Standard Industries; Merrill Lynch has sold United Breweries.

Insider Trades:

GNFC: Reliance Capital Asset Management Limited has purchased from open market 500000 equity shares of the company on 1st August, 2007.

Lower Circuit:

Amar Raja Batteries, Easun Reyrolle, Hindustan Oil Exploration, Zuari Industries, Tanla, Indus Fila, Bartronics, Evinix, Kothari Products, IOL Broadband, Taneja Aerospace, Kalindi Rail, Vakranjee Software, Bag Films, IID Forgings, Zenith Infotech and BF Utilities.

Upper Circuit:

Jai Corp, Marksons and Jaybharat Textile.

Delivery Delight (Rising Price & Rising Delivery):

Cadila and Marico.

Abnormal Delivery:

SBI, Kesoram, Reliance Capital, Jet, Hindalco, IDFC, ICICI Bank, VSNL, Lupin, Bharti Airtel, Voltas, SAIL, Grasim and Century Textiles.

Major News & Announcements:

India's June exports rise 14% to $11.87bn, imports rose 36.7% to $19.2bn

Gujarat Ambuja Cements July sales at 1.39mn tons (up 20%)

DCM Shriram Consolidated gets Rs7bn contract

Godrej Consumer plans to acquire companies, aims to buy low-cost hair colour companies overseas

Bajaj Auto July sales at 185890 units (down 7%)

Maruti July sales at 57909 units (up 24.7%)

TVS Motors July Motorcycles sales at 44392 units (down 3.5%)

Hero Honda July sales at 201191 units (down 15%)

M&M July sales 19163 units (up 45.8%)