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Thursday, October 25, 2007

Decision day…Grin and bear it


If we are to learn to improve the quality of the decisions we make, we need to accept the mysterious nature of our snap judgments.

It's a big day for the bulls, especially the FIIs. Market regulator SEBI will unveil its final regulations on offshore derivative instruments (ODIs), including Participatory Notes (P-Notes). The draft released on Oct. 16 rattled the market before clarifications from SEBI pulled the market up. Still, a host of issues with regard to P-Notes remain unanswered. FIIs will be hoping that the gray areas are sorted out by SEBI today. The move is good for the long-term health of the market, though there could be some short-term hiccups. Besides the SEBI Board meeting on P-Note guidelines, we also have the F&O settlement today. Market players will know about SEBI's final call on P-Notes only after the market is closed for the day. So, the anxiety and uncertainty will keep players on tenterhooks and trading choppy.

As far as global markets are concerned, the trend is not so bad. After a sharp fall initially on renewed credit market jitters, the Dow Jones Industrial Average ended flat, though the Nasdaq lost nearly 0.9%. Markets in Europe closed lower while in Latin America stock benchmarks ended mixed. Other emerging markets in Russia and Turkey were marginally down. In Asian markets this morning, the Hang Seng was a big mover as were markets in South Korea and Singapore. The Nikkei in Tokyo was up marginally. We expect a positive opening but things will turn volatile as the day wears on. In the past couple of years we have seen that the bulls have bounced back smartly every time there has been a big crash. This year only, they have done so on three occasions - in February-March, in July-August and now in October. We expect the market to remain resilient with a positive bias in the days and months to come.

Shares of Maytas Infra Ltd. will be listed today. The company, promoted by Satyam promoters, has set an issue price of Rs370 per share. The stock is expected to shoot past the Rs500 mark.

US stocks dropped for the first time in three days after Merrill Lynch reported the biggest quarterly loss in its 93-year history and home sales tumbled. Merrill fell the most since 2002 on $8.4bn in write-downs from credit-market losses.

The selloff accelerated after the National Association of Realtors said existing home sales sank more than expected last month, to its slowest pace on record. The industry group also revealed that the median home price fell 4.2% from a year ago in September.

Stocks pared most of their decline late in the day and the Dow average recovered from a 206-point drop on speculation that the Federal Reserve will cut interest rates before its Oct. 31 meeting.

The S&P 500 Index lost 4 points, or 0.2%, to 1,515.88 after retreating as much as 2%. The Dow ended flat at 13,675.25. The Nasdaq sank 25 points, or 0.9%, to 2,774.76.

Market breadth was negative as decliners topped advancers on the New York Stock Exchange by nearly 2 to 1 on volume of 1.58 billion shares. Losers beat winners by more than 2 to 1 in Nasdaq trade as 2.78 billion shares traded hands.

Bond prices staged a modest rally, lowering the yield on the benchmark 10-year note to 4.33%, down from 4.4% late on Tuesday. The dollar moved modestly lower against the euro and eased versus the yen.

Light, sweet crude for December gained $1.83 to settle at $87.10 a barrel on the New York Mercantile Exchange, after US oil inventories took a surprise dip in the latest week. COMEX gold for December gained $2.50 to $765.60 an ounce.

European stocks ended a choppy session down. The pan-European Dow Jones Stoxx 600 index fell 0.6% to 377.45 with the mining sector down 2%. The UK's FTSE 100 closed down 0.5% at 6,482.00, the German DAX 30 shed 0.2% to 7,828.96 and the French CAC-40 fell 0.5% to 5,674.67.

Latin American stocks closed mixed. Brazil's Bovespa ended down 0.12% at 62,624.81 after dropping 2% during afternoon trade. Mexico's IPC lost 0.6% to end at 32,048.18, but recovered from a 1.6% tumble shortly after the session started. The Merval gained 0.2% to 2.256.61 in Buenos Aires. In Santiago, the IPSA gained 0.3% to 3,464.87.

In Russia, the RTS index dropped 0.2% to 2123 and the ISE National-30 index in Turkey slipped 0.2% to 70,453.

In Asia, most markets are trading higher. Commodity-related stocks gained after crude oil prices rose and global investors increased the bets that the Fed will cut borrowing costs after US existing home sales plunged.

Posco and Hyundai Heavy Industries climbed after South Korea's economy grew in the third quarter. Japanese exporters slid after the yen strengthened against the dollar, reducing the value of sales made abroad.

The Morgan Stanley Capital International Asia-Pacific Index advanced 0.4% to 165.06 at 10:30 a.m. in Tokyo. Japan's Topix index slid 0.1% to 1,561.89. South Korea's Kospi Index gained 2%, and Taiwan's Taiex index climbed 1.4%. All Asian markets in the region open for trading rose except New Zealand.

The yen rose against all 16 of the world's most-actively traded currencies as global investors cut their holding of high-yielding assets amid persistent worries over the health of the US economy, especially its weak housing sector.

All eye on SEBI meet, F&O expiry

After posting over 5% gains in previous trading session, key indices added on to their gains in early trades. However, bulls were unable to hold on to their gains as markets turned choppy. Traders and investors preferred to book some profits which were witnessed in the index heavyweights like Infosys, ONGC, Bharti Airtel and HDFC.

Finally, the 30-share Sensex ended flat at 18,512. NSE Nifty closed 22 points higher at 5,496.

Sun TV slipped 2.5% to Rs325. The company announced that their Q2 results with net profit at Rs801.6mn (up 67.2%) and net sales rose 106% to Rs1.94bn. The scrip touched an intra-day high of Rs349 and a low of Rs321 and recorded volumes of over 2,00,000 shares on NSE.

Federal Bank gained 0.6% to Rs386 the company announced that they would set right issue price on October 26. The scrip touched an intra-day high of Rs398 and a low of Rs377 and recorded volumes of over 1,00,000 shares on NSE.

Today’s Writing was locked at 5% upper circuit to Rs95.3 after the company’s unit has entered in venture with Naftogaz unit. The scrip touched an intra-day high of Rs95.3 and a low of Rs92 and recorded volumes of over 28,000 shares on NSE.

Union Bank of India surged by over 3% to Rs160 after the company announced its Q2 result with net profit at Rs2.76bn (up 42.2%). The scrip touched an intra-day high of Rs174 and a low of Rs158 and recorded volumes of over 30,00,000 shares on NSE.

Reliance Communications gained by 0.8% to Rs749 as reports stated that the company is likely to sell additional 10% in its tower arm RTIL through an IPO. The scrip touched an intra-day high of Rs775 and a low of Rs744 and recorded volumes of over 99,00,000 shares on NSE.

Dhanus Technologies declined by 4% to Rs327. According to reports the company has planned to acquire two US-based communications companies and a Chinese telecom services provider by raising Rs8bn. The scrip touched an intra-day high of Rs355 and a low of Rs325 and recorded volumes of over 13,00,000 shares on NSE.

Britannia Industries rallied by over 6.5% to Rs1480 after the cookie maker announced that its second-quarter profit more than doubled to Rs485mn in the quarter ended September. 30, rising 128% from a year earlier. The scrip touched an intra-day high of Rs1559 and a low of Rs1455 and recorded volumes of over 11,000 shares on NSE.

Stocks in News:

Dr. Reddy’s performance in July-September quarter was affected due to a sharp decline in revenues from its German subsidiary Betapharm.

TCS says the available indicators suggest no intended reduction in IT budgets.

Infotech Enterprises is scouting for acquisitions to ramp up its capabilities in areas of hi-tech, telecom and automotive.

Patni signs MOU with BITS Pilani for a two-year masters level degree in embedded systems for its employees.

Bank of Maharashtra to enter non-life insurance business in JV with Shriram group and South Africa based Sanlam.

Future Generali, a JV between the Future group and the Italian Assicurazioni Generali Spa, has launched its life and non-life operations in India.

ONGC plans Rs310bn capex in the 11th plan to increase gas production from its KG basin.

ONGC has decided to sell up to 50% stake in a KG basin offshore block to Norwegian energy major Statoil Hydro and Petrobras of Brazil.

ONGC has chalked out an investment plan of Rs63bn for phase II of the redevelopment of Mumbai High South.

Future group might pick up 15% in Percept Holdings.

The cabinet committee on economic affairs (CCEA) will discuss Sterlite Industries’ call option to acquire 49% stake in Bharat Aluminium today.

Gail India is likely to partner with China Gas in developing coal bed methane in Mongolia.

Ranbaxy launches anti-allergic nasal spray in India.

Dabur Pharma has signed an agreement with Spanish generic company Combino Pharm to supply and distribute generic oncology products