Our chief defect is that we are more given to talking about things than to doing them – Jawahar Lal Nehru.
Looks like the Left is doing the talking for the bulls! For a change, television talk by AB Bardhan, a senior Left party leader managed to give a fillip to the stock market. He told a news channel that the communists were willing to permit the Government to start negotiations with IAEA on India-specific safeguards. This is a big relief for the Government, though a formal announcement to this effect will be made after the meeting of the UPA-Left panel on the Indo-US nuke deal, on Nov. 16. What's more, the Government will need to have the safeguards approved from the Left parties before signing the same. If the communist allies stick to the current stance, there is a likelihood that the landmark pact between India and the US could still see the light of day. That is still in the realm of speculation and conjecture, for now the bulls seem to have found some positive trigger to latch on to.
Things also appear to be bright as far as global markets are concerned. Call it short covering, a technical pull-back or a dead-cat bounce, US stocks managed to stage a smart rally overnight amid some soothing words from the CEO of battered Wall Street firms. Better than expected earnings from retail giant Wal-Mart also added fuel to the fire. As a result, equity markets surged across the world. We expect the local market to behave similarly. The main indices will witness a gap-up opening in line with the trend in Asian markets. Lower crude oil prices could help boost sentiment though one cannot say the same about FII inflows, which are not showing any sign of revival. This could be a major hindrance for the market in the near term. So, despite the buoyant global trend, the Indian market will remain rangebound yet choppy after initial gains. Stock specific action will continue. And like we mentioned yesterday, hold on to strong counters.
US stocks rallied the most in two months after Wal-Mart's profit beat analysts' estimates and Goldman Sachs said it doesn't plan any significant writedowns on mortgage-related assets. Apple led the Nasdaq Composite Index to its biggest gain in four years after China Mobile said it's in talks to sell the iPhone in China.
The Standard & Poor's 500 Index climbed 42 points, or 2.9%, to 1,481.05, the biggest gain since the Federal Reserve cut interest rates on Sept. 18. The Dow Jones Industrial Average surged 320 points, or 2.5%, to 13,307.09. The Nasdaq added 90 points, or 3.5%, to 2,673.65.
Goldman Sachs CEO Lloyd Blankfein says the company won't take any further significant charges related to the subprime mortgage mess. JP Morgan CEO Jamie Dimon says his company is doing fine and sought to downplay its exposure to subprime and other debt.
E*Trade shares bounced back nearly 41% after slumping 60% on Monday on bankruptcy talk.
Market breadth was positive and volume was strong. Almost nine stocks gained for every one that fell on the New York Stock Exchange.
While the day's advance was positive, it doesn't indicate a new direction for the US market going forward, according to some analysts. Because of the lingering questions about the state of the world's largest economy, a fragile banking sector, high oil prices and consumer spending, US stocks will stay choppy between now and the end of the year.
Laurence Fink, who helped create the market for mortgage-backed securities, says the credit losses that have already cost American banks and securities firms $45bn are about to get worse. Fink, CEO of New York-based fund manager BlackRock, says many institutions don't understand what the credit crunch is going to do to earnings and their balance sheet.
There were more warnings on the US sub-prime crisis. The chaos in the mortgage markets is only going to get worse in 2008 and will put a dent in US mortgage bank earnings, says a report released by Standard & Poor's (S&P). Next year will be the worst for mortgage bank earnings since the 1990s, the ratings agency adds.
US light crude oil for December delivery fell $3.45 to settle at $91.17 a barrel on the New York Mercantile Exchange, sliding after the International Energy Agency cut its monthly forecast on crude demand.
COMEX gold for December delivery fell $8.70 to settle at $799 an ounce on the New York Mercantile Exchange, stalling after a big selloff in the previous session. In currency trading, the dollar continued to slump against the euro. The greenback inched higher against the yen.
Treasury prices fell, raising the yield on the 10-year note to 4.26% from 4.22% late on Monday.
European shares moved off lows to close broadly higher. The pan-European Dow Jones Stoxx 600 index edged up 0.2% to 368.52. The French CAC-40 rose 0.1% to 5,538.91, but the German DAX 30 lagged, slipping 0.4% to 7,777.56. The UK's FTSE 100 closed up 0.4% at 6,362.40.
Stock markets in Mexico and Brazil also advanced. Brazil's benchmark Bovespa stocks index closed up 2.3% to 62,927 while Mexico's IPC index gained 4.6% to 29,484.78. The RTS index in Russia lost 0.9% at 2222 and the ISE National-30 index in Turkey climbed 1.5% to 69,464.
Asian stocks rose for the first time in five days, led by Toyota and Canon, after the yen weakened against the dollar and Wal-Mart's profit beat estimates.
Mitsubishi UFJ Financial Group and National Australia Bank led lenders higher after Goldman Sachs said it doesn't plan significant writedowns on mortgage-related securities.
The Morgan Stanley Capital International Asia Pacific Index added 2.2% to 161.65 as of 11:15 a.m. in Tokyo, after a four-day, 5.4% drop. All markets open for trading climbed.
Japan's Nikkei 225 Stock Average gained 278 points to 15,405.45, its first increase in nine days. South Korea's Kospi index climbed 32 points to 1965, while the Hang Seng in Hong Kong soared by 914 points to 28,717.
The yen dropped to 111.21 against the dollar recently, from as high as 109.22 yesterday.
The rally may not sustain
Markets snapped a six day losing streak after softening of Left’s stance on Indo-US nuke deal lifted the sentiments on Dalal Street. The Left parties on Tuesday said that they may allow government to initiate negotiations on Nuke Deal.
The rally was also fueled by sharp recovery in the Asian markets and buying momentum in the Power, Capital Good and the banking stocks.
All the BSE sectoral indices ended in green except for the BSE IT index the only losing index (down 0.95%). Among the leading gainers, BSE Bankex (up 3.45%), BSE Capital Good index (up 3.40%) and BSE Power index (up 3.04%)
Among the Sensex pack, 19 stocks ended in green. While, 11 scrips finished in negative terrain. L&T, ICICI Bank, HDFC Bank and NTPC were among the major gainers. However, IT bellwether Infosys, Wipro, M&M and TCS were among the major laggards.
Finally, benchmark Sensex surged 298 points to close at 19,035. NSE Nifty closed 78 points higher to close at 5,695.
Reliance Industries edged higher 0.5% to Rs2693 after the company announced that they signed production sharing agreement for deep water offshores in
ONGC ended flat at Rs1180. Reports stated that shortage of rigs is likely to delay development of the company’s KG basin block by a year. The scrip touched an intra-day high of Rs1215 and a low of Rs1156 and recorded volumes of over 1,00,000 shares on NSE.
Reliance Communications advanced by 2% to Rs708 as reports stated that the company is in race for acquiring 51% stake in Telkcom
Ashok Leyland gained 1.2% to Rs37 after reports stated that they are eyeing Joint Ventures in
Power stocks sparked up after Left announced that it would allow the government to talk to IAEA for on Nuke deal. Areva T&D was the top gainer, the scrip rallied by over 13% to Rs2914 after the Communist’s move on Nuclear deal. Others like REL gained 2.2% to Rs1857, BHEl was up 2% to Rs2777 and NTPC rose over 7% to Rs272.
IT stocks continued to be on the receiving end as rupee stayed under the Rs40 per USD. Wipro was the top loser, it slipped 3% to Rs442, Infosys was down 1% to Rs1627, Satyam Computer slipped 0.5% to Rs410.
India Cement gained 2.5% to Rs267 after the Board of Directors of the company announced that they would consider raising funds on November 19. The scrip touched an intra-day high of Rs274 and a low of Rs259 and recorded volumes of over 6,00,000 shares on NSE.
Infosys slipped 1% to Rs1627. The company announced its plans to buy European rivals, consulting firms. The scrip touched an intra-day high of Rs1693 and a low of Rs1607 and recorded volumes of over 29,00,000 shares on NSE.
Pratibha Industries surged by over 9% to Rs279 after the company announced that they have secured Rs413.5mn contract. The scrip touched an intra-day high of Rs281 and a low of Rs242 and recorded volumes of over 1,00,000 shares on NSE.
Stocks in News:
DLF to buy ultra-luxury Aman Resorts for US$250mn
Vodafone to sell 0.6% stake in Bharti by November 2008
Ranbaxy increases stake in Zenotech Lab to 34%
Pratibha Industries wins Rs410mn order for the expansion of the domestic terminal at the Delhi airport
Mcnally Bharat receives a Rs340mn order from Maharashtra State Power Generation Company
Bombay Rayon Fashions to spend Rs11bn on building new fabric and garment facilities in Maharashtra
Texmaco signs a MOU with Australia's United group for building joint facilities in West Bengal
KPIT Cummins plans to set up two offshore development centres for Japanese semi-conductor companies
Jindal Steel and Power’s proposed 6mn tons steel plant in Orissa halted due to land acquisition delays
Noida Toll Bridge expects its net profit to double in FY08 to Rs220mn
Faze Three buys 76% of German bath rug maker Pana Textil GmBH for Rs333mn
Indian arms of Pfizer and GSK to benefit from global job cuts
Petronet LNG plans second gas based power plant of 1,000MW at its proposed Kochi LNG terminal
JSW Energy is planning to transfer a power plant, currently under its fold, to the group’s flagship company JSW Steel
Wockhardt Hospitals is planning to set up 14 super-specialty hospitals over the next two years.
SAIL to invest Rs20bn to set up 10 steel processing units
Samsung India would invest US$100mn in four years at its new manufacturing facility at Sriperumbudur near Chennai
Infosys plans to acquire smaller competitors in Europe
Usha Martin has announced a Rs8.5bn hike in its planned capital expenditure to Rs21bn
ITC is likely to buy Parle Products confectionery business
Gail India is likely to pick up stakes in pipelines in Libya, Algeria and Nigeria
HDFC gets Rs1.7bn brand premium from Ergo for the latter’s 26% stake in its non-life insurance company
ONGC has filled for a three year extension of petroleum exploration license for its Assam Arakan block
The Government to infuse Rs200bn as equity capital in PSU banks
The Government plans not to revise retail fuel prices until crude oil prices stabilize
The screening committee of the coal ministry will consider allocation of 23 blocks in December
The Government says a total investment of US$6.5bn is in pipeline for medical tourism industry
Crude oil production is expected to increase by more than 25% over the next five years.
FII Investment Trend:
FIIs were net sellers of Rs3.32bn (provisional) in the cash segment on Tuesday while the local institutions were net buyers of Rs2.64bn.
In the F&O segment, FIIs were net sellers of Rs11.21bn. Foreign funds net sold Indian equities worth Rs8.2bn on Monday.
Mutual Funds pulled out Rs1.86bn from the cash segment on the same day.