The greatest of worries can't pay the smallest of debts.
It’s cuts and bruises all around. The Federal Reserve has yet again attempted to rescue not just the US economy, but global markets. The unscheduled, yet expected rate cut was prompted by the global meltdown over the past couple of days and a weak start to the year for Wall Street. Though the Fed rate cuts may improve things across global markets for the time being, the worries are far from over. There could be more pain in the offing. Pain is bearable for a short time. But prolonged pain leads to torture so ensure that your positions are good enough to climb over any wall of worry. Else, sit on the fence till the situation stabilizes. We expect a gap-up opening and another highly volatile day of trading. Trend across Asia and later on in Europe will be key to watch out for.
There is a growing feeling that the US is speeding into a recession in the wake of the housing sector bust and the ensuing strain in the credit markets. There are fears that a slowing US economy could hurt 4-5 years of strong global expansion. Hence, the carnage across global markets. But, the Fed move has managed to stem the tide for the time being. There is talk of another 50-basis-point cut by the Fed at its Jan 29-30 meeting. Given the dire situation that the US and the global economy find themselves, that could turn out to be true. In that case, global markets should stage a strong comeback. Not only that, now there is also talk that even the generally conservative RBI Governor YV Reddy could relent and loosen his tight monetary policy. That will surely fire up the bulls. Even an indication of rates having peaked out will be suffice to shore up the gloomy sentiment. A good, market-friendly and reform-oriented budget will be the icing on the cake. However, there is also a chance that the rosy scenario may not work out the way we all wish it to.
FIIs pulled out Rs42.65bn (provisional) from the cash segment yesterday. Domestic institutions pumped in Rs27.79bn. In the F&O segment, they were net buyers of Rs76.7bn.
Results Today: Avaya Global, BILT, Bank of Maharashtra, Bank of Rajasthan, Bongaigaon Refinery, Canara Bank, Chennai Petroleum, D-Link, Dena Bank, Euro Ceramics, Fortis Healthcare, Foseco India, Graphite India, Hindustan Zinc, Ion Exchange, Mid-Day Multimedia, Mirc Electronics, Monsanto India, MRO-TEK, Polaris Labs, PVR, Renuka Sugar, SRF, Sun TV, Union Bank, Varun Shipping and Vivimed Labs.
Kinetic Engineering has decided to sell some of its surplus assets near Pune for Rs480mn. A buyer has been identified and MOU has been entered into. The formalities including obtaining various approvals is under process and expected to be completed by March 31.
Kinetic Engineering's Board has also approved the merger of the Auto Component Division of Jaya Hind Sciaky with the company
Asian stocks have rebounded after the Fed rate cut. The MSCI Asia Pacific Index added 2.6% to 135.47 as of 10:30 a.m. in Tokyo, headed for its biggest gain since Nov. 29. The regional benchmark tumbled 10% in the previous two sessions. It yesterday completed its worst two-day drop in almost 18 years.
The Nikkei in Tokyo was up 3.35% at 12,994 while the Hang Seng in Hong Kong gained 6.3% at 23,132. The Kospi in Seoul advanced 2.1% to 1643 while the Straits Times in Singapore rose 2.9% to 2949. The Shanghai Composite was up 1.15% at 4611 but the Taiex in Taiwan was flat at 7582.
US stocks closed well off their day's lows after the Fed announced a 75-basis-point cut in benchmark interest rates to ward of the looming threat of a recession. The global market selloff prompted the Fed to hold an emergency telephone conference Monday night, and slash the fed funds rate to 3.5%.
Treasury Secretary Henry Paulson says the Fed's emergency rate cut may boost investor confidence and has called on Congress to quickly enact legislation to buttress growth. His remarks came after a two-day rout across global equity markets fueled by mounting concerns that the US is headed into a recession.
The S&P 500 dropped 15 points, or 1.1%, to 1,310.5. The Dow Jones slid 128 points, or 1.1%, to 11,971.19, its first close below 12,000 since November 2006. The Nasdaq lost 48 points, or 2%, to 2,292.27.
Market breadth was negative. About five stocks declined for every four that rose on the New York Stock Exchange.
US stocks have had a miserable start to 2008. Year-to-date, the Dow is down 9.8%, the S&P 500 is down 10.8% and the Nasdaq has fallen 13.6%.
In a statement, the Fed said it was making the move due to the weakening economic outlook and increased risks to growth. This was the first emergency interest rate cut since the Sept. 2001 terrorist attacks in New York. It was also the biggest interest rate cut since 1984.
Treasury prices surged in a classic flight-to-quality, with the yield on the 10-year note falling to 3.45% from 3.65% late on Friday. The dollar fell versus the euro and gained against the yen.
US light crude oil for February delivery fell 72 cents to settle at $90.57 a barrel on the New York Mercantile Exchange. COMEX gold for February delivery rose $8.60 to settle at $890.30 an ounce.
After the close, Apple reported fiscal second-quarter earnings and revenue guidance that missed Wall Street forecasts. The company also reported higher fiscal first-quarter sales and earnings that topped estimates, but investors focused on the forecast, sending shares lower in extended-hours trade.
Texas Instruments reported higher fourth-quarter earnings and weaker revenue. The chipmaker also issued a mostly in-line first-quarter forecast. Shares gained about 1%.
The European Central Bank (ECB) and the Bank of England (BOE) may have to follow the Fed in cutting rates. The widening interest-rate differential between the US and Europe may spur gains in the euro, which is not good for EU. Bank of Canada, in a scheduled meeting, lowered its main rate by a quarter percentage point to 4% and signaled it will act again to shield Canada from the US slowdown.
Strength in the banking sector helped European markets to a higher. The pan-European Dow Jones Stoxx 600 index ended up 2.4% at 316.17. The UK's FTSE 100 finished up 2.9% at 5,740.10, while the French CAC 40 ended 2.1% higher at 4,842.54, and the German DAX 30 ended down 0.3% at 6,769.47.
In the emerging markets, the Bovespa in Brazil was up 4.45% at 56,097 while the IPC index in Mexico surged 6.4% to 26,892. The RTS index in Russia was down 1.6% at 1967 and the ISE National-30 index in Turkey fell 1.7% to 56,314.
Bulls hope for some stability!
Markets slumped second day in running as both the exchanges were halted after benchmark Sensex and Nifty hit the 10% lower circuit limit at open. The fall was attributed to margin pressure amid fears of US economic slow down. Markets extended the down fall to the seventh straight trading session marking a fall of more than 20% since reaching a record high of over 21,200 on January 10, 2008.
However, after wildly gyrating 2,200 points between its high and low, benchmark Sensex staged a swift recovery after crashing by more than 12% early Tuesday. The rebound could be attributed to a reassuring statement about the health of the Indian economy from Finance and the Prime Ministers. Finally, the 30-share Sensex closed at 16,729, plunging 875 points (4.9%). The NSE Nifty nose-dived 309 points or 6% to close at 4,899.
Satyam recovered lost 3.5% to Rs353. The company posted a consolidated profit after tax of Rs4.34bn for the quarter compared to Rs4.09bn in the previous quarter. This represents a sequential growth of 6%. The company also announced that corresponding revenue growth under Indian GAAP consolidated is expected to be between 29 % and 29.2 %. EPS for the full year is expected to be Rs25.50, implying a growth rate of 18.9 %.
The company on Monday announced that it entered into a definitive agreement to acquire Bridge Strategy Group, a Chicago-based management consulting firm. In making the US$35mn, all-cash purchase, Satyam said it significantly reinforces its strategy consulting and business transformation capabilities. The scrip touched an intra-day high of Rs379 and a low of Rs305 and recorded volumes of over 38,00,000 shares on NSE.
Bank of India was among the gainer, the scrip was up 2.5% to Rs390. The company announced that it posted a net profit of Rs5118.90mn for the quarter ended December 31, 2007 as compared to Rs2548.70mn for the quarter ended December 31, 2006. Total Income has increased from Rs25794.50mn for the quarter ended December 31, 2006 to Rs37052.10mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs399 and a low of Rs305 and recorded volumes of over 15,00,000 shares on NSE.
BHEL ended at Rs1993 down 5.2%. The company declared that the company won Rs8.66bn contract from Reliance Industries. The scrip touched an intra-day high of Rs2075 and a low of Rs1800 and recorded volumes of over 17,00,000 shares on NSE.
Grasim Industries slipped over 5% to Rs2862. The company posted a net profit (after minority share) of Rs7218.60mn for the quarter ended December 31, 2007 as compared to Rs5593.10mn for the quarter ended December 31, 2006. Total Income has increased from Rs37329.90mn for the quarter ended December 31, 2006 to Rs44488.30mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs3110 and a low of Rs2570 and recorded volumes of over 98,000 shares on NSE.
Corporation Bank dropped over 6% to Rs352. The company announced that it posted a net profit of Rs1909mn for the quarter ended December 31, 2007 as compared to Rs1464.20mn for the quarter ended December 31, 2006. Total Income has increased from Rs10276mn for the quarter ended December 31, 2006 to Rs12658.30mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs404 and a low of Rs270 and recorded volumes of over 2,00,000 shares on NSE.
Lupin declined by over 6.6% to Rs501. The company announced its Q3 results with net profit at Rs1.7bn Vs Rs560.3mn and net sales at Rs7.50bn Vs Rs5.11bn. The scrip has touched an intra-day high of Rs538d a low of Rs425d has recorded volumes of over 2,00,000 shares on NSE.
Provogue is down 5.3% to Rs1200. The company declared that it acquired majority stake in Sporting & Outdoor. The scrip touched an intra-day high of Rs538 and a low of Rs425 and recorded volumes of over 2,00,000 shares on NSE.
Vijaya Bank declined by over 12% to Rs56. The company declared its Q3 result with net profit at Rs1.27bn Vs Rs927.3mn and interest income at Rs10.2bn Vs Rs7.3bn. The scrip touched an intra-day high of Rs65 and a low of Rs45 and recorded volumes of over 29,00,000 shares on NSE.
News Snippets:
SBI group's consolidation is likely to be delayed. (BL)
L&T may form a JV with US arms major Lockheed Martin to develop Mark 41 Vertical Launching Systems in India. (ET)
NTPC and Gail might have to pump in more money into the Dabhol power project. (ET)
Tata Motors has signed a development contract with Chrysler’s electric vehicle unit to develop and market an electric version of the Ace in the US. (BL)
Tata Power, GMR Energy and GVK Power are eyeing New Delhi's ’s Rs1.75bn first waste-to-energy project. (BS)
An Empowered Committee of Secretaries has allowed ONGC Videsh to acquire stake in Venezuela’s San Cristobal oilfield. (BL)
NTPC is looking to invest Rs17bn in a Jharkhand coal mine. (FE)
GAIL and Engineers India have jointly submitted an EoI to Oman Gas Company for setting up a gas processing plant in Oman. (FE)
United Spirits has launched Dalmore and Jura from its Whyte & Mackay portfolio along with W&M blended scotches. (ET)
Piaggio is planning to increase production and launch new scooters in India. (ET)
Sobha Developers is planning to develop a 156-unit luxury residential project in North Bangalore. (ET)
Infosys and Wipro may bid for specific verticals of Capgemini. (ET)
Supreme Court has rejected a petition seeking stay on construction of DLF Cyber city in Gurgaon. (ET)
Arvind Mills is planning to invest Rs4bn to expand its retail business in four years. (ET)
GHCL is planning to demerge its business into three listed entities. (ET)
Jet Airways is to set up a Maintenance Repair and Overhaul facility and a flight catering facility. (BL)
Aegis Logistics intends to set up 70 outlets of Auto Gas LPG in Andhra Pradesh. (BL)
Delay on the part of Essar Oilfield Services in deploying a semi-submersible rig has affected GSPC’s exploration plan in its deepwater K-G Basin block. (BL)
IOC is setting up an LPG import facility at the land allotted to it by Cochin Port Trust at an investment of Rs1.7bn. (BL)
SIDBI has reduced its prime lending rate by 0.5% and its deposit rates by 0.25%. (BL)
Tanishq, the jewellery division of Titan Industries is embarking on a retail expansion with an aim to increase sales by 50% to Rs30bn in FY09. (BL)
A consortium comprising Reliance Energy and Spanish firm CAF has bagged the project to operate and manage a 22.7 km metro rail link between New Delhi city centre and international airport for 30 years. (BL)
Huawei Tech, Telefon AB LM Ericsson and Nokia Siemens Networks are pursuing a supply contract worth ~US$4.8bn with Tata Tele. (Mint)
Apollo Tyres expects revenues of US$350mn from Hungarian unit in the second year of operations. (DNA)
HDFC Bank is looking to foray into investment banking in the next 3-4 months. (DNA)
PNB may quit JVs with Principal Financial Group in the asset management and insurance broking businesses. (BS)
India added 8.17mn new telecom subscribers in December, taking overall telecom density to 23.89%. (ET)
The RBI has temporarily allowed banks to increase their ceilings on capital market exposures. (ET)
The Government is planning a Rs70bn package to revive the irrigation sector. (ET)
The Government is planning to relax few ECB norms for Ultra Mega Power projects. (ET)
Freight rates for bulk commodities like coal and iron ore could go down by 3-5% in the forthcoming railway budget. (ET)
Indian Railways has managed to negotiate a discount of Rs150 per kilolitre of HSD from oil marketing firms for 2008. (BL)
The EGoM on SEZs will discuss a finance ministry proposal on February 4, to impose export obligation in excess of 50% on such zones. (BS)