The odds of hitting your target go up dramatically when you aim at it.
The odds may seem to be against the bulls. Just when sentiment started to feel better, in came another jolt from Wall Street. We see a cautious start this morning given the lack of cues from Asian markets and a lower closing in the US market. After that, trading will turn more choppy and cues from European markets that will open in the afternoon may influence trade.
With mid-caps and small caps holding steady, don’t be surprised if select heavyweights are pushed higher to portray a feel good factor. We expect that to happen if not later in the day then at least tomorrow, irrespective of global cues this time. In short, we see some bull power coming in.
The ECB and Bank of England are scheduled to announce their decisions on interest rates. A softening stance from these central banks could perk up the sentiment. But all this may happen after our market closes.
With markets across the world sinking in line with the weak US trend, the local sentiment once again took a beating yesterday. A sharp selloff in key Asian markets unnerved investors, and shook their confidence yet again. Market breadth was negative and even the traded volume and turnover were higher from Tuesday. The 500-point fall in the Sensex yesterday is likely to serve as a grim reminder to investors, particularly the smaller ones, that the worst may not be over as yet.
The US economy is virtually in a recession or is very close to being in one. The Chinese economy is also slowing and the economic condition in Europe and Japan is nothing to write home about. There is a concerted effort underway by the governments and central banks in these countries to reverse the slowdown. This may improve prospects for the global economy somewhat, but a protracted and painful correction is imminent.
What kind of bearing this will have on India is anybody's guess though, the nature of our economic growth (which is more driven by domestic factors) means that we will not be hit that hard. Only time will prove whether this 'decoupling' theory is correct or not. But, as far as the market is concerned, the volatility and anxiety is here to stay.
FIIs were net sellers of Rs4.86bn (provisional) in the cash segment on Wednesday. At the same time, local institutions were net buyers of Rs3.57bn. In the F&O segment, they were net sellers of Rs20.86bn. On Tuesday, foreign funds poured in Rs5.77bn in the cash segment. FIIs have now pumped in US$1.34bn in the past three days after offloading more than US$4bn in the previous fortnight or so. Mutual Funds were net sellers of Rs2.97bn in the cash segment on Tuesday.
In Asian markets this morning, the Nikkei in Tokyo was down 104 points or 0.8% at 12,995 while the S&P/ASX 200 index in Sydney slipped 35 points or 0.6% at 5574 and the PSEi in Philippines was flat at 3222. The rest of the Asian markets are closed for the Lunar New Year holiday.
US stocks fell for a third consecutive day, led by energy shares and retailers, after oil prices dropped, retailer Macy's cut its earnings forecast and a Federal Reserve official signaled that higher inflation may prevent more rate reductions.
The S&P 500 Index erased a gain of as much as 1.2% after Macy's said it will eliminate 2,300 jobs, sending retail stocks to their steepest three-day drop in five years. Chevron fell to a nine-month low as oil declined by more than $1 a barrel. Memory chipmaker Micron Technology fell the most since October 2006 after an analyst said computer companies have stockpiles of unused parts.
The S&P 500 was down 10.19 points, or 0.8%, to 1,326.45. The Dow Jones Industrial Average declined 65 points, or 0.5%, to 12,200.1. The Nasdaq Composite Index dropped 31 points, or 1.3%, to 2,278.75, the lowest since October 2006, weighed down by a 5.7% drop in Apple.
Market breath was negative. More than two stocks fell for every one that rose on the New York Stock Exchange.
Speaking before the Birmingham Rotary Club, Federal Reserve Bank of Philadelphia President Charles Plosser said it is important to keep inflation in check, raising concern among some investors and experts that the Fed may not be as aggressive in cutting rates going forward.
"With inflation creeping up, we have to be particularly alert for rising inflation expectations. It is important that inflation expectations remain stable," said Plosser, a voting member of the Federal Open Market Committee (FOMC).
Major US indexes had rallied earlier in the session after the Labor Department said that worker productivity was stronger than expected in the fourth quarter. The news helped counter some of the recession fears that have plagued Wall Street since last year
After the closing bell, network equipment maker Cisco Systems reported earnings that met Wall Street expectations but warned of slower growth going forward.
Treasury prices rose, lifting the yield on the benchmark 10-year note to 3.6% from 3.58% late on Tuesday. In currency trading, the dollar gained versus the euro and slipped versus the yen.
US light crude oil for March delivery fell $1.27 to $87.14 a barrel on the New York Mercantile Exchange. COMEX gold for April delivery surged $14.80 to $900.70 an ounce.
Stocks in Europe advanced. The pan-European Dow Jones Stoxx 600 index rose 0.5% to 320.35, led by defensive issues like utilities. The UK's FTSE 100 closed up 0.1% at 5,875.40, while Germany's DAX 30 rose 1.2% to 6,847.51 and the French CAC-40 added 0.8% to 4,816.43.
The euro fell for a third day today against the dollar and the Japanese yen on speculation that the European Central Bank (ECB) President Jean-Claude Trichet will signal that borrowing costs may need to be cut to bolster growth.
Latin American stocks closed lower. In Brazil, the benchmark Bovespa stocks index closed 3.5% lower at 58,969. Markets in Brazil were shut on Monday and Tuesday on account of the Carnaval celebrations.
Mexico's stocks closed lower for a second-consecutive session. The market's leading IPC index of the 35 most-traded shares fell 0.6% to 27,929.29. Among the other emerging markets, the RTS index in Russia shed 1% to 1947 while the ISE National-30 index in Turkey was down 2.5% at 53,940.
Markets likely to consolidate
Markets were unable to extend gains as bears made a come back after being on the sidelines for past three sessions. Markets opened with a 700 points negative gap mirroring losses in the equity markets across US and Asia. However, after a sharp dip key indices managed to recover gradually from its days low finally closing above the 18,100 mark.
The 30-share Sensex slipped 523 points or 2.8% to close at 18,139. The NSE Nifty lost 161 points to close at 5,322.
Among the 30-scrips of Sensex, Infosys, RIL, ICICI Bank, Bharti Airtel and HDFC were among the major laggards. On the other hand, REL, RCOM, Cipla and ACC were among the major gainers.
Among key secotral indices, The BSE IT index (down 5.5%), BSE Consumer Durable index (down 4.5%), BSE Metal index (down 3.6%), BSE Auto index (down 2.4%) and BSE Realty index (down 2.4%).
Syndicate Bank slipped 1% to Rs94. The company announced that it would sell 80mn shares to large investors. The scrip has touched an intra-day high of Rs95 and a low of Rs89 and has recorded volumes of over 4,00,000 shares on NSE.
Suzlon slipped by 3% to Rs315. The company’s Australian unit won an order for supplying 27 wind turbines. The scrip touched an intra-day high of Rs322 and a low of Rs311 and recorded volumes of over 30,00,000 shares on NSE.
Deepak Fertilizer rallied by over 19% to Rs141 after the company announced that it would form joint venture with Yara. Deepak Fertilizer would hold 51% and Yara 49% stake in the venture. The scrip touched an intra-day high of Rs141 and a low of Rs108 and recorded volumes of over 7,00,000 shares on NSE.
HDIL slid over 4% to Rs976. According to reports the company has secured development rights of Bombay Oxygen Corporation’s land in Mulund, Mumbai for Rs2bn. The scrip has touched an intra-day high of Rs1013 and a low of Rs936 and recorded volumes of over 10,00,000 shares on NSE.
Baja Hindustan advanced 1.3% to Rs231 following reports that the company would invest Rs2.75bn for setting-up a particle and fibre board unit in western Uttar Pradesh. The scrip touched an intra-day high of Rs239 and a low of Rs210 and recorded volumes of over 46,00,000 shares on NSE.
Subex gained 1.6% to Rs297 after the company announced that it bagged a contract from Slovenia-based telecom operator, Telecom Slovenije, to install solutions that will protect from various frauds. The scrip touched an intra-day high of Rs303 and a low of Rs265 and recorded volumes of over 17,000 shares on NSE.
News Snippets:
A nine company consortium including Bharti Airtel and VSNL, will build a high capacity fibre optic submarine cable from India to France via Egypt and Italy. (FE)
IOC may seek board approval for its Rs50bn Haldia paraxylene plant. (BL)
L&T plans to invest US$5bn on power generation business; targets 5,000MW capacity in next five years. (DNA)
SCI may invest US$800mn in its shipbuilding foray. (BS)
Tata Motors subsidiary, TAL Manufacturing Solutions, to make floor beam for Boeing’s 787 Dreamliner aircraft. (Mint)
Ispat Group has acquired two coal blocks in Mozambique. (BS)
Arvind Mills may demerge its brands and apparel retailing businesses in to separate companies. (DNA)
Mundra Port to invest Rs100bn to raise cargo capacity. (FE)
Ranbaxy Laboratories gets US FDA approval to manufacture and market a paediatric drug. (BS)
Vedanta plans Rs60bn plant in Bengal. (TOI)
Tata Group plans to foray into retail broking business. (BL)
Mercator Lines to acquire three dredgers for US$100mn in the next six months. (BS)
Central Bank of India may reduce retail loan rates by 50bps. (BL)
Sintex Industries raises Rs6bn through a QIP issue. (FE)
Vijaya Bank may acquire a bank in northern or western India. (BL)
Bhushan Steel to invest Rs260bn to build a 12mn tons capacity in West Bengal, Jharkhand and Orissa. (BS)
ICICI Bank is not likely to cut interest rates in near term (BL)
Maruti Suzuki India to export 250,000 cars from Mundra port. (TOI)
Economic Front Page:
3G licenses could raise US$5bn for the government in the first year itself. (Mint)
The Union Cabinet is unlikely to hike fuel prices this week. (BL)
According to the Director General of Hydrocarbons (DGH), India has 2,000 tons of cubic ft gas hydrates pool. (FE)
The Government may cut excise duty on power equipments and other inputs from 16% to 8% in the upcoming Budget. (ET)
India’s domestic Information Communication Technology market may reach US$24bn by 2011, according to Gartner Inc. (Mint)
The Government seeks $500mn ADB loans for Indian Railways expansion plans. (BL)
The Government may consider a profit reserve plan to offset losses incurred by exporters due to rupee appreciation. (FE)
Airport hotels in Delhi may miss the November 2010 target. (Mint)
Stationery goods, electrical appliances and 46 other products may be removed from small scale industries list. (ET)
TRAI likely to recommend more FDI in FM radio segment. (FE)