Power is the ability not to have to please.
With the Reliance Power issue getting a record oversubscription, Anil Ambani is in no obligation to please anyone today. He is confident of the future and expects those who put their money in the issue to remain confident in India and the power sector for the long term. The weakness will hit all stocks, not just Reliance Power alone, he defends. But it’s a day bulls are hoping against hope for some rescue. We expect a cautious to weak opening given the weak mood in Asia. Markets will remain volatile, irrespective of how Reliance Power lists. We reiterate that one should sell into the rally for the short-term, and buy for the long term.
Whatever happens at the bourses, it will be history in the making as far as the Indian capital market and Anil Ambani are concerned. Reliance Power will make its stock market debut after successfully completing India's biggest-ever IPO last month. One expects a lot of hype surrounding everything that the Ambanis do. Reliance Power has been no exception. The issue attracted record subscriptions and broke all records for an issue in a primary market.
But, since then a lot has changed. The sentiment has dived further on the back of fresh round of bad news on the US economy. Locally too, things haven't exactly been great with the Government predicting almost a 1% dip in the GDP for FY08 and inflation crossing the 4% mark. The industrial output numbers, to be released tomorrow, are also likely to be weak. The FIIs, after briefly resuming their shopping spree, have started selling again, albeit gradually. A couple of high-profile IPOs have been withdrawn due to the fragile market conditions. So, the backdrop for Reliance Power's listing is not ideal.
Still, Anil Ambani is upbeat, both about the present and future. And, why not. A listing, strong or at issue price, will take him to the top echelons of India's corporate czars in terms of wealth. Having said that, the so-called grey market premium on Reliance Power has shrunk, and the upside is expected to be capped, unless some hidden forces manage to keep the bears at bay. Even if they do, the market is more than just Reliance Power or Anil Ambani. And on that front, we are afraid things are not appearing quite as bright.
This morning, the Asian markets have opened down. The G7 group has reiterated that a recession is looming in the US and this could impact global growth. The Finance ministers and central bankers from the world's most advanced countries have promised to do more to stop the slide.
India's industrial production growth is likely to have fallen below the 10% mark in December for the second time in three months. Production at factories, utilities and mines is forecast to have grown by just 6.9% from a year earlier, after rising by just 5.3% in November, according to a survey of economists by Bloomberg. The official figures will be released around noon in New Delhi tomorrow.
FIIs were net sellers of Rs7.97bn (provisional) in the cash segment on Friday. At the same time, local institutions were net buyers of Rs1.93bn. In the F&O segment, they were net sellers of Rs6.17bn. On Thursday, foreign funds pulled out Rs1.68bn from the cash segment. Mutual Funds were net sellers of Rs784mn in the cash segment.
Asian markets are mostly down this morning. Commonwealth Bank of Australia and Kookmin Bank led regional financial shares lower after G7 policy makers said that the slowing US economy will erode global growth and warned of more financial-market turmoil.
Commonwealth Bank dropped for the first time in three days after Australia's central bank said it will likely need to increase interest rates further. Kookmin declined the most in almost three months in South Korea, where the market resumed trading after a three-day holiday.
The MSCI Asia-Pacific excluding Japan Index slipped 1.2% to 463.41 as of 9:51 a.m. in Hong Kong, following a six-week, 11% decline. An index of financial shares was the biggest drag among the benchmark's 10 industry groups.
The Hang Seng in Hong Kong slipped 370 points or 1.6% to 23,098 and the Straits Times in Singapore was down 34 points or 1.2% at 2897. In Australia, the S&P/ASX 200 Index slid 2.4% at 5523, while South Korea's Kospi dropped 2.8% to 1649, the region's biggest decline.
Benchmarks in Japan, China and Taiwan are shut today. The Hong Kong and Singapore markets reopened following the Lunar New Year holidays last week.
US stocks closed mixed on Friday, as the price of oil and other commodities soared, sparking concern about inflation and an already slowing economy. The ongoing credit market mess dragged down the financial sector while Amazon.com's buyback plan boosted the tech stocks.
On the week, all the three main US stock indices were down for the first time in three weeks after service industries unexpectedly contracted at the fastest pace since 2001 and analysts predicted that rising consumer defaults will hurt banks' earnings.
The Dow Jones Industrial Average declined 65 points to 12,182.1, off session lows that had the blue-chip index sliding nearly 150 points. For the week, the Dow closed with a weekly loss of 4.4%. The S&P 500 dropped 6 points to 1,331.29, down 4.6% from a week ago. The Nasdaq gained 12 points to 2,304.85, a weekly drop of 4.5%. Year-to-date, the Dow is down 8.2%, the S&P 500 is down 9.3% and the Nasdaq is down 13.1%.
Next week brings earnings from General Motors, Coca-Cola, Clear Channel and Applied Materials. Economic reports include the January retail sales report, the February NY Empire State Index and the Feb. consumer sentiment index from the University of Michigan. Additionally, Federal Reserve Chairman Ben Bernanke is due to testify before the Senate Banking Committee on Thursday.
Chennai-based Cognizant Technology Solutions reported higher fourth-quarter profit that beat expectations and issued an upbeat forecast. Shares jumped 16.7% in active Nasdaq trade.
Market breadth was negative on Wall Street. On the NYSE, losers topped winners by over 3 to 2 on volume of 1.45bn shares. On the Nasdaq, decliners edged advancers 4 to 3 on volume of 2.26bn shares.
In economic news, December wholesale inventories rose 1.1%, topping forecasts for a rise of 0.3%. A separate report showed that consumer confidence continues to sink.
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.64% from 3.77% late on Thursday. In currency trading, the dollar fell versus the yen and the euro.
US light crude oil for March delivery rose $3.66 to settle at $91.77 a barrel on the New York Mercantile Exchange. COMEX gold for April delivery added $12.30 to settle at $922.30 an ounce.
European shares ended higher on Friday. The pan-European Dow Jones Stoxx 600 index ended up 0.4% to 315.50. Earlier, it had traded as high as 318.86, a gain of around 1.5%. The index was still down around 4% on the week. The UK's FTSE 100 closed up 1.1% at 5,784.000, while the German DAX 30 finished up 0.5% at 6,767.28. The French CAC-40 ended the session down 0.3% at 4,709.65.
In the emerging markets, the Bovespa in Brazil was up 0.2% at 59,075 while the IPC index in Mexico advanced 0.35% to 28,185. The RTS index in Russia was down nearly 0.9% at 1870 and the ISE National-30 index in Turkey added 0.1% at 52,007.
Power, can it go on?
It was third straight session of loses for bulls as key indices ended in negative territory. In the early trades firm cues from the US markets lifted the Indian bourses to open with a positive bias. However, were unable to hold on to their gains as intensified selling pressure dragged the benchmark Sensex to hit a low of 17,203.
Markets managed to make a come back led by the IT and FMCG stocks. However, the key indices once again lost ground and finally closed with marginally losses. The 30-share Sensex ended 17,464 losing 62 points. The NSE Nifty closed flat at 5,120.
Overall about 511 stocks advanced, 2,249 stocks declined while 41 stocks remained unchanged. Among the BSE 30 index 14 stocks advanced and 16 stocks declined.
Among key secotral indices, The BSE Consumer Durable index (down 3.2%), BSE Metal index (down 2.6%), BSE Realty index (down 2.4%), BSE Bankex index (down 2.1%) and BSE Capital Good index (down 1.6%). However, the BSE IT and FMCG index were the only gainers up 3.7% and 2.3% respectively.
ONGC advanced 1% to Rs996 following reports that its helium unit in Tamil Nadu to go onstream soon. The scrip touched an intra-day high of Rs1014 and a low of Rs975 and recorded volumes of over 7,00,000 shares on NSE.
Tata Chemical slipped 1.5% to Rs295. According to reports the company plans to raise up to Rs3.25bn by offloading its investment in Tata Investment Corporation Ltd (TICL) to Tata Sons Ltd. The scrip touched an intra-day high of Rs311 and a low of Rs289 and recorded volumes of over 5,00,000 shares on NSE.
HEG dropped by over 3.5% to Rs351. The company announced that they would sell 6mn warrants at Rs365 per share. The scrip touched an intra-day high of Rs366 and a low of Rs346 and recorded volumes of over 28,000 shares on NSE.
Suzlon Energy gained 1% to Rs310 after the company’s wholly owned subsidiary, SE Drive Technik Gmbh, formed a joint venture with Re Power Systems AG, Germany, reports stated. The scrip touched an intra-day high of Rs315 and a low of Rs298 and recorded volumes of over 30,00,000 shares on NSE.
UTV Software was down by 2.4% to Rs789. According to reports, UTV Toons, animation division of UTV Software would be merged with the UTV Motion Business. The scrip touched an intra-day high of Rs888 and a low of Rs776 and recorded volumes of over 1,00,000 shares on NSE.
Sujana Metals slipped 3.5% to Rs35. Reports stated that the company would invest Rs16bn to treble its capacity to 1mn tons till 2010. The scrip touched an intra-day high of Rs37 and a low of Rs34 and recorded volumes of over 3,00,000 shares on NSE.
BHEL marginally ended flat at Rs2019 despite the company declared that it won Rs33.9bn order to set up two units 500MW. The scrip touched an intra-day high of Rs2034 and a low of Rs1987 and recorded volumes of over 7,00,000 shares on NSE.
Elecon Engineering was up 0.6% to Rs222. The company announced that it secured order worth Rs470mn. The scrip touched an intra-day high of Rs226 and a low of Rs217 and recorded volumes of over 73,000 shares on NSE.
A Manic Monday lies in store as the largest IPO Reliance Power gets listed on the bourses. The withdrawal of IPOs by Emaar MGF and Wockhardt Hospitals only confirms the weakness in sentiment. Further with Asian markets would open after a long holiday so once again even international cues would be looked upon.
News Snippets:
The RBI is not in favour of the government subscribing to the SBI rights issue through bonds. (BS)
ONGC plans to offer 22 marginal fields, mainly onshore, in current calendar year to service contractors for development. (BL)
DoT has approved the government’s proposal to auction the surplus land of VSNL worth over Rs100bn. (ET)
The government may rule against Eicher Motors in its attempt to invoke Press Note 1 to stop the Daimler-Hero group JV. (ET)
Reliance Communications to invest Rs8bn to enhance its managed global Ethernet services footprint for enterprises. (BS)
Moser Baer is investing US$1.5bn in solar power over the next two years. (ET)
Textile and apparel manufacturer Raymond plans to set up 950 stores across the country by 2010. (FE)
Tata Motors plans to introduce its Nano car to the European market in four years. (ET)
Bank of India has raised Rs.13.6bn through a QIP issue. (ET)
SCI plans to spend US$500mn for acquisition of bigger vessels. (Mint)
Tata Steel has consolidated its stake in Tata Metaliks to over 50%, making it its subsidiary. (DNA)
Ceat will invite international players as equity partners for its two greenfield projects costing Rs8bn. (BL)
Coal Ventures International, the PSU coal SPV, is likely to secure its first block in Mozambique. (FE)
Rural Electrification Corporation plans to raise US$200mn from export credit agencies in overseas markets. (DNA)
The Hinduja group and ONGC Videsh hope to reach a general agreement with Iran to develop oil and gas fields in that country. (BL)
Aditya Birla Group is planning to form a JV with a foreign company to make products for the export market. (ET)
Usha Martin has entered the realty business with a new unit Usha Breco Realty Pvt Ltd. (DNA)
Tata Power plans an entry into the infrastructure sector. (ET)
ACC has transferred its ready mix concrete business to a wholly-owned subsidiary ACC Concrete Ltd. (DNA)
The K Raheja group has shown interest in setting up a Rs10bn IT park in Orissa. (DNA)
Tata Motors takeover of Jaguar-Land Rover may be delayed as labour union of the target companies raised concern over employment security and future of the brands. (TOI)
Economic Front Page
The Union Budget may reduce the dividend distribution tax rate from 15% to 12.5%. (ET)
The industry sold 113,899 cars in January, registering a 9% growth as compared to last year. (BS)
Government says it would no longer permit new IT units to be set up within industrial parks. (BS)
The Sixth Pay Commission estimates 150% salary increase for civil services. (FE)
The RBI is planning to bring in new risk disclosure norms for banks selling forex derivatives products to corporates. (ET)
DoT has indicated that it is open to the idea of auctioning of 2G radio frequencies. (ET)
TRAI may set FDI norms for broadcasting and cable services. (BL)
Government may allow FDI in specific retail sectors if an expert body foresees no impact on neighbourhood stores. (Mint)
The ministry of shipping, road transport and highways has proposed a Rs12bn fund to upgrade highways. (ET)
Government de-reserves 79 items from the SSI list. (FE)
Commerce Ministry has opposed FTA with China until it becomes a market economy. (BS)