No one will go to the rescue of a drowning man if his cries are feeble.
The shriek cries of the bulls have been heard by the Fed. So what if some people say the quality of paper the Fed is accepting is ‘garbage.’ The much-talked about emergency Federal Reserve meeting hasn't materialised yet, but the US central bank has managed to bring the bulls back in hordes. The Fed, along with its peers in other developed countries, have decided to lend $200bn to the tense banking system in a bid to bolster liquidity. It's a big psychological boost for the struggling global equity markets and may ease the strain in the grim credit markets. Having said that, one needs to guard against any needless euphoria and be cautious.
Surely, there will be a big rally today in our markets, but one should sell into the advance rather than buy aggressively. Remain careful and follow the global market trend closely. Wait for some more time before you resume the shopping spree. What we need is big bucks from the foreign funds on a sustained basis to restore confidence among investors, especially the small ones. Of late, FII fund flows have been rather erratic, making it tough for anybody to accurately predict their direction. The bulls will be safe only when FII flows turn positive on a regular basis.
Shares of Rural Electrification Corp. (REC) will get listed today. The public sector term lender for rural power projects had fixed the issue price at Rs105 per share. The issue was subscribed by nearly 28 times amid dire times for the primary market. The stock may benefit from the general feel-good and good prospect for the power sector.
FIIs were net sellers of Rs5.39bn (provisional) in the cash segment yesterday while local funds pumped in Rs3.03bn. In the F&O segment, foreign funds were net buyers of Rs6.22bn yesterday. On Monday, FIIs were net sellers to the tune of Rs11.38bn in the cash segment. Mutual funds were net buyers of Rs3.36bn on the same day.
Most Asian markets rallied this morning following the big gains made by their US peers overnight in reaction to the Fed move to unshackle the credit markets. A regional benchmark rose the most in a month, spurred by a global advance.
Commonwealth Bank of Australia climbed by the most in more than six weeks. Toyota and BHP Billiton gained on speculation that the Fed's plan will revive demand in the world's biggest economy.
The MSCI Asia Pacific Index surged 2.7% to 141.55 as of 11:56 a.m. in Tokyo, its biggest gain since Feb. 14. All 10 of the index's industry groups advanced, with more than 10 stocks climbing for each one that declined. Financial stocks, the worst performing group on the index this year, provided the biggest lift today.
The Nikkei in Tokyo was up 2.7% at 12,999 while the Hang Seng surged 2.7% to 23,633. The Kospi in Seoul gained 2.1% to 1677 while the Straits Times in Singapore was up 2.7% at 2939. Shanghai Composite added 0.4% to 4182 and the Taiex in Taiwan rose 1.5% to 8511.
Australia's S&P/ASX 200 Index climbed 3.1%, set for the biggest jump since Feb. 1. All markets open for trading in the region rose.
US stocks bounced back on Tuesday, and how? The Federal Reserve's move, in tandem with other leading central banks, to pump $200bn into the strained banking system lifted the sagging spirits on Wall Street.
The S&P 500 index and the Nasdaq Composite climbed the most in more than five years, and the Dow Jones Industrial Average scored its fourth-biggest point jump ever.
The Dow jumped almost 417 points, or 3.55%, to close at 12,156.81. This was also the biggest one-day point gain for the bluechip benchmark since July 2002. In percentage terms, the gain was the best since March 2003.
The Dow had ended the previous session at a 17-month low.
The broader S&P 500 climbed 47.28 points or 3.7% to shut shop at 1,320.65 after ending the previous session at a 19-month low. It was the biggest one-day percentage gain since May 2002.
The Nasdaq surged 86.42 points, or almost 4% to close at 2,255.76 after ending the previous session at its lowest level in 18 months. It was the biggest one-day percentage gain since March 2003.
The rally, which lost a little bit of steam in the late morning regained momentum in the afternoon, with investors fired up after the Fed said it would loan as much as $200bn in securities in a bid to boost liquidity in the financial system.
The Fed's move prompted a sharp drop in odds of a more than three-quarter point cut to short-term interest rates, according to futures trade on the Chicago Board of Trade.
US light crude oil for April delivery rose 85 cents to settle at $108.75 a barrel in New York. The front-month contract ended the previous session at a record closing high of $107.90.
COMEX gold for April delivery soared $4.20 to $976 an ounce. The dollar touched a fresh record low against the euro and fell versus the yen. Treasury prices slumped, raising the yield on the benchmark 10-year note to 3.59% from 3.45% late on Monday as investors took profits.
Stocks in Europe too rallied on the Fed announcement. The pan-European Dow Jones Stoxx 600 index advanced 1.2% to 307.82, snapping a three-session losing streak. The banking sector rose more than 3%. The UK's FTSE 100 closed up 1.1% at 5,690.40, while the French CAC-40 advanced 1.3% to 4,627.69 and the German DAX 30 rose 1.2% to 6,524.57.
All the emerging markets ended sharply higher. The Bovespa in Brazil surged 3.95% to 62,367 while the IPC index in Mexico jumped 4.5% to 29,466. The RTS index in Russia was up 2.3% at 2058 while the ISE National-30 index in Turkey soared 5% to 53,884.
Bulls hope to build on gains
After being on the receiving end for several trading sessions, markets staged a recovery on Tuesday with the 30-share benchmark Sensex gaining 1.2% ending above the 16k mark. Major laggards were the telecom companies, Bharti Airtel and Tata Communications, Maruti Suzuki and Satyam. The IT sector as a whole was under pressure. The NSE Nifty closed at 4,865 gaining 65 points. Among the 50-stocks of Nifty index, Tata Power, GAIL and Siemens were the top gainers, spurting over 6% each.
Overall about 2,101 stocks advanced, 611 stocks declined while 35 stocks remained unchanged. Among the BSE 30 index 20 stocks advanced while 10 stocks declined. RIL, L&T and DLF were among the major gainers, while; ICICI Bank, HDFC and Bharti were among the major laggards.
BEML rallied by over 5% to Rs1178 as reports stated that it would finalise its German JV to make wagons and other railway components by end-March. The scrip touched an intra-day high of Rs1194 and a low of Rs1097 and recorded volumes of over 18,000 shares on NSE.
GAIL surged by over 7% to Rs421 after the company said that it would spend Rs23bn this financial year. The scrip touched an intra-day high of Rs437 and a low of Rs391 and recorded volumes of over 28,00,000shares on NSE.
L&T surged by over 7% to Rs2916 after the company said that it secured Scada Systems contract from ONGC. The scrip touched an intra-day high of Rs2950 and a low of Rs2650 and recorded volumes of over 14,00,000 shares on NSE.
JSW Steel slipped by a percent to Rs910. According to reports, the company would issue one equity share for every 22 held in Southern Iron and Steel Company for merger of the two companies. The scrip touched an intra-day high of Rs948 and a low of Rs909 and recorded volumes of over 5,00,000 shares on NSE.
Lanco Infratech surged by over 4% to Rs390. The company on Monday announced that it awarded Rs500mn contract to a unit of Punj Lloyd Ltd to build a facility in the southern city of Hyderabad. The scrip touched an intra-day high of Rs404 and a low of Rs352 and recorded volumes of over 19,00,000 shares on NSE.
REL gained by 2% ton Rs1287 after reports stated that 35 lakh shares of REL change hands on BSE at Rs1247. The scrip touched an intra-day high of Rs1308 and a low of Rs1211 and recorded volumes of over 47,00,000 shares on BSE.
After staging a gradual come back on Tuesday, bulls would hope to hang on to their gains. Global scenario also looks a bit supportive with the Asian markets closing on a positive note and the European markets also hanging on to their gains. For tomorrow, markets may carry on the momentum. However, one should not over leverage their positions and be cautious as you never know what can hit you from which part of the world while you are sleeping.
Corporate Front Page
Reliance Entertainment plans to launch 20 television channels. (Mint)
NTPC expected to sign agreement with NHPC, PFC and TCS to form a second electricity exchange in India. (Mint)
GMR Infrastructure has confirmed closure of commercial operations of the Begumpet airport in Hyderabad from March 16. (Mint)
Marico has sold its processed food division, SIL, to Denmark’s Good Food group. (Mint)
Tata Steel’s third quarter profit including that of Corus group stood at Rs14bn. (Mint)
ING Vysya bank seeks to double deposit base and raise customer base over five times in two years. (Mint)
Government says the proposed JV of BHEL and NTPC to be called NTPC-BHEL Power Projects. (BS)
Bajaj Hindustan plans foray into molasses based chemical business. (BS)
Gail plans new arm for city gas supply, to be set up in 2-3 months. (BS)
TCS targets US$2bn revenues from emerging markets by 2011-12. (BS)
Essar group may not pitch for stake in Prize Petroleum. (BL)
Exide Industries to double capacity in two years. (BL)
Nicholas Piramal rechristened Piramal Healthcare. (BL)
ONGC to seek further extension for Bengal offshore drilling. (BL)
Celebrity Fashions enters pact with Jeans Knit for plant sale. (BL)
Bongaigaon Refinery gets shareholders' approval for merger with IOC. (BL)
BSNL repays Rs30bn government loan. (BL)
Satyam in pursuit of Oracle based deals in area of government, civil aviation and financial services. (BL)
United Spirits to increase focus on premium brands; aims at 100mn cases in two years. (BL)
Apollo Tyres’ diversification plans in Kerala hits roadblock. (BL)
Allied Digital to acquire 51% stake in Bangalore-based Digicom for Rs200mn. (ET)
Nicholas Piramal looking for acquisition opportunities in US and Europe to expand its contract manufacturing biz. (ET)
Nicholas Piramal may sell small stake in its research company to private equity funds. (ET)
Rodere Holdings, the Cyprus-based private equity investor, to invest Rs2bn in Orbit Corp. (ET)
Ratnagiri Gas & Power plans to raise funds via IPO. (ET)
Delhi-based realty firm BPTP outbids DLF to bag largest land deal worth Rs50.06bn in Noida. (ET)
PNB plans to sell nearly 26% stake in its subsidiary PNB Housing Finance. (ET)
SBI may raise US$200-500mn in bonds denominated in Malaysia ringgits for international operations. (ET)
Bajaj Auto to change name to Bajaj Holdings and Investments and will exit from benchmark Sensex and Nifty from March 14. (FE)
Centrum, Future Holdings enters in a strategic partnership. (FE)
Tata Chemicals to invest Rs7.5bn in the next three to four years to foray into Ethanol sector. (FE)
Economic Front Page
Banks operating in India had US$3.16tn of derivatives on their books as on December 2007. (Mint)
Unions resort to non-cooperation to protest grounding of old airports. (Mint)
Government mulls lower user fees at new private airports. (BS)
DoT to keep landline, internet services revenue out; while calculating spectrum fee. (ET)
RBI may ban hiring of loan recovery agents by banks. (ET)
Government to act on a proposal to attach securities lying in frozen Demat accounts of investors if PAN not submitted. (ET)
Commerce and Industry minister would provide some relief to sectors hit by rupee appreciation in the forthcoming Foreign Trade Policy (FTP). (FE)
Government may opt for public private partnership model in housing sector. (FE)