Contentment consist not in adding more fuel, but in taking away some fire
The fuel hike measure to be decided today is something the markets have to contend with. It’s a bit of a paradox as any increase in fuel prices will help oil PSUs (to a small extent) while at the same time, the move could push inflation towards the double-digit mark. The government will have to do some balancing act (in sentiment at least). What kind of package the Government has in store for the state-run oil firms, we may know by the end of the day.
The market managed to stage a smart comeback after being pounded in early morning trades. Short-covering in the afternoon lifted the key indices from the day's low. The bounce was particularly remarkable considering that most Asian markets were down sharply. It would be interesting to see if the bulls are able to continue the recovery process after the recent reversals. The market breadth remained negative and the sell-off came on much higher volume. The market is expected to go down further given the nervousness over the impending fuel price hike and its fallout on inflation and economic growth.
There are also murmurs of political instability with the Left Front reportedly planning to consider its ties with the Congress-led coalition regime. With general elections due in the first half of next year, this may not happen. In any case, the market is more worried about high oil prices, soaring inflation, slowing GDP growth, global financial turmoil and foreign capital outflows. Though some of these negative factors have already been factored in, each day seems to bring in fresh set of bad news. Technically too, the market appears to be a bit weak. On the Nifty, 4630 is seen as the next big support. Below this level though there could be danger.
Coming to today's outlook, we expect a cautious opening on the back of the overnight fall in US stocks and mixed trend in Asian markets.
FIIs were net sellers to the tune of Rs10.21bn (provisional) in the cash segment yesterday while the local institutions poured in Rs2.62bn. In the F&O segment, foreign funds were net sellers at Rs8.59bn. On Monday, FIIs were net sellers of Rs3.49bn in the cash segment. Mutual funds offloaded shares worth Rs1.57bn.
AIA Engineering, Orbit Corp, Royal Orchid Hotels and Shasun Chemicals will declare their results today. AIA Engineering will also consider a stock split.
Shares of Anu’s Laboratories Ltd. and Gokul Refoils & Solvent Ltd. will get listed today.
Asian stocks rose today, led by technology and automobile companies, as the dollar rallied after Federal Reserve Chairman Ben Bernanke signaled he is done cutting interest rates and the region's vehicle makers boosted US sales.
Sony and Toyota gained after the dollar traded near a three-month high against the yen, boosting the value of the companies' overseas earnings. Honda and Kia Motors rose after Japanese and South Korean automakers outsold the three biggest US manufacturer for the first time.
The MSCI Asia Pacific Index added 0.7% to 150.18 as of 10:40 a.m. in Tokyo, rebounding from yesterday's 1.8% fall. An index of consumer-electronic and car manufacturers rose 2.1%, the largest gain among the benchmark index's 10 industry groups.
Japan's Nikkei 225 Stock Average climbed 0.7% to 14,314.24. Other Asian equity markets open for trading advanced apart from South Korea, the Philippines and China.
US stocks fell for the second day running, as growing speculation that Lehman Brothers will be forced to raise more capital led a slump in financial shares and a drop in oil prices dragged down energy companies.
Federal Reserve Chairman Ben Bernanke's hints that the central bank will stop cutting interest rates also hurt sentiment.
The S &P 500 Index declined 8.02 points, or 0.6%, to 1,377.65. The Dow Jones Industrial Average slipped 100.97 points, or 0.8%, 12,402.85. The Nasdaq Composite Index lost 11.05 points, or 0.4%, to 2,480.48.
Seven stocks fell for every five that rose on the New York Stock Exchange.
Lehman Brothers slid to its lowest level since August 2003 on concern that it may report its first ever quarterly loss. Wachovia declined the most since April on a report billionaire investor Michael Price is betting the stock will drop.
Exxon Mobil and Chevron led energy producers lower as crude declined for the first time in three days.
The Dow struggled in the morning on weakness in select stocks, while the S&P 500 and Nasdaq had gained on the day's economic news and Bernanke's comments on the economy and the dollar. But stocks tumbled in the afternoon, with the Dow losing as much as 150 points before erasing some of those losses.
Between the financial and energy sectors alone, almost 40% of the S&P 500 was under pressure, and with little strength in the technology space to counter that weakness, the major indices had to slip.
US stocks are likely to remain rangebound and choppy. Thursday brings the revised reading on first-quarter productivity, the ISM reading on the services sector and a report from payroll services firm ADP on private sector employment in May. The broader April non-farm payrolls report is due Friday.
GM said it will close four pickup and SUV plants by 2010. It added that higher fuel prices have impacted consumer preferences for vehicles. GM also said it plans to make more fuel-efficient vehicles.
Separately, GM said May North American vehicle sales fell 27.5%, topping forecasts. Among other automakers reporting May sales, Ford Motor said overall sales dropped 16%.
In the day's economic reports, factory orders rose 1.1% in April after increasing 1.5% in March, the government reported. Sales were expected to drop 0.1% in the month.
Meanwhile, Fed chairman Bernanke said the US economy remains under pressure, but hinted that the central bank is unlikely to cut rates again soon, due to rising oil prices and other inflationary pressures. Bernanke was speaking to the International Monetary Conference in Barcelona, Spain, via satellite.
US light crude oil for July delivery fell US$3.45 to settle at US$124.31 a barrel on the New York Mercantile Exchange. The national average price for a gallon of regular unleaded gas rose to US$3.978, AAA said, from US$3.975 Sunday, the 26th record high in 27 days.
The dollar rose versus the euro and the yen, building on recent gains after Bernanke made comments in his speech regarding keeping the US currency strong. Treasury prices rose, lowering the yield on the 10-year note to 3.90% from 3.96%.
COMEX gold for August delivery fell US$11.50 to settle at US$885.50 an ounce.
European shares advanced. The pan-European Dow Jones Stoxx 600 index gained 0.8% to 321.05. The UK's FTSE 100 closed up 0.8% at 6,057.70, while the French CAC-40 rose 1% to 4,983.71, and Germany's DAX 30 inched 0.2% higher to 7,019.13.
In the emerging markets, the Bovespa in Brazil was down 2.6% at 70,011 while the IPC index in Mexico fell 0.45% at 31,493. The RTS index in Russia dropped by almost 1% to 2429 while the ISE National 30 index in Turkey advanced 0.9% to 49,217.
Market may turn choppy again
Weak global cues coupled with all round selling in scrips across the sector dragged the benchmark Sensex to hit an intra-day low of 15,709. However, led by index heavyweight Reliance Industries and other index drivers staged a strong comeback in late afternoon trades. Thus, aiding the key indices to close with minimal losses.
Further the European markets also lifted the sentiment and helped erase notable amount of losses market had recorded earlier.
Finally, the BSE benchmark Sensex ended 100 points lower to close at 15,962 and the Nifty index lost 23 points to close at 4,715.
Overall about 847 stocks advanced; 1,817 stocks declined while 58 stocks remained unchanged. Among the 50-Nifty 30 stocks ended in red and 20 stocks ended in green.
SBI ended flat at Rs1385. The bank announced that it raised interest rates on FCNR, NRE Deposits. The scrip touched an intra-day high of Rs1407 and a low of Rs1365 and recorded volumes of over 4,00,000 shares on BSE.
Rasoya Proteins also ended on a flat note closing at Rs65. The company announced that it signed a power purchase pact with Tata Power. The scrip touched an intra-day high of Rs66 and a low of Rs62 and recorded volumes of over 14,000 shares on BSE.
GMR Industries rallied by over 10% to Rs87 after the company announced that it acquired Alagawadi Bireshwar Sugar. The scrip touched an intra-day high of Rs87 and a low of Rs73 and recorded volumes of over 12,000 shares on BSE.
Indus Fila surged by over 5% to Rs128 as reports stated that the company is planning to invest Rs2bn in retail and set up 30-40 retail outlets across India within a year. The scrip touched an intra-day high of Rs133 and a low of Rs115 and recorded volumes of over 39,000 shares on BSE.
IOC gained by over 3% to Rs433 as reports stated that they are in initial phase of discussions with ITC Ltd for merchandise supplies from the latter’s Choupal Sagar stores for its 2,050 kisan seva kendra (KSK) outlets across the country. The scrip touched an intra-day high of Rs436 and a low of Rs412 and recorded volumes of over 1,00,000 shares on BSE.
Jindal Steel & Power was marginally up by 0.5% to Rs2251. According to reports, the company is planning to build a Rs50bn, 1,080-mw, coal-fired captive power plant in Orissa. The scrip touched an intra-day high of Rs2262 and a low of Rs2161 and recorded volumes of over 1,00,000 shares on BSE.
Tata Motors gained 1.3% to Rs570 after the company on Monday announced that they have acquired the Jaguar Land Rover business from Ford Motor for a net consideration of US$2.3bn. The scrip touched an intra-day high of Rs576 and a low of Rs565 and recorded volumes of over 1,000 shares on BSE.
Bharti Airtel declined by over 4% to Rs841. There were reports that, US based networks security major VeriSign have entered into an exclusive 3 year arrangement with Bharti Airtel for developing specific security solutions for Indian corporates. The scrip touched an intra-day high of Rs868 and a low of Rs834 and recorded volumes of over 4,00,000 shares on BSE.
Infosys Technologies slipped by 2% to Rs1922. According to reports, the company secured patents for mobile tech, holography from the US Patent and Trademark Office. The scrip touched an intra-day high of Rs1950 and a low of Rs1882 and recorded volumes of over 3,00,000 shares on BSE.
Corporate News
Idea approaches Spice Communication for M&A talks. (ET)
Shoba Developers plans to diversify its portfolio through slum redevelopment schemes and SEZ, retail and commercial projects. (DNA)
L&T gets order to supply main power equipments for a proposed 1,600mw power project in Andhra Pradesh. (ET)
ONGC gets regulator approval for stake sale in its KG basin block to Petrobras of Brazil and StatoilHydro of Norway. (ET)
Punj Lloyd acquires 74% stake in UK firm for an undisclosed amount. (BL)
Essar Oil may get only 25% stake instead of 50% in Kenya Petroleum Refinery. (ET)
Karuturi Global plans to raise US$250mn to acquire 7.5 lac acres of land in Ethiopia. (BL)
Indian Cements have crossed break even numbers in the first season of IPL. (BL)
Tata Steel plans to shift Rs25bn titanium projects to Andhra Pradesh or Orissa. (BS)
GMR Industries to buy Alagawadi Bireshwar Sugars Pvt Ltd, a Karnataka based Sugar Company. (BL)
Moody downgrades Tata Motors over the acquisition of JLR to Ba2 from Ba1. (DNA)
ABB wins orders worth Rs2.95bn from JSW Energy. (DNA)
Ranbaxy regains number one spot in domestic market in April, buoyed by 25% growth in anti-infective segment in last three months. (ET)
United Breweries plans to invest Rs5bn over the next three years for capacity expansion. (ET)
Suzlon Energy signs an agreement with US government to generate 20% of its electricity using wind power by 2030. (BS)
Nagarjuna Construction gets four orders worth Rs2.5bn (BS)
Hanung Toys to acquire three overseas companies through deals worth US$30mn. (DNA)
Deepak Fertilizers plans to foray into contract mining operation. (DNA)
Gail Gas applies for a license to set-up CNG station and piped gas networks in six cities. (DNA)
Supreme Court dismisses Reliance Infrastructure plea against MERC. (BS)
Crompton Greaves buys French firm for Rs85mn. (BS)
EADS in talks with Vijay Mallya for business jet liners. (BS)
Ispat Industries plans to buy 40% stake each in three overseas mines of Global Steel Holding. (BS)
Mudra Lifestyle plans to set-up a Greenfield spandex yarn project at Silvassa with investment of Rs3bn. (BS)
NTPC aims to add 7,000mw hydel power projects by 2017. (FE)
Loop Telecom, subsidiary of BPL mobile has initiated talks with international telecom giants to sell majority stake. (ET)
Kirloskar Brothers plans to restructure into nine business segments. (BL)
Allcargo to set up logistic business in the Gulf market. (DNA)
Economic News
Government plans to ask the state governments to cap sales tax on petrol and diesel at 20% and 15% respectively. (ET)
DoT may allow AT&T, DLF, Deustche Telecom-MoserBear and others to bid for 3G spectrum licenses. (ET)
Government withdraws tax refund on cement exports that it had allowed the previous day. (ET)
Cement sales grows 7.9% in May. (ET)
Steel makers won’t hold price line beyond three months, indicates Sajjan Jindal MD of JSW Steel. (BL)