Courage is the discovery that you may not win, and trying when you know you can lose.
Good Morning. It’s been a while since we wished you a Good Morning on a Monday. The reasons are best known to you. The bulls are likely to show some courage after suffering one of the worst ever week. US stock benchmarks rebounded on Friday, with the technology-laden Nasdaq even managing a positive finish. What's more, major Asian markets that are open for trading this morning (barring China and Taiwan) are well in the green. The Japanese markets are shut for a holiday. The Dow Jones Industrial Average futures are up over 200 points.
As far as strategy is concerned, remain on high alert despite today's positive undertone, as the global economy is most likely to slip into a recession and India's growth too will be hit badly. There is still widespread skepticism over the steps taken to unfreeze the world credit markets. It will be a while before things start looking up on a sustained basis.
The much-needed breath of fresh air comes in the wake of yet another busy weekend for the world's leading nations. Leaders of the world's most industrialised countries gathered in Washington to thrash out fresh measures to try and stop the non-stop bleeding across equity markets. The G7 has laid out a 5-point plan to combat the unprecedented financial crisis. The European Union (EU) has finally set aside their differences and has announced its own bailout package.
The Government, the RBI and other regulators are likely to take more steps to shore up liquidity and boost market sentiment. The RBI has already pumped in Rs600bn by slashing the CRR by 150 basis points. The Centre may announce some more measures to ease the credit crunch in the wake of the grim set of economic numbers (IIP and Infrastructure Growth). The RBI may go for further cuts in the CRR and even SLR, if the situation so demands.
In the meantime, India Inc. will continue to publish their report card for the July-September quarter. Among the top companies that will announce their results today include Axis Bank, BASF India, Indo Tech Transformers, Orbit Corp., Refex Refrigerants and Repro India.
Other countries also took fresh action Sunday to support their economies. Australia, New Zealand, the United Arab Emirates and Saudi Arabia have all reportedly moved to guarantee bank deposits. The Australian dollar has soared the most since it began freely trading and New Zealand's currency also advanced. The euro rose the most in three weeks against the dollar and the yen.
Billionaire investor George Soros says that the European leaders' rescue plan is a positive step that may help stabilise global financial markets. IMF MD Dominique Strauss-Kahn says that leading countries now have coordinated, detailed and comprehensive plans to resolve the severe credit crisis. He says almost all the affected nations now have taken strong action to shore up their financial sectors.
FIIs were net sellers of Rs25.13bn (provisional) in the cash segment on Friday while the local institutions pumped in Rs17.45bn. In the F&O segment, the foreign funds were net buyers at Rs1.62bn. On Thursday, FIIs were net sellers of Rs8.48bn in the cash segment, taking their total outflows this year to more than $10bn.
US stocks ended with only marginal declines on Friday, led by the blue chip Dow Jones Industrial Average, which bounced back from a decline of as much as 697 points. Credit markets remained tight, although short-term lending showed some improvement from recent days. Bond prices fell, raising the corresponding yields. The dollar gained versus the yen and fell against the euro. Oil, gas and gold prices fell.
The Dow lost 128 points, or 1.5%, while the Standard & Poor's 500 index was down 1.2% and the Nasdaq Composite ended 0.3% higher, following a seven session losing streak. For the week, the Dow fell just over 1,874 points, or 18%, its worst weekly decline ever on both a point and percentage basis. Wall Street lost roughly $2.4 trillion in market value during the week, according to losses in the Dow Jones Wilshire 5000, the broadest measure of the market.
Market breadth was negative. On the New York Stock Exchange (NYSE), losers beat winners five to three on volume of 2.95bn shares. On the Nasdaq, decliners topped advancers almost by a narrow margin on volume of 4.27bn shares.
In the first five minutes of trade on Friday, the Dow plunged 697 points, falling below 7,900 to the lowest point since March 17, 2003. The Nasdaq and S&P also hit more than five-year lows. But stocks recovered abruptly, with the Dow erasing losses. The afternoon saw the Dow make violent swings back and forth across the breakeven line, toppling as much as 600 points and rising 322 points.
The Dow has now tumbled for eight consecutive sessions, losing nearly 2,400 points, or 22%, as panicked investors ditched stocks across the board. US stocks have plunged despite a series of efforts on the part of the government to unfreeze the credit markets and get money flowing through the system again.
Since hitting all-time highs a year ago, the Dow has lost just over 40% and the S&P 500 has lost 43%. The Nasdaq has not come close to reclaiming its tech-bubble record, but it did hit multi-year highs last October. Since then, the Nasdaq has fallen just over 42%.
Investor fear is at an all-time high. The CBOE Volatility (VIX) index, or the VIX, hit a record just shy of 77 Friday afternoon before pulling back a bit.
Investors across the board are pulling money out of equities, with $43.3bn pulled out of stock mutual funds during the week ended Oct. 8.
Oil, gold and other commodities slumped on slowdown fears, and that dragged down oil services, metal and mining and other underlying stocks.
The benchmark 10-year note rallied to 3.88% from 3.76% on Thursday. Treasury bond markets closed early on Friday and are closed on Monday for Columbus Day.
Oil prices plunged to a 13-month low Friday on bets that the slowing global economy will drag down oil demand. US light crude oil for November delivery fell $8.89 to settle at $77.70 a barrel on the New York Mercantile Exchange, the second biggest single-day drop ever.
Oil prices have tumbled on bets of slowing demand since the price of crude hit an all-time high of $147.27 a barrel on July 11. Gasoline price decreased for the 23rd consecutive day, according to a survey of credit card activity by motorist group AAA.
COMEX gold for December delivery tumbled $27.50 to settle at $859 an ounce. In currency trading, the dollar gained against the euro and the yen.
Shares in Europe recorded another massive one-day fall on Friday. The pan-European Dow Jones Stoxx 600 index fell 7.5% to 205.17, which ranks among the worst one-day performances on record for the index.
On Oct. 6, the index closed down 7.6% - its worst one-day drop ever - kicking off a week when the Stoxx 600 fell more than 20%. Some strategists called last week a bear market within a bear market as the Stoxx 600 is down close to 44% in the last year.
French CAC-40 slumped 6.8% to 3,207.86, while Germany's DAX 30 plunged 7% to 4,544.31 and the UK's FTSE 100 dropped 8.5% to 3,947.78.
In the emerging markets, the Russian markets remained closed. Elsewhere, the Bovespa in Brazil was down by almost 4% at 35,609 while the IPC index in Mexico dropped nearly 2% to 19,905 and Turkey's ISE National 30 index dived close to 7% to 36,314.
Sharp cut in the global markets and heavy selling in the realty, banking, capital goods and metal stocks dragged the BSE benchmark Sensex to hit fresh lows of 10,239.7.
The benchmark index however managed to recover from the day's low and touched a high of 10,904 on the back that the central bank cut CRR by 150 bps as against 50 bps announced earlier in the week.
The recovery, however, was short loved as disappointing IIP figures yet again dragged the index to lower levels. Finally, the BSE benchmark Sensex ended 800 points lower to close 10,527 and the NSE Nifty index lost 233 points to close at 3,279.
Market breath slightly was weak, 2,186 stocks declined against 384 advances, while, 49 stocks remained unchanged.
Among the BSE Sectoral indices, BSE Realty index (down 11.3%), BSE Consumer Durables index (down 10.1%), BSE Metal index (down 9.2%), BSE Capital Goods index (down 9.2%) and BSE Power index (down 9%).
ICICI Bank sharply recovered by over 6% after hitting 52-week low of Rs327.
The stock plummeted by over 20% at Rs364 the most since its trading debut in September 1997. The scrip touched an intra-day high of Rs423 and a low of Rs326 and recorded volumes of over 1,00,00,000 shares on BSE.
The RBI and FM, P Chidambaram in the previous week issued statements reassuring investors that the bank has enough capital. ICICI’s Joint Managing Director, Chanda Kochhar reassured investors stating that the bank enough liquidity.
Shares of Infosys recovered sharply after hitting an intra-day low of Rs1040. The stock ended at Rs1226 recovering nearly 10% lower by only 2.2%. The scrip touched an intra-day high of Rs1281 and a low of Rs1040 and recorded volumes of over 91,00,000 shares on BSE.
The company announced financial results for the fiscal second quarter ended September 30, 2008. The company has posted a consolidated net profit of Rs14.32bn versus Rs13.02bn in the previous quarter. This translates into a sequential growth of nearly 10%.
Consolidated revenue for the reporting quarter is at Rs54.18bn, up 11.6% over the April-June quarter. Earnings per share (EPS) for the second quarter has increased to Rs25.02 from Rs22.75 in the first quarter.
"We have revised our US dollar revenue guidance to reflect the current economic situation and the drastic depreciation of major global currencies against the US dollar," said S. Gopalakrishnan, CEO and MD, Infosys. "The challenging environment provides interesting opportunities for transformational service providers like us".
DLF clarified that with reference to headlines in the financial newspapers ‘Standard Chartered Bank had sanctioned a loan to DLF but refused to disburse the same’. The company said that facts are far from truth as there has been no impending transaction by DLF with Standard Chartered Bank or any other bank, and as a result, the question of refusing disbursement does not arise.
DLF slipped by 8% to Rs281. The scrip touched an intra-day high of Rs304 and a low of Rs279 and recorded volumes of over 21,00,000 shares on BSE.
HCL Technologies does not rule out new bidder for Axon.(BL)
NHPC postpones IPO plan on market crisis.(BL)
Tata Teleservices sets off losses of Rs51bn in a biggest write-off by an Indian firm.(Mint)
Infosys Technologies says it would not increase its takeover offer bid for Axon.(FE)
Satyam Computer Services has reportedly been banned from doing any off-shore work with the World Bank.(DNA)
NHPC, PTC and J & K’s Power Development Corp. sign a JV for tapping 2,100MW on the Chenab basin.(ET)
ITC's fashion brand ‘Wills Lifestyle’ will have 100 stores in the next two years from the present 55.(DNA)
Hindustan Zinc reduces prices of zinc and lead.(ET)
3i Group to invest Rs9.9bn in Krishnapatnam port project.(Mint)
Kingfisher Airlines to delay new routes.(ET)
NPCIL to order 2,000MT uranium by year end.(BS)
Chattisgarh government looking to speed up the award of a 1,350MW power project and a coal mine to state owned mineral trading firm MMTC.(Mint)
Vishal Retail to add 100 stores by 2009.(ET)
HCL Technologies to close Axon deal by 24th October.(ET)
Tata Steel to start work at Orissa plant in 3 months.(BS)
Norway based Telenor may buy majority stake in Unitech’s telecom arm for US$1.5bn.(TOI)
Zee Entertainment expands presence in South with launch of a new regional channel in Tamil.(BL)
Tata Motors will roll out a 0.5 tonne payload version of ‘Ace’ light truck.(ET)
Tata Motors is amongst potential buyers of Ford’s stake in Mazda Motor.(TOI)
S Kumars to purchase Italian fabrics firm.(ET)
GE, Areva may tie up with domestic firms for reactors.(BS)
BSNL’s 3G service to roll out in December.(BL)
Aurobindo Pharma receives final approval from US FDA to manufacture and market generic version of ‘Flexeril’ tablets for relief of muscle spasm.(BL)
Hero Honda to roll out seven bikes.(ET)
Hindustan Sanitaryware plans acquisitions in Europe; in talks with companies focusing on high end products.(BL)
Economic Front Page
Forex reserves drop US$7.9bn during the week ended Oct 3 to US$283.9bn.(DNA)
India reports a drop in IIP growth to 1.3% in August from 10.9% a year ago.(FE)
India added 7.32mn new GSM users in September.(BL)
RBI cuts CRR by 150 bps to 7.5%.(FE)
Cement firms’ Q2 advance tax declines 35% yoy.(ET)
Road Ministry suggests a further increase of 33 to 50% in the base fees to be levied on most of the vehicle categories plying over bridges, bypass or tunnels.(BL)
Government may ban short selling in the futures and cash segment in stock markets.(TOI)
India's WPI rose 11.80% in 12 months to September 27, below previous week's rise of 11.99%.(FE)
I&B Ministry is examining the options to end the multiple taxation of DTH & cable operators through central and state levies.(FE)
Domestic airlines carry 9.44mn passengers in June-August, an 11.2% drop from last year.(Mint)
Fertilizer subsidy may fall below Rs1tn mark.(ET)
Finance Ministry asks DoT to speed up 3G auction process, so that operators can roll out services as early as possible.(FE)
Oil companies issue notices to domestic airlines on aviation fuel dies.(BL)
RBI governor hints at repo rate cut to ease credit crunch.(FE)
Steel companies urge government to levy 20% import duty on steel or completely ban its imports for the next three months.(ET)
Indian steel makers may cut prices and as also production in tandem with dip in demand market.(Mint)
India, US sign nuclear deal.(ET)
Easing of foreign ownership in banking may be delayed.(Mint)
Asian Development Bank asked the government to almost halve the size of UMPPs to help firms get funds.(ET)
Government may amend AS21 to plug gaps in accounting practices.(ET)