Reasonable people adapt themselves to the world. Unreasonable people attempt to adapt the world to themselves. All progress, therefore, depends on unreasonable people.
We sure don’t want you to be among the unreasonable lot. Investors` return expectations and investment horizon should be examined in general and then specifically in the context of the current environment. (Read what Nirmal Jain, has to say on What`s a reasonable investment horizon today)
We expect the market to open on a cautious note, with a mixed close on Wall Street and a similar trend in Asian markets this morning. Plus, we have to consider that the US markets will be shut tomorrow on account of Thanksgiving; the next day usually referred to as Black Friday in US will see trading for around half a day. Back home, we will have the F&O expiry tomorrow. While the Citigroup's massive bailout coupled with the latest US government measures to revive lending may have provided some relief to global equities, investors remain jittery. As a result, one should not read too much into any short-term spurt.
The macro-economic situation is not getting any better, with reports of a sharp slowdown in investments. Consumer demand too has also taken a beating amid a severe credit crunch. A case in point is that realty firms are taking loans from mutual fund players as banks are reluctant to lend amid a worsening outlook for the sector. The picture is also dismal for most other sectors. The Government and the RBI have taken several steps to ease the cash squeeze and boost consumption. However, the measures are likely to take some more time to work their way through the system. In fact, the Centre and the RBI are expected to announce more steps (fiscal and monetary) if the situation doesn't improve shortly.
Inflation (which almost touched 13% in August) is on its way down over the next few weeks. It was at 8.9% for the week ended November 8. The Government will announce the latest figures on Thursday. The timing of tomorrow's announcement of inflation will hinge on whether the numbers are good or bad. One more crucial piece of economic data will be unveiled on Friday. The Centre will release the advanced estimates on the second-quarter GDP on Friday. India's economic growth slowed to 7.9% in the first quarter, and expectations are that Q2 reading will be even lower. To put in perspective, India has clocked a GDP growth of 9% or more over the past three fiscal years.
Petroleum Minister Murli Deora has reportedly written to Congress president Sonia Gandhi stating that the current economic conditions are conducive for a cut in retail fuel prices. Deora has apparently sought a Rs5 per liter reduction in petrol prices and Rs20 per cylinder drop in cooking gas. Interestingly, he has not recommended any cut in the prices of diesel and kerosene. A cut in fuel prices has been on the cards with crude oil plunging from $147 per barrel in July to around $50 a barrel. However, the Government had refrained from lowering fuel prices, citing losses for public sector oil marketing companies. Pressure is growing on the UPA to cut fuel prices, though any announcement on this is possible only after the end of the state assembly polls. That will be after Dec. 24. Meanwhile, the BJP has accused the UPA of violating the election code of conduct.
FIIs were net sellers of Rs1.62bn (provisional) in the cash segment on Tuesday while the local institutions pumped in Rs1.55bn. In the F&O segment, foreign funds were net buyers at Rs6.45bn. On Monday, FIIs were net sellers at Rs3.11bn in the cash segment, taking their total this year to over $13.4bn. Mutual Funds net bought Indian shares worth Rs1.04bn.
Hindustan Copper and Mphasis will declare their quarterly results today.
US stocks closed mixed on Tuesday, with the blue chips rising for a third successive day after the Bush administration announced two new programs to unclog the credit markets, even as the housing market remained in doldrums.
The Standard & Poor’s 500 Index posted its first three-day advance since September after the Federal Reserve committed as much as $800bn to help resuscitate lending. The Dow Jones Industrial Average's last three-day streak of gains came towards the end of August.
Cisco Systems and Hewlett-Packard led a decline in technology companies, limiting the market’s advance, on concern about the deepening recession after the US economy saw its worst quarterly decline in seven years.
Wednesday brings a strong of economic reports, including readings on jobless claims, income and spending, manufacturing, housing and consumer sentiment.
The US financial markets are closed on Thursday for Thanksgiving. Markets have a shortened session on Friday.
The S&P 500 added 0.7% to 857.39, extending its rebound from an 11-year low on Nov. 20 to 14 percent. The Dow rose 36.08 points, or 0.4%, to 8,479.47. The Nasdaq Composite Index slipped 0.5% to 1,464.73.
Market breadth was mixed and volume was moderate. Almost two stocks rose for each that fell on the New York Stock Exchange.
US stocks rose in the morning after the government announced a couple of new programs that will provide roughly $800bn to increase the availability of consumer and mortgage lending.
But the advance petered out and stocks plunged through the afternoon as investors sorted through weak reports on third-quarter GDP and housing and opted to cash out of some of the recent gains in technology space.
US stocks had surged on Monday in a broad rally as Citigroup's massive rescue package and President-elect Barack Obama's picks for his economic team pushed investors off the sidelines.
The Commerce Department reported that the US GDP declined at an annual rate of 0.5% in the third quarter versus an earlier reading of a decline of 0.3%. The drop in GDP was in line with expectations.
Although the US is not officially considered to be in recession, it is generally believed to have been in recession since at least the start of the third quarter.
Another report showed the continued weakness of the housing market. The S&P Case-Shiller Home Price national index posted a 16.6% decline in the third quarter, the biggest drop on record.
On the positive side, consumer confidence recovered a bit in November from a record low hit in October.
Late on Monday, HP reported better-than-expected sales and revenue and forecast upbeat fiscal 2009 profit, matching its pre-announcement from a week earlier. However, analysts questioned whether it would be able to maintain its sales pace considering the slowdown in tech spending. HP shares fell 7%.
GM shares continued to plunge amid worries about the ability of the company and the industry to stay afloat without government support.
In other news, BHP Billiton said it was giving up its $68bn all-stock hostile bid for fellow miner Rio Tinto, due to the downturn in commodities amid the economic slowdown. BHP shares gained 14.5%, while Rio shares fell 27%.
US light crude oil for January delivery fell $3.73 to settle at $50.77 a barrel on the New York Mercantile Exchange.
Gasoline prices continued to slump to 3-1/2 year lows, with gas down 2.3 cents to a national average of $1.885 a gallon. Gasoline prices have been dropping for over two months. In that time, prices have lost $1.97 a gallon, or over 51%.
The dollar gained versus the euro and the yen.
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.10% from 3.34% on Monday. Last week, the 2-year, 10-year and 30-year government bonds all hit the lowest levels since the Federal Reserve started keeping records in 1962.
The yield on the 3-month Treasury bill rose to 0.115% from 0.105% on Tuesday, not far from 68-year lows of zero. The 3-month - seen as the safest place to put money in the short term - last hit these levels in September as investor panic peaked.
The low yield means nervous investors would rather preserve their money despite no interest rather than risk the stock market.
Lending rates rose a bit. The 3-month Libor rate rose to 2.2% from 2.17% on Monday, while overnight Libor rose to 0.93% from 0.8% Monday, according to Dow Jones. Libor is a key bank lending rate.
Stocks in Europe built on outsized gains made in the previous session. The pan-European Dow Jones Stoxx 600 index rose 0.7% to 198.79. It soared 8.4% in the previous session.
The French CAC-40 index rose 1.2% to 3,209.56. The UK's FTSE 100 index rose 0.4% to 4,171.25, weighed down by the 36.7% tumble for Rio Tinto after BHP Billiton withdrew its $66bn takeover bid. BHP shares rose 7.2% on relief the takeover bid ended.
Germany's DAX 30 index edged up 0.1% to 4,560.42, as a 22.7% plunge for Volkswagen limited gains. The automaker may extend holiday downtime as its Wolfsburg factory for three weeks, according to reports.
Meanwhile, Bank of England Governor Mervyn King told a parliamentary committee that the very significant fiscal-policy steps by the British government and interest-rate cuts will act to mitigate economic slowdown over the next year.
The BSE benchmark Sensex on Tuesday fell by over 250 points in the fag-end on the back of volume based selling seen across the board only barring the consumer durables.
Bulls were unable to follow up after posting a strong start. Unabated selling in index heavyweights like RIL, SBI, L&T and ITC dragged the markets from their day’s high.
The BSE benchmark Sensex lost 207 points or 2.3% to close 8,695 and the NSE Nifty index was down 54 points to close at 2,654.
Among the 30-components of Sensex, 23 stocks were in the negative terrain and 7 stocks ended in the green.
Dr. Reddy's Lab announced that it has started selling the authorized generic version of GlaxoSmithKline Plc.'s Imitrex migrane treatment drug in the U.S. The stock was down 3% to Rs417 after touching an intra-day high of Rs433 and a low of Rs414 and recorded volumes of over 1,00,000 shares on BSE.
Shares of Great Offshore pared gains and ended lower by 4% to Rs255. The company announced that it has chartered two of its vessels - Malaviya Thirty Three and Gal Ross Sea to Petroleum Marine Services Co., Egypt.
Accordingly, the vessels have commenced operations in the Khafji Oilfields for Saudi Aramco under one year firm charter with option for two more extensions. The aggregate value of the one year firm charter is around US$22mn. The scrip touched an intra-day high of Rs276 and a low of Rs252 and recorded volumes of over 1,00,000 shares on BSE.
Shares of Triveni Engineering surged by over 3% to Rs36 after 1.42cr around 5.5% equity shares of the company changed hands at an average price of Rs35.9 on NSE. The scrip touched an intra-day high of Rs37.8 and a low of Rs35.6 and recorded volumes of over 1,00,00,000 shares on BSE.
Shares of Jindal Steel edged higher by over 0.5% to Rs705 after the company announced that it aims to add hydroelectric, nuclear, wind and solar projects to its larger steel business.
The company also announced that it is considering hydroelectric plants of as much as 1,000MW in India and Nepal and a 50MW wind-power unit in India’s Maharashtra state. The scrip touched an intra-day high of Rs752 and a low of Rs692 and recorded volumes of over 1,00,000 shares on BSE.