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Thursday, February 12, 2009

Adapt to the change


It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change- Charles Darwin.

The same goes for the market and key indices could be primed for a fresh advance after a slow start. Among the key triggers are likely to be a sharp drop in inflation (thanks to the fuel price cut) and possible improvement in IIP data. Satyam’s government-appointed board will also meet today to consider a road-map for future, including a strategic sale. The winter session of Parliament begins today. Interim Railway Budget will be presented on Friday while the Vote-on-Account will be announced on Monday.

Ideally, we should have begun on a firm note, as US lawmakers have reached an agreement on how to reconcile the $789bn economic stimulus plan. US stocks gained marginally but European indices were slightly down. Asian markets are mostly in the red this morning. As a result, the Indian market too could open a little soft. However, encouraging macro-economic data might lead to a pull-back later in the day.

A lot of stock specific and in some cases, sector-centric action, is expected based on the news-flow. On the whole, the market is precariously poised. There are no decisive clues on market’s direction, either near-term or long-term.

Charles Robert Darwin, who would have been 200-years-old today, had in his lifetime demonstrated that all species of life have evolved over time from common ancestors through the process he called natural selection. Investors too should look for some natural selection of stocks which suit their instincts.

US stocks ended higher on Thursday after a fairly volatile day, as lawmakers announced that the Senate and House had reached a compromise deal on the Obama administration's ambitious economic stimulus package.

A rebound in banking shares, which have been battered out of shape recently, also helped bolster the sentiment on Wall Street. This was a day after stocks plunged on skepticism about the new bank bailout plan.

Bank of America shares jumped 9.2% and that of Citigroup climbed 10% after plunging at least 15% in the previous session. GE and Microsoft shares gained more than 2% as 7 of 10 industries in the S&P 500 index rallied.

The Dow Jones Industrial Average gained 50 points, or 0.6%, to end at 7,939.53. The S&P 500 added 6.5 points, or 0.8%, to close at 833.74. The Nasdaq Composite index rose 6 points, or 0.4%, to finish at 1,530.50.

Stocks struggled through the session as investors awaited more news on the stimulus plan. But the market moved higher after Senate Majority Leader Harry Reid announced that a deal had been reached on a $789bn bill that would combine the Senate's and House's separate, but similar measures.

Both houses are expected to vote on the compromise in the next few days. President Obama has said that he wants the final version of the bill on his desk by next Monday, which is the Presidents Day.

The major US indices all lost at least 4% on Tuesday, with the Dow Jones Industrial Average ending at a three-month low, after the government's bank rescue plan failed to provide the necessary details to reassure investors.

The banking sector and the TARP remained in focus on Wednesday, as Treasury Secretary Timothy Geithner testified about the new plan before the Senate Budget Committee in the morning.

Also, executives at eight of the largest financial institutions appeared before the House Financial Services Committee about how they have used the first half of the TARP money. Bank of America CEO Ken Lewis said the bank is still lending, and lending more than they would have as a result of TARP. Top executives from Citigroup, Wells Fargo, JPMorgan Chase and other firms also testified.

Blackberry-maker Research in Motion (RIM) warned that current-quarter profit would come in at the low end of its forecasts, as a result of slower sales due to the recession. Shares fell 14.5% in active Nasdaq trading.

The gap between US imports and exports narrowed in December to a six-year low. The trade gap also shrank for the second year in a row.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 2.78% from 2.81% on Tuesday.

Lending rates were modestly lower. The 3-month Libor rate rose to 1.23% from 1.22% on Tuesday. The overnight Libor rate held steady at 0.30%. Libor is a bank lending rate.

US light crude oil for March delivery fell $1.61 to settle at $35.94 a barrel on the New York Mercantile Exchange. Prices were volatile after the government's weekly supply report showed a bigger-than-expected build in crude supplies.

Gasoline prices rose 1.2 cents to a national average of $1.94 a gallon.

The dollar gained against the euro and fell against the yen.

Gold futures extended gains, climbing above $940 an ounce to their highest level in nearly seven months, as investors continued to buy the precious metal amid doubts on new economic rescue plans unveiled in the US.

Gold for February delivery ended up $30.10, or 3.3%, at $943.80 an ounce on the Comex division of the New York Mercantile Exchange, the loftiest closing level for a front-month gold future since July. Trading more actively, the April contract rose 3.3% to $944.50 an ounce.

European shares lost ground for the second straight session, as details about a plan to shore up the US banking system remained scarce.

The pan-European Dow Jones Stoxx 600 index declined 0.4% to 193.13, with losses fronted by the banking sector.

The French CAC 40 index rose 0.2% to 3,027.72, while the UK's FTSE 100 index added 0.5% to 4,234.26 and Germany's DAX 30 index advanced 0.5% to 4,530.09.

Bulls were unable to carry on the momentum as Indian markets ended in the red for the first time in three days. Overnight losses in the US markets dragged the Nifty index below the 2,900 mark in early trades. However, bulls staged a strong come back in the second half as short covering was witnessed. The rally could also be attributed on hope of further stimulus measures that may be announced in the vote-on-account on Monday.

Finally, the Sensex marginally slipped 28 points to close at 9,618 and the Nifty slipped 9 points to close at 2,925.

Among the 30-components of Sensex, 20 stocks ended in the negative terrain and 10 stocks ended in the green. The major losers in the Sensex were Ranbaxy, Grasim, Reliance Infrastructure, Tata Steel, Tata Motors and Sun Pharma.

Bucking the negative trend were, Maruti, ACC, JP Associates, Bharti Airtel, HDFC and Tata Power.

Shares of Reliance Industries slipped 1.2% to Rs1384. According to reports, the company is planning to sell KG-D6 gas by March end or early April. The scrip touched an intra-day high of Rs1390 and a low of Rs1362 and recorded volumes of over 13,00,000 shares on BSE.

Shares of Reliance Power slipped by 0.5% to Rs102 after reports stated that the company may face delays in building its largest coal-fired plants as the credit crunch has seen its loan approvals held up.

RPower is Rs25bn short of the Rs145bn it requires to borrow for its first 4,000MW plant at Sasan.The scrip touched an intra-day high of Rs103.3 and a low of Rs101 and recorded volumes of over 9,00,000 shares on BSE.

Shares of Wockhardt ended flat at Rs96 .The company announced that its promoters pledge 40% stake in the company to raise around Rs3.5bn. The scrip touched an intra-day high of Rs97 and a low of Rs92 and recorded volumes of over 8,00,000 shares on BSE.

Shares of BEL have gained by 2% to Rs907 after the company announced that it signed a venture agreement with Astra Microwave. The scrip has touched an intra-day high of Rs915 and a low of Rs875 and has recorded volumes of over 3,00,000 shares on NSE.

Astra Microwave have rallied by over 8% to Rs40 hitting an intra-day high of Rs41 and a low of Rs36 and has recorded volumes of over 5,00,000 shares on NSE.

PTC India announced that it plans to foray into PE business with an initial investment of more than Rs5bn, stated reports.

The stock was down by 0.6% to Rs64.4 hitting an intra-day high of Rs64.6 and a low of Rs61.6 and recorded volumes of over 61,000 shares on BSE.

Shares of Zee Limited plunged by over 12% to Rs114 as Axis Bank would replace Zee Limited in NSE Nifty-50 index with effect from March 27.The scrip touched an intra-day high of Rs125 and a low of Rs112 and recorded volumes of over 12,00,000 shares on BSE.

Shares of Maytas Infra witnessed buying interest for the first time in a month after reports stated that Infrastructure Leasing & Financial Services which currently holds 20% of Maytas Infra is looking to acquire complete control of the company.

Infrastructure Leasing is among the 15 lenders to have given a total of Rs50bn to the company.

The stock was constantly hitting lower circuit for 22 straight trading sessions. Finaly, the stock was up by 5% at Rs54.3 touching an intra-day high of Rs54.3 and a low of Rs49.2 and recorded volumes of over 22,00,000 shares on the BSE.

Looking at the strong recovery towards the end, bulls might carry the momentum on Thursday. It’s an eventful day with the IIP data for December to be released is likely to be better than the past couple of months and also inflation may soften a bit further.