Pleasure can be supported by an illusion; but happiness rests upon truth.
The bulls have had the pleasure of magic moments with red turning to green for quite a few days on their screens. Inflation is heading towards sub-zero levels. The truth is that this is just a statistical illusion. At the retail level (except for stocks), prices remain quite high. But that does not rule out the chances for further monetary easing.
The major indices may see some cooling today, especially at start. Global cues are nothing to write home about for bulls or bears. An improvement globally can bring the Indian indices back into green. Mid-cap and small-cap space may continue to swing wildly and given their erratic behaviour, we strongly advocate less exposure for now.
The Fed’s latest move was well received by markets. For India and other emerging markets, the move spells good news as fund raising may become easier and cheaper. Emerging market currencies, like the rupee will advance. However, as always doubts still persist about the efficacy of the plan. Also, there are fears that the unprecedented liquidity injection could revive inflation. Investors, take it easy for now.
FIIs were net buyers in the cash segment on Thursday at Rs230mn while the local institutions were net sellers at Rs187.5mn. In the F&O segment, the foreign funds were net buyers at Rs450.3mn. On Wednesday, FIIs were net buyers of Rs3.54bn. Mutual Funds were net buyers of Rs2.66bn on the same day.
US stocks retreated on Thursday as weak economic reports and a selloff in bank stocks led the declines. Rising oil and gold prices, coupled with a weaker dollar accentuated the fall.
The Dow Jones Industrial Average lost 86 points, or 1.2%, to 7,400.80. The S&P 500 index fell 10 points, or 1.3%, to 784.04. The Nasdaq Composite index shed almost 8 points or 0.5%, to 1,483.48.
After rallying 17% in seven sessions, the S&P 500 and the broader market were always in danger of some softening. That retracement materialised on Thursday on the back of some disappointing economic reports and a selloff in bank stocks.
But, the bottoming-out process is still underway. Stocks are likely to remain rangebound for the rest of the first half. In the second half, stocks could then start a slow climb higher through the year-end, assuming investors get some good news on the economy.
Autos and auto parts makers gained after Treasury said it is providing a $5 billion bailout of auto suppliers, which have been hit hard by the slump in the automaker industry. GM shares jumped 8.7% on the news. Parts makers American Axle, Lear and ArvinMeritor gained as well.
The US markets gained on Wednesday after the Fed said it was buying $300 billion in long-term bonds over the next six months as part of a larger initiative to put $1 trillion into the economy and get credit flowing again.
The House of Representatives voted to impose a steep tax on large employee bonuses at firms that accepted government bailout money. The bill was hatched in the wake of the public outcry after AIG paid out $165 million in bonuses to top executives after accepting more than $170 billion in taxpayer-funded help.
AIG shares jumped 17%. In an interview with CNN, Treasury Secretary Timothy Geithner said his department was responsible for a provision in the $787 billion stimulus package that allowed AIG to award bonuses.
Citigroup said it was pursuing a reverse stock split to help counter the conversion of the government's big preferred share stake into common stock. After initially rallying over 20%, shares turned lower.
Other bank shares retreated too, including Bank of America, Morgan Stanley and Wells Fargo. The banking sector, as measured by the KBW Bank index, rallied 52% through Wednesday's close after ending at multi-year lows two weeks ago. On Thursday, the KBW lost 9%.
Oracle reported higher fiscal third-quarter earnings and a smaller-than-expected drop in sales late Wednesday. The business software maker also declared its first quarterly dividend. Shares jumped 9.7%.
FedEx reported weaker-than-expected third quarter results and also said it will cut back spending by about $1 billion each year.
The number of Americans filing new claims for unemployment fell last week to 646,000 from a revised 658,000 the prior week. Economists thought claims would fall to 655,000. However, the number of Americans continuing to receive unemployment benefits rose to a record 5.473 million.
The Philadelphia Fed index, a regional reading on manufacturing, improved to negative 35 in March from negative 41.3 in February, but the number indicated the economy remains deep in recession. Economists had predicted a level of negative 39.
The index of leading economic indicators fell 0.4% in February, short of expectations for a drop of 0.6%. LEI rose a revised 0.1% in the previous month.
Treasury prices slipped, raising the yield on the benchmark 10-year note to 2.60% from 2.54% on Wednesday.
Lending rates were improved. The 3-month Libor rate fell to 1.23% from 1.29% Wednesday, while the overnight Libor rate dipped to 0.3% from 0.31%. Libor is a bank-to-bank lending rate.
In currency trading, the dollar fell versus the euro and the yen.
US light crude oil for April delivery settled up $3.47 to $51.61 a barrel.
COMEX gold for April delivery rose $69.70 to settle at $958.80 an ounce.
Stocks in Europe advanced on Thursday as markets focused more on the Fed's actions than the ECB's lack of them. The steps taken by the Fed and the Bank of England would be more difficult to replicate across the euro zone, Standard & Poor's warned Thursday.
The pan-European Dow Jones Stoxx 600 index rose 0.7% to 171.87 with insurers and miners fronting the advance. The FTSE 100 index closed up 0.3% at 3,816.93. Germany's DAX 30 index added 1.2% to 4,043.46 and the French CAC 40 index gained 0.6% at 2,776.99.
The BSE Sensex shut shop above the 9,000 mark for the first time since February, 19, 2009. Also, the NSE Nifty index managed to close above the 2,800 mark. Bulls were unable to unable to hold on to their positive start as profit booking and mixed cues from the Asian markets dragged the key indices in the red.
Sliding inflation also was unable to prop up the sentiment. The annual, point-to-point inflation rate slid further to 0.44% in week ended March 7 as against 2.43% in the previous week.
However, as the day progressed, bulls managed to stage a come back in the last hour of the day tracking firm cues from the European markets and some buying witnessed in the realty and the IT index. The BSE Sensex finally gained 25 points to close at 9,001 and the NSE Nifty was up 12 at 2,807.
The BSE Sensex finally gained 25 points to close at 9,001 and the NSE Nifty was up 12 at 2,807.
Among the 30-components of Sensex, 19 stocks ended in positive terrain and 10 stocks ended in the red. Sterlite, HDFC, TCS, Sun Pharma, Maruti and JP Associates were among the major gainers. L&T, BHEL, Tata Motors, Tata Steel and RCom were among the major losers.
Shares of Aurobindo Pharma advanced by 1.2% to Rs167 after the company announced that it secured 3 new registrations from MCC South Africa. The scrip touched an intra-day high of Rs173 and a low of Rs166 and recorded volumes of over 0.14mn shares on BSE.
Shares of Essar Shipping gushed over 18% to Rs32.2 after reports stated that Essar Oilfield Services Ltd. will generate at least a quarter of its annual revenue after the unit is merged with the parent. The scrip touched an intra-day high of Rs32.7 and a low of Rs27.7 and recorded volumes of over 0.45mn shares on BSE.
The dream run for Everonn Systems came to an end. After rallying over 80% in last four trading sessions, the stock slipped by 8% to Rs143 on the back of profit booking. The scrip touched an intra-day high of Rs160 and a low of Rs137 and recorded volumes of over 3.9mn shares on BSE.
Shares of NIIT Ltd rallied by over 16% to Rs20 after almost 1.3% equity shares of the company changed hands in a single block. The scrip touched an intra-day high of Rs22 and a low of Rs17.8 and recorded volumes of over 7.2mn shares on NSE.
Shares of MindTree surged by over 33% to Rs258 as the company is reportedly planning to split its business into five separate units. The scrip touched an intra-day high of Rs285 and a low of Rs200 and recorded volumes of over 2.1mn shares on BSE.
With key indices managing to end above the crucial levels on Thursday, bulls would look to extend gains, provided positive cues from the global equity markets. Avoid mid-caps and small-caps as the current rally may soon fizzle out.