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Thursday, May 14, 2009

Excitement, exit-ment and absurdity!


In politics, absurdity is not a handicap.

The market movement may seem absurd. While there was lot of excitement on the cricket field (IPL T20), high drama is what we expect on the political front. With the grueling month-long election over, political parties have kicked off post-poll efforts to lure potential partners in crime.

Today, we see the key indices slipping at open due to weak global cues. Cricket is said to be a game of glorious uncertainties. The same also applies to Indian politics. Anything’s possible. So, brace for a bumpy ride.

A slew of exit polls have been announced. As expected, all indications point to a fractured verdict. The UPA has a slight edge, but the NDA is breathing down its neck. Attention will now shift to managing the arithmetic.

The President is also likely to play a crucial role. One will hear a lot of noises over the next few days – both before and after the results. This will give rise to speculation, uncertainty and of course increased volatility in the markets.

As a result, we would advise all to stay cautious and light before the clouds clear up.

Bank of Maharashtra, Dolphin Offshore, JK Paper, MRO-TEK and Voltamp Transformers will announce their results today.

FIIs were net buyers in the cash segment on Wednesday at Rs41.06bn while the local institutions poured in Rs1.06bn. In the F&O segment, the foreign funds were net buyers at Rs3.77bn. On Tuesday, FIIs were net buyers at Rs4.94bn in the cash segment, taking their total for the month and year to more than $1bn. Mutual Funds were net buyers at Rs3bn on the same day.

US stocks slumped on Wednesday, with the Nasdaq and S&P 500 falling for a third straight session, as retail sales unexpectedly declined in April. Investors were also a little jittery about the string of banks rushing to raise capital to pay back the government bailout money.

The Dow Jones Industrial Average lost 184 points, or 2.2%, to 8,284.89. The S&P 500 index fell 24 points, or 2.7%, to 883.92. The Nasdaq Composite index dropped 52 points, or 3%, to 1,664.19.

Investors showed caution after a two-month rally that propelled all the major stock benchmarks by at least 30%. Stocks have risen since early March on bets that the US economy is close to turning a corner.

Retail sales fell 0.4% in April, according to a report from the Commerce Department released before the market open. Sales were expected to hold steady, according to a consensus of economists. Sales fell a revised 1.3% in March.

Sales, excluding volatile autos fell 0.5% in April, after dropping 1.2% in the previous month. Economists forecasts had called for a rise of 0.2%.

The number of US households facing foreclosure jumped 32% in April versus a year ago, according to RealtyTrac. More than 342,000 homes received notices of default in the month, up 1% from March.

In other economic news, March business inventories fell 1% after slipping 1.4% in the previous month. Economists expected inventories to have dropped 1.1%.

AIG shares declined as the company's CEO discussed restructuring plans at a House hearing about how the company plans to pay back billions in government loans. Shares rose 11.6%.

Intel was fined a record $1.45 billion by the European Union for allegedly anti competitive practices, a decision the chipmaker plans to appeal. Shares fell.

Freddie Mac posted a $9.9 billion quarterly loss after the market closed on Tuesday and also asked the government for another $6.1 billion in aid. Shares fell 7%.

GM shares started the day with another drop on concerns that it will have to file for bankruptcy, with the stock touching $1 per share, the lowest level since 1933. But GM rallied in the afternoon to finish 6 cents higher at $1.21.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.11% from 3.17% on Tuesday.

In currency trading, the dollar gained versus the euro and the yen.

US light crude oil for June delivery fell 83 cents to settle at $58.02 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery climbed $2 to settle at $925.90 an ounce.

European shares dropped sharply. The pan-European Dow Jones Stoxx 600 fell for a third session, down 2.7% to 200.72, with miners and banks skidding.

The UK's FTSE 100 closed down 2.1% at 4,331.37, as the Bank of England lowered its estimate on UK growth. With data also showing euro-zone industrial output slumping 20% in March, Germany's DAX 30 index slid 2.6% to 4,727.61 and the French CAC-40 index lost 2.4% to 3,152.90.

After a spectacular rally on Tuesday, a highly volatile market ended with sharp losses on Wednesday as most market participants remained wary of the election results which will be announced on Saturday.

The Sensex slipped by 138 points or 1.4% to close at 12,019 after touching a high of 12,256 and a low of 11,934. The index had opened at 12,201 against the previous close of 12,158.

The NSE Nifty lost 46 points or 1.25% to shut shop at 3,635. On the other hand, the Small-Cap and Mid-Cap shares also posted marginal losses with the corresponding BSE indices losing by 0.5% and 0.13%, respectively.

Selling was seen across the board, with Metal, IT, FMCG, PSU, Oil & Gas and Bankex losing by 0.5-2%. Consumer Durables index gained 0.1%.

In the Sensex Tata Steel, Sterlite, ONGC, M&M, JP Associates, Maruti and SBI ended in the red today. While the prominent gainers in the Sensex were ACC, HDFC, Grasim, Ranbaxy and Hindalco.

Outside the frontline indices, the top gainers included Yes Bank, Bajaj Auto, Mundra Port, Asian Paints, Century Textile, IDFC, Federal Bank, OBC, MTNL and Torrent Power.

Among the big losers in the broader market were REI Agro, Fortis Healthcare, Suzlon, Neyveli Lignite, REC, Areva, Opto Circuit, Cummins India and GMR Infrastructure.

The volatility will conotue to prevail on Dalal street ahead of the Lok Sabha results to be out on Saturday, but exit polls from various media outfits will start rolling in from this evening.

At the moment, there is no clarity on who will win the race to parliament. A fractured verdict is what everyone has discounted. A win for UPA may also be welcome unless it is heavily propped up by the Left. It is a big event risk and one should not load up too much on shares.