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Thursday, May 28, 2009

Twist to the global tale!


What separates the winners from the losers is how a person reacts to each new twist of fate.

The twists and turns of the market continue unabated and often irrationally. If a US-led global rally was said to be the main driving force behind Wednesday’s surge, today it could be the basis of a weak start. The overnight fall in the US market coupled with indecisive cues from Asian markets could dampen sentiment at start. Trading will turn volatile given the F&O expiry today.

Bajaj Holding, Corp Bank and Indusind Bank will be excluded from the F&O segment post July. This is in addition to the 53 stocks which will be excluded post the June expiry.

No other immediate catalysts for now besides the GDP numbers tomorrow. The Union budget and Q1 results will be the next events that could have a bearing on the sentiment. Till then, the market’s direction will hinge on daily newsflow. We are in a phase where every big rally will see some profit taking while fresh buying will come in at lower levels.

Asian stock markets open for trading are mostly in the red. Markets in Hong Kong, China and Taiwan are shut for public holidays. Banks led European markets higher for a third straight session. Brazilian and Mexican stock indices have risen to new highs for 2009.

Meanwhile, the difference in yields between Treasury two- and 10-year notes widened to a record on concern surging sales of US debt will overwhelm the Federal Reserve’s efforts to keep borrowing costs low. The so-called yield curve steepened to 2.75%, surpassing the previous record of 2.74% set on Aug. 13, 2003. Yields on 10-year notes have risen more than 100 basis points since Fed officials said in March they would buy up to $300 billion of U. debt over six months.

Results Today: Action Construction Equipment, Bajaj Electricals, Chennai Petro, Dalmia Cement, Gokaldas Exports, GMDC, Ipca Labs, Karur Vysya Bank, L&T, M&M, Nagarjuna Construction, Sangam India, SAIL, Swaraj Mazda, Tata Chemicals, Tata Power and V Guard.

US stock benchmarks erased some of the previous day's gains on Wednesday as concerns over the fate of auto major GM and a jump in long-term borrowing costs raised concerns that the Obama regime's efforts to reduce interest rates will fail. Monsanto Co.’s disappointing forecast triggered a drop in commodity producers.

The Dow Jones Industrial Average fell 173 points, ending the day 2% lower, at 8,300. The S&P 500 index lost 17 points, or 1.9%, to 1,747. The Nasdaq Composite index slid 1.1%, giving up 19 points, at 893.

US stocks had traded mixed for most of the session as concerns that GM will not be able to avoid bankruptcy overshadowed an encouraging housing report. But the selloff gained momentum in the afternoon as the yield on the benchmark 10-year bond jumped to a six-month high.

Shares of energy producers fell even as the price of oil rose above $63 per barrel. Technology stocks, which had led gainers for most of the day, also ended lower.

Treasury prices fell, with the yield on the benchmark 10-year bond rising to 3.71% - it's highest since mid-November. It stood at 3.51% late on Tuesday.

Treasurys sold off shortly after the government said it received relatively healthy demand for Wednesday's $35 billion worth of 5-year notes. The increase raised concerns that mortgage rates, which are tied to the 10-year yield, could head higher and stifle a recovery in the housing market. Many analysts also worry that the record amounts of debt coming to the market could overwhelm demand for bonds as the government expands already massive budget deficits.

GM confirmed reports that bondholders rejected an offer from the company to trade $27 billion of debt for equity stakes, making it much more likely that the auto giant will declare bankruptcy sooner rather than later. The company faces a June 1 deadline to win concessions from its union, creditors and other parties or be forced into bankruptcy by the US Treasury Department, which is funding it's operations. Shares fell 19%.

Sales of existing homes increased 2.9% in April to 4.86 million homes sold, up from a downwardly revised figure of 4.55 million in March, according to the National Association of Realtors. April sales were slightly ahead of expectations. Analysts had forecast a rate of 4.66 million units. But sales are still off 3.5% from the 4.85 million homes sold 12 months ago.

Wednesday's housing data followed a report released on Tuesday that showed that the drop in home prices deepened during the first three months of the year. Separately, a survey showed that business economists expect the recession to end this year. Almost three out of four survey respondents believe the recession will end by the third quarter of 2009, the report said.

The FDIC said that the number of banks on its so-called "problem bank" list jumped to 305 during the first three months of the year, up from 252 in the fourth quarter of last year. This is the highest number of troubled institutions since 1994.

Shares of Bank of America rose 1% after the company said it was well on its way towards raising the nearly $34 billion in capital that government regulators said it needs to buffer against future loan losses.

Monsanto, the world's largest seed company, said it expects 2009 fiscal-year results to be at the low end of its earnings forecast. The company said stronger-than-expected competition in the herbicides business prompted the warning. Shares fell 6%.

Office supplies retailer Staples reported a one-third drop in quarterly profit to $147 million, or 20 cents per share, but still managed to beat analyst expectations. Excluding restructuring expenses, Staples reported earnings of 22 cents per share, one cent ahead of the analyst consensus estimate. The stock fell 1.7%.

In currency trading, the dollar rose against the euro and the yen. It slipped against the pound, with the U.K. currency rising above $1.60.

NYMEX oil for July delivery was rose $1 to settle at $63.45 a barrel. Saudi Oil Minister Ali al-Naimi said on Wednesday that the global economy was capable of managing with oil as high as $75 to $80 a barrel.

COMEX gold for August delivery closed at 953.30 an ounce, unchanged from Tuesday.

Across the Atlantic, European shares rose for a third straight session, with banks rising sharply as data continued to give investors hope that the global economy could be past the worst. The pan-European Dow Jones Stoxx 600 index advanced 0.7% to 210.48.

The French CAC-40 index rose 0.7% to 3,294.86, Germany's DAX 30 index gained 0.3% to 5,000.77 and the UK's FTSE 100 inched 0.1% higher to 4,416.23.

Indian markets ended with outstanding gains on Wednesday as the BSE Sensex shut shop above the 14,000 and the NSE Nifty ended above the 4,250 levels. It was a terrific rally with the heavyweights participating as well. Index bellwethers like ONGC, DLF and ICICI Bank rallied between 6-9%.

Key indices started with a positive gap up tracking strong cues from the US and the Asian markets. US stocks climbed on Tuesday, with the Dow gaining nearly 200 points, spurred by a strong reading on consumer confidence. In Asia as well, the Hang Seng index in Hong Kong rose over 5%.

Markets also gained strength after the country’s finance minister, Pranab Mukherjee said, that the Government will have to focus on implementing and strengthening its infrastructure investments. He also added, we need to seize the opportunity presented by the current circumstances for pushing long pending reform measures which include measures in the area of financial sector and real economy.

The Sensex rallied 520 points or 3.8% to close at 14,019 after touching a high of 14,123 and a low of 13,780. The index had opened at 13,780 against the previous close of 13,589.

The NSE Nifty gained 159 points or 3.8% to shut shop at 4,276.

The advance decline ratio stood at 7:1.

Shares of the Sugar companies were under pressure after the government banned new futures contracts for the commodity. The ban on new contracts and on taking new positions in existing contracts will remain until Dec. 31, said the Forward Markets Commission spokesman, Anupam Mishra.

Bajaj Hindusthan slipped 1.5%, Renuka Sugar fell 2%, Sakhti Sugars declined 3% and Balrampur Chini fell 3.5%.

The textile sector was in demand Arvind Ltd rallied 19%, Alok Industries 14%, BRFL surged 14% and Century Textile advanced 10%.

The media counters also hogged the limelight on Wednesday. Among the top gainers were, TV today up 19%, TV 18 up 14%, NDTV up 8%, Zee News up 5% and Zee Entertainment 4.5%.

The ADAG stocks also were in momentum, Reliance Infra surged 15%, Adlabs advanced 5%, RCom was up 4.3%, RNRL surged 6%, Reliance Capital rallied 7.5%, RPower shot up 12.5%.

Among the BSE Sectoral indices BSE Realty index was the top gainer adding 6.1%, followed by the BSE Bankex index up 5.2%, BSE Power index up 5%, BSE Metal index up 4.6% and BSE PSU index up 4.3%.

The BSE Mid-Cap index surged 3.7% and BSE Small-Cap index gained 3.4%.

In the Sensex, Reliance Infra, Sterlite Industries, DLF, ONGC, Grasim, Ranbaxy, ICICI Bank and JP Associates ended in the green today. However, among the major losers were ACC, Bharti and ITC.

Outside the frontline indices, the top gainers included Bhushan Steel, GMDC, Neyveli Lignite, Hind Copper, Aban, Videocon Industries, Welspun Gujarat and GTL Infra.

Among the big losers in the broader market were Tata Communication, Balrampur Chini, Spice Tele, Renuka Sugar, Bajaj Holding, Castrol India and Lupin.

Shares of ONGC rose over 9.5% to Rs1108 after reports stated that the government may double the price of natural gas. Government may double the administered price of natural gas to US$4.2 per mn British thermal units, added reports. The scrip touched an intra-day high of Rs1118.7 and a low of Rs1025 and recorded volumes of over 0.6mn shares on BSE.

Shares of IVRCL Infra surged by over 6% to Rs288 after the company’s Water Division bagged order worth Rs2.99bn from the Government of Bihar, Public Health Engineering Department. The scrip touched an intra-day high of Rs293 and a low of Rs278 and recorded volumes of over 0.8mn shares on BSE.

Shares of Reliance Power gained by 12% to Rs178 after reports stated that the company may earn Rs40bn from carbon credit sales. The scrip touched an intra-day high of Rs183 and a low of Rs163 and recorded volumes of over 6.3mn shares on BSE.

Shares of RCom surged by over 4% to Rs304 after the company announced that it received shareholders approval for the demerger of its optic fibre division and subsequent merger with wholly-owned subsidiary Reliance Infratel. The scrip touched an intra-day high of Rs308 and a low of Rs292 and recorded volumes of over 5.9mn shares on BSE.