Just living is not enough, said the Butterfly. One must have sunshine, freedom, and a little flower.
Things are far from rosy for the market. The popular color of the rose is splashed across Asian markets. Like most Mondays, a lower opening is in the offing. The real green shoots may be mushrooming with the little rains but the economic ones seem to have floundered. The budget only added to the renewed pessimism, (though expectations had reached stratospheric levels). So, a correction was bound to happen. To get in or get out, that may be the questions. Equities have historically given superior returns and there is no reason why you should think otherwise for the future too.
We are in the midst of a consolidation phase after a strong rally. A rollercoaster ride is in store in the near term with bears slightly better placed. The upside appears to be capped for now. The global picture has also turned pale after briefly promising faster turnaround. Monsoon jitters haven’t yet vanished. Quarterly earnings will also have a bearing on the sentiment.
One virtue that the market should inculcate quickly is patience, as the UPA is unlikely to follow its therapy of growth. It will persist with its counter-cyclical spending spree and inclusive growth agenda. Reforms may happen, but surely not at supersonic speed that the market had been hoping for.
There could be some rebound after last week's 10% crack in the key indices. But, one should not get trapped in it as the undertone has turned a little weaker post budget. And, unless quarterly earnings spring a big surprise, the market is more likely to drift down than stage a smart comeback anytime soon.
Results Today: Axis Bank, Gammon Infra, Indo Wind Energy, Motilal Oswal and Samtel Colour.
FIIs were net sellers in the cash segment on Friday at Rs9.03bn while the local institutions poured in Rs8.86bn. In the F&O segment, the foreign funds were net buyers at Rs8.14bn. On Thursday, the foreign funds were net sellers of Rs2.92bn in the cash segment. Mutual Funds were net buyers of Rs2.57bn on the same day.
The yen erased losses against the dollar and the euro after Asian stocks declined, boosting demand for "safe haven" assets like the Japanese currency. The yen rose for a sixth day against the South Korean won on speculation that the global recession is far from over, prompting investors to reduce holdings of riskier assets like emerging market equities and commodities.
The euro traded near a one-month high against the pound on prospects that the European Central Bank (ECB) President Jean-Claude Trichet will today signal that the central bank policy makers will refrain from cutting interest rates.
The MSCI Asia Pacific Index touched a seven-week low today on concerns that the economic recovery in the US will take longer than anticipated. The regional benchmark dropped 1.3% to 99.35 as of 12:13 p.m. in Tokyo, with seven stocks declining for every two that advanced. The index has lost 4.2% since June 26.
Japan’s Nikkei 225 Stock Average was down 1%, while South Korea’s Kospi Index sank 2.2%. Taiwan’s Taiex Index slumped 3.3%, its biggest drop since June 15.
US stocks closed mixed on Friday, with blue chips and broader market indicators in the red while the technology space managed a small gain. Investors continued to be nervous ahead of the announcement of quarterly earnings even as worries remain over the health of the economy.
The Dow Jones Industrial Average and the Standard & Poor's 500 index suffered fourth straight weekly losses after a worse-than-estimated slide in consumer confidence added to concern that the much-hyped economic recovery could be faltering.
However, technology stocks managed to buck the negative trend, limiting the overall market's slide, following analyst upgrades of Yahoo! and MEMC Electronic Materials.
The Dow industrials lost 36.65 points, or 0.5%, to end at 8,146.5, leaving it with a weekly decline of 1.6%. The S&P 500 shed 3.55 points, or 0.4%, to 879.13, off 1.9% from the week-ago close.
The Nasdaq gained 3.48 points, or 0.2%, to 1,756.0, with the technology-laden index left with a decline of 2.3% for the week. It was the third down week for the tech-laden index in the past four weeks.
It was the longest weekly losing streak for the S&P 500 since March. The S&P 500 is down more than 7.1% since June 12 on concern that the rally of as much as 40% since March went too far and too fast without any substantial improvement in the prospects for corporate earnings.
Less than seven billion shares changed hands on all US exchanges, the slowest trading day since Jan. 2. Market breadth was mixed.
Chevron said late on Thursday that a drop in US refining margins would cut into second-quarter profits and that the impact of higher oil prices was being offset by the weaker dollar. The second-biggest US energy producer said the falling dollar slashed overseas profit from oil and natural-gas wells by almost US$7mn a day during April and May. Shares fell 2.6% on Friday. Fellow Dow oil component Exxon Mobil lost 1.5%. The Amex oil index lost 1.3%.
Oil services stocks were also pressured by a selloff in the price of crude. US light crude oil for August delivery fell 52 cents to settle at US$59.89 a barrel in New York, the lowest settlement in almost two months on concern that a prolonged global recession will sap demand for energy. Crude lost 10% in the week.
The May trade balance narrowed to US$26bn - the lowest reading in a decade and a surprise to economists who were looking for it to expand to US$30bn. The April trade deficit stood at a revised US$28.8bn in April.
US stocks extended their declines as the Reuters/University of Michigan index of consumer confidence trailed economist estimates. The University of Michigan's consumer sentiment index fell to 64.6 in July from 70.8 in June. Economists had forecast a fall to 70.
General Motors (GM) emerged from bankruptcy protection with fewer brands, dealerships and billions less in debt. The new GM will be majority owned by the US government, with the Canadian government, and the United Auto Workers union also taking a share. Old GM's bondholders will eventually own about 10% of the company, although old GM shareholders will not.
MEMC Electronic shares rose 3%. The maker of silicon wafers for solar modules and semiconductors was raised to "buy" from "hold" at Citigroup, which said that the company is starting to reap meaningful cost reductions.
Yahoo! shares gained 2.6%. The owner of the world’s second-most-used Internet search engine was raised to "market weight" from "underweight" by Thomas Weisel Partners.
Dell shares rose 0.5%. Goldman Sachs upgraded the world’s second-biggest maker of PCs to "conviction buy" from "neutral." Goldman raised its rating on the computer-hardware industry to "attractive" from "neutral," saying that downward estimate revisions are mostly behind us and it sees greater upside than downside to estimates into the seasonally stronger second half of the year and in 2010.
IBM shares fell 1.2%. The world’s biggest IT services provider was downgraded to "neutral" from "buy" at Goldman, which said investors will shift their focus from earnings resiliency in a period of soft demand to companies with greater operating leverage and higher top-line growth as tech spending improves.
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.30% from 3.40% late on Thursday.
In currency trading, the dollar gained against the euro and fell against the Japanese yen.
COMEX gold for August delivery settled down US$3.70 to US$912.50 an ounce.
Only about 6% of the S&P 500, or 31 companies, are due to report results this week. But the list includes the who's who of Wall Street finance such as Goldman Sachs, Bank of America, Citigroup and JPMorgan Chase, along with technology bellwethers like Google, Intel and IBM.
Currently, S&P earnings are expected to have declined 36% in the second quarter versus a year ago, according to Thomson Reuters. That means that barring some massive surprises, the S&P 500 is on track to post its eighth straight quarter of weaker profits, the longest streak since Thomson began tracking results in 1998.
European shares declined for the sixth time in seven sessions on Friday, with pharmaceuticals being among the worst performers. The pan-European Dow Jones Stoxx 600 index declined 1.1% to 197.28, bringing losses made this week to 3.4%.
Although this is the fourth straight week of losses, European stocks are roughly flat year-to-date. Germany's DAX index fell 1.2% to 4,576.31, while the French CAC-40 index lost 1.4% to 2,983.10 and the UK's FTSE 100 index dropped 0.8% to 4,127.17.
It was a dismal last half hour of trading on Dalal Street as the Indian markets ended with deep cut on Friday. All round selling in the scrips across the sectors dragged the key indices sharply. Markets registered its biggest weekly fall since October 2008 with the Sensex and Nifty dropping over 9% each over the week.
However, despite such a crash, the IT stocks outperformed the benchmark and the broader indices as the BSE IT index gained 2.1% led by IT bellwether Infosys, TCS and Wipro.
Finally, the Sensex plummeted 253 points to end at 13,504 after touching a high of 13,897 and a low of 13,419. The index had opened at 13,803 against the previous close of 13,757.
The NSE Nifty slumped 77 points or 2% to shut shop at 4,004.
Shares of Infosys have gained by over 3% to Rs1736 as the IT bellwether met its own Q1 revenue estimate and has managed to beat its Q1 EPS forecast.
The company’s full-year dollar guidance is up at the lower end of the range (revenue and EPS). However, its full-year rupee guidance is down.
Infosys reported a consolidated net profit of Rs15.27bn for the April-June quarter versus Rs16.13bn in the previous quarter, representing a sequential fall of about 5%.
Revenue for Q1 FY10 has come in at Rs54.72bn as against Rs56.35bn in the fourth quarter of last fiscal year, reflecting a drop of 3% Quarter on Quarter.
India's industrial output, as measured by the index of industrial production (IIP) rose 2.7% in May as against expectations of 1.3-15%.
India's April-May 2009 industrial output rose 1.9% from 5.3% year ago.
The Government announced that it was revising March industrial output to -0.75% from -0.8%, and April's figure to 1.2% as against 1.4%.