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Wednesday, August 04, 2010

Avoid the chase


If you want to catch something, running after it isn't always the best way.- Lois McMaster.

Looks like this anemic trend of sideways-cum-rangebound movement in the stock benchmarks could last a bit longer. That means the bulls will have to be a little more patient before they see the Nifty cross 5500. Today’s start will be sedate at best given the mixed global cues. The broad range for the Nifty is between 5300 and 5600 if one goes by the F&O indicators. Near-term resistance is likely at 5480-5510 while the support will kick in at around 5420-5370.

Identify the stocks you would like to own and patiently await a better price to buy. Apart from the tepid price action in the key indices, the disappointing aspect over the past couple of sessions has been lower trading volume. Meanwhile, action continues in the small-cap and mid-cap space with a few stocks outperforming the market, mostly due to some news flow. We continue to advocate caution on this front as these stocks tend to be volatile and illiquid.

US stocks closed lower due to a couple of disappointing earnings and not-so-great economic reports. Europe fared slightly better, with indices in key markets finishing flat. The German DAX index though gained marginally, buoyed by a few upbeat results. Friday’s US jobs data will be keenly followed but before that we will get an update on monetary policy in the UK and EU on Thursday.

Results Today: Adani Power, Bombay Rayon, Future Capital, Gujarat Industries Power, IDFC, IL&FS Transportation, Mundra Port and Standard Chartered Bank.

FIIs were net buyers of Rs6.07bn in the cash segment on Tuesday (provisionally), according to the NSE web site. Local funds were net sellers of Rs1.5bn. In the F&O segment, they were net buyers at Rs14.62bn. On Monday, the FIIs were net buyers of Rs8.64bn in the cash segment. Mutual Funds were net buyers at Rs1.32bn on the same day.

US stocks fell on Tuesday as earnings reports from the likes of P&G and Dow Chemical coupled with disappointing economic reports revived concerns about the strength and sustainability of the economic recovery.

The Dow Jones Industrial Average fell 38 points, or 0.4%, to end at 10,636.38, pressured by a 3.4% drop in P&G shares. The S&P 500 index was down 5.40 points, or 0.5%, to 1,120.46, pressured by a 1.7% drop in the materials sector.

The Nasdaq Composite index dropped 11.84 points, or 0.5%, to 2,283.52.

The dollar was lower versus the euro, the British pound and the Japanese yen.

US light crude oil for September delivery rose $1.16 to settle at $82.49 a barrel.

COMEX gold's December contract edged up $2.10 to close at $1,187.50 per ounce.

Treasury prices rose, pushing the yield on the 10-year note down to 2.91% from 2.97% late on Monday.

Better-than-expected corporate earnings helped boost the market 7% in July, the best month for US stocks in a year. However, a spate of disappointing economic reports has raised concerns about the pace of the recovery.

Investors are worried about consumer spending, which accounts for the major chunk of the US economy, as household budgets remain strained by the weak job market.

Investors are bracing for the government's monthly payrolls report due out on Friday.

American employers are expected to cut payrolls in July and the unemployment rate is likely to inch higher. Treasury Secretary Tim Geithner said on Tuesday that the nation's jobless rate could rise for a few months before it falls.

Payrolls processing firm ADP will release July data on private sector employment on Wednesday. In addition, outplacement firm Challenger, Gray & Christmas is due to report on last month's planned job cuts before the market opens.

Government figures showed that both personal income and spending were unchanged in June. Economists had expected spending to remain flat but were forecasting personal income to edge up 0.1% in June, following a revised 0.3% gain in May.

Separately, factory orders fell for the second month in a row, declining 1.2% in June, the government said. Economists expected a 0.5% dip in total orders, after a 1.8% drop in May.

Pending home sales fell 2.6% in June, according to the National Association of Realtors. Economists had expected pending home sales to fall 5% in the month, after a 30% plunge in May.

P&G reported that its fiscal fourth-quarter net income fell 12% from a year earlier, missing expectations. Sales rose modestly, but also fell short of forecasts. Shares in the company, a Dow component, slid nearly 4%.

Dow Chemical reported second-quarter earnings that missed analysts' expectations, even as sales rose 20%. Excluding certain items, the largest U.S. chemical company said it earned 54 cents in the quarter. Analysts were expecting 56 cents.

Most major automakers reported improved US sales in July, making it one of the best months for industry-wide sales over the past two years. General Motors, Ford and Chrysler all said sales rose 5% in the month, versus July 2009.

Toyota said sales slipped 3% in July, but were slightly better than analysts' forecasts. Sales slipped 2% at Honda Motor.

Sanofi-Aventis has reportedly entered into friendly takeover talks with US biotech firm Genzyme. A potential deal would value Genzyme at more than $18 billion, according to the Wall Street Journal.

Research in Motion (RIM) unveiled the much-hyped BlackBerry Torch 9800, a new touch-screen BlackBerry smartphone with a pull-out keyboard and an updated operating system designed to compete with the likes of the iPhone and Android smartphones.

European shares ended mixed, with the German market managing slim gains following strong earnings reports from BMW and Deutsche Post while others closed nearly unchanged.

The Stoxx 600 Europe index ended nearly flat, down 0.01% at 262.06 points. It surged 2.6% on Monday to a level not seen since late April.

In Frankfurt, the blue-chip DAX index rose 0.3% to 6,307.91. The UK's FTSE 100 index edged down 0.01% to end at 5,396.48. The French CAC-40 index fell 0.1% to 3,747.51.

In Greece, the ASE Composite stock index ended up 1.3%, as the Portuguese and Spanish stock indexes also eked out small gains.

BMW shares gained after the premium-car maker's second-quarter net profit surged to €834 million, topping forecasts. It sold 12.5% more vehicles in the quarter.

Deutsche Post DHL shares rose. The company's second-quarter net profit after minorities rose 22.7% to €81 million euros, also beating analyst forecasts.

Shares of BP ended higher. The oil giant said it will sell its oil- and gas-exploration business in Colombia to a consortium of Ecopetrol and Talisman of Canada for $1.9 billion in cash.