Lack of money is the root of all evil – George Bernard Shaw
Even as we live to fight another day, the fact remains that we are in the midst of one of the worst times ever for global equity markets. And the end is nowhere in sight for the moment. As if the bloodbath in European and Latin American markets overnight was not enough, the Asian markets this morning too have continued from where they left yesterday.
The signs are all flashing red across the world. Investors are seeing their shares erode. Leveraged players are asked to immediately cough up money. Power and Future Capital have taken a different meaning in recent days. People went head over heels borrowing money to subscribe to the high-profile IPOs and now some may see their cheques bounce if the market can't bounce back.
What could also exacerbate the matters for
Given the steep fall in Asian and other global markets, we expect another gap-down opening and further weakness. No levels will work in this kind of a market. Even fundamentals are being overlooked. Don't be surprised if there is a trading freeze. If not that, we expect at least another 1,000 points crack in the Sensex.
Things could get even worse once the
A silver lining in the dark clouds is that while FIIs pulled out Rs32.96bn (provisional) from the cash segment yesterday, domestic institutions pumped in almost a similar amount. This trend may persist for a while as a lot of MFs are sitting on cash after raising money through recent NFOs. However, the bad news is it may not be enough to stop the slide.
Results Today: Amara Raja, ANG Auto, Asahi India, Balaji Telefilms, Bank of India, Bombay Rayon Fashions, Brigade Enterprises, Corporation Bank, Cosmo Films, Deccan Aviation, Genus Power, Grasim, Greenply Industries, Gujarat Ambuja Exports, Gujarat Fluorochemicals, GSFC, HEG, i-flex, India Infoline, Info Edge, INOX, Lupin, Mangalam Timber, MIC Electronics, MindTree, Nelco, NOCIL, Noida Toll Bridge, Pantaloon Retail, Phoenix Mills, Punjab Tractors, Sesa Goa, Spicejet, Swaraj Engines, TN Newsprint, Tata Elxsi, Tata Tele (M), Tech Mahindra, United Spirits, UB and Vijaya Bank.
Brazil's Bovespa sank 6.6%, almost 3,800 points, to 53.709.11. Mexico's IPC index fell 5.35%, nearly 1,430 points, to 25,284.88. Europe officially entered bear-market territory, with the pan-European Dow Jones Stoxx 600 index, ending down 5.4% at 309.67.
Leading European indexes also slumped, with the French CAC-40, ending the day down 6.8% at 4,744.45, the German DAX 30 was down 7.2% at 6,790.19, while the UK's FTSE 100 finished 5.5% lower at 5,578.20.
The VDAX-New Index, a benchmark gauge of European stock-market volatility, surged as much as 39%, the most since 2001. The measure of expected price swings for stocks is derived from prices paid for options on Germany's DAX.
This morning the yen declined, erasing gains, on speculation that the recent surge to the strongest in 2 1/2 years against the dollar was excessive. The Australian and New Zealand dollars fell to the lowest in at least four months against the yen as global investors liquidated their higher-yielding assets funded through yen.
Head of the International Monetary Fund (IMF) has called the global economic situation serious and says markets worldwide had responded skeptically to a US stimulus plan. Dominique Strauss-Kahn stresses that a US recession would affect economies across the globe.
"The situation is ... serious," said Strauss-Kahn following a meeting in Paris with French President Nicolas Sarkozy. "All the countries in the world are suffering from a slowdown in growth in the United States."
Back in India though, the Prime Minister and the Finance Minister are still singing the "India Shining" tune. The PM says that sustained orderly growth of the capital markets is a priority area of the UPA Government.
Initially, P Chidambaram refused to comment on the market movement, but by evening his ministry issued a statement advising investors to take informed decisions.
The Bank of Japan (BOJ) today kept interest rates unchanged and economists expect the policy makers to say later today that the world's second-largest economy is growing slower than it had estimated.
Governor Toshihiko Fukui and his colleagues left the benchmark overnight lending rate at 0.5% by a unanimous vote, the bank said in a statement today in Tokyo. The key rate was doubled in February.
Will bounce back remain a hope?
After falling over 1800 points in the previous week, markets further extended their losses on Monday (Jan 21, 2008). It was blood-bath on Dalal Street as a massive sell was triggered on Indian bourses amid rising worries over the US economy and its wider global fallout. It was undoubtedly the biggest ever fall in Indian stock markets history in absolute point's term. The fall could be attributed to selling pressure all over. Further there were also reports stating margin calls getting triggered and few terminals being shut. All the 30 components of Sensex declined with Reliance Energy losing the most, down 16.38%.
Among the BSE sectoral indices, BSE Metal index (down 13.3%), BSE Realty index (down 12.8%), BSE Oil & Gas index (down 11.9%), BSE Mid-Cap index (down 11.3%) and BSE Power index (down 10.9%) bore the brunt of the selling. Sugar and cement shares too fell sharply.
About 138 stocks advanced on the BSE, while 2,658 stocks declined and 13 stocks remained unchanged. In the BSE 500 index, there were only 5 advancing stocks. Finally, the 30-share Sensex closed at 17,605, plunging 1,408 points (7.4%). The NSE Nifty nose-dived 496 points or 8.7% to close at 5,208.
Reliance Industries slipped 9% to Rs2540. According to reports the company has planned to produce 30-40mn cubic meters of gas a day from six finds in the Mahanadi block with an investment of US$1.14bn and also has acquired 1,000 hectares for Mumbai SEZ. The scrip touched an intra-day high of Rs2779 and a low of Rs2345 and recorded volumes of over 82,00,000 shares on NSE.
Rcom plunged over 12% to Rs613. The company has planned to invest Rs200bn for its network expansion this year reports stated. The scrip touched an intra-day high of Rs704 and a low of Rs571 and recorded volumes of over 1,00,00,000 shares on NSE.
L&T was down over 6% to Rs3696. It is among nine companies that have qualified for 2000-MW Talwandi Sabo coal-based thermal power plant at Mansa in Punjab stated reports. The scrip touched an intra-day high of Rs3939 and a low of Rs3470 and recorded volumes of over 16,00,000 0shares on NSE.
Hero Honda slipped 7% to Rs643. The company announced that it is considering using excess capacity at its existing factories to make components and export motorcycle kits after a new factory at Haridwar, Uttarakhand starts production in April accordig to reports. The scrip touched an intra-day high of Rs697 and a low of Rs634 and recorded volumes of over 1,00,000 shares on NSE.
TVS Motors plummeted over 20% to Rs48 after reports stated that the Supreme Court directed the company not to accept any fresh bookings- for the new TVS Flame bike- till Jan29, 2008. The scrip touched an intra-day high of Rs64 and a low of Rs43 and recorded volumes of over 16,00,000 shares on NSE.
Tata Steel dropped 7.7% to Rs721. According to reports the company may partner Vale, Brazil mining company for projects in Brazil. The company has also signed a joint venture with Oman's Al Bahja Group to develop limestone deposits in Salalah in the sultanate reports stated. The scrip touched an intra-day high of Rs780 and a low of Rs626 and recorded volumes of over 37,00,000 shares on NSE.
Mysore Cements declined 20% to Rs39. Reports stated that Sebi asked Heidelberg Cement AG to acquire shares of the company from the Indian promoters, the SK Birla group, at the same price at which it bought shares from public shareholders by open offer. The scrip touched an intra-day high of Rs48 and a low of Rs39 and recorded volumes of over 4,00,000 shares on BSE.
News Snippets:
Reliance Energy raises Rs78.4bn through allotment of convertible warrants to AAA Project Ventures, a promoter group company. (ET)
Reliance Communications awards GSM roll-out contract valued at US$500-600mn to Chinese telecom network major Huawei. (ET)
Satyam Computers has acquired US-based consulting firm Bridge Strategy Group in an all-cash deal of US$35mn. (ET)
L&T bags Rs17bn order from Kuwait National Petroleum Company to manufacture and supply reactors for its clean fuel project. (ET)
Dr. Reddy's have entered into a settlement agreement with Novartis to suspend the launch of its generic capsule rivastigmine tartrate till 2014. (ET)
Ranbaxy has reached an out-of-court settlement with GSKSmithKlime to market generic copies of the latter's US$1bn migraine drug Imitrex in the US. (ET)
Wipro Infotech wins a US$100mn deal from Saudi Arabian Airlines. (ET)
The Supreme Court refuses to allow TVS to market its 125cc bike 'Flame' till the Madras high court hears the patent case filed by Bajaj Auto. (DNA)
RIL multi-product SEZ in Jhajjar district in Haryana is approved by the Centre. (FE)
IOC, Oil India and an Algerian company to prospect oil in Libyan onshore block. (BL)
MRPL and Shell in JV to market and supply aviation fuel in Bangalore and Hyderabad airports. (BL)
Sintex Industries is close to acquiring a composites company abroad in a deal worth around US$100mn. (DNA)
Private equity players acquire 21% equity in Ballarpur Paper Holdings for Rs7bn. (ET)
Network 18 group plans to launch a 24-hour home shopping television channel soon. (DNA)
Raj TV to spent Rs500mn for adding more channels over next 20 months. (BL)
Sona Okegawa, part of Sona group, acquires ThyssenKrupp's precision forging company. (BL)
Vodafone Essar to invest US$6bn over next three years to increase its mobile subscriber base to over 100mn. (BL)
Finance Minister agrees to meet fertilizer sector subsidy needs and other demands. (FE)
Government proposes to introduce new regulations for mining operations to penalize companies delaying development of mines by levying higher rent on the leasehold area. (ET)
Decision on hike in petroleum products postponed until next week. (FE)
10% surcharge on personal and corporate income tax may by halved or scrapped in the Budget. (BS)
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