Avoid the crowd. Be the chess player, not the chess piece.
Bulls and bears are all out to try and checkmate each other. As expected, the bulls failed to sustain the buying momentum and the key indices tumbled from a day's high even as Asian markets closed mostly higher. A similar trading pattern may continue today and perhaps over the following two days.
Thursday's F&O expiry and the release of GDP and inflation data will determine the market's mood. On the global front, US stocks rose and Asian markets are mixed. Oil prices have softened a little and are hovering under $129 per barrel.
On the whole, the bulls still appear to be lacking in conviction in the wake of mounting worries over inflation and its impact on the economy (and even on politics). A weakening rupee coupled with the worsening fiscal situation are also worrisome.
FII inflows are yet to turn positive though domestic funds are providing some support. 'Stay cautious and sell into any rally' should be the ideal strategy. Having said that, select stock-centric buying can be done from a long-term perspective.
Lack of follow-up buying and continued sell-off by the FIIs contributed to the fall on Tuesday. The small-cap and mid-cap indices suffered even more. Market breadth too was highly negative. And, barring few defensive sectors like IT, FMCG and Pharma, other sectoral indices finished in the red. Banking was the biggest loser, followed by Real Estate and Oil & Gas shares.
Key Results Today: Adani Enterprise, Britannia, Emami, Godrej Industries, Harrison Malayalam, Hindustan Dorr Oliver, ICRA, IOC, IVR Prime, IVRCL Infra, JM Financial, M&M, Monsanto, Mundra Port, Pidilite, Tata Motors, Ucal Fuels and Visa Steel.
FIIs were net sellers of Rs4.97bn (provisional) in the cash segment on Tuesday while local institutions were net buyers of Rs5.3bn. Foreign funds were net buyers of Rs1.49bn in the F&O segment yesterday.
On Monday, FIIs offloaded Indian shares worth Rs11.15bn from the cash segment. Mutual Funds were net buyers of Rs516mn.
Asian stocks are mixed this morning as crude oil's decline and a drop in gold and copper prices weighed on raw-materials producers. BHP Billiton slumped the most in a week and Inpex Holdings declined. Canon climbed after Morgan Stanley advised investors to buy the stock.
The MSCI Asia Pacific Index was down 0.4% at 148.07 as of 10:52 a.m. in Tokyo, as about five stocks declined for three that gained. The benchmark index earlier rose 0.2%. An index of raw-materials shares decreased 1.2%, the biggest drop among the regional gauge's 10 industry groups.
Japan's Nikkei 225 Stock Average fell 0.3% to 13,848.64, led by an index of mining and energy companies. Oki Electric Industry Co. surged after the Nikkei newspaper said the company may sell its chip-making business to larger rival Rohm Co. this year.
US stocks advanced on Tuesday after crude oil futures retreated and a stronger dollar prompted investors to go for some bargain hunting after the market's worst weekly drop since February.
Stocks had been mixed to higher through the early afternoon as investors considered the drop in oil prices and mulled over the economic news, including reports showing a surprise rise in new-home sales and the worst drop in home sale prices in 20 years.
The S&P 500 added 9.42 points, or 0.7%, to 1,385.35. The Dow Jones Industrial Average rose 68.72 points, or 0.6%, to 12,548.35. The Nasdaq Composite Index jumped 36.57 points, or 1.5%, to 2,481.24.
Market breadth was positive. Two stocks gained for each that fell on the New York Stock Exchange.
US stocks had tumbled on Friday, on soaring crude oil prices and another weak housing market report ahead of the three-day holiday weekend. All markets were closed on Monday for Memorial Day.
April new-home sales rose 3.3% from a revised reading in the previous month, the government reported. The advance topped expectations, but kept sales near historically low levels.
Another housing report was more grim. The S&P/Case-Shiller national home price index slumped 14.1% in the first quarter, a record decline. A separate report showed that consumer confidence fell more than expected in April, touching a more than 16-year low.
Novellus Systems jumped the most in two weeks after RBC Capital Markets said it expects the company to top analysts' earnings estimates. Darden Restaurants posted its biggest rally since April 1 on Merrill Lynch's advice to buy the shares.
Lennar Corp. led gains in all five homebuilders in the S &P 500 Index after the government said new-house sales unexpectedly increased.
The Nasdaq climbed more than the blue chip indices thanks to strength in tech bellwethers such as Google and Oracle. Apple shares rose on continued anticipation about the late-June launch of the new version of its iPhone.
GM shares fell 1% after a Citi Investment Research downgraded the stock to "hold" from "buy" and cut its 12-month price target. This was part of a broader bearish note on the auto sector, amid weaker sales and surging commodity prices. Ford Motor also had its earnings estimates cut by Citi. Its shares fell 1%.
UBS shares plunged 13.3% after the company warned that it may have to take more writedowns on international real estate. The Swiss bank is also looking to raise almost $16bn in additional funds from shareholders.
US light crude oil for July delivery fell $3.34 to settle at $128.85 a barrel in New York, retreating as the dollar firmed up. A stronger US currency makes dollar-traded commodities like oil more expensive for international buyers.
The national average price for a gallon of regular unleaded gas rose to a record $3.937 from the previous day's record of $3.936, AAA reported.
Gold also retreated in response to the stronger dollar. COMEX gold for August delivery fell $17.80 to settle at $912.80 an ounce. Treasury prices fell, raising the yield on the 10-year note to 3.92% from 3.87% late on Friday.
European shares edged lower in a volatile session. The pan-European Dow Jones Stoxx 600 index lost 0.4% to 317.20. The UK's FTSE 100 closed down 0.5% at 6,058.50 and the French CAC-40 declined 0.6% to 4,906.56. Germany's DAX 30 inched 0.1% higher to 6,958.66.
In the emerging markets, the Bovespa in Brazil slid 0.9% to 70,992 while the IPC index in Mexico was up 0.3% at 31,414. The RTS index in Russia dived 1.9% at 2390 while the ISE National 30 index in Turkey gained 2.1% at 48,982.
Choppiness to continue
It was the fourth straight trading session where the bulls were unable to make a come back. After a steady start to the day, markets were unable to sustain as both the key indices lost ground in the second half of the trading session. The Nifty slipped over 70 points from days high again slipping below the 4,900mark and the benchmark Sensex slipped by over 230 points from days high.
It was again the weak European markets and selling pressure that dragged the markets to close in red. Finally, the BSE benchmark Sensex ended 72 points lower to close at 16,275 and the Nifty index slipped 15 points to close at 4,859.
Overall about 922 stocks advanced; 2,760 stocks declined while 81 stocks remained unchanged. Among the 50-Nifty 23 stocks ended in red and 27 stocks ended in green.
Petron Engineering surged by over 4% to Rs250 after the company announced that it received Letter of Award from Sichuan Fortune Project Management Co Ltd, China for erection work for two 330 MW Power Plants (Phase II) of M/s. Adani Power Project Ltd, at Mundra, Gujarat for a total estimated contract value of Rs430mn. The scrip touched an intra-day high of Rs260 and a low of Rs240 and recorded volumes of over 7,000 shares on NSE.
Aban Offshore advanced by over 4% to Rs4054 after the company said that it received a LoI for one well contract with Husky Oil China Ltd for the same rig Murmanskaya for a period of approximately 50 days. The scrip touched an intra-day high of Rs4089 and a low of Rs3914 and recorded volumes of over 1,00,000 shares on NSE.
Tata Comm edged higher by half a percent to Rs501 after the company announced that it would offer communication services in UAE along with Etisalat. The scrip touched an intra-day high of Rs505 and a low of Rs496 and recorded volumes of over 45,000 shares on NSE.
HDFC Bank ended lower by a percent to Rs1331. The company said that it has renewed contract with NCR to manage 2,000 ATMs. The scrip touched an intra-day high of Rs1368 and a low of Rs1318 and recorded volumes of over 10,00,000 shares on NSE.
Thermax gained 2% to Rs438 after the Company announced that it signed a protocol of agreement for an export order, for supply of Heat Recovery Steam Generator (HRSG).
The order value is about Euro 14.2mn. The scrip touched an intra-day high of Rs469 and a low of Rs425 and recorded volumes of over 1,00,000 shares on NSE.
Sita Shree Food advanced 2% to Rs43 after the company announced that it received 400 Metric ton orders from "Reliance Fresh", prevailing month to deliver Wheat flour and pulses which is increased about 250% from the last order of 160 MT. The scrip touched an intra-day high of Rs45 and a low of Rs42 and recorded volumes of over 25,00,000 shares on NSE.
Fertilizer stocks got a boost after media reports stated that FY09 fertilizer subsidy was seen at Rs95,013cr. Fertilizer stocks like Chambal Fertilizer surged by over 6.5% to Rs76, Nagarjuna Fertilizer advanced by over 2.5% to Rs45, National Fertilizer gained 2.2% to Rs47, Deepak Fertilizer was up by over 1.6% and RCF added 0.5% to Rs68.
Bajaj Finserv rallied by over 8% to Rs555 following reports that the company would take a final decision on setting up an asset management company (AMC) by October this year. The scrip touched an intra-day high of Rs617 and a low of Rs490 and recorded volumes of over 36,00,000 shares on NSE.
Corporate News
RIL Australia, a subsidiary of Reliance Industries, pays US$3.45mn in cash to acquire 49% stake in 4 exploration licenses of Uranium Exploration Australia Ltd. (BL)
OVL, subsidiary of ONGC has established commerciality of its Iranian asset, which is estimated to have 22tcf (trillion cu ft) of gas. (ET)
BHEL and Italian company in race for a Rs13bn order for supplying boilers to Neyveli Lignite. (BL)
Tata Steel gets mineral concession approvals from ministry of mines for two large mines in Jharkhand and Manipur. (DNA)
Omaxe is planning to raise Rs15bn in FY09 for various projects; promoters may dilute 5-10% stake via QIP. (DNA)
EKC is planning to invest Rs1.75bn in expanding capacities across plants in US, Dubai, China and India. (DNA)
PNB is keen to take a 51% stake in the proposed JV for setting up a bank in Bhutan. (BL)
SRF to acquire Thailand based tyre cord company for Rs1bn. (DNA)
Gujarat NRE Coke to raise fresh equity to fund its operations and expansion plans in Australia. (DNA)
BK Modi promoter of Spice Tele may sell its stake to AT&T or Etisalat. (ET)
Repro India to invest US$50mn to buyout digital printing solution firms abroad. (DNA)
Tesco in talks with Wadias, Parsvnath and Kalpataru Properties to enter the Indian market. (ET)
IT Department issues notice to Sesa Goa seeking information on the Vedanta deal. (ET)
DE Shaw raises its stake in Orient Express Hotel by ~2% to 7.6%. (ET)
GVK group is looking for opportunities in overseas airport development projects. (ET)
Jindal Drilling Singapore JV may explore opportunities for raising funds and listing. (BS)
Maytas Infrastructure wins contract for washery reject coal based power project. (BS)
Kirloskar Brothers gets order worth ~Rs1bn form Nuclear Power Corporation. (BS)
Elecon Engineering may acquire a European company. (BS)
Godrej Appliances plans to foray into selling chillers, deep freezers and other cold storage appliances. (BS)
Educomp Solution forms a 50:50 JV with Raffles Education. (BS)
Economic News
Fertilizer Ministry expects fertilizer subsidy to double in FY09 to Rs950bn. (ET)
The Government is considering an option of including cess or surcharge on income tax and corporate tax to bailout oil marketing companies. (BL)
The Government has eased the ban on cement export by allowing shipment through ports in Gujarat. (DNA)
India's crude oil import bill jumps over 40% to US$68bn in FY08. (ET)
Jet Airways, chairman Naresh Goyal expects aviation industry to incur losses in excess of US$2bn. (BS)
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