Falling inflation may give bulls direction

You cannot change your destination overnight, but you can change your direction overnight.

The weather has turned pretty hazy in Mumbai over the past few days, with isolated showers lashing the financial capital. The weather pattern in a way reflects the goings-on in the stock market of late. Most players are clueless about the near-term direction of the market amid mixed fundamentals. At the same time, there have been days when the bulls have managed to ward off the threat from the bears on positive newsflow. The yo-yo pattern is likely to continue for a while. Among the other worries is the relentless outflows by FIIs, which in turn is partly responsible for the fall in the rupee

Talking of macro-economic factors, inflation data will be released after the markets close today. It is likely to dip a bit from 12.34%. Some see it falling below 12% shortly, and if oil prices continue to slide, it may soon be in single digits again. The Government will also release IIP numbers for July tomorrow. Industrial output had grown by 5.4% in June. Data released by the Government yesterday showed that core sector growth for July slipped to 4.3% from 7.2% last year.

We expect the market to open in the red again. On the whole, the key indices will remain choppy while the broader market will continue to languish. Interest rate sensitives may see some spurt especially towards the end of the day in anticipation of a fall in inflation.

Keep an eye on Indian Hotels, as the company is likely to make a big announcement later today.

US stocks rose marginally on Wednesday, as investors snapped up the recently battered energy and technology shares, even as worries about the fate of Lehman Brothers and other financials kept a lid on the advance.

The S&P 500 advanced 7.53 points, or 0.6%, to 1,232.04. The Dow Jones Industrial Average added 38.19, or 0.3%, to 11,268.92, and the Nasdaq Composite Index climbed 18.89, or 0.9%, to 2,228.7.

Market breadth was positive. More than two stocks rose for each that dropped on the New York Stock Exchange.

The US market had found early solace in Lehman's restructuring efforts but shares of the Wall Street securities firm fell sharply late in the session, extending a 45% sell-off on Tuesday, after rating agency Moody's said it may downgrade its debt. S&P Ratings too expressed concerns about Lehman's earnings potential.

An acquisition of Lehman may be more likely in the wake of the brokerage firm's latest quarterly loss and steps it's taking to sell assets, according to some analysts. Moody's said it will probably downgrade Lehman if the firm doesn't do a deal soon.

Strong earnings forecasts from FedEx and Texas Instruments, a firmer dollar, and lower oil and gold prices lent some support to the US stocks. But lingering worries about the financial sector limited gains for the blue chips.

Lehman reported a nearly $4bn third-quarter loss, its biggest quarterly loss since it went public in 1994. The company also said it will spin off part of its commercial real estate assets and slash its dividend. Additionally, Lehman plans to sell a 55% stake in its investment management division.

Lehman shares were choppy on the news, ending lower after rising nearly 10% in the morning and almost 30% in pre-market trading.

While the Federal Reserve is widely expected to once again hold a key interest rate at 2% when it meets on Tuesday, there is a growing sense that the Fed may have to cut rates by the end of the year.

If the Fed does so, it would mark a dramatic change in the central bank's assessment of the economy. As recently as the Fed's last meeting in August, Fed members indicated that their next move would be to hike rates to fight inflation.

The Fed has left rates unchanged at its past two meetings and started to indicate that it was growing more worried about rising commodity prices, particularly oil. However, the US economy, which once seemed on track for a recovery in the second-half, has recently shown signs of weakening further.

Oil prices declined as the US government indicated weaker demand for gasoline, even as supplies of crude and gas dipped more than expected last week. US light crude oil for October delivery fell 68 cents to settle at $102.58 a barrel on the New York Mercantile Exchange, the lowest close since April 1.

Gasoline prices rose overnight, breaking a nine-day losing streak, according to a national survey of credit-card activity.

In the bond market, Treasury prices tumbled, raising the yield on the benchmark 10-year note to 3.63% from 3.57% late on Tuesday. The dollar rallied versus the euro and yen. COMEX gold for December delivery fell $29.50 to $762.50 an ounce.

European shares fell on Wednesday, with financials such as Royal Bank of Scotland leading the fall after Lehman's failure to secure a capital injection from Korea Development Bank and a hefty third-quarter loss. The pan-European Dow Jones Stoxx 600 index lost 0.8% to 277.35. UK's FTSE 100 closed down 0.9% at 5,366.20, while Germany's DAX 30 shed 0.4% to 6,210.32 and the French CAC-40 declined 0.2% to 4,283.66.

In the emerging markets, Russian equities fell sharply for a second session, as investors continued to exit the market amid pressure to meet margin calls. In Moscow, the dollar-denominated RTS index fell 4.4% to end at 1,334. It is down 42% year-to-date. The RTS index has fallen 19% only this month.

Brazil's Bovespa rallied 2.5% to 49,633. Brazil's central bank has lifted its key interest rate by 75 basis points to 13.75%. Mexico's IPC index ended virtually unchanged at 25,622. The ISE National-30 index in Turkey was down 2.5% at 48,787.

Market to remain sluggish

Bulls banged the bears on Monday after India pulled off a historic triumph at the NSG. But their joy, as expected was short-lived as the euphoria lost steam and markets ended lower for second straight trading session.

Scientists at CERN began a huge particle-smashing machine, intending to re-enact the conditions of the "Big Bang" that created the universe.

The Large Hadron Collider (LHC) is the biggest and most complex machine ever made and the platform, the largest scientific experiment in human history.

However, it was not a big bang day for Indian markets as weak global cues again dragged the sentiments on Dalal Street. The US stocks slumped overnight. Asian markets too ended lower by 1-2%. The metal, oil & gas and power stocks witnessed offloading.

Among the 30 components of the Sensex 24 stocks ended in the red and only 6 stocks ended in positive terrain. Index heavyweights like Reliance Industries, Sterlite Industries and Bharti Airtel were among the major laggards. On the other hand, Infosys, ITC and SI were among the major gainers.

Finally, the BSE benchmark Sensex closed at 14,662 losing 238 points and the BSE Nifty index slipped 68 points to close at 4,400.

In the overall market, 932 stocks advanced and 1,720 stocks declined. Whereas, 78 stocks were unchanged.

The IT stocks were in momentum after rupee weakened past the Rs45/US$ mark for the first time since November 20, 2006. The currency declined for a second day as the dollar rose against 14 of the 16 most-active currencies, according to reports.

Mphasis, Infosys and Financial Technologies were among the major gainers.

Shares of Usher Agro surged by over 12% to Rs191 after the company announced that it entered in MoU with Satake Corporation, Japan for expansion of Rice Milling Capacity by another 1 million ton.

Satake will be providing the plant & machinery for the interest free credit period of three years. The MoU provides that the Company will be extended with the technical know-how of the better use and production of bye products of rice, for exclusive right of use this technology in India for a specified period. The scrip touched an intra-day high of Rs192 and a low of Rs172 and recorded volumes of over 41,00,000 shares on BSE.

Shares of Sterlite Industries declined for second straight trading session on reorganization plans, the stock fell by over 12% to Rs507. The stock further took a hit after Macquarie Group cut share-price target by 28% on concern the company's reorganization plan would increase its capital and lower EPS.

The scrip touched an intra-day high of Rs559 and a low of Rs505 and recorded volumes of over 40,00,000 shares on BSE.

Hydro S&S Industries, an Indian maker of polypropylene and plastic products was locked at 20% upper circuit at Rs41.45 after the board of directors of the company announced that they would meet on September 16, 2008 to consider buyback of equity shares. The scrip touched an intra-day high of Rs41.45 and a low of Rs39.1 and recorded volumes of over 16,000 shares on BSE.

Adani Enterprise surged by over 7% to Rs657 after Adani Power secured SEBI approval for IPO. The scrip touched an intra-day high of Rs705 and a low of Rs607 and recorded volumes of over 4,00,000 shares on BSE.

The government is planning to transfer the power management functions of Power Grid Corp of India into a new entity. (Mint)
Dr. Reddy's is revamping its business model to focus on niche services; combining its custom pharmaceutical services (CPS) and API divisions. (Mint)
Bajaj Auto plans four new passenger and cargo vehicles. (Mint)
Saab AB, the Swedish maker of Gripen fighter plane, intends to establish an aerospace development centre in India with TCS. (Mint)
Educomp Solutions buys 50% in Eurokids for Rs390mn. (Mint)
Siemens Healthcare to pay Rs451mn on buyout of a diagonistic firm. (Mint)
IL&FS to pick up 50% stake in NTPC-Bhel venture. (Mint)
Temasek keen on part of Suuti stake in Axis Bank. (Mint)
Unitech in talks to sell stake in wireless unit. (Mint)
TCS, Infosys expect more delays in orders from US market. (Mint)
HCL Enterprise plans to form a venture capital arm. (BS)
Government restarts efforts to sell IFCI stake. (BS)
Electrotherm India signs a JV with Grasim for captive mining of coal block in Chattisgarh. (BS)
Gujarat NRE Coke plans rights issue. (BS)
L&T gets %160mn order from Petrobras. (BS)
Vodafone fears Essar may further dilute BPL stake. (BS)
A shareholder of GHCL has filed a petition to seek adjournment of the AGM on fears of destabilization of existing management. (BS)
Kingfisher Airlines plans to raise $400mn. (BS)
The research arm of Orchid Chemicals is planning public issue by June 2009. (BS)
Dewan Housing arm lines up $250mn real estate fund. (BS)
Japanese spirits giant, Suntory is looking to acquire 10-15% stake in United Sprits. (ET)
Reliance Industries incorporates two wholly owned subsidiaries for London and Singapore market. (BL)
Bharti promoters acquire additional 0.5% stake in Bharti Airtel for Rs8.3bn. (ET)
Nokia, Ericsson, Siemens, Alcatel, Huewai and ZTE submit bids for US$9bn BSNL tender. (ET)
Gammon India acquires 50% stake in Italy-based power company Sofinter. (ET)
Israel's SC stops Sun Pharma from closing Taro open offer. (ET)
Awaita properties acquire controlling stake in JPT Securities. (ET)
NHPC plans a follow on offer after its proposed IPO in October. (ET)
NTT DoCoMo in talks to pick up stake in Tata Teleservices. (ET)
Usher Agro enters in to MoU with Satake Corp, Japan for expansion of rice milling capacity. (ET)
Bank of Rajasthan enters into MoU with ICRA. (FE)
United Breweries, Heineken in discussion to resolve Asia-Pacific issue. (BL)
JSW Steel, Ispat Industries cut prices by Rs2,000 per ton effective from September 1. (BL)
Sel Manufacturing to set up textile park for an investment of Rs5bn. (BL)
Era Infrastructure secures order worth Rs1.29bn from AAI. (BL)
GVK Power & NPCIL plans to buy reactors from GE Westinghouse. (BL)
BPCL-Kochi refinery to set up bottoms upgradation project. (BL)
Reliance Industries evaluating development plans for D6 satellite fields. (BL)
Sobha Developers to construct 40 premium villas in Kerala for Rs1bn. (BL)
DLF secures SEBI approval to buy back shares worth Rs11.10bn at a price not exceeding Rs600/share. (BL)

Economy Front page

Shipping companies plan fixed rates for long term deals. (Mint)
Banks have three months left for complying with a directive by RBI to treat advances given to equity-oriented mutual funds as capital market exposure. (Mint)
India's ranking falls two notches to 122 in a global list that ranks the ease of doing business in 181 economies. (BS)
Core infrastructure growth slows to 4.3% in July from 7.2% in the corresponding period last year. (ET)
Rupee hits two-year low, breaches 45 against the dollar. (FE)
Finance Ministry seeks DoT to consult on the fees to be paid by telecom operators to extend license for 10 more years. (ET)
DTH service providers in talks with media planners and brands to sell space for advertisement. (ET)
Railways record 9% increase in freight traffic during April-August 2008. (ET)
Government to consider proposal to enable banks and financial institutions to fund acquisition of farm land overseas. (ET)
Private companies may be allowed to run, operate and own metro rail networks. (ET)
Central Drug Standard Control Organisation set to simplify regulatory norms for Pharmaceutical industry. (ET)
Government to consider TRAI proposal to hike FDI in news channels. (BL)