The Perfect Storm!

There is bound to come some pain, surely as there are storms and falling rain; just believe that the one who holds the storms will bring the sun.

The bears seem to have found the perfect storm in the desert. For long they have been scouting for a reason to break the range-bound trade and the Dubai-debt issues seem to have done the trick. UAE authorities seem to be coming up with a solution; albeit temporary, and this could at least limit the collateral damage.

We expect a bounce back at start today. Some amount of domestic buying, especially in the large caps is likely after they were randomly beaten down last week. Investors too may have pondered enough over the weekend and decide that the situation is not that bad after all for the time being. The Asian markets are staging a comeback recording decent gains.

The GDP numbers expected later in the day could add to the sentiment if above expectations. Some surveys suggest the India’s economy grew at the fastest pace in a year thanks to record-low interest rates and government stimulus measures.

The primary fears include that a bailout in Dubai may feed further bubbles. Beijing says it plans to continue its stimulus measures. Back home, the RBI says it is watching the situation closely. The event could delay the central bank’s exit measures for some time.

Japanese benchmark moved higher on expectations that the Dubai issue would be limited; moreover the yen’s appreciation halted. For the sake of the world, Dubai World will hope to live up to its tagline of "The sun never sets on Dubai World."

Finance Minister Pranab Mukherjee had said attempt was being made to balance the need to create jobs against inflation concerns. Food inflation meanwhile has climbed to 15.58% and remains a major concern.

Meanwhile Federal Reserve Chairman Ben Bernanke, has written a strong article in a newspaper warning Congress that actions limiting the Fed’s independence could prove detrimental to the causes of financial reform and economic recovery. "The government's actions to avoid financial collapse last fall -- as distasteful and unfair as some undoubtedly were -- were unfortunately necessary to prevent a global economic catastrophe that could have rivaled the Great Depression in length and severity, with profound consequences for our economy and society," he wrote.

Among other news in the media:

Foreign exchange reserves fell by US$1bn to US$285bn, for the week ended November 20.

Six core infrastructure industries see 3.5% yoy growth in October, compared to 4.1% and 7.8% levels of the preceding two months and the 2% for Oct’ 08.

The 46 operational airports in the country handled 42mn domestic passengers during April-Sept’ 2009-10, which is about the same as the numbers handled in 2007.

FDI into India declined 11% yoy to US$15bn in the first six months of fiscal 2009-10.

Exports dip 6.6% yoy in October. The government is assessing the needs of major export-oriented sectors hit by the economic slowdown to provide support for their fast recovery.

Finance Ministry says no to income tax holiday for first 7 NELP rounds.

India’s drug retail market grew by 29.24% in value terms in October this year over the year-ago period.

Government plans ultra mega steel projects, to identify five locations adjacent to mining sites for developing UMSPS.

It seems like fatigue and F&O expiry took its toll on the bulls today. The key indices were attempting to break out of a range where the correction had set-in last month. Lack of any events in the near term, which could trigger a big push towards new highs brought the indices lower.

Also, weakness in European markets following a sharp decline in Chinese stocks triggered a sell-off on Dalal Street in the afternoon trades.

The BSE Sensex lost 344 points to end at 16,854 after touching a high of 17,202.51. The NSE Nifty lost 103 points to close at 5,006.

Among the BSE sectoral indices, banking (2.64%), oil&gas (2.3%), consumer goods (2.24%), realty (2.11%) and IT (1.97%) stocks were the major losers respectively.

The BSE Mid-Cap index ended lower by 1.45% while the BSE Small-Cap index was down by 0.98%. Among the 30-components of Sensex, Hindustan Unilever, Sun Pharma, ACC, Hero Honda were among the top gainers. Top losers in Sensex were Reliance Industries, ICICI Bank, Tata Steel, M&M and SBI.

Indian stock market breadth was extremely negative and pared early morning gains as traders squared off positions on the settlement day of November series.

Private banking stocks declined sharply despite of government planning to move a bill early next year to amend a banking law for allowing foreign investors in private banks to have voting rights in proportion to their shareholdings. ICICI Bank dropped by 4%. HDFC Bank slipped by 2% and Axis Bank slipped by 2% to Rs997.

Tata Steel lost over 3% after it reported a consolidated net loss of Rs2,707cr in Q2 September 2009. Net sales fell 42.8% to Rs2,5270cr in Q2 September 2009.

Auto stocks fell on account of profit booking. Maruti, Mahindra & Mahindra and Tata Motosr were among the top losers.

Profit booking was seen in shares of Uttar Pradesh-based sugar companies, which rose on Wednesday. State's sugar mill association signed an agreement with the sugarcane farmers on the price for the ongoing season (October-September 2009-10). Balrampur Chini, Bajaj Hind and Dhampur Sugar have lost in the range of 2-3%.

In Asia, Australia's S&P/ASX ended lower by 0.29 % at 4708.60, Shanghai Index in China lost 3.6% and Hang Seng index in Hong Kong was down 1.78%.

In Europe, DAX in Germany was down by 1.85% and the CAC 40 index of France dipped 1.97%.