Tuesday theories and FII facts
Facts do not 'speak for themselves', they are read in the light of theory.
Even as bulls were rejoicing about Friday's Rs10-bn net buying by FIIs, Monday’s provisional figures appears to tell a different story as overseas investors turned net sellers. The Sensex gained around 240 points cruising towards the 20K mark. The selling in stock futures may well be the usual creation of arbitrage positions as the cost of carry is up at the beginning of the month. It now remains to be seen if the bulls can continue to be resilient in the face of any slowdown in the US and global worries elsewhere. Lack of local triggers coupled with the absence of fresh FII buying may keep the main indices in a tight range. And if you go by the Tuesday theory, indices usually move opposite to Monday's movement.
In such a scenario, action could be seen outside the indices i.e. in the small-cap and mid-cap shares. The main indices, as and when they swing may do so violently. The downside from here appears limited. Any major fall should be used as an investment opportunity. Besides FII activity, all eyes will now be fixed on the Dec. 11 Fed meeting. The American central bank's action will determine how global equity markets behave in the immediate future. We expect a cautious opening, as global cues are pretty mixed. Thereafter, the market may turn a little choppy and some profit booking may kick in at a later stage in the day. Stocks like IDFC and Tata Chemical could be considered for the short term.
Dish TV India's Board will meet on December 5, to consider a proposal for new equity capital infusion by way of preferential allotment of equity and / or equity related securities. Logix Microsystems has decided to acquire majority interest in Add-on-Auto LLC, USA.
US stocks fell for the first time in five days, led by financial companies, as a warning on further credit market losses by Deutsche Bank offset the announcement of a rescue plan for sub-prime mortgage borrowers.
Morgan Stanley and Merrill Lynch declined after Deutsche Bank analyst Mike Mayo said declining fixed-income markets will reduce fourth-quarter earnings.
MetLife added to the negative sentiment after forecasting 2008 profit that missed analysts' projections. GE fell after Citigroup cut its profit estimate for the US conglomerate.
The Standard & Poor's 500 Index lost 9 points, or 0.6%, to 1,472.42. The Dow Jones Industrial Average decreased 57 points or 0.4%, to 13,314.57. The Nasdaq Composite Index dropped 24 points, or 0.9%, to 2,637.13.
Market breadth was negative. About two stocks fell for every one that rose on the New York Stock Exchange.
Treasury Secretary Henry Paulson, speaking at the National Housing Forum, said that the White House was aggressively pursuing relief for struggling subprime mortgage holders.
Paulson outlined steps the Bush government was taking to help troubled homeowners, but didn't divulge any further details on plans to freeze interest rates at the lower levels.
His comments initially lent some stability to the markets, but the gains were short lived, as stocks turned lower again in the afternoon. Financial, housing and technology were among the worst hit.
GM shares fell 4% after the automaker reported a drop in November sales versus forecasts for a rise, while other auto sales were mixed. Ford's US sales rose 0.4% last month, ending 12 straight months of declines.
E*Trade Financial posted the biggest decline in the S&P 500, dropping 11%. The online bank and brokerage was downgraded to "sell" from "neutral" by Banc of America Securities.
In economic news, the Institute For Supply Management's manufacturing index for November eased to 50.8 in the month, versus forecasts for a slip to 50.5. The index stood at 50.9 in October. Reports are due later in the week on factory orders, consumer sentiment and the big monthly jobs report.
In another sign of the housing sector mess, homebuilder Lennar unloaded 11,000 properties for US$525mn, selling them to a joint venture it set up with the real estate arm of Morgan Stanley. The properties had a net book value of about US$1.3bn on Sept. 30.
Federal Reserve Bank of San Francisco President Janet Yellen said financial conditions and consumer spending have deteriorated more than she expected in the past month, indicating that she backs cutting interest rates next week.
The weak manufacturing sector data coupled with fresh bad news on the housing sector correction stoked optimism that the Fed may need to slash interest rates to keep the world's largest economy from sliding into a recession.
The odds of a quarter-percentage point rate cut to 4.25% at the central bank's Dec. 11 policy meeting are 60%, according to Fed funds futures contracts. Futures are also pricing in a 40% chance of a 0.5% point cut.
Treasury prices rose, lowering the yield on the 10-year note to 3.85% from 3.94% late on Friday. The dollar slipped versus the euro and the yen. US light crude oil for January delivery rose 60 cents to settle at US $89.31 a barrel in New York. COMEX gold for February delivery rose US $5.60 to US $794.70 an ounce.
European stocks closed lower in a choppy session, though media shares advanced, as investors welcomed Vivendi's plan to acquire video-game maker Activision and as WPP secured a big advertising deal from PC giant Dell.
The pan-European Dow Jones Stoxx 600 index edged 0.4% lower at 368.81. The UK's FTSE 100 slipped 0.7% to 6,386.60, while the German DAX 30 fell 0.4% to 7,837.26 and the French CAC-40 shed 0.7% to 5,629.46.
In the emerging markets, the Bovespa in Brazil gained 0.3% to 63,199 while the IPC Index in Mexico rose 0.7% to 29,968. The RTS index in Russia lost 0.9% to 2200 and the ISE National-30 index in turkey added 0.15% to 68,879.
Asian stocks were trading mixed this morning. The Nikkei in Tokyo was down 78 points at 15,550 while the Hang Seng in Hong Kong was up 155 points at 28,813. The Kospi in Seoul and the Straits Times in Singapore were virtually flat at 1908 and 3515, respectively.
The MSCI Asia Pacific Index slid 0.4% to 161.68 as of 10:07 a.m. in Tokyo, snapping a three-day, 3.6% rally. An index of mining companies posted the biggest drop among the benchmark's 10 industry groups.
BHP Billiton and Nippon Mining Holdings slipped after a weak report on the US manufacturing sector, raising concern that demand for raw materials will slow.
The yen rose against all of the 16 most-active currencies after comments by the US Treasury Secretary failed to revive credit-market confidence, prompting traders to sell higher-yielding assets bought with loans from Japan.
The Japanese currency gained the most against the Australian dollar, among the favorites for so-called carry trades, after Paulson said he had no silver bullet to stop subprime-mortgage losses from spreading.
MARKET...
Updside for 20k!
Sensex rose for third straight trading session as bulls started the December series in style. After being net sellers in the previous month the FIIs turned net buyers on provisional basis as they bought stocks worth Rs10.72bn on 30th November. Further positive cues from the International markets and buying momentum in scrips across the sectors lifted the benchmark Sensex to hit an intra-day high of 19,619 finally ending the day at 19,603 hitting days low of 19,446 and the Nifty closed at 5,865 further putting on 102 points.
Lanco Infratech surged by over 5.5% to Rs562 after the company declared that they may set up holding companies for Power, Property, also plans to increase capacity at Orissa Power Plant. The company also announced that it was bidding for 2 India road Projects worth Rs$500mn and no further dilution of equity. The scrip touched an intra-day high of Rs569 and a low of Rs530 and recorded volumes of over 10,00,000 shares on NSE.
Punj Lloyd spurred by over 3.5% to Rs528. According to reports the company’s subsidiary gets Rs12.7bn contract for architectural, civil and structural work from Land Transport Authority of Singapore. The scrip touched an intra-day high of Rs530 and a low of Rs510 and recorded volumes of over 26,00,000 shares on NSE.
Reliance Energy spiked up by over 9.5% to Rs1900 after the company announced that they would raise Rs80bn for infrastructure projects; promoters to invest Rs65bn through convertible warrants and preferential equity shares. The scrip touched an intra-day high of Rs1927 and a low of Rs1788 and recorded volumes of over 52,00,000 shares on NSE.
Ahmednagar Forgings edged higher by 0.5% to Rs232 after the company announced that they are planning to raise Rs408mn in share sale. The scrip touched an intra-day high of Rs253 and a low of Rs231 and recorded volumes of over 14,000 shares on NSE.
Electro Steel Castings was frozen at 5% upper circuit to Rs87.95 after the company declared that they would sell 20mn warrants to founders. The scrip has touched an intra-day high of Rs87.95 and a low of Rs83.70 and has recorded volumes of over 16,00,000 shares on NSE.
Patel Engineering advanced by over 1.7% to Rs780 after the company announced that the company won Rs1.19bn contract. The scrip touched an intra-day high of Rs795 and a low of Rs762 and recorded volumes of over 36,000 shares on NSE.
PNB surged by over 4% to Rs628 after the company announced that they would raise Rs3bn by selling bonds. The scrip touched an intra-day high of Rs640 and a low of Rs608 and recorded volumes of over 8,00,000 shares on NSE.
Sun TV was trading flat at Rs380. The company announced that they started FM radio station at Pondicherry. The scrip touched an intra-day high of Rs399 and a low of Rs370 and recorded volumes of over 1,00,000 shares on NSE.
ABB surged 3% to Rs1604 after the company declared that the company would invest $100mn in India Biz. The scrip touched an intra-day high of Rs1629 and a low of Rs1563 and recorded volumes of over 2,00,000 shares on NSE.
Man Industries spurred by over 4.5% to Rs133 after the company declared that they planned IPO of Real Estate arm. The scrip touched an intra-day high of Rs141 and a low of Rs129 and recorded volumes of over 2,00,000 shares on NSE.
