Better Earning & be Careful
The euphoria of Wednesday may have been forgotten on Thursday. Main indices may be down by it continues to be earning season for bulls on specific counters. Imagine the dream run refinery stocks had. Reasons are hard to find and we hate to speculate on what would have happened. But the action is hot outside the main indices, with small-cap and mid-cap indices on the BSE notching up gains of 1.9% and 1.6%, respectively.
Among the sectors, FMCG, Real Estate, Oil & Gas and PSU pack were in the limelight yesterday. The key indices finished in the red thanks largely to weakness in banking, IT and power stocks. Looks like the trend may continue in the near term with stock centric action dominating the scene. All we can say is be careful with quite a few stocks having witnessed a huge run-up without any significant change in fundamentals.
Plus, one has to bear in mind the mounting losses linked to the US housing sector and its fallout on the American economy and the world at large. Liquidity is drying up (though Wednesday's data shows a big improvement). Most of the positive factors are already reflected in the stock prices. The market has rallied sharply from end August. Hence, there is a likelihood that the current consolidation phase may continue for a while.
The direction of the market will hinge on a few key issues - the bad news coming from the US economy, trend in FII inflows, political developments in New Delhi and of course on local economic data. Today, we foresee a weak opening following a steep fall in US and Asian markets. At the same time, earnings will continue for some bulls somewhere.
Prajay Engineers says its wholly-owned subsidiary Prajay Holdings has received a commitment of FDI worth $36mn for one of its prime projects at Hyderabad.
Vishal Retail says it has opened four new showrooms. The Bombay High Court has approved the merger of Lok Shelters with Lok Housing.
Southern Online has decided to raise up to Rs500mn for setting up a second Biodiesel unit at Vizag with a capacity of 250 tons a day.
US stocks tumbled on Thursday, with financial, commodity and technology shares among the biggest losers on the back of lingering worries about the credit market crisis and weakening consumer confidence.
The Dow Jones Industrial Average fell 121 points, or 0.9%, to 13,110.05. The S&P 500 Index lost 19 points, or 1.3%, to 1,451.15. The Nasdaq Composite Index slipped 26 points, or 1%, to 2,618.51.
More than three stocks dropped for every one that rose on the New York Stock Exchange.
The fall in US stocks came after Wells Fargo said that the housing market is the worst since the Great Depression and investors speculated that Fannie Mae masked credit-market losses in its latest earnings report.
JC Penney led losses among the retailers after the third-biggest department-store chain reported a smaller profit and cut its earnings forecast. Citigroup shares slipped 4.1% after the biggest US bank sold $4bn of 10-year notes at the highest yield relative to benchmarks in its history.
The Federal Reserve injected roughly $6bn into the US banking system yesterday. The Fed accepted more than $20bn of mortgage-backed securities as collateral in the moves.
Barclays Capital, a unit of Barclays Group, said it took $2.7bn in writedowns related to the credit market. The figure was smaller than some analysts had been looking for a week ago. Additionally, the British bank said that 2007 profits are running ahead of last year's performance.
Swiss financial major UBS could take up to $7.1bn in writedowns related to the deteriorating mortgage market in the US, according to the Wall Street Journal. GE confirmed reports that a short-term bond fund it manages has suffered big losses in mortgage-backed securities.
US light crude oil for December delivery fell 66 cents to settle at $93.43 a barrel on the New York Mercantile Exchange after the weekly oil inventories report showed a surprise gain in crude supplies last week.
Treasury prices rose, lowering the yield on the 10-year note to 4.15% from 4.25% late on Wednesday. In currency trading, the dollar rebounded a bit against the euro and declined versus the yen. COMEX gold for December delivery fell $27.40 to $787.30 an ounce.
European shares closed sharply lower. The pan-European Dow Jones Stoxx 600 index slipped 1.3% to 365.82. The German DAX 30 lost 1.5% to 7,667.03, the French CAC-40 fell 0.9% to 5,561.13. The UK's FTSE 100 closed down 1.1% at 6,359.60.
In the emerging markets, the Bovespa in Brazil surged by 2.7% to 64,430 while the IPC index in Mexico dropped 1.6% to 29,170. The RTS index in Russia was down nearly 1.2% at 2217 and the ISE National-30 index in Turkey slid 1.9% to 69,494.
Asian markets were down anywhere between 1.5% to 3.5%, with Hang Seng in Hong Kong falling by over 1,000 points and the Nikkei in Tokyo down over 300 points. Regional exporters led the fall after the yen strengthened against the dollar.
Mizuho Financial Group and National Australia Bank dropped on concern that banks may report widening losses linked to US sub-prime mortgages. BHP Billiton climbed after its mines in Chile resumed production following an earthquake and the Wall Street Journal said Rio Tinto was considering a counter bid.
The Morgan Stanley Capital International Asia Pacific Index fell 1.6% to 158.74 as of 11:04 a.m. in Tokyo. All 10 industry groups dropped, with a group of financial stocks as the biggest contributor to the decline.
Stock benchmarks in other Asian markets open for trading fell, except in New Zealand.
MARKET...
Volitie to previllage!!
Markets ended weak ahead of the weekend as traders preferred booking some profits after yesterday’s 800 points rally. The focus was more upon the Mid-Cap and the Small-Cap stocks as they outperformed the major indices by gaining over 1.5% each.
Selling pressure was witnessed in the Banking, IT and select Power stocks. Among the heavyweights ICICI Bank, Infosys, HDFC Bank and Reliance Industries were the major losers. While, telecom major Bharti Airtel, ITC and L&T held the benchmark Sensex form a huge fall.
Finally, benchmark Sensex lost 144 points to close at 19,784. NSE Nifty closed 25 points lower at 5,912.
Refinery stocks were the star performers of the day. Post the sharp run up in the stock price of Reliance Petroleum, the valuation gap between the public sector refining companies (BPCL, HPCL. IOC, MRPL, BRPL and CPCL) had increased considerably. Rally in stock prices of the PSU refining companies, today could be an attempt to bridge the gap.
Bongaigaon Refinery sky rocketed by over 30% to close at Rs105, MRPL jumped over 22% to Rs128, BPCL was up 17% to Rs426 and Hindustan Petroleum surged 15% to Rs299.
Essar Oil India's newest refiner, jumped 29% to Rs158, extending a six-day winning streak which has more than doubled the stock price. Essar Oil's board of Directors of the company would meet on November. 16 to consider a preferential issue of securities to its owners. The scrip has touched an intra-day high of Rs170 and a low of Rs127 and has recorded volumes of over 4,00,00,000 shares on NSE.
Fertilizer stocks were also in the limelight as the government announced its plans to issue Rs75bn worth of bonds to pay for compensation to be awarded to fertilizer makers after officials agreed to sell farmers growing agents at below- market prices. Nagarjuna Fertilizer rose over 8.5% to Rs71, RCF surged over 9% to Rs78 and Deepak Fertilizer was up 2.5% to Rs150.
Sugar stocks were on the receiving end after the Allahabad High Court ordered Sugar Companies to pay arrears of Rs110 per quintal. Balrampur Chini was down 11% to Rs85, Bajaj Hindusthan declined 10% to Rs202 and Renuka Sugar slipped 1.5% to Rs757.
ACC gained 1% to Rs1055. According to reports the company decided to transfer the ready mix concrete business to its wholly owned subsidiary ACC Concrete for a consideration of ~Rs1bn. The scrip touched an intra-day high of Rs1087 and a low of Rs1036 and recorded volumes of over 2,00,000 shares on NSE.
Reliance Industries marginally slipped 0.5% to Rs2875. Reports stated that the company would buy two helicopters in December for its offshore work. The scrip touched an intra-day high of Rs2910 and a low of Rs2850 and recorded volumes of over 26,00,000 shares on NSE.
Bharti Airtel India's largest mobile-phone operator rose 5% on expectation the government would moderate proposed regulations that may have hampered the company's expansion. The telecommunications ministry set up a panel on Nov. 6 to revise a plan that had intended to raise eightfold the number of users needed to qualify for additional airwaves in some markets for the global system for mobile communications, or GSM, wireless standard used by Bharti. The scrip has touched an intra-day high of Rs921 and a low of Rs865 and has recorded volumes of over 45,00,000 shares on NSE.
DLF advanced 2% to Rs949 after reports stated that the Malaysia’s Columbia Asia Group of Hospitals to construct 100-bed multi-spatiality hospitals in DLF townships. The scrip has touched an intra-day high of Rs957 and a low of Rs927 and has recorded volumes of over 19,00,000 shares on NSE.
