Another choppy day in the offing
To see what is in front of one's nose needs a constant struggle.
The market has been on a rollercoaster ride over the past 3-4 months, primarily due to the subprime woes in the US, selling by FIIs and lack of major local triggers. The Sensex has fluctuated between 17,000 and 20,500 during this period. It went as low as 13,779 on Aug. 17 before rebounding from there to 19,977 on Oct. 29. After several attempts at crossing the 20k mark (in October and November), the Sensex finally managed to rise above the milestone on Dec. 11. Its closing high is 20,375, struck on Dec. 12 and intra-day high is 20,498, hit on Dec. 13. It started correcting again and went as low as 19,079, on Dec. 18, owing to resurfacing of subprime concerns and its fallout on the global markets. Yesterday, the Sensex shut shop at 19,091.
In a nutshell, though the bulls have managed to weather a lot of storms, the ride has not been smooth at all. There have been several bumps and roadblocks along the way. Volatility has increased manifold. The trend has been no different this month. After a positive start and crossing the 20k mark, the Sensex has been facing fresh selling pressure in the past couple of days on the back of weakness in the US and other global markets. FIIs have resumed their selling as well in the last few days. In fact, the trend in FII flows has been extremely unpredictable and erratic, making the main indices swing heavily. In the meantime, small- and mid-cap shares (including penny stocks) have captured the imagination of investors.
The picture may not change much today or over the next few days, as the near-term outlook is murky and the Indian market is dancing to the tunes of global indicators. FII selling has not been of much help either. But, despite the choppy trend, nothing is stopping investors from betting on small- and mid-cap shares. We expect the market to open on a cautious to slightly positive note, given the uncertainty prevailing in the global markets. Though the side counters (non-index stocks) may continue to hog the limelight and extend their gains, one must be careful as the rally in these shares is not real. Investors may indulge in select buying in quality stocks for long-term purpose or stay on the sidelines and wait for more signals on market direction.
US stocks closed mixed on Wednesday after a highly volatile session. Stocks were up in early trading as the Federal Reserve announced results for its first auction of $20bn, signaling strong demand for the plan aimed at defusing the stress in the credit markets.
But Morgan Stanley's $5.7bn subprime related writedown and credit market concerns brought up by Standard & Poor's warnings about bond insurers' credit ratings, dragged the markets down in the afternoon.
Target and Macy's led a gauge of retailers lower after ShopperTrak RCT Corp. said winter storms and rising gasoline prices hurt sales. Union Pacific, the biggest railroad, slid the most since August. Darden Restaurants posted its biggest drop ever after earnings missed analysts' estimates.
The S&P 500 dropped 2 points, or 0.1%, to 1,453. The Dow Jones Industrial Average lost 25 points, or 0.2%, to 13,207.27. The Nasdaq Composite Index increased 5 points, or 0.2%, to 2,601.01.
Market breadth was negative. About 15 stocks fell for every 14 that rose on the New York Stock Exchange.
Morgan Stanley posted a bigger-than-expected quarterly loss and said it would take an additional $5.7bn in writedowns on top of the $3.7bn it had already announced, due to the subprime mortgage mess. Morgan also announced that it will receive a $5bn capital investment from a Chinese state-run investment fund. Morgan shares were higher, along with other major banks including Lehman Brothers and JP Morgan.
In the latest bad news for the housing sector, the level of foreclosures was up 68% in November from a year ago, according to tracking service RealtyTrac. On the upside, foreclosures fell 10% from the previous month.
Thursday brings economic reports from the government on third quarter GDP and leading economic indicators. Also, Bear Stearns will report its earnings for the fourth quarter.
After the close of trade, software maker Oracle reported better-than-expected earnings and sales, giving the company's shares a boost in after hours trading.
Treasury prices rose, lowering the yield on the 10-year note to 4.03% from 4.14% late on Tuesday. US light crude oil for January delivery rose $1.16 cents to $91.24 on the New York Mercantile Exchange after the government's weekly report showed lower than expected crude supplies. In currency trading, the dollar gained versus the euro and the yen. COMEX gold for February delivery fell $2.00 to $805.40 an ounce.
European shares closed lower in another choppy session, with real estate and construction firms pacing the decline amid worries about housing markets. The pan-European Dow Jones Stoxx 600 index fell 0.5% to 358.47. The UK's FTSE 100 advanced 0.1% to 6,284.50, while the German DAX 30 slipped 0.2% to 7,837.32 and the French CAC-40 ended 0.2% lower at 5,497.42.
In the emerging markets, the Bovespa in Brazil gained 1% at 61,721 while the IPC index in Mexico was down 0.6% at 29,074. The RTS index in Russia declined 0.2% to 2264 and the ISE National-30 index in Turkey was down nearly 1% at 68,404.
Asian markets were trading mixed. The Nikkei in Tokyo was up 108 points at 15,139 while the Hang Seng in Hong Kong was almost flat at 27,023. The Kospi in Seoul was also static at 1861 and the Shanghai Composite index in china was up 37 points at 4978.
The MSCI Asia Pacific Index gained 0.4% at 152.58 at 11:00 a.m. in Tokyo, snapping a six-day losing streak. Stock exchanges in Singapore, Malaysia and Indonesia are closed for a public holiday.
The yen traded near a six-week low against the dollar on speculation that the Bank of Japan (BOJ) would leave the benchmark overnight lending rate at 0.5% today, and Governor Toshihiko Fukui will say there was no set time for raising interest rates. |
