Volatile hedges, bulls and bears sit on swing
He who trims himself to suit everyone will soon whittle himself away.
Pleasing everyone is not on the agenda of SEBI. Yesterdays decision of SEBI Board to change pnote regulations may dampen near-term flows, but it will help tighten KYC norms and improve transparency, and thus a positive over the medium-term. We see this as another tightening measure (like the ban on badla in 2001), which could cause a small hiccup in the short-term, but materially improve the transparency and thus the health of the market in the long-term.
As a result, there will be fresh volatility ahead. The street is divided, with some players expecting slowdown in overseas capital inflows and others not too perturbed. Right now, it seems that only the market will show the way forward. We maintain our earlier view of short-term pain and long-term gains, as outlook for the Indian economy remains strong. Bulls will hope the short term means just for the opening session! Intra-day gyrations will remain the order of the day.
After the P-Note issue, the market will now wait for the outcomes of the RBI meeting, on Oct. 30 and the Federal Reserve's meet, on Oct. 31. What the two central banks do will have a bearing on the market. All the more reason for one to be on guard though selective purchases at lower levels can be undertaken. And, don't forget the global trends, especially how the US economy shapes up in the face of the subprime contagion.
Prominent Results Today: Advanta, Allsec Tech, Andhra Bank, Apollo Tyres, Asahi India, AstraZeneca Pharma, Avaya Global, Bata India, BEML, Bharat Bijli, BEL, Bharat Forge, Cadila Healthcare, Clutch Auto, Colgate, CRISIL, Dabur Pharma, Dalmia Cement, Deccan Chronicle, Dredging Corp, Educomp, Emkay Shares, GVK Power, HCC, HDFC, HT Media, ITC, i-flex, ICSA India, ICI India, Indian Hotels, Jindal Stainless, JK Cement, Jyoti Structures, Kale Consultants, Kotak Bank, Lanco Infratech, L&T, Moser Baer, Nagarjuna Fertilizers, Piramyd Retail, Pratibha Industries, Raymond, Tata Steel, Thomas Cook, Tulip IT, TV Today and Valecha Engineering.
US stocks fell for a second day, led by financial shares such as AIG, Countrywide Financial and Merrill Lynch amid persistent worries about the downturn in the housing sector and its broader fallout on the financial markets.
Record high oil prices coupled with lackluster earnings and economic reports fueled investors' nervousness about the health of the world's largest economy.
AIG tumbled to the lowest since August on speculation that the world's largest insurer will report big write-downs related to sub-prime mortgages. Countrywide, the biggest US home-loan company, dropped to a four-year low. Merrill posted its steepest two-day decline since 2002.
Stocks also fell after government reports showed an unexpected drop in durable goods orders and initial unemployment claims topped economists' forecasts, fueling concern that the US economy may slip into a recession.
The S&P 500 Index finished nearly flat at 1,514.4. The Dow Jones Industrial Average lost 3 points, or 0.02%, to 13,671.92. The Nasdaq fell 24 points, or 0.9%, to 2,750.86.
Crude oil rose to a record above $91 per barrel in New York on an unexpected drop in US stockpiles and concern that supply from the Middle East may be disrupted. New US sanctions against Iran, the Turkey-Iraq showdown and a weak dollar helped push prices higher.
Light, sweet crude for December delivery rose as much as 64 cents, or 0.7%, to $91.10 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since trading began in 1983. It traded at $90.97 at 9:26 a.m. Singapore time. Prices are up 51% in a year.
Brent crude oil for December settlement rose as much as $1.32, or 1.5%, to a record $88.80 a barrel in London. It was at $88 a barrel at 9:06 a.m. Singapore time. The contract closed yesterday up $3.11, or 3.7%, at $87.48 a barrel.
Treasury prices ended little changed after an erratic session on Wall Street. In currency trading, the dollar fell against the euro and yen. Comex gold rose $5.40 to $771 an ounce.
After the closing bell, Microsoft reported quarterly earnings that beat analysts' estimates, sending its shares up 5% in extended trading. The Dow component also said it was pumping $240mn in social networking site Facebook, edging out rivals Google and Yahoo, and plans to expand its advertising deal with the site.
European shares advanced. The pan-European Dow Jones Stoxx 600 index rose 1.2% to 381.83, with the telecom sector up 3.7%. The UK's FTSE 100 closed 1.5% higher at 6,576.30, the German DAX 30 gained 1.3% at 7,932.44 and the French CAC-40 advanced 1.5% to 5,760.30.
Latin American equities closed mixed. In Sao Paulo, the Bovespa slipped 0.5% to 62,341.49 and in Mexico City, the IPC index lost 0.5% to 1,886.10. Argentine and Chilean stocks finished higher.
In other emerging markets, the RTS index in Russia rose 1.3% to 2,151 and the ISE National-30 index in Turkey was up marginally at 70,521.
Asian stocks advanced this morning, led by technology shares after Sony and Acer reported earnings that exceeded analysts' estimates and Microsoft raised its profit forecast. BHP Billiton and CNOOC gained as crude oil rose above $91 a barrel for the first time. Metal prices climbed the most in two weeks.
The Morgan Stanley Capital International Asia-Pacific Index rose 0.9% to 166.31 at 11:22 a.m. in Tokyo. An index of consumer discretionary stocks climbed 2.1%, the biggest gain among the 10 industry groups on the regional gauge, which is headed for a 0.3% gain for the week.
Japan's Nikkei 225 Stock Average advanced 0.6% to 16,383.88. South Korea's Kospi index climbed 1.4%, the biggest gain in the region, while Singapore's Straits Times Index rose 1.1%. Asian stock benchmarks rose in all markets open for trading except in New Zealand.
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