Think global, act local!
Let bravery be thy choice, but not bravado. – Menander.
The global cues this morning suggest more green on your screen. With the US market rallying and Asian markets on a firm footing, the good times should last at least for the day. Wild intra-day gyrations are a given; we do not rule out a trend reversal if there is fresh bad news from overseas markets. Stay light and nimble so that you are ready to respond to any change in sentiment.
To say that we live in volatile and uncertain times would be an understatement. And, this applies to most asset classes, except may be for gold, dollar and bonds. After a freak fall on Tuesday, we managed to bounce back, thanks to a late bull charge. The NSE Nifty ended above 200 DMA and also surpassed the 5000 mark.
For the long-term India bulls, any fall is a good chance to buy in limited quantity. Fundamentals remain healthy. Fund flows though erratic may well improve in the coming months. In the near-term, monsoon may have some bearing on sentiment though India's GDP grew pretty well in FY10 despite bad rains. Overall trend will hinge more on external developments.
The Nifty is likely to face resistance at 5080-5100 and even beyond these levels. A sustain stay above 5100 could see it touching 5200 and even 5300, provided global cues remain supportive and monsoon starts off well. Talking of rains, the west coast is staring at a cyclonic storm 'Phet' and may cause some disruption in the monsoon current. Some days back, we had a storm on the east cost. For the record, monsoon has already reached Kerala. We have to see how it develops and progresses to other parts of the country in the next few days and weeks. All we can do right now is to keep our fingers crossed.
Globally, the immediate event to watch out for is Friday's monthly jobs report in the US. Overall, data points coming from the world's largest economy suggest continuing recovery which should stand the world markets in good stead in the future. However, the euro-zone debt crisis, a softening Chinese economy and political instability in Japan are some of the factors that could keep a lid on stock market gains. One also has to keep a constant eye on the euro-dollar rate as it has assumed significant importance due to the euro-zone's fiscal stress.
FIIs were net sellers of Rs1.66bn in the cash segment on Wednesday on a provisional basis, according to the NSE data. The local institutions were net buyers at Rs1.65bn on the same day. In the F&O segment, the foreign funds were net buyers of Rs12.33bn. On Tuesday, FIIs were net sellers at Rs4.73bn in the cash segment, as per SEBI data. Mutual Funds were net sellers at Rs133mn on the same day.
US stocks ended higher on Wednesday, as the energy sector recovered from the previous day's heavy losses and investors welcomed reports on housing and auto sectors.
After losing 234.97 points, or 2.3%, during the past two trading days, the Dow Jones Industrial Average rose 225.5 points, or 2.3%, to end at 10,249.54. The S&P 500 index added 28 points, or 2.6%, to close at 2,281.07 and the Nasdaq Composite rallied 59 points, or 2.6%, to finish at 1,098.38.
More than five stocks gained for each issue on the decline on the New York Stock Exchange.
The euro rose against the dollar to $1.2241, bouncing back from the four-year low touched the day before. The dollar edged lower against the British pound and rose more than 1% versus the Japanese yen.
US light crude oil for July delivery turned higher, climbing 28 cents to settle at $72.86 a barrel.
COMEX gold's August contract dropped $4.30 to settle at $1,222.60 per ounce.
Treasury prices were lower, pushing the benchmark 10-year note's up to 3.34% from 3.26% late on Tuesday.
Energy was the best performer among the 10 industry groups in the S&P 500, as shares of companies involved in the BP spill in the Gulf of Mexico reversed course after a rout the prior day. After a double-digit drop on Tuesday, shares of Halliburton Co., which provided oil-field services to BP, closed up 12%.
All of the Oil and Natural Gas Index's 24 components posted gains, while the Amex Oil Index added 3%, with all 12 of its components also rising.
On Tuesday, energy shares had declined - with BP plunging 15% - after the company's latest attempt to plug the oil spill in the Gulf of Mexico failed and Attorney General Eric Holder said there would be a criminal investigation of the spill.
Transocean, the operator of the Deepwater Horizon rig that exploded in the Gulf, was an exception, falling more than 3% after dropping 12% on Tuesday.
Technology shares also advanced on Wednesday.
In the day's economic news, the National Association of Realtors said that its pending home sales index, a measure of sales contracts for existing homes, rose 6% in April after climbing 5.3% in March. The jump beat the 4.3% increase economists had expected.
Outplacement firm Challenger, Gray and Christmas said that American employers announced plans to cut 38,810 jobs in May, a 1.3% rise from April's four-year low. However, job cuts were 65% lower than the same month in 2009.
Detroit automobile makers reported a jump in US sales in May. Ford Motor Co., General Motors (GM) and Chrysler all reported double-digit sales rises versus the same month last year. GM reported a 32% gain in sales and Ford reported a 23% increase. Toyota Motor's sales rose 7%.
Ford shares rose about 4% while Toyota slipped nearly 1%.
The Financial Crisis Inquiry Commission held the latest in a series of hearings on the role of ratings agencies in the market collapse of 2008-09. Legendary investor and CEO of Berkshire Hathaway Warren Buffett was among the witnesses. Several representatives of ratings agency Moody's were also present.
Across the Atlantic, European shares ended more or less flat as losses in the commodity space eased in the wake of stronger-than-expected US housing data. The Stoxx Europe 600 index finished virtually unchanged at 245.40 after having tallied mild gains on both Monday and Tuesday.
London's commodity-heavy FTSE 100 index fell 0.2% to close at 5,151.32. Meanwhile, the French CAC-40 index shed 1.58 points to close at 3,501.50 and the German DAX index also ended static, at 5,981.20.
Shares of BP, which had fallen more than 2% at one point, ended the day just 0.1% lower after a steep plunge on Tuesday.
Shares of Prudential Plc fell 2.5%. The company said it was withdrawing from an agreement to acquire AIA Group, the Asian life insurance unit of American International Group (AIG). Backing away will cost Prudential about 450 million pounds, the UK insurer said.
Shares of Portugal Telecom rose 1.5% to 8.59 euros. Telefonica, which saw its shares rise 0.8%, has lifted its bid for 50% of the shares in joint venture Brasilcel, the Brazilian wireless carrier known as Vivo, that it doesn't own by 14%, to a total of 6.5 billion euros ($8 billion), according to shareholder Portugal Telecom. That price would nearly equate to Portugal Telecom's market capitalization: 7.7 billion euros.
Late flourish…Nifty back above 200-DMA
After losing over a ton on Tuesday, mostly due to a freak trade in Reliance Industries, the bulls found some relief towards the fag end of the trading session.
The NSE Nifty struggled for direction and was stuck in a narrow trading band of 4980-5000 throughout the day. However, the bulls took control of the situation in late afternoon, with the Nifty managing to surge past its 200 DMA.
Better than expected monthly sales figures kept the auto stocks buzzing. Telecom stocks too were ringing aloud as heavyweights like Bharti Airtel and Reliance Communications bounced back sharply.
The BSE 30-share Sensex surged 170 points to end at 16,741 and the NSE Nifty advanced 50 points to close at 5,019.
Markets in Asia ended in mixed; the Nikkei in Japan fell by 1.2%, Australia's S&P/ASX slipped by 0.7% and while the Hang Seng index in Hong Kong edged lower by 0.2%.
European indices recouped from day's low, however continue to trade with losses. The DAX in Germany was down 0.8%, the CAC 40 index in France was down 1.2% and the FTSE in the UK was down 1%.
All the BSE sectoral indices ended in the positive terrain, BSE Teck index was the top gainer, the index was up 2%, followed by BSE Auto index was up 1.8% and BSE Realty index was up 1.4%. Even the BSE Mid-Cap index ended higher by 0.8% and the Small-Cap index edged higher by 0.8%.
Outside the frontline indices, the big gainers in the broader market were Pantaloon, Fortis, Tech M and Renuka Sugars. On the other hand, losers included REI Agro, Cadila Health, Indian Hotels and Tata Chemicals.
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