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Will he, won’t he? The market is still divided over what action the RBI will take in today's annual policy meeting. A hike could well provide the bears a fresh opportunity to nail the bulls. On the other hand, a status quo (waiting for the Fed to act first) will perk up the mood on the street. The key indices lost ground yesterday as investors developed cold feet amid fears that the RBI may hike the repo rate by 25 bps to contain inflation. As a result, the Nifty failed to cross the 200 DMA of 5150 yesterday.
Meanwhile, a survey of professionals done by the RBI shows that the Indian economy will grow at a healthy 8.1% in FY09. If indeed GDP grows at 8% in the current fiscal it would not be a bad feat at all given the slew of headwinds that we are facing right now. The survey also reveals that corporate profits will clock a 25% growth in FY09, which again would be quite commendable. The central bank also believes that inflation will moderate in the second half, though high crude oil prices will continue to pose a risk.The market appears to have factored in most bad news, both local as well as global. As a result, the bulls may remain in command in the near term, especially if global markets too hold their nerve. Some more grim developments lurking somewhere could spark renewed sell-off. For today, we expect a cautious start and a lackluster trading till noon, when the RBI will announce its monetary policy for the year 2008-09. Select stock centric action will continue based on the results and other company specific announcements.
Key Results Today: Aban Offshore, Alstom Projects, Atlas Copco, Aurionpro Solutions, Bhushan Steel, Cadila Healthcare, Cairn India, Castrol India, CEAT, Esab India, Gateway Distriparks, Gayatri Projects, Grasim, Hanung Toys, IFCI, ING Vysya Bank, JK Tyre, Jyothy Labs, Maharashtra Seamless, Mirc Electronics, Nagarjuna Fertilizers, NALCO, Nestle, Patni, Pioneer Embroideries, Raymond, Reliance Capital, Subex, Taj GVK Hotels, Tata Sponge, UTV, Venus Remedies, Viceroy Hotels and Vishal Retail.
FIIs were net sellers of Rs383.3mn (provisional) in the cash segment yesterday while local institutions were net sellers of Rs1.67bn. In the F&O segment, foreign funds were net buyers of Rs4.55bn. On Friday, FIIs were net buyers of Rs3.49bn in the cash segment while Mutual Funds were net sellers of Rs734mn.
Asian markets were trading mixed this morning. The Hang Seng in Hong Kong was up 289 points or 1.1% at 25,955 while the Kospi in Seoul was down 6 points or 0.3% at 1817. The Straits Times in Singapore dropped 26 points or 0.8% at 3175 while the Shanghai Composite in China rose 46 points or 1.3% to 3521 and the Taiex in Taiwan was down 50 points or 0.6% at 9029.
Benchmarks elsewhere in Asia fell barring Malaysia, the Philippines and China. Japan's markets are closed for a public holiday.
US stocks closed almost unchanged on Monday as investors turned cautious ahead of Wednesday's Fed policy announcement. Stocks had risen earlier after billionaire Warren Buffett financed the $23bn takeover of Wm. Wrigley Jr. Co. and investor Kirk Kerkorian bought a stake in Ford Motor.
Wrigley, the world's biggest maker of chewing gum, jumped the most since at least 1980 after Mars agreed to acquire the company at a 28% premium to its closing price last week. Ford shares rallied after Kerkorian said he bought 4.7% of the second-largest US automaker and plans to buy more.
Microsoft shares slumped for a second day, helping drag the S &P 500 Index and Dow Jones Industrial Average lower, on speculation that the world's largest software company will have to increase its bid to acquire Yahoo.
The S&P 500 ended virtually flat at 1,396.37. The Dow dropped 20 points, or 0.2%, to 12,871.75. The Nasdaq Composite Index finished barely changed at 2,424.4. The Russell 2000 Index, an index of small-cap companies, gained 0.5% for its fourth consecutive advance.
Market breadth was positive. About five stocks gained for every four that fell on the New York Stock Exchange.
Stock gains were limited and tapered off by the close, as investors geared up for the two-day FOMC meeting starting Tuesday. The Fed is expected to cut interest rates again, and then perhaps signal that it is done for the time being.
US light crude oil for June delivery rose 23 cents to settle at $118.75 a barrel in New York after hitting a record $119.93 earlier in electronic trading. Meanwhile, the national average price for a gallon of regular unleaded gas hit an all-time record of $3.603, AAA reported.
COMEX gold for June delivery rose $5.80 to settle at $895.50 an ounce. The dollar gained versus the euro and yen. Treasury prices advanced, lowering the yield on the benchmark 10-year note to 3.82% from 3.87% late on Friday.
Candy maker Mars is buying gum maker Wrigley in an all-cash deal worth nearly $23bn. The deal will eventually make Wrigley a subsidiary of Mars. Warren Buffett's Berkshire Hathaway is making a minority equity investment in the new subsidiary. Wrigley shares surged 23%.
Kirk Kerkorian's Tracinda Corp. is offering $170mn to buy an additional 20mn shares of Ford. Tracinda already owns 100mn Ford shares. Shares of the US auto giant jumped 9.5%.
Continental said it wasn't interested in entering into a merger agreement with another company right now, surprising United Airlines' parent UAL, which had been in advanced talks with the carrier. However, reports say Continental has been in talks with American Airlines' parent AMR about an arrangement that would involve an alliance but not a merger.
Verizon Communications reported higher quarterly earnings that met analysts' estimates on higher revenue that was short of expectations. Shares gained 2.5%. RadioShack reported lower quarterly earnings and sales that nonetheless topped forecasts. Shares slumped 13.5%.
Across the Atlantic, banks helped European shares gain ground for the fourth session in a row. Oil companies and miners also performed well. The pan-European Dow Jones Stoxx 600 index rose 0.6% to 323.62, building on strong gains made on Friday when the index recaptured levels last seen in February.
Germany's DAX 30 rose 0.4% to 6,925.33 and the French CAC-40 advanced 0.7% to 5,012.75, while a poor performance from supermarket chains led the UK's FTSE 100 to close nearly unchanged at 6,090.40.
In the emerging markets, the Bovespa in Brazil gained 0.75% to 65,677 while the IPC index in Mexico was down 1.2% at 30,623. The RTS index in Russia rose 1% to 2150 while the ISE National 30 in Turkey finished flat at 54,167.