Soft-to-flat opening indicated: Wednesday Market Preview

While Wall Street witnessed its biggest decline since last August yesterday, markets in Asia recorded a marginal recovery in early trade today. Meanwhile, the International Energy Agency is expected to meet this week to discuss the need to tap strategic crude stockpiles in the wake of continued turmoil in the Middle East.

 The local market is likely to see a soft-to-flat opening, tracking unsupportive global cues. Wall Street, which opened after an extended weekend yesterday, ended with a deep cut on continued violence in Libya. However, the Asian pack that saw a huge decline on Tuesday was trading marginally lower with two key indices in the green in early trade today. Meanwhile, the International Energy Agency is expected to meet this week to discuss the need to tap strategic crude stockpiles in the wake of continued turmoil in the Middle East. The SGX Nifty was down 26 points at 5,449 against its previous close of 5,476.

Yesterday, the Sensex and the Nifty both opened with a negative gap at 18,391 and 5,504. Both the key indices were able to restrain themselves from falling below yesterday's lows, despite massive sell-offs in Asia and a sudden sharp jump in crude oil prices. The Sensex hit an intra-day low of 18,187, while the Nifty's low was 5,437. The Sensex ended 142 points down at 18,296 and the Nifty settled 49 points lower at 5,469.

 The market remains in a trading zone. The silver lining is that it refuses to go down much in the face of bad news.

The US markets, which opened after an extended weekend, witnessed their biggest loss since August on continued violence in Libya. Wal-Mart tumbled 3.1% as the world’s biggest retailer posted a seventh straight quarterly sales drop at its US stores, falling short of its own projections for the holiday period. Bank of America fell 3.9% after announcing that its credit-card subsidiary was restating eight quarters of reports to regulators because it took a $20.3 billion write-down because of deteriorating credit and new regulations over the past two years. On the other hand, energy components were among the few stocks to gain Tuesday, as oil prices surged. In economic data, US consumer confidence rose in February to a three-year high on improved optimism about the economy and income prospects, according to the Conference Board, a private group.

The Dow declined 178.46 points (1.44%) to close at 12,212.79. The S&P 500 lost 27.57 points (2.05%) to 1,315.44 and the Nasdaq fell 77.53 points (2.74%) to 2,756.42.

Markets in Asia, which settled with huge cuts yesterday, witnessed a marginal recovery this morning with two key indices in the green. Crude oil for March delivery gained 8.6% to $93.57 a barrel in New York on Tuesday, the highest settlement since 3 October 2008, on concern that supplies from Libya, holder of Africa’s largest crude reserves, may be disrupted. Brent crude for April delivery on the ICE futures exchange rose four cents to settle at $105.78 a barrel, its highest settlement since 22 September 2008.

The Shanghai Composite was down 0.08%, the Hang Seng fell 0.45%, the KLSE Composite declined 0.49%, the Nikkei 225 lost 0.20%, the Straits Times declined 0.82% and the Taiwan Weighted was 0.53%. On the other hand, the Jakarta Composite gained 0.39% and the Seoul Composite was up 0.08%.Meanwhile, the International Energy Agency (IEA) said its governing board will hold a meeting to discuss whether to tap strategic stockpiles of crude oil on the back of the political turmoil across the Middle East.

On Tuesday Libya shut all of its ports, including those used to export oil, as tensions in the country continue. Libya’s estimated 44.3 billion barrels of oil reserves are the largest in Africa.

The IEA, which represents the governments of developed economies, the Organization of Petroleum Exporting Countries and top oil exporter Saudi Arabia had reached agreement prior to Tuesday’s gathering that producers should tap surplus production capacity in case oil supply from Libya was disrupted.

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Silver price hits record highs on ‘backwardation’

The precious metal has outperformed gold recently, apparently due to an unusual condition in the silver futures market

Silver spot and futures prices hit a record high on Monday on the spreading unrest in the Middle East and the falling dollar. However, it seems that the real reason for the surge may lie somewhere else.

Very simply, if silver has risen due to the political turmoil in the Middle East, why has gold not gained at the same pace, and why is the dollar which is traditionally the safe haven in a crisis still weak?

The current situation in the silver market isn't just about prices, but about a particular condition called 'backwardation'. Silver is in backwardation, which is a condition when buyers in the futures market are ready to pay a premium to receive the contract sooner due to fear of a shortage of the metal.

Two banks JP Morgan and HSBC are rumoured to be short on silver and they are said to be covering up their positions and this is pushing the price up.

The current prices are being built up on speculation, not on fundamentals. Depending on the technical position of the silver futures market, these prices may or may not sustain.

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Nifty, Sensex still locked in a range: Tuesday Closing Report

As we said yesterday, the market is in a zone where a day or two of rally will be followed by a day or two of decline

The market opened sharply lower, tracking the Asian markets that were trading in negative terrain due to the ongoing turmoil in West Asia, which has fired up crude futures.

The market remained choppy during the entire trading session also on account of the February futures & options contract expiry later this week. However, gains in Reliance Industries following the announcement that British energy major BP Plc will buy a 30% stake in 23 oil blocks for a payment of $7.2 billion, limited the losses.

Feeble attempts of recovery were cut short by profit-booking. A huge sell-off in post-noon trade pushed the indices to the day's lows. There was a marginal bounce-back in the last half hour, but the markets closed in the red.

The Sensex and the Nifty both opened with a negative gap at 18,391 and 5,504. Both the key indices were able to restrain themselves from falling below yesterday's lows, despite massive selloffs in Asia and a sudden sharp jump in crude oil prices. The Sensex hit an intra-day low of 18,187, while the Nifty's low was 5,437. The Sensex ended 142 points down at 18,296 and the Nifty settled 49 points lower at 5,469.

The market remains in a trading zone. The silver lining is that it refuses to go down much in the face of bad news. The advance-decline on the National Stock Exchange was a poor 587:1147.

Declining stocks outnumbered the gainers on the key benchmarks. The Sensex retired with 25 losers and five gainers, while the Nifty had 42 declining stocks against eight stocks on the advances list. Among the broader indices, the BSE Mid-cap index declined 0.85% and the BSE Small-cap index fell by 0.73%.

BSE Oil & Gas (up 1.26%) and BSE Consumer Durables (up 1.21%) were the only gainers in the sectoral space. The major losers were BSE Capital Goods (down 2.12%), BSE Auto (down 1.93%), BSE Bankex (down 1.85%), BSE PSU (down 1.24%) and BSE Metal (down 1.16%).

Following the announcement of the partnership with BP Plc, Reliance Industries (up 2.98%) was the top gainer on the Sensex today. Other major gainers were Reliance Communications (up 1.49%) and Sterlite Industries (up 1.42%). The losers were Hero Honda (down 3.36%), Larsen & Toubro (down 2.65%), HDFC Bank (down 2.59%), Jindal Steel (down 2.48%) and Jaiprakash Associates (down 2.39%).

Maintaining that "some inflationary pressure" will remain in a growing economy, finance minister Pranab Mukherjee today urged the states to strengthen the public distribution system (PDS) to enable the government insulate the poor from the adverse impact of inflation.

Replying to members' concerns during Question Hour in the Rajya Sabha, Mr Mukherjee said the Centre is waiting for a report on how to strengthen and restructure the existing PDS in the country.

Markets in Asia closed sharply lower, following media reports of escalating violence in Libya and anti-government forces taking control of the city of Benghazi. The developments in West Asia led crude prices to levels not seen in over two years. Futures for April delivery in New York rose as much as 9.8% from the 18th February settlement and London-traded Brent surged to the highest since September 2008. Brent may trade between $105 and $110 a barrel in the coming weeks if the uncertainty continues, according to Goldman Sachs Group Inc.

The Shanghai Composite plunged 2.60%, the Hang Seng tumbled 2.11%, the Jakarta Composite tanked 1.33%, the KLSE Composite declined 0.80%, the Nikkei 225 tumbled 1.78%, the Straits Times fell by 1.68%, the Seoul Composite was down 1.76% and the Taiwan Weighted ended 1.87% lower.

Back home, institutional investors were net sellers of equities on Monday. Foreign institutional investors offloaded stocks worth Rs245.42 crore on Monday and domestic institutional investors pulled out stocks worth Rs27.61 crore.

Pharmaceutical major Ranbaxy Laboratories (down 3.05%) today said its consolidated net profit after tax (PAT) surged over five-fold to Rs1,496.80 crore for the year ended 31 December 2010 from Rs296.50 crore in the previous fiscal, the company informed the Bombay Stock Exchange. The company's total income rose to Rs9,380.95 crore for the fiscal ended December 2010 compared to Rs7,986.57 crore in the previous year.

Fortis Healthcare (down 1.55%) today said that it will set up a cardiac centre in Mysore through a joint venture with Karnataka-based Cauvery Hospital. The joint venture will be between its wholly-owned subsidiary, Fortis Hospitals, and Cauvery Hospital, with Fortis owning a majority stake. The cardiac centre, to be located at Cauvery Hospital's Mysore facility, will be set up at an investment of Rs12 crore.

Pharmaceuticals and biotechnology major Wockhardt (down 0.53%) has entered into a strategic global alliance with Sheffield Bio-Science, a Kerry Group Business from the US. Under the partnership, Sheffield Bio-Science will have exclusive sales and distribution rights to supply recombinant insulin to the cell culture markets worldwide.

As a part of the alliance, Wockhardt will develop and supply animal component free (ACF) recombinant insulin for the distribution in the cell culture markets. The Indian major is the first in Asia and only the fourth company in the world to have developed, manufactured and marketed Wosulin-recombinant insulin injectables.

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