All calls rocking yesterday.
Buy NIFTY above 3540 SL 3511 target 3623-3720-3811
DCB buy with sl 28
Airdeccan buy with sl 42
Global stock markets crashed this week on fears the ongoing financial crisis will lead to a deep and prolonged recession. Most bourses lost between 15-20% of their value as the Dow finished at levels last seen in 2003. At the end of Friday’s session, the Dow stood at 8451 while the S&P closed at 899. The New York indices bounced off key support levels (8000/840) during Friday’s trading and thus prevented a full-blown market panic. While there was no single day decline that warranted the term "crash", it’s clear that these markets capitulated this week.
Markets will now attempt to form some kind of bottom over the coming weeks through a process of rally, failed rally, and retesting of the the Oct 10 intraday lows. This week looks mixed at best as the early part of the week may see more downside
As predicted, India’s markets got clobbered last week as the Sensex shed 16% and Nifty posted a 14% loss as the credit freeze went global. The Sensex closed at 10,527 while the Nifty ended Friday at 3279. I’m not optimistic about prospects this week since Mercury’s direct station occurs in fairly close tense aspect with the NSE’s natal Saturn. This will make rallies fizzle fairly quickly and give more courage to those who are shorting the market. I think some intraday trades below 10k/3100 is quite possible although I do not expect any kind of massive decline here. By Friday, we’ll probably be modest lower from current levels.
Warning that developing countries “will suffer for no fault of theirs” from the recession visible in the US and the West, India on Sunday asked the World Bank to play a bigger role to ensure financial resources for emerging economies.
“The crisis will necessarily impact upon the global availability of the financial resources for development…A global recession will sharply contract the demand for exports of many developing countries, adversely affecting the growth prospects. The developing countries would suffer for no faults of theirs,” finance minister P Chidambaram said in a statement. “They (developing economies) did not cause the contagion. Many are not equipped to face the consequences. We need a global effort, particularly in countries with developed capital markets, to review financial oversight and regulatory mechanisms,” he said. Arguing that sufficient attention has not been paid at this year’s meeting towards millennium development goals, Chidambaram said, the countries were most vulnerable to the food and fuel price increase are those who would most likely miss the target. — PTI
With liquidity becoming the immediate priority of the government, it is looking at a slew of measures to make more funds available to the credit market and there are strong indications that banks may be nudged to lend to companies with good credit track records.
Official sources told STOI that a further cut in the cash reserve ratio (CRR), a reduction in interest rates, a ‘ban’ on reverse repo are some of the options being looked at to augment liquidity, while a ban on short selling is being considered as a way of curbing bearish sentiments in the markets.
It is also learnt that a proposal to dilute mark-to-market norms for banks is being seriously considered. Such a step, which has already been taken in the US, essentially allows banks to pretend that their assets have the same value at which they were bought rather than the current market value. Thus, they are able to avoid providing for the losses that would accrue if they actually valued them at current levels.
In addition to these measures, banks might be informally told that they should lend to corporates with AAA ratings. This is because of the fear that restoring liquidity to banks will serve little purpose if they continue to remain wary of lending.
In the aftermath of the global financial meltdown, banks and financial institutions have turned ultra-conservative in lending. “What purpose would it serve if the banks remain tight-fisted,’’ said a bank functionary monitoring the tight credit situation.
The cut in CRR would effectively mean that banks need to maintain a smaller proportion of their reserves with the RBI, thus releasing more funds for them to lend. Similarly, the central bank foregoing the option of reverse repo would mean that it will not soak up money from the banks by borrowings, which again would leave them with more loanable funds.
While these two measures are aimed at boosting liquidity, the proposal to cut interest rates is aimed at making credit available at reasonable rates for corporates. RBI had successively hiked interest rates as inflation rose and though price rise remains an important concern for the government with elections looming, there is now a strong view in the government to focus on restoring liquidity right now.
The government also feels the need to address the volatility in markets. Hence, the idea of banning short selling. Short selling, in which investors sell shares without possessing them, is already banned in the US, Italy and China to check the market downslide.
ON THE ANVIL
The United States and six of the world’s other richest nations agreed on Friday on a five-point plan to rescue the financial industry.
The G-7 nations agreed that the enormity of the crisis called for a global response, US President George W Bush said after the talks.
He also warned individual nations against taking action that could hurt others. It has been a disastrous week for markets around the world, a week that has seen trillions wiped off the value of shares.
The plan, among other suggestions, asks nations to take decisive action and use all available tools to prevent “important’’ institutions from failing; unfreeze credit and money markets and ensure that banks and other institutions have broad access to liquidity and funding; and ensure that banks can raise enough capital from public and private sources to re-establish confidence and kickstart lending to individuals and businesses.
Treasury officials said the US might embark on direct injection of capital into banks in the next two weeks. But Bush cautioned that results would take time. “The benefits will not be realised overnight,’’ he said.
The discussions focused on the growing likelihood that the US and major European countries would have to partially nationalise their banking systems. Such a step would have been unlikely in many countries even a week ago, but the swiftness of events is forcing officials to throw out decades of conventional wisdom about how free markets should operate.
World markets continue to be negative. Asian markets remained weak, European markets were, more or less, flat but the American and Latin American markets continue to trouble us. The Dow Jones, at the time of writing, was trading 290 points in the red while the Nasdaq Composite was almost 75 points down. Crude oil was trading at almost the same levels – $88 a barrel while the rupee versus the dollar is now touching almost 48. Gold continued to remain good – after a jump of $33 an ounce yesterday, it has gained another $24 today, obviously as demand for a safe haven increased and on speculation that the central banks may slash interest rates.