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Mayhem on Road....
Indian market today faced across the board selling. Yesterdays rally proved short blip as our markets sold off along with other Asian and European markets. The sentiment remained bearish on the back of liquidity squeeze in the domestic market and a sharp fall in the Asian indices. Indian stock market opened the day on a negative note after a rise of 4.50% on the previous working day. The benchmark share index, BSE Sensex opened with a loss of 228.16 points, at 10,455.23 . SEBI today reaffirmed its disapproval to overseas lending and borrowing by FIIs and asked them not to take fresh overseas lending and borrowing. Sensex ended the day with a loss of 513.49 points, or 4.81% at 10,169.90 after touching a high of 10,484.85 and a low of 10,128.22. The broad-based NSE Nifty fell 169.75 points, or 5.25% at 3,065.15 after hitting a high of 3,235.75 and a low of 3,051.80. Nifty level was lowest after 26th July, 2006.
Rating & Currencies : Rating agency Moodys downgraded the Tata Steel outlook from stable to negative. The stock plummeted by 12% today. In the currency segment, Euro and Pound tumbled on the expectation of rate cuts in Europe and UK. The Euro fell below 1.28 to a dollar for the first time since November 2006 while the Pound tumbled to a 5 year low. Rupee touched an all time low of 49.49 against the dollar in todays trade.
Sectoral : All sectoral indices finished in red except FMCG index, which managed to gain 0.6%. Metal and Realty indices were down the most, losing 7.9% and 7.6% respectively. ITC and HUL were the sole sensex gainers, up 1.04% and 0.5% respectively, while Tata Steel and Sterlite plunged by 12.04% and 10.04% respectively. BSE Midcap and Smallcap index dropped 2.70% and 2.02% respectively.
World Market : The major Asian indices like Hang Seng (Hong Kong), Kospi (South Korea), Straits Times (Singapore) and Nikkei (Japan) shed over 5-6% each. Among European exchange all were in Deep red, selling was visible across the board. Europe Key exchange FTSE down about 189.21 points at 4040.52 , DAX down about 239.72 at 4544.69 , CAC closed in red with 177.22 points at 3298.18 .
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Market Today - Rebound
Markets opened gapup on strong U.S. and Asian clues, but not able to maintain these levels.Sensex opned with a long gap of 146 points @ 13007 but dropped to a low of 12,697 in noon deals. But then recovred a lot on a news of maybe Senate can pass a new bailout plan tonight and vote in favour of the motion. Sensex finally closed at 195 points up at 13055 and NSE Nifty shuts it shop at 3950 up 29 points only. Rupee also touched a new 64 month low of 47.23 but finally settled at 46.61. This help IT stock to surge and gives a inproportionate gain to BSE SENSEX over NSE Nifty , which has a higher weighage then Nifty. All Asian market was on mixed bag - Nikkei, Taiwan and Hangsang were on gaining side and Kospi and Straigh Times were down. All European market were up by 0.5% - 1% while DAX closed on Red for about 24 points or 0.5% . Tomorrow market will be closed on account of Gandhi Jayanti and Lal Bhadhur Shastri Jayanti. Sectorial
Bankex were again the star of today trade, and second most sector on Gaining side. While the top most firing sector was IT due to Rupee depriciation to 47.23 a new 64-month low. IT and Bankex were 4% and 3.2% respectively. On laggerds , Oil and Gas Sector and Realty were legged behind and down about 1.1% and 2.3% respectively. All Sector on BSE ended on Northward except these two. Satyam and JP Associates was the gem of today trade both gained more than 7% and Reliance and DLF was the crushed today and finally closed on Red note with 2% each. Turnover on 11th Sept , 2008
NSECash Rs.10793.25 BSECash-Rs.4357.88 Future Rs.47733.85 No Arbitrage, CAlls & Strategy for Tomorrow , as tomorrow is trading holiday, will uploaded Arbi and calls for Oct 03 on Oct 02.
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U.S. House of Representatives on Monday votes against the move of $700 billion rescue plan. US President George Bush pleas addressed a speech on House of Representatives to make sure deal will get enough room to clear. Despite of all negotiation before the final trust vote it failed on Monday afternoon’s vote failed by a margin of 228-205.
This bailout plan will allow government instantly to buy upto $350 billion of US distressed debt held by Wall Street banks and investment banks, with a further $350 billion available lto use later.The government would have held on to the debts for several years, possibly until credit markets settled, house prices recovered and it could sell the debt at a profit.
The U.S. government has already provided $900 billion US in relief as part of the financial crisis, including $85 billion US to buy out troubled insurer AIG and $200 billion US to take over mortgage lenders Fannie Mae and Freddie Mac. Critics of the bailout plan said it would have done too much for Wall Street firms, and too little for the average American people. Alternative plans discussed by lawmakers included having the government provide mortgage relief directly to homeowners, as well as loan guarantees for people at risk of losing their houses to stave off or even reverse a foreclosure.
The Dow Effect
Emerging market stocks dumped by Investor and Traders Monday after the U.S. House of Representatives rejected the proposed $700 billion rescue plan for the financial sector.
Stocks in India, Russia and Brazil -- three of the BRIC heavyweights -- were deeply in the red on Morning Session. The markets in mainland China are closed this week for holidays. In Brazil, the Bovespa index tumbled 9.4%. Russia's RTS stock index tumbled 7.1%. However Indian Market smartly recovred and closed in hefty green.Taking unprecedented steps, the Fed and other major central banks on Monday poured hundreds of billions of dollars of added liquidity into money markets.
Equity strategists at Credit Suisse say $700 billion represents about 12% of mortgages not backed by Freddie Mac or Fannie Mae -- "probably an appropriate amount to ensure markets become more liquid." But they said it was too small, especially compared with the original Resolution Trust Corp. program that rescued savings-and-loans in the late 1980s.
In Europe, financial institutions were also ailing, with the governments of Belgium, the Netherlands and Luxembourg launching a $16.4 billion rescue of Fortis, the Belgian-Dutch bank. In a unexpected move Belgium, France leading Leader Dexia get a help of EU6.4 Billion from the government of Belgium and Franch. This bank was the leading lender on government project. Afer Adding help to Bank the top executives Chairman and CEO was removed from their posts.
The U.K. government said it is nationalizing Bradford & Bingley after investors and lenders lost confidence in the mortgage lender, with its stock market listing canceled shortly before the markets opened.
Also, the Icelandic government said it bought a 75% stake in Glitnir HF, the country's third-largest lender, while a consortium of German financial institutions bailed out real-estate firm Hypo Real Estate.
Credit markets remained under pressure, with the yield on the 3-month Treasury bill -- viewed as the least risky short-term investment, falling to 0.294% from 0.87% late Friday. The yield on the 10-year Treasury note declined to 3.615%.
The dollar rallied against the euro and the British pound, while gold gained and oil futures ended with a loss of more than $10 a barrel.
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Rescue Plan - U.S. Congress will pass a law on Sunday to create a fund of $700 billion to buy bad debts from the hosted banks aiming to minimise the Credit Crisis which is a accused for Global economy mahyem. U.S. congress leaders will talk on Sunday Morning to finalise the map for $700 billion fund. A Congressman stated that this is the worst financial crisis since the Great Depression.Nancy Pelosi , speaker of House of Representatives said "We've made great progress", "We have to get it committed to paper so we can formally agree." Treasury Secretary Henry Paulson had lobbied hard for the package, which would rank as the largest bailout in U.S. history, saying the sweeping program was needed to keep credit markets from grinding to a halt under the burden of bad mortgage debts. Remeber US forth largest bank Lehman Brothers , third largest bank Washington Mutual ( WaMu) is washed from system. Government Purchased the Mortgage Lender Fannie Mae and Freddie Mac and Insurance gaint AIG due to this Sub Prime Crisis. The Carolina based Wachovia is also on the queue.. and government status helped Morgan Stanly and GoldMan Sachs to remain in market.
Congress has been racing to reach an agreement before Asian markets open on Monday to avoid a repeat of last week's white-knuckle volatility.It was unclear when the House and Senate might vote on the legislation or whether last-minute hitches might arise.U.S. President George W. Bush spoke with House Speaker Nancy Pelosi on Saturday evening about the negotiations and news of the deal was welcomed at the White House.
"We're pleased with the progress tonight and appreciate the bipartisan effort to stabilize our financial markets and protect our economy," White House spokesman Tony Fratto said. At one point, lawmakers consulted by phone with billionaire investor Warren Buffett, who last week invested $5 billion in Goldman Sachs and also warned that markets were in a "dangerous situation" and on the verge of breaking down.
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Wall Street’s wolf pack has lost its fangs, and the Indian markets are finding it tough to stand apart. That despite strong economic fundamentals and a largely insulated macroeconomic situation.
The answers are quite clear — this is the underbelly of globalization. The Indian economy is feeling the heat of the contagion effect, like never before. And as the global contagion effect spreads like a bush fire to the Indian economy, the question that arises is what’s up ahead for Indian investors and industry?
“We will certainly be influenced by this global slowdown, the pain will be felt with the stock markets reacting in a downturn, but then what do we do? Do we shut or doors on the globe or we go ahead, face the slowdown and emerge out of it,” feels Sanjeev Sanyal, Singapore-based chief economist, Deutsche Bank.
Analysts say there has been a double whammy for India. Direct hit are the ones which had some kind of business linkages with the no longer existing global investment banking giants, such as IT services, real estate and infrastructure.
The major players which are hurt in the IT segment include TCS, Wipro and Satyam. In the real estate sector, Unitech and DLF, among others, have been affected. Analysts agree that all those companies which had these investment banks’ holdings as a significant proportion of their portfolio and business are feeling the squeeze.
Among banks, ICICI Bank is the worst hit private bank, while PSU players Bank of India and Bank of Baroda are affected because of their derivative exposure. FIIs pressed the panic button on India as global agency Fitch downgraded the credit profile to “negative”. However, investors in India have been hit only indirectly, through exposure in the markets. Says Rajeev Shastri, head of alternate businesses of the asset management company Lotus India: “The linkages of Indian investors with these events have been weak as none of these banks are allowed to set up branches in India.”
There is a consensus among asset managers that Indian investors will not be affected very badly. “The Indian markets are certainly over-reacting. The global meltdown has created volatility in the markets but it will not last for long,” says Waqar Naqvi, CEO, Taurus Mutual fund.
However, not all are optimistic. Some analysts feel every large player had invested in some way or the other in India. Lehman had holdings in Satyam, AIG had partnership with Tata’s insurance wing and Merrill Lynch had business with Infosys. Says Anil Advani, head of research, SBICAP Securities, “Nobody is aware of the depth and magnitude of the crisis.
The situation is not transparent as of now.”
Arindam Ghosh, CEO, Mirae, sums it up: “The impact will certainly be felt but not at the portfolio level. The short-term volatility may erupt but the medium and long term perspectives are healthy and safe.
Link to the Article...
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This Friday FTSE ( London Financial Times Index ) , one of the premier exchange of world, surged by 8.84 % after continuous 4 days loss.This is the maximum gain in a single day since 21 Oct ,1987 ( US aftermath ). FTSE faces 10% downward journey from Monday to Thursday.
Index soars on the news of US Government planing to save the financial world by tackling the situation. Further Financial Services Authority ( FSA ) a regulatory body who controls the exchanges in UK , put 29 securities on Do - Not- Short - Sell list until January 16 , 2009. All of the 29 stocks are Financial Stock. After this news FTSE bounced sharply in Friday trade , closed by 8.84% or 431 points .
Read the Part 1 story on US market ... Click here
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US post its biggest gain on 2 day since 1987 (termed as aftermath year)
Posted by Abhishek , on 21st Sept 2008 . @ 12.13 PM IST
Posted by Abhishek , on 21st Sept 2008 . @ 12.13 PM IST
American market posted its rally of 2 day since the crisis of 1987 as government introduced some plans to save world largest economy and market. This week financial dominated S&P 500 Index make the biggest loss in seven year. Financial shares in the S&P 500 plunged 13% in the first three days of the week as Lehman Brothers Holdings Inc. filed for bankruptcy, Merrill Lynch & Co. sold itself and the government seized American International Group Inc., sending the market to its steepest declines since the 2001 terrorist attacks. But during the last two trading day as Government decided to safe the market and retail stakeholder by adding more measures like
* SEC imposes temporary ban on short sales on 799 stocks
* US Treasury to back money market mutual funds .
US Market rallied to covering its losses that is made in the beginning of this week to close in FLAT to the extent. On Thursday ,Wall Street posted its biggest one-day percentage gain since October 2002 -- when the last bull market was born -- after a congressional aide said U.S. Treasury Secretary Henry Paulson has been circulating a proposal to lawmakers that would create an entity to deal with the billions of dollars of bad debt still clogging the financial system.
Biggest Bankruptcy of World
1) Lehman was the fourth-largest U.S. investment bank before it filed the biggest bankruptcy in U.S. history on Sept. 15, smashed to the sub prime-mortgage crisis that this financial gaint helped to create. The firm was forced into bankruptcy after Barclay Plc and Bank of America Corp. abandoned takeover talks and the company lost 94 percent of its market value this year.
2) Merrill Lynch agreed to be bought by Bank of America after its shares plunged 36 percent the prior week. Merrill led gains in the in the S&P 500, climbing 73 percent to $29.50.
3) Goldman Sachs Group Inc. and Morgan Stanley, the only remaining independent brokerages on Wall Street after Lehman's bankruptcy and Merrill's sale, climbed after earlier enduring their steepest one-day sell-offs ever as the nation's three largest pension funds stopped loaning shares to investors betting on the firms' declines. Goldman dropped 16 percent to $129.80 for the week and Morgan Stanley fell 27 percent to $27.21.
4) Washington Mutual - Financial stocks gained 7.4 percent overall. Washington Mutual Inc., the largest U.S. thrift, surged 56 percent to $4.25 on the government's rescue plans and reports four potential bidders may be interested in buying pieces of the company. . We got a report that CITI Financial is also intrested to buy this troubled firm.
5) AIG fell the most in the S&P 500, losing 68 percent to $3.84. The biggest U.S. insurance company was taken over by the government after mortgage-related losses led to credit-rating downgrades that drove the company to the brink of insolvency. The government said it will receive a 79.9 percent stake in return for an $85 billion loan that analysts said may be repaid by liquidating the company. Analyst believe that this amount of $85 billion is not enough and government is need to inject further money on this Insurance Gaint.
The Federal Reserve kept its benchmark interest rate at 2 percent on Sept. 16, citing risks to growth and inflation. The central bank agreed to the AIG loan hours after the decision.
Please refer to our next Article of Rally of 1987 - Part -2 ( EUROPE )
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This Article is prepared with the references of a research paper of HARVARD UNIVERSITY,
The first major financial crisis of the 21st century involves esoteric instruments, unaware regulators, and skittish investors. It also follows a well-trodden path laid down by centuries of financial folly. Is the “special” problem of sub-prime mortgages this time really different?
Our examination of the longer historical record, which is part of a larger effort on currency and debt crises, finds stunning qualitative and quantitative parallels across a number of standard financial crisis indicators. To name a few, the run-up in U.S. equity and housing prices that Graciela L. Kaminsky and Carmen M. Reinhart (1999) find to be the best leading indicators of crisis in countries experiencing large capital inflows closely tracks the average of the previous eighteen post World War II banking crises in industrial countries. So, too, does the inverted v-shape of real growth in the years prior to the crisis. Despite widespread concern about the effects on national debt of the early 2000s tax cuts, the run-up in U.S. public debt is actually somewhat below the average of other crisis episodes. In contrast, the pattern of United States current account deficits is markedly worse.
Report by Carmen M. Reinhart. University of Maryland and the NBER
&
Kenneth S. Rogoff. Harvard University and the NBER
&
Kenneth S. Rogoff. Harvard University and the NBER
Till now Sept 2008 , this Sub prime crises not solved. Only God knows how much losses is been made by these banks, they are also not declaring their complete losses in sub Prime till yet. Bailout plan by FED for Credit firm Freddie Mac and Fannie Mae and a $85 billion bailout package for Insurance Gaint AIG is not end of this story.. Merrill Lynch stakeholder is saved by Bank of America as BOA completly purchased Merrill Lynch in all cash deal of $50 billion. Lehman - this is the 4th largest credit firm of the world having assest of more than $639 billion and a borrowings of $620 billion is widly affected by this Sub Prime crise.. As Lehman Brothers story is on Dead End.. They have only two options left 1) to file a Bankruptcy or 2) sell the entire company to any business rival.. Of Course taking over LEHMAN is not a easy job, they need to face their business losses that the company is facing now a days... Now there is a news on Morgan Stanley and Goldman Sachs ,, market sources say that Morgan Stanley is also on big trouble.. As they have wide exposer on Sub Primes...
What Ever the report is, only retail trader or Investor who is flusing their money on this market.. On Nov 2007 Lehman was quoting around $67 / share now they are on big hit on Wednesday Leman was trading on range of 22 cents to 25 cents... So who burn their hand???... Only Retail Investor who thought they will not loose there money in safe stock like Lehman they loose... This simplyfies that Stock Market is not for retailers... They willl only loose their money.... and dunt buy stock on their name.. buy on their business according to market and with time...
Ideas by Abhishek on 18/09/2008 , Thursday 08.00 PM
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