Tag: Stocks

Nasdaq Composite, S&P 500 drops as growth fears persist

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Global equities fell further on Thursday, unable to sustain a late rally on Wall Street, as investors dumped stocks on fears of sluggish growth and bought safe-haven assets such as government debt and the Swiss franc.

Supply chain woes continued to fuel inflation and growth concerns as Cisco Systems Inc warned of persistent component shortages, knocking its shares down 13.7 percent. The plunge made it the latest big-name stock this week to post its largest decline in more than a decade.

“Data showed factory output in the US Mid-Atlantic region decelerated far more than expected in May with the business outlook for the six months ahead of the weakest in more than 13 years,” a regional Federal Reserve bank survey said.

Some mega-cap growth stocks that have underperformed this year posted gains but the rally fizzled. The Dow Jones Industrial Average fell 0.75 percent, the S&P 500 lost 0.58 percent and the Nasdaq Composite dropped 0.26 percent.

Big slides for Walmart on Tuesday and Target on Wednesday have demoralized investors who wonder about rising costs across the supply chain, said Michael James, managing director of equity trading at Wedbush Securities.

“You got a pretty severe shock to the system for portfolio managers with the combination of those two,” James said. “That type of damage is hard to repair, piled on top of the extremely challenging year that technology investors have had,” he said.

But James said there is those who view market as being extremely oversold and “you’re due for some kind of a bounce.” Traders are looking for a catalyst that will turn the market around as a near-term bottom approaches, said Rick Meckler, president of hedge fund LibertyView Capital Management LLC.

But, “there’s probably still enough fear among investors to see a few more downdrafts,” he said. Cash hoarding has reached the highest level since September 2001, indicating strong bearish sentiment, according to Louise Dudley, a portfolio manager at Federated Hermes Ltd.

Goldman Sachs estimates a 35 percent probability of a US recession in the next two years, while Morgan Stanley sees a 25 percent chance of one in the next 12 months.

US spot power and natural gas prices soared to their highest in over a year in some US regions as Americans cranked up air conditioners during a spring heatwave. MSCI’s gauge of stocks across the globe fell 0.65 percent and the pan-European STOXX 600 index lost 1.37 percent.

The S&P 500 is down about 18 percent from its record close on Jan. 3, and MSCI’s index has fallen the same since peaking on Jan. 4.

Germany’s 10-year bond yield fell below 1 percent and US Treasury yields fell as more soft US economic data stirred worries the Federal Reserve’s aggressive monetary tightening could hurt the global economy.

The yield on 10-year Treasury notes fell 3.8 basis points to 2.84 percent, after hitting a three-week low of 2.77 percent. The dollar fell across the board, pulling back further from a two-decade high, as most other major currencies drew buyers.

The dollar index fell 0.89 percent, with the euro up 1.11 percent to $1.05. The Japanese yen strengthened 0.35 percent to 127.79 per dollar. The Swiss franc gained after Swiss National Bank president Thomas Jordan signaled on Wednesday the SNB was ready to act if inflation pressures continued.

Central banks have been walking a tightrope, trying to regain control of decades-high inflation without causing painful recessions. “We will have to discuss what we can do together in our respective areas of responsibility to avoid stagflation scenarios,” German finance minister Christian Lindner said as he arrived for a two-day meeting of top central bankers near Bonn.

Oil prices rebounded from two days of losses in a volatile session, bolstered by weakness in the dollar and expectations that China could ease some lockdown restrictions that could boost demand. US crude futures rose $2.62 to settle at $112.21 a barrel. Brent settled up $2.93 at $112.04 a barrel.

US gold futures settled up 1.4 percent at $1,841.20 an ounce, as a weaker dollar and Treasury yields burnished bullion’s safe-haven appeal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Why Street is punishing this cement maker’s stock despite better-than-expected results

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A cement maker’s stock has failed to excite the Street despite beating consensus earnings estimates. Dalmia Bharat shares fell as much as 6.1 percent to Rs 1,367.3 apiece on BSE, as the headline indices struggled to keep above the flatline after two days of sharp losses.

The company’s earnings before interest, taxes, depreciation and ammortisation (EBITDA) stood at Rs 682 crore for the January-March period, down 11.4 percent on a year-on-year basis, according to a regulatory filing. It, however, jumped 66.7 percent sequentially.

Dalmia Bharat’s sales volume saw an increase of 15.8 percent to 6.6 million tonnes in the January-March period compared with the previous quarter.

Puneet Dalmia, Managing Director at Dalmia Bharat, told CNBC-TV18 it was a good quarter for the company. He said the company expects its volume growth to top seven percent in the year ending March 2023 though its margin may remain flat in the next two quarters.

“Our cost increase last year was about 20 percent, but the price increase has only been three percent. I think there is always a lag in most industries to pass this on. It depends upon demand supply and it depends upon a lot of macroeconomic factors as well. My view is that the headwinds are likely to continue. And over a period of time only we will be able to pass on (the costs),” he said. 

He believes the company will only be able to pass on higher costs to its customers in the second half of the year as “things should stabilise a little bit  depending upon how the (Russia-Ukraine) war shapes out”.

Analysts say the company’s performance was surprising given the sector continues to struggle against low demand and input cost pressure.

Vishal Periwal, Head of Institutional Research at IDBI Capital Markets, told CNBCTV18.com that though the company’s margin improved sequentially, how exactly demand pans out going forward remains a key concern in the sector.

“Demand is an unknown element and is currently the main pain point for the cement sector,” he said.

The company’s demand EBITDA per tonne improved by Rs 310 sequentially to Rs 1,030 in the January-March quarter though it declined by Rs 320 on a year-on-year basis, he pointed out.

Periwal prefers largecap stocks in the space with a pan-India presence. He likes UltraTech and Ambuja from the basket.

Catch latest market updates with CNBCTV18.com’s blog

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Here’s why Reliance Industries fell 3% today despite decent March-quarter results

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The share price of Reliance Industries (RIL) fell 3 percent on Monday amid overall weakness in the market following global equity sell-off. The stock was trading 2.98 percent lower at Rs 2,543 on the BSE at 11:30 AM.

The Sensex opened 647 points lower at 54,188 while the Nifty50 opened 183 points lower at 16,227. Both the headline indices fell further, hitting their lowest intraday levels since March 9. While the Sensex touched a low of 53,918.02, Nifty hit 16,142.10.

RIL among others contributed the most to the fall in the 50-stock index. The decline in the shares comes despite the company’s decent fourth-quarter numbers, with a 22.5 percent growth in profit to Rs 16,203 crore owing to strong oil refining margins, consistency in telecom, digital services and retail business growth.

The revenue from operations increased by 37 percent to Rs 2.11 lakh crore during the last quarter. RIL is the first Indian firm to cross $100 billion revenue in a year.

Goldman Sachs sees RIL as unique energy transformation story. It expects further acceleration in earnings with an expectation of 21 percent sequential growth in Q1, and has maintained its ‘buy’ call on the stock with a target price of Rs 3,200.

CLSA said RIL is one of the best earnings growth stories among India’s large caps and recommended to ‘buy’ the stock.

RIL’s strong O2C performance was despite macro challenges caused by the Omicron wave, high energy prices and dislocations on account of the Russia-Ukraine conflict. 

“Despite the ongoing challenges of the pandemic and heightened geopolitical
uncertainties, Reliance has delivered a robust performance in FY2021-22,” said Mukesh Ambani, Chairman and Managing Director, Reliance Industries.

“Our O2C business has proven its resilience and has demonstrated strong recovery despite volatility in the energy markets. Our relentless focus on customer satisfaction and service has led to higher engagement and increased footfalls, driving robust revenue and earnings figures across our consumer businesses,” he said.

Disclaimer: Network18, the parent company of CNBCTV18.com, is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Bottomline: Bears can wear you out

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

For those unfamiliar with bear markets, here’s a quick snapshot to get your bearings right

Bears can maul you. Bear markets can do that and more to your portfolio. Hence, for those who don’t have the patience and conviction to see through the phase, it is best to sit out, lest you lose your savings and your peace of mind.

Unlike Bulls, Bears don’t charge. They tire you, wear you out and drain your portfolio of any semblance of gains. What you consider undervalued today can suddenly become dirt cheap tomorrow. But if you go all in now, looking to bottom fish, you may be completely out of ammunition when that happens.

So, sit out, sit tight and wait for the Bear to tire if you really want to go hunting.

The Big Falls

History reveals that markets can erase significant gains in bear phases, eroding over 60 percent of value at times. And that’s for the benchmark indices. The mid and small caps that come alive in bull markets will likely lose most of their value and liquidity.

Also Read | Bottomline: A quick guide to the LIC IPO

A study of big declines in the S&P-500 index reveals that in nine such phases in the past, the average period of the down phase lasted 15 months, and the average loss was 34 percent. Compare this to what we’ve seen so far in this decline and we come up with five months and under 16 percent. A pure mathematical inference would imply another 10 months of pain and perhaps another 18 percent of downside. If you do the math, the S&P-500 could bottom near 3200-3180. That’s a steep decline from near 4000 today.

A look at the oldest Indian index benchmark reveals a similar picture. A look at the four most recent declines suggests an average 10-month period of decline and an average drawdown of 39 percent. That would put the Sensex near 38,000, far below the current 54,800 level.

Drawing from the past

Each period is different, each day is different, each hour is different, so it isn’t quite right to compare one period with another and assume what happened in the past will happen in the future. That’s always a risk in forecasting, but history also offers the best clues for managing risks of the future. Learning from past mistakes is a popular adage. And using that as the basis, here’s a glimpse of what can lie in store.

Also Read: Bottomline | In wildly swinging markets, be the animal you are

Going by empirical evidence, the likelihood of a bear phase stretching for many months and leading to a sharp erosion in value, is quite probable. From what we’ve noted above, such phases can easily stretch to a year. So, maybe we’ll be feeling more bullish at some point early next year. We may also (if this truly is a bear phase) get an opportunity to buy stocks 15 percent to 25 percent cheaper, if not more.

A rough scenario building suggests the Nifty could bottom out anywhere between 13,500 and 12,500, which is still a fair distance from where we are. So, if you are already partly invested in the market, hold your horses. Don’t go bottom fishing just yet. There will be opportunities to invest, whichever way the market goes. But if we really are in a bear phase, you’ll at least have some dry powder to use when the time is truly ripe.

Invest safely.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow