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Money Nov 7, 2012

Indian equities best bet if fiscal cliff drags world markets down

2:20 pm Even if Obama's re-elections has not pleased the US markets, it has struck the right chord with Indian equities, which continue to trade higher.

According to Adrian Mowat of JP Morgan Obama's win will now allow the speedy redressal of the threat of the fiscal cliff. Mowat adds that if the markets fall during the debate on the fiscal-cliff threat, then Indian equities are a good bet offering excellent demographic dividends especially after the improvement in the macro-economic situation.

Gold too will be one of the major beneficiaries of Obama's win as the various measures that will be taken to address the looming fiscal cliff including the continuance of the QE3 programme, will keep the dollar weak and add strength to gold. ( Read here)

US markets don't want another 4 years of Obama

1:00 pmGlobally, the bigger worry is now about how the markets will react to Obama's win.Traders and investors say the best way for Obama to celebrate his re-election would be to avoid a budget crisis that could send the US economy reeling.

Economists fear letting all the tax hikes and spending cuts take effect at once would hammer consumer and business spending. Wall Street had preferred because of his approach of retaining tax cuts, and making spending cuts. The Obama Administration favors raising taxes on the richest Americans, and also increasing capital gains and dividend taxes.

Steven Englander, head of G10 foreign exchange strategy at Citigroup, told Reuters that the fiscal cliff "could become a bigger issue down the road, and if we don't see progress quickly the market may reconsider how risk-positive the next few months will be."

"The market is going down. The market does not want another four years of Obama. It does not want these tax hikes on a fragile economy," Peter Boockvar, Miller Tabak strategist told CNBC. "We have an economy that's barely staying above recession. Europe's problems are deepening. Now we have the prospect of higher taxes." (Read more here.)

Meanwhile, in the Indian market, shares of banks and real estate companies rose as investors bet on increased home sales during the festival season, which in turn is seen likely to push up loan demand for banks.

DLF shares rose 2.37 percent to Rs 211 and DB Realty 7.25 percent to Rs 114. Meanwhile, State Bank of India rose 2.3 percent to Rs 2223, ICICI Bank 1.4 percent to Rs 1097 and HDFC Bank 0.7 percent to Rs 644. "Real estate stock valuations are cheap, huge difference between stock valuations and project valuations, festive demand is tepid but prices are not falling," Hiten Gala, a senior manager advisory at Brokerage Sharekhan, was quoted as saying in the a Reuters report.

Obama win means more inflation, debt and spending

11:45 amSensex continues to trade higher after Barack Obama was re-elected as a US President for the next four years. Asian (ex-Japan) markets too gained ground following the US Elections outcome. The rupee rose by 17 paise to 54.26 against the dollar in early trade. The dollar tumbled against the euro in Asian forex trading after President Barack Obama won a second term following a nail-biter White House race.

The probability of quantitative easing in the US has increased with the re-election of President Barack Obama, said Ramesh Damani, BSE broker.

Meanwhile Bicon CEO Kiran Mazumdar Shaw feels that the Obama win establishes stability for global economy. "Obama's Victory establishes continuity and stability not only for the US but for the global economy," she tweeted.

However, investor Jim Rogers has cautioned that the US fiscal cliff will worsen going ahead since Obama will continue with his current policies. This implies there will be more deficit spending and more debt, which will make things worse for the US economy.

He expects Obama's policies to drive up commodities and drive down the dollar.

"Investors should prepare for rising prices and more expansionary monetary policy now that President Barack Obama appears to have won re-election, Rogers told CNBC in an interview.

Meanwhile, Firstpost writer Vivek Kaul predicts gold is set for another rally.And this rally is likely to continue, with some gold bulls talking of a price of $3,500 by 2013-end. But does that mean gold will rally in India? While the gold is set to rally in dollars, for Indians to make money it has to rally in rupee terms. For that to happen the Indian rupee either has to remain at the current levels against the dollar or depreciate further. ( You can read all about it here). And according to ArjunParthasarathy , the Obama victory being positive for the US dollar will keep the rupee pressured at lower levels. ( Read here).

Obama win is bad news for IT

"Not the best news for India or the IT outsourcing industry. However, we need to understand how much of the election rhetoric continues into 2013 and that will determine the full implications to us," said PhaneeshMurthy, CEO iGATE."The concern over the deficit and jobs will continue (in the US) and in my mind, will force the sluggishness to remain in the economy," he said. ( Read more here).

With Obama win, analysts cautious over impending fiscal cliff

11:00 am Even as Obama supporters are celebrating his win, analysts are cautioning about the impending fiscal cliff that the president has to overcome.

The fiscal cliff refers to the effect of a series of enacted legislation which, if unchanged, will result in tax increases, spending cuts, and a corresponding reduction in the budget deficit.

"It's so damaging for the economy to have this continuous uncertainty hanging over it," Jens Nordvig, Global Head of Foreign-Exchange Strategy, Nomura Securities, New York, told Reuters.

On Obama reaching a compromise on fiscal cliff, Nordvig said, "I really hope so ... I think hopefully we can get a deal. I think Boehner wants to cut a deal and perhaps the Tea Party movement is somewhat weakened by this... There's appetite from his side to do a deal, there's appetite from Obama's side to do a deal," Nordvig was quoted as saying in a report.

Read more analyst views here.

Obama win means more sensible politics, says Soros

10:22 am The Obama win means that Ben Bernanke is going to continue at the Federal Reserve and he can take forward his quantitative easing 3 programme, said Robert Parker of Credit Suisse on CNBC TV18.

This is good for the global market, he said.

Meanwhile, billionaire investor George Soros said he was "Delighted" with Obama's win, he says hopefully Republicans "will make better partners in the coming years" to avoid fiscal cliff. He added that Barack Obama will open "the door for a more sensible politics."

"The American electorate has rejected extremist positions, opening the door for a more sensible politics."

Sensex jumps as Obama wins US polls; rupee up, gold spikes

10:00 am The Indian market was steady with an upward bias after Barack Obama won the US presidential elections, while the Dow Futures were down about half a percent.

The Sensex and Nifty were up 0.3 percent at 18802.92 and 5743.15.

"In the short-term, an Obama win will induce buying, Portfolio manager PN Vijay told CNBC-TV18.

Ramesh Damani, Member, BSE, had told CNBC TV18 earlier that an Obama win will set the stage for a fiscal cliff in the US, he said. He expected the market to remain volatile for a few more sessions.

"The Nifty had sprung into action towards close on Tuesday to clock its fifth consecutive positive close; this time above the 5700 levels. A close above 5735 is required to confirm breakout and move past 5800 levels," IIFL said in a pre-open note.

Rupee trades at 54.25/26 versus its previous close of 54.43/44, tracking the dollar's losses versus most other Asian currencies.

"While Wall Street honchos may have preferred to have Mitt Romney in the White House, Obama's reelection may at least clear away some of the long-standing uncertainty over the shape of new regulations like the Volcker Rule, which limits trading by many banks," reports Market Watch.

Stocks in news

Bharti Airtel was up 1.6 percent despite reporting a profit decline to Rs 721 crore as against Rs 760 crore year ago and a CNBC TV18 poll of Rs 830 crore. A Reuters report attributed the decline to an increase in costs and a slowdown in customer additions that limited revenue growth.

Indian Hotels Co was down 0.5 percent after the company reported a net loss of Rs 6.36 crore againt a net profit of Rs 8.35 crore a year ago.

Tata Power fell 0.89% to Rs 105.50 after the company reported a consolidated net loss of Rs 83.80 crore in Q2 September 2012, lesser than Rs 1187.32 crore in Q2 September 2011.

Mastek shares extended their rise and were up 5 percent after the yesterday announced a buyback

Sensex flat, Obama win will induce buying on Dalal St

9:12 am It's a flat start to the Indian markets. The Sensex opened in green, up 0.11 percent at 18883 levels, while the Nifty is up 0.07 percent at5728 levels, as the market watches a neck-to-neck contest in the US presidential polls. Dalal St would prefer Obama back and that is the case with many countries except of course China. Counting has begun for what promises to be a nail biting finish.

Whatever the impact of the poll outcome, the markets will move on, Technical Analyst Anil Manghnani, told CNBC TV18. "It will be done and dusted by the end of the week," he said.

He expects a Nifty close above 5730 to trigger a big move.

There is no volume in the market, which makes difficult for the breakouts to sustain. Though volumes can come back once the breakout happens, one would like to see breaking out with volume, he said.

According to a survey by Barclays, which included, institutional asset managers , hedge funds, banks, corporates and official institutions a win for Obama will see bond market rallying while a win for the Republican candidate is likely to ensure a rally in stocks. Based on the resurvey, Barclays "There would be confusion in the Indian market if Romney wins, which is likely to have some negative impact on the Indian market."

Most BSE sectoral indices are in green. Tata Motors, ICICI, TCS are among Sensex gainers.

Bharti Airtel shares are up more than 1 pct after results.

Meanwhile, the Dow Jones gained 133 points, or 1%, while S&P 500 rose 0.8%.

Financial markets priced in Obama win, says Citi Private Bank

8:45 am The financial markets have priced in a win for Barack Obama in the US presidential polls and so a win for Mitt Romney would be a surprise, said John Woods of Citi Private Bank on CNBC TV18.

If Romney wins, Woods does not expect him to change Federal Reserve chief Ben Bernanke in the near term. Liquidity flow is seen shifting to the developed markets in the eventuality of a Romney win, he said.

However, the reaction is seen as kneejerk as the focus will shift to the fiscal cliff, which has no easy resolution, he said.

Dow Jones futures declined 108 points to 13,093 and SGX Nifty too came off as the election seems to be heading for a photo finish, CNBC TV18 reported.

8:00 am
Asian shares mixed as investors watch early US Polls results

Asian shares were steady on Wednesday as investors hoped for a decisive result in a close-fought US presidential election, with early counting underway and voting continuing in crucial swing states which will decide the outcome.

Polls showed President Barack Obama and Republican challenger Mitt Romney remained in a neck-and-neck race, with 270 electoral college votes needed to win.

A Romney victory, if there is a Romney victory, would be better for shares as more uncertainty would be removed. AP

The first clues to who will win could come from the swing states of Virginia, Florida and Ohio. Polls in all three states close at 8 p.m. EST (0100 GMT) and if the results are clear, US television networks could begin projecting winners soon after.

The MSCI index of Asia-Pacific shares outside Japan was up 0.1 percent, pulled higher by Australian shares which rose 0.3 percent as an overnight rise in commodities boosted mining stocks. South Korean shares opening up 0.3 percent.

Japan's Nikkei average opened up 0.6 percent.

"The broad outline of the US election is expected during trading hours. If the uncertainty is dispelled with results pointing to a clear winner, the main board is expected to trace last night's Wall Street gains." Park Jung-sup, an analyst at Daishin Securities, said of Seoul shares.

The dollar was down 0.1 percent against the yen at 80.28, but off Tuesday's low of 79.96 yen.

Why a Romney win would favour stocks

The general market view is a Romney win would favor stocks due to the perception his policies are pro-business, while a second term under Obama would favour bonds as he is perceived to favour low interest rates.

Without a decisive win and a clear majority in Congress by either Obama or Romney, investors expect messy negotiations over a "fiscal cliff" - nearly $600 billion worth of spending cuts and tax increases that risk pushing the economy into deep recession.

A sharp downturn in the world's largest economy raises concerns about demand for industrial metals, analysts say.

They also say a win by Romney would hurt gold in the short term and overall risk sentiment, as he has been critical of Federal Reserve Chairman Ben Bernanke's aggressive quantitative easing, which has kept risk-favourable market sentiment and supported gold for the prospect of future inflationary pressure.

"An Obama re-election would be a 'status quo' and sigh of relief for those outside the US and the early rally started in North America will likely continue," said Neal Gilbert, market strategist at GFT in a note to clients. "If Romney is the early favourite, expect uncertainty and indecision to reign as risk markets take back many of their early gains."

"A close race could be devastating mainly because the market hates uncertainty and a flood of funds in to the safety of the $would be the likely outcome, destroying the risk trade," he said.

If the election falls short of a clear result, it risks roiling financial markets as was the case in 2000 when Bush versus Gore battle ended up in the Supreme Court.

U.S. crude futures fell 0.5 percent to $88.28 a barrel.

Aside from the U.S. election, markets will eye Greece, as the parliament later on Wednesday votes on 13.5 billion euros of fresh spending cuts and tax hikes. The austerity measures are crucial to unlocking 31.5 billion euros in aid from global lenders to keep the debt-laden country afloat.

The euro eased 0.1 percent to $1.2804, near a two-month low around $1.2764 hit on Tuesday.

Reuters


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