Markets to move sideways for two or three days before we see some direction
The market closed lower for the week ended 11th March, mainly on concerns over oil supplies due to continuing tension in West Asia and the possibility of an interest rate hike by the Reserve Bank of India (RBI) at its forthcoming policy review on Thursday. Easing food inflation end-February and higher industrial output figures for January did not help to change the outlook.
The market opened weak on Monday, due to political uncertainty over the DMK's threat to pull out its ministers from the Union Cabinet. As the air cleared in Delhi, stocks made good gains on Tuesday. The indices closed almost flat on Wednesday, with crude prices again fuelling uncertainty and this also contributed to the fall on Thursday.
On the last day of the week, the Sensex and the Nifty opened with a negative gap, following a sharp decline in US markets the day before and weakness in the Asian markets. News of the earthquake in Japan dragged the indices to their intra-day lows. From there onwards, however, the market recovered half its losses and in the end the Sensex closed at 18,174, a loss of 154 points, and the Nifty ended at 5,445, down 49 points.
Overall, the market closed the week down 2%, with the Sensex declining 312.36 points and the Nifty losing 93.30 points.
The major gainers on the Sensex during the week were ONGC (up 5%), Reliance Communications (up 3%), Wipro (up 2%), DLF and Reliance Industries (up 1% each). The top losers were Tata Steel (down 6%), BHEL, TCS, SBI and Maruti Suzuki (down 5% each).
In the sectoral space, BSE Realty and BSE Oil & Gas rose 1% each, while BSE Capital Goods and BSE Metal declined 3% each.
After a gap of nearly three months, food inflation eased to 9.52% for the week ended 26th February, from 10.39% in the previous week. The rate of price rise of food items has fallen to a single-digit figure for the first time since the week ended 4th December 2010, when it was 9.46%.
The decline in food inflation is expected to give the government some breathing space, as it has been severely criticised for not controlling inflationary pressure caused by high food and crude oil prices.
Deceleration in manufacturing and mining sectors pulled down the factory output growth rate to a meagre 3.7% in January, and this could prompt the RBI to take a re-look at its monetary tightening measures aimed at containing price rise. In January last year, industrial growth, measured in terms of the Index of Industrial Production (IIP), was 16.8%. Meanwhile, the IIP for December 2010 has been revised upwards to 2.5% from the earlier 1.6%.
India's exports rose by 49.8% year-on-year to $23.6 billion in February on the back of increased demand from markets in North America, Asia and Africa. Imports rose by 21.2% to $31.7 billion, leaving a trade gap of $8.1 billion.
During April 2010-February 2011, the country's merchandise shipments grew by 31.4% to $208.2 billion, surpassing the export target of $200 billion for the entire fiscal 2010-11. During this period imports grew by 18% to $305.3 billion. The trade deficit for the 11-month period stood at $97.1 billion.
Concerned over the worsening political turmoil in West Asia and the impact of rising global crude oil prices on the economy, the finance ministry has suggested that the RBI focus on containing inflation.
The central bank has raised key policy rates seven times since March 2010, to tame inflation, which of late has started to decline. However, with the surge in global crude oil prices following political turmoil in West Asia, it is unlikely that inflation would continue to fall as predicted by policymakers.
India's per capita income increased by 14.5% during 2009-10 to Rs46,492, from Rs40,605 in 2008-09. As per the base year 2004-05, the per capita income in rural areas was Rs16,327, while in the urban areas it stood at Rs44,223.
On the international front, China reported a trade deficit of $7.3 billion in February, against expectations of a surplus, which the government attributed to the long holiday period for the Lunar New Year celebrations in February. Japan's gross domestic product fell at an annualised 1.3% in the December quarter, more than the 1.1% contraction reported last month. Also, the Bank of Korea hiked its benchmark base rate to 3% from 2.75%, for the second time in three months, in a bid to curb rising prices.
Meanwhile, forces loyal to Libyan president Maommar Ghadafi are reported to have tightened their grip on western Libya, where the country's key oil facilities are housed. Following the development, Western nations are considering all options to end the crisis, which has a bearing on the global economy.
The market has been weak, but there is still no panic. The direction will be clear in a few days.
The upward revised interest rate for the regular interest payment scheme is 10.47% for 36 months, 48 months and 60 months
Tamil Nadu Power Finance has revised the interest for its existing fixed deposit schemes. The upward revised interest rate for the regular interest payment scheme (RIPS) is 10.47% for 36 months, 48 months and 60 months. The interest is calculated annually. The interest rate for the RIPS scheme for senior citizens (age 58 years and above) is 10.50% p.a. (11.02%) for 36, 48 and 60 months. The rate of interest is calculated monthly. The revised interest rate for this cumulative interest payment scheme (CIPS) is 10% p.a. for 60 months. The interest rate for the Powerfin CIPS scheme for senior citizens is 10.50% p.a. for 60 months.
While the market is on a declining trend, there is no clarity about which way it is headed
The market opened in the red, tracking weak global cues on escalating tensions in West Asia. Half-hearted attempts to lift the indices into the green a couple of times were shot down by sellers. An increase in IIP numbers for January also did not help matters. Then, as news broke of a huge earthquake in Japan in the late morning session, investors were nervous, leading to a further fall in the indices.
The key indices touched the day's low shortly after noon and moved sideways after that till the end of the session.
The Sensex and the Nifty opened with a negative gap at 18,248 and 5,456, respectively, following a sharp decline in the US markets on Thursday and the Asian markets early Friday. However, after initial weakness the indices recovered significantly, and even crawled into the green.
The Sensex hit intra-day highs of 18,368 and the Nifty at 5,503, after which selling resumed. Around noon, the news of the earthquake in Japan took the indices to intra-day lows of 18,063 and 5,412. But the market recovered half its losses from there onwards. In the end, the Sensex fell 154 points to close at 18,174 and the Nifty ended at 5,445, lower by 49 points. The advance-decline ratio on the National Stock Exchange was 472:1241. While the market has been weak, there is still no panic. The direction will be clear in a few days.
The market breadth on the key indices was negative today. The Sensex closed with 25 stocks in the red and five gainers and the Nifty had 40 declining stocks and 10 in the advancing list. In the broader markets, the BSE Mid-cap index declined 1.07% and the BSE Small-cap settled 1.12% lower.
With the exception of oil & gas and fast moving consumer goods sectors, all other sectoral gauges settled lower. BSE Metal (down 1.91%), BSE TECk (down 1.61%), BSE IT, BSE Power (down 1.49% each) and BSE Capital Goods (down 1.42%) were the top losers. On the other hand, BSE Oil & Gas (up 0.81%) and BSE Fast Moving Consumer Goods (up 0.03%) were the only gainers in the sectoral space.
ONGC (up 2.14%), Reliance Industries (up 0.73%) and Tata Power (up 0.55%) were the noteworthy gainers on the Sensex. The major losers on the benchmark were BHEL (down 3.64%), Reliance Communications (down 3.46%), Reliance Infrastructure (down 3.19%), Sterlite Industries (down 3.06%) and Jaiprakash Associates (down 2.90%).
Industrial growth, as measured by the Index of Industrial Production (IIP), slowed to 3.7% in January 2011 compared to a 16.8% expansion in the year-ago period, dragged down by the poor performance of the manufacturing sector, particularly capital goods.
However, growth in factory output in January was better than the 2.53% expansion (revised upward from 1.6%) in the previous month.
Adding to the woes of the markets, the news of the strong earthquake in Japan resulted in the Asian markets closing lower today. After the earthquake hit, the Nikkei 225 extended its losses to close at its lowest level since 31st January.
Besides, China's February consumer price index stood at 4.9%, unchanged from the January figure, but exceeded analysts' predictions of a 4.8% rise. China's producer price index, a measure of pipeline inflation pressures, rose 7.2% from a year earlier, up from 6.6% in the previous month.
In volatile foreign exchange trade, the yen fell sharply immediately after the news of the earthquake, but bounced back against the dollar as the Bank of Japan said it would do all that was necessary to ensure financial stability.
The Shanghai Composite declined 0.73%, the Hang Seng tanked 1.55%, the Jakarta Composite slid 1.27%, the KLSE Composite fell 1.40%, the Nikkei 225 plunged 1.72%, the Straits Times declined 1.04%, the Seoul Composite tumbled 1.31% and the Taiwan Weighted fell 0.87%.
Back home, foreign institutional investors were net sellers of equities worth Rs97.19 crore on Thursday, whereas domestic institutional investors were net buyers worth Rs108.98 crore.
State Bank of India (down 0.70%), India's largest lender, is looking to buy banks in Africa and Southeast Asia to expand its overseas operations. It has earmarked around $200 million for the proposed acquisitions.
SBI has been on the lookout for large acquisitions, but after the global financial meltdown it has been focusing on smaller deals. It is aiming to increase the contribution from its international operations to 25% over the next five years, from about 16% currently.
Infosys Technologies (down 1.07%) has bagged three big transformational deals ranging between $50 million and $200 million. The deals, extending over a period of four to five years, are with companies in the manufacturing, retail, and banking, financial services and insurance space. The customers are based in the US and Europe.
Pharma major Nectar Lifesciences (up 1.67%) has received the approval of the Japanese Ministry of Health for Cefuroxime Axetil. The approval marks a significant achievement for the company and demonstrates further progress made towards entering highly regulated and strong markets like Japan. Last September, the company was granted 'Certificate of Suitability' for its key molecule Cefuroxime Axetil in the European Union.