BSE Sensex, Nifty downtrend confirmed: Friday Closing Report

In the first leg, the Nifty may hit 5,750


The domestic market settled lower for the second day in a row on weak global cues which led to an across-the-board sell-off. The over 1% decline in the market indices confirms a downtrend. In the first leg, the Nifty may hit 5,750. The National Stock Exchange (NSE) registered a volume of 71.64 crore shares and advance-decline ratio of a poor 347:1103.


The market opened on a subdued note on concerns about the US budget deal. However, optimism expressed by House Speaker John Boehner of finding a solution to avert higher taxes and spending cuts pushed the US markets higher overnight. On the other hand, markets in Asia were down in morning trade on US uncertainties.


Back home, the Nifty opened 28 points lower at 5,888 and the Sensex resumed trade at 19,395, 59 points down from its previous close. The opening figures on the benchmarks were their intraday highs. Lack of any domestic triggers kept the indices sideways in subsequent trade.


The market extended its losses on across-the-board selling pressure, pushing the benchmarks further southwards in the post-noon session. A weak opening of the key European indices also dented sentiments.


The benchmarks fell to their intraday lows towards the end of trade with the Nifty going down to 5,842 and the Sensex retracting to 19,221. The market closed near the lows on the absence of any local cues and weak global markets. The Nifty finished 69 points (1.16%) down at 5,848 and the Sensex settled 212 points (1.09%) lower at 19,242.


Both, the BSE Mid-cap index and the BSE Small-cap index declined 1.47% each today.


All sectoral indices settled in the negative. The losers were led by BSE Realty (down 3.51%); BSE Metal (down 1.80%); BSE Healthcare (down 1.70%); BSE Capital Goods (down 1.66%) and BSE Power (down 1.63%).


Only two of the 30 stocks on the Sensex closed in the positive; they were TCS (up 0.78%) and ITC (up 0.03%). The top losers were Jindal Steel & Power (down 3.52%); Sterlite Industries (down 3.23%); Bharti Airtel (down 3.08%); Hindalco Industries (down 2.68%) and Sun Pharmaceutical Industries (down 2.68%).


The top two A Group gainers on the BSE were—Container Corporation of India (down 2.86%) and Glenmark Pharmaceuticals down 2.46%.

The top two A Group losers on the BSE were—Jet Airways India (down 7.03%) and Adani Power (down 6.65%).


The top two B Group gainers on the BSE were—Alchemist Realty (up 20%) and Peacock Industries (up 19.88%).

The top two B Group losers on the BSE were—Trio Mercantile Trading (down19.66%) and Minaxi Textiles (down 14.63%).


Out of the 50 stocks listed on the Nifty, only two stocks settled in the positive. The gainers were ITC (up 0.82%) and TCS (up 0.48%). The key losers were Jaiprakash Associates (down 4.44%); Jindal Steel & Power (down 3.95%); IDFC (down 3.59%); Sesa Goa (down 3.14%) and Hindalco Ind (down 3.09%).


Markets across Asia settled lower on concerns about budget deal logjam in the US. A Sydney-based analyst was quoted saying “If they go off the fiscal cliff, the US economy could go into a recession. At stake is the US economy and by implications the global economy.”


The Shanghai Composite declined 0.69%; the Hang Seng lost 0.68%; the Jakarta Composite shed 0.11%; the KLSE Composite dropped 0.70%; the Nikkei 225 contracted by 0.99%; the Straits Times fell 0.38%; the Seoul Composite skidded 0.95% and the Taiwan Weighted tanked 0.99%.


At the time of writing, the key European markets were down between 0.67% and 0.89% and the US stock futures were trading sharply lower, indicating a lower opening of US stocks later in the day.


Back home, inflows by foreign institutional investors (FIIs) on Thursday were almost offset by outflows from domestic institutional investors (DIIs). While FIIs pumped in Rs466.75 crore, DIIs pulled out Rs444.01 crore.


Hinduja Group firm Gulf Oil today said it has completed its acquisition of US-based Houghton International for $1.045 billion (about over Rs5,747 crore) after conclusion of necessary regulatory approvals. The acquisition of this speciality chemical maker would make Gulf Oil the world's 9th largest lubricant company, without affecting its financials as the purchase has been made through "a step-down subsidiary structure" in the US and UK. Gulf Oil spurted 2.24% to settle at Rs82 on the NSE.


Hyderabad-based IL&FS Engineering and Construction Company has received a letter of award for the execution of an engineering procurement and construction contract at Dighi Port in Maharashtra. The contract is valued at Rs 168 crore and involves the construction of a multipurpose berth, development of a backup area including the construction of utilities. The stock gained 1.47% to close at Rs58.85 on the NSE.


The huge natural gas discovery in a Mozambique block where Bharat Petroleum Corp (BPCL) and Videocon Industries are partners, will be turned into LNG plant to be jointly built with neighbouring gas field operator Eni SpA of Italy. BPCL declined 1.24% at Rs345.55 while Videocon fell 1.35% to settle at Rs215.05 on the NSE.


RBI opens ECB gateway for low-cost affordable housing projects

While the Union Budget 2012-13 granted external commercial borrowings (ECB) for low-cost affordable housing projects, the Reserve Bank of India (RBI) has taken a good 10 months to come out with the notification


The RBI, vide its notification  dated 17 December 2012, has allowed ECB to eligible developers/builders for low-cost affordable housing projects and housing finance companies (HFCs) and National Housing Bank (NHB) for financing prospective owners of low-cost affordable housing units under the approval route. However, the eligible borrowers will not be permitted to raise foreign currency convertible bonds (FCCBs) under this scheme and cannot use the ECB funds for acquisition of land. All existing norms on ECBs, as may be applicable, shall be applicable here as well.


The NHB shall act as a nodal agency for deciding the project's eligibility as a low-cost affordable housing project. Once satisfied, the application shall be forwarded to the RBI for consideration under the approval route. Currently, a limit of $1 billion has been fixed for ECBs under the low-cost affordable housing scheme and the limit shall be reviewed on an annual basis. 

Which projects will be eligible?

1. A project with at least 60% of the perm-issible FSI (floor space index) for units with a maximum carpet area of 60 square meters. 
2. Slum rehabilitation projects. The parameters shall be set by the Central Sanctioning and Monitoring Committee of the Affordable Housing in Partnership Scheme (AHP) constituted under the chairmanship of Secretary, Housing & Urban Poverty Alleviation (HUPA).
Who are eligible borrowers?
1. Developers/ Builders-Developers/ builders with minimum five years of experience in undertaking residential projects and proven track record in terms of delivery and quality.
2. Housing Finance Companies (HFCs)-All NHB-registered HFCs satisfying the following requirements:
a. Minimum paid-up capital of not less than Rs50 crore as per the last audited balance sheet;
b. Minimum net owned fund (NOF) of not less than Rs300 crore for the past three financial years; 
c. The borrowing through ECB shall be within the overall borrowing limit of 16 times the NOF;
d. Net non-performing assets (NNPA) shall not exceed 2.5% of the net advances;
e. The maximum loan amount sanctioned to the individual buyer will be capped at Rs25 lakh, subject to the condition that the cost of the individual housing unit shall not exceed Rs30 lakh; and
f. The ECB shall be swapped into rupees for the entire maturity on fully-hedged basis.




Coal industry: Supply-side bottlenecks!

Estimates of India’s large proven coal reserves are not disputed. But, due to the slow movement of mined coal, power generators, which feed the hungry industry and masses, end up importing coal at a much higher price


In a candid admission of facts, finance minister, P Chidambaram, stated, while tabling the mid-year economic analysis in parliament, that there is an urgent need for the government to take responsibility of addressing supply-side bottlenecks in the coal industry.


The country is actually facing a crisis in nearly every industry. Each of them must be handled urgently, and with care, in order to overcome the crisis. It can start anywhere, but start it must!


Take the coal industry, for instance. With the dwindling supply of fossil fuels and gas supplies from Reliance Industries, it has become imperative to mine the known sources of coal in the country.  India's proven coal resources are estimated at 100 billion tonnes.


There are probably hundreds of millions of tonnes of coal yet to be discovered. Let it be that way for now. The need of the hour is the extraction of coal from existing sources, where mining has been taking place for decades.


So what’s the problem? Our methods of extraction are archaic and the machinery employed is outdated. Western countries have, for several years now, been profitably employing modern technology.


Need for urgent decision on the Coal Regulator


Besides the issue of equipments, what else ails our industry? Too many ministries are looking into the issue and none of them is doing so well enough.


Narasing Rao, CMD of Coal India, has reiterated that “it is moving of coal and not producing it” which is the biggest issue the industry is facing. As much as 50 million tonnes of coal are lying at the pitheads for want of rakes. The logistics provided by Indian Railways (IR) is shoddy. IR is unable to create the infrastructure necessary to move the cargo.


Proven coal reserves estimates, whether they will last for 50 or 100 years, is not an issue in dispute. In fact, many more will be discovered and a few abandoned, but in the meantime, due to inadequate movement of mined coal, power generators, which have to feed the hungry industry and masses, are paying a very high price for imported coal. Some enterprising Indian companies have coal mining operations abroad so as to ensure supplies for their units back in India.


However, this overdependence on imported coal is rather risky, to say the least. Despite agreements and heavy investment overseas, what happens if the political set up in a country changes? The most recent example is the GMR episode in Maldives.


Power “less” dilemma: Coal industry at the cross-roads


It is well known that the Inter-Ministerial Group (IMG) set up by the coal ministry, comprising 14 members from various key departments, has been working on the issue of allocation of coal blocks. Although 54 new coal mines for allocation have been identified, it looks like the government will not go ahead with the issue of auctioning.  So, here again, we are back to square one!


The tug-of-war between the power ministry and coal ministry officials must stop. It seems the power ministry “wants the captive coal block allottees to participate in tenders for PPAs (power purchase agreements) floated by the power distribution companies, but the ministry of coal has not even responded to the proposal” as per media reports. Inordinate delays on all such issues of ‘clearances’ from ministries and state governments must stop, if we want to make any progress at all.


Although details have not been made public, Coal India appears to have at least made the right decision to spend a billion dollars in buying new equipment, such as dumpers of various capacities, to overcome the transport bottleneck.


It seems as if Narasing Rao means business and, given the freedom to work his way, he can hopefully make some good progress in the year ahead.


To read more articles by AK Ramdas, please click here.


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)



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