Stocks
BSE Sensex, Nifty in a sideways move: Monday Closing Report

Close on the Nifty above today’s high may lead to a short rally
 

Remaining listless for a major part of the trading session, the market closed flat with a mixed bias as investors await the Winter Session of Parliament, later this week, which could decide the fate of the recently announced reforms by the UPA government.

 

The Nifty made an intra day high of 5,593, which was the lowest since 21 September 2012. Although the Nifty made a lower low and a lower high today, it managed to close at almost the same level as on Friday. A close on the Nifty above today’s high may lead to a short rally. The National Stock Exchange (NSE) saw volume of 56.74 crore shares and an advance decline ratio of 565:1329.

 

The Indian market opened marginally higher tracking its Asian peers which were in the green as US policymakers held initial talks on Friday to look at ways to avoid the “fiscal cliff”.

 

The Nifty opened three points up at 5,577 and the Sensex resumed trade at 18,350, a gain of 41 points over its previous close. Support from IT, banking and telecom stocks lifted the benchmarks to their intraday high in initial trade itself. At this point the Nifty touched 5,593 and the Sensex went up to 18,387.

 

However, the indices could not maintain the gains and entered the negative terrain around 9.40am. Subsequently the market moved sideways amid choppy trade which saw the indices hovering on both sides of their previous close.

 

The market was listless in the noon session the absence of any positive triggers. The benchmarks fell to their intraday lows a little after 1.45pm despite a positive opening of the European bourses. At the lows, the Nifty was down to 5,549 and the Sensex went back to 18,246.

 

The market closed flat with a mixed bias despite positive global cues. While the Sensex snapped its six-day losing streak gaining 30 points to 18,339, the Nifty closed at 5,571, up three points over its previous close.

 

Underperforming the Sensex, which settled marginally higher, the broader markets settled in the negative. The BSE Mid-cap index dropped 0.89% and the BSE Small-cap index declined 0.85%.

 

The sectoral gainers were BSE Auto (up 1.04%); BSE Fast Moving Consumer Goods (up 0.87%); BSE TECk (up 0.06%) and BSE Realty (up 0.02%). The main losers were BSE Consumer Durables (down 1.14%); BSE Capital Goods (down 0.83%); BSE Healthcare (down 01.75%); BSE Metal (down 0.67%) and BSE PSU (down 0.36%).

 

Thirteen of the 30 stocks on the Sensex closed in the positive. The top gainers were Maruti Suzuki (up 3.87%); Bharti Airtel (up 2.89%); ITC (up 2.70%); Bajaj Auto (up 2.23%) and Mahindra & Mahindra (up1.60%). The key losers were Tata Power (down 2.52%); TCS (down 1.90%); Tata Steel (down 1.61%); HDFC (down 1.23%) and Larsen & Toubro (down 1.22%). 

 

The top two A Group gainers on the BSE were—Maruti Suzuki (up 3.87%) and AstraZeneca Pharma India (up 3.21%).

The top two A Group losers on the BSE were—L&T Finance Holdings (down 9.58%) and Tata Global Beverages (down 5.48%).

 

The top two B Group gainers on the BSE were—Vandana Knitwear (up 20%) and Essar Securities (up 19.92%).

The top two B Group losers on the BSE were—Sujana Universal Industries (down 18.80%) and Lawreshwer Polymers (down 12.99%).

 

Out of the 50 stocks listed on the Nifty, 19 stocks settled in the positive. The major gainers were Maruti Suzuki (up 4.05%); Bharti Airtel (up 3.19%); ITC (up 2.64%); Bajaj Auto (up 2.01%) and Hero MotoCorp (up 1.75%).

 

Markets in Asia closed mostly higher on news that president Barack Obama will hold talks with congressional leaders next week in a bid to find solutions to the budget crisis. Besides, speculations of monetary easing by the Bank of Japan also boosted investor sentiment.

 

The shanghai Composite rose 0.11%; the Hang Seng advanced 0.49%; the Nikkei 225 surged 1.43%; the Straits Times gained 0.18% and the Seoul Composite climbed 0.93%. On the other hand, the Jakarta Composite declined 0.87%; the KLSE Composite fell 0.37% and the Taiwan Weighted shed 0.01%.

 

At the time of writing, two of the three key European indices were trading lower while the US stock futures were in the positive.

 

Back home, foreign institutional investors were net buyers of shares totalling Rs509.71 crore on Friday whereas domestic institutional investors were net sellers of equities amounting to Rs374.73 crore.

 

Karnataka Bank has informed BSE on Monday that it has raised Rs250 crore by issue of non-convertible subordinated debt instruments in the nature of debentures (lower Tier-2 bonds) on private placement basis. The bonds with a tenor of 10 years opened for subscription on 22nd October and closed on 12th November. The stock fell 0.49% to close at Rs140.85 on the NSE.

 

Monnet Ispat and Energy, which is scouting for coal assets to feed its steel plant in India, is looking to buy a majority stake at a coal mine in Colombia. The mine is currently producing 50,000 tonnes of coal and estimated to have 25 million tonne reserve. The company expects to close the deal in a month. The stock advanced 1.35% to close at Rs289.95on the NSE.

 

The Uttam Galva group has acquired a majority stake of about 58.35% in ailing Lloyds Steel and plans to invest additional Rs380 crore in the steelmaker to turn around the company. Uttam Galva surged 2.75% to settle at Rs61.70 on the NSE.

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Revenue growth reaches new lows; recovery uncertain: Espirito Santo

In its latest report, Espirito Santo Securities has observed that revenue growth has slowed down considerably, leading to the question of whether a turnaround has happened. Has it?

In a new report dated 19 November 2012, Espirito Santo Securities (ESS) is uncertain when the recovery will pick up as aggregate quarterly earnings of over 400 companies grew only by 4.9% year-on-year (y-o-y), the slowest pace in the last three years. The report said, “Adjusting for inflation, the growth rates look even more anaemic and show how hard volume-led growth is to come by.” The economy has been affected because the global economy has been volatile and uncertain, with Europe and America going through difficult times. Moreover, the Reserve Bank of India (RBI) has taken a firm stance and kept interest rates unchanged (repo rate at 8%), in order to moderate inflation. The sectors which have got affected by the slowdown are industrials (revenues down 8% y-o-y), real estate (revenues down 9% y-o-y), telecom and healthcare. The sector which has performed very well is energy, revenues which grew at an impressive 8.2% y-o-y.

However, the good news is that, according to ESS, margins have improved even though revenue growth declined. This was due to lower commodity prices which translated to lower input costs. EBITDA grew by 13.7% y-o-y while margins expanded by 130 basis percentage points (bps) y-o-y. All the sectors, except consumer discretionary, saw their margin expand including those whose revenues were affected. Real estate, healthcare and energy saw margins expand by 706 bps, 764 bps and 865 bps respectively.

Even though margins expanded, it is not a cause for celebration. Why? Because, according to ESS, demand has still not picked up. The basis of higher margins would not just be lower cost but also higher revenues. As revenues increase, companies will invest more in capital expenses (capex) which is an indication of economy expansion and also creates more jobs. The report said, “A sustainable turn needs a demand recovery, which with the consumer stretched and government under fiscal pressure, needs a turn in the investment cycle, which we still don’t see in the lead indicators that we monitor.” In other words, there’s no sign of the bottom of the investment cycle. Most companies are cautious in putting their capital to work as demand is slack. The fundamental underlying of the economy—demand—must pick up. The report further says, “This hardly lends confidence in sustainability. Meaningful upgrades need a demand revival, led by turn in investment cycle, of which there is yet no sign.”
 

Check our earnings reports of various companies here. We will be putting up our own earnings analysis shortly. Stay tuned.

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SC issues notice to CBI and Centre on coalgate

Expanding the ambit of judicial scrutiny of the alleged irregularities, the apex court also issued notice to the CBI on a plea for appointment of a SIT and the cancellation of allocation of 194 coal blocks to various companies

New Delhi: The Supreme Court on Monday issued notice to the Centre and the Central Bureau of Investigation (CBI) on a plea for a probe by a special investigation team (SIT) into the alleged irregularities in the coal block allocations, reports PTI.

 

A bench of justices RM Lodha and AR Dave also sought response from them on a public interest litigation (PIL) petition seeking cancellation of the licenses granted by the government for coal blocks to various private companies.

 

The bench, however, refused to stay the licenses, which were allegedly granted in violation the of law.

 

The court asked the government and the agency to file its comprehensive reply on the alleged irregularities in the coal block allocation within eight weeks and posted the matter for further hearing on 24th January.

 

The bench was hearing a PIL filed by various members of civil society including former CEC N Gopalaswami, ex-Navy chief L Ramdas and former Cabinet Secretary TSR Subramanian, seeking a SIT probe into the alleged scam.

 

They have alleged the ongoing CBI investigation into the alleged coal block scam is not sufficient and only SIT can conduct an impartial probe in the case, in which names of many ministers and their kith and kin have cropped up.

 

The alleged coal block allocation scam came under judicial scrutiny on 14th September when the apex court, on a PIL by advocate ML Sharma, had directed the Centre to explain if the guidelines on allotting natural resources to private companies were being strictly followed.

 

Expanding the ambit of judicial scrutiny of the alleged irregularities, the bench today also issued notice to the CBI on a plea for appointment of a SIT and the cancellation of allocation of 194 coal blocks to various companies.

 

In the fresh PIL filed by members of civil society and NGO Common Cause, the petitioners sought quashing of the entire allocation of coal blocks to private companies, made by the Centre from 1993 onwards.

 

"The involvement of senior ministers, public servants, different departments of Centre and state governments concerned in the alleged corruption and bribery by beneficiary companies need to be investigated.

 

"Considering the magnitude of investigation and possibility of involvement of high public offices, including the PMO, and the fact that CBI functions under the same very government it is supposed to investigate, a court-monitored investigation by an SIT is required to ensure proper investigation in the matter," the petition said.

 

The petitioners alleged that allotment of coal blocks was non-transparent and conducted in an unfair manner in violation of various rules and procedures.

 

"That investigation of CBI at the instance of CVC is partial and does not cover the full magnitude of the coal scam. The alleged conspiracy in blocking the policy of competitive bidding and the manner in which the screening committee functioned need to be investigated thoroughly, which involves senior ministers including the highest executive office of the country," the petition said.

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