BSE Sensex, Nifty trying to fight to back: Wednesday Closing Report

The Nifty came back from under 6,030 but the trend is still down

The market managed to settle in the positive on the back of smart bounce back in late trade on hopes that the Reserve Bank of India will cut interest rates in its policy meeting next week. The market is trying to its best to retain the uptrend. Today the Nifty came back from under 6,030 but the trend is still down.


The domestic market opened marginally higher supported by finance minister P Chidambaram’s assurance to global fund managers in Hong Kong on Tuesday that the Indian government is hopeful of containing the fiscal deficit within the targeted 5.3% of the GDP this fiscal and trimmed to 4.8% in the next. On the global front, markets in Asia were mixed in morning trade as the Bank of Japan on Tuesday decided to delay fresh policy measures till next year.


The Nifty opened four points up at 6,053 and the Sensex rose by 15 points to 19,997. Buying in realty, technology, metal and capital goods stocks lifted the market higher in early trade.


A minor bout of profit taking at the highs saw the benchmarks paring part of its early gains and moving sideways in the morning session.  However, selling pressure in PSU, auto and realty sectors pushed the market into the red in noon trade. A flat opening of the European markets also weighed on investor sentiment back home.


The benchmarks dropped to their lows around 2.30pm wherein the Nifty touched 6,021 and the Sensex went back to 19,921.


A splendid bounce back in the late session helped the market emerge into the green. The gains saw the indices hitting their intraday highs in late trade. The Nifty touched 6,070 and the Sensex went up to 20,058 at their highs.


The market closed near the day’s high amid range-bound trade. The Nifty added six points (0.10%) to 6,054 and the Sensex ended at 20,027, up 45 points (0.23%) over its previous close.


The broader indices were punished in today’s trading session as the BSE Mid-cap index dropped 0.91% and the BSE Small-cap index declined 0.90%.


BSE TECk (up 0.64%); BSE Bankex (up 0.43%) and BSE Capital Goods (up 0.10%) settled higher while all other sectoral gauges ended in the negative. The top losers were BSE Realty (down 2.34%); BSE PSU (down 1%); BSE Consumer Durables (down 0.94%); BSE Auto (down 0.83%) and BSE Metal (down 0.54%).


Sixteen of the 30 stocks on the Sensex closed in the positive. The chief gainers were Bharti Airtel (up 4.44%); Tata Power (up 2.38%); ITC (up 1.37%); Hero MotoCorp (up 1.02%) and HDFC (up 0.92%). The main lowers were Hindustan Unilever (down 4.43%); Tata Motors (down 1.98%); Hindalco Industries (down 1.54%); GAIL India (down 1.32%) and Bajaj Auto (down 1.24%).


The top two A Group gainers on the BSE were—Zee Entertainment (up 5.41%) and Bharti Airtel (up 4.44%).

The top two A Group losers on the BSE were—HDIL (down 14.33%) and Jaypee Infratech (down 8.65%).


The top two B Group gainers on the BSE were—Ajanta Pharma (up 19.99%) and TPL Plastech (up 13.97%).

The top two B Group losers on the BSE were—Everlon Synthetics (down 15.67%) and Maharashtra Polybutanes (down 14.30%).


Out of the 50 stocks listed on the Nifty, 23stocks settled in the positive. The major gainers were Bharti Airtel (up 4.55%); Tata Power (up 2.51%); ICICI Bank (up 1.80%); ITC (up 1.11%) and Hero MotoCorp (up 0.99%). The main losers were HUL (down 4.12%); HCL Technologies (down 3.09%); Jaiprakash Associates (down 2.39%); BPCL (down 2.24%) and IDFC (down 2.01%).


Markets in Asia closed mixed on expectations of positive corporate earning reports. However, the Bank of Japan’s decision to defer its stimulus plan led that market lower for the third day in a row.


The Shanghai Composite rose 0.25%; the Jakarta Composite added 0.05%; the KLSE Composite gained 0.40% and the Straits Times advanced 0.35%. On the other hand, the Hang Seng lost 0.10%; the Nikkei 225 tumbled 2.08%; the Seoul Composite declined 0.81% and the Taiwan Weighted fell 0.19%.


At the time of writing, the European indices were mostly higher and the US stock futures were mixed with a negative bias.


Back home, foreign institutional investors were net buyers of shares amounting to Rs1,046.40 crore on Tuesday whereas domestic institutional investors were net sellers of equities totalling Rs855.35 crore.


Exide Industries plans to acquire the remaining 50% of ING Vysya Life Insurance Company for an aggregate consideration of Rs550 crore. Exide currently holds 50% stake in the life insurance company.  Post such acquisition EIL has in principle decided to identify and induct a new international player in the life insurance business to infuse fresh equity into IVL (subject to regulatory approvals). The stock declined 0.56% to close at Rs125.40 on the NSE.


Greenply Industries’ board on Wednesday approved the establishment of a veneer or veneer-cum-plywood unit in Myanmar through a subsidiary in Kolkata. It will approach the concerned authority in Myanmar for necessary approval, the company said in a filing with the stock exchanges today. The stock gained 2.20% to close at Rs438.90 on the NSE.


Three forfeited coal blocks of NTPC have been given back to the country’s largest power producer after getting approval from the law ministry, a development that will boost the company's valuation prior to its share-sale. The three coal blocks—Chatti-Bariatu, Kerandari and Chatti-Bariatu (South), all in Jharkhand—were forfeited from the state-run company in 2011 as it failed to develop them within the stipulated time-frame. NTPC declined 0.70% to close at Rs163.20 on the NSE.


Justice Verma panel gets 80,000 suggestions

Justice JS Verma said the failure of governance was the root cause of crime against women. He also said it was “equally shocking” that there was total apathy of everyone who had a duty to perform


New Delhi: The Justice JS Verma Committee, set up to recommend measures to improve laws dealing with sexual offences, has received around 80,000 suggestions and wrapped up its work within 29 days, reports PTI.


Verma, the head of the three-member panel, was approached by the central government for the task on 23rd December. The other members of the panel were former Himachal Pradesh Chief Justice Leila Seth and former Solicitor General Gopal Subramaniam.


He said the failure of governance was the root cause of crime against women. He also said it was “equally shocking” that there was total apathy of everyone who had a duty to perform.


“We have submitted the report in 29 days. When I offered to do the work within 30 days, I did not realise the magnitude of the work,” Verma told a press conference after submitting his voluminous report to the home ministry.


He said the report may be known after him but it is the outcome of suggestions from people within India and outside the country.


“We received 80,000 suggestions,” he said adding all of them were read and considered before finalising the report.


On how he decided on a time-frame for finalising the report, Verma said when a senior Cabinet minister approached him on behalf of prime minister Manmohan Singh he asked him when is the next session of Parliament.


“The minister told me that the (Budget) session will start on 21st February. There were two months. So I decided let’s do it in 30 days. If we are able to do it in half the time available, then the government with its might and resources should also act fast,” he said.


He complimented the youth for the mature response.


“Youth has taught us what we, the older generation, were not aware of. I was struck by the peaceful manner in which the protests were carried out... the youth rose to the occasion,” he said.


Wipro and Infosys will shine, predicts Espirito Santo Securities

The institutional research firm picks Wipro to finish first, followed by Infosys, as it expects industry dynamics to improve in FY13-14. The Economist, however, doesn’t foresee a good future for the Indian IT industry

Espirito Santo Securities (ESS) believes that the information technology (IT) industry will turn the corner in FY13-14 as clients’ discretionary spending is expected to increase with companies’ enhanced performance. Furthermore, the improved outlook of the United States economy is expected to result in increased order inflow to India. The report said, ‘The three distinct positive comments/observations that came out post the results were: discretionary spending is picking up, FY13-14 is looking better than FY12-13 and almost all companies have increased realisation and reported better-than-expected margins’. This is despite the fact that IT budgets continue to be under pressure and are likely to be slashed. But the argument ESS puts forth is that incremental revenues will pour in from small discretionary spends.

To see our analysis on earlier ESS reports, click here.

However, we are skeptical of Indian IT industry of doing well because the focus of the re-elected American president is it to increase more American onshore jobs. There is talk of bringing some outsourcing jobs back to American shores and this could hurt the Indian IT industry in general. It is not yet known whether the impact will be felt in FY13-14 and how big it will be, but it will surely arrive. In fact, countries like Philippines and Vietnam already have a cost advantage over India, in terms of wage differentials. The Economist even carried a special section on Indian outsourcing (issue dated 19th-25th January) which states that some of the biggest outsourcers, for instance General Electric and General Motors, have already brought back some IT jobs back to American shores. The Indian IT industry has every reason to worry about this trend, especially with president Obama at the helm for another four years. The impact may not be felt in FY13-14, though. One factor that may buoy the industry is the rupee-dollar equation as Indian economy is still weak. But this is an external factor and subject to speculation.

One of the biggest beneficiaries has been Wipro, according to ESS, which believes the company to be worth Rs475 per share. Wipro, which has often (perhaps unfairly) been compared to Infosys, has recouped much of the valuation as its realisations have dramatically improved. According to ESS’s report, ‘Wipro’s margins have increased with improvement in realisations and will be sustainable with increased efficiencies. One quarter of strong volume growth will have a magnified impact on margins’. The report further said, ‘Wipro has invested over the past year to differentiate the front-end (sales) and standardise the back-end (delivery). The benefits of these are already visible in the form of improving deal traction and revenue productivity’.

ESS believes that HCL Technologies will be one of the Tier-1 IT stocks to look out for because of change in leadership which will happen in July 2013, when Vineet Nayar steps down as CEO. This is a significant event as Nayar has been associated with HCL Technologies since 2005, which is a long time.

Furthermore, the report said, ”While the margin expansion has been commendable, we believe HCL Technologies will have to reinvest in the business in light of the increasing competitive intensity in the restructuring market and the company’s expectations of a weakness in discretionary spends”. While HCL Technologies believes that discretionary spending in its portfolio is a concern, we feel that it is also a concern for the industry as a whole. ESS believes that HCL Technologies is worth Rs748 per share.

ESS is neutral on Tata Consultancy Services and pegged its value at Rs1,450 per share.


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