Fast recovery from the previous fall indicates a strong uptrend in the offing
The domestic market pared all its gains to settle flat on selling pressure in Bharti Airtel on account of its dismal quarterly performance and lower growth forecast by global research entities. Yesterday we had mentioned that the trend is up and the market may still witness some days of gains. Today the Nifty edged higher and closed marginally in the green. The downward trend witnessed from the high of 5,349 on 10 July 2012 to the low of 5,032 of 26 July 2012, has more than recovered in the past nine trading days (including today). The index is now waiting for a break-out to decide the further direction. However, the trend seems to upwards. The National Stock Exchange (NSE) saw a higher volume of 66.23 crore shares.
The market opened with meagre gains even as its peers in Asia were trading higher this morning on ongoing optimism from Europe. US stocks settled in the positive overnight on comments from Boston Fed Bank President Eric Rosengren that the central bank should renew bond buying till the economy stabilises.
The Nifty opened eight points up at 5,345 and the Sensex started off at 17,639, a gain of 37 points over its previous close. The market was range-bound amid choppy trade as investors awaited further announcement from domestic policymakers about growth-boosting measures.
The indices fell to their intraday lows in the first hour of trade on profit booking after two days of gains. At the lows the Nifty dipped to 5,339 and the Sensex went back to 17,606.
The market picked up some momentum in the second half of trade as buying in blue chips which pushed the benchmarks to their highs in post-noon trade. The Nifty rose to 5,378 and the Sensex scaled 17,727.
However, selling pressure once again dragged the indices lower on late trade. The market pared all its gains and closed flat with a mixed bias as private sector telecom major Bharti Airtel dived over 6% on poor quarterly performance. The Nifty added one point to settle at 5,338 while the Sensex lost one point to 17,601.
The advance-decline ratio on the NSE was 699:999.
Among the broader indices, the BSE Mid-cap index settled 0.20% lower and the BSE Small-cap index declined 0.38%.
BSE Auto (up 1.20%); BSE PSU (up 0.82%); BSE Metal (up 0.81%); BSE IT (up 0.37%) and BSE Fast Moving Consumer Goods (up 0.36%) were the top gainers in the sectoral space. The losers were led by BSE Realty (down 2.01%); BSE TECk (down 0.81%); BSE Capital Goods (down 0.61%); BSE Bankex (down 0.54%) and BSE Consumer Durables (down 0.26%).
The top performers in the Sensex list were Mahindra & Mahindra (up 3.92%); Hindalco Industries (up 2.23%); Sterlite Industries (up 1.29%); Hindustan Unilever (up 1.20%) and Infosys (up 1.16%). The main losers were Bharti Airtel (down 6.60%); GAIL India (down 2.87%); ICICI Bank (down 1.62%); TCS (down 1.11%) and Larsen & Toubro (down 0.73%).
The top two A Group gainers on the BSE were—Hindustan Copper (up 12.96%) and MMTC (up 12.21%).
The top two A Group losers on the BSE were—Bharti Airtel (down 6.60%) and Lanco Infratech (down 4.91%).
The top two B Group gainers on the BSE were—Hester Biosciences (up 19.99%) and K Sera Sera (up 19.94%).
The top two B Group losers on the BSE were—Kemrock Industries & Exports (down 16.12%) and VKS Projects (down 11.39%).
The top stocks on the Nifty were M&M (up 3.87%); BPCL (up 3.02%); Hindalco Ind (up 1.98%); Grasim Industries (up 1.73%) and Ranbaxy Laboratories (up 1.67%). The main losers on the index were Bharti Airtel (down 6.43%); GAIL India (down 3.02%); DLF (down 2.07%); Punjab National Bank (down 1.86%) and ICICI Bank (down 1.68%).
Most markets in Asia closed higher for the third consecutive day on sustained hopes of action to tackle the Eurozone debt crisis. Meanwhile, media reports suggest that the Bank of Korea is likely to consider reducing repurchase rates on Friday while the Japanese central bank will begin its two-day policy meeting today.
The Shanghai Composite rose 0.16%; the Jakarta Composite gained 0.13%; the KLSE Composite advanced 0.29%; the Nikkei 225 surged 0.88%; the Seoul Composite climbed 0.87% and the Taiwan Weighted settled 0.33% higher. On the other hand, the Hang Seng lost 0.04% and the Straits Times declined 0.50%.
At the time of writing, the key European indices were in the negative on a clutch of negative news. Similarly, the US stock futures were trading lower, signalling a lower opening of the US markets.
Back home, foreign institutional investors were net buyers of shares totalling Rs815.94 crore on Tuesday and domestic institutional investors were net buyers of stocks aggregating Rs55.25 crore.
Alembic Pharmaceuticals today said it has entered into a drug development and licensing agreement with the US-based Accu-Break Pharmaceuticals under which it plans to launch over five generic drugs in the next two to three years. Under the agreement, new brand of products will be developed using the technology of Accu-Break Pharmaceuticals (ABP) that makes it easier to split tablets by hand into accurate dosages, the firm said. Alembic gained 1.34% to close at Rs64.50 on the NSE.
Kanoria Chemicals & Industries board on Wednesday proposed a 10% share buyback plan. The buyback of shares of Rs5 each will be done at a price “not exceeding Rs42 a share. The exercise would be carried out through open market operations. The total amount marked for the exercise is Rs50.40 crore. The stock tanked 7.42% to close at Rs33.70 on the NSE.
RBS Private Banking India has released a report wherein it expects the RBI to cut rates by 50 bps and expects the market to touch 5,700 by year-end and finds Indian equities undervalued
Investors can look forward to Indian equities outperforming in the second half of 2012 on the back of an expected change in policy stance, RBS Private Banking India said in its Mid-Year India Outlook 2012 report released today. RBS, like Morgan Stanley, is also bullish on India’s prospects, and expects the National Stock Exchange’s (NSE) Nifty index to hit the 5,700 mark by December 2012. So, is there a bull market on the cards, despite considerable headwinds? What can investors expect?
According to the report, RBS values equities at 12.8 times one-year forward earnings, which is less than the ten-year historical average of 13.8. The global investment bank has assumed 15% earnings growth over two years. Likewise, on a price-to-book basis, Indian equities are trading at 2.1 times against the ten-year historical average of 2.8 times. RBS advises investors to “maintain their allocations close to recommended levels rather than sit on the sidelines.”
The bank has recommended high dividend yield stocks in this kind of environment and cites that equities are discounting at 16% on the dividend yield basis. In addition to high dividend yield stocks, it has come up with a 15-stock basket themed “Indian Olympians” based on certain criteria such as high profit, ROE, ROCE, etc. However, it is not known what the exact composition is. Sector-wise, it prefers “interest-rate sensitive” sectors such as financials, consumer discretionary, automotive, healthcare and IT companies. It is negative on telecoms and consumer staples. Over and above this, it has preferred large caps over mid-caps.
The trigger for interest-rate sensitive securities to outperform is interest rates. The investment bank expects the Reserve Bank of India (RBI) to cut rates by 50 basis points. RBS chief investment officer Rajesh Cheruvu said, “We believe that prevailing macro conditions make strong fiscal action more effective than early monetary action. Going forward, lower commodity prices should ease headline inflation, and weakened domestic gold demand will support the current account and in turn aid the currency and inflation.” RBS also thinks that the government could partially deregulate diesel and liquefied petroleum gas prices.
Apart from equities, the investment bank prefers corporate bonds over government bonds as the latter has already run up considerably while corporate bonds have remained sticky. Also, it expects a spread compression between corporate bonds and government securities, and recommends high quality names. Again, specific names of were not given.
Rupee-wise, RBS has forecast the rupee to strengthen to 52 per dollar. The Indian rupee has depreciated by 8% this year. However, the appreciation of the rupee is contingent on strengthening of the capital account, and this would mean easing of macro-economic conditions such as fiscal deficit, reduced gold imports leading to reduced current account deficit, falling oil prices and initiation of reforms processes. Reforms process would be contingent upon the government’s ability to implement the land acquisition bill, mining regulations, authority for accountability in the civil administration and progress on the Goods and Service Tax (GST) and Direct Tax Code (DTC) towards implementation in 2014.
On a global scale, the bank expects policy action from China and other emerging markets, including India, to “support growth over the next few months”. Prateek Pant, director, Products and Services, RBS Private Banking said “Europe holds the key to the performance of financial markets for the coming half of the year. We believe that flare-ups in the Eurozone will continue, but would be met by policy response. Although financial markets are expected to remain volatile, coordinated policy action in the Eurozone, combined with domestic policy progress should see Indian equities continue to outperform in the second-half.”
If all of this does not pan out, RBS sees the Nifty going down to 4,900 levels, if the US growth slows further, the size and form of QE3 disappoints, domestic issues like policy paralysis continues and monsoon fails to pick up.
Positive indications from policymakers boost the indices
The market closed higher for the second day on assurances from the new finance minister to look at easing interest rates and review the retrospective tax provisions. Today the Nifty saw a sharp bounce enabling the benchmark hit the highest intraday high since 3 April 2012. The benchmark closed almost at the same level. The trend is up and the market may still witness some days of gains. The (National Stock Exchange) NSE saw a volume of 54.35 crore shares.
The market opened marginally higher, even though most of its Asian peers were higher in morning trade on the back of a positive close in Europe and the US overnight on assurance from Germany to support the European Central Bank’s bond purchase plan. The Nifty opened 12 points up at 5,295 and the Sensex added 43 points to its previous close to start the day at 17,456.
The benchmarks slipped to the day’s low in initial trade itself with the Nifty at 5,282 and the Sensex going back to 17,418. However, brushing aside early hiccups, buying interest soon pushed the indices to a higher trajectory. The gains were supported by banking, IT, capital goods and healthcare stocks.
In his first media briefing after taking charge of the finance ministry, P Chidambaram said fiscal and monetary policies must point to the same direction to moderate inflation. “The government will work with the Reserve Bank of India to ensure that inflation is moderated in the medium term.” He also promised to review of tax rules with retrospective provisions and said that he would take corrective measures wherever necessary.
Optimism from the finance minister and the key European markets trading in the green pushed the market higher in noon trade. The market hit its intraday high around 2.40pm with the Nifty touching 5,350 and the Sensex climbing to 17,642.
Profit taking at the highs saw the benchmarks paring some of their gains, but ensured a green close for the second day in a row. The Nifty gained 54 points (1.03%) at 5,337 and the Sensex surged 189 points (1.08%) to settle at 17,602.
The advance-decline ratio on the NSE was higher at 937:733.
The broader markets underperformed the Sensex today. The BSE Mid-cap index gained 0.35% and the BSE Small-cap index rose 0.36%.
The top sectoral gainers were BSE IT (up 1.95%); BSE Auto (up 1.70%); BSE TECk (up 1.58%); BSE Realty (up 1.53%) and BSE Bankex (up 1.20%). BSE Healthcare (down 0.09%) and BSE Consumer Durables (down 0.04%) were the only losers in the sectoral space today.
Tata Motors (up 4.42%); GAIL India (up 3.21%); TCS (up 2.86%); Bajaj Auto (up 2.16%) and ICICI Bank (up 2.16%) were the top gainers on the Sensex. The losers were led by Hero MotoCorp (down 1.37%); Bharti Airtel (down 0.79%); Sun Pharma (down 0.28%); Reliance Industries (down 0.20%) and Dr Reddy’s Laboratories (down 0.01%)
The top two A Group gainers on the BSE were—TTK Prestige (up 4.99%) and Bajaj Finserv (up 4.53%).
The top two A Group losers on the BSE were—IRB Infrastructure Developers (down 6.99%) and Strides Arcolab (down3.90%).
The top two B Group gainers on the BSE were—Money Matters Financial Services (up 19.98%) and Vertex Spinning (up 19.57%).
The top two B Group losers on the BSE were—Standard Chartered PLC (down 19.97%) and Hazoor Multiprojects (down 14.91%).
The top stocks on the Nifty were Tata Motors (up 4.15%); IDFC (up 3.59%); DLF (up 3.57%); Ambuja Cement (up 3.49%) and GAIL (up 2.86%). The main losers were Cairn India (down 1.42%); Hero MotoCorp (down 1.33%); Power Grid Corporation (down 1.20%); BPCL (down 1.06%) and Ranbaxy Laboratories (down 0.89%).
Markets across Asia closed mostly in the green on renewed hopes from European policymakers to find a solution to the continent’s lingering debt problems.
The Shanghai Composite rose 0.13%; the Hang Seng gained 0.37%; the Nikkei 225 climbed 0.88%; the Seoul Composite added 0.05% and the Taiwan Weighted was up 0.13%. On the other hand, the Jakarta Composite fell 0.49%; the KLSE Composite declined 0.51% and the Straits Times settled 0.13% lower.
At the time of writing, CAC 40 of France was up 0.46%, DAX of Germany was trading 0.33% higher while UK’s FTSE 100 was down 0.16% and the US stock futures were trading with gains.
Back home, foreign institutional investors were net buyers of equities amounting to Rs555.73 crore on Monday whereas domestic institutional investors were net sellers of shares aggregating Rs4.23 crore.
Net debt of realty major DLF has come down marginally by Rs45 crore in the first quarter of this fiscal to Rs22,680 crore though it is likely to decline significantly as the company expects to finalise divestment of three major non-core assets soon.
DLF said its net debt stood at Rs22,680 crore as on 30th June against Rs22,725 crore at the end of last fiscal. The stock closed at Rs218.80 on the NSE, up 3.57% over its previous close.
Direct to Home (DTH) service provider Dish TV launched a standard definition box with recording facility branded Dish+ on Tuesday. Priced at Rs1,690, it comes with a free 4GB pen drive as part of the inaugural offer. The company said post the video cassette recorders era, consumers do not have a recording device, and it hopes to fill this gap with its SD recorder. The stock gained 2.59% to close at Rs73.20 on the NSE.