Daily Market View: Expect range-bound trading

Unless 17,700 on the upside or 17,300 on the downside is breached, the market is expected to remain listless

The market witnessed subdued activity today on account of the 'Bharat Bandh' called by the opposition parties across the country to protest the recent fuel price hike by the government. Volatility was high but the trading volume was very low. The market traded in a narrow band and ended the session on a flat note. The Sensex ended at 17,473, down 19 points (0.11%) and the Nifty was at 5,236, lower by 1.2 points (0.02%).

The top gainers on the Sensex were Mahindra & Mahindra (M&M) (up 1.33%), Wipro (up 0.89%), Bharti Airtel and HDFC (up 0.81% each) and Infosys (up 0.51%). The top Sensex losers were Reliance Communications (down 2.88 %,), Hindalco Industries (down 1.73%), ONGC (down 1.45%), BHEL (down 1.27%) and Hindustan   Unilever (down 1.13%).

In the sectoral space on the BSE, healthcare (up 0.53%), IT (up 0.39%) and bankex (up 0.32%) were the top performers, whereas oil & gas (down 0.79%), metals (down 0.40%) and PSU (down 0.37%) were the laggards.

Asian equity indices finished mixed on Monday. Investors remained cautious on worries over the slowdown in China after disappointing economic data last week.

Nikkei 225 gained 63 points (0.69%) to 9,267. Jakarta Composite advanced 6 points (0.20%) to 2,877, Seoul Composite was up 4 points (0.21%) to 1,675 and Taiwan Weighted gained 109 points (1.49%) to 7,439.96.

Among the markets that ended lower, Shanghai Composite was down 19 points (0.80%) to 2,364, Hang Seng was down 63 points (0.32%) to 19,842 and KLSE Composite was down 8 points (0.61%) to 1,299.  The South Korean market remained closed today.

The US markets continued their slide on Friday due to disappointing jobs data. US employment in June fell for the first time this year. Overall, 125,000 workers lost their jobs last month, more than the drop of 110,000 that analysts had predicted. Besides, the government also reported that factory orders fell in May for the first time in nine months. The 1.4% drop was the biggest since March 2009. This news coupled with the jobs data unnerved traders, taking the markets down.

The Dow lost 46.05 points (0.47%) to 9,686.48, its lowest close since 5 October 2009. The S&P 500 index fell by 4.79 points (0.46%) to 1,022.58 while the Nasdaq was down by 9.57 points (0.47%) to 2,091.79.

The US market remained closed today for the Independence Day holiday.

Back home, normal life was disrupted in several parts of the country during the 'Bharat Bandh' called by a combined opposition to protest the fuel price hike. The greatest impact was felt in National Democratic Alliance (NDA) and Left-ruled states and in Maharashtra.

Sporadic incidents of violence, in which buses and trains were targeted and clashes with police who baton-charged the protestors, were reported during the day-long nation-wide strike.

The country's new chief statistician TCA Anant today said hiking fuel prices was a better option than keeping them artificially low and widening the fiscal deficit.

He also hinted that the government's move to hike fuel prices should have come sooner, but acknowledged that it was difficult to time these kinds of decisions because of 'multiple pressures' in a democracy.

Inflation will ease into a comfortable zone by December, Montek Singh Ahluwalia, deputy chairman of the Planning Commission, said on Monday.

The Reserve Bank of India (RBI) on Friday raised interest rates earlier than expected, ahead of its 27th July policy review, days after the government freed fuel prices. Analysts expect another 25 basis points (bps) hike on 27th July, on concerns over inflation hovering above 10%. The central bank projects headline inflation, which hit 10.16% in May, to fall to 5.5% at end-March.

Foreign institutional investors were net sellers in the equities market on Friday, offloading stocks worth Rs305 crore. Domestic institutional investors were net buyers, purchasing stocks worth Rs26 crore.

The boards of directors of Anil Dhirubhai Ambani group companies Reliance Power (up 3.5%) and Reliance Natural Resources (RNRL) on Sunday approved the merger of the two companies. The boards approved a 4:1 share swap ratio.

Shareholders of RNRL will get one share of Reliance Power for every four shares held by them. The exchange ratio is based on a valuation by KPMG. The deal comes within days of RNRL signing a revised gas supply deal with RIL for power projects, which are under the charge of Reliance Power.

Eicher Motors gained 3% after VE Commercial Vehicles, a joint venture between Eicher and Sweden's Volvo, said it sold 2,966 trucks and buses in June, up 43% year-on-year. Exports during the month were slightly lower at 220 units.


SC rejects plea seeking government control over BCCI, IPL

The Court dismissed a PIL, filed by freelance journalist Alok Varshney, that had sought a direction that the accounts of both BCCI and IPL should be scrutinised thoroughly and all international cricket matches should be telecast only on Doordarshan

The Supreme Court today dismissed a PIL seeking government control over the working of Board of Control for Cricket in India (BCCI) and Indian Indian Premier League (IPL) to check alleged corruption and misappropriation of funds in the two bodies, reports PTI.

"You want the accounts of BCCI should be audited. It is audited under the Companies Act," a Bench headed by Chief Justice SH Kapadia said.

The remarks of the Bench came when advocate Manjulla Wadhwa, appearing for the petitioner, submitted that the accounts of BCCI should be audited by the Comptroller and Auditor General (CAG) because the body represents the Indian cricket team.

The Bench, also comprising Justices K S Radhakrishnan and Swatanter Kumar, was not impressed by the counsel's submission that government should involve itself with the working of BCCI which is a registered society under law.

The counsel also contended that BCCI does not come under the RTI Act.
The PIL, filed by a freelance journalist Alok Varshney, had sought a direction that the accounts of both BCCI and IPL should be scrutinised thoroughly and all international matches should be telecast only on Doordarshan.


Fuel hike prudent, should have come sooner: Chief statistician

It would be better to make fuel prices rise than to let Budget deficits grow, said TCA Anant, who recently took over as secretary of the ministry of statistics and programme implementation

New Chief Statistician TCA Anant today said hiking fuel prices was a better option than keeping them artificially low and widening the fiscal deficit, even as the Opposition organised a nationwide strike against the government's decision today, reports PTI.

"On the balance, it would be better to make fuel prices rise than to let Budget deficits grow," Anant, who recently took over as Secretary of the Ministry of Statistics and Programme Implementation, told PTI in an interview.

Anant also hinted that the government's move to hike fuel prices should have come sooner, but acknowledged that it was difficult to time these kinds of decisions because of "multiple pressures" in a democracy.

"It is very difficult to time these kinds of things, trying to time these things right is next to impossible, particularly in a democracy where you have multiple pressures at any given point of time. It is a right policy and it should have been taken earlier," he said.

Explaining his reasoning for supporting the hike, he said if an open-ended fuel subsidy is maintained, huge budget deficits would occur when global petroleum prices rise. "This, too, contributes to generalised inflation," Anant said.

When asked whether diesel prices should also be deregulated like petrol, he said it is not a question of whether you should give a diesel subsidy or not, the relevant point is whether it should be given in a manner that it has an unbounded effect on the budget deficit.

"Then what you are doing is you are converting uncertainty in a single commodity's price into a generalised uncertainty over your entire price level," he explained.

Anant said an economy cannot have a strict regulated regime for fuel prices, as it will widen the Budget deficit.

"You can continue a policy of management, where you temper the global effects on the domestic economy, but you cannot have a strict regulated regime that we will not allow diesel prices to rise. What does it mean? It means that you have created an open-ended draw on your Budget," he said.

The Chief Statistician said since a rise in petroleum prices makes them relatively expensive vis-a-vis other fuels, some kind of substitution of these petroleum products will also happen, leading to a dampening impact on inflation.

"Rise in fuel prices will lead to some effect on general price level, but because it changes relative prices, there will be some substitution. So, the effect would be dampening. If I don't do it, I will be creating generalised inflation," he said.

The government had last month deregulated petrol prices, leading to a hike of Rs 3.5 a litre, while diesel rates were increased by Rs 2 a litre, LPG by Rs 35 a cylinder and kerosene by Rs 3 a litre.

The Opposition NDA and Left Front today protested against the government's move to raise fuel prices and rising inflation.

Though food inflation has moderated substantially by a whopping 3.98 percentage points to 12.92 per cent for the week ended June 19, food prices are quite high.

Earlier, RBI had said, "There has been some moderation in food price inflation, but the price index of food articles continues to increase."

RBI further said, "Although entirely justified in terms of long-term fiscal and energy conservation objectives, the recent increase in fuel prices will have an immediate impact of around one percentage point on WPI inflation, with second round effects being felt in the months ahead."

Overall inflation stood at over 10 per cent in May.

Petroleum Secretary S Sundareshan had said the decision to hike fuel prices will help bring down the revenue oil PSUs lose on selling fuel by about Rs 21,000 crore to Rs 53,000 crore.

"This (Rs 53,000 crore) under-recovery will be borne by the government and upstream oil companies like ONGC," he had said.

A lower fuel subsidy bill may help the government reduce the fiscal deficit substantially. It was estimated to come down to 5.5 per cent of GDP during 2010-11 from over 6.6 per cent last fiscal.


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