Daily Market View: Watch 17,300 for a possible reversal

The short-term uptrend will possibly continue till 17,300 when the first test of this up-move happens

The market was in the positive zone for the entire trading session on strong US housing data and Indian services sector data for May 2010. The Sensex ended at 17,022, up 280 points (1.6%) while the Nifty closed at 5,110, up 90 points (1.8%). The bourses started with a sharp rise taking cues from their Asian counterparts. The indices traded in a narrow range for most of the day and ended the session with modest gains.

Asian stock markets were up on Thursday, following a rally on Wall Street as the Dow surged more than 200 points overnight. Key benchmark indices in Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan rose by1.62% to 3.24%. However, China's Shanghai Composite was down 0.73%.

US stocks were up on Wednesday as investors picked up stocks at bargain prices, led by energy stocks. The Dow gained 225 points (2.2%) to 10,249. The S&P 500 was up 27 points (2.5%) to 1,098. The Nasdaq climbed 59 points (2.6%) to 2,281.

The Bank of Japan has asked the government to fix the fiscal deficit as public debt has been twice the size of Japan's gross domestic product (GDP). Although Japan's economy grew 1.2% in the first quarter of this year, the central bank expressed its concern over the long-term economic growth prospects of the nation due to the slowdown in the eurozone.

Closer home, the food price index rose to 16.55% in the year to 22nd May, higher than the previous week's annual reading of 16.23%, following a rise in vegetable prices. The fuel price index climbed 14.14%, compared with an annual rise of 12.08% in the previous week due to higher prices of electricity. The wholesale price index stood at 9.59% in April after hitting 10.6% in February.

The government said that it is not time for the Reserve Bank of India (RBI) to intervene in the currency market after the rupee was down 4.3% against the dollar in May. The rupee strengthened today, buoyed by gains in the equity market and the dollar trading lower against other major currencies.

Foreign institutional investors (FIIs) were net sellers, offloading stocks worth Rs166 crore. Domestic institutional investors bought stocks worth Rs165 crore. 

Godrej Consumer Products (GCPL) (up 1.8%) has acquired the entire equity stake in Argentina-based hair-care firm Argencos S A, its second acquisition in Latin America in less than two weeks. In May 2010, Godrej had acquired the Issue Group, a market leader in the Latin American hair-colour market.

Amtek Auto (up 1.4%) intends to buy additional 2.52 crore shares, or 20% equity, in group firm Amtek India at Rs68 per share in an open offer. The offer will open on 23 July 2010 and will close on 11 August 2010. Essar Capital Finance (an unlisted firm) has made an offer to buy additional 28 lakh shares, or 20% equity stake, in AGC Networks (formerly known as Avaya GlobalConnect) at Rs274 a share. The offer will open on 16th July and will close on 4th August.

Reliance Industries (up 1.9%) is reportedly looking at partnering with major cell-phone handset makers to help them produce low-cost 3G handsets apart from wireless broadband application devices. NTPC (up 2%) is reportedly set to acquire controlling interest in a 720-million-tonne coalfield in Australia in a deal valued at $1 billion-$1.5 billion, which will enable it to generate about 3,500 megawatts of power capacity. GMR Energy, a unit of GMR Infrastructure (up 0.8%), has reportedly raised Rs350 crore from the IDFC Group for a significant minority stake. The transaction is part of GMR Energy's plan to raise Rs1,600 crore through the equity route to meet its immediate requirements.




Will Property Prices Fall

Housing prices are again reaching for the skies; demand is stagnating. How much should prices fall for the market to be reasonably valued? When can that come about? Moneylife reporters and analysts offer some answers

After a brief period of calm and serenity, following the crash in the second half of 2008, exuberance and buoyancy have quickly returned to India’s financial and economic...

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Govt gives ONGC, OIL freedom to price natural gas

ONGC and OIL would have the freedom to sell any production from new fields in their nominated blocks at non-APM rates

In a significant development, the government has given national oil firms Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) freedom to price any additional natural gas produced from blocks given to them on nomination basis at market rates, reports PTI.

So far, all gas-current and future-produced from blocks given to ONGC and OIL was priced at government-controlled rates, called APM.

The petroleum ministry, in an order dated 31st May, has now made a distinction between existing producing fields and new ones in the nomination blocks.

"ONGC and OIL would have the freedom to sell any production from new fields in their nominated blocks at non-APM rates," the order said.

Even the price of APM gas from 1st June has been more than doubled to $4.2 per million metric British thermal units (mmBtu), at par with the rate at which Reliance Industries (RIL) sells gas from its eastern offshore Krishna Godavari (KG)-D6 fields.

"It has been decided that the price of APM natural gas produced by national oil companies (NOCs) be fixed at $4.2 per mmBtu less royalty. Hence, the APM price inclusive of royalty (to customers) would be $4.2 per mmBtu," the order said.

APM gas prior to 1st June was sold at Rs3,200 per thousand cubic metres or $1.79 per mmBtu.

For customers in the North-East, the net consumer price would be 60% of the new rate, i.e. $2.52 per mmBtu. "The difference would be paid to ONGC and OIL through government budget."

The government has also made a significant departure from the previous practice of pricing natural gas in rupees and has now decided to price it in US dollars.

"The price (of $4.2 per mmBtu) would be converted to rupees per thousand cubic metres (mscm) at the Reserve Bank of India (RBI) reference exchange rate of the month previous to the month during which supply of APM gas is made. The price in rupees per mscm would be adjusted every month on the basis of RBI reference exchange rate," the order said.

This rate would be excluding cess, transportation charge, marketing margin/service charge and taxes.

"As regards existing producing fields, the production of ONGC and OIL from these, including any additional production, would be considered as APM gas and sold at APM rate," the order said.

The order said the government has also decided that company marketing the APM gas, GAIL India Ltd, has been allowed to charge a marketing margin of Rs200 per mscm.

ONGC and OIL would, however, not have the freedom to choose their customers. "The sale of APM and non-APM gas produced from nominated blocks would be in accordance with government's decisions regarding commercial utilisation of gas," the order said.

In case of reduction in availability of APM gas, supplies to customers would be reduced on a pro-rata basis.

To meet the deficit in supply of APM gas, GAIL and other oil marketing companies marketing non-APM natural gas would supply non-APM gas, subject to availability and connectivity, to connected APM customers on priority, provided they are willing to pay the higher non-APM price, it added.

The Cabinet had last month approved the raising of gas price from Rs3,200 per thousand cubic metres ($1.79 per mmBtu) to Rs6,818 per thousand cubic metres ($3.818 per mmBtu). After adding royalty, the price for user industries would be Rs7,500 per thousand cubic metres (Rs 7.5 per cubic metre) or $4.2 per mmBtu.

The hike in gas price would also lead to a rise in the cost of fertiliser production and power generation. However, fertiliser prices will not increase as the government subsidises the sector.

The increase in power tariffs would be marginal as only 11% of the total electricity generated in the country comes from gas-based power projects. And, of these, only one-third use the gas with the increased price tag.

ONGC and OIL would gain about Rs5,000 crore and Rs700 crore in revenue respectively due to the gas price increase.

GAIL India, which has been allowed to charge Rs200 per thousand cubic metres or 11.2 cents per mmBtu as marketing margin, would gain Rs150-Rs200 crore in revenue annually.

State-run ONGC and OIL produce 54.32 million cubic metres of gas per day-about 40% of the total amount originating from the country-through fields given to them on a nomination basis.












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