Derivatives expiry may lead to volatility: Wednesday Closing Report

If the Nifty closes above its previous day’s high, it may lead to a short rally

The market was treading water in morning trade, but the news of the S&P downgrade pushed the benchmarks to the day’s lows in late morning trade. However, the market clawed back and finished with a minor loss. Today on a higher volume of 57.23 crore shares on the National Stock Exchange (NSE) the Nifty ended marginally down by 21 points. In the last two closing reports we had mentioned that the index may seek support at 5,145 and then at 5,080. Today the index almost reached the first level of support and closed at above that level at 5,202. We may now see a reversal if on any day the index closes above its previous day’s high.

The market opened almost unchanged as IT major Wipro announced a subdued guidance the first quarter of the current fiscal. On the other hand, the Asian pack was trading firm this morning on firm earnings from the US. The Nifty opened one point lower at 5,222 and the Sensex started the day at 17,226, up 19 points over its previous close.

IT major Wipro reported 7.7% increase in consolidated net profit at Rs1,480.90 crore for the fourth quarter ended 31 March 2012 compared to Rs1,375.40 crore during the January-March quarter in 2010-11. The company said during the ongoing quarter (Q1, FY2012-13), it expects revenues from IT services business to be in the range of $1,520 million to $1,550 million, assuming that exchange rates of the dollar will be at Rs50.07.

The market hit its intraday high in early trade itself with the Nifty rising to 5,236 and the Sensex inching up to 17,250. The lacklustre guidance by Wipro put pressure on technology stocks and kept the market fluctuating near the previous close till late morning trade.

However, news of global rating agency Standard & Poor’s downgrading India’s rating outlook to negative (BBB-) from stable (BBB+), pushed the indices sharply lower to the day’s low in noon trade. At the lows, the Nifty touched 5,161 and the Sensex went down to 17,019.

The ratings agency said it expects the government to face headwinds in implementing policy measures to improve fiscal and macroeconomic parameters in the near future in view of the current unfavourable political environment.

A positive opening of the key European indices helped the domestic market recover from the lows. Another international ratings agency Moody's Analytics today said India is growing but below its potential as politics is weighing on the economy. The rating’s agency termed the national government as the “single biggest drag” on business activity.

The positive outlook by Moody’s further strengthened the indices in late trade. However, the S&P outlook weighed on the market, which closed in the negative. At the close, the Nifty closed at 5,202, down 21 points, and the Sensex settled 56 points lower at 17,151.

The advance-decline ratio on the NSE was tilted towards the losers at 540:1137.

Among the broader indices, the BSE Mid-cap index declined by 0.55% and the BSE Small-cap index fell by 0.53%.

The losers outnumbered the gainers in the sectoral space today. The top losers were BSE Consumer Durables (down 1.67%); BSE IT (down 1.48%); BSE PSU (down 1.42%); BSE Realty (down 1.33%) and BSE Power (down 1.28%). The gainers were BSE Fast Moving Consumer Goods (up 0.48%); BSE Auto (up 0.22%) and BSE Healthcare (up 0.09%).

Bharti Airtel (up 2.25%); Hero MotoCorp (up 1.92%); Sterlite Industries (up 1.89%); Maruti Suzuki (up 1.23%) and HDFC Bank (up 0.96%) topped the Sensex list today. The main losers were Wipro (down 7.29%); GAIL India (down 3.35%); BHEL (down 2.32%); TCS (down 1.92%) and Coal India (down 1.81%).

The Nifty gainers were led by Sterlite Ind (up 2.46%); Hero MotoCorp (up 2%); Sesa Goa (up 1.84%); Bharti Airtel (up 1.72%) and Cairn India (up 1.65%). Wipro (down 7.01%); Reliance Power (down 4.14%); GAIL India (down 3.49%); Siemens (down 2.67%) and IDFC (down 2.66%) settled at the bottom of the index.

Markets in Asia closed mostly in the green as better-than-expected earning reports and housing data from the US supported investor sentiment. All eyes are now on the outcome of the two-day meeting of the US FOMC later today.

The Shanghai Composite gained 0.75%; the Nikkei 225 surged 0.98%; the Straits Times rose 0.18% and the Taiwan Weighted climbed 0.86%. On the loser’s side, the Hang Seng lost 0.15%; the Jakarta Composite fell by 0.16%; the KLSE Composite declined 0.19% and the Seoul Composite shed 0.07%. At the time of writing, the major European markets were up between 0.22% and 1.76% and the US stock futures were trading higher, indicating a firm start to the US markets.

Back home, foreign institutional investors were net sellers of shares totalling Rs860.78 crore on Tuesday while domestic institutional investors were net buyers of equities amounting to Rs419.08 crore.

Aurobindo Pharma has received final approval from the US FDA to manufacture and market Olanzapine tablets in America. Olanzapine tablets are the generic equivalent of Eli Lilly & Company’s Zyprexa tablets. They are indicated for the treatment of serious psychotic disorders such as schizophrenia and falls under the neurological therapeutic category. The stock closed at Rs127.15 on the NSE, down 1.70% from its previous close.

Drug major Ranbaxy Laboratories today introduced its first indigenously developed anti- malarial new-age drug ‘Synriam’, priced at Rs130 for a course of three tablets. Company officials claimed the drug is priced lower than the available drugs in the market for treatment of malaria, but said it will be priced much lower when made available for government anti-malarial schemes. The stock declined 2.13% to close at Rs513.50 on the NSE.

FMCG company Bajaj Corp has raised price of its largest selling brand “Almond Drops” by 8.6% to offset input cost pressures. Among key raw materials, light liquid paraffin (LLP) and vegetable oil prices increased over 25% in the last fiscal year, while glass bottles were expensive by around 12%, the company said. The stock closed 2.37% lower at Rs121.75 on the NSE.


Tech group to revisit poverty estimates in two weeks

“The government has decided to set up a technical group to revisit the methodology for estimation of poverty and identification of poor,” minister of state for planning Ashwani Kumar said

New Delhi: A technical group to revisit the norms to estimate poverty will be set up within the next two weeks, the Lok Sabha was informed, reports PTI.

 The Planning Commission’s new poverty estimates announced last month had created uproar in Parliament leading to demands for removal of the panel’s deputy chairman Montek Singh Ahluwalia.

“Government has since decided to set up a technical group to revisit the methodology for estimation of poverty and identification of poor taking into account multiple dimensions and indicators of poverty so that the poor and deprived households can obtain the benefit of different government programmes and schemes,” minister of state for planning Ashwani Kumar said during Question Hour.

“The technical group will be in place in the next two weeks,” he said replying to supplementaries.

 The poverty ratio in the country had come down from 37.2% in 2004-05 to 29.8% in 2009-10, Mr Kumar said prompting members to strongly oppose the statement.

 Shailendra Kumar (SP) accused the government of making “false claims” and demanded a Joint Parliamentary Committee to finalise the poverty estimates.

 Anant Geete (Shiv Sena) criticised the government for the “faulty” methodology for arriving at the poverty estimates.

“It will be incorrect to say that we have lied. Figures do not lie. We have given the same figures to the Supreme Court,” the minister said.

Speaker Meira Kumar asked the minister to keep in mind the concerns and anxiety of the entire House when the Technical Committee revisits the issue of poverty estimates.

“I hope that when the Technical Committee is revisiting the issue, the concerns and anxiety of the entire House for eradication of poverty, be kept in mind if and when it is implemented,” she said.

 Ashwani Kumar said the Planning Commission estimates poverty on the basis of survey data of the National Sample Survey Organisation (NSSO) on household consumer expenditure.

 He said the Planning Commission has been coming out with poverty estimates since 1977 based on a methodology that tabulates the expenditure of about one lakh households.

“Since the households have different number of members, the NSSO for purpose of comparison divides the household expenditure by the number of members to arrive at the monthly per capita consumption expenditure,” Mr Kumar said.

The Suresh Tendulkar Committee proposed to validate the poverty lines by checking the adequacy of actual private expenditure on food, education and health by comparing them with normative expenditures consistent with nutritional, educational and health outcomes.


S&P cuts India's outlook to negative, warns of downgrade

The lowering of the outlook by S&P from stable (BBB+) to negative (BBB-) is expected to make external commercial borrowings expensive for Indian Inc

New Delhi:  Global agency Standard and Poor’s (S&P) lowered India’s rating outlook to negative and warned of a downgrade in two years if there is no improvement in the fiscal situation and the political climate continues to worsen, reports PTI.

The lowering of outlook from stable (BBB+) to negative (BBB-) is expected to make external commercial borrowings (ECBs) expensive for Indian Inc. It may also have implications for the capital market.

“The outlook revision reflects our view of at least a one-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish or progress on fiscal reforms remains slow in a weakened political setting,” said S&P’s credit analyst Takahira Ogawa in a statement.

BBB- is the lowest investment grade rating.

Commenting on the rating action, Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities, said “Indian (new) sovereign rating is just one step away from junk bond status...Somehow I feel the dream of India growth story is coming to an end.”

The negative outlook, the rating agency further said, signals likelihood of the downgrade of India’s sovereign within the next 24 months. “A downgrade is likely if the country’s economic growth prospects are dim, its external position deteriorates, its political climate worsens, or fiscal reforms slow,” it said.

The lowering of rating outlook comes despite the finance ministry pitching for an upgrade at the recent round of meetings between the officials and representatives of the S&P.

S&P said India’s real GDP (gross domestic product) per capita growth will likely remain moderately strong at 5.3% in 2012-13, compared with about 6% on average over the prior five years.

“India’s favourable demography and the increasing middle- class population will undergird its medium-term growth prospects, which in turn will support the sovereign ratings,” Mr Ogawa said.

India’s favourable long-term growth prospects and high level of foreign exchange reserves support the ratings, the agency said. On the other hand, India’s large fiscal deficits and debt, as well as its lower middle-income economy, constrain the ratings, it added.

“High fiscal deficits and a heavy debt burden remain the most significant constraints on the sovereign ratings on India. We expect only modest progress in fiscal and public sector reforms, given the political cycle—with the next elections to be held by May 2014—and the current political gridlock,” S&P said.

Such reforms include reducing fuel and fertiliser subsidies, introducing goods and services tax (GST), and easing of restrictions on foreign ownership of various sectors such as banking, insurance, and retail sectors, it said.

On the other hand, S&P said the ratings “could stabilise again if the government implements initiatives to reduce structural fiscal deficits and to improve its investment climate.”

Fiscal measures could include an increase in domestic prices and a more efficient use of fuel and fertiliser subsidies, or an early implementation of the GST.

Reacting to the rating action, a senior finance ministry official said India’s growth rate is intact and robust and it is not going to have any major impact on the country.

“We are not overtly concerned about revision. Other nations make India look good,” the official added.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)