Flat-to-positive opening indicated for Indian share market: Monday Market Preview

Markets in Asia were mixed in early trade today while Wall Street continued its winning spree for the third day on Friday

The Indian share market is likely to witness a flat-to-positive opening on Monday, tracking mixed Asian markets in early trade today on global concerns. On the other hand, US markets continued their upmove into the third day on Friday on positive economic news with investors. The SGX Nifty, which opened higher, pared some early gains and was eight points up at 5,682 compared to its previous close of 5,674.

Domestic triggers for the week include the March futures and options contract expiry, infrastructure output, weekly food inflation, fiscal and trade deficit and factory output and auto sales numbers.

Last week the market closed with smart gains, mainly on institutional support and firm cues from the global arena. It had a negative bias at the close of the first day of the week, but climbed up and stayed positive on the other four days. The gains kept increasing, with the maximum registered on the last two days. The four-day rally and strong close changes the picture from a range-bound market to an uptrending market with the promise of further gains. The Nifty will now target 5,800 and the Sensex 19,400.

The market clocked gains of over 5% in the week (the best weekly gains since July 2009) with the Sensex closing on Friday at 18,816 and the Nifty at 5,654, their best closing levels since 27th January this year. The Sensex added a whopping 937 points and the Nifty jumped 281 points over the week.

The latest four-day rally (22nd March to 25th March) has added 977 points on the Sensex and 289 points on the Nifty. The rally has surpassed the three-day budget rally (28th February to 3rd March) when the Sensex gained 789 points and the Nifty 233 points.

Going forward there are tremendous headwinds like spiralling crude prices and inflationary pressures and the market will not run away at this stage. Besides, the next big trigger for the domestic market is the upcoming earnings season. Any entry into the market and specific stocks must be on the dips.

US markets continued their rally into the third day on Friday with Dow logging the best week since July last year. Positive economy news led investors to set aside worries of high oil prices, problems with Japan’s nuclear reactors and new developments in Europe's debt crisis, as Portugal looked likely to seek funds from the European Union. The US government said the economy grew at a 3.1% annual rate in the fourth quarter of 2010. Technology stocks rose after business software giant Oracle Corp. reported a 78% jump in income.

The Commerce Department reported that the economy, as measured by the gross domestic product (GDP), grew at an annual rate of 3.1% in the October-December quarter, an upward revision from last month’s 2.8% estimate for the same period. For the final three months of the year, consumer spending grew at an annual rate of 4%, the strongest showing in four years.

The Dow rose 50 points (0.41%) to 12,220.59. The S&P 500 added 4.14 points (0.32%) to 1,314 and the Nasdaq rose 6.64 points (0.24%) to 2,743.

Markets in Asia were mixed in early trade on Monday, on concerns within the region and across the world. The Nikkei 225, Japan’s benchmark was in the red as rising radiation levels hampered repairs at the country’s nuclear power plants. Political tensions in West Asia and the Middle East and renewed debt crisis in the Euro zone also kept investor sentiments low.

The Shanghai Composite gained 0.72%, the Hang Seng added 0.04% and the KLSE Composite rose 0.03%. On the other hand, the Jakarta Composite fell 0.18%, the Nikkei 225 declined 0.36%, the Straits Times was down 0.38%, the Seoul Composite shed 0.14% and the Taiwan Weighted fell 0.45% in early trade.

Back home, expressing concern over high costs and limited reach of banking services, finance minister Pranab Mukherjee on Sunday said that the government was working in collaboration with the Reserve Bank of India to address these concerns.

Mr Mukherjee also said that there was a need to “reflect upon possible flaws in our system and address them to withstand adversities. We need to make our financial sector more competitive by enhancing efficiency and transparency.”

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Mukesh Ambani enters another Anil Ambani domain

Reliance Industries announces a tie-up with DE Shaw group to build financial services business in India

On a quiet Sunday morning, while the country was more excited about cricket, Reliance Industries Limited (RIL) announced plans for joint venture with the D. E. Shaw group “to build a leading financial services business in India”. D. E. Shaw group is a global investment and technology development firm with over $20 billion in aggregate investment capital as of March 1, 2011, but there is a big question about how and when this joint venture will take off. 

Reliance Industries is under investigation by the Securities and Exchange Board of India (SEBI) in connection with a 2007 matter when RIL sold 4.1% of the equity of Reliance Petroleum in an open market transaction, earning huge profits. Reliance Petroleum has since been merged and does not exist. Media reports have suggest that SEBI Chairman C B Bhave, who rejected RIL’s request to file consent proceedings had been looking to make an example out of RIL by imposing a penalty in the region Rs500 crore for insider trading, and probably other restrictions as well. However, there is now a new chairman at SEBI and there is some speculation that things may be different under U K Sinha’s leadership. 

Our queries to the top brass of SEBI and the media agency of Reliance Industries (NeUcom) about the implications of the insider trading investigation on the joint venture’s plans did not elicit a response at the time of publication this piece.

According to a press release issued on behalf of Reliance Industries, the “joint venture will incorporate the D. E. Shaw group’s investment and technology expertise with Reliance’s operational knowledge and extensive presence across India to offer a comprehensive array of financial services to the Indian marketplace”. It quotes Reliance Chairman Mukesh Ambani  saying, “Reliance is delighted to partner with the D.E. Shaw group in the financial services domain.  The D. E. Shaw group is a natural partner for Reliance. Together, we look forward to participating in the growing Indian financial services sector”.

Lou Salkind, a member of the D. E. Shaw group’s Executive Committee is quoted saying, “We are excited about this new partnership with Reliance.  We have had a long-term commitment to Asia generally and to India specifically, having begun our operations in the country fifteen years ago”. He is also quoted as saying, “We believe this joint venture allows us to apply to the Indian markets our historical success in investment management and market-making, and that strengthening our presence in India and deepening our relationship with Reliance benefits our business globally.”

Anil Chawla, a Managing Director and head of the D. E. Shaw group’s private equity activities in India is quoted in the release saying, “This joint venture will draw upon the core competencies of both firms to develop a platform that can serve the growing needs of Indian companies and individuals.” 

Reliance Industries Limited (RIL) is India’s largest private sector with a turnover of  Rs 2,00,400 crore and a net profit of  Rs 16,236 crore (US$ 3.6 billion) as of March 31, 2010.

The D. E. Shaw group has been in India since 1996, initially focusing on global information technology.  It now has over 700 employees in its Hyderabad, Gurgaon (Delhi), and Mumbai offices.

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COMMENTS

Bijoy

6 years ago

RIL will surely do good if this venture takes place. I dnt know why authorities always try to pull RIL down by some or the other law defaulting cases. May be coz they wanna mint some money too. Anyways, my best wishes to RIL for their new venture. Dhirubhai 1's said... Jab log tumhare khilaaf bolna shuru karein, tab samhjna ke tum tarakki kar rahe ho !

More gains possible: Weekly Market Report

But buy only on declines

The market closed the week with smart gains, mainly on institutional support and firm cues from the global arena. It had a negative bias at the close of the first day of the week, but climbed up and stayed positive on the other four days. The gains kept increasing, with the maximum registered on the last two days. The four-day rally and strong close changes the picture from a range-bound market to an uptrending market with the promise of further gains. The Nifty will now target 5,800 and the Sensex 19,400.

The market clocked gains of over 5% in the week (the best weekly gains since July 2009) with the Sensex closing on Friday at 18,816 and the Nifty at 5,654, their best closing levels since 27th January this year. The Sensex added a whopping 937 points and the Nifty jumped 281 points over the week.

The top Sensex gainers were DLF (up 13%), Jaiprakash Associates (up 10%), ICICI Bank, BHEL (up 9% each) and Infosys Technologies (up 7%). There were no losers this week.

All sectoral gauges ended positive with the BSE Realty index (up 9%) and BSE Bankex (up 6%) the top gainers.

The current four-day rally (22nd March to 25th March) has added 977 points on the Sensex and 289 points on the Nifty. The rally has surpassed the three-day budget rally (28th February to 3rd March) when the Sensex gained 789 points and the Nifty 233 points.

Going forwards there are tremendous headwinds like spiralling crude prices and inflationary pressures and the market will not run away at this stage. Besides, the next big trigger for the domestic market is the upcoming earnings season. Any entry into the market and specific stocks must be on the dips.

In economic news, food inflation was back in double digits at 10.05% for the week ended 12th March after a fortnight-long gap. Food inflation, which has been showing a declining trend for the last three weeks, stood at 9.42% in the week ended 5th March. In the corresponding week of the previous year, it was more than double, at 20.62%, as per government data.

The rate of price rise in food items, which accounts for over 14% of overall inflation, may prompt the Reserve Bank of India (RBI) to hike key policy rates. The central bank has already hiked its key policy rates eight times since March 2010. The last hike was taken at its mid-quarterly review on 17th March. Headline inflation, which has been above 8% since March 2010, was at 8.31% in February 2011.

The Centre has extended the ban on exports of pulses for another year, till March 2012, even as the country is likely to import 3.4 million tonnes of the vital foodgrain item to match the enhanced demand.

Production of pulses during 2011-12, as per the Second Advance Estimates of the agriculture ministry is put at 16.51 million tonnes. On the other hand, the Planning Commission has estimated the demand for pulses during the next fiscal at 19.11 million tonnes.

In one of the shortest Budget sessions in recent times, the government managed to clear the Finance Bill for 2011 with some modifications. Finance minister Pranab Mukherjee rolled back the 5% service tax on healthcare and also modified tax proposals relating to ready-made garments, dividend tax, personal computers, printers, mobile phones and auto parts. The government also tabled a Bill to raise the voting rights of shareholders of nationalised banks to 10% from the existing 1%.

India's foreign exchange reserves for the week ended 17th March surged by $1.67 billion to $303.51 billion, helped by a healthy increase in foreign currency assets (FCAs). The reserves had declined by $755 million to $301.84 billion in the previous week.

FCAs, which include the effect of appreciation or depreciation of non-US currencies such as the euro, pound and yen held in reserves, went up by $1.47 billion to $273.72 billion for the week under review, according to RBI data. India's gold reserves were unchanged at $22.14 billion at the end of the reporting week, the central bank said.

On the international front, the ongoing turmoil in West Asia has now spread to Syria. Government troops opened fire on protesters in cities across Syria and pro- and anti-government crowds clashed in Damascus, as one of the Mideast's most repressive regimes sought to put down demonstrations that exploded nationwide, demanding reform.

Also, Bahrain's security forces fired tear gas at anti-government protesters in the Gulf kingdom on Friday after a prominent Shiite cleric vowed that their demands for the Sunni monarchy to loosen its grip on power will not be silenced by "brutal force".

Portuguese prime minister Jose Socrates resigned earlier this week after the country's Parliament rejected the minority government's austerity measures. The move is likely to be a setback to the European Union's initiatives to take the region out of the debt crisis.
 

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