Bulls need a new hope, even if it’s a false one
My column in the previous issue was titled “Reality Strikes”. Well, the inevitable happened. From a high of 6,111 on 29th January, the Nifty fell to an intraday low of 5,675 on the Budget day, a crash of 7.14% in just a month. For Moneylife readers, this correction would not have come as a surprise. Ever since the Nifty sailed past 5,900,...
If the last week’s lows hold, the Nifty will attempt to cross 5,740 and then 5,770
The market declined over 2% in the Budget week as corporates and foreign investors were largely disappointed with the proposals announced by the finance minister on Thursday. While he made a clarification on the tax residency certificate issue on Friday, some other proposals are seen as a setback to foreign investments. Concerns about the twin deficits—current account and fiscal—also dampened sentiments.
The BSE Sensex declined 398 points (2.06%) to settle at 18,919 and the Nifty closed the week at 5,720, a fall of 131 points (2.23%). The market indices are down for the fifth week in a row. However, if the last week’s lows hold, the Nifty will attempt to cross 5,740 and then 5,770.
The market managed to close with minor gains on Monday amid high volatility on support from the IT sector. The benchmarks tanked over 1.5% on Tuesday on global concerns, which led to a broad-based sell-off in the domestic market. Optimism emanating from the Economic Survey that the government would be able to rein in the current account deficit led the market in the positive on Wednesday.
The lacklustre Union Budget which proposed higher taxes on corporates and individuals saw the market paring its early gains and crashing by over 2% from the day’s high on Thursday. The finance minister’s clarification soothed foreign investors, which helped the market close in the green on Friday.
BSE Consumer Durables (up 4%) and BSE IT (up 2%) were the top sectoral gainers in the week. The key losers were BSE Realty (down 9%) and BSE PSU (down 5%).
TCS, Infosys (up 3% each), Bajaj Auto (up 2%) and Wipro (up 1%) were the main gainers on the Sensex while Hindalco Industries (down 8%), Tata Steel, Reliance Industries, HDFC Bank (down 6% each) and Coal India (down 5%) were the major losers on benchmark.
The Nifty was led by TCS, Jaiprakash Associates, Infosys (up 3% each), Bajaj Auto (up 2%) and Wipro (up 1%). The top losers were Siemens (down 10%), Reliance Infrastructure (down 9%), DLF, Hindalco Ind and Punjab National Bank (down 8% each).
The much talked about Railway Budget, presented two days ahead of the Union budget, turned out to be largely a non-event. While sparing passengers from another hike within a month, Pawan Kumar Bansal, however increased charges for super-fast trains, and fees for ticket cancellation and reservations.
The pre-Budget Economic Survey for 2012-13, tabled in Parliament on Wednesday, projected a turnaround in the economy in 2013-14, with growth expected to be in the range of 6.1% to 6.7%, higher than the advance estimates of 5% growth in the current financial year. The improved growth, however, would be subject to a normal monsoon, further moderation in inflation, which should induce further relaxation of the tight monetary stance, and a mild recovery of global growth.
Finance Minister P Chidambaram, presenting his eighth Budget, did not have too many options before him. Corporates were miffed as he raised the surcharge on corporate tax to 10% from 5% for domestic companies, whose taxable income exceeds Rs10 crore per year, and raised the surcharge on dividend distribution tax to 10% from 5%. He also levied a 10% surcharge on persons earning above Rs1 crore a year.
India’s economic growth in the October-December period of the current financial year declined to 4.5% —the decade’s lowest quarterly growth.
In international news, US president Barack Obama on Friday ordered the start of $85 billion in government spending cuts, heralding a potentially decade-long wave of belt-tightening that is likely to impede US economic growth this year. The cuts total $1.2 trillion over nine years. Of that, $85 billion comes out of the budget for the remaining seven months of this fiscal year, making for effective reductions of about 13% for defence programs and 9% for non-defence programs.
A weak recovery on the cards
The market closed in the green, but off the highs, as the finance minister clarified there was no cause for concern about the tax residency certificates. A weak recovery is on the cards as the market is trying to form a base. The National Stock Exchange (NSE) recorded a volume of 74.55 crore shares and advance-decline ratio of 688:817.
The market, which plunged over 1.5% yesterday, opened in the positive this morning as investors picked up stocks at lower levels. In the international arena, the US markets ended with minor losses on Thursday as US investors were seen awaiting the outcome of a meeting of policy makers to avoid fresh taxes and spending cuts. A fall in China’s factory growth in February led the Asian markets lower in morning trade today.
The Nifty opened nine points up at 5,702 and the Sensex started off at 18,877, a gain of 15 points. Profit booking in early trade pushed the benchmarks into the negative for a short while to touch their intraday lows. At the lows, the Nifty fell to 5,680 and the Sensex went down to 18,821.
However, buying in capital goods, power, metal and consumer durables stocks helped the market recovered from its lows. The market remained in the positive for the remainder of the morning session boosted by a report of an uptick in manufacturing activity in February. The HSBC India Manufacturing Purchasing Managers’ Index (PMI)—a measure of factory production—stood at 54.2 in February.
A clarification from the finance minister that the status tax residency certificates (TRCs) held by foreign investors remains unchanged from last year, saw the market getting a further boost in post-noon trade. The news resulted in the indices hitting their highs with the Nifty at 5,739 and the Sensex touching 18,989.
The market closed off the highs as investors analysed the budget proposals announced by the finance minister on Thursday. The Nifty settled 27 points (0.47%) higher at 5,720 and the Sensex finished the session at 18,919, a gain of 57 points (0.30%) over its previous close.
The broader indices witnessed a mixed close, as the BSE Mid-cap index gained 0.29% 2.46% while the BSE Small-cap index fell 0.18%
The top sectoral gainers were BSE Consumer Durables (up 3.20%); BSE Capital Goods (up 1.62%); BSE Auto (up 1.50%); BSE Power (up 0.80%) and BSE Metal (up 0.63%). The losers were BSE 3.93%); BSE TECk (down 0.22%); BSE Fast Moving Consumer Goods (down 0.09%) and BSE Oil & Gas (down 0.04%).
Sixteen of the 30 stocks on the Sensex closed in the positive. The main gainers were Maruti Suzuki (up 4.98%); Jindal Steel and Power (up 2.87%); Bajaj Auto (up 2.63%); Larsen & Toubro (up 2.51%) and Cipla (up 2.40%). The main losers were Bharti Airtel (down 3.89%); Dr Reddy’s Laboratories (down 1.44%); ITC down 1.42%); Hero MotoCorp (down 1.30%) and TCS (down 1%).
The top two A Group gainers on the BSE were—Core Education Technologies (up 18.78%) and Suzlon Energy (up 18.07%).
The top two A Group losers on the BSE were—NHPC (down 10.56%) and DLF (down 6.25%).
The top two B Group gainers on the BSE were—MVL Industries (up 19.88%) and Gujarat Themis Biosyn (up 19.87%).
The top two B Group losers on the BSE were—Shri Lakshmi Cotsyn (down 19.97%) and Gennex Laboratories (down 19.17%).
Of the 50 stocks on the Nifty, 29 ended in the green. The key gainers were Maruti Suzuki (up 5.28%); Jaiprakash Associates (up 4.82%); Reliance Infrastructure, BPCL (up 3.51% each) and Power Grid Corporation (up 3.50%). The key losers were DLF (down 5.97%); Bharti Airtel (down 3.44%); IDFC (down 2.18%); Siemens (down 1.79%) and Cairn India (down 1.58%).
Markets across settled mostly in the positive on reports of a fall in Japanese consumer prices fell for the third straight month in January leading to speculations that the country’s central bank will initiate new measures to control deflation. Markets in China settled lower on reports of a fall in manufacturing activity last month.
The Jakarta Composite rose 0.33%; the Nikkei 225 gained 0.41%; the Straits Times added 0.05% and the Taiwan Weighted surged 0.84%. On the other hand, The Shanghai Composite fell 0.26%; the Hang Seng dropped 0.33% and the KLSE Composite shed 0.01%. The Seoul Composite was closed for trade today on account of a local holiday.
At the time of writing, the key European indices were trading with losses between 0.31% and 1.16% and the US stock futures were in the negative, indicating a lower opening for US stocks later in the day.
Back home, foreign institutional investors were net sellers of shares of a huge Rs1,317.79 crore on Thursday on account of the finance minister’s comments about tax residency certificates held by foreign investors. On the other hand, domestic institutional investors were net buyers of shares totalling Rs 417.94 crore.
Internet firm Info Edge, which owns job portal Naukri.Com, today said it has acquired software developer MakeSense Technologies for Rs8 crore. The latter has developed proprietary software for semantic search, which will augment search capabilities for both recruiters and job seekers, principally on the company’s portal Naukri.Com. Info Edge gained 1.89% to close at Rs354.95 on the NSE.
The Competition Commission of India has approved the proposed acquisition of a majority stake by the UK-based Diageo in UB group’s United Spirits. It said the deal would not have an adverse impact on competition. United Spirits climbed 1.85% to close at Rs1,874.10 on the NSE.
Karnataka Bank has increased interest rate on deposits by 25 basis points on all fresh retail term deposits of 1-2 years maturity period. The rate of interest on deposits has been increased from 9% to 9.25% with effect from 1st March. The stock declined 2.89% to close at Rs135.85 on the NSE.