Friday’s Market Report: Rally eludes

There is still no sign of a pull-back rally so far

Unsupportive global cues and below-expectation quarterly numbers from IT major Wipro resulted in a weak opening for the Indian market. Analysts say that volatility on account of quarterly numbers would be part of the next few trading sessions. The indices struggled to push themselves into the green at noon, but profit-booking pulled them down again into negative territory.

A half-hearted recovery attempt was crushed by a strong bout of selling, which led the indices to the day's lows. Range-bound trading followed, with the indices erasing some of the losses, but settling in the red.

We had been expecting the market to rally, but this has not happened so far. Today, the Sensex fell 39 points to end at 19,008, after failing to cross yesterday's high. The Nifty fell 15 points to end at 5,697. We still stick to our forecast of a rally. We mentioned yesterday that the Sensex may end the third week in the positive after ending negative for two consecutive weeks. The Sensex ended 1% up (147 points up) today from the closing of 14 January 2011 (18,860). From the start of 2011, over 14 trading days (3 January 2011-20 January 2011) foreign institutional investors have taken out Rs4,100 crore from the Indian market and the Sensex has fallen 1,463 points from the closing of 31 December 2010. The advance-decline ratio for NSE stocks was positive at 742:641.

Today, the market breadth was negative. The Sensex had 18 losers and 12 gainers, while the Nifty closed with 33 declining stocks and 17 advancing stocks. However, the broader indices inched higher. The BSE Mid-cap index gained 0.22% and the BSE Small-cap index rose 0.46%.

In the sectoral space, BSE Oil & Gas (up 0.78%), BSE Bankex (up 0.77%) and BSE Power (up 0.67%) were the noteworthy gainers. On the other hand, BSE IT (down 1.29%), BSE Fast Moving Consumer Goods (down 1.28%) and BSE TECk (down 1.02%) were the top losers.

Reliance Infrastructure (up 2.81%), State Bank of India (up 2.49%), Reliance Communications (up 2.14%), BHEL (up 1.75%) and Reliance Industries (up 1.73%) were the top Sensex gainers. The major losers were Wipro (down 4.59%), ONGC (down 2.57%), ITC (down 1.63%), DLF (down 1.56%) and Sterlite Industries (down 1.52%).

The Supreme Court today pulled up telecom minister Kapil Sibal for making statements undermining the report of the Comptroller and Auditor General on the 2G scam and asked him to behave with "some sense of responsibility". It directed the Central Bureau of Investigation to go ahead with the probe into the scam without getting influenced by anybody's statement.

Lingering concerns over the possible interest rate increase by Chinese authorities dragged markets down in Asia for another day. Analysts also voiced concern about policy-tightening measures across the region. Commodity shares were down on worries that demand would slow down in China.

The Hang Seng declined 0.53%, the Jakarta Composite plunged 2.16%, the KLSE Composite fell 1.22%, the Nikkei 225 tumbled 1.56% and the Seoul Composite tanked 1.74%. On the other hand, the Shanghai Composite surged 1.43% and the Taiwan Weighted gained 0.29%.

Back home, the multi-brand retail sector is likely to be opened for foreign investors with a foreign direct investment (FDI) cap of 51%, as efforts are being made by the industry ministry to evolve a consensus on the vexed issue.

According to sources, the government will have to allow a minimum of 51% FDI in multi-brand retail, the same as was permitted in single brand retail.

Foreign institutional investors were net sellers of stocks worth Rs943.91 crore on Thursday while domestic institutional investors were net buyers, purchasing equities worth Rs256.32 crore.

Supreme Infrastructure India (up 6.13%) has bagged an order from the National Highway Authority of India (NHAI) for four-laning the Panvel-Indapur section of NH-17 in Maharashtra, under NHDP phase III on BOT basis (designing, engineering finance, construction, operation and maintenance). The cost of the project is about Rs1,150 crore, while the EPC cost is about Rs830 crore.

Amtek Auto (down 0.20%) has formed a joint venture with South Korean automaker Autech Corporation to manufacture specialised vehicles. The vehicles are for the defence, para-medical, fire-fighting and waste management sectors. The company will set up an assembly facility at Daruhera in Haryana with an initial capacity of 10,000 units per year.

Suzlon Energy's (up 1.93%) subsidiary-Suzlon Energia Eolica do Brasil-has bagged an order from Martifer Renovaveis Geraçao de Energia e Participaçoes SA to set up, operate and maintain a 218MW project across the states of Ceara and Rio Grande do Norte, in Brazil. The turnkey project will comprise 104 units of the company's S88-2.1 MW wind turbines, which can generate enough electricity to power over 160,000 Brazilian households.

The project is scheduled to be commissioned in phases by June 2012 and is expected to offset over 425 tonnes of CO2 annually. This addition of 218MW will enhance Suzlon's leading presence in Brazil to a cumulative total installation of 600MW.


HCC open to resolve Lavasa issue with ministry

Third-quarter profit drops by half on project delays and slowing order flows

Nothing seems to be going right for Hindustan Construction Company (HCC) these days. In November, the environment ministry asked it to stop work on its project at Lavasa, order flows have dried up. Worse, it has had to bear the cancellation of a project worth Rs230 crore.

"In the third quarter we have not received any new order and an order worth Rs230 crore from NTPC was cancelled due to environmental issues," Vinayak Deshpande, chief operating officer, HCC, told Moneylife.

The company had received a contract to construct a barrage and desilting chamber for NTPC's Loharinag Pala Hydro Electric Power Project (4x150 MW) in Uttarkashi district of Uttaranchal.

"The company has revised its 2010-11 (April-March) order book target of Rs25,000 crore due to persistent delays in infrastructure and power orders from the government," Mr Deshpande said. HCC's current order book stands at Rs18,505 crore and it expects to reach at Rs20,000 crore by the end of this fiscal year.

On the Lavasa project, HCC says it is open to sort out issues with the Ministry of Environment & Forests (MoEF). "We would like to resolve all issues over the Lavasa project with MoEF. I hope we will resume work soon," Ajit Gulabchand, chairman, HCC, said.

The MoEF issued a stop-work notice to the company's Lavasa project, citing environmental problems and the absence of approvals for construction of the 5,000 acre luxury hill city project near Pune. Lavasa Corporation, a subsidiary of HCC, subsequently challenged the notice in court, saying the order was against all laws of natural justice.

However, Mr Gulabchand said that the company would not withdraw the case against the ministry. He also refused to comment on any notification from the MoEF to pay substantial penalty for violation of environmental laws.

HCC today reported a 46% fall in net profit for the October-December quarter to Rs7.94 crore from Rs14.75 crore, due to slower project executions. However, revenues for the quarter increased by 9% to Rs1,028 crore from Rs945 crore.
The company has a cash balance of Rs281 crore, while the debt pressure amounts to Rs3,500 crore.

"During the quarter, we have witnessed a slowdown in infrastructure activity. Several project orders have been deferred by various government departments and private firms due to delays in acquiring land and related clearances," Mr Gulabchand said.


RBI wants banks to shift to chip-based ATM cards

Mumbai: Concerned over rising incidents of cyber frauds, the Reserve Bank of India (RBI) will soon ask banks to shift to chip-based automated teller machine (ATM) cards from the existing magnet strips ones and upgrade the currency vending machines, reports PTI.

The RBI working group on information security, electronic banking and technology risk management has also made a case for setting up special cells on banking frauds in the state police departments to deal with bank related cyber crimes.

"It is recommended that RBI may consider moving over to chip-based cards along with requiring upgradation of necessary infrastructure like ATMs/POS terminals in this regard in a phased manner," said the report of the working group headed by RBI executive director G Gopalakrishna.

While pitching for chip-based cards, the report said, it is difficult to copy and make their duplicates as compared to the existing magnet strips ones, which are currently used.

Besides, the working group has recommended widespread changes in the existing IT system of the Indian banking industry to make banking services more safe and secure.

"The Reserve Bank will begin implementing the recommendations of the working group shortly," the central bank said in a statement.

In case of online frauds where jurisdiction is not clear and there is ambiguity on where the police complaint should be filed, the working group has recommended setting up separate cell on bank fraud in police departments.

"The matter of having a separate cell working on bank frauds in each state police department, authorised to register complaints from banks and get the investigations done on the same, needs to be taken up with respective police departments," said the report.

It has also suggested that for debit or credit card transactions at the POS (point of sale) terminals, PIN-based authorisation should be put in place instead of the signature-based system.

The non-PIN based POS terminals, it added, should be withdrawn in a phased manner.

The RBI had set up the working group in April 2010 to suggest guidelines for banks covering the entire gamut of electronic banking.

On cloud computing, the report said security and legal issues on it are still evolving and "a bank needs to be cautious and carry out due diligence to assess the risks comprehensively before considering cloud computing."

Cloud computing, which is internet-based, facilitates software applications and other technological resources to be shared online.

The working group report added that given the nature of the problem of cyber security, engagement is required at a wider level both nationally and internationally, with the government, law enforcement agencies, various industrial associations and academic institutions.

The report found that most retail cyber frauds and electronic banking frauds would be of values less than Rs1 crore.

But "since these frauds are large in number and have the potential to reach large proportions, it is recommended that the special committee of the board be briefed separately on this to keep them aware of the proportions of the fraud and the steps taken by the bank to mitigate them," the report said.

The special committee should specifically monitor the progress of the mitigating steps taken by the bank in case of electronic frauds and the efficacy of the same in containing fraud numbers and values, it added.

The experience of controlling/preventing frauds in banks should be shared between banks on a regular basis, it added.


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