Global cues point out to a gap-down opening for Indian shares: Tuesday Market Preview

Investors were concerned that the downward revision in the US sovereign rating would slow growth in the world’s largest economy

The local market is likely to see a gap-down opening on dismal global cues. Marco economic news in the US pushed down key indices to the month’s low on Monday and tracking the weak US markets, those in Asia have opened weak this morning. The SGX Nifty was 39.50 points down at 5,699.50 compared to its previous close of 5,739.

The local market opened flat yesterday as Asian markets showed little gains following the Chinese central bank's decision to hike reserve requirements for banks. Poor quarterly numbers of Infosys and the rise in headline inflation for March continued to weigh on investors' minds for the second day. The Sensex opened at 19,390, three points higher than its close on Friday and the Nifty resumed trade a point lower at 5,824.

Select buying in metals, banking, capital goods and oil & gas stocks pushed the indices to the day's high at around 10.30am. At the high, the Sensex was up 262 points at 19,649 and the Nifty had gained 73 points at 5,898. After range-bound trading for an hour, the market witnessed a steep fall with the indices crashing down into the red on profit booking.

Sideways trading continued into the post-noon session with the market gradually edging lower and it touched the intra-day low in the last half hour, the Sensex at 19,071 and the Nifty at 5,722. The indices saw a marginal recovery from those levels, but still ended lower for the second straight day. The Sensex retraced 296 points at 19,091 and the Nifty closed at 5,729, down 95 points from its Friday close.

The sell-off was partly caused by short-term foreign traders selling, as debt troubles in Europe resurfaced and signals of interest rate hikes were visible around the world. The market benchmarks, the Sensex and the Nifty, have been on a downtrend from 6th April. It was punctuated by a rally on 13th April. That rally turned out to be a one-off affair. Given the way the market sold off today after a rousing start, expect further declines to 5,600 on the Nifty and 18,400 on the Sensex.

Markets in the US ended lower on Monday after Standard and Poor’s revised its outlook on the US credit rating lower to ‘negative’ from ‘stable’ on a poor budget outlook. The ratings cut could force investors to dump Treasuries and potentially send the country’s borrowing costs rising. The last time the US was placed on a negative watch was in January 1996.Concerns about the rate-tightening measures by the Chinese central bank also weighed on the sentiments.

This apart, the National Association of Home Builders/Wells Fargo Housing Market index fell to 16 from 17. A reading above 50 indicates that more builders view sales conditions as good than poor. The index has not been above 50 since April 2006.

Among stocks, Bank of America and Caterpillar each fell 3.1%, Citigroup finished flat and Halliburton gained 0.7%, after the oil-field-services company's first-quarter profit more than doubled.

The Dow tumbled 140.24 points (1.14%) to 12,201.59, its biggest point and percentage drop since mid-March and lowest close this month. The S&P 500 fell 14.54 points (1.10%) to 1,305.14. The index fell below 1,300 for the first time since 24th March, though it later rebounded above that level.  The Nasdaq declined 29.27 points (1.06%) to 2,735.38.

Tracking the weak US markets overnight, their counterparts in Asia were lower in early trade on Tuesday. Easing oil prices also hurt investor sentiment. Meanwhile, The International Monetary Fund on Monday criticised developing countries for not responding strongly enough to the surge of foreign inflows into their markets, saying the result could be a hard economic landing.

The Shanghai Composite was down 1.61%, the Hang Seng declined 1.46%, the Jakarta Composite fell 0.66%, the KLSE Composite lost 0.55%, the Nikkei 225 tumbled 1.49%, the Straits Times declined 0.94%, the Seoul Composite tanked 1.15% and the Taiwan Weighted fell 1.14%.

Brent crude for June delivery fell $1.84 to settle at $121.61 a barrel, having slipped to a session low of $121. Nymex crude for May fell $2.54 to settle at $107.12, after slipping as low as $106.54. The May crude contract expires on Tuesday.

Back home, diversified business conglomerate Aditya Birla Group on Monday said it has acquired Swedish pulp maker Domsjo Fibre for a total consideration of $415 million (over Rs1,800 crore). The production capacity of the acquired firm, which clocked revenue of $390 million last year, will be increased to 2.55 lakh tonnes by June 2012 from 2.1 lakh tonnes at present.

Commenting on the deal, Aditya Birla Group chairman Kumar Mangalam Birla said: “The acquisition further enhances our position in the global pulp and fibre business.”

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A downturn has begun: Monday Closing Report

Nifty may go down to 5,600 and Sensex to 18,400

The local market opened flat as Asian markets showed little gains following the Chinese central bank's decision to hike reserve requirements for banks. Poor quarterly numbers of Infosys and the rise in headline inflation for March continued to weigh on investors' minds for the second day. The Sensex opened at 19,390, three points higher than its close on Friday and the Nifty resumed trade a point lower at 5,824.

Select buying in metals, banking, capital goods and oil & gas stocks pushed the indices to the day's high at around 10.30am. At the high, the Sensex was up 262 points at 19,649 and the Nifty had gained 73 points at 5,898. After range-bound trading for an hour, the market witnessed a steep fall with the indices crashing down into the red on profit booking.

Sideways trading continued into the post-noon session with the market gradually edging lower and it touched the intra-day low in the last half hour, the Sensex at 19,071 and the Nifty at 5,722. The indices saw a marginal recovery from those levels, but still ended lower for the second straight day. The Sensex retraced 296 points at 19,091 and the Nifty closed at 5,729, down 95 points from its Friday close. Today's intra-day highs and lows were lower than those recorded on Friday, an indication that the market is on a downward trend. The advance-decline ratio on the National Stock Exchange was 379:1030.

Among the broader markets, the BSE Mid-cap index declined 1.29% and the BSE Small-cap index fell by 1.29%.

The sell-off was partly caused by short-term foreign traders selling, as debt troubles in Europe resurfaced and signals of interest rate hikes were visible around the world. The market benchmarks, the Sensex and the Nifty, have been on a downtrend from 6th April. It was punctuated by a rally on 13th April. That rally turned out to be a one-off affair. Given the way the market sold off today after a rousing start, expect further declines to 5,600 on the Nifty and 18,400 on the Sensex.

All sectoral gauges ended in the red today. BSE Realty (down 3.17%), BSE IT (down 2.73%), BSE TECk (down 2.32%), BSE Capital Goods (down 2.12%) and BSE Metal (down 1.92%) were the top losers.

Hero Honda (up 1.80%), Hindustan Unilever (up 1.65%), Bajaj Auto (up 1.09%), ONGC (up 0.66%) and Maruti Suzuki (up 0.19%) were the major gainers on the Sensex. On the other hand, DLF (down 4.69%), TCS (down 3.43%), Jaiprakash Associates (down 3.13%), Tata Steel (down 2.92%) and Infosys Technologies (down 2.80%) ended at the bottom of the Sensex list.

India's gross domestic product (GDP) is projected to continue to grow at a brisk pace of 8.8% in 2011-12 (FY11-12), according to the Centre for Monitoring Indian Economy (CMIE). The domestic environment is conducive for growth and private consumption expenditure is projected to grow by a healthy 7.5% and gross fixed capital formation by 14.6%, the leading economic think-tank said in its latest monthly review of the country's economy.

In FY10-11, the performance of India's economy has been robust, it said, and added that real GDP is estimated to have grown by 9% during the fiscal.

The People's Bank of China's rate-tightening initiative on Sunday spooked most markets across the region today. Investors were concerned that higher prices might induce other central banks in the region to take firm steps towards curbing inflation.

Meanwhile, media reports indicate that the Fukushima Daiichi plant will take at least six to nine months to resume operations after the nuclear power plant was damaged in the devastating earthquake in Japan last month.

The Hang Seng was down 0.74%, the Jakarta Composite fell 0.09%, the Nikkei 225 lost 0.36%, the Straits Times declined 0.28%, the Seoul Composite was down 0.13% and the Taiwan Weighted shed 0.04%. On the other hand, the Shanghai Composite gained 0.21% and the KLSE Composite rose 0.36%.

Back home, institutional investors-both foreign as well as domestic-were net sellers in the equities segment on Friday. Foreign institutional investors offloaded stocks worth Rs253.43 crore and domestic institutional investors sold shares worth Rs360.88 crore.

Aban Offshore (down 1.48%) has received firm orders from ONGC for the deployment of jack-up rigs, Aban III and Aban IV, for a period of three years each. The total value of these orders is around $138 million (equivalent to Rs620 crore), the company said in a filing with the exchanges.

McNally Bharat Engineering Company (1.40%) has informed the BSE that the company has received an order from SAIL's Bhilai Steel Plant for its New Coke Oven Battery No 11. The order, valued at Rs379 crore, is scheduled for completion in 24 months.

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Now, sell UID…sorry, hassle more people to get incentive

Maharashtra government is offering incentive to its employees for enrolling more residents for the UID number scheme. The incentive part could be dangerously misused by the state government employees by promising fake benefits to get more people enrolled under the controversial Aadhaar project.

The Maharashtra government has decided to give incentives to its employees for hassling…sorry, enrolling common residents for the unique identification number (UIDN) or Aadhaar number. There are already several stories about the fake promises given by employees, like the Aadhaar number would help in getting foodgrains under the public distribution scheme (PDS), several other benefits given under the below poverty level (BPL) initiatives and so on. The additional attraction of incentive would pose serious risks for people who are unaware of the dangers of the Aadhaar number.

The Maharashtra government has in a resolution (GR) issued on 11 April 2011, said it will pay 25 paisa per enrolment to its employees working in the taluka and municipal zones who are engaged in the enrolment work for Aadhaar. This incentive would be derived from the Rs5 per UID number provided to the district collectors and municipal commissioners in the state. The balance Rs4.75 would be spent on daily expenses incurred for items like electricity, maintenance of the enrolment centre as well as travelling and daily allowances and training and seminar expenses.

The GR also mentions that the union government has sanctioned Rs50 per UID number for enrolling the first 20 crore residents for the Aadhaar project by March 2012. The incentive of 25 paisa per UID number would effectively be paid out of this amount.

Many activists are aghast over issues related to the UID number and this incentive has angered them even more. One activist says, "It (the GR) quotes the central government as having issued a target for the first phase. How can one find out, who precisely defined this target and how does it translate into an objective that can be incentivised?"

Already, many voices have been raised against the forceful implementation of the UID project, with most objections focused on concerns over privacy. The incentive issue will certainly push government employees to enrol more residents by any means, when they don't know what Aadhaar is and how it would affect their lives.

Moreover, there are issues over the legality of Aadhaar itself. The National Identification Authority of India (NIA) Bill is still pending before Parliament. The Bill seeks to constitute a statutory authority and lay down its powers and functions, besides deciding the framework to issue the UID or Aadhaar numbers. Yet, the Indian government and UID Authority of India (UIDAI) has been gone about implementing the scheme and issuing Aadhaar numbers without any constitutional validity as yet.

According to an expert, the government is the executive not empowered by the Constitution to implement projects spending public money without legislative sanction. "In the case of UIDAI, while the executive may appoint anyone to head it, the government is legally constrained from implementing the project and issuing Aadhaar numbers," the expert said.

The NIA Bill is under the consideration of the Parliament Standing Committee on Finance, headed by former finance minister Yashwant Sinha and has members from across the political spectrum.
 

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COMMENTS

Natabar Dey

6 years ago

Not one single person-even the educated and enlightened ones, can tell anyone as to how can anyone obtain an UID. In Tamilnadu, a retired Chief Commissioner of Income-tax, living in Chennai for almost three decades, has been awaiting his EPIC for the last four years! This is India, Sir.

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