Huge volatility ahead of the Union Budget: Friday Closing Report

The stock markets remain highly volatile ahead of the Union Budget, to be presented on Monday. Both, the Sensex and Nifty ended the day in the green; however, markets will get a clear direction only after the Budget

Tracking the gains in the Asian stock markets this morning, post the easing of crude prices, the domestic market opened in the green. The market was jittery ahead of the announcement of the Economic Survey and the Railway Budget, which resulted in the Sensex dipping into the red in early trade and the Nifty was almost there. However, buying support soon lifted the indices higher and they stayed range-bound till 1pm.

With no mention of any credible projects for rail infrastructure that related companies could benefit from, the market pared early gains and slipped to the day's low in post-noon trade. Buying support in fast-moving consumer goods, banking and auto lifted the market into the green in continuing volatile trade and closed positive, snapping a three-day fall.

The Sensex and Nifty opened with a gap-up at 17,775 and 5,321, 10-day opening lows. Although the market ended positive today, the indicators have started finding some direction. The market is headed for a fall. The manner in which the market has lost in the past few days shows that the gains are very slow. This shows that the bears still have control on the market.

The Sensex and the Nifty hit an intra-day low of 17,470 and 5,233, respectively. The intra-day high for the Sensex was 17,812 and for the Nifty it was at 5,338. The Sensex closed 69 points up at 17,701 while the Nifty gained 41 points at 5,304. The advance-decline ratio on the National Stock Exchange was 600:795.

The market will get a clear direction after the close of trade on Monday, when the Union Budget is going to be presented. However, all rallies are likely to be short-lived.

The market breadth on the key indices was mixed today. While the Sensex closed with 17 losers and 13 gainers, the Nifty had 33 advancing stocks and 17 in the declining list. The broader indices lagged behind today with the BSE Mid-cap index declining 0.22% and the BSE Small-cap index falling by 0.31%.

BSE Fast Moving Consumer Goods (up 2.20%), BSE Bankex (up 1.86%) and BSE Auto (up 0.75%) were the top gainers in the sectoral space while BSE IT (down 0.72%), BSE Capital Goods and BSE TECk (down 0.49% list) were the top losers.

Tata Motors (up 4.43%), ICICI Bank (up 3.55%), ITC (up 3%), State Bank of India (up 2.09%) and Jindal Steel (up 1.87%) were the major performers on the Sensex while Reliance Communications (down 5.40%), Reliance Infrastructure (down 4.58%), Mahindra & Mahindra (down 3.38%), Hindalco Industries (down 2.48%) and Sterlite Industries (down 2.23%) topped the losers' list.

According to the Economic Survey, the economy is expected to revert to the pre-crisis growth level of 9% in the next fiscal, buoyed by strong fundamentals. "Based on the performance of the economy over the last five years and analysis of the underlying trends... India's real gross domestic product (GDP) is expected to grow by 9% (+/-0.25%) in 2011-12," the pre-budget survey tabled in Parliament today stated.

Presenting her third budget in UPA-II in the Lok Sabha today, railway minister Mamata Banerjee spared the passengers of any increase in fares and proposed no hike in freight rates, while announcing 56 new train services, including nine non-stop Duronto trains and three Shatabdis. The budget has proposed the highest-ever plan outlay of Rs57,630 crore for 2011-12.

The minister also announced the introduction on a pilot basis of a pan-India, multi-purpose 'Go India' smart card, which would be a single-window package for passengers for seamless payment for tickets for long distances, suburban and metro journeys.

Markets in Asia finished on an optimistic note on easing crude prices. Oil prices retreated after the International Energy Agency assured it was prepared to release its emergency oil stockpiles to offset any shortfall resulting from the flare-up in Libya. The Hang Seng gained for the first time in four days, as investors went bargain-hunting after the index had plunged to a five-month closing low on Thursday. The Shanghai Composite settled unchanged after gaining 0.3% yesterday.

The Hang Seng jumped 1.82%, the Jakarta Composite rose 0.13%, the Nikkei 225 advanced 0.71%, the Straits Times surged 1.75%, the Seoul Composite gained 0.69% and the Taiwan Weighted advanced 0.68%. On the other hand, the KLSE Composite ended 0.04% and the Shanghai settled flat with a negative bias of 0.02 points.

Crude for April delivery jumped 2% to $99.20 a barrel in New York. It is up 14% for the week, the biggest jump for a benchmark futures contract in two years. In London, Brent for April delivery advanced 1.7% to $113.25 a barrel.

With no new proposals that would enthuse rail equipment companies, stocks of companies in the sector fell. Stone India declined 7.53%, Texmaco tanked 7.98%, Titagarh Wagons plunged 13.06%, BEML lost 2.90%, Kernex Microsytems declined 4.97%, Kalindee Rail Nirman tumbled 13.74% and Hind Rectifiers declined 13.84%. Bucking the trend, Container Corporation of India gained 3.15%.

Omaxe Infrastructure & Construction, a wholly-owned subsidiary of Omaxe (up 0.93%) has been awarded a project valued at around Rs136 crore by the Ministry of Defence. The project is for construction of dwelling units including allied services for officers, JCOs/OR at Deolali (Army) and Nasik (Air Force).

Kajaria Ceramics (up 1.55%) has acquired 51% stake in Gujarat-based Soriso Ceramic for a total consideration of Rs5.60 crore. Consequently, Soriso Ceramic is now a subsidiary of Kajaria Ceramics. The latter has an annual capacity of 2.30 million sq metres per annum of rectified ceramic floor tiles, the addition of which would take the Kajaria's total capacity to 30.60 million sq metres by March 2011.


ICVL may buy coal assets in Australia

ICVL, the joint venture between five State-owned companies, is also participating in the bidding process for acquisition of equity in some underdeveloped coal assets abroad

International Coal Venture Ltd (ICVL) is reviewing several proposals for acquiring coal assets in Australia with a view to examining their suitability and viability, according to a statement made by coal minister Sriprakash Jaiswal in the Lok Sabha.
ICVL, a joint venture of five State-owned companies-Steel Authority of India, Coal India Limited, Rashtriya Ispat Nigam Limited, NMDC Limited and NTPC, has been formed for securing metallurgical coal and thermal coal assets in overseas territories.
The company is also participating in the bidding process for acquisition of equity in some underdeveloped coal assets abroad, said the minister.
However, Mr Jaiswal added that no acquisition has been made so far.
ICVL, at the time of its constitution, had set itself a target to buy at least one coal asset by the end of March, but has made no progress yet.
Steel and power companies in India are facing difficulties in securing coal mines, due to problems with environment clearances and stiff opposition from local communities.
Indian steel companies' demand for coking coal is met by imports, as the country merely produces coking coal. Demand for coking coal has been growing as State-owned and private players are ramping up production capacity.
ICVL has identified Indonesia, Mozambique, the USA and Colombia as target countries for acquisition of coal assets and proposals received from these countries are also under review, added Mr Jaiswal.
 Power companies are also facing shortage of thermal coal supply in the country. In its recent report, ICRA says, "The demand-supply gap in the domestic industry is likely to widen significantly over the medium- to long-term as many large-size, coal-based power projects are expected to be commissioned over this period. Many of these projects were conceived on the premise that domestic coal would be available to them in the required volumes."
 Since the last quarter, prices of coking coal and iron ore have been shooting up in international markets, as the floods in Queensland (Australia) has disrupted mining and shipments of coal, amid surging demand.
The coal will be sourced from assets-once they are acquired-and would primarily be used by the promoter companies of ICVL, the minister added.


Eco Survey: 9% growth next fiscal, unrest in Middle East, inflation dampeners

The Economic Survey 2010-11, tabled in the Lok Sabha by finance minister Pranab Mukherjee, said tight monetary policies would have to stay to curb inflation and mitigate global risks such as rising food and commodity prices and debt problems in the European nations

New Delhi: Inflation will remain a priority for the government which projected over 9% economic growth in the next fiscal even as downside risks emerge from rising oil prices due to turmoil in the Middle-East, reports PTI.

The Economic Survey 2010-11, tabled in the Lok Sabha by finance minister Pranab Mukherjee, said tight monetary policies would have to stay to curb inflation and mitigate global risks such as rising food and commodity prices and debt problems in the European nations.

Ahead of the general budget, the survey made out a case for gradual exit of stimulus provided to the industry to combat the impact of the global financial crisis in 2008-09.

Insisting that the inflation is clearly the 'dominant' concern, the survey said "current growth and inflation trend warrant persistence with an anti-inflationary monetary stance". Consolidation of fiscal deficit would also be essential to check the price rise, it added.

"Inflation is a matter of great concern, no doubt. Just one year ago in February 2010 food inflation was as high as 20.2%... though it is high but it has come down in January... still it is an area of concern and we shall have to work on it, particularly in the context of global economic crisis," Mr Mukherjee told reporters after tabling the survey.

The survey, considered a report card on the economy, listed rising international oil prices and sovereign debt problems in the Euro zone and the political turmoil in the Middle East as the downside risks for the Indian economy.

Higher current account deficit due to impact of fragile global recovery on Indian exports and increasing domestic consumption was listed as an area of concern.

"The problem may be further aggravated by the rising international oil prices," it added.

For the current fiscal, the survey said, the economy would grow by 8.6%, up from 8% a year ago. "It is expected that the growth will breach the 9% mark in 2011-12", reaching the pre-crisis levels.

The survey also suggested a set of reforms, including streamlining of land acquisition and environmental clearance norms, to expedite infrastructure projects, a crucial driver of growth.

Besides, it also pitched for opening of foreign direct investment (FDI) in multi-brand retail starting with metro cities. "FDI in retail may help bring in technical knowhow to set up efficient supply chains which could act as models of development," the survey added.

It also pressed for reforms in banking and insurance sector.

The survey suggested private participation in social sectors such as health and education in the form of public-social-private-partnership to supplement the government efforts.

India, the survey said, needs a policy to bring another round of multifaceted reforms for the industrial sector to have a sustained double-digit output growth in the medium to long-term.

In the short-term, the sector is likely to grow at moderate but sustainable rate. However, increasing cost of financing and slowdown in foreign equity inflows in the current financial year are causes for concern.

"Over the medium to long-term, to sustain double-digit output growth and reduce the vulnerabilities of the sector, there is a need to put in place a policy framework for embarking on another round of multifaceted reforms," it said.

It also pitched for giving banking licences to industrial houses wanting to set up banks to promote the goal of financial inclusion.

"As regards allowing industrial houses, business houses and NBFCs to promote banks, they may be allowed full banking license with provision for avoiding conflict of interest issues," it said.

On India's exports, it said that shipments will surpass the $200 billion target for the current fiscal and the gradual roll-back of stimulus measures is not likely to impact growth of the country's overseas shipments.

On insurance, it said that there will be different set of norms for life and non-life insurance companies for coming out with a public float.

"It is proposed that the disclosure requirements for life and non-life companies would be separately mandated given the nature of their respective business," the survey said.

It added that investors would be required to be made aware of the financial performance, company profile, financial position, risk exposure, corporate governance and management of these companies.

To contain excessive flow of foreign capital, it said that India should work closely with G-20 countries to take collective steps.

"We will have to keep open the options of having to take corrective measures, should these flows affect us adversely.

The most important step in this context is to work with the G-20 countries and try to figure out collective decision rules, whereby each country tries to intervene minimally in the flow of capital," the pre-budget survey said.

It further said, "When it does intervene, it does so taking into account the externalities on other nations."

The continuing debt turmoil in the euro zone area could have an adverse fallout on the Indian economy, hurting its capital flows as well as exports, it added.


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