Indian markets rally, ignore Asian & global developments

Bourses poised to remain in positive territory during Thursday’s trade

Indian markets remained highly volatile throughout the day, as they opened lower from yesterday’s close on weak global cues, followed by China’s move to curb lending. However, at the end of the day, bourses shrugged off weak global cues following strong industrial production data and on expectations that Indian firms may report good earnings in the third quarter. The Sensex gained 87 points from the previous day’s close, ending the day at 17,510, while the Nifty closed at 5,234, up 24 points.

During the day, Asia’s key benchmark indices in Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan fell by between 0.87%-2.59%, while China’s index fell 3.09%.

As per reports, the Chinese central bank said that China will raise the proportion of deposits banks must set aside as reserves, by 50 basis points starting 18 January 2010.

On Tuesday, 12 January 2010, the Dow Jones Industrial Average fell 38 points while the S&P 500 and the Nasdaq Composite declined 11 points and 30 points respectively.

In premarket trading, the Dow was trading 10 points lower.

Back home, at 11:30 hrs, the Sensex slid by 63 points to 17,360 while the Nifty was trading below 5,200 at 5,187, down 24 points, following China raising its cash reserve ratio by 50 basis points. However, at 14:00 hrs, the Sensex was trading up 29 points from the previous day’s close at 17,451 while the Nifty was trading at 5,213, up three points.

Cement stocks rallied during the day, following reports that cement makers are set to hike prices by Rs3-Rs5 per 50-kilogram bag from Friday, 15 January 2009, in northern, southern and western markets. ACC was up 6% while Ambuja Cement and UltraTech Cements were up 5% each.

Banswara Syntex rose 14%, after the company bagged an order for supply of three-layer waterproof breathable fabrics for an undisclosed sum.

Deepak Nitrite shot up 20%, after the company launched new products in the fuel additives space.

Entertainment Network (India) was up 5%, on reports of follow-up buying after the RBI allowed foreign investors to buy further shares in the Mumbai-based media firm.

Sintex Industries posted 2% and 12% growth in sales and operating profits in the December 2009 over December 2008 quarter. The stock was down 1%.

IVRCL Infrastructures & Projects announced that it has bagged road projects worth Rs1,550 crore. The stock remained flat. 

During the day, finance minister Pranab Mukherjee said that the Indian economy is expected to grow by around 7.75% in the fiscal year to March 2010, but food price inflation was a major concern. He said that the government could unload surplus wheat and rice stocks for open market sale. He also said that India’s rising expenditure for fertiliser subsidy is a matter of concern.

Montek Singh Ahluwalia, deputy chairman, Planning Commission, said in an interview to a television channel that food price inflation was a worrying problem, but he expected prices to go down.

Agriculture minister Sharad Pawar said that high food price inflation may start moderating in seven to ten days, following the measures unveiled by the government.

Meanwhile, Anand Sharma, trade minister, said that the government will give financial incentives to exports of around 2,000 products including those in engineering, electronics and chemicals. He also added that the boost, to support a nascent recovery in India’s exports sector, would cost up to an additional Rs500 crore ($110 million) in the current fiscal year ending in March.

As per a survey by leading staffing firm, TeamLease Services, India Inc still remains cautious about hiring in the January-March period. According to the quarterly report, hiring sentiment saw a marginal improvement with the employment outlook index for the January to March quarter standing at 47 index points, 1% higher than the previous quarter.

Tomorrow the market will open higher. If the Nifty ends up above 5,250, then we won’t be surprised to see it make a new high above 5,300.
 

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Sugar prices to decline within a week, says Pawar

The Indian government has taken a slew of measures to increase availability of sugar, pulses and other commodities. It hopes that rates of the sweetener, being sold at nearly Rs50 a kg, would start declining in a week

Under attack over the rise in prices, the Indian government on Wednesday took a slew of measures to increase availability of sugar, pulses and other commodities and hoped rates of the sweetener, being sold at nearly Rs50 a kg, would start declining in a week's time, reports PTI.

To increase the availability of sugar, the government relaxed the norms for processing of raw sugar and allowed duty-free import of white sugar till December-end.

A host of decisions, including selling of two-three million tonnes of wheat and rice in the open market over the next two months and asking state-owned trading firms to intensify import of pulses, was taken at a meeting of the Cabinet Committee on Prices chaired by prime minister Manmohan Singh.

Food & agriculture minister Sharad Pawar told reporters that the prime minister would convene a chief ministers' meeting in the last week of this month to discuss the price situation and take stern action against hoarders.

These steps, Mr Pawar said, "would definitely impact the price situation. Prices would come down in four to eight days."

The government has come under intense criticism from all parties, including UPA partner Trinamool Congress, for rising food inflation, which soared to a decade's high of about 20% in December.

Mr Pawar said as the Uttar Pradesh (UP) government has not allowed processing of imported raw sugar, the Union government has relaxed the Central excise duty rules enabling mills to carry out refining elsewhere.

Nearly nine lakh tonnes of imported raw sugar are lying at Kandla and Mundra ports following the restrictions imposed by the UP government in November 2009.

This apart, several state governments have been advised not to impose value added tax (VAT) on imported sugar. They have also been asked to take stringent measures to check hoarding and black-marketing.

The Union government may increase the subsidy on imported edible oil from the prevailing rate of Rs15 a kg. The subsidy scheme for public distribution of imported edible oil under the states will continue till 31 October 2010. It was to earlier supposed to lapse on 31st March.

Cooperative major National Agricultural Cooperative Marketing Federation (NAFED) and the National Consumer Cooperative Federation (NCCF) will be authorised to distribute subsidised imported oil and pulses in states that are not implementing the scheme.
 

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Newsviewer Exclusive
SEBI issues inane order on Reliance Mutual Fund ad

Lack of clear regulation led to an absurd tussle between SEBI and Reliance Mutual Fund over the duration of the statutory warning in the Fund’s ad.

Lack of clear-cut regulation from the Securities and Exchange Board of India (SEBI) on how to calculate the duration of the statutory warning (on the investment risks involved) in mutual fund advertisements has led to a frivolous tussle between Reliance Mutual Fund (RMF) and the market regulator. The tussle has ended with SEBI asking RMF to follow the rules, without being able to prove the precise nature of the violation.

The market watchdog had issued a show-cause notice to RMF and Reliance Capital Asset Management Ltd (RCAML) for Reliance Infrastructure Fund’s recent advertisement, saying that the statutory warning (“Mutual Fund Investments are subject to market risks, please read the scheme information document carefully before investing”) ran for less than 5 seconds, which violated the SEBI circular of 26 February 2008. RMF was asked to withdraw its advertisement immediately. RMF complied and thereafter ran a new advertisement in which the standard warning was for a duration of six seconds. 

Dr KM Abraham, a member of SEBI, in his order issued on Wednesday, stated that RMF had failed to prove that the statutory warning in the advertisement ran for five seconds, even though SEBI, in its notice to RMF, did not mention the actual duration of the statutory warning. He could only claim that the statutory warning in the ad was meant for informing and protecting investors.

SEBI merely charged that the duration of the statutory warning in the CD submitted by RMF was less than 5 seconds. Besides, it argued that if RMF had complied with the SEBI circular, it would not have withdrawn the commercial immediately after the order! This is strange logic. It is as if a motorist, having being asked to pull aside, is asked to prove that he did not violate traffic rules. And also asked, if there was no violation, why did he pull aside?

The source for all this confusion is SEBI itself. While it is bothered that the statutory part of the ad must run for 5 seconds, it has not bothered to specify how to calculate this time period. In a hearing on 1 October 2009, the RMF counsel contended that the measurement of the audio-visual component ought to be from the point at which either the audio or the visual starts, to the point when the last of the two components stops. SEBI had no counter-argument to this view.

To bolster its case in this inane issue, RMF obtained an opinion from an ENT (Ear Nose and Throat) specialist who had stated that the advertisement submitted to SEBI was indeed coherent and comprehensible.

The SEBI circular dated 26 February 2008 increased the mandatory duration of the standard warning in audio-visual advertisements from two seconds to five seconds.
 

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