Indian stocks to see gap-down opening: Thursday Market Preview

Inflation numbers will be the focus of marketmen today

The Indian stock market is likely to open lower on mixed cues from the Asian pack after Moody’s threatened to downgrade US’ triple-A rating for the government’s failure to raise its debt ceiling even as the 2nd August deadline draws near. Earlier, in overnight trade US stocks closed higher as Federal Reserve chief Ben Bernanke assured investors that it would consider additional measures to support the economy if things get worse.

Back home, the government is expected to release headline inflation numbers for June. The fuel price hike by the government last month will see the inflation going up. Inflation for May stood at 9.06%. It has been above 8% since January 2010 and It has stayed above 9% since December last year but moderated to 8.66% in April this year. Besides, the weekly food inflation data will also be released today.

The market snapped its three-day losing streak to close higher on Wednesday, along with its Asian peers and all-round buying support from institutional investors. Earlier, the Nifty opened 16 points higher at 5,542 and the Sensex resumed trade at 18,469, up 57 points from its previous close. The indices touched the day's low in the initial session, with the Nifty dipping marginally to 5,541 and the Sensex a tad lower to 18,465. Subsequently, the market resumed its upmove on good buying in the realty, consumer durables and healthcare sectors.

The market pared a small portion of its gains in mid-morning trade, but continued its northbound journey on support from institutional investors. Despite choppiness in the post-noon session, consumer durables and oil & gas sectors were the top sectoral gainers in post-noon trade. The indices touched their day's high in the closing minutes of trade, with the Nifty scaling 5,596, and the Sensex at 18,626.

All-round buying support ensured that the markets closed near the day's highs. The Nifty closed 59 points up at 5,585 and the Sensex settled at 18,596, up 184 points.

On Tuesday, we had mentioned that the Nifty would rise to 5,600. The index was close to this level today. The Nifty may now rally up to 5,665.

US stocks rose higher on Wednesday as Fed chief Bernanke asserted that the central bank would consider new initiatives to support the economy if things get worse. The Fed’s $600 billion bond-buying programme, known as QE2, has contributed to huge equity gains since September last year.

However, Moody’s warning that it would downgrade the US credit rating of ‘triple-A’ as the government is still not able to find support for raising its debt ceiling. The move is expected to impact stocks on Thursday.

The Dow gained 44.73 points (0.36%) to settle at 12,491.61. The S&P 500 added 4.08 points (0.31%) to 1,317.72 and the Nasdaq rose 15.01 points (0.54%) to 2,796.92.

Markets in Asia were mixed in early trade on Thursday after Moody’s said that it would downgrade US government debt. The threat pushed the dollar lower against other global currencies and weighed on investor sentiments. Besides, investors are also concerned about the worsening debt situation in Europe.

The Shanghai Composite gained 0.36%, the Jakarta Composite rose 0.15%, the Straits Times advanced 0.23% and the Taiwan Weighed added 0.19%. On the other hand, the Hang Seng fell 0.16%, the KLSE Composite shed 0.07%, the Nikkei 225 declined 0.37% and the Seoul Composite fell 0.42% in early trade.

Back home, Indian lenders are not in favour of the Reserve Bank of India’s (RBI) proposal to deregulate savings deposit rate—the only regulated one in the system now—citing the current volatile market environment.

Savings deposits that are a source of low-cost funds for banks form 22% of banks' total deposit base, the RBI had said in late April.

The Indian Banks’ Association (IBA), the apex banking body, has conveyed banks’ stance to the RBI ahead of its quarterly monetary policy review on 26th July.


Three blasts at Dadar, Zaveri Bazar and Opera House in Mumbai; scores injured, some deaths reported

Explosions happened at about 7pm; not known immediately who may be responsible

At least three blasts occurred in separate parts of Mumbai late this evening injuring scores of people, according to information available. Some deaths were also reported in the explosions that happened at around 7pm.

Very little was known immediately about the explosions that went off in the generally busy Dadar area in central Mumbai, and Zaveri Bazar and Opera House in south Mumbai. Police said it was too early to say anything specific about how the blasts happened or who may be responsible.

The incident brought back memories of the serial train bombings five years ago that killed over 200 people and wounded 700 more. The seven blasts that went off within a few minutes on the suburban Western Railway, on 11 July 2006, were carried out by the Lashkar-e-Toiba and Students Islamic Movement of India.

In November 2008, in a coordinated terror attack in South Mumbai, about 160 people were killed and 300 injured at Chhatrapati Shivaji Terminus (the main railway terminal), Taj Mahal Palace and Tower hotel, Oberoi Trident hotel, Cama Hospital and Nariman House (a Jewish community centre).

Zaveri Bazar, a busy business area of the city, has previously suffered two explosions that killed about 50 people.


Montek suggests higher power tariffs during peak hours

Power distribution companies in the country are estimated to have incurred a staggering loss of about Rs70,000 crore in the last fiscal and the amount is expected to be as much as Rs1,16,000 crore by 2014-15

New Delhi: Raising concerns about the health of power distribution utilities, Planning Commission deputy chairman Montek Singh Ahluwalia today suggested introduction of different electricity tariffs for peak and off-peak hours, reports PTI.

Power distribution companies in the country are estimated to have incurred a staggering loss of about Rs70,000 crore in the last fiscal and the amount is expected to be as much as Rs1,16,000 crore by 2014-15.

Speaking at the power ministers conference on distribution reforms here, he said it is easy to have a 'time of the day tariff', where the rate is slightly higher for the peak period.

"The real issue is the difference between peak and non-peak is sufficiently large to actually encourage a switch.

That probably requires higher tariffs during peak period and may be even lower tariffs during non-peak periods," he said.

Peak period generally refers to the time when electricity is high compared to ordinary time.

There has always been a mismatch between power tariffs and the cost of generating electricity, which is hurting the financial health of power distribution companies (Discoms).

Going by estimates, electricity distribution losses touched about Rs70,000 crore in 2010-11.

Power secretary P Uma Shankar noted that electricity distribution losses are expected to reach as much as Rs1,16,000 crore by 2014-15.

"Losses are seeing an upward trend... We have to improve the health of Discoms," he said.

The main focus of the power ministers' conference is the financial health of Discoms and reasons for huge losses incurred by them. The country has about 73 power distribution entities.

"To tackle the commercial losses, strong political will is required. Curbing power pilferages and improving governance can bring down the losses," minister of state for power KC Venugopal said.

The government has taken various initiatives, including Restructured Accelerated Power Development and Reform Programme (R-APDRP), to reduce the Aggregate Technical and Commercial (AT&C) losses in power distribution area.

According to power minister Sushil Kumar Shinde, more than Rs40,000 crore have already been spend on R-APDRP.

AT&C losses in the country are pegged in the range of 20% to 40%.


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