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Weekly Market Report: Sensex trying to shrug off bad news and target 20,200

The local market ended the holiday-shortened week with modest gains on the back of positive economic indicators, mainly from the domestic space. The Reserve Bank of India’s (RBI) decision to keep key rates unchanged on the last trading day of the week, boosted investor sentiments.

The broader markets led the gains on Monday, overcoming initial hiccups and helping the markets close with modest gains. The market, which witnessed a fair deal of volatility on Tuesday, ended in positive territory for the third day in a row, tracking global cues and on better-than-expected domestic inflation numbers for November.

The market ended its three-day winning streak on Wednesday on global economic concerns and on cautiousness ahead of the announcement of the RBI’s mid-term policy. The indices made a splendid recovery on Thursday (the last trading day of the week) despite choppy trade and ignoring the rise in the weekly food inflation data, as the RBI decided to keep policy rates unchanged.

The market ended the week in the green, with a gain of 2% on the Sensex and Nifty.

The top gainers on the Sensex during the week included Tata Motors (up 8%), Tata Steel (up 7%), Reliance Infrastructure, TCS (up 6% each) and Sterlite Industries (up 5%). On the other hand, Hero Honda, Mahindra & Mahindra (down 6% each), Jindal Steel & Power (down 4%), Bajaj Auto and Maruti Suzuki (down 2% each) were at the bottom of the list.

In the sectoral space, the BSE IT index (up 5%) and BSE TECk (up 4%) were the noteworthy gainers. BSE Fast Moving Consumer Goods and BSE Bankex ended flat.

With the declining trend in inflation and amid reports of a liquidity crunch, the RBI said on Thursday that it has decided to buy government securities from banks to the tune of Rs48,000 crore in the next one month to inject more funds into the system.

In its mid-quarter review of monetary policy, the apex bank kept its short-term lending and borrowing (repo and reverse repo) rates to banks unchanged at 6.25% and 5.25%, respectively. It maintained the mandatory cash reverse ratio (CRR) at 6% of the banks’ total deposits.

Rising for the second week in a row, food inflation reached 9.46% during the week ended 4th December as vegetables turned expensive, even as the RBI deferred a further hike in policy rates in view of overall moderation in the price rise. Even though food inflation rose from 8.69% in the previous week, it is less than half of 20.90% recorded in the corresponding week of the last year.

Easing food prices pulled down the wholesale price index (WPI) based inflation to an 11-month low of 7.48% in November. The fall in inflation prompted finance minister Pranab Mukherjee to express the hope that it will come down to around 6% by this fiscal-end. The RBI has pegged it at 5.5% by March.

This is the fourth consecutive month when the overall inflation has been in the single digits. It had remained over 10% for six months till July. The last time inflation was below 8% was in December 2009 when it stood at 7.31%.

The three state-run oil marketing companies—Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL)—this week hiked petrol prices on the back of a rise in global crude prices. While BPCL increased the petrol price in Delhi by Rs2.95 a litre, IOC raised the price by Rs2.96 and HPCL by Rs2.94 per litre. Sources said a Rs2 per litre hike in diesel prices is on the agenda of a meeting of the Empowered Group of Ministers, headed by finance minister Pranab Mukherjee, on 22nd December.

In international news, foreign direct investment (FDI) into China rose for the 16th consecutive month to hit $9.704 billion in November, indicating that China remains a favoured investment destination. The November figure brings inbound FDI for the first 11 months to $91.707 billion, a year-on-year increase of 17.73%.

The Bank of Japan’s quarterly Tankan index of sentiment among large manufacturers slipped to 5 in December from 8 in September. A positive number means optimists outnumber pessimists.

Ireland’s parliament approved the 85 billion euro EU/IMF bailout package on Wednesday despite opposition threats to renegotiate the deal that would force losses on some senior bondholders in Irish banks. 

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NTPC may float another FPO next fiscal

New Delhi: State-run power producer NTPC may approach the government next fiscal for permission to raise funds through a follow-on public offer (FPO) to part-finance power equipment purchases worth an estimated Rs1,50,000 crore, reports PTI.

“NTPC may approach the government next fiscal for a follow-on offer,” a power ministry official said.

NTPC currently generates over 32,000MW of electricity per annum, but plans to ramp up capacity to 75,000MW by 2017.

For this purpose, it is expected to float a Rs1,50,000 crore international competitive bidding tender to source the power equipment.

However, the stake to be divested by the government and the fresh equity to be offered under the FPO could not be ascertained, as the proposal is still at a nascent stage.

NTPC has already raised over Rs 8,000 crore through its FPO in February this year.

The company may also borrow from overseas to fund its expansion plans. “It may raise money from the overseas market,” the official added.

NTPC recently tied up with Japan-based Bank of Tokyo-Mitsubishi UFJ for a $300 million loan to part-finance its ongoing and new projects.

Meanwhile, the power ministry is gearing up for the 20% follow-on offer of state-run Power Finance Corporation, which is likely to be launched early next fiscal.

PFC would raise fresh equity to the tune of 15% and the government would divest a 5% stake in the company through the FPO.

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