Minor gains on the cards but the trend is still down: Friday Closing Report

Nifty may move in the range of 5,390-5480 unless the uptrend resumes

The market settled lower on institutional selling in blue-chips, which resulted in the capital goods, realty and banking sectors ending as the biggest losers today. Today’s closing finally broke the seven-week rally, the first weekly close in the negative since the beginning of 2012.

As we guessed yesterday, today the Nifty slipped below 5,425 and closed a tad above that level. The decline in the past three days may now lead to some buying. But any rally may be met with selling. From here, if the pattern of a lower low and lower high continues, as it did today for the second consecutive day, we may the Nifty finding support at 5,390. At the higher level, index may get resisted in the 5460-5480 area. The National Stock Exchange (NSE) saw a volume of 102.82 crore shares.

Despite positive cues from its global peers the domestic market opened flat for the second day. US stocks closed higher overnight on better-than-expected economic news which also boosted the Asian pack in early trade today. The Nifty opened four points lower at 5,479 and the Sensex was unchanged from its previous close at 18,079.

Initial across-the-board buying saw the indices touching their intraday highs in early trade. At the highs, the Nifty rose to 5,521 and the Sensex climbed to 18,198. However, institutional selling soon led the market into the negative.

News of Citigroup selling its entire stake in mortgage lender HDFC and Etisalat’s exit from the telecom joint venture with DB Realty pulled down individual stocks. Among the sectoral gauges, capital goods, realty and banking suffered the most today.

The losses kept expanding as trade progressed with the market falling to its mid-session low in post-noon trade with the benchmarks dipping below their psychological levels.  At the lows, the Nifty slipped to 5,406 and the Sensex dropped to 17,849.

A minor recovery in the dying minutes enabled the market close off the lows. At the end of trade, the Nifty closed 54 points lower at 5,429 and the Sensex was down 155 points at 17,924. Nifty futures was trading at 40-50 points higher which shows remarkable optimism among the bulls. This alone would be a reason for the market to remain under pressure.

The advance-decline ratio on the NSE was negative at 561:1224.

Among the broader indices, the BSE Mid-cap index fell by 0.64% and the BSE Small-cap index dropped 0.71%.

BSE Metal (up 1.08%); BSE TECk (up 0.56%); BSE IT (up 0.55%); BSE Consumer Durables (up 0.31%) and BSE Fast Moving Consumer Goods (up 0.28%) were the sectoral gainers today. The main losers were BSE Capital Goods (down 2.96%), BSE Realty (down 2.28%); BSE Bankex (down 1.95%); BSE Oil & Gas (down 1.71%) and BSE PSU (down 1.22%).

The top-five Sensex stocks were Sterlite Industries (up 3.83%); Tata Power (up 2.10%); Coal India (up 1.47%); Bharti Airtel (up 0.96%) and Tata Steel (up 0.95%). The main losers were HDFC (down 3.83%); DLF (down 3.44%); Larsen & Toubro (down 3.38%); BHEL (down 2.80%) and State Bank of India (down 2.44%).

Sterlite Ind (up 3.78%); Tata Power (up 2.15%); Coal India (up 1.46%); Power Grid Corporation (up 1.38%) and Jindal Steel (up 1.20%) were the toppers on the Nifty today. The laggards were led by IDFC (down 4.48%); DLF (down 3.66%); Reliance Infrastructure (down 3.63%); HDFC (down 3.62%) and Kotak Mahindra Bank (down 3.30%).

Markets in Asia closed mostly higher, riding on positive economic news. In the US, home sales in January climbed to a nine-month high and weekly jobless claims fell to a four-year low. This apart, the South Korean central bank stated that consumer confidence rose to a three-year high.

The Shanghai Composite gained 1.25%; the Hang Seng added 0.12%; the KLSE Composite rose 0.14%; the Nikkei 225 surged 0.54%; the Straits Times rose 0.33%; the Seoul Composite climbed 0.60% and the Taiwan Weighted settled 0.28% higher. Bucking the trend, the Jakarta Composite tanked 1.62%. At the time of writing, the key European indices were trading with modest gains and US stock futures were in the positive.

Back home, foreign institutional investors were net buyers of shares totalling Rs104.55 crore on Thursday. On the other hand, domestic institutional investors were net sellers of shares amounting Rs640.93 crore.

Pharma major Strides Arcolab today said it has received USFDA approval for its Brazilian plant that produces sterile dry powder anti-biotic injectables. The plant has already been approved by other international regulatory agencies like MHRA and ANVISA and with this approval the company is in a position to commercialise products worldwide in the second half of 2012. Strides closed 0.25% higher at Rs545.15 on the NSE.

Leading steel pipe manufacturer Welspun Corp plans to spend $100 million (Rs500 crore) and add 200 jobs at its 3,50,000-tonne Little Rock production unit in Arkansas state of the US.

Through this expansion, the company will expand its product line of steel pipes to include the production of 6-inch to 20-inch ERW steel pipes, it said. The ERW pipes are largely used by oil and gas companies. The stock tumbled 3.63% to close at Rs141.95 on the NSE.

Panacea Biotec has launched polio vaccine POLPROTEC in Nigeria to help combat the spread of the debilitating disease in the country, one of the last nations still to eradicate the virus. To make the vaccine easily available, Panacea is partnering Emzor Pharma, which has a strong footprint across Nigeria. Panacea settled 3.06% lower at Rs77.50 on the NSE.


DB Realty denies any suit being filed against them

New twist in ongoing tussle between two former partners

A day after UAE-based Etisalat announced that it planned to sue Indian realty major DB Realty for “fraud and misrepresentation”, the latter has issued a statement saying no suit has been filed against them.

A press release from DB Realty said, “DB Realty is in the business of real estate development and has no direct or indirect shareholding in Etisalat DB (EDB). No suit or claim has been filed against DB Realty since it was never party to any agreements or otherwise.” The press release also said that Etisalat’s exit will not affect the financials of DB Realty.

The statement comes a day after Etisalat declared it was going to sue DB Realty for fraud and misrepresentation, and has started legal proceedings in the Bombay High Court against Shahid Balwa, chairman of Etisalat DB (EDB); vice chairman Vinod Goenka and Majestic Infracon Pvt Ltd, a DB group company.

Etisalat said that it was “induced into its investment in the company that was then Swan, without any disclosure of the matters that are now alleged by the CBI (Central Bureau of Investigation) and Supreme Court to have occurred in connection with the obtaining of second generation (2G) licences by EDB”.

The overseas company said that the events occurred a year before it had invested in the joint venture and admitted that it is facing major losses due to its investment “despite having no hand in 2G scam”. The Dubai-based telecom major’s statement was followed by a joint declaration by Mr Balwa and Mr Goenka, who claimed that they had filed a suit against Etisalat for mismanagement with the Company law Board (CLB), but withdrew it because Etisalat promised to perform better. The promoters of DB Realty said that Etisalat did not keep its promise, and said that the JV company was facing FEMA investigations due to Etisalat’s investments; and added that “Etisalat will be held responsible for their wrongful acts”.


Retirement benefit costs up 45% at top 100 companies

The combined estimated liabilities for employee benefits across BSE-100 companies was Rs2.9 trillion as on 31 March 2011, as compared to Rs2 trillion in the year-ago period: Towers Watson study

Indian companies seem to be facing a sharp rise in their liabilities towards employees’ retirement benefits and the cumulative figure for the top-100 firms grew by 45% to Rs2.9 trillion last fiscal.

As per a study conducted by global risk management and human resource consultancy major Towers Watson, the combined estimated liabilities for employee benefits across BSE-100 companies was Rs2.9 trillion as on 31 March 2011, as compared to Rs2 trillion in the year-ago period.

Liabilities for employee benefits for India Inc are long-term in nature and comprise of retirement provision made by the companies. Provident fund and gratuity are two mandatory retirement benefits for employees in India. Besides, gratuity, defined benefit (DB) pension, leave benefits and other DB plans can also be termed as liabilities for employee benefits in India.

“While, the liabilities of companies have increased significantly in the last one year, the proportionate rise in assets has not been commensurate,” Towers Watson India director client account management Kulin Patel said.

The significant rise in liabilities is likely to have a direct impact on the profits, the report said.

“Employee benefits liabilities would continue to increase as companies grow and this becomes all the more important, if the economic environment is uncertain. Going forward, companies should be more vigilant about how their liabilities develop, relative to company financials,” Mr Patel added.

Consistent with findings over the previous years, public sector banks by far have the largest risk of the extent of liabilities against their finances. The liabilities for the banks as a collective within the BSE 100 have increased almost two fold to Rs0.1 trillion as on 31 March 2011 from Rs0.06 trillion as on 31 March 2010.

“This could be due to the liabilities fully reflecting the impact of wage revisions and employees taking advantage of the second pension option offered by the bank into the defined benefit pension scheme,” the report said.

Far behind the banking sector, the oil & gas segment within the BSE 100 takes the second position with average benefit liabilities at Rs0.018 trillion as on 31 March 2011 compared to Rs0.016 trillion as on 31 March 2010.

The findings are based on an analysis of pertinent statistical data found in annual reports of 95 out of the BSE 100 companies and in particular notes to accounts related to employee benefits costs and liabilities.


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