Sensex and Nifty may even try to make a recovery
The local market opened weak on mixed cues from its Asian peers, then skidded further early in the day, after which the indices popped in and out of the red in choppy trade. The early decline was led by selling in rate-sensitive sectors like realty, power, auto and capital goods. While the market crawled into the green in mid-morning trade, the volatility put a cap on the gains pushing the gauges lower again.
The indices continued to swing in the post-noon session, weighed by a huge decline of over 3% on the Shanghai Composite, the biggest decline since mid-November, following Friday's 50 basis point increase in the reserve requirement for banks.
The Sensex opened with a gap-up of 23 points at 18,883, but the Nifty made a negative opening, down six points at 5,649. The market remained volatile throughout the day. The Sensex moved in a range of 239 points (107 points up and 132 points down) and ended in the positive (22 points higher) at 18,882. The Nifty ended flat at 5,655. We expect the market volatility to reduce and the indices to trade in a narrow range before the next move.
Foreign institutional investors have been booking profits continuously since 5th January. But the volume of outflow has slowed down. Last week, we expected the market to fall, which it did. The decline will lose momentum as time passes and we may witness a rally soon. It remains to be seen whether the rally is a strong or a weak one.
The market breadth was tilted in favour of the losers. The Sensex had 17 declining stocks and 13 gainers, while the Nifty settled with 30 stocks in the red and 20 in the green. Selling was more rampant in the broader markets as the BSE Mid-cap index declined 1.39% and the BSE Small-cap index fell 1.40%.
The top sectoral gainers were BSE IT index (up 1.73%), BSE TECk (up 1.33%) and BSE Consumer Durables (up 0.25%). The main losers were BSE Realty (down 2.37%), BSE Metal (down 1.32%) and BSE Capital Goods (down 1.17%).
The top performers in the Sensex list were HDFC (up 3.15%), Infosys (up 2.06%), Cipla (up 1.87%), TCS (up 1.74%) and Bajaj Auto (up 1.62%). The laggards included Reliance Infra (down 7.84%), Jaiprakash Associates (down 5.55%), Reliance Communications (down 4.77%), Sterlite Industries (down 3.80%) and DLF (down 3.19%).
The government is likely to take a decision on the $9.6-billion Cairn-Vedanta deal in the next few weeks and the decision would be taken on merits. "There is absolutely no delay on the part of the government regarding the Cairn-Vedanta deal. We will come to a decision on this (deal) in the course of the next few weeks. The decision will be taken on merits," said oil secretary S Sundareshan.
Asian markets closed mostly in the red today, on fears that various nations in the region might tighten policy measures to rein in prices, following the Chinese example. Profit-taking after recent gains was also seen as a reason for today's decline.
The Shanghai Composite plunged 3.02%, the Hang Seng fell 0.52%, the Jakarta Composite slid 0.94%, the Straits Times lost 0.23%, the Seoul Composite was down 0.39% and the Taiwan Weighted declined 0.83%. On the other hand, the KLSE Composite gained 0.29% and the Nikkei 225 added 0.04%.
Back home, cooking oil prices are reported to have surged by up to 62% in last one year, according to Solvent Extractors Association. They expect retail prices of edible oils to remain firm in the wake of high global prices.
Foreign institutional investors were net sellers of stocks worth Rs748 crore on Friday. On the other hand, domestic institutional investors were net buyers of equities worth Rs290.11 crore.
Triveni Engineering & Industries (down 4.71%) has signed a renewal of its license agreement for a term of 12 years with US-based Lufkin Industries Inc, to manufacture high-speed gear and gear boxes. The geographical coverage under the agreement has also been extended to cover major markets in South-East Asia such as Malaysia, Indonesia, Singapore and Thailand.
Steel Strips Wheels (SSWL) (down 0.02%), has bagged a prestigious contract from Peugeot Citroen (PSA) group, one of the major car makers in Europe. The Indian major has been a supplier of its products to the European car major for the past four years. The new business involves supply of nearly 0.6 million wheels in the next five years and foreign exchange earning of almost $9 million.
Sensex and Nifty may even try to make a recovery
IT hardware major HCL Infosystems (up 2.45%) has received a contract from Kerala State Electronics Development Corporation (Keltron) to provide laptops and netbooks to the state government's [email protected] project. However, the deal value was not disclosed. The project has been initiated by the Kerala government to foster IT education and facilitate information and communication technologies-enabled education delivery in schools across the state.
Follow-on public issue to raise up to Rs3,700 crore for Jamshepur expansion hits market on Wednesday
Tata Steel has acquired nearly 75% of land required for its greenfield project at Kalinganagar in Orissa and it intends to start work soon, Hemant M Nerurkar, managing director, Tata Steel, told Moneylife.
"Right now, we have almost 75% of land in our possession for the greenfield project in Orissa and it is enough to start work on the first phase of the project. We will start construction work soon," Mr Nerurkar said.
Tata Steel has been struggling to set up a greenfield project in Orissa for the past few years. "Developments in our projects in Orissa had not gone up to our expectations. However, the brownfield project in Jamshedpur is going well," he pointed out.
The company has planned a follow-on public offer (FPO) to raise Rs3,500 crore to Rs3,700 crore, to enhance domestic production capacity at its Jamshedpur plant and repay debt. The rest of its will also be used for general corporate purposes. The FPO hits the market on 19th January.
The FPO comprises a net issue of 55,500,000 equity shares to the public and a reservation of 1,500,000 equity shares for subscription by eligible employees. The issue will close on 21st January. The price band has been fixed between Rs594 and Rs610 a share.
"We will use around Rs1,700 crore to Rs1,800 crore for expansion of existing works at the Jamshedpur steel plant, around Rs1,000 crore will be used to repay debt and the rest of it will be used for other investment purposes," said Koushik Chatterjee, chief financial officer. Tata Steel plans to add 3.2 million tonnes to its current production capacity of 6.8 million tonnes at the Jamshedpur plant by December 2012.
"The company could also invest some part of the proceeds for the Bengal coal project of Riversdale," Mr Chatterjee said. "After this offer (FPO), the promoter's share holding in the company will come down by around 2.4% to 30.8%."
The company has appointed seven banks to manage the issue-Kotak Mahindra Bank, Citi, Deutsche Bank AG, Royal Bank of Scotland Plc, SBI Capital Markets, Standard Chartered Bank Plc and HSBC Bank.
On the volatility in steel prices, Mr Nerurkar said, "Prices of steel will go up in line with rising prices of raw materials, mainly coking coal." He also said that prices of steel cannot be increased every time as it could distract demand.
Analysts feel that the company will not suffer a hit on account of rising coking coal prices in the international market as about 60% of its requirement is met from captive mines.
"We are not facing any kind of difficulties for securing raw materials supply. We have sufficient stock of coking coal and iron ore," Mr Nerurkar said.
New Delhi: Industry chamber, Confederation of Indian Industry (CII) today pitched for expeditious enactment of the Insurance bill to hike the FDI in private insurance companies to 49%, from the current 26%, to raise the penetration level, particularly in the rural markets, reports PTI.
Insurance penetration in rural and social sectors is marked by high risk and hence require more dynamic and efficient risk management systems, CII said in a statement.
"...Hence there is a strong need to raise FDI cap in Insurance sector from the current 26% to 49%," CII said in its comments on the Insurance Laws (Amendment) Bill, 2008.
The Insurance Bill, when enacted, would allow raising the FDI cap for the industry to 49%. However, it has been awaiting approval since 2008 as it was delayed by strong opposition from the Left parties.
The insurance sector already has joint ventures with several foreign companies like ERGO International AG, Prudential Plc, ING Group, Allianz and Aviva.
These companies would be able to increase their investments in their Indian joint ventures if the FDI limit is increased.
"Greater foreign investments would help in training and skills upgradation of the agents. Raising the FDI cap will enable expertise (skills) and know-how transfer that are generally not available under the current regime," CII said.
The industry chamber said currently there is a shortage of expertise in the Indian insurance industry (like actuarial, underwriting, claims management).
Further, CII has suggested that non-executive directors of a corporate agent be permitted to be the director of a life insurance company.
"This would help regularise many cases where the promoter companies of the insurance companies have their own corporate agency like banks and finance companies," it said.