Monday’s Market Preview: Flat-to-positive opening likely

The Indian market is likely to witness a flat-to-positive opening on the back of mixed global cues. Wall Street ended sharply lower on Friday as the Group of Twenty (G-20) meeting failed to come up with any constructive understanding at the end of two-day meeting over the weekend. Markets in Asia were mixed despite higher-than-expected gross domestic product (CDP) numbers for the September quarter. The SGX Nifty, which opened strong, pared early gains and was just 1.50 points higher at 6,085.50 compared to 6,084 on Friday.

The aftermath of the festive season proved costly for investors as global cues, weak domestic industrial growth numbers for September and mixed earnings reports trashed the indices last week. Pullout by foreign institutional investors also weighed on the markets. The Sensex and the Nifty both closed with cuts of around 4% on a weekly basis.

Markets in Asia were mixed in early, despite better-than-expected GDP numbers for the September quarter. GDP rose an annualized 3.9% in the three months ended 30th September, following a revised 1.8% expansion in the previous quarter, the Cabinet Office said in Tokyo today. In nominal terms, the economy grew 2.9%.

The Jakarta Composite was up 0.04%, the KLSE Composite gained 0.19%, the Nikkei 225 surged 0.71%, and the Seoul Composite was up 0.32%. On the other hand, the Shanghai Composite declined 0.85%, the Hang Seng fell 0.01%, the Straits Times was down 0.46% and the Taiwan Weighted fell 0.88% in early trade. The SGX Nifty, which opened strong, pared early gains and was just 1.50 points higher at 6,085.50 compared to 6,084 on Friday.

The US markets declined on Friday again to end the worst week in the last three months. With the Group of Twenty (G-20) summit of not much use to the US as it failed to persuade world leaders to come up with plans to strengthen global growth, the markets ended lower. The markets also took a hit from the Chinese market as the government there said that the pace of inflation hit a more than two-year high in October, raising speculation that China would hike rates to ease inflation. The Dow tumbled 90.52 points (0.80%) to 11,192. The S&P 500 declined by 14.43 points (1.18 %,) to 1,199. The Nasdaq fell by 37.31 points (1.46%) to 2,518.

In a late night development on Sunday, controversial telecom minister A Raja submitted his resignation after being ordered to do so by his party, DMK, in the wake of allegations that he caused a loss of Rs1.76 lakh crore to the exchequer while allocating second generation (2G) spectrum two years ago.

The resignation was submitted after he returned to Delhi from Chennai where he met the party chief and state Chief Minister M Karunanidhi twice in the last 24 hours.

Prime minister Manmohan Singh is expected to handle the telecom portfolio in the interim period till a new minister is appointed, sources indicate.


Weekly Market Report: Bulls shaken, will they be stirred?

The aftermath of the festive season proved costly for investors as global cues, weak domestic industrial growth numbers for September and mixed earnings reports trashed the indices this week. Pullout by foreign institutional investors also weighed on the markets.

The markets opened higher on the first day of the week, riding on the festive euphoria of the previous week but profit-taking after the recent rally led the indices lower at the end of the session. The indices started lower on Tuesday; however, buying on select counters amid volatile trading ensured a positive closing.

The consolidation, which began on Wednesday, continued till the end of the trading week. Nervousness in the global market played on investors' minds leading to a flat closing with a negative bias for the domestic market. The downturn on Thursday was steeper as even the easing of the weekly food inflation numbers offered no respite to the market. On Friday, the Sensex witnessed its worst weekly fall since 1st June, plunging 2.10%, on weak global cues and poor industrial growth numbers for September.

Food inflation for the week ended 30th October stood at 12.30% against 12.85% in the previous week, on improved supply of items, showing a downward movement for the fourth straight week.

Considering that food inflation stood at a high of 12.59% during the corresponding week of last year, even 12.30% inflation is quite elevated.
Industrial growth declined the most in 16 months to 4.4% in September, reflecting a slowdown in demand across sectors, as interest rates rose in response to the Reserve Bank of India's tight monetary moves.

Finance minister Pranab Mukherjee has expressed concern at the sluggish pace of factory output, but reserved detailed comments for want of in-depth analysis. However, many experts remain positive on industrial growth numbers for the next few months due to the festive season and prospects of better farm produce.

Auto sales continued to break records for the fourth consecutive month in October with the Society of Indian Automobile Manufacturers (SIAM) stating that total vehicles sold in the country last month at 14,60,655 units was better than the mark set in September this year. The industry had witnessed total sales of 13,29,086 units in September this year.

Overall vehicles sold in the domestic market during October grew by 45.93%, from 10,00,953 units in the same month last year.

The Reserve Bank of India (RBI) has expressed concern over the falling credit offtake, which slipped to a poor 16.6% in the last fiscal. Noting that there has been steady decline in credit growth since FY04-05 when it had touched a high of over 30%, credit offtake declined to a low of 16.6% in the fiscal ending March 2010, RBI said in its statutory 'Report on Trend and Progress of Banking in 2009-10'.

It further noted that the slipping credit growth was also a reflection of slowing deposit growth.

On the international front, global leaders at the Group of Twenty (G-20) at the end of their two-day meeting on Friday pledged to refrain from competitive devaluation of their currencies and to take steps to mitigate risks arising from excessive capital flows to emerging markets. The "Seoul Action Plan" called for moving towards more market-determined exchange rates.

The declaration comes amid a currency war between the US and China, which also had ramifications for India and several other countries in terms of their exports becoming uncompetitive.

The G-20 group includes India, the US, China, Germany, France, Brazil, Russia and Japan.

It has also asked the advanced economies, including those with reserve currencies, to be "vigilant against excessive volatility and disorderly movements in exchange rates."

The declaration said these steps will help mitigate the risk of excessive volatility in capital flows that is faced by some emerging countries.


New Mines Bill to be tabled in winter session: Minister

New Delhi: The mines ministry today said it is ready with the final draft of the new Mines Bill and a Group of Ministers (GoM) will meet soon to review the proposed law amid protests by the industry over provisions mandating 26% profit-sharing with project-affected persons, reports PTI.

The Mines and Mineral Development and Regulation (MMDR) Act will be introduced in the ongoing winter session of Parliament, mines minister B K Handique said.

"Any day the GoM would be meeting... We have finalised the draft, but some changes will be there. It will be introduced in this session," Handique told reporters.

Asked about any changes in the final draft, he said there was some modification, but warned that the clause for 26% profit sharing by miners with project-affected people was retained in the final draft.

"There are a number of changes in the final draft. 26% (profit-sharing clause) - that is there so far," he said.

Asked about the industry demand for watering down the provisions, he said he has received a letter from Planning Commission deputy chairman Montek Singh Ahluwalia, who had indicated that a group of industrialists wanted an opportunity to raise their concerns.

"I have received a letter from the deputy chairman, Planning Commission. They have said a group of industrialists wants to meet me," Mr Handique said and added that the GoM, headed by finance minister Pranab Mukherjee would take a final call on the draft Bill, which has incorporated all the changes suggested by different ministries.

The 10-member ministerial panel headed by finance minister Pranab Mukherjee had arrived at a consensus on the Mining Bill last month, which, among other things, makes it mandatory for companies to share 26% of the profits from mining operations with project-affected people.

For such profit-sharing, the GoM has proposed creation of a District Mineral Foundation for disbursement of the benefits to locals.

The GoM has met thrice so far on the Bill.

Miners body FIMI and companies like Jindal Steel and the Tatas have criticised the proposed levy and asked the government not to charge it as a separate tax, saying that social obligation is a part of the operating cost of a company.

The new Bill also seeks to expedite the grant of mineral concessions in a transparent manner and attract big-ticket investment in the sector.


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