Nifty should stay above 4,780 for the rise to continue
The market priced in the lower GDP numbers and settled in the green, off the day’s high. The Nifty managed to end in the positive although it stayed below yesterday’s low. The gain was on a large volume 78.12 crore shares on the National Stock Exchange (NSE). We may still see struggled gain up to the level of 5,000 if the Nifty manages to sustain itself above 4,780.
Nervousness ahead of the release of the second quarter GDP numbers led the market lower at the opening bell. The political impasse, which has stalled Parliament proceedings in the Winter Session that began on 22nd November, also weighed on the sentiments. The Nifty opened at 4,766, down 39 points, and the Sensex declined 139 points to start trade at 15,869.
The market fell to its intraday low in early trade wit the Nifty falling to 4,755 and the Sensex moving back to 15,850. Consumer durables, metal, banking and oil & gas stocks witnessed selling pressure, which kept the indices lower in the morning session.
The Indian economy expanded at a lower rate in the second quarter of the current fiscal year as a series of rate increases by the Reserve Bank of India (RBI) and a global slowdown hurt local demand. India’s economy grew 6.9% in Q2 September 2011, after expanding by 7.7% in the first quarter, government data showed. GDP growth in the first six months of FY11-12 stood at 7.3% against 8.6% in the corresponding period of the last financial year, the CSO data showed today.
Despite the lower growth numbers, the market moved higher in noon trade as the data was in line with analysts’ expectations. The benchmarks hit the day’s high around 1.45pm with the Nifty rising to 4,852 and the Sensex scaling 16,180. However, profit booking at higher levels pushed the indices lower once again.
Institutional buying in select stocks in the last half hour enabled the market close in the green, but off the day’s high. The Nifty settled 27 points higher at 4,832 and the Sensex added 115 points to close trade at 16,123.
The advance-decline ratio on the NSE was 632:1046.
While the benchmarks managed to make a positive close, the broader indices underperformed the Sensex and ended lower. The BSE Mid-cap index settled 0.66% down and the BSE Small-cap index lost 0.73%.
The sectoral gainers were led by BSE Oil & Gas (up 1.63%); BSE Fast Moving Consumer Goods (up 1.20%); BSE TECk (up 0.95%); BSE IT (up 0.64%) and BSE Power (up 0.61%). The main laggards were BSE Consumer Durables (down 2.04%); BSE Realty (down 0.91%); BSE Auto (down 0.69%); BSE Bankex (down 0.61%) and BSE Capital Goods (down 0.18%).
Bharti Airtel (up 3.17%); ONGC (up 3.06%); Sun Pharma (up 2.84%); NTPC (up 2.40%) and Hindustan Unilever (up 2.26%) were the top performers on the Sensex. On the other hand, ICICI Bank (down 3.01%); Sterlite Industries (down 2.98%); Hero MotoCorp (down 2.76%); Tata Motors (down 2.76%) and Jaiprakash Associates (down 1.66%) settled at the bottom of the index.
The major gainers on the Nifty were Power Grid Corporation (up 3.83%); ONGC (up 3.63%); DLF (up 3.26%); NTPC (up 3.03%) and Jindal Steel (up 2.71%). The key losers were SAIL (down 3.94%); Sterlite Ind (down 3.03%); Ranbaxy (down 2.96%); Axis Bank (down 2.73%) and Hero MotoCorp (down 2.43%).
Asian stocks settled mixed, snapping the steepest two-day gain, after Standard & Poor's cut credit ratings on 15 top lenders including Bank of America, Goldman Sachs and Citigroup. On the positive side, European officials agreed on a plan to insure the first 20%-30% of new bond issues, however, they provided few details on how much leverage the fund would use and how big its size would be.
The Shanghai Composite tumbled 3.27%; the Hang Seng declined 1.46%; the Nikkei 225 fell by 0.51%; the Seoul Composite lost 0.49% and the Taiwan Weighted tanked 1.21%. On the other hand, the Jakarta Composite gained 0.74%; the KLSE Composite climbed 1.90% and the Straits Times advanced 0.53%.
Back home, selling by foreign funds in the equities segment was offset by buying by domestic investors on Tuesday. Foreign institutional investors were net sellers of stocks aggregating Rs320.87 crore while domestic institutional investors were net buyers of stocks worth Rs361.23 crore.
The SAIL-led consortium that has bagged rights to three iron ore mines in Afghanistan today said it may invest around $11 billion on the entire project, including infrastructure creation, mining and setting up a six million tonne per annum steel plant and 1,000MW thermal power plant. SAIL tumbled 3.94% to close at Rs80.50 on the NSE.
Amid concerns of rising non-performing assets in the banking industry, IndusInd Bank has undertaken steps to tighten its credit appraisal process to ensure better asset quality. As per the new initiatives, the bank is extending corporate loans mostly to existing customers instead of adding new ones. It is also shying away from taking credit exposure in those companies, which get impacted by high volatility in the rupee-dollar exchange rates. The scrip declined 3.72% to Rs246 on the NSE.
Hindustan Unilever (HUL), in an effort to fight against shrinking margins, has hiked retail prices of premium bathing soaps by 2.6%-5.5%. The price of 90gm pink and white Lux soap has been raised by Re1 to Rs19 while the prices of 45gm and 75gm packs of Dove soap have also been hiked by Re1 to Rs19 and Rs39 respectively. The stock gained 1.75% to close at Rs395 on the NSE.
The small farmer stands to gain little from allowing FDI, because no matter how much we wish, middlemen are not going to disappear while retailers need to focus on post-harvest businesses
Media discussion on allowing foreign direct investment (FDI) in retail looks sharply polarised. While one side portrays FDI as a ‘magic wand’, the answer to all problems right from the agricultural system to public distribution and unemployment, others are equally critical of its merits; and labelled it as ‘a failed model imported from US’.
What must be understood is that FDI will not change everything. No amount of FDI can change the uneconomical land holding pattern that defines Indian agriculture. Farming and harvesting equipment and techniques also cannot be expected to change and standardize magically. The small farmer stands to gain little from allowing FDI, because no matter how much we wish, middlemen are not going to disappear. Indians should be happy if the middlemen are removed. Whether it will create more or less employment is debatable.
Unless the big retailers decide to approach the farmer and provide him advances in terms of credits, equipment and seeds, dominance of the middlemen will continue. India’s big retailers clearly lack the will to change. Retailers want things on their terms, at their time rather than adjust to the market practices. It will be a long time, before both change and meet somewhere in the middle.
At the top, there is a lack of awareness of markets and at the bottom; it is a question of having to work harder. I will elaborate. For instance, the farm produce reaches wholesale markets in the middle of the night. All the supermarket chains have fixed times for accepting the produce. Their reluctance to go to the markets in the middle of the night or morning makes them dependant on other traders, who add to the costs.
There is potential, but in order to realise it, the industry itself must change its outlook. A foreign player could actually change things, especially if they have a long-term view. Moreover, there is a lot that can be changed.
Today, the big Indian retailers have no approach outlined for vegetable farming. The vegetable markets need change and the ideal thing would be to have an Amul like set up, which can act as their saviour. Without that, the traders will dominate, even if the Wal-Marts were to step in. It is also necessary to bring about some rationality in crop patterns, crop rotations and other practices. If big retail can bring about ‘contract’ farming, change will happen.
If the retailers take up this issue and things improve, Agricultural Produce Market Committee can be done away with. There is no need for such a primitive market mechanism. World over, auction centres for vegetables provide cold storage facilities and they are not simply rolled on the ground, like it is done in India. If that is achieved, perhaps it will lead to evening out of vegetable prices round the year.
The other blunder that India’s retailers have made is not making any investments in post harvest businesses. There is an enormous investment required in all the stages of farming, including downstream processing units to handle the unsalable vegetables.
FDI can be channelled for that purpose: in the farm, at processing stage, for transportation and at the market place. The other big change that can come about with entry of foreign names is easy credit from banks. Bank finance will open up for firang names. Today, Indian companies do not get money for agriculture from banks.
And for the farmers and customers too, there are benefits in the long term. The farmer will take time to realise that better techniques can actually help him. Yes, job losses can happen if the farmer wisens up and uses more mechanisation. Job losses in the farm can be offset by job gains in the post harvest sector.
FDI will also provide an exit opportunity for the Indian business that have already invested in retail. The changing practices of handling produce from farm to fork will make sure that the customer then will get better products. However, he may not gain anything in price.
Apart from SAIL, NMDC, Rashtriya Ispat Nigam, JSW Steel, Jindal Steel & Power, JSW Ispat and Monnet Ispat are the members of the consortium
State-run Steel Authority of India (SAIL)-led consortium is likely to make an initial investment of Rs375 crore for detailed exploration of three iron ore mines bagged at Hajigak in Afghanistan.
"The consortium will have to first establish the reserves through a detailed exploration. Around Rs 375 crore investment is needed for that. The decision on putting up a steel plant will be taken only after satisfactory outcome of the detailed exploration," sources in the know said.
A consortium of seven Indian steel makers, both public and private, led by SAIL bagged the development rights to mine in three iron ore blocks - B, C and D - at Hajigak in the Central Bamiyan province of Afghanistan.
"The Hajigak iron ore deposits consists of four blocks – A, B, C & D. The estimated iron ore reserves is approx. 484, 930 and 357 million tonnes in A, B & C blocks respectively while D block has small reserves," SAIL said in a statement.
The fourth block has been given to a Canadian firm, Kilo Gold Company. Hajigak mines, located across the Hindu Kush Mountains, between Bamyan and Maidan Wardak provinces, are known for its rich source of iron ore.
The source said that though the consortium members do not raise any doubt on the authenticity of the estimates, as per the industry practice, they will carry out the detailed exploration themselves before putting in more funds on mines.
"After gauging the estimated reserves, consortium members will decide on putting up a steel plant in Afghanistan. But, nothing has been finalised on it as yet, simply because that is not possible until one is sure about reserves," he said.
"The setting up of the steel plant will also depend upon the outcome of the techno-feasibility study on the proposed plant," he added.
However, at the same time, he said that the members were keen on setting up a steel plant in Afghanistan as the country is in need of huge quantity of steel for sprucing up its beleagured infrastructure.
Apart from SAIL, NMDC, Rashtriya Ispat Nigam, JSW Steel, Jindal Steel & Power, JSW Ispat and Monnet Ispat are the members of the consortium.
In the late afternoon, SAIL was trading at around Rs80.60 per share on the Bombay Stock Exchange, 4.10% down from the previous close.