The uptrend continued to be backed by a strong rally in the US yesterday and in Asia today. Tomorrow would be a critical day for all markets, as we are dependent on what the US Federal Reserve says about continuing fiscal stimulus. A close below 6,195 tomorrow may mean trouble for the bulls
Riding on global optimism, the market continued its uptrend after reversing earlier this week. The market on Wednesday opened in the positive and remained above yesterday’s close throughout the session. The bulls are in charge and have prevented the markets from falling below yesterday’s high. The key moment will be tomorrow, when the market will come to know of the final decision of the US Federal Reserve ‘tapering’.
The Sensex and the Nifty opened at 20,944 and 6,231, respectively. Immediately by the first hour of the session the indices hit their respective intra day low at 20,937 and 6,223. Market recovered from the low and staged a range bound move until 1.00pm after which it gained movement and in the last hour of the session, both Sensex and Nifty hit the intra-day high of 21,087 and 6,269, respectively. This is the highest of Sensex since 5 November 2010 while for Nifty it is the highest since 11 November 2010. The market closed almost near the day’s high, Sensex at 21,034 (up 105 points or 0.50%) while the Nifty at 6,252 (up 31 points or 0.50%).
However, the breadth of the market was barely even, with slightly more advances than declines, signifying the nervousness of the markets and not a broad-based uptrend. Out of 1,230 stocks, 633 were up, 533 were down and 64 were unchanged. The volumes on the National Stock Exchange marginally lower than yesterday’s 63.96 lakh shares at 60.52 lakh shares.
Among the other indices on the NSE, PSU Bank was the only loser, 1.57% while the top five gainers were Pharma (1.30%); FMCG (1.18%); Infra (1.07%); Consumption (1.06%) and Smallcap (0.68%).
Among the Nifty stocks, 23 stocks ended in the green. The top five gainers were Bharti Airtel (up 5.28%); Dr Reddy (4.18%); BPCL (3.13%); Ranbaxy (2.96%) and Hindalco (2.63%). The top five losers were Axis Bank (2.31%); Wipro 2.07%); Bank of Baroda (2.06%); Ambuja Cements (1.31%) and State Bank of India (1.29%).
Overall, it has been a good day for global markets. Stocks are on the rise on newfound optimism on the upcoming Federal Open Markets Committee (FOMC) that it will continue its monetary easing stimulus. Encouraging quarterly results from top companies like Volkswagen, Europe’s biggest carmaker, and Barclays underscored Euro region’s recovery. German 10-year bunds rose for a seventh day, the longest winning streak in more than two years. The US markets continued to see positive economic data, with 150,000 workers added to the payrolls. However, many are overlooking the possibility of negative effects of the US shutdown, when data will be released in December.
Despite increased economic optimism, the WTI crude oil dropped to $97.24 a barrel after US inventories rose last week to a four-month high. Copper advanced to $7,265 a metric ton. Gold advanced to $1,349.29 an ounce.
All European and Asian markets were trending up. Tokyo’s Nikkei and Hong Kong Hang Seng were particularly strong, moving up 1.23% and 2% respectively. US Futures were seen up in early trade and Europe was trading in the green.
The ‘Doing Business’ report, a joint initiative of The World Bank and The International Finance Corporation has ranked India 134 out of 189 in terms of doing business. This is worse than the 132 rank India scored last year
India has been a terrible place to do business. Well, it has just become harder. In their latest project report, The International Finance Corporate and World Bank ranks India 134th, down from 132nd last year, in terms of doing business. In fact, India fared considerably worse than her neighbours namely: Sri-Lanka (85), Bangladesh (130), Pakistan (110), Nepal (105) and Maldives (95). The report also notes that India initiated no reform measures at all to improve its ranking.
The final rank is a combination of 10 indicators and cover 189 economies namely: Starting a Business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
Singapore topped the global ranking on the ease of doing business. Joining it on the list of the top 10 economies with the most business-friendly regulatory environments are Hong Kong SAR, China; New Zealand; the United States; Denmark; Malaysia; the Republic of Korea; Georgia; Norway; and the United Kingdom.
For the south Asia region alone, India was consistently ranked low almost across all segments, sometimes even worse than Sri Lanka, Pakistan and Afghanistan.
For instance, India is ranked 179th for starting a business, way below Afghanistan which is ranked 24th, and way below regional average of 86. As many as 12 procedures are expected in order to start a business in India, worse than her regional peers, including Pakistan. It almost takes a month to start one while it takes just five days to start one in Afghanistan.
India is ranked at almost near the bottom, 182nd, when it comes to dealing with permits. Only China, Eritrea, Libya, Syria, Albania and Tajikstan are below us. Anybody doing business in India is expected to hop all over the place by doing as many as 35 procedures just to get a single permit. Pakistan requires 11 procedures.
In terms of enforcing contracts, India is one of the worst in the world, ranking 186 out of 189. It takes around 1,420 days to enforce one in India. In OECD high income countries, it takes little over one-third of the time.
When it comes to protecting investors, India is ranked 34th globally, below Bangladesh and tied with Pakistan. This has worsened from 32nd when compared to last year.
However, this doesn’t mean much because none of the reform measures have been undertaken as observed in the report. India has not undertaken any reform measures.
When it comes to ease of paying taxes, India fared considerably worse than its regional peers. It is ranked 158th globally, and worse than its regional peers of Afghanistan, Bangladesh, Bhutan, Nepal and Maldives. India topped the regional list in terms of tax as percentage of profits, at 62.8%, which is high.
India is ranked 132nd in terms of trading across border, worse than Sri-Lanka, Pakistan and Bangladesh. As many as nine documents are required to export (compared to five for Sri-Lanka) and as many as 11 documents are required to import (compared to seven for Sri-Lanka).
When it comes to resolving insolvency, India is ranked 121, worse than its regional peers. It takes an average of 4.3 years to resolve one case of insolvency, with a recovery rate of just a quarter of the investment. In other words, a creditor is expected to take back just 1/4th of what is due, in case things go bad, that too after four years. Regionally, India fared worse than Pakistan, Sri-Lanka, Bangladesh, Maldives and Afghanistan.
When it comes to getting electricity, India is ranked 111th. Again, here, as many as seven procedures are required for businesses to obtain electricity. Pakistan requires six and Afghanistan just four. India topped the regional list for the time taken to get electricity, at nearly two months.
In terms of obtaining credit, India ranked 28th globally, and ahead of regional peers. Afghanistan bottomed the regional list, ranking 130.
The Doing Business Project provides objective measures of business regulations and their enforcement across 189 economies and selected cities at the sub-national and regional level.
Normalcy will be restored to the foreign exchange market only when the demand for dollars from public sector oil marketing companies (OMC) is fully returned to the market, says Nomura
The RBI (Reserve Bank of India) has lowered has hiked the repo rate by 25bp to 7.75% and cut the MSF rate by 25bp to 8.75%. According to Nomura, even though the process of realigning the interest rate corridor to normal monetary policy operations is now complete, the repo is still not the operative rate owing to tight liquidity.
Further liquidity easing (such as a hike in the cap on bank borrowing under the liquidity adjustment facility) will be dependent on continued low volatility in the FX market. A successful tapering of oil demand is a pre-condition to making the repo the operational rate, a process which may take a few months, says Nomura in its research note on the RBI monetary policy meeting. According to Nomura, “normalcy will be restored to the exchange market only when the demand for dollars from public sector oil marketing companies (OMC) is fully returned to the market.” In his post-policy press conference, the RBI Governor also mentioned that OMC dollar demand will be gradually tapered keeping in mind the value of the rupee, a credible fiscal consolidation plan and growth prospects.
Nomura views the overall RBI policy decision to be marginally positive as the additional term repo liquidity should lower funding costs and provide some support to near-term growth and equity inflows prospects.
Nomura maintains its baseline expectation of another 25bp hike in the repo rates to 8% by March 2014, followed by a prolonged pause. However, the likelihood is increasing that the terminal repo rate in this cycle may have to be higher to lower inflation expectations, moderate CPI inflation and to give a positive real return to savers.