Nifty, Sensex may try to bounce back but may be resisted: Wednesday Market Report

If the Nifty stays above 5,720 tomorrow a short rally is likely. A close above 5,745 will mean a continuation of the pull-back. On the downside, the support is at 5,660

The market settled lower as the political logjam in Delhi ignited worries about inflows from foreigners and a slowdown in growth. If the Nifty stays above 5,720 tomorrow a short rally is likely. A close above 5,745 will mean a continuation of the pull-back. On the downside, the support is at 5,660. The National Stock Exchange (NSE) reported a volume of 82.86 crore shares and advance-decline ratio of 277:1244.
The market opened on a flat note as the political uncertainty at the Centre continued for the second day today. The DMK’s decision to withdraw support to the Congress-led UPA government worried investors about the fate of the economic reforms which are still to see the light of day. Markets across Asia were down in morning trade as the Cypriot Parliament rejected the proposal to tax bank account holders as a condition for bailout. Overnight the US markets ended mixed on the developments in Cyprus.
The Nifty slipped five points to open trade at 5,741 while the Sensex started off at 19,026, up 18 points over its previous close. The benchmarks hit their intraday highs in initial trade itself. The Nifty rose to 5,745 and the Sensex inched up to 19,028 at their respective highs.
However, selling pressure pushed the market lower a short while later. Except for the BSE Fast Moving Consumer Goods and BSE Healthcare, all other sectoral indices were in the red.
The market made a couple of half-hearted attempts to emerge into the positive, but selling pressure ensured the indices stay in the red.
A positive opening of the key European markets did not help matters back home as the market continued drifting southwards in post-noon trade.
The benchmarks dropped to their lows in the last hour of trade with the Nifty falling to 5,682 and the Sensex declining to 18,837.
While the market settled off the lows, it was down for the fourth consecutive day. The Nifty declined 52 points (0.90%) to 5,694 and the Sensex dropped 124 points (0.655) to settle at 18,884.
The broader indices were thrashed in today’s market decline as the BSE Mid-cap index dropped 1.90% and the BSE Small-cap index tumbled 2.32%.
The sectoral gainers were BSE Fast Moving Consumer Goods (up 0.67%); BSE IT (up 0.12%); BSE Auto (up 0.07%) and BSE Consumer Durables (up 0.01%). The top losers were BSE Realty (down 4.67%); BSE Power (down 2.65%); BSE PSU (down 2.37%); BSE Bankex (down 2.10%) and BSE Capital Goods (down 2.04%).
Eleven of the 30 stocks on the Sensex closed in the positive. The main gainers were Hindustan Unilever (up 3.37%); Tata Motors (up 1.51%); Cipla (up 1.47%); TCS (up 0.78%) and Tata Power (up 0.66%). The key losers were Bharti Airtel (down 4.18%); State Bank of India (down 3.87%); NTPC (down 3.43%); ICICI Bank (down 2.85%) and Hindalco Industries (down 2.80%).
The top two A Group gainers on the BSE were—HUL (up 3.37%) and Grasim Industries (up 1.84%).
The top two A Group losers on the BSE were—HDIL (down 19.90%) and Opto Circuits (down 12.59%).
The top two B Group gainers on the BSE were—Aeonian Investments (up 19.97%) and Bafna Shipping (up 14.29%).
The top two B Group losers on the BSE were—Bilcare (down 19.96%) and Pioneer Investcorp (down 19.95%).
Of the 50 stocks on the Nifty, 15 ended in the green. The key gainers were HUL (up 3.58%); Asian Paints (up 2.19%); Cipla (up 1.86%); Tata Motors (up 1.65%) and Grasim Ind (up 1.26%). The main losers were Reliance Infrastructure (down 8.91%); DLF (down 3.88%); JP Associates, SBI (down 3.85% each) and IDFC (down 3.73%).
The Asian pack witnessed a mixed close as the possibility of a rejection of the bailout package for Cyprus ignited fears about a fresh debt crisis in Europe. On the other hand, a forecast of an expansion in manufacturing activity in China ahead of the release of a flash reading of the HSBC Markit manufacturing index pushed markets in China and Hong Kong.
The Shanghai Composite jumped 2.66%; the Hang Seng surged 0.97%; the Jakarta Composite rose 0.18% and the KLSE Composite gained 0.37%. Among the losers, the Straits Times declined 0.63%; Seoul Composite dropped 0.97% and the Taiwan Weighted lost 0.525.
At the time of writing, the key European indices were up between 0.14% and 0.59%. At the same time, the US stock futures were in the positive, indicating a firm opening for US stocks later in the day.
Back home, foreign institutional investor were net buyers of equities amounting to Rs62.63 crore on Tuesday whereas domestic institutional investors were net sellers of stocks totalling Rs71.38 crore.
Glenmark and Mylan plan to sell generic versions of the drug Malarone, the most successful anti-malarial medication in the UK. With a UK court revoking Glaxo’s patent on the drug, Glenmark Generics was able to launch the first generic version of the drug, Atovaquone proguanil, in the UK in early February. Glenmark Pharmaceuticals declined 1.34% to Rs493.15 on the NSE.
Media company Prime Focus on Wednesday said Hong Kong-based private equity fund AID Partners Capital has invested $10 million in its subsidiary Prime Focus World (PFW). The investment has been made through optionally convertible preference shares of PFW, which are convertible into 4% equity, Prime Focus said in a statement.  The stock fell 0.60 to settle at Rs41.50 on the NSE.
The state-run IDBI Bank has successfully raised $500 million through a five-year bond sale in the international markets at a coupon of 3.75% which is likely to be the cheapest ever for the bank. The stock dropped 2.97% to close at Rs83.20 on the NSE.


Govt to offload 10.82% stake sale in SAIL through OFS route on Friday

The government is banking on disinvestment of SAIL to meet the disinvestment target of Rs24,000 crore in the current fiscal. So far, it has raised over Rs22,300 crore through PSU stake sales

The Empowered Group of Ministers (EGoM) on Disinvestment, headed by Finance Minister P Chidambaram, which met in New Delhi today, cleared a 10.82% stake sale in steel major SAIL. The issue will hit the markets on Friday.


The base price would be made public only after the close of market hours tomorrow.


“SAIL OFS (offer for sale) has been approved by EGoM. The issue will hit market on 22nd March,” disinvestment secretary Ravi Mathur informed the media.


The Department of Disinvestment (DoD) has already held roadshows in Singapore, Hong Kong, US, UK and continental Europe for the proposed SAIL disinvestment. SAIL comes under the administrative control of steel ministry.


The merchant bankers for SAIL share sale include SBI Caps, Kotak Mahindra and Deutsche Bank. Post stake sale, the government's stake would come down to 75%.


For the third quarter ended 31 December 2012, SAIL reported a 23% decline in net profit at Rs 484 crore from the year-ago period mainly due to lower net sales realisation amid subdued market conditions.


The Cabinet Committee on Economic Affairs had in July last year approved 10.82% disinvestment in SAIL out of government’s 85.82% stake, through the OFS route.


However, the disinvestment plan could not be taken forward amid the dismal market conditions. The government had kept the issue on hold anticipating buoyancy in the market to return.


SAIL shares have not been part of the market rally during 2012. The stock, which touched a 52-week high of Rs115.90 on 17 February 2012, has been losing ground ever since talks of disinvestment began.


The government is banking on disinvestment of SAIL to meet the disinvestment target of Rs24,000 crore in the current fiscal. So far, it has raised over Rs22,300 crore through PSU stake sales.


Lending rates are unlikely to fall, says Nomura

The cost of funding remains high for Indian banks, as deposits have lagged behind credit growth which curtails their ability to lower lending rates, says Nomura Global Economics Research

Despite the Reserve Bank of India (RBI) cutting the repo rate by 25 basis points (bps), lending rates in the country are unlikely to fall due to high cost of funding, says Nomura Research.


“RBI noted that the space for further easing was ‘quite limited’. At a time when transmission of rate cuts is also partially clogged, this suggests that lending rates are unlikely to fall much. The transmission of rate cuts remains challenging. Excluding yesterday’s 25bps (basis points) cut, the 75bp repo rate cut has so far only translated into a 30bp reduction in lending rates and a 25bp decline in deposit rates,” the research report said.


Nomura said, a combination of factors such as credit growth outpacing deposit growth and elevated government cash balances has tightened liquidity, which has forced banks to chase deposits, raising their funding costs and affecting their ability to cut lending rates.


“RBI has historically used stealth tightening (easing) of liquidity conditions to change the operative rate to the repo (reverse repo). Transmission in the current regime (where the repo will remain the operative rate) remains untested,” it said.


Nomura concludes by maintaining its below-consensus GDP growth forecast of 5.6% y-o-y (year-on-year) in FY14 from 4.9% in FY13.


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