Nifty, Sensex resisting a decline – Wednesday closing report

Nifty seems trapped in the 8,430-8,530 zone


We had mentioned in Tuesday’s closing report that if NSE’s CNX Nifty goes below the previous day’s low, a short-term decline may happen. The Indian benchmark opened Wednesday in the red and stayed there for most of the time till 1pm. After that the Nifty moved higher and remained in the green zone till the end of the session. It also managed to stay above Tuesday’s low, giving hope to the bulls. The market will remain volatile on Thursday when the futures & options (F&O) of November 2014 series expires.

S&P BSE Sensex opened at 28,322 while Nifty opened at 8,450. Sensex moved between 28,261 and 28,470 and closed at 28,386 (up 48 points or 0.17%). Nifty moved between 8,439 and 8,500 and closed at 8,476 (up 13 points or 0.15%). NSE recorded a lower volume of 78.66 crore shares. India VIX fell 3.99% to close at 12.9850.

Commerce Secretary Rajeev Kher has said the Foreign Trade Policy will address the exporters' concerns of slowdown in several key markets like European Union and Japan and a lot of policy developments and diversification measures are being worked out to deal with the challenges of exports.

A report by HSBC showed that after two consecutive months of sell-offs, FIIs have net inflows of $5.3 billion in Asian equities with all markets having received positive flows in November. Of the $5.3 billion of net inflows in Asian equities, China ($2.3 billion) regained the top position as the 'most loved' market, pushing India ($1.4 billion) down to second position in the region, while Thailand was placed at the third spot.

Global rating agency Moody's said India's credit trends in 2015 will depend on steps governments takes to address high fiscal expenditures, recurrent food price inflation, and wide infrastructure deficit. The sovereign outlook for India (Baa3) remains stable. The global sovereign outlook for 2015 is also stable as a gradual global recovery supports sovereign credit quality, Moody's said in its outlook report. It released report entitled "2015 Outlook: Global Sovereigns" today.

The Appellate Tribunal for Electricity gave a favourable verdict to Gujarat State Petronet Ltd against the Petroleum and Natural Gas Regulatory Board (PNGRB). The case was related to tariff revision, and PNGRB has been asked to re-determine the tariff upward. This would be the second revision in the past six months while the first revision was 10.8%. This move pushed up gas stocks. Gujarat Gas (16.87%) was the top gainer in ‘A’ group on the BSE while GAIL (2.75%) was the top gainer in the Sensex 30 pack. Gujarat Gas hit its 52-week high today.

Rasoya Proteins (4.86%) and Kailash Auto Finance (4.76%) were among the top two losers in ‘A’ group on the BSE. The stocks continued to hit their new 52-week lows today.  Zee Entertainment (3.96%), which hit it 52-week high on Tuesday, was among the top three losers in the group today.

Bharti Airtel (2.43%) was the top loser in Sensex 30 stock. It was recently in news for it signed the deal with American Tower Corporation through its international arm, Bharti Airtel International (Netherlands) BV.

US indices ended Tuesday flat. The Commerce Department reported that the US economy grew at its fastest pace in more than a decade during the spring and summer. However, readings on consumer confidence and central-Atlantic manufacturing missed forecasts.
Except for Nikkei 225 (0.14%) all the other Asian indices closed in the green. Shanghai Composite (1.43%) was the top gainer. European indices are trading in the green. US Futures too are trading higher.


Strong US dollar will offset FII inflow

According to Care Ratings, while strengthening of the US dollar has caused volatility in the currency markets, FII inflows may provide cushion to the Indian rupee against a strong dollar


The strengthening of the US dollar in recent times has caused some element of volatility in the currency markets. Given that this strengthening of the dollar is synchronous with the US recovery and likely increase in interest rates, it does need to be watched carefully. However, if the current positive trend of foreign institutional investment (FII) inflows in equities and debt securities is sustained, it will provide some cushion to the Indian rupee, says Care Ratings.


It said, given that other components of the external account like import of oil has benefited partly due to the strong dollar, as the price of oil gets calibrated to the dollar and when the dollar falls, the price of oil increases and vice-versa, there would be some countervailing force to stabilise the rupee. "The implication is that while the Reserve Bank of India (RBI) has brought about order in the balance of payments and several components like imports, external commercial borrowing (ECB) flows, and FII funds, it would also have to constantly monitor changes in the external account on account of such changes in the currency value," the ratings agency said.


According to a research note, a stronger dollar, though good for the US economy would militate at the margin for its exports, though it is still considered to be a domestic driven rather than an external driven economy unlike some of the East Asian emerging markets. "But one consequence has definitely been that commodity prices have started coming down aided also by the low growth expected in countries like China which cannot be countered by the US recovery. China is the largest consumer of metals and prices have been moving southwards since August," the report said.


Talking about impact of stronger US dollar on other currencies, Care Ratings said, while the movement of the currency for any country is dependent on the various factors that affect the balance of payments, there is prima facie reason to believe that some part of the movement can be explained by the stronger dollar. It should be mentioned here that domestic factors have also influenced such movements like the Russian ruble being affected by the Ukraine imbroglio, it added.


According to the research note, there are two direct consequences of the stronger US dollar. The price of gold which bears an inverse relation with the strength of the dollar has moved downwards to below the $1200 per ounce mark. Traditionally gold is held as a substitute for the dollar as a safe haven. With the dollar becoming stronger, it said, a trend which will probably continue to move in this direction, gold has taken a hit along with other commodities.


"There has also been a flow of funds to the US now and a movement away from the other foreign bonds. This will have an impact in the coming months on the overall flow of funds to the emerging markets which benefited from both the QE programme as well a weak dollar," the report concluded.


Bhopal gas tragedy victims appeal to higher court in the US

According to victims, the project manager who approved all of the detail design for the Bhopal plant stated in a newly-submitted declaration that he was working for Union Carbide, which the lower court chose to disregard


Victims of the 1984 Bhopal gas tragedy have filed an appeal in a higher court at New York contesting a lower court’s decision that Union Carbide Corp cannot be sued for the ongoing contamination from the chemical plant.


The survivors and members of the surrounding community near the plant site in Bhopal in Madhya Pradesh for toxic contamination, along with the property owners whose wells have been fouled by toxins from the plant, have filed the appeal in the US Court of Appeals for the Second Circuit.


The plaintiffs allege that UCC was intimately involved in the creation and disposal of toxic wastes at the Bhopal plant by designing, providing, approving and overseeing the construction of an inadequate waste management system.


The manager, who oversaw the construction of the plant confirmed that he worked for UCC, not for the Indian subsidiary that officially operated the plant, the plaintiffs said.


In July, however, a federal trial judge ruled that UCC was not sufficiently involved in the acts at the plant and that the project manager actually worked for the subsidiary.


“The plaintiffs have provided substantial new evidence that demonstrates UCC’s involvement. But the court chose to improperly assess the weight and credibility of this evidence, assessments that are supposed to be left to the jury,” counsel for the plaintiffs and Litigation Coordinator for EarthRights International, Rick Herz said.


Non-governmental organisation EarthRights International said since judges are not supposed to weigh evidence without letting a jury hear the case, the plaintiffs believe that the Second Circuit will correct the error in judgement against UCC.


Another defendant in the case was Warren Anderson, who was the CEO of UCC at the time of the Bhopal disaster. He died in September this year at a nursing home in Florida at age 92.


In the appeal filed last Friday, the plaintiffs said the Project Manager who approved all of the detail design for the Bhopal plant, Lucas John Couvaras, stated in a newly-submitted declaration that he was working for UCC, which the court chose to disregard.


“The new evidence here — most notably the declarations of Couvaras and the experts — fills the gaps identified in (the case). A rational jury could credit Couvaras’ declaration that he was a UCC employee, and agree with Plaintiffs’ experts that UCC’s manufacturing process and waste disposal strategy were causes of the pollution. Summary judgment must be reversed,” the appeal said.


In December 1984, poisonous gas from the chemical plant enveloped nearby communities, killing over 5,000 people. UCC then largely abandoned the site, allowing toxic wastes to leach into the local water supply.


EarthRights had filed the lawsuit in the Southern District of New York on behalf of residents of Bhopal, saying land and water of the citizens are being contaminated by waste from the plant.


In his July ruling, US District Judge John Kennan had ruled that UCC was not sufficiently involved in the acts at the plant and that the project manager actually worked for the subsidiary.


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