Nifty, Sensex showing no signs of fatigue: Weekly Market Report
As long as Nifty stays above 7,850, the index will look to head higher
The S&P BSE Sensex closed the week that ended on 28th August at 26,638 (up 219 points or 0.83%), while the S&P CNX Nifty ended at 7,954 (up 41 points or 0.52%). Last week, we had mentioned that the Nifty and Sensex are headed higher, subject to dips. Nifty has to stay above 7,850 for the rally to continue.
On Monday, although the market opened on a positive note, by the end of the session it started giving up gains. The weakness could be attributed to news from the Supreme Court declaring the all allocations of coal blocks, from 1993 till 2010,  illegal. Nifty closed at 7,906 (down 7 points or 0.09%).
Finance Ministry said it is considering a bifurcation of the post of chairman and managing director in public sector banks to strengthen corporate governance in light of recent cases of corruption.
US Federal Reserve Chairwoman Janet Yellen in her speech on Friday said, early rate hikes are possible, but it will depend on how the economy evolves in the next few months.
On Tuesday the indecisiveness on the bourses continued, with the Nifty closing marginally lower for the second consecutive session. Nifty closed at 7,905 (down 2 points or 0.02%). The highlight of the day was the Competition Commission of India (CCI) levying a total penalty of Rs2,544.64 crore on 14 car makers, at the rate of 2% of the average turnover. The penalty is to be deposited within 60 days of receipt of the order. They were penalised for having a monopolistic control over the spare parts and diagnostic tools of their respective brands. The car companies charged arbitrary and high prices for their spare parts. They were also found to be using their dominant position in the market for spare parts and diagnostic tools to protect their market for repair services, thereby distorting fair competition.
Department of Industrial Policy and Promotion (DIPP) on Tuesday notified an increase in the foreign direct investment (FDI) limit to 49% from 26% in the defence sector.
Ahead of August futures and options expiry, on Wednesday the indices moved in a range for most of the trading session. Nifty closed at 7,936 (up 31 points or 0.40%).
Nifty again managed to close in the positive on Thursday after increased volatility especially at the end of the session. Nifty closed at 7,954 (up 18 points or 0.23%).
Global credit rating agency Moody's Investors Service said that, India's sovereign ratings are constrained by persistently high inflation. Without a significant increase in food output, the risk from continued inflation could limit India's growth prospects, Moody's said.
DIPP on Wednesday issued a notification allowing 100% FDI through the automatic route in railway infrastructure.
There are reports that the Economic Offence Wing (EOW) of Mumbai Police is probing the role of public sector banks in relation to the fixed deposit (FD) scam.
The stock markets were closed on Friday for Ganesh Chaturthi. Data released on Friday showed that gross domestic product (GDP) grew by a better-than-expected 5.7% in April-June, sharply higher than 4.6% in the previous quarter, signalling a revival in the economy.
For the week, among the other indices on the NSE, the top two performers were FMCG (3%) and Auto (1%), while the worst two performers were Realty (6%) and Metal (5%).
Among the Nifty stocks, the top five stocks for the week were BHEL (6%); Hindustan Unilever (5%); Dr Reddy's Lab (4%); ITC (3%) and BPCL (3%), while the top five losers were Jindal Steel (21%); DLF (9%); Tata Power (8%); Hindalco (7%) and Bank of Baroda (5%).
Of the 1,517 companies on the NSE, 561 companies closed in the green, 925 companies closed in the red, while 31 companies closed flat.
Out of the 27 main sectors tracked by Moneylife, the top five and the bottom five sectors for this week were:


SAT upholds NSE decision to refuse Emkay Global's plea

According to SAT, if trades are executed due to negligence or breach of duty they cannot be considered material mistake and therefore not qualify for annulment


Holding on to the sanctity of trades on the exchanges, the Securities Appellate Tribunal (SAT) on Thursday upheld National Stock Exchange (NSE)'s decision to refuse Emkay Global Financial Services plea for annulment of erroneous trades executed in October 2012.

At the same time, SAT has asked NSE to review trades executed by Emkay with two brokers - Inventure Growth and Securities and Prakash K Shah Shares and Securities.

The case relates to orders entered by a dealer of Emkay on 5 October 2012, that had led to a flash-crash of over 900 points (fall of 15.5%) in the NSE's benchmark index Nifty, forcing the bourse to temporarily halt trading.

Emkay had approached SAT after NSE refused to accept its request for annulment of the erroneous trades.

In a final ruling dated 26th August, SAT has upheld NSE's contention that norms related to trades on exchange should be inviolable "to ensure sanctity of dealings on the exchange".

"If trades are executed due to negligence or breach of duty they cannot be considered material mistake and therefore not qualify for annulment," SAT said.

As per the tribunal, 'material mistake in the trade' would be attributable to unforeseen circumstances, which vitiate sanctity of the trades executed on exchange.

"Breach of duty/negligence would not be unforeseen circumstance that can be said to vitiate the trades executed on the exchange," SAT said.

Among others, SAT noted that Emkay had not installed a "validation mechanism" before entering sell orders and was also negligent in transmitting erroneous trades from the dealer's terminal to the NSE's server by ignoring four to five level checks that were available in the system.

Moreover, SAT also rejected Emkay's contention that NSE's trading system was faulty and in violation of market norms on grounds that the matter was pending before Sebi and it "would not be proper" for the tribunal to comment on the same.

However, SAT noted that while Emkay Global during the trades had incurred losses of Rs51 crore on account of sell orders, two counter-parties - Inventure Growth and Securities and Prakash K Shah Shares and Securities - had made huge profits running into several crores of rupees.

According to SAT, violations committed by - Inventure Growth and Prakash K Shah Shares - "were serious violations" and NSE should have considered that the trades were "vitiated" on account of such violations by the two brokers.

Accordingly, the matter in this regard has been remanded back to NSE for fresh consideration.


Mid-caps register a 40% growth in operating income in June quarter

Even though growth in revenues was marginal, quarterly results declared by 266 mid-caps on Moneylife’s database reported much higher profitability


Companies classified by Moneylife as mid-cap (market-cap between Rs500 crore and Rs2,000 crore) reported an aggregate growth in revenues of just 2% for the quarter ended June 2014. However, operating income of these companies grew substantially by 40% during this period. Moneylife tracks a database of 1,294 companies, of which 1,222 companies have declared their results for the June 2014 quarter. Of these 1,222 companies, 266 are mid-caps. Aggregate revenues of the mid-caps form a share of 8.39% of the total revenues of the 1,222 companies.


Over the one year period ended 26 August 2014, the market-cap of these mid-cap companies have nearly doubled, thanks to improving performance and hopes of higher economic growth following a change in government. During the quarter ended June 2014, the aggregate market-cap of the 266 companies has increased by 47%. Valuation, as defined as market-cap to operating profit, had increased by 40.79% over the year.

As many as 42 companies registered a loss in the June 2014 quarter. While the number of companies that have declared a net-loss in the period have remained the same, the quantum of the loss registered has come down by 32% from the June 2013 quarter. A little over half the mid-cap sample or 139 mid-cap companies have reported a double digit growth in sales and 128 companies reported a double digit growth in net profits. Even 16 loss-making companies of the June 2013 quarter have made a turnaround in the latest quarter.


Profitability margins have improved in the latest June quarter, compared to the quarter a year ago. The aggregate operating profit margin has increased to 8.88% for the June 2014 quarter, up from 6.45% in the June 2013 quarter. As many as 149 or 56% of the companies have reported an increase in operating margins, while, 138 or 52% of the companies have reported an increase in net profit margins.


Coming to valuation, the mid-caps as a whole are quoting at a market-cap to operating profit (MC/OP) of 6.9 times. Large-caps are quoting an MC/OP of 8.5, while Mega-caps are quoting an MC/OP of 12.8 times.


Out of the mid-cap sample, the market-cap of 252 or 95% of the companies has risen over the one-year period ended 26 August 2014. As many as 232 or 87% of the mid-cap companies are quoting a higher valuation compared to the period a year ago.




Rajeev Kapur

2 years ago

It appears that people are rushing in with the hope to make windfall gains. The experts are egging public to trust the tall claims of promotors for huge future gains. Is caution the need of hour or should every one join in the party?

Will real estate follow the uptrend in equities or continue to languish? Conservative investors may invest in real estate as it is less risky than Stocks if due diligence is done.

A friend asked if he should buy more midcaps or invest in a third house property for a 5-10 yrs horizon? House is safer but he would be liable to wealth tax and may have to take a loan if he does not want to liquidate his stock investments. What is your view?

Parimal Shah

2 years ago

The high profi shown by many midcaps is a prelude to entering the market with FPO or similar tricks to fool retail investors again.
Brace yourself for a flood of such issues in next and the next quarter.


Rajeev Kapur

In Reply to Parimal Shah 2 years ago

Yes, when the tide is up even leaky boats may rise.

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