Investor Issues
Nifty, Sensex weak – Weekly closing report
Nifty will have to stay above 7,800 for the bulls to gain strength
 
We had mentioned in last week’s closing report that Sensex, Nifty were still on an uptrend but that bulls were tiring. We had also mentioned that Nifty should stay above 7,870 for the market to head higher. The markets ended flat on Friday, the closing day of the week indicating that interest rates and fundamentals of shares are likely to be the deciding factors of share price appreciation in the near future, apart from a favourable monsoon. The trends of the major indices during the week’s trading are given in the table below:
 
 
Depressed by negative Asian markets, along with unwinding of long positions, key indices of the Indian equity markets traded in the red during the late-afternoon trade session on Monday. The BSE market breadth was heavily tilted in favour of the bears -- with 1,580 declines and 952 advances. The key Indian indices had ended on a flat-to-negative note during the previous trade session on April 22. Initially on Monday, the indices had opened on a flat note as they were dragged lower by negative Asian markets and a weak close of the US exchanges on Friday. Besides, investors were seen cautious ahead of the US FOMC (US federal open market committee) meet slated for April 27-28. The US FOMC meet assumes significance as it will decide the future course of the US interest rates. 
 
Foreign direct investment (FDI) inflow to India touched a record level of $51 billion during the April-February period of the last financial year, the government said on Monday. "We have had a record inflow of FDI in this country, more than $51 billion from April to February, and that is the highest ever," the Department of Industrial Policy and Promotion (DIPP) Secretary Ramesh Abhishek said here at an event hosted by industry chamber Ficci on intellectual property rights (IPR). Credit rating agency Moody's Investors Service said earlier this month that India's rising FDI inflows help reduce the current account deficit and also the external financing needs.
 
Key Indian stock market indices, which opened lower on Tuesday, surged in the afternoon session following strong global cues. Good buying was observed in metal, auto, realty and banking sectors. There was underlying caution among the investors before the meetings of the central banks of the US and Japan this week. The Fed is expected to keep interest rates unchanged but investors will keep a close eye on the Fed Chair's comments regarding future outlook.
 
Aditya Birla-led aluminium manufacturer Hindalco said on Tuesday it will accept the Australian company Metal X's improved takeover offer for its Australian subsidiary Aditya Birla Minerals Ltd. Metal X has announced its "intention to improve its ongoing takeover offer for acquiring the shares of ABML under the relevant laws of Australia", Hindalco said in a stock exchange filing. Metal X has offered one fully paid ordinary share in Metals X Ltd for 4.5 ABML shares and Australian $0.08 in cash for every ABML share held, it said. "Further, the company (ABML) has informed that Hindalco has communicated to ABML its intention to accept the aforesaid offer subject to receiving the approval of RBI and no bona fide superior proposal being announced by a third party within five business days of Metals X announcing its intention to make the aforesaid offer," the filing added. "Aditya Birla is an underperforming company and its shareholders have seen substantial loss of wealth over the last few years," said Metals X chief executive and managing director Peter Cook. "However, Metals X believes its underground mining experience, technical capability, financial capacity and experience in operating Western Australian mines make Metals X almost uniquely placed to take on the Nifty challenge," he said. Hindalco shares closed at Rs103.25, up 4.93% on the NSE.
 
The logjam in parliament, coupled with caution ahead of US monetary policy review and mixed Asian indices, depressed the Indian equity markets on Wednesday. Consequently, the key indices of the Indian equity markets traded flat on Wednesday. The BSE market breadth was slightly tilted in favour of the bears -- with 1,308 declines and 1,220 advances. Investors were seen cautious ahead of the US FOMC (US Federal Open Market Committee) meet and the Bank of Japan (BoJ) monetary policy review. The US FOMC meet assumes significance as it will decide the future course of the US interest rates. A hike in interest rates is expected to lead away Foreign Portfolio Investors (FPIs) from emerging markets such as India. Besides, the unwinding of long positions ahead of the futures and options (F&O) expiry and the ongoing logjam in parliament dampened sentiments. Investors are worried that the logjam might postpone key economic legislation from getting passed.
 
American credit rating agency Moody's on Wednesday retained India's outlook at 'positive' saying the country's history of double-digit inflation, high government debt levels, weak infrastructure and a complex regulatory regime have constrained its credit profile.
 
Profit booking, coupled with the logjam in parliament and negative global cues, subdued the Indian equity markets on Thursday. The sell-off was accelerated by the decision by the Bank of Japan (BoJ) to maintain the status quo in its monetary policy. This led to key indices of the Indian equity markets closing the day's trade in the red. The BSE market breadth was tilted in favour of the bears -- with 1,672 declines and 854 advances. 
 
The US Federal Reserve said that it will maintain the target range for the federal funds rate at 0.25%-0.5%, but gave little clue on the timing of its next rate hike. The US Labour market conditions "have improved further" even as growth in economic activity "appears to have slowed", the Fed said in a statement on Wednesday after wrapping up a two-day policy meeting, noting that it will continue to "closely monitor" inflation indicators and global economic and financial developments. The Fed currently expects that the US economy will expand "at a moderate pace" and the labour market indicators will "continue to strengthen," according to the statement. The Fed raised its benchmark interest rate by 25 basis points to 0.25%-0.5% in December, the first rate hike in nearly a decade, marking the end of an era of extraordinary easing monetary policy. But the turmoil in financial markets and a slowdown in global economy since the start of the year have raised increasing concerns about the strength of the US economy, forcing Fed policymakers to hold off on any further rate hikes since then.
 
On Friday, the markets ended flat. The markets will be guided by interest rates and corporate earnings and weakness, if any, in the global markets.

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Housing price inflation moderates
Lack of affordability leads to muted growth in housing prices
 
House Price Inflation is moderating as per Reserve Bank of India's Housing Price Index (HPI). House price inflation reduced to 9.8% y-o-y in the October-December quarter of 2015. This is the lowest ever-recorded number since the first quarter of CY2010. It is also a significant reduction from the 13.1% housing inflation witnessed in the third quarter of CY2015.  The previous low was in Q3FY13-14 when the rate of increase stood at 10.1%. On a annual basis, prices rose by 13.6% in 2015. In absolute terms, HPI increased to 221.7 from 218.2 as compared to the previous quarter. The base for 2010-11 is 100. 
 
HPI tracks Mumbai, Delhi, Chennai, Kolkata, Bengaluru, Lucknow, Ahmedabad, Jaipur, Kanpur and Kochi.  Out of the 10 cities, six reported a moderation in the rate of HPI. Jaipur witnessed a decline in prices on a y-o-y basis. Delhi and Mumbai witnessed around 10% rise in prices in the quarter. Lucknow reported the highest increase of 16.1%, while Kochi saw a rise of 8% 
 
Housing prices have risen significantly over the last decade, making owning a home a distant dream for many poor and middle-class households. Due to this lack of affordability, there is a lot of unsold housing inventory in some top-tier cities. This may keep the rate of growth in housing prices muted.

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Government makes a u-turn on EPF, agrees to 8.8 percent interest rate
New Delhi : In a major climbdown after persistent pressure from the trade unions and political parties, the government on Friday increased interest rate on employees provident fund (EPF) deposits to 8.8 percent for 2015-16 from 8.70 percent as it had announced earlier.
 
"I am happy to tell you that the EPF rate has been increased to 8.8 percent," Labour Minister Bandaru Dattatreya told reporters here.
 
The provident fund rate was 8.75 percent in 2014-15 and the Central Board of Trustees (CBT) had recommended to make it 8.8 percent for this fiscal. However, the finance ministry had rejected the recommendation and had approved only 8.70 percent interest, citing lower earnings.
 
Most trade unions had protested the decision and the issue was also raised by political parties both in parliament and outside. Trade unionist and Communist Party of India-Marxist MP Tapan Kumar Sen had also raised it in the Rajya Sabha.
 
Trade unions had threatened to intensify agitation from September if the government did not comply with the demand of higher EPF interest rates.
 
"This protest from all central trade unions is to condemn such arrogant, anti-worker approach of the central government," said a statement by All India Trade Union Congress (AITUC).
 
This is not the first u-turn the government has made in regard to the EPF.
 
On April 19, close on the heels of violent agitation in Bengaluru and also demand from trade unions, including from RSS-affiliated Bharatiya Mazdoor Sangh (BMS), the government had withdrawn its new rules of provident fund withdrawal.
 
According to the new norms proposed earlier this year, subscribers are not to be allowed to claim withdrawal of PF after attaining 54 years of age, and would have to wait till 57.
 
The earlier norms allowed contributors or subscribers to claim 90 percent of their accumulations in their PF account at the age of 54 years, and the final claims to be settled just one year before their retirement.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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