The markets suffered a massive bout of volatility today, rising and falling 180 points on the Nifty intraday. The bias remains weak until Nifty closes above 6,230.
On Wednesday, we predicted that Nifty may hit 6,260 but may not sustain it. This is exactly what happened on Thursday. The markets opened flat, without much fanfare and stayed flat through the first hour of trade. After that, it suddenly picked up pace and shot up, led by technology and metals, hit an intra-day high of 6,288.95. However, this was a pump-and-dump operation. The momentum didn’t last long and Nifty fell precipitously after 1.30pm. It is the third consecutive session when the indices ended in the red.
The Sensex and the Nifty opened at 20,896 and 6,228, respectively. The Sensex moved up to the level of 21,142 before dropping off to 20,797, while the Nifty moved up to the level of 6,288 then dropped to as low as 6,180. The Sensex closed at 20,822 (down 72 points or 0.35%) while the Nifty closed at 6,187 (down 27 points or 0.45%).
The National Stock Exchange (NSE) recorded almost the same volumes as yesterday, with 68.46 crore shares trading hands. Of the 1,228 shares on the NSE, 396 advanced, 787 fell while 45 remained unchanged, signifying broad weakness and lack of depth.
All sectoral indices were in the red except for IT (up 1.28%), metals (up 0.75%) and pharma (marginally up by 0.06%). PSU Banks and Bank Nifty were the worst hit, down 3.54% and 2.10% respectively.
Of the 50 stocks on the Nifty, 18 ended in the green. The top five gainers were Tata Steel (4.28%); HCL Tech (2.03%); Hindalco (1.43%); Infosys (1.29%) and TCS (1.19%), while the top five losers were Bank of Baroda (-6.19%), DLF (4.71%), BHEL (4.10%), Axis Bank (3.78%) and BPCL (3.69%).
After a brief respite from this year’s fall, the rupee once again went down, on demand from oil companies. The rupee (INR) hit a 6-week low against the US dollar, making it the worst performer in Asia. A Reuters poll revealed that the INR is unlikely to strengthen more. In order to stabilise the rupee, it is reported that PSU banks sold dollars on behalf of the RBI. At the same time, S&P, the ratings agency, affirmed India’s sovereign at BBB-/A-3. Yet, it remains negative unless government manages to reverse growth.
Meanwhile in the US, markets continue to scale new heights. The Dow Jones Industrial Average closed at a record high on Wednesday. Traders are betting that the accommodative monetary condition will not change in the near future. More than this, there’s newfound global hype over Twitter’s IPO which has been set at $26 a share. However, all eyes are on US third quarter GDP data as well as jobless claims which is due to be released today.
European market players are sitting by the sidelines, waiting for European Central Bank and Bank of England to take action. European markets were seen flat ahead of the decision. Asian markets were down except for Taiwan, Jakarta and Kuala Lumpur. Hang Seng was down 0.68% while Nikkei was down 0.76%. US futures were trading in the red.
S&P's negative outlook for India indicates that it may lower the rating to speculative grade next year if the government that takes office after the general election does not appear capable of reversing the country's low economic growth
Ratings agency Standard & Poor's (S&P) affirmed the 'BBB-' long-term and 'A-3' short-term unsolicited sovereign credit ratings on India with a negative outlook.
According to the ratings agency, the vibrancy of India's democracy will again come to the fore in general elections, which are due no later than May 2014. It said, "Power has alternated between the Congress Party and the BJP since 1998. The next government, regardless of its composition, will face several challenges. The 13th Finance Commission has recommended a central government fiscal deficit target of 4.2% of GDP in the fiscal year ended March 2013. Although the current Congress administration tried to close the gap to this target, it did so by having one-off measures such as compressing unspent budget allocations and selling minority stakes of nonfinancial public enterprises to public sector financial enterprises."
"The new government will face difficult tasks to place its fiscal accounts on a firmer footing: phasing out of diesel subsidies, financing the expansion of food subsidies, addressing other subsidies such as those for fertilizer, and introducing the nationwide rollout of a common goods and services tax," the ratings agency added.
According to Barclays, this commentary (by S&P) is marginally positive, with the ratings agency almost ruling out a downgrade before the national elections, which are due in May 2014 and even though the negative outlook is maintained, S&P has effectively given the next government a window to usher in economic reforms. "Based on our discussions with market participants, most appear to be taking into account a small but non-negligible possibility of a ratings downgrade in the coming months, and high grade benchmarked portfolios had less-than-benchmark exposure to the country’s bonds. Given that the next rating update could well be at least nine months away, maintaining an underweight position would be expensive. As a result, we expect S&P’s update to prompt some buying that could push spreads 15-20 basis points (bp) tighter versus benchmark," it said in a note.
In a release, S&P said, its rating affirmation rests in several key strengths of India. "These include a robust participatory democracy of more than 1 billion people and a free press; low external debt and ample foreign exchange reserves; and an increasingly credible monetary policy with a largely freely floating exchange rate," it said.
"These strengths are counterbalanced by significant weaknesses, which include an onerous burden from its public finance, lack of progress on structural reforms, and shortfalls in basic services typical of a nation with a GDP per capita of $1,500. Real per capita growth had averaged more than 6% annually for fiscal year 2004-2011 (ended March 2011), and had eased India's fiscal constraints and poverty levels. But growth has slowed steadily since then to half that level, fraying the social contract and putting at risk the declining trend in government debt," the ratings agency added.
UP government has provided security cover to 830 people beyond the authorised list. In fact 170 of them had been give security free of cost!
The Lucknow bench of the Allahabad High Court while hearing a public interest litigation (PIL) has asked the Uttar Pradesh (UP) government to remove unauthorised security cover provided to 830 people and recover the cost from these people within next 15 days.
Social activist Dr Nutan Thakur had filed the PIL. The affidavit signed by Ajay Kumar Singh, DSP, of Security Wing in UP before the HC states, "currently 830 persons beyond the authorised list have been awarded security by the UP Government. Out of these unauthorised persons, 170 have been awarded security free of cost while 650 have been awarded security on payment."
Displaying its displeasure over grant of security personnel to unauthorised persons, the Bench of Justice Imtiyaz Murtaza and Justice Devendra Kumar Upadhyaya asked the state government about the money that was not recovered. While directing the UP government to recover the money in 15 days, the High Court said in case the recovery is not made, the senior superintendent of police (SSP) or SP will be held liable for the same.
As per the affidavit, the total expenditure on these persons beyond authorised list comes at Rs4.83 crore. Of this Rs3 crore has been recovered while Rs1.83 crore still needs to be recovered.
The affidavit also mentions names of several persons who have been granted security even without any recommendation from the district security committee (DSC). The HC also directed the state government to immediately withdraw security provided without the recommendation of DSC.
While Dr Thakur has been asked to file her rejoinder reply, the state government has been directed to file reply under signature of the Principal Secretary (Home). The next date of hearing has been fixed on 2 December 2013.