The market will remain under pressure for a variety of local and international issues
The Sensex ended the day 31 points lower (0.17%) to 17,822 points and the Nifty closed 17 points lower (0.31%) at 5,323 points. The market started the day with a sharp rise. However, it came down soon and tested the intra-day low. The market traded in a narrow range throughout the day.
European stocks fell on Tuesday ahead of US earnings reports. Key benchmark indices in the UK, France and Germany were down by 0.13% to 0.18%. Most Asian stocks fell on Tuesday, with raw-material producers and Japanese exporters drifting lower after Alcoa Inc's revenue trailed analyst estimates and the dollar weakened. Key benchmark indices in Indonesia, Japan, Hong Kong, South Korea, Singapore and Taiwan were down by 0.14% to 1.08%. Key benchmark indices in China and South Korea rose by 0.02% to 1.02%.
US stocks were up on Monday, helped by the downturn in the dollar and the aid plan for Greece. The Dow gained 8.6 points (0.08%) to 11,006. The Nasdaq rose four points (0.16%) to 2,457.87 and the S&P 500 gained 2.11 points (0.16%) to 1,196.
Closer home, the meteorological department has said that a second consecutive dry session is unlikely. The monsoon season last year was the worst in the past 37 years, creating a shortage in sugarcane and oilseed production. Data from the weather office shows that out of about 20 droughts since 1901, 17 were followed by near-normal rainfall. The weather office will issue its formal monsoon forecast in the second half of April. The wholesale price index probably rose 10.39% in March from that of the year-ago period. Projections from 20 economists ranged from a rise of 10.08% to 11%. The chief economist adviser to the finance ministry said that the economy has probably grown 8.5% in the March quarter. The secretary for financial services in the finance ministry said that a tightening of the interest rate is very likely.
Rolta India (up 2.7%) has acquired US-based consulting, development and system integration company OneGIS Inc. The financial details of the deal were not given. Hindustan Construction Company (down 1%) has received an order worth Rs608 crore for the reconstruction and completion of a dry dock in Mumbai which is scheduled to be completed in 48 months. Container Corporation of India (up 1.3%) said on Monday, (12th April), that goods worth Rs30 crore were damaged due to a fire at its export warehouse on Saturday, (10th April). There was also a partial damage worth Rs5 crore to the warehouse building. The firm’s liability for goods and warehouse facilities are fully insured.
NTPC (up 0.7%) will soon allocate 50% of the power generated from any plant to the State where the plant is located. Now, it allocates 10% of the total power generation from any plant. Hero Honda (down 5.2%) which is running at full capacity, might have a tough time in coming days as the company is likely to launch various new models. GAIL (down 0.26%) will invest Rs15,000 crore over the next two-three years in expanding its pipeline network to connect consumption centers. Infosys (up 3.6%) reported a 5% increase in both its sales and operating profit for the March quarter from the year-ago period. Infosys expects a 2.9% growth in earnings per share (EPS) on a consolidated basis at between Rs106.82 to Rs111.38 in FY11 over FY10.
Foreign institutional investors were net buyers on Monday of Rs14 crore. Domestic institutional buyers were net sellers of Rs192 crore.
SEBI has told all the 14 insurance players covered in its earlier diktat that all ULIPs launched after 9th April will require its approval
Just when all market players thought that the dust was finally settling down in the spat between the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) over unit-linked insurance plans (ULIPs), the market watchdog has fired yet another unexpected salvo in this turf war between the regulators.
SEBI has said today that any ULIP launched after 9th April would require its approval, and ULIPs launched before this date would continue to operate as per the earlier norms.
But this recent SEBI diktat is all the more surprising because yesterday (12th April) finance minister Pranab Mukherjee had clearly stated that the status quo would be maintained with regard to ULIPs. SEBI’s order clearly goes against the finance minister’s statement.
Sources in the know also confirm that Mr Mukherjee has not yet read SEBI’s latest circular.
According to SEBI’s circular (dated 13th April): “This is to bring to the notice of investors that SEBI has decided to keep in abeyance, till further notice, the enforcement of the above directions (in accordance with the order dated 9th April) with respect to the ULIP schemes /products existing on the date of the order, i.e., 09.04.10. However, with respect to any new ULIP schemes/products launched after 09.04.10, the directions mentioned in the said order will be enforced as indicated therein.”
“SEBI’s order is in abeyance, it’s not cancelled. The FM could have said that it (regulation of ULIPs) comes under the purview of IRDA. (The) IRDA lobby was so strong that the government could not take action against IRDA directly,” said an insurance expert, preferring anonymity.
“It’s a jurisdiction issue and will be taken up by the courts; legally, it should be under IRDA’s jurisdiction. SEBI feels that (market) investments need to be regulated by it; SEBI always wanted to do it. If they succeed, it will be against the principle of natural justice and against policy holders,” says a source from Reliance Life.
There has been a sustained bull market playing out, but new fund offers have virtually dried up
A sustained market rally is usually a harbinger of a slew of new fund offers (NFOs) from fund houses eager to tap into the prevailing optimism. Indeed, past data indicates that, with a slight lag, any prolonged rally in the stock markets brings in its wake a bucketful of NFOs, while a sustained decline results in a scaling down of the same.
This time around though, fund houses are seemingly not enthused by the phenomenal market rally over the past one year. Between 1 January 2009 and 31 December 2009, the Sensex shot up by over 76%. Despite this, the well of NFOs has virtually gone dry. Since the beginning of calendar year 2010, only three NFOs have come out into the markets. Over February this year, not a single NFO has been launched by any of the fund houses.
This is in sharp contrast to 2003 when the Sensex rallied 72%. Fund houses responded in style—they rubbed their hands with glee and presented 19 NFOs before investors in the subsequent year. This was followed by a record 37 NFOs in 2005 after the markets had carried on their momentum into the subsequent year. Similarly, when the index shot up 46% in 2007, fund houses dumped another bagful of NFOs (21 in all) in the subsequent year.
It is therefore surprising to see how the huge rally of last year has failed to bring about a glut of NFOs this time around. The only probable explanation could be the current travails facing the mutual fund industry as a consequence of the changes introduced by the Securities and Exchange Board of India (SEBI) last year. Is this phenomenon a direct fallout of the agenda unleashed by SEBI to impose a new regime for the industry? If fund houses continue to remain silent while the markets chart new highs, this situation would be unique.