Positive opening likely: Monday Market Preview

Easing of tensions in the Middle East is seen as a positive indicator for markets worldwide

The Indian market is likely to open in the positive on supportive global cues, continuing the pull-back rally that began on Friday. Wall Street closed with decent gains on Friday following the resignation of Egyptian president Hosni Mubarak. Price of oil and gold softened after the news, easing tensions about potential disruption in supplies of crude. Markets in Asia were trading higher in early trade on Monday, supported by easing of tensions in the Middle East and a less-than-expected decline in Japanese gross domestic product (GDP) for the December quarter. The SGX Nifty was 37.50 points higher at 5,350.50 compared to its previous close of 5,313.

The government t is expected to announce the wholesale price index (WPI) based inflation for the month of January later in the day, giving some direction to the market.

The market was down for the third week in a row and there was no respite for the bulls. However, for what it is worth, selling was considerably reduced in the last three trading days of the week and we can look forward to a slightly better week ahead-provided the week's low holds.

On Friday, we were expecting a weak rally to begin if the market held on to the low. The market did rally after making a new eight-month low of 17,296 on the Sensex and 5,178 on the Nifty. The Nifty was able to cross the previous day's high, pointing towards some sort of a revival in the week to come. The market declined 2% over the week. The Sensex fell 280 points to 17,729 while the Nifty lost 86 points to 5,310.

The US markets closed with decent gains on Friday following resignation of Egyptian president Hosni Mubarak. The news came as a relief as escalation of the situation would derail oil transportation through the Suez Canal. In economic news, US retail sales increased by 2.2% in the week ended 5th February after four straight declines, the International Council of Shopping Centers said. Besides, the Thomson Reuters/University of Michigan preliminary index of consumer sentiment for the month climbed to 75.1 from 74.2 in January, the highest level in eight months on decreasing unemployment figures.

The Dow gained 43.97 points (0.36%) at 12,273.26. The S&P 500 added 7.28 points (0.55%) at 1,329.15 and the Nasdaq rose 18.99 points (0.68%) at 2,809.44.

Positive developments in the Middle East over the weekend boosted the Asian pack, which was trading in the green in early trade on Monday. Erasing of prices of crude and gold prices after the news was announced also added support. Besides, a less-than expected decline in Japan’s GDP for the December quarter boosted stocks in Japan. GDP for the December quarter fell by 1.1% on an annual basis, against analysts forecast of a 2% fall. 

The Shanghai Composite surged 1.39%, the Hang Seng gained 0.68%, the Jakarta Composite advanced 0.71%, the KLSE Composite rose 0.56%, the Nikkei 225 was up 0.76%, the Straits Times gained 1.01%, the Seoul Composite jumped 1.64% and the Taiwan Weighted was up 0.84% in early trade.

Back home, former Reserve Bank of India (Rbi) deputy governor SS Tarapore said the “soft and calibrated monetary policy measures” taken by the central bank to tackle inflation have failed and has called for stern steps to tackle price rise, which has become a national crisis.

Warning that the government and RBI’s preoccupation with high growth at the cost of inflation will be counterproductive and disastrous, he called for “a proactive, forward-looking monetary policy” to ease inflation and not the baby-step measures as it has been recently doing.
 

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IRDA releases norms for merger of general insurance companies

An acquirer will need approvals from IRDA, the Reserve Bank of India (RBI) and the finance ministry, in case it has foreign direct investment. Most of the 22 players in the private sector have foreign investment, which is capped at 26 percent

New Delhi: More than 10 years after opening up of the insurance sector, the Insurance Regulatory and Development Authority (IRDA) has proposed to allow mergers and acquisitions in the general insurance business that requires consolidation among the 24 industry players, most of which are loss-making, reports PTI.

To protect the interest of policyholders, they must be given the right to exit from the insurer, which is on the block for acquisition, IRDA said in its draft guidelines.

"The transacting parties shall ensure that policyholders of the transferor entity are migrated in a manner which ensures that their existing policies are continued to be serviced by the transferee entity on terms and conditions no less favourable than those existing prior to the merger," IRDA said.

An acquirer will need approvals from IRDA, the Reserve Bank of India (RBI) and the finance ministry, in case it has foreign direct investment.

Most of the 22 players in the private sector have foreign investment, which is capped at 26 percent.

The regulator has also said that the intent of the acquirer should be clearly spelt out.

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A better week ahead? Weekly Market Report

But medium-term weakness to persist

The market was down for the third week in a row and there was no respite for the bulls. However, for what it is worth, selling was considerably reduced in the last three trading days of the week and we can look forward to a slightly better week ahead-provided the week's low holds.

A host of factors like the political turmoil in the Middle East, the hike in key interest rates by China, wider implications of the 2G spectrum scam and dismal industrial production numbers for December, pulled the markets down. Easing of the weekly food inflation did not provide any solace as prices of manufactured goods continue to show a rising trend. The negative news on the domestic front delayed the upmove in the market.

On Friday, we were expecting a weak rally to begin if the market held on to the low. The market did rally after making a new eight-month low of 17,296 on the Sensex and 5,178 on the Nifty. The Nifty was able to cross the previous day's high, pointing towards some sort of a revival in the week to come.

The market declined 2% over the week. The Sensex fell 280 points to 17,729 while the Nifty lost 86 points to 5,310.

The top gainers on the Sensex in the week were DLF (up 4%), HDFC (up 3%) and Bajaj Auto (up 2%). The major losers were Reliance Communications (down 15%), Hindalco Industries (down 11%) and Reliance Infrastructure (down 9%).

While there were no gainers in the sectoral space, BSE Bankex and BSE Fast Moving Consumer Goods indices settled flat. BSE Consumer Durables and BSE Metal (down 6% each) were the top losers.

The market opened with decent gains on Monday as investors went bargain-hunting. Choppiness resulted in the indices touching their previous close a couple of times, but positive momentum continued with the market trading range-bound. Although the market ended positive, it closed well below the day's opening.

The market opened with modest gains on Tuesday, but it soon pared some of the initial gains as profit-booking set in, leading the indices into the red in mid-morning trade. Selling pressure resulted in a slow southward journey and the market finished near the day's low.

As expected, stocks opened on a pessimistic mode on Wednesday. However, after the market quickly hit the lows in the first half hour, there was a strong revival; the indices made up the day's losses and were in the green intermittently. However, sellers took over in the last two hours, following rumours about action against Anil Ambani group companies, but a recovery in the dying moments of trade helped to cut the losses.

On Thursday, the market opened flat, tracking the Asian peers that were trading lower on worries of interest rate hikes by countries across the region which have been hit by high inflation. Domestic concerns over the broader implications of the 2G spectrum scam also hurt investor sentiment. It traded within a range for most of the day, never getting anywhere near the previous day's high and the bears prevailed at the end.

On the last trading day of the week, the Sensex opened a touch higher while the Nifty opened flat. The market witnessed some upmove as investors resorted to bargain hunting. However, lower IIP numbers for December led the indices into the red in morning trade. Buying continued in the post-noon session, giving a thrust to the market. After being mauled for a couple of days, the broader markets were in the limelight, outperforming the Sensex with a huge gain. The market closed with gains of over 1.5% on the day.

Industrial growth slowed even further to a dismal 1.6% in December 2010, from 2.7% in November and 18% in the corresponding period a year ago. The decline in the Index of Industrial Production (IIP) has been attributed to the poor performance of the manufacturing sector.

Industrial growth during April-December this fiscal stands at 8.6%, unchanged in comparison with the corresponding period of the previous year.

Food inflation declined to a seven-week low of 13.07% on 29th January, as prices of potatoes and pulses eased, but consumers continued to feel the pinch of high prices of vegetables. Food inflation, which snapped a three-week rising trend, fell by nearly four percentage points from 17.05% in the week ended 22nd January. It was 22.08% a year ago.

The last time food inflation came down to such levels was in the week ended 11th December when it was at 12.13%.

The government, earlier this week, estimated economic growth for the current financial year at 8.6%, as against 8% a year ago. The Central Statistical Organisation's (CSO) gross domestic product growth projection is higher than the forecast by the Reserve Bank of India and the finance ministry.

The latest GDP growth estimate of 8.6% for the entire fiscal means that the pace of economic expansion has slowed down in the second half of FY2010-11, given that the GDP growth in the April-September 2010 period was at 8.9%.

On the international front, China raised interest rates on Tuesday, the third time since mid-October. The benchmark one-year lending rate was increased to 6.06% from 5.81%, effective Wednesday. The one-year deposit rate has been raised to 3% from 2.75%. The move is an attempt to curb liquidity in the face of rising costs. 

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