Range-bound movement expected: Weekly Market Report

Nifty will move between 5,300 and 5,600

Global factors and a mixed bag of corporate earnings resulted in the market closing with a negative bias for a fourth consecutive week. A steep Rs5 petrol price hike fuelled more speculation of a further interest rate hike by the Reserve Bank of India (RBI), slowing down the tempo and this does not look like changing in the near term.  

The market, settled with deep cuts on Monday and Tuesday, but the losses were reduced on Wednesday. On Thursday and Friday, the indices settled higher, recovering some of the earlier losses. Still, on a weekly basis, the market was 1% lower with the Sensex 205 points down at 18,326 and the Nifty off 58 points at 5,486.

While the expiry of the May futures and options contract mid-week is expected to keep the market range-bound, an imminent diesel price hike that will impact costs across the board will likely weigh on sentiments. The Nifty should stay in a range between 5,300 and 5,600.

State Bank of India's profit plunge dragged the stock down 12% this week, ending as the top loser on the Sensex. ONGC lost 10% on reports that the government is expecting the oil explorer to share a larger part of the subsidy burden. Reliance Communications (down 8%), Reliance Infrastructure and Jaiprakash Associates (down 7% each) were the other major losers. On the other hand, Larsen & Toubro was the top gainer (up 8%), bolstered by upgrades following a 17% increase in quarterly profit. TCS (up 4%), Cipla, HDFC Bank (up 3% each) and BHEL (up 2%) were other major gainers.

Among the sectors, BSE PSU and BSE Oil & Gas indices tumbled 5% each, but BSE Capital Goods rose 4% and BSE Consumer Durables gained 1%.

On Thursday, finance minister Pranab Mukherjee expressed relief over a marginal easing of inflation, saying "Both in food inflation and overall wholesale price index (WPI) inflation there is a declining trend."

The government said headline inflation for April was down to 8.66% from the revised 9.04% in March. (The revision was carried out as metal products were not incorporated earlier due to a programming error.) The inflation figure for February was similarly revised upward to 9.54% from the earlier 8.31%.

Food inflation slipped further to 7.47% for the week ended 7th May, from 7.70% in the previous week. This is the lowest rate of price rise in food items in the last 18 months, since separate data for food inflation started coming in. It is also the third consecutive week that food inflation has been lower.

But India's chief statistician TCA Anant warned that high global crude prices could impact economic growth in 2011-12. He projected that the gross domestic product (GDP) is likely to grow by around 8.5% during the fiscal. Mr Anant also expects headline inflation to fall below the 8% mark by August-September if the monsoon is normal.

On the political front, the Central Bureau of Investigation (CBI) filed its first charge-sheet in a Delhi court against Suresh Kalmadi, listing him as the main accused in a corruption case on a Commonwealth Games-related contract worth Rs141 crore. The agency, in its over 50-page charge-sheet, said Mr Kalmadi was the key person with all the powers to take decisions on awarding contracts.

On Friday, a special court sent DMK member of parliament Kanimozhi and Kalaignar TV managing director Sharad Kumar to jail, on charges of handling bribes in the 2G scam. Rejecting their bail applications, the court said that most of the witnesses against the DMK leader are employees of Kalaignar TV and hence the possibility of they being influenced cannot be ruled out.
On the international scene, the Japanese economy contracted more than expected in the first quarter after the March earthquake and tsunami disrupted production and prompted consumers to cut back spending, sending the nation to its third recession in a decade. Gross domestic product contracted an annualised 3.7% in the three months through March and a revised 3% in the previous quarter.

Policymakers the world over continue to worry about the global economic slowdown, reducing demand for commodities like crude and metals, which hurt investor sentiments.  Domestically, with most corporates having declared their results, global cues will likely determine the direction of the market in the coming week.


India launches communications satellite—GSAT-8; to boost DTH coverage

The satellite has 24 transponders to augment India’s Ku-band relay capabilities—primarily for DTH TV broadcast services—with a coverage zone including the entire Indian subcontinent

Bangalore: India's advanced communication satellite GSAT-8, which is aimed at augmenting direct-to-home (DTH) TV broadcast services, was today successfully launched by Arianespace from Kourou in French Guiana, reports PTI.

GSAT-8 was injected into space by European launcher Arianespace’s Ariane 5 rocket which lifted-off at 02.08 am (IST), with Japan’s ST-2 spacecraft as co-passenger.

Prime minister Manmohan Singh congratulated the Department of Space for the successful launch of the communication satellite. Mr Singh rang up space secretary K Radhakrishnan at the launch site and conveyed his greetings.

With a design life exceeding 12 years, GSAT-8 weighs 3,100 kg and is one of the heaviest and high-powered satellites built by the Indian Space Research Organisation (ISRO).

The satellite carries 24 transponders to augment India’s Ku-band relay capabilities—primarily for DTH TV broadcast services—with a coverage zone including the entire Indian subcontinent.

Additionally, GSAT-8 carried the two-channel GAGAN system for aircraft navigation assistance over Indian airspace and adjoining areas.

The total project cost was around Rs600 crore. While the cost of the satellite was around Rs250 crore, Rs300 was the launch cost. The insurance cost was around Rs30 crore.

ISRO said Ariane 5 placed GSAT-8 into the intended Geosynchronous Transfer Orbit (GTO) of 35,861 km apogee (away from Earth) and 258 km perigee (close to Earth), with an orbital inclination of 2.503 deg with respect to equator.

“Initial checks have indicated normal health of the satellite,” the space agency said.

Preparations are underway for the firing of 440 Newton Liquid Apogee Motor (LAM) during the third orbit of the satellite at 03:58 hrs IST tomorrow as a first step towards taking the satellite to its geostationary orbital home.

An ISRO team, which witnessed the launch, expressed happiness over the successful mission.

“I am extremely happy to announce that ISRO’s Master Control Facility at Hassan near Bangalore has confirmed the reception of signals from GSAT-8 and taken charge of the command and control of GSAT-8 immediately after its injection into the geo-stationary transfer orbit,” Mr Radhakrishnan, who is also ISRO chairman said.

“This (the launch) is another great moment for us,” he said.

Mr Radhakrishnan said the user community in India was looking forward for the operationalisation of the 24 high-power Ku band transponders into the Indian National Satellite system.

ISRO officials said the launch was doubly gratifying as the space agency had lost two satellites last year in two unsuccessful GSLV missions launched from the home soil.

The space agency was desperately looking to augment transponder capacity, which is in great demand.

Built by Japan’s Mitsubishi Electric Company, ST-2 would be operated by the ST-2 Satellite Ventures joint company of Singapore Telecommunications Ltd (SingTel) and Taiwan’s Chunghwa Telecom Company Ltd.

GSAT-8 marked the 14th Indian satellite launched by Ariane family of vehicles in the last 30 years.

Since the launch of the Apple experimental satellite on Flight L03 in 1981, Arianespace has put into orbit 13 Indian satellites.


Despite the IPO scams in the past, why do market manipulators still have a field day?

Two IPOs have just failed, possibly because the “market help” was not available. The bigger issue is why are the regulators so silent, given that we have had such a huge IPO scam in 2005 which involved banks, depositories and brokers?

Yesterday, (Two failed IPOs show that manipulators have withdrawn from the game, for now ), we had highlighted the rot in the IPO (Initial Public Offering) process.

Manipulators get to work once the stock is listed. They rig the shares, liquidate their entire stake and walk out. If they are not involved, average issues (not the Coal India variety) find it hard to sell. The manipulators are able to mobilize tens of thousands of retail applications. And the exchanges and the market regulator? They are in their ivory towers and have no clue about any of this. In fact, they seem not to be interested either.

Why is this rigging still going on? Haven't the regulators learnt from the IPO scams of 2003 and 2006? The negligence on the part of the market regulator, the Securities and Exchange Board of India (SEBI), has become more evident from the fact that even today, smaller IPOs are relying upon these market manipulators to 'succeed'.

In the past, SEBI has taken action but it seems to have led to no change. When the regulator started scanning an entire spectrum of IPOs launched over 2003, 2004 and 2005, it ended digging up wagonloads of dirt and probably prevented a larger conspiracy to completely hijack the market. SEBI had barred brokerage firms like Karvy and Indiabulls from the market. It had also directed HDFC Bank and IDBI Bank not to open new demat accounts for share transactions.

Following are some actions that SEBI has taken in the past:

24 entities banned from primary and secondary market, including Indiabulls and Karvy

Quasi-judicial proceedings against Karvy Depository Participant (DP) and Pratik DP, banned from the market

12 DPs told not to open fresh demat accounts, including HDFC Bank, IDBI Bank, Central Bank, ING Vysya Bank, IL&FS and Motilal Oswal; 15 more under scrutiny, including ICICI Bank, Citibank, and Standard Chartered.  

85 financiers barred from the market.

The regulator also pulled up NSDL (National Securities Depository Limited) and CDSL (Central Depository Services (India) Limited) for 'grave management lapses'. The findings revealed contributory negligence on the part of the depositories and their managements.

As per SEBI's order, the promoters of NSDL and CDSL were directed to take all appropriate actions including revamping of management which clearly had allowed matters to come to such a sorry pass.

In the interest of attracting more investors to the stock market, SEBI needs to ensure that companies do not use IPOs as a one-time, fund-raising exercise with a plan to avoid accountability and compliance through the best available delisting opportunity.  

Earlier, SEBI had said that certain entities had cornered shares reserved for retail applicants in the name of fictitious entities in the IPOs of Yes Bank and Infrastructure Development Finance Company (IDFC).

Apart from the Yes Bank fraud, SEBI reportedly had definite data about two IPOs where retail allotments were rigged, but market observers believe the scam was far bigger. The Yes Bank and IDFC cases were only the tip of the iceberg.

The Reserve Bank of India (RBI), to curb this malice, had sought an explanation from banks in which benami accounts were unearthed in the IPO scam. The RBI had fined three banks for violation of ''know your customer'' (KYC) norms relating to loans against shares and investing in IPOs. These three banks were HDFC Bank (slapped with the highest penalty of Rs 25 lakh), followed by ING Vysya Bank (Rs10 lakh) and IDBI Bank (Rs 5lakh).

The retail investor continues to become more disenchanted every day. Our investor population has already nosedived from around 20 million to just about eight million.

The trend in almost all recent IPOs indicates that investors are disgusted with the high valuations and have shunned the primary market. This is why lesser-known issues need the help of manipulators. So restoring the confidence of retail investors and growing the investor base ought to be the challenge before all the concerned regulators. But the opposite is more likely to happen-the retail investor may actually become extinct, looking at the manipulation that takes place with any IPO issue.




5 years ago

Out of 120 IPOs only 22 ipos have rewarding the investors as per market prices of the above companiesas on 9/12/11 which mens only 22% companies have given positive return while 88% companies have given negative returns to the investors The loss is varying from 1%to 90.5.% The list of the IPOs issued from October 2009 to October 2011 can be verified fromthe statistics given on chittorgarh.com a portal analysing the IPOS and its performance etc.
This is very alarming situation and unless panic button is pressed the disaster will continue.Companies are charging heavy premium on public issues without any sort of justifications and the Merchant Bankers are not taking any steps to check this. The SEBI,Finance Ministry, Ministry of Company affairs stock exchanges all are sitting quite and not bothered about this type of looting by the corporate India. How a company which has not started its operations even without acquiring land ,plant and machinaries arecharge even 100 rupees premium to 200 rupees premium Previously there was cheque by controller of capital issues and registrar of Companies .After liberalisation the companies charging premiums according to their whims and fancies.
It is high time that the government authoritiesand the statutory bodies concerned take the matter seriously and plug this corrupt practice.
There are dishonest brokers and grey market operators involved in execution of the evil designs of teh promoters
Investors shoul abstain from applying for IPOs now onwards. People should have faith in the capital market Then only share market will function properly Having burnt their fingers in the public issues during the last 3 years the investors should be very choosy and beforeapplying think 10 times.

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