Range-bound opening indicated: Wednesday Market Preview

Fears of rising fuel prices is weighing on the market

The local market is likely to see a range-bound opening as macro-economic fears still persist. With domestic earnings for the March quarter coming below expectations, corporates are now concerned that higher interest rates will impact margins, going ahead.

On the global front, US market rose on Tuesday on good economic news and news of a trade surplus in China in April. Markets in Asia were mostly higher, supported by upbeat commodity prices. However, the SGX Nifty, which opened with good gains, pared some of its earlier gains and was 15 points higher at 5,564 against its previous close of 5,549.

The Sensex and Nifty opened slightly above Monday’s closing levels at 18,565 and 5,556, respectively. The market maintained an uptrend throughout the morning session, during which it hit its intra-day high-higher than that registered on Monday—at 18,689 and 5,593. We had suggested on Monday that 5,600 would be a barrier. Nifty almost hit 5,600 and collapsed.

The news of a ministerial panel meeting to consider raising fuel prices this week capped the upmove and the market started losing strength. The indices soon hit their intra-day lows at 18,429 and 5,515. However, news that the meeting might be deferred helped the market to stage a minor recovery. It has been reported that the government is considering raising diesel prices by as much as Rs4 a litre, the steepest hike in about a decade. It is also looking at hiking domestic LPG prices.

The resumption of the upmove on the market helped the Sensex to recover 84 points from its intra-day low, to close at 18,513, still down by 17 points. The Nifty closed at 5,541, down by 10 points. Given the increased volatility, the support for the Nifty now lies at 5,450, although when it gets there a new decline will resume. A close above 5,590 could result in a short rally till 5,730.

Markets in the US closed higher for the third day in a row on upbeat economic news. The news of Microsoft buying Skype also supported the upmove but Microsoft slid 0.6% after announcing the deal. Besides, news of a trade surplus in China also helped ease worries.

In economic news, US wholesale inventories rose in March as businesses saw a sharp increase in sales. Inventories advanced 1.1% in March, slightly above economists’ estimates and sales surged 2.9%, more than double analysts’ projections.

The Dow rose 75.68 points (0.60%) at 12,760.36. The S&P 500 gained 10.87 points (0.81%) to 1,357.16 and up 1.7% in the last days.  The Nasdaq Composite advanced 28.64 points (1.01%) at 2,871.89.

Markets in Asia were trading mostly higher in early trade today on news of inflation easing in China and higher commodity prices. China’s inflation fell to 5.3% on an annual rate in April, and from a 5.4% rise in March. On the other hand, industrial output was considerably weaker than forecast, rising 13.4% in April from the same period of last year.

Crude prices rose on Tuesday on concerns that flooding could hit the US Gulf Coast refining hub. Brent crude for June delivery gained $1.73 to settle at $117.63 a barrel and US crude for June delivery settled up $1.33 at $103.88 a barrel.

The Jakarta Composite gained 0.36%, the KLSE Composite rose 0.72%, the Nikkei 225 climbed 0.50%, the Straits Times advanced 0.28%, the Seoul Composite was up 0.49% and the Taiwan Weighted added 0.11%. On the other hand, the Shanghai Composite declined 0.49% and the Hang Seng lost 0.39%.

Back home, competition watchdog, Competition Commission of India (CCI) has found prima-facie evidence of cartelisation by private airlines to take advantage of strike by pilots of national carrier Air India. According to the preliminary findings, the airlines have been found to have formed a cartel to decide ticket prices during the period when Air India pilots went on a strike.

The CCI has called private airlines on 13th May to pass an interim order, which would ask private airlines to immediately stop opportunistic pricing of tickets.

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SEBI directs Sun-Plant Agro to wind up collective schemes

The latest order confirms an earlier interim ex-parte order on 21 October 2010 against Sun-Plant Agro directing it not to collect any money from investors, or to launch any scheme, and not to dispose off any of the properties or delineate assets of the scheme

The Securities and Exchange Board of India (SEBI) passed an order on 3 May 2011 directing Sun-Plant Agro to wind up its existing collective scheme(s) and refund the money collected by it under the scheme(s) with returns to the investors within three months of the order.

The latest order confirms an earlier interim ex-parte order on 21 October 2010 against Sun-Plant Agro directing it not to collect any money from investors or to launch any scheme or not to dispose off any of the properties or delineate assets of the scheme, or not to divert any fund raised from public at large kept in bank account and/or at the custody of the company, till further directions in this regard.

The market regulator further stated that in the event of the company failing to act as per the order, SEBI will initiate prosecution under the Securities and Exchange Board of India Act, 1992, against the company, or persons in charge of the business of its scheme(s).

Sun-Plant Agro was raising funds in the name of 'sale of plants'. It allegedly sold plants to purchasers, maintained the plants and thereafter provided returns on the amounts invested at the end of the scheme in the form of wood, even though no identity or marking of the particular plant which was sold, was provided to purchasers.

 SEBI said that such activities of the company carry the features of a Collective Investment Scheme (CIS), specified under Section 11AA of the SEBI Act read with Regulation 3 of the SEBI (CIS) Regulations.

 The company ought to have wound up the scheme in 2003 pursuant to rejection of the application for provisional registration by SEBI and the filing of the 'Winding Up and Repayment Report' by the company. However, the activities of Sun-Plant Agro and the details of amounts received by it against cost of trees during 2003 to 2010 prima facie indicate that even after submission of the Winding Up and Repayment Report in 2003, the company has been carrying out activities of a CIS without obtaining a Certificate of Registration from SEBI, the market regulator said.

 Interestingly, the company, which calls itself 'ISO:9001:2008 certified eco-friendly organisation', has partnered with the West Bengal Wasteland Development Corporation (WBWDC). Sun-Plant Agro, with WBWDC, plans to plant the jatropha crop over about 30,000 acres in the arid districts of Bankura, Birbhum, West Midnapore and Purulia over the next 15 years.

The SEBI order dated 3 May 2011 has further stated that for the specific purposes of the repayment/refund of the moneys to the investors as directed above, those directions as mentioned in the ex-parte order dated 21 October 2010 in as much as it relates to disposal of properties of the scheme, the operation of the Order is modified to allow Sun-Plant to meet the liabilities of the refunds to the investors in accordance with these directions.

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Sideways movement still on: Tuesday Closing Report

As expected, Nifty almost hit 5,600 and collapsed

The Sensex and Nifty opened slightly above yesterday's closing levels at 18,565 and 5,556, respectively. The market could maintain an uptrend throughout the morning session, during which it hit its intra-day high-higher than that registered on Monday-at 18,689 and 5,593. We had suggested yesterday that 5,600 would be a barrier. Nifty almost hit 5,600 and collapsed.

The news of a ministerial panel meeting to consider raising fuel prices this week capped the upmove and the market started losing strength. The indices soon hit their intra-day lows at 18,429 and 5,515. However, news that the meeting might be deferred helped the market to make a minor recovery. It has been reported that the government is considering raising diesel prices by as much as Rs4 a litre, the steepest hike in about a decade. It is also looking at hiking domestic LPG prices.

The resumption of the upmove on the market helped the Sensex to recover 84 points from its intra-day low, to close at 18,513, still down by 17 points. The Nifty closed at 5,541, down by 10 points. Given the increased volatility today, the support for the Nifty now lies at 5,450, although when it gets there a new decline will resume. A close above 5,590 could result in a short rally till 5,730.

The advance-decline ratio on the National Stock Exchange was a negative 766:919. Foreign institutional investors have been net sellers over the past four days.

The broader markets closed mixed with the BSE Mid-cap index losing 0.04% and the BSE Small-cap index gaining 0.25%.

BSE Fast Moving Consumer Goods (up 1.20%), BSE Realty (up 1.12%) and BSE Power (up 0.48%) were the noteworthy gainers in the sectoral space. On the other hand, BSE Bankex (down 0.63%), BSE Consumer Durables (down 0.60%) and BSE Capital Goods (down 0.38%) were the top losers.

Hindustan Unilever (up 4.46%), NTPC (up 4.31%), Sterlite Industries (up 2.87%), Jaiprakash Associates (up 2%) and Reliance Communications (up 1.29%) were the top performers on the Sensex today. The laggards were led by HDFC Bank (down 1.47%), Hero Honda (down 1.26%), Mahindra & Mahindra (up 1.23%), Tata Power and Tata Steel (down 0.95% each).

The International Monetary Fund has again revised downwards India's growth outlook for 2011 to around 8%, on the back of high inflation and the overall global economic outlook that is clouded by rising commodity prices, especially oil. The multilateral agency had earlier also moderated the country growth projection to 8.2% from 8.4%.

The Asian Development Bank has already revised its growth projection for India to 8.2% for this calendar year from its earlier estimate of 8.7%, on account of high prices.

Markets in Asia, with the exception of Taiwan, settled in the green on media reports that Toyota Motor Corporation is likely to resume normal production as early as August, ahead of the earlier time-frame of November-December. Also, China recorded a trade surplus of $11.4 billion in April, beating expectations, as exports grew markedly faster than imports. Investors are now focused on Chinese inflation data that is expected on Wednesday.

The Shanghai Composite gained 0.60%, the Jakarta Composite rose 0.40%, the KLSE Composite advanced 0.26%, the Nikkei 225 climbed 0.25% and the Straits Times was up 0.64%. On the other hand, the Taiwan Weighted lost 0.14%. Markets in Hong Kong and South Korea were closed for a local holiday.

Back home, foreign institutional investors were net buyers of stocks worth Rs196.42 crore on Monday, whereas domestic institutional investors were net sellers of equities worth Rs125.78 crore.

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