Downside momentum loses steam. Only a close below 6,165 will signify further downside for Nifty
Monday’s was the fourth consecutive trading session on the bourses when it closed in the negative. Market today awaited the Markit Economics to unveil the result of a monthly survey on the performance of India's services sector for December 2013.
The BSE 30-share Sensex opened at 20,914 while the NSE Nifty opened at 6,221. The Sensex moved in the range of 20,722 and 20,914 and closed at 20,787 (down 64 points or 0.31%) while the Nifty moved between 6,170 and 6,225 and closed at 6,191 (down 20 points or 0.32%). The NSE recorded 61.37 crore shares. We were expecting a strong downward movement which has not materialised so far. A close below 6,165 could be a signal for such a downmove.
Among the other indices on the NSE, the top five gainers were Media (up 2.38%); Smallcap (up 0.77%); Nifty Midcap 50 (up 0.58%); Pharma (up 0.45%) and FMCG (up 0.29%). The top five losers were PSU Bank (1.87%); Bank Nifty (1.19%); Finance (0.77%); Realty (0.75%) and Service (0.64%).
Of the 50 stocks on the Nifty, 15 ended in the green. The top five gainers were ONGC (1.90%); Jindal Steel (1.70%); Sun Pharma (1.48%); Tata Motors (1.25%) and Lupin (0.76%). The bottom five losers were Tata Power (2.74%); ICICI Bank (2.23%); Bank of Baroda (2.13%); State Bank of India (2.01%) and Hero MotoCorp (1.57%).
Of the 1,233 companies on the NSE, 677 closed in the green, 496 closed in the red while 60 closed flat.
The HSBC/Markit Purchasing Managers (PMI) Index for the services industry fell to 46.7 in December from 47.2 in November, registering the sixth consecutive monthly drop in output levels, the longest period of continuous reduction since the 2008/2009 global financial crisis. According to HSBC, new business contracted at the quickest pace since September. The upcoming general elections had also contributed to the latest drop in new orders, it said.
Accordingly, the HSBC India Composite Output Index, which maps both services and manufacturing, stood at 48.1, below the crucial 50 mark, for the sixth consecutive month. The index dropped from November's 48.5, indicating a slightly faster rate of contraction.
On price rise, HSBC said, the rate of cost inflation was only moderate and the weakest since July. Moreover, input price inflation in the private sector as a whole eased to a six-month low.
The telecom companies, who are being investigated in connection with the 2G spectrum scam or the arbitrary allocation of spectrum to private companies at throwaway prices, had argued that the government's auditor cannot examine private entities. The court today rejected that contention. After the high court refused to stop the audit, the companies moved Supreme Court, which referred their case back to the high court.
The Indian government will offer at least 56 oil and gas blocks in its next round of new exploration and licensing policy (Nelp) auction that will be launched next week, oil secretary Vivek Rae said on Monday. The oil ministry has recommended revenue-sharing between the companies and the government in place of the current production-sharing mechanism, he said.
US indices closed flat on Friday. The US Senate is scheduled today to vote, and likely approve, the nomination of Janet Yellen as the Fed's new chief. She would succeed Fed Chairman Ben Bernanke on 1st February, if confirmed.
Except for Seoul Composite (up 0.37%) all the other Asian indices closed in the negative. Nikkei 225 was the top loser which closed down 2.35%.
The HSBC China services PMI fell to 50.9 in December from 52.5 in November, HSBC Holdings said on Monday. New order growth reported by the service providers in December was the weakest in six months, but the services sector saw an increase in payroll numbers for the fourth month in a row, HSBC said.
European indices are showing a mixed trend while US Futures were trading in the green.
Markit's Eurozone Composite PMI, which gauges how thousands of manufacturing and services companies fare every month, rose to 52.1 in December from 51.7 in November. Markit's Eurozone Services PMI was also unchanged from the preliminary reading, although it slipped slightly to 51.0 from November's 51.2. The euro zone's unemployment rate fell slightly in October to 12.1%, or around 19.3 million people.
Morgan Stanley Mutual Fund’s exit says a lot about India’s regulatory regime, as much as about the fund companies
Given the fanfare that marked the Morgan Stanley India Growth Fund’s arrival in India, in January 1994, its decision to throw in the towel exactly 20 years later, by selling out to HDFC Mutual Fund, ought to have attracted far more media discussion. That it has attracted less attention than Fidelity Mutual Fund’s exit, a couple of years ago, reflects that sorry state of India’s mutual fund industry. Of course, Morgan Stanley (MS) has itself to blame. It played on the ignorance of Indian investors to launch a whisper campaign in the ‘grey market’ that its units would soar like equity shares. People stood in long, serpentine queues to submit their applications and many even paid a premium for the forms.
Far from opening at a premium, the net asset value of the close-ended scheme did not touch the issue price for over a decade. Investor anger about Morgan Stanley was so high that this fund house had little prospect of launching another scheme to increase its AUMs (assets under management), for a long time.
Morgan Stanley’s cowboy ways were not restricted only to this scheme. When the economy opened up, MS first entered India though a 50:50 collaboration with SBI Mutual Fund (SBI MF) for an offshore fund. The two parted ways a little after executives of the State Bank of India (SBI) found that they were lulled into signing an agreement that gave veto powers to MS over investment decisions. The clause had been quietly slipped into the fine-print and was only discovered much later, when the first disagreement cropped up. The giant SBI discovered, to its shock, that it was the junior partner in the equal deal that they thought they had signed. After that, it was only a matter of time before they broke up. But Morgan Stanley executives, who were treated like movie stars by India’s political establishment and had easy access to India’s top bureaucrats and businessmen, were too cocky to learn any lessons. However, angry investors taught them a hard lesson that culminated in the sale of its business, exactly 20 years later.
Just one major IPO took place in 2013. Instead of working on reviving investor confidence and protecting them, SEBI plans to reduce disclosure—in a disclosure-based regime—to boost IPO interest.
I f Morgan Stanley’s exit reflects disenchantment with the mutual fund industry, then resource mobilisation through initial public offerings (IPOs) is in even worse shape. In the entire 2013 just one IPO caused a flutter among investors—of Just Dial. The other two worth a mention were VMart and Repco Home, while Power Grid picked up a massive Rs6,958 crore through a follow on offer. While, 35 IPOs from the small and medium enterprises (SME) mobilised around Rs367 crore, the IPO market is as much in the doldrums, as it was after the IPO mania of 1992-96 saw thousands of fly-by-night operators vanish with investors’ money. The difference between the situation 20 years ago and now is that policy-makers neither understand investor disenchantment nor do they care.
Consider the experiment with the SME sector. On the one hand, 35 public offerings based on a different set of rules (no filing of prospectus, but market-making mandatory and minimum application of Rs1 lakh) seem like good performance. But aggregator sites report that only 20 out of 45 stocks listed on the two national bourses are traded and that, too, with low volumes. But, instead of working on reviving investor confidence, the Securities and Exchange Board of India (SEBI) plans to relax entry barriers by scrapping IPO grading, reducing disclosures and doing away with even the formality of making a public offer. This is after the experiment with offering a safety net to investors had also failed (in fact, two issues offering a safety net had to pull out of the market). However, market observers believe this will only lead to SME listings being the newest way to launder money by hawala operators.