Sensex, Nifty still on a short-term downtrend: Wednesday Closing Report

As suggested yesterday, the intraday rallies today were met with selling. Only a close above any previous day’s high would mean a trend reversal

Warning of a downgrade of India’s sovereign rating in the next years by S&P and European concerns led the market lower today. Today the Nifty moved in a narrow range of 5,647 and 5,687 and closed near the days low. Yesterday we had mentioned that the index will move with a negative bias, we continue with this stance. The National Stock Exchange (NSE) saw a volume of 69.04 crore shares and an advance decline ratio of 477:1291.


The market opened lower on weak global cues following the International Monetary Fund’s caution about the pace of global economic growth. Concerns about Spain and Greece also weighed on the sentiments.


The Nifty opened 34 points lower at 5,671 and the Sensex started the day at 18,699, down 94 points from its previous close. Select buying amid sharp volatility saw the indices hitting their intraday highs in early trade itself. At this point the Nifty rose to 5,687 and the Sensex went up to 18,741.


The market remain subdued in morning trade after global rating agency Standard & Poor’s stated that there is “one in three” chance of India facing a downgrade in its sovereign rating to junk status in the next two years. The agency added that the outlook can be revised upwards to stable if the government succeeds in reducing fiscal deficit, improve the investment climate and revives growth.


The announcement resulted in banking, capital goods and technology stocks coming under selling pressure. Selling intensified in the second half of trade as the European markets opened in the negative following comments from the IMF that the region’s debt crisis was seen as the main reason for the slowdown in global growth.


Lacklustre trade continued in the last hour, which dragged the benchmarks to their lows around 2.30pm. The Nifty went down to 5,648 and the Sensex retracted to 18,622 at the lows.


The market closed near the lows following the downgrade threat by S&P which resulted in the realty, power and banking sectors emerging as the top losers. The Nifty closed 49 points (0.85%) down at 5,656 and the Sensex dropped 162 points (0.86%) to settle at 18,631.


The broader markets suffered a bigger blow today as the BSE Mid-cap index dropped 1.29% and the BSE Small-cap tanked 1.53%.


BSE Fast Moving Consumer Goods (up 0.04%) was the only sectoral gauge to settle higher. The top losers were BSE Realty (down 4.61%); BSE Power (down 2.17%); BSE Bankex (down 1.31%); BSE PSU (down 1.31%) and BSE Capital Goods (down 1.30%).


Only three of the 30 stocks on the Sensex closed in the positive. The gainers were ITC (up 0.36%); Hero MotoCorp (up 0.33%) and Reliance Industries (up 0.09%). The key losers were State Bank of India (down 2.32%); Tata Power (down 2.25%); Hindalco Industries (down 2.11%); BHEL (down 2.04%) and NTPC (down 1.82%).


The top two A Group gainers on the BSE were—Container Corporation of India (up 3.29%) and Jaiprakash Associates (up 2.58%).

The top two A Group losers on the BSE were—GMR Infrastructure (down 9%) and Lanco Infratech (down 8.54%).


The top two B Group gainers on the BSE were—Karuturi Global (up 19.39%) and Burnpur Cement (up 17.35%).

The top two B Group losers on the BSE were—Som Distilleries & Breweries (down 12.26%) and Raj Oil Mills (down 12.02%).


Out of the 50 stocks listed on the Nifty, seven stocks settled in the positive. The key gainers were Jaiprakash Associates (up 2.87%); HCL Technologies (up 1.11%); Punjab National Bank (up 0.86%); Hero MotoCorp (up 0.64%) and ITC (up 0.48%). The major losers were DLF (down 5.40%); Siemens (down 3.98%); IDFC (down 3.43%); Reliance Infrastructure (down 2.94%) and SBI (down 2.70%).


Markets in Asia settled lower on worries that the tardy global growth would impact corporate earnings. The ongoing territorial dispute between China and Japan also weighed on investors.


The Hang Seng dipped 0.08%; the Jakarta Composite shed 01.01%; the KLSE Composite fell 0.24%; the Nikkei 225 tanked 1.98%; the Straits Times declined 1.05% and the Seoul Composite dropped 1.56%. Bucking the trend, the Shanghai Composite gained 0.22%. The Taiwan market was closed for trade today.


At the time of writing, markets in Europe were down between 0.22% and 0.41% and the US stock futures were in the negative.


Back home, foreign institutional investors were net buyers of shares totalling Rs613.98 crore on Tuesday whereas domestic institutional investors were net sellers of stocks amounting to Rs430.60 crore.


Reliance Power has raised external commercial borrowings of around Rs1,588 crore ($302 million) to fund its 100 MW solar power project in Rajasthan. The 100MW plant is being built adjacent to India’s largest thin film PV Project, the 40 MW photovoltaic project, commissioned by the company in March. The stock tanked 4.05% to settle at Rs99.60 on the NSE.


L&T Finance Holdings, the NBFC arm of the engineering giant Larsen & Toubro, today said it has successfully completed the acquisition of Indo Pacific Housing Finance (IPHF) for Rs110 crore. The acquisition is likely to help L&T Finance enter the housing finance business by expanding the network of IPHF. The stock closed 1.44% lower at Rs51.50 on the NSE.


Off-the-road tyre manufacturer Balkrishna Industries has commissioned the first phase of its plant at Bhuj in Gujarat. The greenfield plant is a part of the company’s Rs1,800-crore expansion programme that would be completed in 2015. The stock dropped 1.55% to close at Rs285 on the NSE.


Mayawati defers decision on BSP support to UPA government

Mayawati's putting off a decision is being seen as a pressure tactic on the Centre as it comes a day after the Supreme Court said the CBI was at liberty to probe a disproportionate assets case against the BSP supremo

Lucknow: Keeping up the suspense over Bahujan Samaj Party (BSP) continuing outside support to the United Progressive Alliance (UPA) government at the Centre, Mayawati on Wednesday deferred a decision on the issue even as she asked party cadres to be ready for snap polls, reports PTI.
Mayawati, who had said that a decision on continuing support will be taken today, said the BSP National Executive and the Parliamentary Board have left it to her to take a final call on it.
"But there will be no delay. The decision will be taken soon and conveyed to you," she told reporters after the meeting.
Mayawati said it was now her "responsibility" to take a decision on the issue keeping in mind the interests of the people as well as her party's ideology.
Her putting off a decision is being seen as a pressure tactic on the Centre as it comes a day after the Supreme Court said the CBI was at liberty to probe a disproportionate assets case against her.
BSP's continuing its support to the Government may hinge on how the CBI proceeds after the court's nod.
UPA, whose numbers have dwindled in the Lok Sabha with the exit of Trinamool Congress, is banking on the support of BSP, which has 21 MPs, and Samajwadi Party that has 22 MPs.
"Keeping in mind the state of instability at the Centre, mid-term polls can take place any time. Our party has to prepare on a war-footing. We want to emerge as a balance of power," she said.
Reacting cautiously, Congress said she was entitled to take any decision and if there were any differences as far as Government's policies were concerned, efforts would be made to resolve them..
"I would only appeal to our supporting parties that if there are any differences as far as policies are concerned, we will try to convince them...and resolve them," Union minister and party leader Rajiv Shukla said.
Congress spokesperson Rashid Alvi said, "it is an internal matter of the BSP. Our government is stable." 
The BSP chief said her party has supported the UPA with a view to weaken fundamentalist forces in the country and work for the welfare of all the sections of the society, including Dalits and minorities.
"But it is a matter of sorrow that the attitude of the central government has been very disappointing regarding these from the very beginning," she said.
Mayawati said that prices have spiralled due to the "wrong policies" of the government.
"Besides, a number of anti-people decisions have been taken by the Centre due to which people of the country are very perturbed...corruption is rampant and no effective steps have been taken so far to check it," the former UP Chief Minister said while announcing that a nationwide agitation will be launched against the government.


S&P says one-in-three chance of India's rating downgrade in next two years

According to the ratings agency, the negative outlook signals at least a one-in-three likelihood of a downgrade of the sovereign rating on India to 'junk' from 'negative' within the next 24 months

Mumbai: There is a "one in three" chance of a downgrade of India's sovereign rating to junk status in the next two years, reports PTI quoting ratings agency Standard & Poor's (S&P).
"The negative outlook signals at least a one-in-three likelihood of a downgrade of the sovereign rating on India within the next 24 months," S&P analysts Takahira Ogawa and Elena Okorochenko said in a note.
On the upside, especially given the slew of reform measures carried out by the government in the past three weeks, the outlook can be revised upwards to stable if the government succeeds in reducing fiscal deficit, improve the investment climate and revives growth, S&P said.
Factors forcing a downgrade would be a drop in growth prospects, deterioration on the external front, worsening of the political climate and slow movement on fiscal reforms.
In June, the agency revised its outlook on the present BBB- rating to negative, which is one notch above junk grade and the lowest investment rating in among the BRIC economies.
It estimates the fiscal deficit to shoot up to 6% from the targeted 5.1% this fiscal, and growth to fall to 5.5% compared to the government's revised projection of 6.5%.
"Fiscal measures to lower deficits could include a more efficient use of fuel, fertiliser, and agricultural subsidies, or the implementation of a goods and service tax," it suggested. .
S&P has drawn attention to the risks on the political front like Mamata Banerjee-led Trinamool Congress quitting the ruling alliance, impending state elections and the general elections in 2014.
Considering that the government is in a minority, passage of amendments to allow additional foreign ownership in insurance and pension will be "more challenging", S&P said.
S&P had come out with a note asking for action from the political establishment and Prime Minister Manmohan Singh in June, when "policy paralysis" was a buzzword, to avoid being junked.
Last month, it welcomed the slew of reforms like allowing foreign holdings in multi-brand retail, aviation and media, but kept the outlook unchanged.
S&P's rivals Moody's and Fitch had also revised their respective outlooks on the sovereign rating to negative following the gloom on the economic front caused by factors both external and domestic.
The Finance Ministry had earlier said it would present the country's strengths to the rating agencies to avoid a downgrade.




5 years ago

High time rating agencies, or for that matter whosoever judges the performance of economies changed their parameters to factor in the inherent strengths and weaknesses of nations. Countries like India with huge resources including human resources and much less consumption needs as compared to ‘developed’ countries and nations which are permanently dependent on outside markets for sustenance and perennially building up capacities for unproductive purposes like war and journey to Mars are measured on the same scale. This is unacceptable. To counter this tendency, India should set up a purely research-based rating agency with expertise of international standard. Geographical area, population, resources, potential for development, sovereign debt and all should be factored in while making comparisons.

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