Sensex, Nifty to edge higher, subject to dips: Friday closing report

The Nifty has to stay above 5,455 for the upmove to continue

The improved factory output in the euro area which was more than what the economists estimated and the fewest US workers in more than five years applying for jobless benefits boosted the market sentiments. The indices could overcome the initial weakness on the bourses and went into the positive zone and ended in the green for second consecutive trading session. At the close, the indices hit their respective highs and closed near to that level.


As we mentioned, the index has to manage keeping itself above any previous day high for the upward momentum to gain strength. The indices today made a higher high and a higher low. The Sensex opened at 18,387 and moved in the range of 18,211 and 18,547 and closed at 18,519 (207 points up, 1.13%), while the Nifty opened at 5,429 and moved in the range of 5,378 and 5,479 and closed at 5,472 (63 points up, 1.17%). The National Stock Exchange (NSE) recorded a volume of 62.10 crore shares.


Except for India Vix (fell 6.97%) all other major indices rose today with CNX Smallcap (1.87%); Lix 15 (1.50%); CNX Nifty Junior (1.42%); Nifty Midcap 50 (1.27%) and CNX Midcap (1.23%) were the top five gainers.


Among the other indices except for Realty (fell 2.02%) and Media (fell 0.14%) all the other indices rose with Bank Nifty (2.17%); Finance (1.76%); Auto (1.72%); IT (1.49%) and PSE (1.40%) were the top five gainers.


Of the 50 stocks on the Nifty, 32 ended in the in the green. The major gainers were BHEL (8.10%); Tata Power (5.09%); HCL Technologies (5.06%); Jaiprakash Associates (4.20%) and Jindal Steel (3.64%). The major losers were DLF (4.87%); UltraTech Cement (3.58%); Sesa Goa (2.21); Bharti Airtel (1.73%) and Cipla (1.35%).


Finance Minister P Chidambaram and Reserve Bank of India Governor D Subbarao on Thursday, 22 August 2013, said in separate news conferences that India doesn't plan to introduce capital controls.


Finance Minister P Chidambaram said on Thursday that revival and encouragement of growth will continue to be the focus of the government. He said that there is no cause for the panic that seems to have gripped the currency markets and that is feeding into other markets. Chidambaram believes that the rupee is undervalued and has overshot what is generally believed to be a reasonable and appropriate level. Capital inflows will, in due course, correct the position. India's debt indicators are within prudent limits.


India's inflation could accelerate in the current fiscal year due to the rupee's sharp depreciation, the Reserve Bank of India (RBI) said in a report on Thursday. The RBI will continue with measures to cut exchange-rate swings and revisit its steps once the currency stabilizes, Governor Duvvuri Subbarao said yesterday


The rupee today reached upto 64.75 against dollar. The rupee had hit record low of 65.56 in intraday trade on Thursday, 22 August 2013. Barclays expects the rupee at 61 in six to 12 months, which partly reflects an improvement in the current account deficit. Barclays' forecast is less bearish than many recent forecasts. Deutsche predicted USD/INR to go to 70 in a month or so, while Credit Agricole said it does not see fundamental value below 70.



Lower real or nominal interest rates may not be enough to stimulate growth when non-monetary factors impede revival in growth, Deepak Mohanty, executive director at RBI, said on Friday. The negative impact of increase in policy rate is first felt on output before moderating impact on inflation, he said in a speech.


Finance Minister P. Chidambaram sought parliamentary approval on Friday for 1.27 billion rupees of extra spending in the current fiscal year, signaling his determination to keep the fiscal deficit under tight control. The finance minister told the lower house of parliament that gross extra spending of about 75 billion rupees would be mainly funded from savings under different schemes, leaving just $19.62 million that adds to the budget burden.


HSBC downgrades Indian equities to "neutral" from "overweight", citing a sharp rise in the cost of equity for companies and a slowing growth. JPMorgan also downgraded Indian shares on Tuesday to "neutral" from "overweight", citing strain in balance of payments.


Asian market had a mixed performance. Shanghai Composite fell the most, 0.47% while Nikkei 225 was the top gainer, 2.21%.


European indices were mostly in the green. Germany's economy sharply rebounded in the second quarter from a weak start to the year, gaining steam from a pickup in investment and robust consumption, official data showed Friday. Gross domestic product swelled 0.7%, corresponding to an annualized rate of 2.9%, the national statistics office said. The figures confirm official estimates issued last week. That makes Germany the fastest growing of the world's largest industrialized economies in the second quarter.  


Investors are keeping a close watch on the Federal Reserve's three-day annual monetary conference in Jackson Hole, Wyo which begins today, 23 August 2013, on whether Fed officials give any indication of the timing of the potential tapering of the Fed's bond purchases.


Market awaits sales of new homes in the US. US Futures were trading lower.


Lupin’s US-based subsidiary Lupin Pharmaceuticals Inc has received US health regulator's approval to market a generic version of Sanofi Aventis' Rifadin capsules in 150 mg and 300 mg strengths, used to treat tuberculosis, in the American market. As per the IMS sales data, Rifadin Capsules had annual US sales of around $18.5 million. The stock rose 2.42% to close at 795.90 on the NSE.


Is India headed to a similar situation as seen in the 1990s?

The rise in US real rate and dollar has pushed Asia to lift its real rates at a time when growth is slowing. With India having a huge current account deficit, this would further increase the economic turmoil for the country

India’s rupee hit another record low at Rs65.56 against the dollar yesterday, inflation has begun to rise again and there is no improvement in the current account balance. If this is bad, it could get much worse. According to a recent report Morgan Stanley Research, “If the rise in the US dollar were to continue for longer, this will bring Asia to a situation that would be similar to the 1990s. The rise in real rates amid a slowing GDP growth environment – in other words – a pro-cyclical tightening of monetary policy, will pose considerable headwinds to the region’s growth outlook.” Though the growth slowdown may be less severe, the recovery will be less vigorous. With higher real interest rates, the region would need to improve productivity to lift growth. According to the brokerage firm, “This situation would be more challenging than the 1990s – because demographic trends are now weaker. While the US economy is again picking up, it is not coming back as a leveraged consumer but as a reindustrializing competitor”

This situation has a striking similarity to the mid-1990s, according to Morgan Stanley, “The developments have largely mirrored those from the mid-1990s to 2001. In this cycle, like that in 1995 to 2001, as US real rates moved up along with a decline in its trade deficit, the dollar appreciated – forcing Asian currencies to weaken and Asian real rates to rise. The rate hike cycle in the US during 2004-06 is not comparable. During that period, the US trade balance continued to widen and the dollar continued to weaken.” Compared to 1997 India had a similar real GDP growth however, the current account balance is much worse. It even has a higher short term external debt. Forex reserve for months of imports is similar to that of 1997.

Why are real rates rising in Asia? “The region’s excess saving, after having steadily risen from 2001 to a peak in 2007, has fallen back to 2001 levels. As a result of an improving US economy and market expectations of Fed tapering, interest rates in the US have been steadily rising, adding to the upward pressures on interest rate trends in Asia,” mentions the report. The upward pressures on real rates in Asia will likely remain as a trend. We believe the key factors that will drive real rates in Asia will be trends in the US dollar, real rates and trade balance.

The monetary tightening will weigh on credit growth and domestic demand and accelerate the pace of formation of non-performing loans in the banking system. Rising real rates will imply an increase in the cost of capital and debt burden of borrowers. Moreover, an environment of rising real rates with moderating GDP growth tends to be less supportive of risk assets, which would further depress domestic consumer/corporate confidence.

According to Morgan Stanley, “We are at the beginning of the cycle of a rise in the US dollar and rates implying that the upward pressures on real rates in Asia will likely remain as a trend. The key factors that will drive real rates in Asia will be the trend in the US dollar, real rates and trade balance. The trend in US real rates will influence capital flows and hence real rates trend in Asia.”

The magnitude and pace of upward moves in real interest rates in Asia are likely to depend on what happens to real rates in the US, which in turn is related to the strength of the US recovery. Morgan Stanley expects that the stronger dollar and higher US real rates are here to stay, real rates may not rise to the mid-1990s cycle highs, because the US real GDP growth trend is likely to be lower in this cycle. Plus, total leverage ratios in the US remain high. Both these factors suggest a lower bar for real interest rates in the US.



Abhijit Gosavi

3 years ago

By "real rates" do you mean inflation-adjusted interest rates? China is unlikely to do as badly as India because they have invested where they ought to and their forex reserves are about 10 times India's (if I'm not wrong). In any case, the situation in India is likely to become worse because the government has neither given incentives for manufacturing nor has it invested in infrastructure. Without exports, things won't improve in the long-run, unless your currency rules the world :)

Even ten years after the time they built the Mumbai-Pune highway, the metros are not connected via highways. Manufacturing cannot thrive in a country where the supply chain of a product does not have a supporting transportation network. Surely ten years with impressive growth rates provided enough breathing space/time to work on the basics of building a strong economy?

Ramesh Poapt

3 years ago

Inflation is grossly under reported by Govt. as per world's eminent Economist. Retail depositorsSrcitizens not getting rates to nutrilize real inflation. lower lending rates for big borrowers,many of them are defaulters.Moneylife to please take up suitably.

M & B Switchgears changes company name to Ujaas Energy Limited

The company is well known for being the first to generate & sell Solar REC made at its 2 MW solar power plant, commissioned in March 2012 at Rajgarh (Madhya Pradesh)

M & B Switchgears Limited announced that effective 19 August 2013, the company's changes its name to Ujaas Energy Limited. The need for this change is to define the nature of its business more accurately and categorically.


“Ujaas” means “Light at the Dawn” in the local language.


The company is the first to generate & sell Solar REC in the country from  its solar power plant of 2 MW commissioned in March 2012 at Rajgarh (Madhya Pradesh).


Vikalp Mundra, joint managing director, Ujaas Energy expressed confidence that the company would continue on the growth trajectory. Solar power will become one of the biggest contributors to India’s huge appetite for power. With the encouragement and support provided by the SERCs (State Electricity Regulatory Commissions), solar PV (photo voltaic) capacity is expected to triple in the country in FY 2013-14, he added.


With a vision of offering a simple, universally acceptable, easily maintainable system of green energy to humanity at large, the company introduced a unique concept of solar parks and branded it as UjaasTM. Ujaas Park is a plug and play model of service in solar projects at an affordable cost. It is a single window service to own a solar power plant, right from selection of land to selection of technology; putting up a solar power plant; getting all the permissions; selling power to third party buyers etc. It gives a complete solution to an investor to own and operate a solar power plant.



sadashiv gupta

3 years ago

it is a Collective Investment Scheme.

Ramesh Poapt

3 years ago

solar equipments for every household...can Moneylife thro light (solar) in the matter,ie its availability,cost,quality,maintainance, options available(models/company like TayaBP)?

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