Nifty needs to stay above today’s low for avoiding further losses
On Thursday, the Indian market recovered almost all of Wednesday’s losses and tried to stay above yesterday's low. At the beginning of the session the market made an immediate plunge into red territory when it hit the day’s low but made a quick recovery and traded in a narrow range mostly above yesterday’s close.
The S&P BSE 30-share Sensex opened at 25,597 while the NSE Nifty opened at 7,641. After hitting a low of 25,410 and 7,594, both Sensex and Nifty recovered to reach a high of 25,611 and 7,658, respectively. Sensex closed at 25,576 (up 102 points or 0.40%) while Nifty closed at 7,650 (up 23 points or 0.30%). The NSE recorded a lower volume of 119.97 crore shares. India VIX fell 0.92% to close at 16.9025.
NTPC (1.33%) was among the top five gainers in the Sensex 30 pack. Recently, the joint venture company between NTPC and NPCIL, Anushakti Vidhyut Nigam, came in the news for being embroiled in legal problems. Under the law only government or its agencies can undertake activities in the atomic field.
Bharti Airtel (3.57%) was the top loser among the Sensex 30 stocks. Credit Suisse downgraded the stock to "underperform" from "neutral" and reduced the target price to Rs265 from Rs275. It is currently trading at Rs341.55 on the BSE.
Hindalco Industries (3.78%) was among the top six gainers in the ‘A’ group on the BSE. There was news that the company's US subsidiary Novelis successfully cast the first production-sized ingot at its aluminium recycling and casting center in Nachterstedt, Germany.
Suzlon Energy which was among the top two gainers in the ‘A’ group on the BSE yesterday was the top loser (4.98%) in the group today. Jaypee Infratech (4.95%) was among the top two losers in the group. Supreme Court refused the company's plea to direct the Noida Authority to grant completion certificates to its projects falling within a 10-km radius of the Okhla Bird Sanctuary. The decision has an immediate impact on at least 30,000 flats, and puts into doubt the fate of another 70,000 under-construction flats in the long term.
Markit Economics said India's industrial output in April rose to 3.4% from previous -0.5%, while manufacturing output increased to 2.6% in April from previous -1.2% over the year.
US indices closed in the red on Wednesday. The US posted a $130 billion budget deficit in May and the smallest shortfall for the first eight months of a fiscal year since 2008, as a stronger economy and rising employment bolstered revenue. The deficit last month was about $9 billion less than the $139 billion shortfall in May 2013, the Treasury Department said in Washington.
Except for NZSE 50 (0.31%) and Straits Times (0.09%) all the other Asian indices closed in the red. Jakarta Composite (0.76%) was the top loser.
European indices were trading marginally in the green. US Futures too were trading little higher.
Intel had filed an appeal with the EU’s General Court, arguing that the European Commission had not appropriately made its case in 2009 and imposed the 1.06 billion euros penalty
The European Union's (EU) General Court on Thursday upheld a record fine of 1.06 billion euros (about $1.44 billion) imposed five years ago on Intel by Europe’s top antitrust authority. The Court also rejected the appeal filed by the world’s largest computer chip maker against the ruling of European Commission's 2009 order.
Back in 2009, the European Commission imposed a fine of 1.06 billion euro on Intel, for having abused its dominant position on the market for x86 central processing units (CPUs). It was the highest single antitrust penalty that the authorities in Brussels have levied on a single company. Moreover, the Commission ordered Intel immediately to bring an end to that infringement in so far as it had not already done so.
In a statement, the Court said, “Intel attempted to conceal the anti-competitive nature of its practices and implemented a long-term comprehensive strategy to foreclose Advanced Micro Devices (AMD) from the strategically most important sales channels”.
“None of the arguments raised by Intel supports the conclusion that the fine imposed is disproportionate,” it said, noting that, in fact, the penalty was “at the lower end of the scale” at 4.15% cent of Intel’s annual turnover.
Intel still can appeal the case to Europe’s highest court, the European Court of Justice.
According to Rabobank, the newly elected Modi government is most likely to push ahead with large numbers of stalled public sector projects, invite FDI in sectors like railways and bring major administrative reforms
There has been a dramatic transformation in India's prospects over the past 12 months, and particularly since the recent May election results. After receiving a strong mandate from voters, the newly elected Narendra Modi government can push ahead with a large number of public-sector projects that already have funds allocated but which have fallen into a 'development hell', invite foreign direct investment (FDI) in sectors like railways and bring major administrative reforms to tackle widespread bottle-necks and inefficiencies, says Rabobank in a report.
Even though India's GDP growth is sluggish and most private sector indicators are also weak, there still is room for optimism, feels Rabobank. According to the report, there are three major points that can shift the tide:
1. Mr Modi looks set to use his extensive knowledge of India's labyrinthine bureaucracy and administrative structures to push ahead with a large number of public-sector projects that already have funds allocated but which have fallen into what Hollywood refers to as 'development hell'. Official estimates are that 303 such projects in sectors ranging from power, petroleum, industry, coal, shipping, mining, railways, chemicals, roads and steel, all of which are ready to go but are still waiting for an official sign-off, total a massive $116.9 billion. Given that India's total gross fixed capital formation in Q1 2014 from the public and private sector combined was just $140.5 billion, that means there is likely to be a significant lift to investment growth over the next few quarters as these projects are finally rolled out.
2. FDI would be encouraged in a wider variety of sectors, including India's vast railway network.
3. Significantly, and partly due to the lack of a majority in the upper house, Mr Modi has underlined his determination to push ahead with major administrative reforms to tackle widespread bottle-necks and inefficiencies. In short, there is a great deal of 'low hanging fruit' that India can easily pluck to generate substantially higher growth, though the prime minister has stressed what a mammoth task the overall restructuring of the economy will be and argues it will need two full terms to make a serious start on it.
The impact of the recent election is potentially huge and the underlying optimism was evident. "However, " Rabobank said, "in the background there has also been a marked improvement in some of India's key macro-fundamentals that deserves equal attention. In particular, the previously problematic balance of payments (BoP) has shown a huge turnaround in the past two quarters. Whereas in Q4 2012, the current account deficit (CAD) was equal to a worrying 7.0% of the GDP (a flashing red light for Indian Rupee in retrospect), as of Q1 2014, this had narrowed back to just 0.3% as the trade deficit has shrunk from over 11% of GDP to only around 6%."
India's overall BoP has also moved back into significant surplus for two consecutive quarters. Rabobank said, "True, there are perhaps still issues on the 'quality' of those capital inflows. In particular, there is arguably still not enough direct investment in that mix, net foreign direct investment (FDI) was very low in Q1 at just $901 million, even though actual inward FDI hit a nominal high of $9,781 million. However, portfolio investment has certainly picked up again, especially into debt securities, while net deposits from non-resident Indian (NRIs), while well below the surge seen in Q4 2013, are a further useful source of capital."
"Overall, that transition in the BOP is a huge positive for Indian Rupee and by extension will the current account withstand any liberalisation of the current restrictions on gold imports remains to be seen," the report added.
However, Rabobank says not to expect a sudden fiscal or monetary poicy shift from the Narendra Modi government to support meagre GDP growth. It said, "Importantly, the Modi government is aware that it needs to narrow the persistent fiscal deficit in order to keep public-sector debt under control, a gradual decline in the deficit is the most likely path ahead rather than a surge in state-spending. At the same time, the Reserve Bank of India (RBI) is de facto shifting its focus towards consumer price index (CPI) as a policy target, given persistent upward pressure on inflation from supply side shocks to food prices, which implies that the reverse repo-repo rate corridor will remain at 7.0% to 8.0% for some time ahead, even if the next move is more likely to be down than up."
"The unchanged outlook for Indian rupee over the next 12 months may appear uninspiring, but there is a lot happening behind the scenes. Indeed, Indian Rupee itself may not move outside of a 59-60 band but India's forex reserves are likely to increase significantly," says Rabobank in the report.
The report says, RBI on its part is likely to use the present window of opportunity on BoP to build India's forex reserves, which have been essentially flat for too long and hence have declined in terms of their coverage of both the overall import bill and external debt servicing obligations.