Nifty to target 5,780
The Nifty carried on from where it ended on Friday, registering an even better intra-day high and low today, with a 46 points gain to close at 5,680. We expected the Nifty to move to the 5,700 level, which it did at the intra day high. The market reacted strongly to events such as the benefit for telecom majors from the tariff hike by Airtel and in anticipation of better results from Reliance Industries.
After 10 days of sideways consolidation, the market is headed higher. We can expect the Nifty to move up to 5,780.
The market looked past the weakness in its Asian peers and overcame nervousness ahead of the Reserve Bank of India's policy review meeting, to climb higher on buying in heavyweights, and it settled higher for the second straight day.
Weak cues from the Asian region led to a flat opening in the domestic market. The imbroglio over raising the US debt ceiling ahead of the 2nd August deadline was the main factor that impeded the markets early on. The Nifty opened at 5,634, unchanged from its close on Friday, while the Sensex resumed trade 31 points higher at 18,753.
The market was volatile and fluctuated on both sides of the neutral line on added concerns that the RBI may raise rates again on Tuesday. The indices fell to the day's low in initial trade, the Nifty dropping to 5,617 and the Sensex back to 18,671.
The market remained range-bound in choppy trading till around 1pm, when key European indices opened weak. Buying in Reliance Communications, Bharti Airtel, M&M, Sterlite Industries and some others, helped the indices cross their psychological levels-5,700 (on the Nifty) and 18,900 (on the Sensex)-in the post-noon session.
The indices went on to touch the day's high as the Nifty rose to 5,701, a gain of 84 points from its intra-day low, and the Sensex went up to 18,932, up 261 points from the day's low.
The advance-decline ratio on the National Stock Exchange (NSE) was a positive 994:681.
The broader indices underperformed the Sensex today as the BSE Mid-cap index settled with a gain of 0.49% and the BSE Small-cap index advanced 0.50%.
The top sectoral gainers were BSE Auto, BSE TECk (up 1.38% each), BSE Capital Goods (up 1.23%), BSE Healthcare (up 1.22%) and BSE Metal (up 1.17%). The only loser was BSE Fast Moving Consumer Goods (down 0.80%).
The best performers on the Sensex were RCom (up 14.91%), Bharti Airtel (up 5.37%), M&M (up 3.49%), Hindalco Industries (up 2.32%) and Sterlite Industries (up 2.25%). The major losers were Cipla (down 1.24%), ITC (down 0.96%), Hindustan Unilever (down 0.67%), Infosys (down 0.66%) and ONGC (down 0.05%).
The top gainers on the Nifty were RCom (up 13.84%), Bharti Airtel (up 4.86%), Axis Bank (up 3.28%), M&M (up 3.26%) and Sun Pharma (up 3.21%). The main losers on the benchmark were Cipla (down 1.54%), Sesa Goa (down 1.30%), Power Grid Corporation (down 1.14%), ITC (down 1.13%) and Infosys (down 0.79%).
However, the indices came off their highs in a minor bout of profit booking in the late session and the Nifty closed with a gain of 46 points at 5,680 and the Sensex settled at 18,871, up 149 points.
Markets in Asia settled in the red as the yen rallied against the dollar and railways-related stocks in China were hurt after an accident involving two high-speed trains over the weekend. The Shanghai Composite posted its biggest single-day percentage fall since mid-January, losing 2.96%.
The Hang Seng declined 0.68%, the Jakarta Composite fell 0.48%, the KLSE Composite slipped 0.35%, the Nikkei 225 fell 0.81%, the Straits Times was 0.36% lower, the Seoul Composite tanked 0.96% and the Taiwan Weighted tumbled 0.93%.
Back home, foreign institutional investors were net buyers of stocks worth Rs444.91 crore on Friday while domestic institutional investors were net buyers of shares worth Rs243.05 crore.
Today, the board of directors of Chennai-based education support services company EdServ Softsystems approved the launch of a GDR issue to raise up to $35 million to fund its expansion plans.
EdServ expects to complete the fund-raising process within the next fortnight. With the latest fund raising, it has also revised its revenue guidance to achieve a 60% growth in the current year. The stock closed up 1.75% at Rs139.30 on the National Stock Exchange.
The country's largest wind turbine-maker Suzlon Energy today said it will sell its 26% stake in Belgian company Hansen Transmission to German firm ZF Friedrichshafen for $187 million (about Rs840 crore). The transaction would be done through Suzlon's step-down, wholly-owned subsidiary, AE-Rotor Holding BV (AERH). The Suzlon stock gained 3.4% to settle at Rs54.75 on the NSE.
Engineering and construction conglomerate Larsen & Toubro (L&T) has won a major order valued at $273 million from Qatar General Electricity & Water Corporation (Kahramaa) for the supply and construction of 13 extra high voltage (EHV) sub-stations in Qatar. The order, a part of Qatar's power transmission system expansion phase 10 (stage I) project, is the single largest secured by L&T's power transmission and distribution (PT&D) division in a GCC country. L&T rose 1.5% to Rs1,854.60.
According to Macquarie, the recent performance of gold prices, increasing availability of options like ETFs, and the perception that gold is safe while equities are speculative, has attracted money flow into these instruments
"Indian god believes in gold and so do Indians!" says Macquarie Capital Securities. According to the brokerage, the recent massive find of gold worth $22 billion from a small temple in India tells you about the Indian fascination for gold. Due to this fascination, the brokerage said, it is amazed to see the steady shift of money to gold, silver and crude from equities.
The price of gold has been continuously rising over the past few years, and today, the yellow metal nudged a fresh all-time high. And Macquarie explains enough reasons for this.
"Macroeconomic uncertainty led by persistent high inflation has led to considerable amount of money flowing into the precious commodity, as investors look to protect their money's worth, but investors are not alone. Last week we realised that god is also perfectly hedged against inflation," Macquarie said in a research report.
Equity volumes are nowhere close to the highs seen back in 2007 and 2008 and are down 30%-40% compared to levels seen in 2009, the year we saw a turnaround in global equity markets. While the market has been volatile, it has not been accompanied by commensurate volumes.
Instead, excess global liquidity since 2009 has given rise to speculative interest in commodities and high inflation has diverted investor interest towards gold. Silver is another commodity that has seen tremendous buying since the second half of 2010 and has in fact surpassed gold volumes by miles in the past six to nine months. At the same time, crude continues to attract speculative interest as global geopolitics continues to be wobbly, the report said.
"Inflation has remained high in emerging economies and has started creeping up in developed economies. At the same time, recent US economic indicators have been weak and fresh concerns over European sovereign debt issues have emerged, leading to high-risk aversion in global markets. All these, coupled with loose monetary conditions, have led to high speculative interest in gold and other commodities."
For June 2011, headline inflation was at 9.44%, mainly driven by manufactured products (7.43%) and primary articles (12.22%). While food prices, up 1.9% month-on-month (m-o-m) showed no signs of receding, non-food articles surprised positively with 1.7% m-o-m decline.
Fuel inflation came in at 12.8% year-on-year (y-o-y) as the full impact of the fuel price hike is yet to flow through. While June inflation surprised positively, the revisions made to wholesale price index (WPI) data off late, suggests persisting inflationary pressures. The government revised April WPI upwards by around 110 basis points.
Coming back to the gold story, last week, ratings agency CRISIL also said it believes that Tier-II and -III towns will drive growth for branded gold jewellery retailers over the medium term. The demand for gold jewellery in these centres is strong and growing, buoyed by increasing affluence and preference for branded jewellery. These gold jewellery retailers are expected to derive over half their revenues from such small towns by 2012-13, as against around 40% in 2009-10, CRISIL stated.
Gold demand in India has grown at an average 13%-14% annually over the past 10 years and comprises nearly 15% of total global demand. Unlike other markets, gold in India is seen more as a sign of prosperity and security in addition to being considered auspicious during festivals and weddings. In this context, gold demand in India has been quite resilient, price corrections notwithstanding, primarily driven by income growth, high savings rate and favourable demographics.
Lately, investment in gold exchange-traded funds (ETFs) has also seen significant growth in India driven by characteristics like liquidity, ease of investing, as a hedge against inflation and notably lower volatility compared to equities. According to the World Gold Council (WGC), gold ETFs in India increased their gold holdings in the second quarter of 2011 by more than 30% sequentially and 50% y-o-y.
The unearthing of massive amounts of gold, worth an estimated $22 billion (and counting), at the Sree Padmanabha Swamy temple in Kerala also confirms the huge interest in the previous metal. Questions are now being asked as to how much gold these temples might actually have.
To put things in perspective, the value of gold at the Kerala temple alone is nearly one-fourth of India's fiscal deficit, and double the value of gold held by the Reserve Bank of India (RBI). The money from the sale of the metal can feed the 410 million Indians living below the poverty line for 43 days-and that's only one temple! WGC estimates put India's gold holding at 18,000 tonnes, or approximately $800 billion or roughly half of India's nominal gross domestic product (GDP), Macquarie concluded.
Trading sentiment turned bullish as gold marched to a record of $1,624.30 an ounce adding 1.4% overseas, after US lawmakers failed to reach an agreement on raising the federal debt limit, increasing concerns of a US default and boosting demand for the metal as a safe haven
New Delhi: Surpassing all previous records, gold roared to an all-time high of Rs23,620 per 10 grams by adding Rs200 in the Indian national capital Monday on increased buying by stockists and investors, driven by a record rally in global markets, reports PTI.
Silver also moved up by Rs500 to Rs59,500 per kg on increased offtake by industrial units and coin makers.
Silver coins followed suit and jumped by Rs1,500 to fresh high of Rs65,500 for buying and Rs66,500 for selling of 100 pieces.
Trading sentiment turned bullish as gold marched to a record of $1,624.30 an ounce adding 1.4% overseas, after US lawmakers failed to reach an agreement on raising the federal debt limit, increasing concerns of a US default and boosting demand for the metal as a safe haven.
The white metal also gained 1.5% to $40.74 an ounce in the global markets, the highest level since 19th July.
On the domestic front, gold of 99.9% and 99.5% purity shot up by Rs200 each to fresh high of Rs23,620 and Rs23,500 per 10 grams, respectively.
Sovereigns followed suit and added Rs50 to Rs18,950 per piece of eight grams.
In line with a general firming trend, silver ready rose by Rs500 to Rs59,500 per kg and weekly-based delivery gained Rs805 to Rs60,270 per kg.