Share prices in a slow downtrend: Thursday Closing Report

Nifty has been wilting slowly. The next support is at 5,520

The market is expected to remain range bound till the much-awaited monetary policy review meeting of the Reserve Bank of India (RBI), scheduled for next week. The macro events do not support a downward movement on the indices. The US market had a flat ending with a negative bias on Wednesday, while Asian indices closed mixed today, with most of them ending in the green. The Nifty may find support at 5,520.

A mixed bag of corporate results offset the sharp dip in weekly food inflation data, leading the market to close in the red for the second day in a row.

Weak corporate earnings and dismal global cues resulted in the domestic market opening lower. The Nifty started at 5,555, 12 points lower from its previous close, and the Sensex resumed trade at 18,515, down 13 points. Auto, healthcare, realty and IT stocks were on the sellers' list in early trade.

A short while later, however, buying in select stocks pushed the market to its intra-day high. At this point the Nifty was at 5,579 and the Sensex was at 18,567. But volatility saw the indices swing on both sides of the neutral line in subsequent trade.

Mixed corporate results put pressure on the market in the noon session and the indices moved in the red. The market touched its intra-day low in the last half hour and the Nifty dropped to 5,533, down 46 points from the high of the day, while the Sensex retraced 152 points to 18,415 from its intra-day high.

At the close, the Nifty settled with a loss of 25 points at 5,542, and the Sensex ended at 18,436, a decline of 66 points.

The advance-decline ratio on the National Stock Exchange (NSE) was 586:1110.

The broader markets were equally punished in trade today with the BSE Mid-cap index settling 0.43% lower and the BSE Small-cap index declining 0.45%.

The BSE IT index (up 0.14%) and BSE TECk (up 0.09%) were the only two gainers in the sectoral space. The top losers were BSE Consumer Durables (down 2.20%), BSE Realty (down 1.43%), BSE Bankex (down 0.98%), BSE Healthcare (down 0.80%) and BSE Oil & Gas (down 0.78%).

Hero Honda (up 1.57%), Tata Motors (up 0.71%), Hindustan Unilever (up 0.60%), Wipro (up 0.58%) and Infosys (up 0.57%) were the main gainers on the 30-share Sensex. The major losers were Reliance Communications (down 4.24%), Reliance Industries (down 1.66%), Jaiprakash Associates (down 1.39%), HDFC Bank (down 1.30%) and NTPC (down 1.16%).

The top Nifty gainers were Hero Honda (up 1.82%), Cairn India (up 1.45%), Siemens (up 1.30%), Sun Pharma (up 0.96%) and ITC (up 0.87%). Major losers on the index were RCom (down 4.13%), Kotak Bank (down 3.53%), IDFC (down 2.67%), Sesa Goa (down 2.61%) and RIL (down 2.08%).

Markets in Asia settled mostly higher, but preliminary data from the purchase managers' index in China indicated that manufacturing may have contracted in July to 48.9 from 50.1 in June. The final reading is due on 1st August. The data pushed the Shanghai Composite down 1%, its biggest decline since 12th July. However, the deal on the Greek debt crisis by European leaders, expected later today, kept hopes alive in other markets in the region.

The Jakarta Composite gained 0.43%, the KLSE Composite rose 0.21%, the Nikkei 225 added 0.04%, the Straits Times advanced 0.38% and the Taiwan Weighted climbed 0.13%. On the other hand, the Shanghai Composite tumbled 1.01%, the Hang Seng fell by 0.07% and the Seoul Composite declined 0.46%.

Back home, on Wednesday foreign institutional investors were net sellers of stocks worth Rs90.44 crore, whereas domestic institutional investors were net buyers of shares worth Rs20.48 crore.

In a bid to expand its overseas footprint, Canara Bank plans to open offices in five countries, including Germany and Japan, during the current fiscal. The bank is also pursuing a licence from the US authorities to set up banking operations.

Currently, the bank has overseas branches in the UK, Hong Kong and China. The total business of these overseas branches aggregated $4,376 million for the financial year ended March 2011. Canara Bank declined 1.81% to end at Rs516.45 on the NSE.

State-run mining giant Coal India (CIL) plans to invest about Rs30,000 crore to augment its capacity over the next five years. The funds will be spent on new mining projects, washeries, machinery and equipment. The Maharatna firm has set a production target of 452 MT (million tonnes) for the current fiscal and wants to ramp it up to 556 MT by 2016-17. In 2010-11, it had recorded production of 431 MT. CIL added 0.05% to close at Rs367.30 on the NSE.

The Punj Lloyd Group has bagged a civil contract worth Rs210 crore from NTPC, for its thermal power project. The company will undertake balance offloaded work for the power plant in Bongaigaon district of lower Assam. The project is scheduled for commissioning by 2014. Punj Lloyd lost 1.41% to close trade at Rs73.25 on the NSE.


FM hopeful of further moderation in prices

"The trend is encouraging so far as the domestic sector is concerned. But we do not have total control over international issues, international commodity prices, fuel prices, and the influence of the external inflationary pressure could have some adverse impact on our domestic front," finance minister Pranab Mukherjee said

New Delhi: Encouraged by moderation in food inflation to 7.58% for the week ended 9th July, finance minister Pranab Mukherjee on Thursday expressed hope that the price situation would improve in the days ahead, reports PTI.

"If this declining trend continues, I do hope it will have a moderating influence on the price front," Mr Mukherjee told reporters here.

His comments came after food inflation fell to a three-week low of 7.58% for the week ended 9th July on the back of cheaper pulse prices and a high base last year.

Food inflation, as measured by the Wholesale Price Index (WPI) stood at 8.31% in the previous week. It was as high as 19.52% in the corresponding week of July 2010, suggesting a high base.

During the week under review, prices of pulses went down by 7.67% on a year-on-year basis. However, prices of other food items continued to rise.

Inflation of overall primary articles stood at 11.13% during the week under review, down from 11.58% in the previous week. Non-food articles reported an inflation of 15.50% for the week ended 9th July, compared to 15.20% in the previous week.

Mr Mukherjee said the domestic situation on the price front was improving, though concerns remain over international issues.

"The trend is encouraging so far as the domestic sector is concerned. But we do not have total control over international issues, international commodity prices, fuel prices, and the influence of the external inflationary pressure could have some adverse impact on our domestic front," he said.

The government had on Wednesday said that inflation will continue to remain high till December on account of "seasonal effects and upward movement in crude oil, manufactured and administered fuel prices..."

Headline inflation stood at 9.44% in June. It has remained consistently above the 9% mark since December 2010.


Prayas outlines steps to develop gas infrastructure, open up competition, before freeing prices

Pune-based NGO believes this will enable the better use of natural gas instead of oil and enhance energy security and revenues

Natural gas should be used for transport and cooking rather than for base-load power generation, which would allow gas pricing to be freed and help reduce subsidies, while improving energy security, according to Prayas Energy Group. The Pune-based non-governmental group says, however, that before freeing prices it is necessary to create a competitive shippers market, unbundle operations and set up a nationwide gas grid.

Gas supply in India is dominated by the Oil and Natural Gas Corporation (ONGC), Reliance Industries Limited (RIL) and the Gas Authority of India (GAIL). These companies are involved in production, transmission and distribution activities. There is no independent gas marketer in India and a concentrated and integrated gas market is not conducive to freezing gas prices.

Prayas has listed various areas that require change for the improvement of the gas sector.

It says that the gas market in India is not very competitive and is characterised by a few players and significant vertical integration. Therefore, there is a need to develop a competitive market for shippers (or marketers/aggregators). This should be accompanied by ensuring that gas pipeline capacities are freely open to access to all shippers.

Prayas says that the development of a nationwide gas pipeline grid and distribution infrastructure must be expedited to create a nationwide gas market. 'Unbundling', or vertical disintegration, must be implemented effectively in the gas market to prevent transporters or producers dominating the market.

Once such a competitive gas market, with associated infrastructure, is in place (in say five years), gas prices should be completely market determined. Gas should not be allocated at controlled prices to any new gas-based power plant, while existing gas-based power plants can be allocated gas at controlled prices, but for only (say) 40% PLF, so that they can function not as base-load plants but as intermediate load plants. This may require addressing some issues with respect to existing power purchase contracts.

If the option of establishing fertiliser plants outside is feasible, no new gas-based fertiliser plants should be allowed in India as long as the fertiliser imports do not pose a food security threat, or imported fertilisers contribute, say 20%, of total consumption.

Limited quantities of gas at controlled prices (say, 25%-30% PLF) may be allocated to combined heat and power (CHP) applicants in commercial buildings with connected load greater than, say 5MW, so that they can use efficient CHP technology. Even 5 mmscmd allocation for this can help reduce pressure on urban power distribution, particularly at peak hours. This decision can be reviewed when a competitive gas market is established.

Prayas believes that piped gas should replace LPG in urban India. The government should divert subsidised LPG (not used by urban households who shift to piped gas) to rural households, thus significantly improving public health and quality of life

Although Prayas recommends using coal for base-load power generation, it goes without saying that this should not be at the cost of the local environment and livelihood, and appropriate safeguards and compensation mechanisms must be devised to address this.

The organisation believes that these steps would result in gas replacing oil as a fuel, which will enhance energy security and increase government revenues. The government can use such increased revenues (and reduce subsidies) to subsidise rural LPG, some fertiliser imports and power generation (if required).


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