Nifty will be range-bound. The first support is at 5,433, while resistance is at 5,620
The Sensex and the Nifty opened well below yesterday's closing following a huge decline in US markets and weakness in all Asian markets. The Sensex opened at 183 points below yesterday's close at 18,426 and the Nifty started 62 points lower at 5,530. The indices immediately hit their intra-day lows, at 18,391 and 5,522.
Very weak US data raised questions about future demand for Asian exports as well as the likely impact on economic growth. Apart from a weak ISM manufacturing reading, employment data from ADP showed an increase of just 38,000 jobs in the past month, well below expectations for an increase of 175,000. The ADP data is a precursor to official non-farm job numbers due on Friday. Goldman Sachs and several other large financial institutions cut their estimates for Friday's non-farm payrolls figure in the wake of the ADP report.
But the Indian market showed good resilience and the Sensex and Nifty stabilised after the morning lows and moved up to their intra-day highs at 18,541 and 5,568 respectively. This happened on reports of slowing down of food inflation. Food inflation rose 8.06% in the year to 21 May 2011 slowing down from an annual rise of 8.55% a week ago. The primary articles price index was up 10.87% compared with an annual rise of 11.60% a week earlier. However the fuel price index climbed 12.54% compared with a rise of 12.11% a week earlier.
The Sensex fell 115 points to close at 18,494, while the Nifty fell 42 points to close at 5,550.
Major gainers on the Sensex were HUL which rose by 3.53%, Bajaj Auto (up 2.22%), ITC (up 0.77%), RIL (up 0.54%), Hero Honda (up 0.53%). The biggest loser was Reliance Infrastructure which fell by 4.66%, followed by Reliance Communication (down 4.11%), ICICI Bank (down 3.10%), Tata Motors (down 2.81%), and Mahindra & Mahindra (down 2.19%). Among the Sensex stocks, nine stocks rose and 21 fell. The Nifty had 16 stocks which rose and 34 stocks which fell.
Except for the BSE FMCG, BSE Consumer Durables, BSE Oil & Gas sectors, all other BSE sectoral indices ended in the red. The BSE Bankex registered the biggest drop of 1.52%. The advance-decline ratio on the National Stock Exchange (NSE) was 606:1142.
Dr C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, today said that the economy may grow by 8.5% in FY12 and he expects inflation to come down to 6.5% by next March.
House of Pearls was one of the top gainers on the NSE, up 20.01%. The company expects revenues to rise by 15% to 20% in the coming fiscal. Clutch Auto rose 18.17% and continued to be among the top gainers today on the news of demerger of the auto ancillary technology division.
Sun TV Network fell 28.31% on reports that former telecom minister Dayanidhi Maran could be investigated by the Central Bureau of Investigation (CBI) for alleged favours granted to Aircel as a quid pro quo. Maran is currently textiles minister in the UPA government and served as telecom minister in the first term of the UPA government. His brother Kalanidhi is chairman and managing director of Sun TV Network. Meghmani Organics slumped 7.23%.
The Federal Reserve's second round of quantitative easing, the policy designed to temporarily increase money supply, keep interest rates low and stimulate the economy, ends on 30 June 2011. However, such weak results may make the Federal Reserve consider supporting the US economy by extending its asset purchases, which have been often criticised in Asia as being responsible for driving inflation.
The SEBI chief is worried about poor retail participation. The regulator and the exchanges are alone responsible for this. Will anything change?
The Securities and Exchange Board of India (SEBI) has finally woken up to the fact that it has fallen short in its key role to develop the capital market and increase the base of investors. Today, SEBI chief UK Sinha admitted as much, saying that the market regulator would take steps to get retail investors back into the market. While the new SEBI chief's policy changes are well-intentioned, the measures to be taken would make sense only if they are grounded in reality. We will be keenly watching what SEBI does, for Moneylife alone has been highlighting how investors have been pushed out of the capital market system by a combination of factors.
In India, the retail participation in the stock market has declined from 20 million in the 1990s to 12 million in 1999, and just around 8 million in 2009, according to official data, this despite the fact that the Sensex has grown by 20 times during this period. As a percentage of the total population, the retail investor participation is just 1.3%, whereas in the US and China it is 27.7% and 10.5% respectively, according to the Bimal Jalan Committee report. The SEBI chief has targeted an optimistic figure of 8% for retail participation in India.
As has been pointed out by Moneylife repeatedly in the past, the decline in investor participation is due to many complex issues for which the regulator and the stock exchanges are squarely responsible. This cannot be resolved by making just one or two policy changes. The market is riddled with problems ranging from the difficulties for investors in opening a demat account to price manipulation, poor grievance redressal and the lack of proper guidance. Retail investors face a tough time, and to add to this they are taken for a ride by greedy investment advisors.
In August last year, Union minister of state for finance, Namo Narain Meena, revealed in Parliament the reality of the Indian 'equity cult'. He said around 50% of the cash market transactions on the National Stock Exchange (during April-June 2010) came from a shockingly low 451 investors, of whom 156 were proprietary traders, while 50% of the trading in NSE's derivatives segment came from just 106 investors of whom 58 were proprietary traders. Only 6% of client accounts contributed to 90% of the trading in the cash segment. 80% of turnover came from just 41,654 investors. In other words, 1,50,546 investors (78%) accounted for just 10% of trading turnover.
Moneylife magazine and Moneylife Foundation have on a regular basis highlighted these issues through articles and seminars. In the month of February, Moneylife Foundation released a position paper on the issues faced by retail investors, alarmed by the decline in retail participation. This paper was sent to the finance minister, the finance secretary, the joint secretary, Capital Markets, and Yashwant Sinha, head of the Standing Committee on Finance. Investors face multiple issues as identified by Moneylife Foundation. Some of these are listed below:
To open a demat account an investor has to go thorough cumbersome KYC procedures. Along with this, the customer has to sign on numerous forms, many of which they sign without asking too many questions. The charges involved in opening and maintaining a demat account are not in favour of the retail investor either. Investors have to cough up nearly Rs550-Rs3,500 just open an account and then there are account maintenance and transaction charges. Brokers usually ignore those with small investments and look for investors with bigger pockets, as they earn higher commissions on the later.
The power of attorney (POA), which gives brokers the power to operate their clients account for conducting trades, is often misused by the brokers. In August 2009, an individual from the brokerage firm India Infoline was arrested for conducting unauthorised trades in an investors' account that led to a loss of Rs13 lakh for the investor (Read, Harassed Investors.) This is taking place in spite of the lengthy and complicated procedure of creating a demat account and is a de-motivation for the investor.
Portfolio management services (PMS) are no better in servicing clients. There are several cases where investors have been duped by fanciful presentations of the brokerage firms. The major problem is that this area is not yet regulated. Investment norms are not clear and there is no restriction to churning and trading. They have been cases where investors have lost a major portion of their fund value due to excessive churning. (Read, Will Portfolio Managers Be Accountable?)
The issues related to demat accounts, mis-selling, and PMS can be tackled to some extent with proper investor education. But, issues like price manipulation, corrupt accounting practices and over-pricing and incorrect grading of IPOs, are issues which cannot be controlled by the investor. It is the job of the regulator to take stern action against such malpractices. But, SEBI has not seriously pursued investor protection.
Investor protection is one of the primary objectives of SEBI. But, its grievance redressal system is not up to the mark. In May 2009, the chief information commissioner (CIC) under the Right to Information (RTI) Act had severely criticised the regulator's handling of investor grievances. The CIC said that SEBI was not providing the right support to information-seekers and rejected requests even when it had the power to obtain details from stock exchanges.
"The response of the regulators in India has been knee-jerk and panicky. Instead of trying to punish wrongdoers after in-depth investigation and sensitivity to market practices, the regulators have only succeeded in eroding investors' confidence in the market by high-profile arrests and media hype," says Deena Mehta managing director, Asit C Mehta Investment Interrmediates, and one of the three trading member-directors on the board of the Bombay Stock Exchange.
Uttar Pradesh chief minister says henceforward developers would have to negotiate with landowners directly and the acquisition would go through only if 70% of the owners agree to it
Lucknow: Under pressure over the farmers' agitation over land acquisition, the Mayawati government in Uttar Pradesh (UP) today announced a new policy under which its role in acquiring land for private developers would only be that of a facilitator.
The chief minister, who held a farmers' panchayat earlier in the day to discuss their problems, announced that the new policy will be implemented with immediate effect.
Facing criticism and serious protests over acquisition of land for private companies, the government has decided that from now on developers would acquire land directly from farmers, PTI reports.
The chief minister also said that such acquisition could only happen with the agreement of 70% of the farmers in a given area. In case of disagreement, the project would be reviewed, she said.
Giving details of the new policy, Ms Mayawati said that in the affected villages where land has been acquired, the developer would have to construct a Kisan Bhavan as well as a model school.
The chief minister clarified that areas where land has already been acquired and compensation distributed to farmers including Bhatta-Parsaul and Tappal will be out of the ambit of the policy.
Ms Mayawati said the new policy had been thought of to safeguard the interest of farmers, and she added that their suggestions during the day-long panchayat would be incorporated in the government order.
Terming the new policy as a historic one, the chief minister said efforts would be made to get it implemented at the national level as the union government also plans to bring a land acquisition bill during the monsoon session.
She stuck to her threat to protest outside Parliament if the Centre failed to bring a new bill in the monsoon session.
Blaming opposition parties for instigating the recent agitation, she said that instead of putting pressure on the Centre to amend the existing policy, they enacted a "drama" in UP and created a law and order problem at some places in the state.
The chief minister said that an assurance has been given to representatives from Bhatta-Parsaul that the government would compensate the damages.