Stocks
Share prices to move sideways: Monday Closing Report

Nifty to move in the range of 4,600 and 4,735

The market opened in the green on the government’s initiative to attract more foreign funds. While intense volatility kept the benchmarks fluctuating in and out of the red for the entire session, brisk buying in the last hour helped the market end its four-session slide. Today the National Stock Exchange (NSE) traded on a low volume of 42.16 crore shares with too much of a downward bias, however, the Nifty ended in positive. The index has been able to cross its first support of 4,615. From here we may see the benchmark move sideways in the range of 4,600 and 4,735. But, if it breaks the lower range, the fall may go to the level of 4,455.  

The market started the New Year on a buoyant note following the government’s announcement to allow qualified foreign investor (QFIs) to invest directly in the Indian stock market, a move which will help in attracting more foreign funds. The Nifty started the day at 4,640, a gain of 16 points, and the Sensex resumed trade 79 points up at 15,534. Auto, Consumer durables and metal stocks supported early gains. However, light selling after the positive open pushed the market into the red in less than an hour of the opening bell.

The indices were choppy in the absence of any cues from the Asian region where most markets were closed today. After hovering in and out of the red a couple of times, the benchmarks fell to the day’s lows. The Nifty hit 4,588 and the Sensex dropped to 15,358.

Aggressive short-covering in the last hour, once again, lifted the indices into the positive. The Sensex went on to hit its intraday high in late trade with the index at 15,543. The market finally managed to close higher, snapping its four-day decline. The Nifty added 12 points to close at 4,637 and the Sensex settled at 15,518, a rise of 63 points.

The advance-decline ratio on the NSE was 881:826.

The broader indices settled mixed in today’s trade. The BSE Mid-cap index lost 0.07% while the BSE Small-cap index added 0.11%.

The top sectoral gainers were BSE Consumer Durables (up 1.35%); Oil & Gas (up 1.31%); BSE IT (up 1.23%); BSE TECk (up 1.08%) and BSE Metal (up 0.64%). The top declining sectors were BSE Fast Moving Consumer Goods (up 1.31%); BSE Auto (down 1.20%); BSE Power (down 0.44%); BSE Realty (down 0.39%) and BSE Healthcare (down 0.16%).

Coal India (up 3.61%); Tata Motors (up 3.03%); Reliance Industries (up 2.03%); Maruti Suzuki (up 1.82%) and ICICI Bank (up 1.73%) were the main gainers on the Sensex. The laggards were led by Bajaj Auto (down 7.40%); Hero MotoCorp (down 3.50%); Hindalco Industries (down 3.02%); DLF (down 2.13%) and NTPC (down 1.53%).

The Nifty toppers were Coal India (up 4.11%); Tata Motors (up 3.47%); Reliance Communications (up 3.35%); Maruti Suzuki (up 2.15%) and Tata Steel (up 2.12%). The draggers of the index were Bajaj Auto (down 7.86%); Sesa Goa (down 4.53%); Hero MotoCorp (down 3.62%); Hindalco Ind (down 2.89%) and Grasim (down 2.84%).

Most markets in Asia were closed for trade today for the New Year’s holiday. In economic news from the region, South Korea’s manufacturing activity for December dropped to a three-year low on the back of concerns about the global slowdown.

Among those that were open, the Seoul Composite closed 0.03% up while the Jakarta Composite fell 0.34% and the Taiwan Weighted tumbled 1.69%. At the time of writing, key European markets were in the positive. The US market will remain closed on Monday.

Back home, foreign institutional investors were net sellers of shares totalling Rs178.15 crore on Friday. On the other hand, domestic institutional investors were net buyers of stocks worth Rs266.60 crore.

SUV major Mahindra & Mahindra’s Farm Equipment Sector (FES) division today reported a marginal increase in tractor sales in December 2011, at 16,389 units compared to 16,334 units during the same month the previous year.

Domestic sales were up 1.19% to 15,315 units while exports during the month dipped 10.43% to 1,074 units. The stock declined 1.18% to close at Rs673.75 on the NSE.

Indiabulls Real Estate plans to buyback its fully paid-up equity shares of face value Rs2 each from existing shareholders at a price of Rs75 per share with the buyback size not exceeding Rs450 crore. The company plans to buy back 6 crore shares, which would sum up to approximately 12.66% of the pre buyback equity shares of the company. The stock rose 0.86% to close at Rs47.15 on the NSE.

Surya Roshni, the second-largest lighting company in the country, is setting up a light-emitting diode (LED) bulb laboratory and research centre in Uttarakhand at a cost of Rs15 crore with a view to give a boost to the segment. The Surya Group is eyeing a turnover of Rs5,000 crore next fiscal, up from the present Rs3,000 crore. The stock surged 1.15% to close at Rs43.90 on the NSE.

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Jacob Ballas to invest Rs200 crore in Religare Finvest Limited

Religare Finvest currently has more than 25,000 MSME accounts and its loan book stands at Rs11,380 crores.

Religare Finvest Limited (RFL), one of India’s largest capitalized NBFCs and a subsidiary of Religare Enterprises Limited, announced that NYLIM Jacob Ballas India Fund III LLC (Jacob Ballas Fund) has agreed to invest Rs200 crores in the form of compulsory convertible preference shares. This will be the second equity investment in the company (RFL) in quick succession with Avigo Capital having invested Rs150 Crores in November 2011. Religare Finvest provides debt capital to MSMEs in the form of loans against property, working capital loans, loans against plant and machinery, vehicles and construction equipment and loan against marketable securities among others. Religare Finvest currently has more than 25,000 MSME accounts and its loan book stands at Rs11,380 crores (as on 30 September 2011).

Jacob Ballas Fund is advised by Jacob Ballas Capital India Private Limited ("JBC", www.jbindia.co.in ), a leading private equity advisor based in New Delhi, India with a 19 member team, advising three India focused Mauritius based private equity funds. Investors in the Funds comprise predominantly leading international institutions such as insurance companies, sovereign wealth funds, pension funds, banks, funds of funds as well as reputed international family investment offices. The Funds have generated ten liquidity events from its portfolio including full and partial exits.

Commenting on this development, Shachindra Nath, group CEO, Religare Enterprises Ltd said, “We are pleased to announce this capital infusion by Jacob Ballas in Religare Finvest Limited. This investment is not only an external endorsement of the operating model but also demonstrates that despite macro headwinds in challenging times there are value seeking investors for fundamentally strong business models. Our NBFC, led by a strong leadership team over the last three years has created a unique MSME focused operating model backed by strong underwriting capabilities. This move also positions us well to capitalize on the existing business opportunities while delivering superlative value for all our stakeholders.”

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Another duty hike; FY11-12 iron ore export unlikely to cross 50MT

Apart from the duty hike, the decline in exports of iron ore was due to a number of reasons, including the imposition of a ban on exports of the raw material from Karnataka since July 2010 following allegations of widespread illegal mining

New Delhi: The country’s miners have said the upward revision in iron ore export duty to 30% will make India’s produce uncompetitive in the global market and total shipments are unlikely to exceed 50 million tonnes (MT) in the current fiscal, reports PTI.

“The government has further hiked export duty on iron ore to 30% on 30th December. This will make Indian iron ore totally uncompetitive in the world market,” Federation of Indian Mineral Industries’ secretary general RK Sharma said.

“Iron ore exports are already down by around 30% during the April-November period of the current fiscal over the same period last fiscal. It will be far more challenging next year,” he added.

The government had raised export duty on both lumps and fines to 20% in the Budget for the current fiscal in order to check the indiscriminate export of the key steel-making raw material and encourage domestic value addition.

India, the world’s third-largest iron ore exporter, had shipped 117.3 MT of iron ore in 2009-10 and 70%-80% of this was in the form of fines, which do not have many takers among domestic steel-makers.

In 2010-11, iron ore exports from the country came down to 97.64 MT and in the first eight months of the current fiscal, exports dipped by a little over 28% to 40 MT vis-a-vis the corresponding period last fiscal.

In fact, following the duty hike in the Budget and a slew of events thereafter, iron ore exports from the country have witnessed negative growth in the current fiscal over the previous fiscal.

Apart from the duty hike, the decline in exports of iron ore was due to a number of reasons, including the imposition of a ban on exports of the raw material from Karnataka since July 2010 following allegations of widespread illegal mining.

Production of iron ore in around 45 mines in Goa has also been shutdown due to environmental reasons. An informal export ban is also in place in Odisha.

Mr Sharma said in the remaining period of the current fiscal, only some quantity of exports would be feasible from Goa, besides stocks lying at other ports.

“However, taking all, it is not going to be 45-50 MT in the current fiscal,” he added.

Concerned over the severe shortage of iron ore after the ban on mining in Karnataka, steel minister Beni Prasad Verma had written to the finance ministry last September for raising export duty on iron ore to 30% to discourage exports.

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COMMENTS

Deepak

5 years ago

The steel industry is now shamelessly & openly gleefully anticipating reduction in iron ore prices at the cost of the exchequer and people of India by reduction of prices from NMDC's ore supply to them after successfully lobbying the Steel and Finance ministries to increase the export duty on iron ore to 30%! In the name of conserving resources, these pvt profiteers are getting a Govt subsidy of Rs.25,000 crores from NMDC and railways at the cost of Indian Govt and public (by NMDC’s flawed pricing formula of international iron ore price less export duty less export railway freight (since the ore is for domestic supply, these factors of export duty less export railway freight should logically not be reduced to determine domestic ore price). Despite the huge subsidy, these steel producers have the face to increase steel prices for Indian consumers by Rs.500-1500 this month based on increase in international steel prices, thus robbing Indian consumers of the benefit of subsidised ore! They have also quoted twisted figures: in fact export of iron ore is worth USD 10 billion and steel import is just USD 4 billion and in fact on net basis, steel imports are much lower (note: besides iron ore cost, steel cost includes cost of coke, other raw materials, labour, capital, interest, etc. and is therefore not comparable). In any case, the steel industry is already creating an outflow of USD 14 bill of foreign exchange for import of coking coal and coke. More than 70% of the ore exported from India is of quality not used by Indian steel mills, 50% is waste for Indian steel mills; there is therefore no logic in conserving such ore. The price differential for iron ore between domestic and export is only due to Govt's artificial tariff barriers for export with hidden intentions. India needs to implement the China model, where their ore is not exported only because domestic mills pay the market price and buy the ore before importing from distant sources with high freight. The applicable tax (VAT) in China is same for domestic sale, export or import of ore, giving a level policy framework. Thus, in India too, export duty increase should be only in conjunction with a similar level of duty on domestic sale, so that the Govt does not lost that revenue on domestic sale of ore and does not provide such a huge (unintentional?) subsidy (of Rs.20,000 crore) to pvt steel producers who price their finished product at market prices, and pocket the subsidy. Unfortunately, in India, officials are ready to sacrifice the country's interest for petty gains at the behest of lobbyists.

Deepak

5 years ago

The steel industry is now shamelessly & openly gleefully anticipating reduction in iron ore prices at the cost of the exchequer and people of India by reduction of prices from NMDC's ore supply to them after successfully lobbying the Steel and Finance ministries to increase the export duty on iron ore to 30%! In the name of conserving resources, these pvt profiteers are getting a Govt subsidy of Rs.25,000 crores from NMDC and railways at the cost of Indian Govt and public (by NMDC’s flawed pricing formula of international iron ore price less export duty less export railway freight (since the ore is for domestic supply, these factors of export duty less export railway freight should logically not be reduced to determine domestic ore price). Despite the huge subsidy, these steel producers have the face to increase steel prices for Indian consumers by Rs.500-1500 this month based on increase in international steel prices, thus robbing Indian consumers of the benefit of subsidised ore! They have also quoted twisted figures: in fact export of iron ore is worth USD 10 billion and steel import is just USD 4 billion and in fact on net basis, steel imports are much lower (note: besides iron ore cost, steel cost includes cost of coke, other raw materials, labour, capital, interest, etc. and is therefore not comparable). In any case, the steel industry is already creating an outflow of USD 14 bill of foreign exchange for import of coking coal and coke. More than 70% of the ore exported from India is of quality not used by Indian steel mills, 50% is waste for Indian steel mills; there is therefore no logic in conserving such ore. The price differential for iron ore between domestic and export is only due to Govt's artificial tariff barriers for export with hidden intentions. India needs to implement the China model, where their ore is not exported only because domestic mills pay the market price and buy the ore before importing from distant sources with high freight. The applicable tax (VAT) in China is same for domestic sale, export or import of ore, giving a level policy framework. Thus, in India too, export duty increase should be only in conjunction with a similar level of duty on domestic sale, so that the Govt does not lost that revenue on domestic sale of ore and does not provide such a huge (unintentional?) subsidy (of Rs.20,000 crore) to pvt steel producers who price their finished product at market prices, and pocket the subsidy. Unfortunately, in India, officials are ready to sacrifice the country's interest for petty gains at the behest of lobbyists.

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