Our second resistance of 5,540 has been breached. Investors shrug off slower growth concerns
The market today opened positive on a strong Asian rally, backed by speculation that European officials will sanction more assistance for Greece. The Sensex and Nifty opened at 18,267 and 5,492 respectively. That was the day's low for the Sensex, while the Nifty touched its intra-day low of 5,490 in the first hour. The market, which was on an uptrend, witnessed a jolt on the news of slower GDP growth in the March quarter. The Indian economy grew by a slower-than-expected 7.8% in the January-March 2011 period, compared with 9.4% in the previous corresponding quarter.
Poor manufacturing sector output growth at 5.5% dragged down overall economic growth, farm output showed tremendous improvement at 7.5% in the quarter under review. Overall, GDP grew at 8.5% in the fiscal year ended March 2011, a touch lower than the government's expectation of 8.6%. A finance ministry official today said economic growth in FY12 would probably be around 8.75%, lower from the earlier target of 9%. The official said the government hoped to meet its FY12 fiscal deficit target of 4.6%.
The market resumed its uptrend quickly, perhaps recognizing a silver lining in slower economic growth that might cause the RBI to soften its stance on interest rates.
In afternoon trade, the Sensex and Nifty hit 12-day highs at 18,527 and 5,572 respectively. The Nifty crossed it first resistance of 5,540 and closed well above it. The Sensex rallied 271 points to close at 18,503 and the Nifty gained 87 points to end the day at 5,560. We can expect the Nifty to reach at least 5,600.
All Asian indices ended positive, in the range of 0.13% to 2.32%. All European markets were up and Dow futures was up a huge 117 points at the time of writing.
Jaiprakash Associates (up 4.59%) was the major gainer in the Sensex stocks, followed by HDFC Bank (up 3.47%), DLF (up 3.27%) and ITC (up 3.07%). The only loser was Cipla, which dropped by 1.05%. On the Nifty, 47 stocks gained, while only two fell and the GAIL stock remain unchanged.
All the sectoral indices ended in the green. The interest sensitive realty sector was the biggest winner with the BSE-Realty index up by 2.53%. FMCG stocks rose on hopes that the timely monsoon rains would help boost rural income, which contributes a substantial part of the revenues of FMCG firms. The BSE- FMCG index was up by 2.25%. BSE-IT rose by 0.50%. The advance-decline ratio on the National Stock Exchange was 1257:484.
ONGC, the country's largest oil & gas exploration firm by sales, rose 1.15%, following the March quarter results announced after market hours on Monday. While sales grew by a meager 1%, the operating profit fell by 15% over the corresponding year-ago period. ONCG attributed the weak results to higher discounts on crude sales given to PSU oil marketing companies to meet their under-recoveries on fuel sales at government-controlled prices. ONGC gave a discount of Rs12,136 crore to these firms in the quarter, sharply higher than Rs4,999 crore in the previous corresponding quarter.
Reliance Communications (RCom) rose 2.17%, following the announcement of quarterly results after market hours on Monday. Meanwhile, RCom has decided to initiate due diligence to sell its stake in Reliance Infratel, its passive infrastructure subsidiary.
Order inflows in the power sector were poor in April 2011, but power generation registered an encouraging 7.6% growth year-on-year, and alternate energy sources did much better. Power stocks have by and large underperformed the market over the past three months
Power forms a vital part of infrastructure development. In India, recently, the sector has been riddled with poor order inflows. But the growth in power generation has been encouraging. Renewable forms of power generation also have shown strong growth over the past few months. There have been large orders for wind projects and nuclear power generation and hydro generation have crossed the targets set by the Central Electricity Authority (CEA) for April 2011.
According to a research report by IDFC Securities on the status of infrastructure development, "Order inflows (in infrastructure) in April 2011 fell sharply by 49% year-on-year, due to very few orders in the power generation segment, which has been the mainstay of order inflows."
Power generation has grown by 7.6% over the previous year for April 2011. In 2010-11, the power generation sector contributed 45% to the total order inflows of the infrastructure sector. Power transmission and distribution (T&D) was the second highest contributor with 16.9%.
However, orders for the power generation sector fell in April 2011 to Rs8 billion, which is the lowest in two years. Consequently, the order inflows for infrastructure overall during the month fell by half to Rs76 billion from the corresponding period a year ago.
But, IDFC says, there was some relief for the power sector in May. L&T and BHEL received a few large orders, and Gamesa got a large order from Caparo Energy for wind projects in India. This resulted in a 68% yearly jump in order bookings this month.
The highest growth in power generation was in the nuclear power segment that grew by 40.5% from 18,631 MU (power unit) in FY2009-10 to 26,182 MU in FY2010-11. Nuclear generation achieved a remarkable growth rate of 50.72% over March-April 2011 due to improved availability of nuclear fuel to the nuclear plants.
Nuclear power generated 2,660 MU in April, exceeding the target by 612 MU. Energy generated from hydro-electric stations (excluding import from Bhutan) during the month was 8,875 MU against the target of 7,522 MU. Hydro-based plants and coal-based plants registered a growth of 3.40% and 9.22% respectively in March-April 2011. Thermal power generation grew only by 3.4% due to the negative growth rate of gas-based stations.
Alternate energy generation has immense potential as generation of clean and renewable energy is top priority for the country. The growth in nuclear power generation and hydro power generation has been encouraging.
Unfortunately, the performance of power company stocks has not been great. The BSE Power index was down by 12.11% over FY2010-11, against a 10.96% gain by the Sensex in this period.
According to a chart prepared by IDFC, on the performance of power stocks in relation to the Sensex over the past three month, power equipment manufacturer ABB Ltd outperformed the Sensex by 23.5%, whereas the public sector unit BHEL was lower by 4.4%.
Among power utilities, Jaiprakash Power Ventures was the top performer, beating the Sensex by 26.2%. NTPC and Adani saw lower growth compared to the Sensex-they were 1.3% and 7.5% lower.
Most power transmission companies also displayed poor performance. Kalpataru and Jyoti Structures were 4.5% and 6.2% lower than the Sensex.
Journalist and RTI activist Vinita Deshmukh says any individual can use the Right to Information Act for the betterment of society and to find answers to everyday problems. At a Moneylife Foundation workshop, she described numerous instances where common citizens have persisted and succeeded along this road
There was a convict, who was sentenced to prison for murder. However, due to the good conduct he exhibited, he was put in an open cell. But when he protested about the quality of the food in the prison he was shifted back to a closed cell without being given any reason. He used the Right to Information (RTI) Act to obtain a copy of the Indian Prison Manual, then wrote to the media about the injustice done to him, and managed to get back to an open cell.
Narrating this incident at a seminar on 'How to use the RTI Act effectively', Vinita Deshmukh, journalist and RTI activist, said: "If a prisoner can use the RTI Act, why can't we? I don't say that we take on a huge scam, but there are several small matters which directly concern you, and which you can remedy."
Ms Deshmukh presented numerous case studies to illustrate how the RTI Act has been used by individuals for the betterment of society, or to find answers to everyday problems. She described how she had utilised information obtained by using the RTI, to make Pune residents aware of the environmental and civic laws that were being flouted by Dow Chemicals, which planned to set up a chemical plant under the garb of a 'research centre'. Under pressure of a growing popular agitation, the government subsequently called a halt to the project and Dow Chemicals pulled out.
Ms Deshmukh gave examples of how senior citizens, peasants and journalists have used the Act to obtain information and put pressure on the authorities to do their job and stop corruption. "Instead of waiting for 30 days and risking further delay for appellate follow-ups, use Section 4 of the RTI Act which allows any citizen to go to a public authority's office and inspect files and records," she said.
The journalist and RTI activist also talked about how grievances have been addressed almost immediately after filing an RTI application, and how sometimes even files that had gone missing, reappeared miraculously when the information was sought. "Government babus don't show it, but they are scared of the RTI. Use it as often as you can, and it will not only check corruption but also ensure better, speedy and efficient governance," she said.
Ms Deshmukh expressed optimism over the use of RTI in India. "India is much ahead of the United States in the public use of the Right to Information, and if we say that 35% of the applications filed are replied to satisfactorily, that is quite some achievement. If people take up the issue seriously, they can force the government to act properly," she said.
This programme, hosted by Moneylife Foundation, complemented earlier seminars on the RTI issue addressed by Ashok Ravat and Bhaskar Prabhu. Ms Deshmukh writes a column for Moneylife that also focuses on the effective use of RTI. Mr Ravat and Mr Prabhu both described their association with the RTI movement and gave tips on how to use RTI better.