Share prices will give up some gains, but may be supported on declines: Monday Closing Report

Nifty may trade between 5,450 and 5,650 before the next move

Adding to the surge on Friday, the market headed further northwards today, after overcoming initial hiccups. The gains were largely attributed to the oil & gas sector after the government raised retail fuel prices after the market closed on Friday.

Weak global cues led to the market opening lower this morning. The Nifty resumed trade at 5,441, down 30 points and the Sensex started the day 108 points lower at 18,133. Realty, IT and metal stocks saw selling pressure in early trade, pulling the indices to the day's lows. The Nifty dipped to 5,434 while the Sensex dropped back to its opening level.

Overcoming initial weakness, the market was pushed to a higher trajectory on support from the oil & gas sector. PSU, auto and capital goods also helped lift the indices higher in the green.

The market continued to be range-bound till the noon session. Support from key European indices, which pared initial losses, led the domestic benchmarks to their day's highs. At the intra-day highs, the Nifty was up 82 points at 5,553 and the Sensex climbed 253 points to 18,494.

Subsequently, the market came off the day's high, but closed trade with decent gains. The Nifty finished 55 points higher at 5,527 and the Sensex closed at 18,412, up 172 points. The Nifty closed in the positive for the fifty day in a row and the Sensex notched its third consecutive day of gains.

The market has been quick in correcting its recent downward move. The total loss on the Nifty of 391 points in 10 out of 13 trading sessions, starting 2nd June, has been covered up to the extent of 269 points in five trading days. We had mentioned in our closing report on Friday that the market may go up to 5,556. Today's intra-day high was around this level. We expect the Nifty to now move sideways, in the range of 5,450 and 5,650.

State-run oil companies rallied today after the government announced a hike in fuel prices to ease pressure on their margins. HPCL jumped 5.80%, Oil India surged 5.69%, BPCL climbed 4.62%, ONGC rose 4.16%, IOC advanced 3.10% and GAIL India added 1.83% on the BSE today.

The advance-decline ratio on the National Stock Exchange was 1073:617.

The broader indices also supported the benchmarks as the BSE Mid-cap rose 0.82% and the BSE Small-cap index gained 0.80%.

Among the sectoral gauges, BSE PSU was the top gainer (up 1.92%). It was followed by BSE Capital Goods (up 1.75%), BSE Bankex (up 1.61%), BSE Auto (up 1.49%) and BSE Oil & Gas (up 1.40%). BSE Realty (down 0.62%), BSE Fast Moving Consumer Goods (down 0.48%) and BSE Consumer Durables (down 0.43%) were the sectoral losers.

Among the Sensex stocks ONGC (up 4.16%), Mahindra & Mahindra (up 3.09%), Maruti Suzuki (up 2.86%), Larsen & Toubro (up 2.69%) and Tata Steel (up 1.65%) were the top performers. On the other hand, Reliance Infrastructure (down 1.48%), ITC (down 0.77%), Hero Honda (down 0.76%), DLF (down 0.74%) and Wipro (down 0.33%) were the top losers.

The top Nifty gainers were Power Grid (up 5.07%), BPCL (up 4.71%), ONGC (up 4.01%), Reliance Capital (up 3.57%) and Maruti Suzuki (up 3.16%). The main losers on the index were Reliance Infra (down 1.13%), Grasim (down 1.10%), DLF (down 0.99%), Ambuja Cement (down 0.75%) and ITC (down 0.72%).

The Asian pack, with the exception of the Shanghai Composite, settled lower today. Speculation that the Greek government might not be able to garner required support in parliament later this week, for an austerity plan, kept investors on edge.

Financial stocks across Asia suffered a setback after the Basel Committee on Banking Supervision said on Saturday that banks deemed too big to fail must hold as much as 2.5 percentage points in additional capital as part of efforts to prevent another financial crisis.

The Hang Seng fell by 0.59%, the Jakarta Composite declined 0.91%, the KLSE Composite shed 0.14%, the Nikkei 225 tanked 1.04%, the Straits Times settled 0.61% lower, the Seoul Composite tumbled 0.98% and the Taiwan Weighted declined 0.38%.

Back home, foreign institutional investors were net buyers of stocks worth Rs890.44 crore on Friday. On the other hand, domestic institutional investors were net sellers of shares worth Rs486.85 crore.


RIL consulted before finalising draft KG-D6 report: CAG

The CAG said that in the case of performance audit on hydrocarbon production sharing contracts, interactive meetings were held with two operators, including RIL, prior to the finalisation of the draft performance audit report

New Delhi: Government auditor Comptroller and Auditor General of India (CAG) today said that it had consulted Reliance Industries (RIL) before finalising the draft performance audit report on hydro carbon production sharing contracts at its KG-D6 gas fields, reports PTI.

“At no stage did this office (CAG) refuse any operator an opportunity to respond to observations made by us,” the CAG said in a statement while responding to reports that the auditor did not give an opportunity to RIL to present its views.

The auditor said that in the case of performance audit on hydrocarbon production sharing contracts, “interactive meetings were held with two operators, including RIL, prior to the finalisation of the draft performance audit report.”

However, in a letter dated 22nd June, the petroleum ministry said the CAG did not mention its observations or seek comments of the private firms on its audit objections during the interactive meetings it had with RIL and Cairn days before finalising its draft report.

Such non-disclosure was not in line with the production sharing contract because of which the government will not be reverse any cost recovery or disallow any expenditure, the government letter said.

The CAG said the performance audit follows a structured, systematic and objective architecture, which involves taking into account all relevant facts furnished by the concerned parties to ensure a balanced and objective reporting.

The government auditor said that as per the audit methodology the draft report was forwarded to ministry of petroleum and natural gas and ‘Entry and Exit conferences’ with the oil ministry as per the standard practice.

“It is for the ministry to take a view on what operator- specific points it needs to share, at this stage, with the operators,” the CAG said.

The CAG, in its 8th June draft report, stated that the oil ministry and its technical arm, the Directorate General of Hydrocarbons (DGH), favoured Reliance and Cairn by allowing them to retain their entire exploration acreage, turning a blind eye to increases in capital expenditure and giving additional area in violation of the Production Sharing Contracts (PSCs).

In the draft report, the CAG said rules were bent, enabling RIL to retain the entire 7,645 square kilometre KG-DWN-98/3, or KG-D6 block, in the Krishna Godavari Basin off the east coast.

Also, the development plan RIL submitted for Dhirubhai-1 and 3, two of the 18 gas discoveries in the KG-D6 block, was not in compliance with the PSC and the ministry and the DGH turned blind eye to the company raising capital expenditure without having begun work on the previous one.


Banking: Credit & asset quality key growth drivers in FY12, says recent survey

Growth from credit growth is expected to moderate, due to the lower GDP growth projection; Net Interest Income expected to come down, but profitability is expected to remain at a healthy 18.5% on a year-on-year basis

According to a report released today by ICICI Securities, the banking industry as a whole will be able to shake off the (one-off) provision for retirement benefits and burden of the transition to system-based NPAs (Non-performing Assets) in FY11. The study also states that credit growth is expected to slow down to approximately 18%-19%, on a year-on-year (y-o-y) basis. NII (Net Interest Income) for the sample covered in the study is expected to decline from approximately 39% (y-o-y) to an estimated 16% in FY12.
However, according to the study, the profitability of the universe selected is expected to remain healthy, at 23% (y-o-y). This is despite the constant hikes in monetary rates by the Reserve Bank of India. But ICICI Securities says that the tight monetary regime has laid stress on the cost of banking funds, NIMs (Net Interest Margins) and asset quality.

The study also maintains that private banks have performed better than their public-sector counterparts, and these government-owned lenders may face pressure due to high NPAs due to their exposure to various power and infrastructure projects.

The report says that on the cost front, there was a divergence between public-sector banks (PSBs) and their older government-owned counterparts. These banks (both PSBs and older government entities) had to bear the brunt of higher NPA provisioning; provision for the second pension option and gratuity enhancement with on-off provision for retired employees.

The official monetary policy has lowered GDP (Gross Domestic Product) projection from 8.5% (previous estimates) to the 7.8%-8.5% range. This revision, says the study, "makes us (ICICI Securities) believe that our earlier estimate of 20% credit growth has to be revised from 18%-19% with the RBI also setting a target of 19% for FY12."

The report adds: "In India, the credit to nominal GDP (market prices) is 50% as against over 100% for China and many other neighbouring economies." This factor, says the study, "depicts that the opportunity for growth in credit is enormous if economic growth stays high."

Personal loans (almost 50% of them are housing advances) have remained stable, at 18% of total non-food credit. The study also notes that commercial real estate and NBFC (non-banking financial companies) loans remain an "area of concern," under the services segment.


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