There is no strength in the upmove. Watch whether the Nifty closes below 4,950
The market snapped its two-day gaining streak as negative cues from Europe in the second half of the day pushed the indices into the negative territory and led to a flat close. After the market opened in the positive, the Nifty went on to make a 12-day high (including today) at 5,045. Although the index traded in the positive till the pre-noon session, each time it made a lower high, ultimately slipping into the red. The index made a higher high and higher low but ended in the red on global worries. Yesterday, we had mentioned that the Nifty would move in the range of 5,030 and 5,135. It crossed this level through the intraday high. We now feel that the market is headed down, at least in the short run.
The domestic market opened in the positive on support from its global peers on signs of easing of debt worries in Europe. The Nifty opened 40 points up at 5,020 and the Sensex resumed trade at 16,668, a gain of 111 points over its previous close. Buying in consumer durables, banking, metal and realty stocks boosted the market in initial trade. The Sensex touched its intraday high in the first 15 minutes at 16,774.
Profit-booking set in after the market touched the intraday high, resulting in the indices paring some of the early gains as trade progressed. The market entered the negative terrain in the noon session on a lower opening of the European markets on nervousness ahead of the European Financial Stability Facility (EFSF) expansion vote in the Slovakian Parliament later today.
Dipping to the day’s low in the post-noon session, the Nifty fell to 4,967 and the Sensex touched 16,513. While buying in select stocks lifted the market into the green, the indices flirted near yesterday’s closing levels in subsequent trade. The market closed flat with a negative bias, ending its two-day gaining spree. At close, the Nifty lost five points at 4,974 and the Sensex settled at 16,536, down 21 points. The National Stock Exchange (NSE) saw a volume of 63.32 crore shares.
The advance-decline ratio on the NSE was 997:706.
The broader indices outperformed the Sensex with the BSE Mid-cap index closing 0.49% higher and the BSE Small-cap index adding 0.22%.
In the sectoral space, BSE Consumer Durables (up 1.16%), BSE Metal (up 0.97%), BSE Auto (up 0.87%), BSE Capital Goods (up 0.75%) and BSE Power (up 0.58%) were the top gainers. On the other hand, BSE IT (down 2.70%), BSE TECk (down 1.44%), BSE Oil & Gas (down 0.56%), BSE Fast Moving Consumer Goods (down 0.40%) and BSE Realty (down 0.04%) were the losers.
The top performers on the Sensex were Sun Pharma (up 4.47%), Tata Motors (up 3.64%), NTPC (up 3.49%), Bharti Airtel (up 3.18%) and Jindal Steel (up 2.71%). The losers were led by Infosys (down 3.17%), TCS (down 2.26%), Wipro (down 2.04%), ONGC (down 1.88%) and Hindustan Unilever (down 1.76%).
The top-five gainers on the Nifty were Sun Pharma (up 3.88%), NTPC (up 3.22%), Sesa Goa (up 3.17%), Tata Motors (up 2.64%) and SAIL (up 2.41%). The main losers were Infosys (down 3.50%), HCL Technologies (down 2.95%), TCS (down 2.79%), Wipro (down 2.41%) and ONGC (down 2.11%).
Markets in Asia closed trade in the green on the optimism in Europe while the Chinese market climbed after a unit of Beijing’s sovereign-wealth fund increased its stake in four of the country’s biggest banks. Retailers in South Korea got a boost after data showed that wholesale inflation in September eased off a four-month high.
The Shanghai Composite rose 0.16%; the Hang Seng jumped 2.43%; the Jakarta Composite climbed 2.34%; the KLSE Composite gained 1.05%; the Nikkei 225 advanced 1.95%; the Straits Times settled 0.93% higher; the Seoul Composite surged 1.62% and the Taiwan Weighted rose 2.59%.
Back home, foreign institutional investors were net buyers of stocks worth Rs211.71 crore on Monday. On the other hand, domestic institutional investors were net sellers of equities worth Rs37.13 crore.
Pharma major Aurobindo Pharma has received final approval from the US health regulator to manufacture and market generic Gabapentin tablets, used in the treatment of central nervous system (CNS) disorders, in the American market. Gabapentin tablets are the generic equivalent of the Neurontin tablets of Pfizer Pharmaceuticals. The company plans to launch the tablets soon in the US market. Aurobindo Pharma settled 0.94% higher at Rs128.65 on the NSE.
Heavy equipment manufacturer BEML on Tuesday announced its entry into dredging with a technology tie-up with Netherlands-based Vosta LMG. The new stream of business would generate an additional Rs 220 crore in revenue for BEML in the next two years. The stock declined 0.52% to Rs487.05 on to NSE.
The country’s largest power producer NTPC said coal shortage is hurting the performance of several of its plants, including Dadri and Vindhyachal, resulting in lesser electricity generation. Going by estimates, coal shortages are impacting over 4,000 MW of NTPC’s power generation capacity. Despite the setback, the stock gained 3.22% to close at Rs176.10 on the NSE.
“The biggest disappointment for the primary market has been the lack of divestment by the government. Only one divestment (PFC) took place in the first half of the current fiscal. The pipeline of divestment/PSU offerings continues to become larger by the day, yet nothing of it seems to be materialising,” Prime Database CMD Prithvi Haldea said
New Delhi: Indian companies raised Rs9,582 crore through public issues in the first half of the current fiscal, a decline of 22% over the corresponding year-ago period, reports PTI quoting primary market tracking firm Prime Database.
“The first half of the current fiscal has ended with mobilisation of only Rs9,582 crore through public equity issues... This mobilisation is lower than Rs12,280 crore in the corresponding period of the preceding year, representing a fall of 22%,” the report said.
In terms of the number of issues, however, the first half of FY11-12 was similar to the previous fiscal. Thirty-one public issues were witnessed in the April-September period of 2011, compared to 32 issues in the year-ago period.
Out of the Rs9,582 crore raised through public issues in H1, FY11-12, Rs5,004 crore was mopped up through 30 initial public offers (IPO) and Rs4,578 crore was garnered via one follow-on public offer (FPO).
“The biggest disappointment for the primary market has been the lack of divestment by the government. Only one divestment (PFC) took place in the first half of the current fiscal. The pipeline of divestment/PSU offerings continues to become larger by the day, yet nothing of it seems to be materialising,” Prime Database CMD Prithvi Haldea said.
“This is as good a time as ever for the government to enlarge the investors’ base and the capital market and to raise money that it so desperately needs. For this, besides IPOs, it should change the method of FPO offering by first doing a closed auction for QIBs and then a fixed price issue for retail,” he said.
The average deal size fell to Rs309 crore in the first half of FY11-12, down from Rs353 crore in the corresponding period of the preceding year. There were only two issues worth more than Rs1,000 crore during the period. On the other hand, there were 11 issues worth less than Rs50 crore, the smallest of which raised Rs23.25 crore.
The banking and financial services sector dominated the public issue space, with seven companies raising Rs7,621 crore, followed by electronics - consumer and media industry, with two issues garnering Rs324 crore, and electric/electronics equipment, with two issues raising Rs320 crore.
In terms of the methodology for the offers, 30 of the 31 issues during the period were executed through the book-building route, cornering over 99% of the total amount raised, with only one small issue adopting the fixed price method.
The option of roping in anchor investors was only exercised by four companies.
Looking ahead, the report said that the future outlook appears uncertain, despite the fact that there is no shortage of issuers. There are as many as 109 companies either with the Securities and Exchange Board of India (SEBI) approval or are awaiting approval for their public offers.
Returns from other dynamic bond funds have not been so great. What makes Daiwa’s offering different?
Daiwa Mutual Fund has launched Dynamic Bond Fund, an open-ended income scheme. The New Fund Offer (NFO) price for the scheme is Rs10 per unit. The benchmark index for the scheme is the CRISIL Composite Bond Fund Index.
Dynamic Bond Fund, as the name suggests, is designed to give the fund manager the flexibility to change the duration of the bond as and when needed. Interest rates and bond prices are inversely related. When the interest rate is rising, bond prices fall and fund managers should be able to decrease the duration of the bond; short-term bonds face a lower impact. And when the interest rate is falling, they should be able to increase the duration of the bond.
The other flexibility is to move into cash and sit on the sidelines when the interest rate is rising sharply over different horizons. It is to offer this flexibility that dynamic bond funds were introduced. They will dynamically move from a fully-invested situation to a fully-cash position and various stages in between, depending on the fund manager's reading of the interest-rate situation.
There is just one problem. Among the most difficult things to predict in financial markets are interest rates. Economists use a variety of techniques to forecast interest rates. The most basic is to use economics and history as a guide and to make a judgment on the appropriate level of interest rates and their future course, given the state of the economy and important economic variables.
Since most economists disagree on how the economy works, or what economic history means, predicting interest rates is more difficult than it seems. The reason for this inaccuracy is simple. Interest rates reflect a complex set of forces including human behaviour, which is highly complex.
This complexity has been compounded by the globalisation of economies and the integration of financial markets, on account of which money moves at lightning speed. The net result is that forecasts of interest rates and actions based on them have often turned out to be wrong.
Not surprisingly, the idea of dynamic bond funds has by and large proved to be good only on paper. We studied eight of them, and their returns since inception do not seem great. Some of them have given returns as low as 2.9% since inception. Birla Sun Life Dynamic Bond Fund-Ret gave a return of 7.98%; Taurus Dynamic Income Fund gave a return of 6.63% and Tata Dynamic Bond Fund fetched a return of 5.39%. Among the others are UTI Dynamic Bond Fund (7.54%); Canara Robeco Dynamic Bond Fund-Retail (5.01%); Reliance Dynamic Bond Fund (4.22%) and SBI Dynamic Bond Fund whose return of 2.90% is the worst among the lot. (It was launched in 2004).
Even the best among the lot, Birla Sun Life Dynamic Bond Fund-Ret, has given a return of just 7.98% over a period of around seven years, which is far lower than bank fixed deposit rates. The existing funds are already performing badly. Can Daiwa Mutual do better?