The Nifty may see a sideways movement between 5,290 and 5,425
Global events and dismal domestic factory output numbers for December 2011 weighed on the market this week. The international scene was dominated by the impasse in Greece over the agreement with its creditors. Even though the beleaguered nation managed to clinch a deal on reforms and austerity measures, policymakers are concerned about Greece keeping its commitments. However, despite pressures, the market managed to close with a gain of 1%, making it the sixth positive weekly close.
The market closed higher on positive global cues on Monday. However, on Tuesday the market fell on concerns that Greece may be unable to avoid the default as it struggled to reach terms on a new bailout package. The market managed to register gains on Wednesday on hopes that Greece would find a way to end its debt problems. The benchmarks extended their gains on Thursday even as Greece failed to sew a deal to avoid a debt default. Dismal IIP data for December and a weak performance of the global markets saw the market closing lower on Friday.
The Sensex added 144 points to close the week at 17,749 and the Nifty ended 56 points up at 5,382. We may now see the Nifty moving sideways between 5,290 and 5,425.
The BSE Realty index and the BSE Consumer Durables index both closed 6% higher, while the BSE Healthcare index ended 1% lower.
Jindal Steel & Power (up 9%), Bajaj Auto (up 8%), TCS, Wipro and Sterlite Industries (up 5% each) were the top Sensex gainers whereas Bharti Airtel (down 10%), Hindustan Unilever, Mahindra & Mahindra, Sun Pharmaceuticals (down 3% each) and BHEL (down 1%) settled as top losers in the week.
The Nifty toppers were Jindal Steel & Power (up 9%), Cairn India, SAIL, Bajaj Auto (up 8% each) and ACC (up 6%). The main decliners were Bharti Airtel (down 10%), HUL, IDFC, Dr Reddy’s Laboratories and M&M (down 3% each).
Industrial production grew just 1.8% in December 2011 compared to 8.1% in the corresponding period last year, due to contraction in mining and capital goods sectors and a lower manufacturing sector growth. The decline in IIP numbers will make a good case for further rate cuts by the RBI, experts opine.
India’s exports growth rate recorded a marginal increase of in January with the overseas shipments expanding by 10.1% year-on-year to $25.4 billion despite weak demand in the western markets. Imports grew at a faster rate of 20.3% to $40.1 billion, leaving a trade deficit of $14.7 billion, commerce secretary Rahul Khullar said on Thursday.
According to Mr Khullar, the problems in the US and Europe are clearly weighing down on the country’s exports. From a peak of 82% in July 2011, export growth has slipped to 44.25% in August 2011, 36.36% in September 2011 and 10.8% in October last year.
On the international front, after many days of flip-flops, Greek leaders Thursday said they had reached a deal on economic reforms and austerity measures needed to secure a second bailout, however, Eurozone finance ministers demanded more measures and a parliamentary nod before providing the aid.
In the US, the country’s trade deficit widened more-than-expected to $48.8 billion in December, rising to the highest level since July 2008. Meanwhile, weekly jobless claims dropped by 15,000 to 358,000, the second-lowest level in nearly four years, according to a government report Thursday.
Nifty may move sideways between 5,290 and 5,425
The market settled lower as poor industrial output numbers for December and unending European woes weighed on investors. With a lower volume of 96.62 crore shares on the National Stock Exchange, the Nifty once again made a higher high and higher low. However, the intraday range of the index doesn’t indicate any strength for a major move. From here, we may see the benchmark moving sideways between 5,290 and 5,425.
The market opened marginally lower this morning, ahead of the industrial output data for December 2011 and on weak cues from Asia. Although Greek policymakers managed to sew a deal on economic reforms and austerity measures on Thursday, Wall Street settled with small gains overnight. The nervousness was reflected in Asia as bourses in the region were trading mostly lower in morning trade. Back home, the Nifty opened 12 points lower at 5,400 and the Sensex lost 13 points to resume trade at 17,818.
Value picking kept the indices in the positive for a major part of the morning session. While the Nifty touched its intraday high of 5,427 in the first half hour itself, the Sensex rose to its high of 17,890 at around 10.50 am.
However, with industrial output numbers for December 2011 coming in at a mere 1.8%, the market began to drift lower in pre-noon trade. Subdued European market in early trade, as Eurozone finance ministers put tough conditions before approving a bailout package for Greece, added to the woes in the domestic market in the second half of the trading session.
The indices touched the low-point of the day at around 1.30pm with the Nifty falling to 5,341 and the Sensex going back to 17,627. While the market made a small recovery, it closed with a loss of around 0.50%. The Nifty settled at 5,382, down 31 points and the Sensex ended the session down 82 points at 17,749.
The advance-decline ratio on the NSE was in favour of the decliners at 836:953.
The broader indices witnessed a flat ending with a mixed bias. The BSE Mid-cap index rose 0.11% while the BSE Small-cap index lost 0.02%.
With the exception of the BSE Metal index (up 0.58%), all others settled lower. The top losers were BSE Realty (down 0.93%); BSE Oil & Gas (down 0.80%); BSE Healthcare (down 0.71%), BSE Bankex (down 0.68%) and BSE Power (down 0.41%).
Despite posting a dismal performance for the third quarter, Tata Steel emerged as the top gainer on the Sensex (up 5.30%). Other key gainers were Bajaj Auto (up 2.10%); Wipro (up 0.80%); TCS (up 0.29%) and ITC (up 0.17%). The losers were led by Hindalco Industries (down 3.62%); Maruti Suzuki (down 1.99%); Mahindra & Mahindra (down 1.36%): Reliance Industries (down 1.23%) and ICICI Bank (down 1.21%).
Tata Steel (up 5.12%) also was the top performer on the Nifty. It was followed by SAIL (up 3.72%); Bajaj Auto (up 2.25%); Sesa Goa (up 2.05%) and HCL Technologies (up 1.19%). Hindalco Ind (down 4.34%); Ambuja Cements (down 4.04%); Reliance Infrastructure (down 3.97%); ACC (down 3.66%) and IDFC (down 3.19%) settled at the bottom of the index.
The Asian pack, with the exception of the Chinese benchmark, closed in the negative as investors were worried whether the Greek debt restructuring deal would hold. In economic news, Chinese imports recorded a 15.3% drop in January, the lowest since August 2009, while exports fell 0.5%last month, signalling lower demand.
The Hang Seng declined 1.08%; the Jakarta Composite tanked 1.67%; the KLSE Composite fell by 0.23%; the Nikkei 225 decreased by 0.61%; the Straits Times dropped 0.71%; the Seoul Composite lost 1.04% and the Taiwan Weighted ended 0.61% lower. Bucking the trend, the Shanghai Composite added 0.10%. At the time of writing, the key European bourses were trading weak and the US stock futures were in the negative.
Back home, foreign institutional investors were net buyers of shares totalling Rs1,200.66 crore on Thursday, whereas domestic institutional investors were net sellers of equities amounting to Rs1,037.58 crore.
Godrej Properties (GPL), the real estate arm of Godrej Group, today launched its first venture in Chennai, the Rs450 crore 'Godrej Palm Grove'. Pirojsha Godrej, executive director of the company said 1,556 modern apartments would come up over 12.5 acres along NH-4 Bengaluru Highway ranging from 1,188 sq ft to 1,489 sq ft. The stock declined 1.86% to close at Rs644 on the NSE.
The income Tax department today conducted simultaneous searches in offices and manufacturing facilities of Hyderabad-based Aurobindo Pharma. The searches assumed significance as these were carried out ahead of the company’s board of directors' meeting to consider the unaudited financial results for the quarter ended 31 December 2011. The stock tumbled 6.18% to close at Rs110.15 on the NSE.
Elecon Engineering Company has been awarded an order worth Rs12.95 crore from The Indure, New Delhi. The order envisages supply, transportation, erection and commissioning of reversible stacker cum reclaimer with tools and tackles, mandatory spares and commissioning spares for 2x525 MW Monnet Thermal Power Project located at Angul in Orissa. The scrip fell 0.23% to settle at Rs64.70 on the NSE.
A decade after the Ketan Parekh scam, the custodian appointed under the Special Courts Act has moved a petition seeking custody of all the money paid by him to Bank of India and Madhavpura Mercantile Cooperative Bank (Ahmedabad)
How did Ketan Parekh, the primary accused in the securities scam of 2000 according to the Joint Parliamentary Committee (JPC) report, manage to pay several hundred crore rupees to two banks, when he, as a notified party under the Special Courts Act of 1992, had declared negligible assets to the custodian? We may finally get an answer to this question.
On 1 February 2012— a good 11 years after the Ketan Parekh-led securities scam rocked the stock markets—the custodian filed an application (No 166 of 2011) against 19 companies of the Ketan Parekh group asking that all payments made by him to Madhavpura Mercantile Cooperative Bank (MMCB) of Ahmedabad and Bank of India, should be deposited with the custodian.
This surprise action, long overdue, for the first time will probably answer a key question that we at Moneylife have frequently asked: How did Mr Parekh make payments running into several hundred crores without a source of income and when he has been banned from the capital market by the Securities & Exchange Board of India (SEBI) for 14 years? How could these payments be a condition to let him out on bail?
The custodian lists 19 entities as being part of the Ketan Parekh group and includes some entities with whom Mr Parekh has frequent denied any association. It may be recalled that the MCCB had gone bust when it was discovered that Ketan Parekh, in cahoots with the bank’s former chairman and his son, had illegally obtained over Rs800 crore from the bank to fund his last ditch efforts to pull himself out of financial trouble.
The persons and entities named in the custodian’s application before the Special court are—Ketan Vinaychandra Parekh, Navinchandra Narbeheram Parekh, Mamta K Parekh, Panther Financial Capital Management Services, Luminant Investment Services Pvt Ltd, KNP Securities, Triumph Securities, V N Parekh Securities Pvt Ltd, Saimangal Investrade, NH Securities, Nakshatra Software Pvt Ltd, Goldfish Computers Pvt Ltd, Chitrakoot Computers Pvt Ltd, Manmandir Estate Developers Pvt Ltd, Panther Industrial Products, Triumph International Finance, Panther Investrade, Classic Credit, Classic Shares & Stock Broking. The list includes his wife, his father and all the companies that were considered to be a part of his trading empire during the late 1990s, when he dominated the market.
For those who have forgotten, the custodian was appointed after the securities scam of 1992 under the provisions Special Court (Trial of Offences relating to transactions in securities) Act, 1992. The statute was enacted, ostensibly to ensure a speedy trail of scam related offences, but nearly 20 years later, many of the cases filed in the early 1990s are still dragging in various courts. In the process, many of the guilty have not been punished, while some innocents are also condemned to a grinding litigation.
The custodian’s application says, “that it is beyond comprehension or even understanding that” that Mr Parekh could make such substantial payments subsequent to notification whereas the assets disclosed on 19 September 2003 were a negligible (Rs1.55 crore interest in shares). Mr Parekh had paid approximately “Rs72.2 crore to Madhavpura” between 28 August 2001 and 31 January 2005—most of it was after he had been notified. The custodian states that these payments were made without seeking the sanction of the Special Court.
The Custodian obtained this information while “going through various proceedings filed against” Ketan Parekh by Bank of India and MCCB had found “affidavits and pleadings” by Ketan Parekh, showing that he had “deposited various amounts” with these banks, subsequent to the date of his ‘notification’ under the Special Courts Act.
The custodian says that all the companies which made payments on behalf of Ketan Parekh “were front companies” as were the funds that were at their disposal. It asks how companies with a tiny shareholding could make payments that ran into crores of rupees. It also quotes a letter written by Ketan Parekh on 29 March 2001 to the chairman & managing director (CMD) of Bank of India which declares: “In any event, the business of all these entities were run by me only acting as a decision maker and the other family members though acting as signatories were not in the know of things.”
The custodian has sought direction of the Special Court for disclosure of the bank accounts opened by these entities post notification and their audit by the chartered accountant on an affidavit. It also wants the court to direct Mr Parekh to disclose “the source of funds in respect of the shares of the companies arrayed as respondents” in the list above.
The custodian’s action is making waves in the Special Court and most lawyers and others associated with the trial and investigations believe that it may lead to significant disclosures when the hearings begin.
(Sucheta Dalal is the managing editor of Moneylife. She has co-authored the best-selling books “The Scam: From Harshad Mehta to Ketan Parekh”; “AD Shroff: A Titan of Finance” and “Pathbreakers 1&2”. Based on her outstanding investigative journalism spanning over two decades, she was awarded the Padma Shri in 2006.)