Soft-to-flat opening likely: Monday Market Preview

Friday’s rate-tightening by the Chinese central bank led most Asian markets lower in morning trade today while Wall Street continued its northwards journey, ending with marginal gains on Friday

The Indian market is likely to witness a soft-to-positive opening on the back of a tepid start by its Asian counterparts in early trade on Monday. On the other hand, markets in the US ended another session with gains, riding on the positive economic indicators reported earlier in the month. The SGX Nifty was down 14 points at 5,452 on Monday compared to its previous close of 5,466 on Friday.

Domestic triggers for the week include expiry of February the futures and options contract, the railway budget and the economic survey. 

Positive economic indicators on the domestic front and support from the global arena helped the market add to the gains accrued on the previous Friday, and this continued till Thursday (17th February). While the market ended lower on the last trading day of the week, it still gained 3% on a weekly basis, snapping a three-week losing spree. The Sensex gained 483 points and the Nifty settled 149 points higher.

Does Friday's sharp fall (higher high and lower low compared to Thursday) signal a trend change? On Monday, the Nifty should close above 5,520 to keep the rally intact. We expect initial weakness on Monday at least.

Markets in Asia were mostly lower in early trade on Monday, prompting investors to indulge in profit-booking after recent gains. Besides, the Chinese central bank’s move to hike banks’ reserve requirement on Friday and the ongoing tensions in the Middle East also weighed on the sentiments.

The economic pointers for today include Thailand’s fourth quarter GDP data, Taiwan’s export orders for January, Hong Kong’s unemployment for November to December and Japanese economic report for February.

The Hang Seng declined 0.17%, the KLSE Composite fell 0.12%, the Nikkei 225 lost 0.36%, the Straits Times was down 0.37%, Seoul Composite declined 0.27% and the Taiwan Weighted shed 0.12%. On the other hand, the Shanghai Composite gained 0.46% and the Jakarta Composite rose 0.51% in early trade.

Wall Street witnessed its third straight week of gains with the S&P 500 6.8% higher for the year and more than 20% in just six months. The US markets continued their gains on Friday on the back of good economic indicators and earnings reported earlier in the month. Bur volumes were low as investors were concerned about new developments in the Middle East. The Dow surged 73.1 points (0.59%) at 12,391.25. The S&P 500 added 2.58 points (0.19%) to 1,343.01 and the Nasdaq rose 2.37 points (0.08%) to 2,833.95.

The US markets are closed on Monday for the Presidents Day holiday.

Back home, the government will make efforts to make the planned Joint Parliamentary Committee (JPC) on the 2G scam broad-based to accommodate as many parties as possible. According to the government sources, the effort is to make the JPC a “broad-based committee” with its strength likely to be between 21 and 30.

Sources said if the JPC has 30 MPs then it would comprise 20 members from the Lok Sabha and 10 from the Rajya Sabha. If the Committee is set up with 21 members, then 14 will be from the Lower House and 7 from the Upper House.
 

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Range-bound movement expected: Weekly Market Report

Market to see initial weakness

Positive economic indicators on the domestic front and support from the global arena helped the market add to the gains accrued on the previous Friday, and this continued till Thursday (17th February). While the market ended lower on the last trading day of the week, it still gained 3% on a weekly basis, snapping a three-week losing spree. The Sensex gained 483 points and the Nifty settled 149 points higher.

The top Sensex gainers this week were Bajaj Auto (up 9%), HDFC Bank (up 8%), Tata Power, Jindal Steel & Power (up 7% each) and HDFC (up 6%). The major losers on the index were Reliance Communications (down 19%), Hindalco Industries (down 12%), Reliance Infrastructure (down 11%), ONGC (down 10%) and Cipla (down 5%).

In the sectoral space, the BSE Bankex gained 5%, BSE Metal rose 4%, while BSE Realty was the lone loser that lost 2%.

Does Friday's sharp fall (higher high and lower low compared to Thursday) signal a trend change? On Monday, the Nifty should close above 5,520 to keep the rally intact. We expect initial weakness on Monday at least.

The market is expected to remain range-bound with ups and downs at regular intervals. The government is under pressure, for even as inflation figures have been a little lower, prices continue to head upwards. The next big trigger for the market is the Union budget that will be announced on 28th February. Will the finance minister work magic for the economy? Don't bet on it.

Food inflation dropped to a two-month low of 11.05% for the week ended 5th February as onion prices moderated and pulses were cheaper, prompting finance minister Pranab Mukherjee to assert that the rate of price rise will fall to a single-digit in some time. Food inflation fell by 2.02 percentage points from 13.07% in the previous week.

The finance minister also cautioned that a weekly decline in food inflation could be "deceptive". He, however, expects wholesale price index-based inflation to come down to 7% by March-end.

On Friday, the government launched a new series for measuring inflation, which calculated the consumer price index (CPI)-based inflation for January this year at 6%. This figure was arrived at based on a comparison with the annual all-India CPI index average for the whole of 2010.

According to the new series, the all-India consumer price index for January 2011 was at 106 (provisional figure) with the base at an annualised level of 100 for the entire year.

Prime minister Manmohan Singh underlined during an unusual interaction with editors from the electronic media this week that he would stay in office to take the reforms process forward. He denied that a series of corruption scandals had made him a lame-duck leader and assured that the guilty would be punished. Allegations that the government may have lost up to Rs1,76,000 crore in revenues on the allocation of 2G spectrum at very low prices in return for kickbacks, have rocked the government, practically paralysing Parliament and worried the stock markets.

The wholesale price index (WPI)-based inflation declined marginally to 8.23% in January from 8.43% in the previous month. Prices of certain commodities like wheat, pulses and sugar have eased, but essential items like onions and other vegetables continued to be dear. Headline inflation based on wholesale prices has remained above the 8% mark since January last year.

Though inflation has eased marginally from December, it is expected that the Reserve Bank of India will take further policy-tightening steps in its monetary review due next month.

In international news, Chinese inflation hit a lower-than-expected 4.9% in January, but price pressures excluding food were at the strongest in at least a decade and will force the central bank to keep tightening monetary policy. Meanwhile, core inflation, excluding food prices, jumped to 2.6% year-on-year-the highest in at least a decade-from 2.1% a month earlier, while producer prices shot up 6.6% in the year to January from 5.9% in December.

In the US, president Barack Obama defending his new budget as one of "tough choices", saying that the more difficult decisions about the nation's biggest expenses were Medicare, Medicaid and Social Security. The president pitched his $3.73 trillion budget as a balance of spending on needed programmes and significant reductions that would reduce the deficit by $1.1 trillion over a decade.

As was expected, China on Friday raised the banks' required reserves by 50 basis points on the back of stubbornly high inflation. This is the fifth such increase since October, which will force the country's biggest lenders to lock up a record amount of their deposits with the central bank, removing cash from the economy that otherwise would have put pressure on prices.

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Nifty, Sensex may remain weak: Friday Closing Report

The five-day rally was interrupted sharply today and the market will be weak on Monday, at least initially

The market opened in positive terrain, tracking its Asian counterparts which were trading with gains. The key indices touched their intra-day highs in morning trade, but turned southward as the scope of the CBI probe into the 2G scam widened with more big names coming under the scanner.

The market fluctuated in the post-noon session, popping in and out of the red a couple of times, when a strong bout of profit-booking took the key indices to the day's lows. The sell-off resulted in all sectoral gauges slipping into the red.

As suspected, after five continuous days of rallying, the market declined today. The Sensex and Nifty opened on a positive note at 18,564 and 5,558. Within an hour of trading, they touched the day's high of 18,691 and 5,599. It was also a 15-day intra-day high (starting 31 January 2011). Thereafter, the market gradually declined.

The indices made an intra-day low of 18,160 and 5,442 in late afternoon trade. Today's intra-day low was lower than yesterday's low and the market closed below Thursday's low, as well. The Sensex ended 295 points lower at 18,212 while the Nifty was down 88 points at 5,459.

Does today's sharp fall (a higher high and lower low compared to yesterday) signal a trend change? On Monday, the Nifty should close above 5,520 to keep the rally intact. We expect initial weakness on Monday at least. The advance-decline ratio on the NSE was a terrible 388:1338.

The market breadth on the Sensex and Nifty was in favour of the declining stocks. The Sensex closed with 25 losers and five gainers while the Nifty returned home with 39 declining stocks against 11 advancers. The broader indices underperformed the Sensex with the BSE Mid-cap index declining 1.98% and the BSE Small-cap index tumbling 2.35%.

The BSE Realty index (down 4.04%) was the top loser in trade. It was followed by BSE Auto (down 2.39%), BSE Oil & Gas (down 2.09%), BSE Capital Goods (down 1.97%) and BSE Consumer Durables (down 1.84%).

Hindustan Unilever (up 1.99%), Jindal Steel (up 1.55%) and Cipla (up 0.57%) were the noteworthy gainers on the Sensex. The top losers were Reliance Communications (down 6.80%), Reliance Infrastructure (down 5.60%), Jaiprakash Associates (down 5.54%), Tata Motors (down 3.91%) and ONGC (down 3.40%).

The government, which today launched a new series for measuring inflation, pegged the consumer price index (CPI) based inflation at 6% for January this year. The figure was arrived based on a comparison with the annual all-India CPI index average for the whole of 2010.

According to the new series, the all-India consumer price index stood at 106 (provisional figure) for January 2011, taking the base at an annualised level of 100 for the entire year.

Markets in Asia, barring the Chinese benchmark, settled higher on the last trading day of the week. Investor sentiments were lifted on positive economic data from the US on Thursday which suggested that the pace of the global recovery was intact. However, worries about policy-tightening initiatives spooked the market there. However, geo-political tensions in the Middle-East kept the gains in check.

The Hang Seng surged 1.26%, the Jakarta Composite jumped 1.95%, the KLSE Composite gained 0.60%, the Nikkei 225 added 0.06%, the Straits Times gained 0.13%, the Straits Times rose 1.82% and the Taiwan Weighted was 1.84% higher. On the other hand, the Shanghai Composite tanked 0.92% at the end of trade.

The Chinese central bank on Friday raised the banks' required reserves by 50 basis points, the second increase this year in its effort to curb rising prices. Meanwhile, China's annual inflation stood at 4.9% in January, up from 4.6% a month earlier.

Back home, institutional investors were net buyers in the equities segment on Thursday. Foreign institutional investors pumped in Rs37.99 crore and domestic institutional investors bought stocks worth Rs244.40 crore.

Ind-Swift Laboratories (down 3.57%) has received the Pharmaceutical & Medical Devices Agency (PMDA) approval from the Japanese government for Pioglitazone and Risedronate Sodium to be manufactured at its facilities at Derabassi in Punjab. With this achievement, Ind-Swift Laboratories has become the first Indian company to get Japanese approval without any observations. This would pave way for huge exports by the company to Japan.

IRB Infrastructure Developers' (down 1.36%) wholly-owned subsidiary-IRB Tumkur Chitradurga Tollway-has achieved financial closure in terms of the concession agreement executed with NHAI, by tying up debt of Rs831 crore. The total cost of the project is Rs1,142 crore, out of which the company will finance Rs831 crore via debt and around Rs311 crore through equity contribution.

Pratibha Industries (up 0.43%) has secured a contract from Oil and Natural Gas Corporation. The project is for the construction of an intelligent corporate office building at the Bandra-Kurla Complex, Mumbai.  The total value of the contract is worth Rs240 crore and is to be completed in 18 months.

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