Tepid opening seen for Indian share market: Thursday Market Preview

Wall Street closed in the red overnight and the Asian markets were lower in early trade today, on concerns about the pace of economic recovery due to spiralling crude prices

The Indian share market is likely to see a tepid opening on unsupportive global cues. Markets in the US closed marginally lower on Wednesday concerns that the ongoing tensions in West Asia will hamper the economic recovery. Stocks of heavy industries, commodity-related industries and technology companies ended lower. Markets in Asia were in the red on global concerns and news that the Japanese economy fell at an annualised rate of 1.3% in the December quarter. The SGX Nifty was 22 points lower at 5,510 compared to its previous close of 5,532.

Back home, food inflation for the week ended 26th February will be released around noon today, giving some direction to the market later in the day. Food inflation for the week ended 19th February eased by a percentage point to 10.39%, mainly on a decline in vegetable and cereal prices.  

The domestic market opened in positive terrain on Wednesday supported by strong Asian markets and on weaker oil prices. But choppy trade followed with the indices moving into the red in mid-morning trade. Feeble recovery attempts were thwarted by selling pressure, with the indices consolidating the gains of the last few trading sessions and ending almost flat.

The Sensex opened with a gap up of 83 points at 18,523 and the Nifty opened 22 points up at 5,542, on weaker oil prices. They hit intra-day highs early in the trading session, but soon witnessed a falling trend. The intra-day highs of the Sensex and Nifty were 18,583 and 5,563. By noon the indices hit their intra-day lows of 18,304 and 5,477, respectively. The market rose later in the day. By the end of the session the Sensex was up 30 points at 18,470, while the Nifty was 10 points up at 5,531.

Markets in the US closed marginally lower overnight as concerns that ongoing tensions in West Asia will impact economic growth weighed on investors’ sentiments. Crude remains the focal point as any spike in prices would have a cascading effect on the economy, analysts opined. Stocks of heavy industries, commodity-related industries and technology companies ended lower.

In economic news, wholesale inventories rose a more-than-expected 1.1% to a seasonally adjusted $436.88 billion in January, its highest level since November 2008.

The Dow shed 1.29 points (0.01%) to close at 12,213.09. The S&P 500 fell 1.80 points (0.14%) to end at 1,320.02 and the Nasdaq declined 14.05 points (0.51%) to close at 2,751.72.

Rising crude prices and a weak outlook of the Japanese economy in the December 2010 quarter led Asian markets lower in early trade on Thursday. Libyan forces carried out attacks on oil facilities in the country threatening supplies, which may hurt prices.

In economic news, Japan’s gross domestic product fell at an annualized 1.3% rate in the December quarter, more than the 1.1% contraction reported last month. The December quarter decline was more than analysts’ forecasts. Besides, the Bank of Korea raised the benchmark seven-day repurchase rate to 3% from 2.75%, for the second time this year after inflation exceeded its target ceiling for two consecutive months.

The Shanghai Composite declined 0.90%, the Hang Seng fell 0.33%, the Jakarta Composite was down 0.52%, the KLSE Composite fell 0.49%, the Nikkei 225 tanked 1.09%, the Straits Times shaved off 0.54%, the Seoul Composite declined 0.97% and the Taiwan Weighted was 0.93% lower in early trade.

Back home, finance minister Pranab Mukherjee yesterday gave an assurance that he will look into the demand of various industrial associations seeking withdrawal of the excise duty on bicycles, hosiery, blankets, garments, sewing machines and other industrial products.


Murli Industries scrip shoots up on corporate debt restructuring plans

The stock of Murli Industries, whose promoter was indicted recently by SEBI, is shooting up. Since 28th February, the share price has gained over 40%, indicating possible market manipulation

The promoter of Murli Industries was recently banned from trading, by the market regulator for involvement in price-rigging. Yet, the Murli Industries (MIL) stock price has recently seen an upward trend after sliding since November, suggesting that there is some manipulation.

Since 28 February 2011, till the time it was last traded, the share price has moved up from Rs26.35 to Rs37.05, a leap of over 40%.

On 7th March, when the BSE benchmark index, the Sensex, was down by 236 points, MIL climbed by Rs2.75, or nearly 10%. In three months from 25 November 2010, the stock price crashed from Rs111.20 crashed to Rs25.75 on 25 February 2011, a fall of 77%.

According to industry sources, last week the company's officials met bankers for the first round of corporate debt restructuring (CDR). This is said to be the main reason for the stock hitting the upper circuit over the past couple of days.

The company, which is into diversified businesses like power, cement, paper and paperboard and operates a solvent extraction refinery, reported a loss of around Rs97.20 crore for the December 2010 quarter.

Moneylife recently reported on possible accounting manipulation in Murli Industries. The interest cost for the third quarter stood at Rs52.48 crore, nearly double that in the earlier quarter when it was at Rs25.68crore. According to industry sources, the company has not taken on any new debt during this quarter. (Read, Murli Industries: A story of accounting malpractices?)

MIL made an ambitious foray into cement, but was weighed down by the debt that it ostensibly used to build up its production capacity. Now that it is selling off its cement business, the company will be able to concentrate more on its core businesses like solvent extraction, paper and power.

In November last year, there were various media reports which indicated that MIL was close to offloading its cement division to Mexico's Cemex, the world's third-largest cement maker.

A few months ago, SEBI banned the company and its promoter from trading in its own shares and the shares of group companies. MIL was one of the four companies where promoters had colluded with speculators to ramp up prices. The others were Ackruti City, Welspun Gujarat Stahl Rohren and Brushman India.


Infra, robust economy to boost credit-rating biz in 10 yrs: SEBI

Strong growth of financial markets over the next decade due to buoyant domestic demand and huge infrastructure investments will translate into better business opportunities for CRAs in India, market regulator SEBI stated

New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has said the credit rating agencies (CRAs) in India are likely to witness a surge in their activities in the coming decade on the back of robust economic growth and substantial investments in infrastructure, reports PTI.

In its latest monthly bulletin, SEBI also said regulations governing the activities of CRAs in the country would ensure a fair play for the sector.

"...India will experience strong growth of financial markets over the next decade due to buoyant domestic demand and huge infrastructure investments," SEBI said.

This will translate into better business opportunities for CRAs in India, provided they function properly, the market regulator added.

CRAs are firms that provide investors with assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings.

According to SEBI, CRAs in India acted in a fairly responsible manner during the recent financial meltdown, unlike many other countries where they played a dubious role and aggravated the crisis.

"Prima facie, there is no immediate concern about the operations and activities of CRAs in India even in the context of the recent financial crisis," the market regulator quoted a recent report by the High Level Coordination Committee on Financial Markets.

India has taken steps to overhaul the regulatory framework for CRAs, in the wake of recent global financial meltdown to improve the quality of their services.

"India was among the first countries in the world to have formally adopted a regulatory framework for CRAs way back in 1999," SEBI said.

It added that the country has been introducing amendments to these regulations in line with the changing market conditions, the latest amendments being introduced in May last year.

"The regulations cover all aspects of CRAs functioning with respect to ownership, code of conduct, operations, conflicts of interests, etc and have served the market well over the last decade," SEBI said.

CRAs are currently regulated by SEBI though there have been demands by other regulators to supervise some of their activities.

In this matter, SEBI said: "The CRAs should be registered and regulated by the regulator for securities market. They may acquire further accreditation with other regulators, if felt necessary, for rating products that come in their regulatory domain or that are used by their regulated entities."

Credit rating agencies like Standard & Poor's, Crisil, ICRA and CARE have operations in India.


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