Thursday Closing Report: More gains likely

Today was the expiry day for the December series of futures and options and the market began cautiously. Yesterday the market had rallied on thin volumes and expectations were positive especially since the Sensex had gone past the recent short-term high of 20,157.

The Sensex continued Wednesday’s gains. The index hit an intra-day high of 20,410.91 and closed 133.04 points up at 20,389.07 (up 1%). The intra-day high and close is the highest in the past one and half month, suggesting a possible breakout towards a new high. Of the 30 Sensex stocks, 25 stocks were in the positive in the range of 0.06% to 2% while five stocks ended in the negative, with the maximum fall of 1.18% in HDFC Bank.

The S&P CNX Nifty was up 41.50 points (up 0.68%). Among the Nifty 50 stocks, 36 stocks were gainers in the range of 0.03% to 5.99%. Suzlon Energy was the highest gainer (5.99%) on rumours of a possible change in management control. The 14 losing stocks were in the range of 0.23% to 1.45%. The biggest loser was HDFC Bank. Infosys and Hindalco Industries hit  52-week highs of Rs3,447 and Rs244.25 respectively during trading and ended at Rs 3,440.50 and Rs 243.85 respectively. Except for the BSE Oil and Gas Index, all other BSE indices ended in the positive. The maximum gain came in BSE Consumer Durables and BSE IT, 1.32% and 1.04% respectively.
All eyes were also on the government to unveil data on some wholesale price indices, that is the food price index, the primary articles index and the fuel price index for the year through 18 December 2010.

Inflation in the food articles group climbed to 14.44% in the week ended 18 December 2010 from 12.13% in the previous week, the latest government data showed. This was the fourth instance of an increase in food inflation after it had eased for seven consecutive weeks. Food inflation surged to a 10-week high for the week ended 18th December as prices of vegetables, particularly onions, fruits and protein-based products, continued to escalate.

However, food inflation is still far below the level of 21.19% seen during the same week last year. Inflation in Primary Articles group jumped to 17.24% in the week under review from 15.35% in the week ended 11 December 2010, the latest data shows. Inflation in the Fuel & Power group inched higher to 11.63% from 10.74%.

In Asian markets, except for KLSE Composite (down 0.36%) and Japan’s Nikkei 225 (down 1.12%) all the Asia-Pacific indices ended positive on growing optimism over global economic growth. The Hang Seng was up 0.13%, Jakarta Composite was up 0.12%, Seoul Composite was up 0.37% while Taiwan Weighted was up 0.47%.

China’s manufacturing activity continued to expand in December, but the pace of growth slowed to a three-month low, according to the outcome of a survey by HSBC, released on Thursday. China’s purchasing managers’ index for December came in at 54.4, above the threshold of 50 that separates expansion from contraction, but below November’s reading of 55.3.

On the domestic front the market regulator has mandated that companies with less than 25% public float will have to raise funds through a public share sale and not through private placement to institutions, a move aimed at widening retail holding and limiting stock price manipulation. FIIs were net buyers of Rs547.58 crore and domestic institutional investors were net sellers of Rs170.34 crore.

In corporate news, Parsvnath Developers Ltd has found a place for the first Cash and Carry store for Carrefour, the world’s second largest retailer, at the Seelampur Metro Mall in New Delhi. The Seelampur mall is the eighth mall the company has completed. Parsvnath gained 4.41%.

Larsen and Toubro has bagged orders worth Rs1,164 crore for its metallurgical and water operating division. This includes a major order from a Tata Steel joint venture worth Rs523 crore for a 6,00,000 tonnes per year (TPY) continuous annealing and processing line for production of high-grade rolled steel sheet. Nippon Steel Engineering is to provide technology and imported line equipment for the project. The project is scheduled to complete in 30 months.

L&T’s water unit has secured orders worth Rs530.84 crore from Tamil Nadu Water Supply and Drainage Board for water supply schemes in Hongenakkal. Funded by Japan International Co-operation Agency, the scope of the work includes supply and laying pipelines with an execution period of 24 months and a maintenance period of 60 months. Another order worth Rs110.60 crore is from Punjab Water Supply & Sewerage Division for development of sewerage network and construction of sewage treatment plant in Hoshiarpur and Jalandhar with a contract period of 12 months. L&T gained 0.85%.

Suven Life Sciences, a biopharmaceutical company, has been granted patent for two of its products for new chemical entities (NCEs) for treatment of disorders associated with neuro-degenerative diseases. These will be valid till 2027. With these new patents, Suven now has a total of 11 granted Indian patents on NCEs. Suven gained 2%.


Citibank fraud suspect arrested; remanded in police custody

Gurgaon: Shivraj Puri, the suspected mastermind in the Citibank fraud case, was today arrested and remanded to seven days in police custody, police commissioner SS Deswal said. 

Mr Puri, a relationship manager at Citibank’s Gurgaon branch, was arrested this morning and produced before  duty magistrate Raj Kumar Yadav, who ordered him to be handed over to police custody, reports PTI.

Mr Deswal told journalists yesterday that Mr Puri may have collected upwards of Rs200 crore from various individuals. Many of these people are businessmen in the National Capital Region and some of them are from the Hero automobile group. It was earlier reported that Citibank officials had estimated the fraud at about Rs400 crore.

Mr Puri, 32, is said to have collected funds from high net-worth individuals (HNIs) towards some investment products, promising them unusually high returns. He claimed that these products were authorised by the bank’s investment product committee and he routed the funds to the stock market through brokerage firms like Religare Securities.

It is alleged that Mr Puri also produced a forged notification of the Securities and Exchange Board of India (SEBI) to obtain the funds from customers.

On the instructions of the police, about 60 accounts in different banks and financial institutions were frozen yesterday. Eighteen accounts at Citibank were suspended on Tuesday. An FIR of cheating and forgery has been lodged against Mr Puri and three others.

Religare Securities, a brokerage arm of Religare Enterprise, has said tha Mr Puri is a client of its broking business in his individual capacity since June 2009 and that all KYC formalities and other due diligence was followed. “We have no knowledge of the details of this alleged scam,” Religare stated. It said it would cooperate in the investigation in the matter.


Costly onion pushes food inflation to 10-week high

New Delhi: Soaring onion prices pushed food inflation to a 10-week high of 14.44% for the week ended 18th December, a worrying development that could prompt the Reserve Bank of India (RBI) to hike key policy rates next month to check price rise.

“This is an area of concern no doubt... there has been real increase in the prices of certain food items. We are looking into it,” finance minister Pranab Mukherjee said.

Food inflation rose for the fifth consecutive week on the back of high onion prices that rose by almost 40% on an annual basis to touch Rs75-80 per kg in the retail market, reports PTI. However, the prices have declined a little since then.

The price rise was also quite steep for vegetables, fruits and protein-based products like milk, egg, fish and meat. The price rise in these products ranged between 17 and 30%.

“So far as onion is concerned, we have taken care of it... but the fluctuation in milk, fruits, vegetables and certain commodities have also contributed to the inflation. We are waiting for the full monthly figure,” Mr Mukherjee said. “Weekly variations are there. Whether these are corrected in the coming week is to be seen. But I am still holding that year-end inflation may be around 6.5%.”

Mr Mukherjee’s estimate of year-end inflation, however, is higher than the 5.5% that prime minister Manmohan Singh indicated earlier this month.
Experts say that the rise in food inflation by 2.31 percentage points from 12.13% in the previous reporting week would force the central bank to review the pause on a short-term rate hike at the quarterly policy review meet on 25th January 2011. Food inflation was at 21.29% a year ago.

The recent hike in the petrol price by about Rs3 a litre also contributed to pushing up the index of fuel and power by 11.63% year-on-year during the week. The rise in index on account of the petrol price increase was over 25%.

“If food inflation persists, the RBI may go in for a moderate hike of 25 basis points in short-term rates at its next policy review,” said Crisil chief economist DK Joshi. On the impact of the fuel price hike, he said: “What is of more concern to overall inflation is the global fuel price. We believe that fuel price will remain a challenge for the government in 2011.”

Rising inflation, saw the government put off a decision to raise the price of diesel yesterday, even as global crude prices soared to $92 a barrel, the highest in two years.

“There could be some monetary action before the end of the fiscal if inflation remains at such a high level for sometime,” said Anubhuti Sahay, economist at Standard Chartered Bank.

For the week under review, the price of cereals declined marginally by 0.70% y-o-y, while that for pulses fell by 10.79%. The price of rice went up marginally y-o-y, while that for wheat declined by 5.51%. Potato prices also declined on an annual basis by almost 24%. On a weekly basis, however, the price of most items—barring vegetables—moved in a narrow range.

The last time food inflation was this high was in the week ended 9th October when it was 15.53%. Food inflation has been in the double-digits through most of 2010. But the government was looking forward to a moderation in food inflation after a normal monsoon.

But after a brief decline in November, food inflation again started to climb on account of the rise in onion prices. Onion prices have shot up due to destruction of crop in some parts by unseasonal rain and hoarding. Last week, the government announced a ban on exports of onions and also withdrew import duty to increase availability in the domestic market.


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