Nifty may suffer an intraday correction tomorrow, if it goes below 5,875
On Wednesday, the BSE Sensex opened marginally higher while the NSE Nifty opened weaker. Both the indices moved in the negative zone for major part of the trading session except for a strong recovery during the last hour.
The Sensex opened at 20,000 and moved lower after hitting the day’s high at 20,056. At the end of the session the index hit an intra-day low of 19,778 and closed at 19,997 (up 0.36 points). The Nifty opened lower at 5,887. It hit its intra-day low in the noon session at 5,833 from where it recovered to hit day’s high at 5,924 in the last few minutes of the trading session and closed at 5,913 (up 16 points or 0.28%).
Except for FMCG (down 1.13%); Energy (down 0.47%); IT (down 0.45%) and Media (down 0.03%) while all the other indices on the NSE closed in the positive. The top five gainers were PSU Bank (5.33%); Metal (3.15%); Realty (3.04%); Smallcap (2.02%) and Nifty Midcap 50 (1.80%).
Of the 50 stocks on the Nifty, 30 ended in the green. The top five gainers were Bank of Baroda (8.19%); PNB (7.17%); DLF (5.84%); Jaiprakash Associates (5.26%) and Grasim (4.67%). The top five losers were Power Grid (3.08%); Cairn (2.83%); Tata Motors (2.40%); ITC (2.04%) and Hindustan Unilever (1.92%).
One more measure to strengthen the rupee taken, by the Reserve Bank of India (RBI) on Tuesday, was that the banks can raise funds overseas above 50% of their Tier-I capital, with a minimum maturity of three years, and swap these borrowings with the central bank at a concessional rate of a 100 basis points for one to three years. The rate shall be reset after every one year from the date of the swap at 100 basis points lower than the prevailing market rate. The RBI added that banks are free to borrow in any foreign currency but the swaps will be available only for conversion of the US dollar equivalent into rupees and will be computed at relevant cross rates on that day.
Gold will extend a drop into 2014 as the US Federal Reserve tapers stimulus, Goldman Sachs Group said, forecasting that a decision by the central bank to start reducing bond-buying next week may spur renewed selling.
With the threat of military action against Syria easing, the US indices ended in the green on Tuesday. US President Barack Obama called for diplomacy in dealing with chemical weapons in Syria but kept open the possibility of military action against the Assad regime. Obama had called for potential strikes against Syria in retaliation for Syria's use of chemical weapons against civilians in late August. However, with a diplomatic solution on the table, Obama asked Congress to delay a vote on whether to authorize military strikes.
Except for Hang Seng (down 0.17%), Jakarta Composite (down 0.20%) and Straits Times (down 0.50%) all the other Asian indices ended in the green. Seoul Composite was the top gainer, up 0.49%. The US futures were trading flat as were the major European indices.
European indices had a mixed performance, while US Futures were trading lower.
SEBI has barred 34 entities, including Sunil Mehta, from markets for synchronised trading, creation of artificial volumes and price manipulation in scrips of eight companies
Market regulator Securities and Exchange Board of India (SEBI) has barred 34 entities from the securities market for three to five years in the matter of synchronised trading by connected persons. The case relates with synchronised trading, creation of artificial volumes and price manipulation in scrips of eight companies, Allcargo Global Logistics Ltd, Asian Star Company, KSL & Industries, Mavens Biotech, Panoramic Universal, Rasi Electrodes, Sat Industries and Ushdev International.
In a release, SEBI said, "The period of debarment already undergone by the noticees in terms of the earlier Orders dated 20 February 2010 and 27 May 2011 passed in the matter shall be taken into account while computing the said periods of debarment ordered."
Synchronised or circular trading refers to a practice where the seller and buyer may have an understanding between them on trading of specific shares.
Sunil Mehta has been barred from accessing the capital market and is prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly, for a period of seven years.
The market regulator has barred 13 entities, including Anjana Mehta, Jitendra Jain, Hemlata Hankare, Ajay Roongta, Bharat Jain, Suresh Hanswal, Praveen Gate, Manish Mathur, Bhavesh Kothari, Rakesh Jain, Bhavesh Jain, Naresh Rajawat and Hitesh Jain from accessing the capital market and are further prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly, for a period of five years.
Those who have been barred from the markets for three years include, Usha Mehta, Seema Mathur, Devendra Rai, Renu Paliwal, Rashmi Gandhi, Ramesh Gandhi, Hasmukh Jain, Pawanben Jain, Reeta Rajawat, Kunal Kothari, Sweta Kothari, Shobha Kothari, Neela Khicha, Kamlesh Jain, Vinay Kothari, Pradeep Kothari, Sitanshu Nanawati, Shaikh Jainuddin and Meena Rajawat.
According to SEBI release, its directions issued against Alpesh Rajmal Shah and Anil Rajmal Shah shall not continue.
Last year in September, SEBI has imposed a penalty of Rs1 lakh on Sunil Mehta for indulging in synchronised trading activities in shares of 12 companies including Ushdev International and Lotus Eye care Hospitals. The alleged synchronised or circular trading in these companies happened from 1 March 2009 to 15 December 2009 on the BSE.
Ray Dalio and Jeff Gundlach—two of the most prominent hedge fund managers believe that the Indian economy and the stock market is on the precipice of a big fall
Two of the world's biggest and most successful hedge fund managers are very pessimistic on India and have cautioned investors that investing in India will be fraught with big risks. Jeff Gundlach, who manages a hedge fund DoubleLine Capital LP, believes that India’s currency is weak because of reliance on foreign capital and that he would rather not own Indian stocks. He also said that India’s stock markets look “very scary” because of high oil prices and rupee depreciation. He is short India amongst emerging market countries. Ray Dalio, another hedge fund who manages $150 billion in assets at Bridgewater Associates was quoted as saying that India should “prepare for the worst” since it has been one too vulnerable to foreign capital inflows which may now avoid emerging markets.
In his webcast titled “What If”, Gundlach said, “emerging markets currencies with the largest capital dependence on foreign capital flows to fund currency account gaps have been particularly hit.” As you can see one of his slides from his presentation, India’s short-term debt coverage ratio doesn’t look good. In fact, it has cratered below the average threshold limit. This essentially means that India has fewer reserves to meet short term debt obligations.
Dalio was quoted as saying, “We are going to have an emerging market crisis” particularly due to adverse balance of payments. He also said that emerging markets like India is not an attractive place to invest because of the unfavourable pricing and flows. He said that emerging markets have to confront the balance of payments problems and had little doubt about the tough times ahead for emerging markets. He pointed out that India’s stock market had been benefiting a lot, thanks to the quantitative easing, and unusual monetary policies adopted by the United States Federal Reserve and other developed countries like Japan. More dollars came to India as a result of this, boosting India’s stock markets. However, lack of economic reforms and political will, particularly in the infrastructure sector, meant that India solely depended on foreign capital to plug both current and fiscal gaps. This is a recipe for disaster. When foreign capital dries or is withdrawn (much of it due to a better economic recovery and US Federal Reserve decision to ‘taper’ monetary easing), India is left with little and, as a consequence, the rupee got clobbered.
The Economist believes that India has been complacent and failed to take advantage of incoming foreign capital to stimulate economic reforms. It said in a piece on 24 August, “India’s troubles are caused partly by global forces beyond its control. But they are also the consequence of a deadly complacency that has led the country to miss a great opportunity. To prevent a slide into crisis, the government needs first to stop making things worse”.
One would expect that a weaker rupee would help plug trade gaps as exports become more profitable. But it is not so because of economic mismanagement which has resulted in poor productivity and higher inflation which has eroded domestic competitiveness and resulted in higher input costs for some industries. As a result, the manufacturing sector which stands to benefit from a dearer rupee is not able to export competitively, although the information technology sector is expected to benefit. “India’s structural problems also make it harder for local exporters to cash in on the weak rupee,” says Bruce Einhorn and Kartik Goyal of Businessweek.
Soberlook.com, a financial blog, believes that India is headed for a full blown stagflation. It said, “At this stage, rising prices, sharply higher interest rates, and a loss of confidence within the business community will bring the economic growth to a standstill, potentially pushing the country into a full blown stagflation.”
India now pin their hopes on Raghuram Rajan, the smart economist from University of Chicago who had predicted the US economic crisis in 2005, to fix the economy. However, this will be a tall order. Gavin Davies, a writer for Financial Times blog, says, “It will not be easy for Rajan to restore credibility to monetary policy, but that is an essential task, without which all else will fail. Rajan believes that, with appropriate structural reforms, India can one day return to the heady 8%-10% growth rates of the 2000s. Maybe, but most of these reforms seem politically beyond reach at present. International investors should expect a painful period of tighter monetary policy and even slower growth before the crisis is over.”