Upmove subject to dips: Weekly Market Report

Nifty may move up to the level of 5,500

The market settled higher in the week on positive domestic factors and global cues, making it the fourth successive weekly gain. The draft guidelines on the general anti-avoidance rules (GAAR) released by the finance ministry on Thursday and the clarifications that followed from prime minister's office on Friday saw foreign investors cheering the move, pumping in Rs3046.76 crore in equities on Friday (according to BSE data).

The Sensex closed the week at 17,430, up 457 points (2.70%) and the Nifty surged 133 points (2.58%) to settle at 5,279. We may now see the index making an upmove to the level of 5,500, subject to dips.

The market erased all its gains and settled in the negative on Monday as the government's initiatives to boost growth did not meet market expectations. The range-bound market witnessed a good recovery in late trade on Tuesday which enabled a green close. Hopes of the prime minister ushering in reforms for boosting growth, after taking charge of the finance portfolio, pushed the market higher on Wednesday. Positive sentiments ahead of the outcome of the two-day EU summit saw the indices closing marginally higher on Thursday. News from the Eurozone helped the market close sharply higher on Friday.

All sectoral indices on the BSE settled higher in the week, led by BSE Power (up 5%) and BSE Metal (up 4%).

The top gainers on the Sensex were Tata Power (up 11%), Jindal Steel & Power (up 8%), Maruti Suzuki, ICICI Bank (up 6% each) and Tata Steel (up 5%). The main losers on the index were Tata Motors, Bharti Airtel (down 2% each) and Hindustan Unilever (down 1%).

The top performers on the Nifty were Tata Power (up 11%), Jindal Steel & Power (up 8%), Maruti Suzuki, ICICI Bank (up 6% each) and Tata Steel (up 5%). Cairn India (down 6%), BPCL (down 3%), Tata Motors, Bharti Airtel (down 2% each) and HUL (down 1%) settled at the bottom of the index at the end of the week.

The RBI on Monday increased the FII limit in government bonds by $5 billion to $20 billion, while allowing up to $10 billion from the overseas borrowings by India Inc for refinancing rupee loan.

Ratings agency Moody's has retained outlook on India's rating at stable despite the slowdown in GDP growth rate saying that it is unlikely to be even a medium-term feature.

The finance ministry on Thursday proposed a monetary limit for invoking the controversial GAAR in its draft guidelines. Although the draft did not specify the monetary limit, it said that those deals which are over a prescribed limit should be covered by GAAR provisions.

The guidelines further said that GAAR provisions would be invoked only in cases where foreign institutional investors (FIIs) choose to take the benefit of double tax avoidance treaties.

However, the Prime Minister's Office on Friday clarified that "These (draft guidelines) have not been seen by the prime minister and will be finalised with the approval of the prime minister, who holds the finance portfolio, only after considering the feedback received".

Morgan Stanley has upgraded Indian stocks to "equal weight" after being 'underweight' since the first quarter of 2011, saying India is now trading at a price to book multiple of 2.1x, close to the trough valuations of 2.0x in the 2002 and 2008 cycles.

On the global front, leaders at the European Union (EU) summit agreed on Friday that EU rescue funds could be used to stabilize bond markets, without forcing countries that comply with EU budget rules to adopt extra austerity measures or economic reforms. It was also agreed that a single supervisory body for euro zone banks, controlled by the European Central Bank, would be created by the end of the year-much faster than previously envisaged. The deal had followed Spain and Italy's earlier threat to withhold support for a growth package.


Commerce ministry begins inquiry into core sector data goof up

There have been similar problems earlier as well in different sets of crucial data, and this issue has been raised even by Reserve Bank of India governor D Subbarao


New Delhi: India’s commerce and industry ministry has initiated an internal exercise to find out the reasons behind the goof up in the eight core sector growth data for May, which was revised within hours of the release to the media on Friday, reports PTI.

“We have started an internal exercise to find out the reasons of problems in the data. My officers are on the job,” a ministry official said when asked about the reasons for lowering of core sector data for May to 3.8% from 4.6%.

The official further said, “the ministry of statistics and programme implementation (MoSPI) should tell the reason behind the data issues.”

However, an official in MoSPI said, “We take data from the Department of Industrial Policy and Promotion (DIPP) for Index of Industrial Production (IIP). I will find out when we start revising figures for the forthcoming IIP numbers”.

While DIPP, which is under the commerce and industry ministry is responsible for dissemination of wholesale price index and core sector data, the MoSPI collects data for national income and releases the IIP figures.

On Friday, in an afternoon statement, the commerce and industry ministry said that the eight core sector industries recorded a growth of 4.6% in May on the back of surge in cement and coal production. But within three hours, it was changed to 3.8%.

The growth in the cement sector, which showed 22.1% expansion in May according to the first press statement, was later changed to 11.3%.

The eight core industries—coal, crude oil, natural gas, fertilisers, petroleum refinery products, electricity, cement and finished steel—have a weight of 37.9% in the IIP.

There have been similar problems earlier as well in different sets of crucial data, and this issue has been raised even by Reserve Bank of India (RBI) governor D Subbarao.

Last year, the commerce ministry revised downwards its export data for several months.

Similar errors were also noticed in IIP figures which had to be revised later, much to the embarrassment of the government.

There were also reports of error in the updated series of the whole sale price index.

The government has set up a committee to revise the index to take into account structural changes in the economy since 2004-05.

The 31-member group, to be chaired by Planning Commission member Saumitra Chaudhuri, will suggest methods for ensuring smooth flow of data and also to look into the possibility of having a single agency for collecting data for WPI and IIP.


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