Previous day’s low has to be watched out for a reversal in trend
The market brushed aside the lower GDP numbers and closed in the green for the fourth day in a row. Once again, the Nifty made a higher high and higher low today. The low of 5,828 is the highest since 26 April 2011. We continue to see the uptrend remaining firm, however, the previous day’s low has to be watched out for a reversal in trend. The National Stock Exchange (NSE) saw a volume of 126.39 crore shares and an advance decline ratio of 1123:671.
Continuing its upmove, the Indian market opened higher on signs of an improvement in the economy, as pointed out by global agencies Moody’s and Goldman Sachs this week, and positive global trends. However, local investors were cautious ahead of the GDP (gross domestic product) numbers for the September quarter.
The Nifty opened 11 points higher at 5,836 and the Sensex started off at 19,230, up 59 points over its previous close. Buying in metal, capita goods and realty sectors led the market in early trade.
However, the benchmarks soon pared their gains on nervousness about the economic growth data. The declined saw the indices touching their intraday lows at around 10.45am. At the lows, the Nifty fell to 5,828 and the Sensex retracted to 19,186.
Meanwhile, the Indian economy grew by 5.3% in the July-September period of the current fiscal compared to 6.7% in the same period of the last fiscal. GDP in the first quarter of FY 2013 stood at 5.5%.
The September quarter GDP numbers coming in line with analysts’ expectations once again pushed the market higher. The market climbed to its high in noon trade with support from metal, power, PSU and oil and gas sectors. The gains helped the indices hit their highs wherein the Nifty touched 5,875 and the Sensex rose to 19,346.
Profit booking after the indices hit their highs saw the market paring a small part of its gains, but it ended in the green for the fourth straight day. The Nifty gained 55 points (0.94%) to settle at 5,880 and the Sensex closed the session at 19,340, up 169 points (0.88%).
Among the broader indices, the BSE Mid-cap index climbed 1.10% and the BSE Small-cap index advanced 0.82%.
The top performers in the sectoral space were BSE Metal (up 2.07%); BSE Power (up 1.77%); BSE PSU (up 1.70%); BSE Bankex (up 1.46%) and BSE Consumer Durables (up 1.40%). The laggards were BSE Auto (down 0.32%); BSE Fast Moving Consumer Goods (down 0.24%) and BSE Realty (down 0.20%).
Twenty three of the 30 stocks on the Sensex closed in the positive. The main gainers were Jindal Steel (up 5.39%); BHEL (up 4.92%); ONGC (up 4.44%); Sterlite Industries (up 3.24%) and Hindalco Industries (up 2.65%). The main losers were Hindustan Unilever (down 1.72%); Tata Motors (down 1.44%); Bajaj Auto (down 1.13%); Maruti Suzuki (down 0.93%) and Coal India (down 0.80%).
The top two A Group gainers on the BSE were—Indiabulls Financial Services (up 10.61%) and Suzlon Energy (up 8.80%).
The top two A Group losers on the BSE were—Apollo Hospitals Enterprise (down 7.95%) and NHPC (down 3.64%).
The top two B Group gainers on the BSE were—UltraTech Cement (up 7.91%) and Bayer CropScience (up 5.91%).
The top two B Group losers on the BSE were—Zee Entertainment (down 3.58%) and Container Corporation of India (down 3.03%).
Out of the 50 stocks listed on the Nifty, 40 stocks settled in the positive. The major gainers were UltraTech Cement (up 5.49%); Jindal Steel (up 5.47%); BHEL (up 5.33%); ONGC (up 4.41%) and IDFC (up 3.32%). The key losers were Ranbaxy Laboratories (down 1.73%); HUL (down 1.66%); Tata Motors (down 1.31%); Maruti Suzuki (down 1.24%) and Bajaj Auto (down 0.89%).
Markets in Asia closed mostly higher on optimism that US lawmakers will clinch a budget deal and news that the Japanese Cabinet approved a second round of stimulus worth 880 billion yen ($10.7 billion), ahead of next month’s elections.
The Shanghai Composite surged 0.85%; the Hang Seng gained 0.49%; the KLSE Composite rose 0.22%; the Nikkei 225 advanced 0.48%; the Straits Times climbed 0.79% and the Taiwan Weighted surged 1.02%. On the other hand, the Jakarta Composite declined 0.99% and the Seoul Composite lost 0.10%.
At the time of writing, key markets in Europe were trading with minor gains and the US stock futures were marginally higher.
Back home, foreign institutional investors were net buyers of shares totalling Rs1,579.97 crore on Thursday while domestic institutional investors were net sellers of stocks totalling Rs896.22 crore.
Thermax has won a Rs 503-crore EPC (engineering, procurement and construction) order from a NMDC to set up a captive power plant for its new three million tonne per annum integrated steel plant in central India. The order also includes a water de-mineraliser plant, cooling water system and ventilation systems. Thermax declined 1.43% to close at Rs584 on the NSE.
State-run power sector lender Rural Electrification Corporation (REC) today said its public issue of tax-free bonds aimed at raising up to Rs4,500 crore will open for subscription on 3rd December and will close on 10th December. The proceeds will be utilised for normal lending operations in the power sector and infrastructure projects to augment resource base of the company. The stock gained 0.70% to close at Rs230.65 on the NSE.
Structural reforms and the re-establishment of fiscal discipline are needed for the economy to return to over 7% GDP growth rates, says BNP Paribas Asian Instant Insight
Indian GDP (gross domestic product) growth nudged down to 5.3% y-o-y (year-on-year) in Q2 FY2013 from 5.5% previously. Seasonally adjusted, GDP is estimated to have risen by just 4.1% q-o-q (quarter-on-quarter) annualised. On the expenditure side, sluggish consumption growth was noticeable. On the output side, manufacturing and agricultural outputs were weak. GDP growth for FY2013 as a whole now looks on course for 5.4%. These are the main points highlighted in another tepid GDP report, which underlines the marked deterioration in India’s macro-fundamentals in recent years. This analysis is by Richard Iley, Asian Instant Insight, BNP Paribas.
The BNP Paribas analyst points out that the silver lining is in the trend GDP probably still being close to 7%. Considerable slack is opening up, paving the way for some limited easing by RBI perhaps as early as January 2013. But structural reforms and the re-establishment of fiscal discipline are needed for the economy to return to 7%+ growth rates.
There is however, a stark warning from the BNP Paribas analyst that the politicians in power in India may not be ready for the discipline that is required. The chaotic start to Parliament’s Winter Session reinforces how difficult this will be, given India’s dysfunctional and fractious politics. A radical recasting of India’s growth versus inflation mix looks unlikely. And if the reform push stalls, the 5%-6% growth rates seen over the last year will become increasingly locked-in.
Giving reasons while analysing the GDP data, BNP Paribas says that the main reason for the low GDP growth was the weakness in agricultural output. Despite the late improvement in this year’s monsoon, further weakness is probable next quarter in agricultural output. Services output particularly in the hotels and distribution category was also somewhat softer than anticipated. Its growth was sluggish at 7.2% y-o-y. Manufacturing output, up just 0.8% y-o-y, was also an important contributor to the lower growth in the economy. Monthly industrial production data indicate that little improvement is likely next month.
On the expenditure side, fixed asset investment improved a little but, at 4.1% y-o-y, it continues to undershoot overall GDP growth. Kickstarting the investment cycle remains the key to reviving growth, observes BNP Paribas. Private consumption also continued to slow, up just 3.7%, suggesting that slow growth is denting labour market performance even as stubborn rates of food inflation are eating into disposable income. Lastly, export growth was also muted, up 4.3%, reminding that India is not immune from sluggish global growth, particularly the recessionary Eurozone.
According to the prediction by the BNP Paribas analyst, the RBI (Reserve Bank of India) may choose to look through the woes of the economy and cut interest rates as early as January. Given tight liquidity, an earlier (and further) CRR cut at its December policy review looks likely too.
Finally, while the government’s intentions are sincere, there are constraints which the current UPA government faces in effecting even limited reform measures, concludes BNP Paribas.
The PIL filed by retired Karnataka High Court judge, Justice KS Puttaswamy and advocate Parvesh Khanna questioned the government's decision of issuing Aadhaar numbers to citizens while the National Identification Authority of India Bill, 2010 is pending before the Rajya Sabha