Uptrend to be short-lived: Wednesday Closing Report

Nifty to move in the range of 5,065 to 5,200

The market closed higher for a second consecutive day today, with early support from Asian indices and across-the-board buying by institutional investors. We had mentioned yesterday that if the Nifty holds on to 5,020 we could expect the index to reach 5,100 and climb further up to 5,200. Today, the Nifty traded above yesterday’s close for the entire session. The National Stock Exchange (NSE) today witnessed about the same volume as on Tuesday with 74.47 crore shares traded. Looking ahead, we could see the benchmark move in the range of 5,065 to 5,200.

Gains in the Asian markets supported the domestic market. The Nifty resumed trade at 5,080, up 16 points from its previous close, and the Sensex began the day at 16,922, up by 59 points. The Nifty touched its intra-day low in initial trade at 5,076, while for the Sensex its opening level was the low.

Broad-based buying kept all sectoral gauges in the green and helped the market continue its northward journey.

Overcoming minor bouts of volatility, the market went on to touch its intra-day high at around 2pm. At the highs, the Nifty was at 5,155 and the Sensex climbed to 17,157.

Reserve Bank of India (RBI) governor D Subbarao said today that he would not like to comment on the subject of another rate hike, before looking at headline inflation data for August which will be released on 14th September. The RBI will hold a mid-quarter monetary policy review on 16th September.

Later in the day, investors took profits off the table at higher levels, pulling down the benchmarks from their intra-day highs. The market closed in the green, the Nifty gaining 60 points at 5,125 and the Sensex well above the 17,000 mark at 17,065, a gain of 202 points.

The advance-decline ratio on the NSE was 1308:420.

Among the broader indices, the BSE Mid-cap index advanced 1.24% and the BSE Small-cap gained 1.53%.

Twelve of the 13 sectoral gauges settled higher. BSE Realty (up 3.42%), BSE Power (up 2.43%), BSE Capital Goods, BSE Bankex (up 2.12% each) and BSE Metal (up 2.02%) were the top gainers, while BSE Fast Moving Consumer Goods (down 0.13%) ended in the negative.

The top gainers in the Sensex list were Jaiprakash Associates (up 7.70%), HDFC Bank (up 3.42%), Coal India (up 3.38%), Tata Power (up 3.38%) and NTPC (up 2.95%). The major losers were ITC, Mahindra & Mahindra (down 0.99%), Infosys (down 0.53%), Bajaj Auto (down 0.20%) and Hindustan Unilever (down 0.13%).

JP Associates (up 7.24%), Ambuja Cement (up 6.32%), ACC (up 5.09%), SAIL (up 4.97%) and Tata Power (up 3.60%) led the gainers on the Nifty, whereas M&M (down 1.30%), ITC (down 1.13%), TCS (down 0.76%), Infosys (down 0.72%) and Dr Reddy’s (down 0.65%) were the key losers.

Markets in Asia also closed in the green today as investors went bargain-hunting.  Also, a weaker yen boosted Japanese exporters. However, investors were cautious due to the continuing debt issues in Europe. German finance minister Wolfgang Schaeuble said on Tuesday that Greece would not get its next bailout instalment unless it meets goals under the aid package.

The Shanghai Composite gained 1.84%, the Hang Seng advanced by 1.71%, the Jakarta Composite jumped by 2.87%, the KLSE Composite rose by 0.70%, the Nikkei 225 surged 2.01%, the Straits Times was higher by 2.08%, the Seoul Composite jumped by 3.78% and the Taiwan Weighted advanced by 2.20%.

Back home, inflows from foreign institutional investors on Tuesday were negated by withdrawals by domestic institutional investors. While FIIs pumped in Rs431.48 crore, domestic institutional investors pulled out Rs415.17 crore from equities.

Education solutions provider Educomp Solutions today said it has received a Rs60.72 crore order from the Chhattisgarh government for implementation of ICT solutions across 582 government high schools and higher secondary institutes. The order covers six districts, namely Sarguja, Jashpur, Korba, Korea, Raigarh and Janjgir Champa, the company said. The stock gained 3.24% to settle at Rs223.20 on the NSE.

Aurobindo Pharma announced it has formed an equal joint venture with Russian healthcare equipment company Ojsc Diod to manufacture and sell drugs in Russia, Belarus and Kazakhstan. Aurospharma Company, the new JV will set up a plant to make non-penicillin and non-cephalosporin Rx generics and other drugs that are categorised as over-the-counter products in Russia, the company said. The stock settled at Rs137.75, up 3.69% on the NSE.

Kalindee Rail Nirman (Engineers) has bagged a contract worth around Bangladesh Taka 106 crore (equivalent to $15 million) from Bangladesh Railway for projects scheduled for completion in 18 months. The stock gained 4.07% to Rs121.50 on the NSE.



Differences in govt over diesel subsidy come to the fore

While Planning Commission deputy chairman Montek Singh Ahluwalia has favoured decontrol of the fuel, heavy industries minister Praful Patel wants subsidies to continue to meet the government's 'social obligation'

New Delhi: The differences within the government over pricing of diesel came to the fore today, with the Planning Commission favouring decontrol of the fuel while heavy industries minister Praful Patel wanted subsidies to continue to meet the government's 'social obligation', reports PTI.

Addressing the annual convention of the Society of Indian Automobile Manufacturers (SIAM) here today, Mr Ahluwalia said India needs to adjust its policy to the 'energy reality' as the world is entering an era of high energy costs.

"The present distortion of diesel and petrol prices should be corrected first," Mr Ahluwalia said.

While the government had in June last year freed petrol prices, diesel continues to be sold at a subsidised rates.

He also said subsidised fuel is not sustainable in the long-term and "we need to have rationalisation of energy security".

However, reacting to Mr Ahluwalia's remarks, Mr Patel said: "Diesel and petrol price disparity will stay. It will not go away as we have a social obligation..."

The minister also said policy planners and the government need to review their definition of diesel as a dirty fuel.

"There has been question over the environmental sustainability of diesel technology... But if we look at Europe or other developed world, the technology has developed so much and proved to be even better than the petrol technology," Mr Patel said.

Mr Patel also rejected the possibility of diesel being freed from government control in the near-term, stating, "At the moment, there is no move in the government to bring any change in the pricing."

While petrol in Delhi costs Rs63.70 a litre, diesel is priced at Rs41.29 per litre.

Over 40% of the Rs63.70 a litre price of petrol in Delhi is made up of taxes-a Rs0.69 customs duty, Rs14.78 in excise and Rs10.62 in state value-added tax (VAT).

However, in the case of diesel, the total taxes account for only Rs7.64 out the retail price of Rs33.65 in Delhi.

The taxes include Rs0.74 in customs duty, Rs2.06 in excise duty and Rs4.84 state VAT.

While petrol has been freed from government control and is priced at market rates, diesel continues to be sold at government-dictated rates.

Petrol prices have risen by 21% since they were freed from government control in June last year. The price of petrol in Delhi was Rs51.43 a litre when the government decontrolled the fuel on 26 June 2010. Today, it costs Rs63.70 a litre.


Oil ministry chides DGH for reopening RIL marketing margin issue

The ministry feels a Pandora's Box will be opened if the DGH move is approved, as public sector firms like GAIL India, too, have been charging a marketing margin, which is higher than what is being levied by Reliance, for several years now

New Delhi: The oil ministry has rebuked its technical arm, the Directorate General of Hydrocarbons (DGH), for reopening the issue of the marketing margin that Reliance Industries (RIL) charges on selling KG-D6 gas, but may seek the law ministry's opinion to ascertain if the firm can be asked to share those revenues with the government, reports PTI.

The ministry has conveyed its displeasure to the DGH at the highest-level over the reopening of a long-settled issue, sources privy to the development said.

It feels the DGH is wrongly interpreting the contract, which clearly states that the government is entitled to get a share of the price of gas at the delivery point. On the other hand, the marketing margin charged by the Mukesh Ambani-led firm is to be intended to cover the risk involved in carrying gas from that delivery point to customers' door-step.

The DGH recently asked RIL to add the $0.135 per million metric British thermal units (mmBtu) marketing margin to the KG-D6 gas price of $4.205 per mmBtu for the purpose of calculation of the government's profit take.

Sources said the ministry feels a Pandora's Box will be opened if the DGH move is approved, as public sector firms like GAIL India, too, have been charging a marketing margin, which is higher than what is being levied by Reliance, for several years now.

The same principle will have to be applied to gas produced from state-owned Oil and Natural Gas Corporation (ONGC), which is marketed by GAIL.

But to settle the issue once and for all, the ministry plans seek an opinion from the law ministry, they said.

The DGH demand also runs contrary to the stance the oil ministry took on the issue in Parliament last year.

The then oil minister Murli Deora had on 24 February 2010, told the Rajya Sabha that the marketing margin was a bilateral issue between the seller (Reliance) and the buyers.

The government approved the price for gas sales at the delivery point of the KG-D6 field as per the provisions of the Production Sharing Contract inked with RIL.

"The said price ($4.2 mmBtu) does not include any charge beyond the PSC delivery point. The marketing margin (levied by Reliance) is beyond the delivery point and arises as a result of the gas sale and purchase agreement signed between the seller and the buyer," Mr Deora had stated.

The PSC provides for sharing of revenues from the sale of gas between the government and the contractor at the said price at the delivery point. It does not envisage sharing of revenues earned by the contractor from marketing margins with the government, he had further said.

The marketing margin was in lieu of the risks and costs incurred by the contractor on marketing the gas. It is to cover risks like seller liabilities in case of non-supply, customers drawing less than their quota, non-payment of dues and settlement of disputes.

Sources said the DGH wanted the marketing margin to be added to the gas sale price of $4.20 per mmBtu so that profit-sharing between the contractor and the government is calculated at the total price of $4.335 per mmBtu charged by RIL from its customers.

At present, Reliance and the government split profits at the gas sales price of $4.20 per mmBtu after deducting the project cost.

Besides marketing risks, the $0.135 per mmBtu margin is charged by Reliance on account of its extensive efforts to identify customers, execute and manage gas sales and purchase agreements (GSPAs), as well as gas sales planning, daily gas sales operations, gas accounting and invoicing and collection, sources said.

The Anil Dhirubhai Ambani Group had in 2009 opposed the levy of a marketing margin by RIL, but agreed to pay it unconditionally after an oil ministry clarification.

Other gas marketers like state-run GAIL India also charge a marketing margin. GAIL charges a $0.18 per mmBtu margin on the sale of regasified LNG and about $0.12 per mmBtu for gas from fields like Panna/Mukta and Tapti and Ravva.


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