Nifty should make higher lows to reach 4,805
Adverse macro-economic indicators indicating a slowdown, put pressure on the markets in the week. Looking at the dismal performance of various sectors, the depreciation in the value of the rupee and high inflation, the Reserve Bank of India (RBI) plans to revise downwards its growth forecast for the current fiscal in its quarterly policy review next month. However, investors took support from the positive global signals resulting in the market closing higher for the week.
The Sensex settled at 15,739, up 247 points (2%) while the Nifty gained 62 points (1%) to close the week at 4,714. If the Nifty manages to make a higher low, it may touch 4,805, or else it may fall to the level of 4,670.
Domestic concerns and weak Asian markets dragged the indices lower on Monday. Political developments at the Centre resulted in the market closing with a deep cut on Tuesday. Snapping its five-day decline, the market closed with handsome gains on Wednesday on a late rally.
Brisk buying in the second half of trade helped the benchmarks close higher for the second straight day on Thursday. The market closed with a 0.50% loss on Friday on concerns that the GDP growth in the current fiscal will be lower than the RBI’s forecast of 7.6%.
In the sectoral space, the BSE Oil & Gas index and BSE Fast Moving Consumer Goods index, both gained 3%, while BSE Capital Goods declined 3% and BSE Metals fell 2%.
The top Sensex gainers were Tata Motors, ICICI Bank (up 7% each), HDFC, Mahindra & Mahindra (up 6% each) and HDFC Bank (up 5%). The key losers on the index were Jaiprakash Associates (down 9%), Larsen & Toubro, Jindal Steel & Power (down 6% each), Tata Steel (down 5%) and Hero MotoCorp (down 4%).
Tata Motors, SAIL, ICICI Bank, Cairn India (up 7%) and Ranbaxy Laboratories (up 6%) were the key gainers on the Nifty. JP Associates (down 9%), L&T, Jindal Steel & Power, HCL Technologies and IDFC (down 6% each) ended up as top losers in the week.
The RBI said the Indian economy is likely to grow below its projection of 7.6% this fiscal, and is likely to revise downward the forecast in its policy review next month. In October, it had cut the GDP growth forecast for 2011-12 to 7.6%, from 8% earlier.
There are risks to inflation, RBI governor D Subbarao said, adding that high oil prices and the sudden depreciation in rupee pose challenges for the economy.
Food inflation fell sharply to a near four-year low of 1.81% for the week ended 10th December from 4.35% in the previous week. The latest number is the lowest rate of food inflation since the week ended 9 February 2008, when it stood at 2.26%.
“There is the strong base effect, on top of a normal monsoon and good harvest. I believe the moderate rate will continue for at least a month or two and we can expect its impact in the December headline inflation numbers also,” Crisil chief economist DK Joshi said.
However, putting forth a conservative view, Deloitte Haskin & Sells director Anis Chakravarty said, “Both the high base and good production is responsible for moderation in food inflation numbers. However, it is too early to say if this will sustain. We should wait and watch till at least early February before coming to a firm conclusion."
On the international front, better-than-expected economic indicates supported a four-day rally in US stocks Gauges on employment, consumer confidence and housing starts were positive, setting aside concerns about the Eurozone crisis for the time being.
Meanwhile, Europe’s recently created regulator, the European System Risk Board (ESRB) on Thursday warned that the strength of the financial system needed to be improved and called for banks to shore up their balance sheets. In a related development, Standard & Poor’s is expected to announce its report on debt ratings for 15 Eurozone nations next month.
Nifty still has some strength to reach 4,805 but the move will be volatile
The market pared all the gains made in the morning session and settled lower on brisk selling in blue-chip stocks by institutional investors in the second half of trade. Yesterday we had mentioned that the Nifty may see range-bound movement with an upward bias to the level of 4,805. Today the index again managed to leap ahead with a higher high and keep itself above yesterday’s low. However, the benchmark fell by 20 points on a lower volume of 52.22 crore shares on the National Stock Exchange (NSE). If the Nifty is able to make a higher low, it may reach 4,805, or else it may fall to the level of 4,670.
The market opened higher on the back of positive global cues. Wall Street closed in the green for a third straight day on Thursday after data showed weekly unemployment claims fell to their lowest in three-and-half years. The positive economic data supported gains in Asia in morning trade today. The Nifty resumed trade at 4,763, a gain of 29 points over its previous close, and the Sensex added 50 points to start the day at 15,863. Capital goods, realty, banking, metal and oil & gas stocks witnessed buying interest in early trade.
The indices hit their intraday highs within the first few minutes of the opening bell with the Nifty touching 4,763 and the Sensex scaling 15,911. However, intense volatility kept a tap on the gains with the indices trading sideways till noon.
A huge bout of institutional selling in heavyweights stocks in the post-noon session saw the market giving up all its gains and enter the negative terrain. Telecom stocks were under pressure after the department asked mobile service providers to discontinue 3G roaming arrangements.
The market continued to fluctuate in the negative territory despite the European markets trading in the green. The indices touched the day’s low in late trade with the Nifty going down to 4,693 and the Sensex falling to 15,671.
The advance-decline ratio on the NSE was 937:746.
Among the broader indices, the BSE Mid-cap index added 0.07% and the BSE Small-cap index jumped 1.07%.
The sectoral gainers were BSE Capital Goods (up 0.66%); BSE Auto (up 0.23%); BSE Realty (up 0.12%) and BSE FMCG (up 0.09%). The top losers were BSE Consumer Durables (down 1.15%); BSE Oil & Gas (down 1.05%); BSE Bankex (down 1.04%); BSE PSU (down 0.65%) and BSE Metal (down 0.42%).
Wipro (up 2.17%); BHEL (up 1.91%); Hindustan Unilever (up 0.83%); Tata Motors (up 0.52%) and Maruti Suzuki (up 0.38%) were the key gainers on the Sensex. The leading losers were NTPC (down 3.27%); DLF (down 2.23%); Jaiprakash Associates (down 2.01%); Tata Steel (down 1.81%) and Bajaj Auto (down 1.47%).
The top stocks on the Nifty were Siemens (up 2.35%); BHEL (up 2.15%); Grasim (up 2.04%); Wipro (up 1.92%) and Sesa Goa (up 0.97%). On the other hand, Ranbaxy (down 4%); NTPC (down 3.09%); Reliance Communications (down 2.99%); BPCL (down 2.97%) and IDFC (down 2.66%) were the major losers on the index.
The market settled lower, snapping its two-day gaining streak, on institutional selling in the second half of trade. The Nifty closed with a loss of 20 points at 4,714 and the Sensex settled 75 points down at 15,739.
The Asian pack closed higher, taking support from the positive US economic data, which eclipsed concerns about the European debt crisis. While weekly jobless claims fell to their lowest in three-and-half years last week, consumer confidence rose to a six-month high in December. Trading was low-key in Asia as the Japanese market was closed for a local holiday.
The Shanghai Composite gained 0.85%; the Hang Seng surged 1.37%; the Jakarta Composite added 0.04%; the KLSE Composite gained 0.31%; the Straits Times climbed 0.44%; the Seoul Composite advanced 1.07% and the Taiwan Weighted jumped 2.07%. The Nikkei 225 was closed for trade. At the time of writing, major European indices were trading nearly 1% higher and the US stock futures were trading in the positive.
Back home, foreign institutional investors were net sellers of stocks totalling Rs236.39 crore on Thursday. On the other hand, domestic institutional investors were net sellers of equities amounting to Rs229.74 crore.
Air-conditioning and commercial refrigeration firm Blue Star today said it is setting up a new plant in Ahmedabad at an initial investment of Rs15 crore and is likely to start production from the facility by the end of this fiscal. The plant will manufacture refrigeration products such as deep freezers, bottle coolers, milk coolers and water coolers. It will have the capacity to manufacture one lakh units annually in the initial phase. The stock closed 1.53% lower at Rs157.25 on the NSE.
Steel-maker Monnet Ispat today said it will buy back shares worth up to Rs100 crore from the open market at a price not exceeding Rs500 apiece. Monnet Ispat said its board cleared the buy-back proposal at a meeting on 22nd December. The stock gained 1.51% to close at Rs363.40 on the NSE.
Orchid Chemicals & Pharmaceuticals today said it has received an initial payment of $1.5 million from Merck as part of drug development collaboration. Under the terms of agreement, Orchid is eligible to receive payments totalling more than $100 million with the achievement of various research and development milestones involving multiple candidates. The stock rose 0.11% to close at Rs140.75 on the NSE.
As many as 28 IPOs, largely featuring real estate and power companies, refrained from going public this year citing poor markets conditions. At the same time, two others have cancelled their IPOs post issue
The markets have witnessed volatile trade throughout the entire year. Over the course of the year the Sensex has gone from 20,500 in the beginning of the year to around 15,800 as of now after slumping to its two-year low a few days back. Under these market conditions companies were diffident about going public despite the fact that the approval from the Securities and Exchange Board of India (SEBI) is valid for only a year.
The list of the companies whose approvals have expired this year includes real estate companies like Lodha Developers, Ambiance Real Estate, Kumar Urban Developers, Neptune Developers, BPTP, Raheja Universal and Lavasa Corporation. A number of power companies were a part of the list, as well, and include names such as Sterlite Energy, Jindal Power, Avantha Power and IND Bharat Power Infra. Other major companies include Reliance Infratel, Glenmark Generics, Gujarat State Petro Corp, One97 Communications.
According to a report by SMC Global Services, the negative mood of the capital markets have led to 28 companies calling-off their initial public offers (IPOs). The probable amount that these 28 companies were planning to raise was to an aggregate of Rs32,200 crore. Apart from these, there were two IPOs that opened their issues but later on withdrew their IPO plans due to poor response. Galaxy Surfacants, a cosmetic manufacturer, was under subscribed. The other—Swajas Air Charters—a non-scheduled airline operator, cancelled its issue despite getting a subscription of 1.72 times.
Reliance Infratel was the first company that failed to launch its Rs5,000 crore IPO before the regulatory approval lapsed on 11th January this year. Endurance Technologies, which was the latest addition to the list, expired on 13 December 2011. The approval of AGS Transact Technologies expires on 30 December 2011, the company still shows no signs of opening to the public in the few days that remain. In fact, the last two months have not seen any company opening its public issue.
According to the report, this will impact the Indian corporate's ability in fund raising to finance their expansion projects resulting in slowdown in capacity building and job creation. Private equity (PE) firms which have invested in these companies would have to wait a while as many of them wait for an IPO to make their exit. This may even defer future PE investments.
Further, the government’s disinvestment program which was supposed to bring public issues of several blue-chip PSUs couldn’t take off. The government has called off much anticipated FPOs (follow-on public offers) of ONGC, BHEL, SAIL, etc. Many investors anticipating these big issues would be left disappointed.