Wednesday’s Market Preview: Positive opening indicated

The domestic market is expected to witness a gap-up opening on positive cues from the global arena. The US markets, which opened after an extended weekend, reported modest gains on strong earnings reports and signs easing of the debt situation in Europe. The Asian pack was mostly in the green in early trade on Wednesday, boosted by US corporates. The SGX Nifty was down 18 points at 5,720 over its previous close of 5,738.

The market witnessed a gap-up opening on Tuesday on better-than-expected third quarter earnings reports from blue-chips. Renewed buying interest from institutional investors also supported the upmove. The indices picked up momentum in morning trade and the Sensex regained the 19,000-mark and the Nifty crossed the 5,700 level. The gauges were range-bound in subsequent trade. The market remained listless post-noon, but a sudden bout of institutional buying in the last half-hour lifted the key indices to the day's highs and ensured a close near those levels. The Sensex closed 210 points higher at 19,092 while the Nifty gained 69 points and settled at 5,724.

Wall Street, which opened after an extended weekend, closed with modest gains on positive earnings reports and signs of easing of the debt crisis in Europe. Apple’s CEO Steve Jobs’ medical leave weakened the stock in regular trading, however, the stock gained in after-hours trading on the back of better-than-expected revenues. Other companies like Google and Caterpillar also gained, anticipating good earnings.

In economic news, the Federal Reserve Bank of New York survey of regional manufacturing activity showed improvement in January, coming in just below economists’ forecasts. But traders noted an improvement in the key new-orders index.

The Dow gained 50.55 points (0.43%) to settle at 11,837.93. The S&P 500 added 1.78 points (0.14%) to 1,295.02 and the Nasdaq rose 10.55 points (0.38%) at 2,765.85.

Earnings optimism in the US also supported markets in Asia in early trade today with most of them trading higher. Speculations that Chinese inflation numbers, due on Thursday, will not hinder growth also gave some relief.

The Hang Seng rose 0.61%, the Nikkei 225 was up 0.15%, the Straits Times added 0.01%, the Seoul Composite gained 0.45% and the Taiwan Weighted was up 0.14%. On the other hand, the Shanghai Composite was down 0.11% and the KLSE Composite lost 0.29%.

Implementation of the much-awaited mobile number portability (MNP) from Thursday will hit the operating margins of service providers while those with deeper pockets would be better placed to cope up (with the new scenario), ratings agency ICRA noted.

The nationwide implementation will increase churn of customers, shoot up the customer acquisition and retention costs, and lower the ARPUs (average revenue per user) as competitive tariff plans will have to be offered, the agency said..


Further rate hike to impact industrial growth: Commerce ministry

New Delhi: A week ahead of the Reserve Bank of India (RBI) reviewing the monetary policy with expectations of a policy rate hike, commerce and industry minister Anand Sharma has cautioned that raising cost of borrowing “may not be suitable” tool to rein in inflation, reports PTI.

Making out a strong case for easy finance to the industrial sector, in a letter to finance minister Pranab Mukherjee, Mr Sharma said that industrial growth has already plunged to an 18-month low of 2.7% in November 2010.

“The high inflation in primary articles, particularly vegetables, is more on account of supply side constraints and monetary policy may not be the most suitable intervention to deal with the situation,” he said.

While he appreciated concerns on inflation, the minister said, “Industrial sector clearly needs sustained support to enable complete recovery.”

The RBI is scheduled to announce its quarterly policy review on 25th January. There are wide anticipations that the central bank in its third quarter monetary policy review will raise the key policy rates by at least 25 basis points in the wake of soaring inflation.

High food inflation has been a major concern for the government. Rising food prices have pushed up inflation to 8.43% in December last year.

Food inflation stood at a high level of 16.91% in the first week of January, after touching 18.32% in the last week of December 2010.

“A selective restriction on credit may be necessary to check inflationary pressures, but the imperative of easy credit flow for industrial sector, especially the infrastructure and manufacturing is crucial for the economy,” the minister added.

The minister said that the capacity addition has not been at an appropriate level to ensure the sustained targeted growth in gross domestic product (GDP).

The government is expecting that the country’s economy would grow by 8.75% in the current fiscal.

“... Capacity addition has been much below the 11th Plan targets in power, roads and other infrastructure sectors,” he added.

RBI has raised short-term rates six times last year to check inflation.


Lavasa project unauthorized: Environment ministry

New Delhi: The environment ministry today held that the controversial Lavasa housing project near Pune is unauthorized and directed the Lavasa Corporation Limited (LCL) to maintain status-quo at the construction site, reports PTI.

The ministry, however, said it is prepared to consider the project on merits subject to imposition of penalties, creation of an Environmental Restoration Fund (ERF), formulation of a comprehensive Environmental Impact Assessment (EIA) and the management plan, an order released by the ministry said.

“....The LCL project is in violation of EIA Notifications....the construction is unauthorized and there has been environmental degradation,” it said.

The terms and conditions include payment of a substantial penalty for the violation of environmental laws, which is incontrovertible, and creation of an ERF by the LCL which would be managed by an independent body with various stakeholders under the overall supervision of the ministry.

The ministry also put imposition of stringent terms and conditions to ensure no further environmental degradation takes place and that any degradation that has already occurred would be rectified within a time-bound schedule.


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