The domestic market witnessed lacklustre trade in the week ended 24th December on unsupportive global cues, which saw low volumes ahead of the holiday season in the West, and lack of major domestic economic triggers, and ended with modest gains.
With foreign fund inflows at record levels of Rs58,982.38 crore in 2010, the economy growing at 8.9% in the fist half of the current fiscal and the market closing 13% higher in the calendar year so far, investors are hopeful of a continuation of the trend. However, factors like risks of rising inflation and a possible hike in fuel prices are likely to put some pressure.
The market opened in the red on Monday, However, profit booking after the indices touched the day's high, pulled the indices down to the neutral line, where they closed with a mixed bias. Strong global cues enabled the local market log in with gains on Tuesday. Across-the-board buying kept the indices in the positive terrain throughout the trading session and helped them end above their crucial levels.
The market witnessed a gap-up opening supported by good global cues on Wednesday. The benchmarks touched the day's highs in early trade and were in a narrow range after that, ending lower at the end of the session. The steep rise in the weekly food inflation numbers put the indices under pressure on Thursday, and kept them in a narrow range on both sides of the neutral line till the end of the session.
The last trading day of the week saw the indices climbing into the positive zone, from a negative opening. Support came from consumer durables, metals and fast moving consumer goods stocks, helping the key benchmarks to end above their psychological levels.
The market closed the week with a modest gain of 1%; the Sensex gained 208.81 points and the Nifty rose 62.85 points.
Among the Sensex toppers, Hero Honda jumped 15%, Reliance Communications surged 10%, Sterlite Industries, Hindalco Industries advanced 7% each and Jindal Steel & Power rose 4% on a weekly basis. Standing at the bottom of the list were Tata Motors and ONGC which declined 3% each, Reliance Infrastructure that fell 2%, and Larsen & Toubro and Jaiprakash Associates which shed 1% each.
The BSE Metal index (up 4%) and BSE IT index (up 2%) were the noteworthy gainers, while the BSE Capital Goods index and BSE PSU index (down 1% each) were the laggards this week.
Fuelled by soaring onion prices, the food inflation after a gap of one month re-entered the double-digit zone at 12.13% as on 11th December, raising fears of another key policy rate hike by the Reserve Bank of India (RBI) in January.
Official data showed that for the week ended 11th December, food inflation rose by 2.67 percentage points, from 9.46%, touching a six-week high. It was 10.15% for the week ended 13th November.
In a bid to cool skyrocketing retail prices, the government has abolished import duties on onion and banned its exports for an indefinite period even as wholesale prices started showing signs of decline.
Agriculture secretary PK Basu expressed confidence that retail prices would come down in seven to 10 days with the expected arrival of fresh crops. Deputy chairman of the Planning Commission Montek Singh Ahluwalia said the spike in onion prices was only a temporary phenomenon due to unseasonal rains.
On the corporate front, JSW Steel announced that it will acquire a controlling stake in Ispat Industries-with an enterprise value of around $3 billion-for a consideration of Rs2,157 crore. The deal envisages Ispat Industries to issue 108.66 crore equity shares on a preferential basis at Rs19.85 per share. In addition, JSW will make an open offer to minority shareholders of Ispat as per SEBI guidelines.
In international news, South Korea on Sunday announced plans for a levy on foreign borrowing by banks, in an attempt to curb potentially destabilising capital inflows. The move is the latest in a series of measures by emerging markets to curb a flood of capital from the US and elsewhere, which is pushing up the value of their currencies.
Reports from China indicate that government authorities are considering enhancing provisioning requirements on local government financing vehicle loans. Besides a probable rate hike also put pressure on the regional bourses during the week.
Analysts are optimistic of the markets doing better in the New Year.
The sudden spurt in the stock price will be an opportunity for investors who have been stuck with the shares
The market regulator, the Securities and Exchange Board of India (SEBI), on Thursday barred PS Saminathan, managing director of Pyramid Saimira Theatre Ltd (PSTL), from the markets and restrained him from becoming a director in any listed company for 10 years. Today, within hours of the SEBI announcement, the stock price of Pyramid Saimira zoomed to hit an upper circuit.
On Friday, Pyramid Saimira shares closed 19.94% higher at Rs7.46, while the benchmark Sensex ended the day up 0.5% at 20,073 points. The company's shares hit a 52-week low of Rs5.10 on 30th November and a high of Rs24.85 on 12th January.
The surprising element in trading today was that there were 2,23,363 buy orders pending with no sellers available. The Pyramid Saimira shares hitting the upper circuit is a boon for public shareholders who have been stuck with the shares for a long time now.
In its order yesterday, SEBI asked Mr Saminathan to make an open offer through a merchant banker to buy the company's shares from the public, through a public offer, by paying them the value determined by the valuer, within a period of three months.
SEBI said, "The fictitious entries in the books of accounts with a view to paint a rosy picture about the financial health of the company (Pyramid Saimira), disclosure of the inflated financial position and false corporate announcements mislead the investing public and constitute the worst kind of fraud on the part of the company, management and promoters. The issue of share warrants to promoters without receiving the consideration constitutes the worst kind of breach of trust of the investors."
SEBI had conducted an investigation into alleged fraudulent and unfair trade practices by Pyramid Saimira, its management and promoters. Surprisingly, the company levelled counter-allegations against the regulator, saying that it had no authority to probe its accounts.
In this regard, MS Sahoo, whole-time member of SEBI, said, "As regards inflated profits and revenues, the noticees (Pyramid Saimira) have stated that SEBI is not an expert body on accounts and the investigation into accounts of PSTL cannot be conducted by students of political science who are working with SEBI, but by an independent audit firm. SEBI's refusal to go ahead with audit by an independent audit firm indicates its bias against the noticees. Since the show-cause notice (SCN) is based on investigation of accounts of PSTL by SEBI, the noticees would not respond to the allegations in the SCN and would not provide the relevant records to the investigation authority. They have, however, stated that it is the prerogative of PSTL to maintain accounting records in a manner fit to the business exigencies and SEBI has no power to draw any inference in this regard. I find that the noticees wish to dictate how a statutory authority, which is authorised under the law to conduct investigations, would conduct investigation. Unfortunately, this privilege is not available to the noticees under the law. Refusal to conduct investigation in the way the noticees desire in no way indicates bias on the part of a statutory authority. Besides the allegations about competence of SEBI officials to investigate into affairs of a company is not in good taste."
In November 2009, the market regulator had directed Pyramid Saimira to restrain from dealings in the securities market for seven years, after the company was found guilty of allowing five persons to illegally corner shares from the initial public offering that had been reserved for employees of the company.
Appeals by the company against the order were dismissed by the Securities Appellate Tribunal (SAT) and the Supreme Court in orders on 7th April and 16th July, respectively. In addition, the Madras High Court, in September, appointed a provisional liquidator in the winding up petition filed by Patni Financial Advisors, one of the many creditors of the theatre chain, film production and exhibition company.
What happens to investors?
New Delhi: The government has exuded confidence that economic growth in the current and the next quarter will be as encouraging as 8.9% recorded in the previous two quarters, but said India must tackle barriers to ensure double-digit level growth, reports PTI.
"It is expected the...two quarters would be as encouraging, if not better... we assume that we will be able to reach 8.5%-8.7% of gross domestic product (GDP) growth this year and perhaps next year will be able to reach a higher level," finance minister Pranab Mukherjee said at the annual general meeting of the PHD Chamber.
However, the country will have to tackle host of national and international problems to register double-digit growth on a sustainable basis, he said.
"It (double digit growth) must be on a sustainable basis and for that we shall have to ensure that the challenges that we are facing today, one on the price front, another on fiscal consolidation and third certain developments which are taking place (internationally)," he said.
The Indian economy grew by 8.9% in the first two quarters this fiscal. The government's Mid-Year Analysis projects the economy to grow by up to over 9% this fiscal.
If this happens, Indian economy would expand at a pace registered three years before the global financial crisis hit the economy in 2008.
While India is charting a high growth path, Mr Mukherjee said there are "many barriers" which need to be crossed for achieving a sustainable double-digit GDP growth.
While the government is desperately trying to bring down rates of essential food items, the wholesale price based inflation for November was about 7.5%.
The recent spurt in onion prices has catapulted food inflation to double-digits level during the week ended 11th December. Besides, international oil prices could further push up the inflation.
The finance minister said the Reserve Bank of India's (RBI) decision to inject Rs48,000 crore into the system without hiking policy rates shows that the central bank is not only fully aware of the inflationary pressures but also mindful of the requirements for higher growth.
Mr Mukherjee exuded confidence that the government's fiscal policy and RBI's monetary actions are in tandem and will help the economy recover and achieve higher growth trajectory.
The RBI has decided to inject Rs48,000 crore into the system by buying government securities through open market operations, as the system faces cash crunch due to high credit needs and advance tax payments. Top 100 companies paid over Rs25,000 crore of advance tax in the third quarter of this fiscal.