Weekly Market Report: Further downside, but watch 18,500

The Indian market closed lower for the second week in a row on the back of a massive pull-out by institutional investors, worried that the Reserve Bank of India (RBI) could increase interest rates to try and curb soaring inflation. Results announced by some heavyweights this week were marginally down from the previous quarter, but lower projections for the fourth quarter put a strain on the stocks.

Last week, we had said that the Sensex may go down by another 1,000 points. It ended the week down 831 points. In fact, the upmove that started on 6th March was seriously damaged on Friday, with the Sensex crashing below 19,000 and Nifty below 5,900, following continuous selling by foreign investors. Friday’s move is significant because for the first time since the rally began in March 2009, the indices have made a lower top and a lower bottom.

The recent top at 20,664 (6,181 in Nifty) was lower than the previous top of 21,108 (6,338) while Friday’s low of 18,812 (5,640 in Nifty) is lower than the previous low of 18,954 (5,690). In fact, the indices are now trading at a level that is very close to the end of the two-year bull market. There will be short rallies, but unless the recent highs are crossed, the decline will continue after bouts of rallies. The breach of 19,000 has been seriously damaging for the bulls.

The market was down on Monday, following across-the-board selling and all sectoral indices ended in the red. A mixed opening and choppiness were the main features of trading on Tuesday. Bargain hunting at lower prices helped the indices recover from the day’s lows, but the market ended lower for a sixth consecutive day.

Positive global cues supported a green opening on Wednesday, but a sharp fall in industrial output numbers for November dragged the indices lower for some time. Institutional buying late session, ensured a positive close.

Lower-than-expected third quarters results declared by IT bellwether Infosys Technologies before the opening bell on Thursday, put pressure on the market throughout the day. The weekly food inflation figures added to the woes and forced the government to assure more steps to curb rising prices.

The Sensex fell below the 19,000 mark on a bout of institutional selling in the last half-hour of trade on Friday, to its lowest close since 9 September 2010. Earlier in the day, the higher wholesale price-based inflation for December put pressure on interest-sensitive sectors like banking, realty, metal and auto.

Overall the market closed the week with a loss of 4%, its worst weekly loss since May last year. The Sensex plunged 831.37 points and the Nifty declined 250.05 points.

Bharti Airtel (up 1%) was the only gainer on the Sensex in the week. Sterlite Industries and Mahindra & Mahindra ended flat, while HDFC Bank (down 9%), Jaiprakash Associates (down 8%) and Larsen & Toubro (down 7%) were the major losers in the week ended 14th January.

All sectoral indices closed in the red with BSE Capital Goods (down 6%) and BSE Realty (down 5%) leading the losers.

Inflation shot up to 8.43% in December from 7.48% in the previous month, as prices of certain food and non-food items continued to show an upward trend. After moderating somewhat in November, the overall inflation—measured on the basis of wholesale prices—rose in December, as vegetables like onions, and other protein-based items became expensive.

With inflation showing no signs of moderating, it is widely expected that the RBI will raise key policy rates at its quarterly review of monetary policy on 25th January.

Industrial growth plunged to an 18-month low of 2.7% in November 2010 from over 11% recorded in the previous month. The sharp deceleration in November figures was because of a mere 2.3% growth in manufacturing, which constitutes around 80% of the Index of Industrial Production (IIP), which measures the expansion in factory production.

Food inflation declined, but stayed at an elevated level of 16.91% for the week ended 1st January, prompting the government to assure more steps to rein in prices of essential items. Even as food inflation showed a meagre decline, vegetable prices were up 3.84% during the week, with onion prices rising by 1.73%.

On the corporate front, the third quarter results of Infosys, the country’s No.2 services exporter, lagged expectations, pulling the stock down nearly 5% on Thursday. The company’s Q3FY11 net profit at Rs1,780 crore and net sales at Rs7,106 crore were at the lower end of expectations of the market. Volume growth at just around 3% was lower than the 6%+ expected and its revenue guidance for FY11 at $6.04-6.06 billion and an EPS of Rs118.68-Rs118.90 were also below expectations. Analysts had estimated an EPS of Rs120 EPS.

With no major economic triggers expected next week, investors will be keenly watching corporate results to place their bets on the markets. Besides, participation of institutional investors will also guide the market going forward.


BSE resolves 632 investor complaints in Dec 2010

Mumbai: The Bombay Stock Exchange (BSE) today said it has resolved 632 complaints for the month of December 2010, against 329 listed firms. However, overall, as of end of the year there were still a large number of complaints pending before the exchange, reports PTI.

A total of 472 complaints were received during the month of December against 261 listed companies, BSE said.

Meanwhile, during the period, BSE resolved 632 complaints against 329 firms, a release issued by the exchange said.

It added that as on 31 December 2010, 1,060 complaints were pending against Vatsa Corporation, 172 against Mukerian Papers, 161 against Enkay Texfoods Industries, 153 against Panchmahal Cement, 139 against Montari Industries, 105 against Eastern Mining & Allied, 103 against Arihant Industries, 97 against Montari Leather, 94 against Padmini Technologies and 88 against Prakash Fortran Softech, the release added.


GAIL buys LNG from Qatar to meet severe winter demand

New Delhi: State gas utility GAIL India will import a shipload of LNG from Qatar in January to meet the increasing energy demand this winter season.

GAIL has signed a contract with RasGas of Qatar to import a cargo of liquefied natural gas (LNG) this month, according to a source. (LNG is natural gas cooled to -162 degrees Celsius to temporarily convert it into a liquid form, to make it easier to transport over long distances by cryogenic ships.)

"The company is trying to get more cargos, but for now it is importing one cargo from Qatar," the source said. But he could not say at what price the gas was contracted. GAIL will receive the Qatar cargo at Petronet LNG's terminal at Dahej in Gujarat.

This year, the winter has been colder than in previous years, across the country, which has led to higher power load. Gas-fired power plants have requisitioned for more fuel and GAIL is importing the cargo to meet the demand.

According to the source, the state-owned firm will in February get the first cargo in a three-year deal with Japanese trading house Marubeni. In October last year, GAIL signed a three-year deal with Marubeni to buy 0.5 million tonnes of LNG beginning in 2011. "Marubeni will supply GAIL eight cargos of LNG every year for three years. In all probability, two cargos per quarter will be supplied," the source said.

Besides Dahej, the Marubeni cargos may also go to the 5 million-tonnes-a-year Dabhol terminal in Maharashtra which is nearing completion.

Marubeni will sell LNG to GAIL at 9.75% of the prevailing Brent crude oil price plus $1 per million British thermal unit. At Brent price of $92 a barrel, the Marubeni LNG will cost $9.97 per mmBtu. After adding import duty, the cost of converting LNG to its original gaseous state (regassifying), transportation charges and local levies, the Marubeni gas would cost customers close to $13 per mmBtu.

While GAIL is an equal promoter of Petronet LNG along with Indian Oil Corporation (IOC), Oil and Natural Gas Corporation (ONGC) and Bharat Petroleum Corporation (BPCL). It along with NTPC owns the Dabhol LNG plant. The source said GAIL and NTPC plan to commission the Dabhol plant in the first quarter of 2011. Initially, the plant will operate at 20%-30% capacity as the breakwater is not fully constructed.

Petronet imports 7.5 million tonnes per annum of LNG from RasGas under a long-term contract.


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