Weekly Market Report: Market directionless

Nifty to remain range-bound between 5,440 and 5,540

The market closed lower this week mainly on account of the 50 basis points hike in key rates by the Reserve Bank of India (RBI). The impasse in the US over raising the debt limit before the 2nd August deadline added to the concerns and the market ended 3% lower.

On Monday, the market closed with modest gains, continuing from the previous week. But the RBI rate hike on Tuesday erased almost all the gains of the previous two days. The cautious outlook expressed by the finance minister and indications of more monetary tightening to come kept the market lower on Wednesday.

Selling in heavyweights led the indices lower on Thursday. The losses were trimmed on Friday, but the market closed in the negative for a fourth consecutive day. The Sensex lost 525 points during the week, to end at 18,197, and the Nifty finished at 5,482, a loss of 152 points. The market is directionless, with the Nifty expected to trade in the range of 5,440 and 5,540.

The BSE Realty index (down 7%) and the BSE Capital Goods index (down 5%) were the major losers in the sectoral space, while the BSE TECk and the BSE Healthcare ended unchanged. There were no sectoral gainers in the week.

The top Sensex gainers on a weekly basis were Reliance Communications (up 9%), Bharti Airtel (up 6%), Maruti Suzuki (up 4%) and Bajaj Auto (up 1%). The losers were led by Jaiprakash Associates (down 11%), BHEL, Reliance Infrastructure, Jindal Steel & Power (down 7% each) and State Bank of India (down 6%).

The main gainers on the Nifty were RCom (up 8%), Bharti Airtel (up 6%), Maruti Suzuki (up 4%), Axis Bank (up 3%) and ACC (up 2%). The major losers on the benchmark were Jaiprakash Associates (down 12%), IDFC (down 11%), Kotak Mahindra Bank (down 8%), BHEL and Reliance Infra (down 7% each).

Following the RBI's rate hike, retail home, auto and personal loans as well as corporate borrowings are expected to cost more. Expectedly, industry expressed its disappointment over the sharp increase in interest rates, saying the move would harm investment sentiment.

Food inflation fell to a 20-month low of 7.33% for the week ended 16th July. The decline could also be attributed to the high 18.56% figure of the corresponding year-ago period, dubbed as the 'high base effect'. The latest figure is the lowest since separate data for food inflation was first released in November 2009.

The moderation in food inflation is expected to come as a relief for the government and the Reserve Bank of India (RBI), which has repeatedly hiked key rates to tackle inflationary pressure.

According to data released on Friday, eight core infrastructure industries expanded by 5.2% in June as against 4.4% in the same period last year. The expansion was attributed to healthy growth of electricity and steel, which grew by 8.2% and 12.5% in June from 3.8% and 4.3% in the corresponding month last year. However, overall in April-June 2011, the growth of core industries slowed down to 5% from 6.8% in the previous corresponding quarter.

On the corporate front, the Competition Commission of India (CCI) has cleared Reliance Industries' (RIL) buyout of Bharti group's 74% stake in insurance joint ventures (JVs) with AXA of France. Once the deal materialises, RIL and its subsidiary Reliance Industrial Infrastructure (RIIL) would own 57% and 17% respectively in both the insurance companies and would become AXA's partners in India.

More than three weeks after the Cabinet Committee on Economic Affairs (CCEA) gave its conditional nod to the $9-billion Cairn-Vedanta deal, the oil ministry on 26th July sent a formal letter to the companies informing them of the decision. The government's okay to the transaction is subject to Cairn, or its successor, agreeing to treat royalty payments on the Rajasthan oilfields as recoverable from oil sales. Also, Cairn India will have to withdraw the arbitration it has initiated disputing its liability to pay Rs2,500 per tonne oil cess on its 70% share in the fields.

On the global front, the Senate on Friday rejected House Speaker John Boehner's debt-limit plan, hours after the House had passed it. The House now plans to vote on Democratic Senator Harry Reid's plan on Saturday, in the hope that it would pave the way for a bipartisan compromise on the debt ceiling and stave off a default. Even if a late deal is struck, the US risks losing its top-notch AAA credit rating.

World leaders are appalled by the state of affairs in Washington and World Bank president Robert Zoellick said on Friday that the US was playing with fire.

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SEBI imposes fine of Rs90 lakh on two Pyramid Saimira directors

PSTL claimed to have entered into lease/hire agreements with 765 theatres in various states as on 31 March 2008, and with 802 theatres as at the end of June 2008. However, during investigation it was able to show copies of only 257 such agreements

Mumbai: Market regulator Securities and Exchange Board of India (SEBI) on Friday imposed fine of Rs90 lakh on N Narayanan and V Natarajan, directors of Pyramid Saimira Theatre (PSTL), for indulging in fraudulent and unfair trade practices, reports PTI.

The case relates to PSTL’s involvement in committing irregularities in its books of accounts and showing inflated profits and revenues in financial statements for 2007-08.

PSTL and its directors lured the general public to invest in the shares of the company based on such false financial statements.

“After taking into consideration all the facts and circumstances of the case ... impose a penalty of Rs50 lakh on the noticee N Narayanan and Rs40 lakh on the noticee V Natarajan respectively, under Section 15 HA of the SEBI Act which will be commensurate with the violations committed by them,” the market regulator said in an order.

The Section 15 HA has provisions for imposing penalties in case of fraudulent and unfair trade practices.

The order comes a day after SEBI imposed a penalty of Rs1.1 crore on MS Swaminathan, promoter and managing director of PSTL in the same case.

Both Mr Narayanan and Mr Natarajan were whole-time directors of PSTL during the period when the irregularities took place and were alleged to have published false and misleading financial results of company.

SEBI had initiated inquiry on the irregularities in November 2009 and a show-cause notice was issued against Mr Narayanan and Mr Natarajan in April 2010.

PSTL claimed to have entered into lease/hire agreements with 765 theatres in various states as on 31 March 2008, and with 802 theatres as at the end of June 2008. However, during investigation it was able to show copies of only 257 such agreements.

The market regulator also found that no money was paid by PSTL to some theatres for creation of security deposits.

SEBI also observed the duo failed in their duty to exercise due care and diligence and allowed the company to fabricate the figures and making false disclosures.

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Eight core sector industries grow by 5.2% in June

The expansion was attributed to the health growth of electricity and steel, which grew by 8.2% and 12.5% in June from 3.8% and 4.3% in the same month in 2010

New Delhi: With electricity and steel showing healthy production growth, the eight core infrastructure industries expanded by 5.2% in June as against 4.4% in the same period last year, reports PTI.

The industries-crude oil, petroleum refinery products, natural gas, fertilisers, coal, electricity, cement and finished steel-have a weight of 37.90% in the overall index of industrial production.

With addition of two sectors-fertilisers and natural gas-the number of key infrastructure sectors, picked up separately for measuring performance has now gone to eight.

Electricity and steel grew by 8.2% and 12.5% in June from 3.8% and 4.3% in the same month in 2010, according to the provisional data released today.

Crude oil production grew by 7.7% in the month under review from 6.8% in the comparable period of last year. Petroleum refinery products, too, grew by 4.7% from 2.9%.

However, natural gas, cement, coal and fertiliser showed a negative growth of 11.7%, 0.8%, 3.3% and 2.4%, respectively.

During April-June 2011-12, the growth of core industries slowed down to 5% from 6.8% in the same quarter previous year.

The growth of eight core infrastructure industries slowed down to 5.3% in May against 7.4% a year ago.

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