Weekly Market Report: Subject to small dips, a major rally has started

The last week of 2010 saw the domestic market post respectable gains despite low volumes, as institutional participation picked up towards the end of the week. The market ended the year with a gain of 17% on the Sensex and 18% on the Nifty.

The market opened with a gap of 23.69 points at 20,412.76, to hit an intra-day high of 20,552.03, and closed the day at a one-and-a-half-month high of 20,509.09. We may soon cross the level of 21,004.96 achieved on 5 November 2010. The indicators of the moving averages and institutional investors’ net inflows show that the rally will continue for some time to come.

A high degree of choppiness interlaced with regular bouts of selling resulted in a subdued close on Monday. The market kept dipping in and out of the red on Tuesday leading to a flat close with a negative bias. Support from consumer durables, banking and metal stocks ensured a decent close on Wednesday, with the key indices closing above their psychological levels. On Thursday, despite food inflation touching a 10-month high of 14.44% in the week ended 18th December, the market posted gains of around 1%.

The last trading day of the week as also the last trading day of 2010 extended the winning streak. The market started in the green in the absence of cues from its Asian peers, most of which were closed for trading on account of the New Year’s Eve holiday. The market gained 2% in the week ended 31st December with the Sensex surging 435.43 points and the Nifty up 122.90 points.

Leading the gainers, Bajaj Auto was up by 7%, followed by HDFC Bank, Hindustan Unilever (up 6% each), Tata Power (up 5%) and HDFC (4%). On the other hand, Reliance Industries, ONGC and Tata Motors remained at the bottom of the list, ending flat this week.

Among the sectors, BSE Consumer Durables index (up 4%) and BSE Realty index (up 3%) were the notable sectoral gainers in the week, while the BSE Oil & Gas ended flat.

Ms Madhabi Puri-Buch, the MD-CEO of ICICI Securities said, “We expect strong earnings growth to take precedence over multiple expansion with Sensex target of 23,165 by December 2011. Accordingly, we bank on sectors which are likely to exhibit superior earnings growth. We prefer large-caps to mid-caps, given their enhanced ability to endure negative undercurrents if any. We bank on outperforming sectors of last year like IT (reaping benefits of global growth, revival of discretionary spending), pharma (strong domestic and US led growth, M&A opportunity), banks (strong base growth to make up for rich valuation), capital goods (strong Tier-I led growth).”

Soaring onion prices pushed food inflation to a 10-week high of 14.44% for the week ended 18th December, a development that may prompt the Reserve Bank of India to hike key policy rates next month, to check price rise. Food inflation rose for the fifth consecutive week on the back of high onion prices, which rose by almost 40% on an annual basis, touching Rs75-Rs80 per kg in the retail markets.

Growth in key infrastructure sectors dropped to a 21-month low of 2.3% in November, over the same month last year, and from 8.6% in October this year, raising apprehensions about the momentum of expansion in the country’s total factory output.

The lacklustre growth of the six infrastructure sectors, which have a weightage of 26.68% in the overall industrial output, was largely on account of a dip in petroleum refinery and cement output.

The textiles ministry said it will soon seek Cabinet clearance for a National Fibre Policy, which is aimed at ending the tax disparity between cotton and man-made (synthetic) fibre. In its draft policy, which has been in the public domain since June, the ministry had expressed concerns over the “historical discrimination” of man-made fibres and textiles vis-à-vis cotton and cotton textiles in the form of higher excise duties.

In international news, China’s manufacturing activity continued to expand in December, but the pace of growth slowed to a three-month low, according to the outcome of a survey by HSBC released on Thursday. China’s purchasing managers’ index for December came in at 54.4, above the threshold of 50 that separates expansion from contraction, but below the November reading of 55.3.


L&T construction arm wins orders worth Rs2,503 crore

Larsen & Toubro Ltd (L&T) said its unit Electrical & Gulf Projects Operating Company (E&GP OC) has won domestic and international projects worth Rs2,503 crore in the third quarter of 2010.

The projects ranged from establishment of power transmission lines and sub-stations to railway construction work.

In the domestic market, the company secured projects worth Rs1,516 crore, including a Rs290 crore project for setting up a 10x270-MW thermal project for Indiabulls, L&T said in a filing to the Bombay Stock Exchange (BSE).

In addition, the company secured a Rs375 crore order from Rajasthan Rajya Vidyut Prasaran Nigam Ltd for laying a 765-kV transmission line from Anta to Phagi and establishing a 220/132-kV gas insulated sub-station at Mansarovar.
Furthermore, E&GP OC was awarded a Rs103 crore project by KSK Mahanadi Power Company Ltd for laying a 400-kV transmission line in Chhattisgarh.

The company also won a Rs300 crore turnkey project from GMR for establishing 400-kV sub-stations at Alwar and Deedwana, in Rajasthan, besides associated transmission lines.

A Rs190 crore project for track-doubling work between Ariyalur and Valadi in Tamil Nadu, including overhead electrification, signalling and telecommunication works, was also bagged by the company.

In the overseas market, the company secured projects valued at Rs987 crore from GCC (Gulf Cooperation Council) countries, including seven sub-station projects and projects for laying a total of 153km of transmission lines during the third quarter, the release added.

On Friday, L&T ended 0.35% up at Rs1,979.05 on the BSE, while the benchmark Sensex closed 0.59% to 20,509.09 points.


Personal finance Friday

Kotak Mahindra MF launches Multi Asset Allocation Fund; SBI Mutual Fund launches Debt Fund Series-18 Months-5; ICICI Lombard General Insurance to provide weather-based crop insurance

Kotak Mahindra MF launches Multi Asset Allocation Fund

Kotak Mahindra Mutual Fund has launched Kotak Multi Asset Allocation Fund, an open-ended income scheme.

The investment objective of the scheme is to generate income by investing predominantly in debt and money market securities, to generate growth by taking moderate exposure to equity and equity related instruments and provide diversification by investing in Gold ETFs.

The new issue opens on 31st December and closes on 14th January. The minimum investment amount is Rs10,000. The scheme will be benchmarked against 80%-CRISIL MIP Blended Fund Index and 20%-price of gold. Abhishek Bisen and Pankaj Tibrewal will be the fund managers for the scheme.

SBI Mutual Fund launches Debt Fund Series-18 Months-5

SBI Mutual Fund has launches SBI Debt Fund Series-18 Months-5, a close-ended income scheme.

The investment objective of the scheme is to provide regular income, liquidity and returns to the investors through investments in a portfolio comprising of debt instruments such as government securities, PSU & corporate bonds and money market instruments maturing on or before the maturity of the scheme. Dividend (payout) and growth options are offered under the scheme.

The new issue opens on 31st December and closes on 6th January. The minimum investment amount is Rs5,000. Rajeev Radhakrishnan is the fund manager.

ICICI Lombard General Insurance to provide weather-based crop insurance
ICICI Lombard General Insurance has been given the mandate to provide weather-based crop insurance for the ongoing Rabi season in Tamil Nadu. It would cover Villupuram and Dindigul districts in the state.

The crops that ICICI Lombard would cover for the season are paddy, maize, vegetables, flowers, groundnut, gingelly, mango, tomato, chillies, tapioca and pulses. The weather-based crop insurance provides cover against weather-related risks faced by crops such as excess or deficit rainfall, variations in temperature and fluctuations in humidity.

This scheme facilitates immediate compensation based on certified data collected from independent third-party bodies such as the Tamil Nadu Agriculture University, Tamil Nadu Water Resources Department, Central Tobacco Research Institute. This method of claim settlement removes the need for carrying out field surveys.

This is a unique insurance scheme, where the beneficiary is not required to file a claim for loss to receive a payout. Instead, ICICI Lombard intimates and settles the claim amount to the beneficiary based on certified data collected from independent third party bodies.

In Tamil Nadu, ICICI Lombard had covered 1,384 farmers and 22,382 acres of land for the last Rabi season.


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