Weekly Market Report: The market may give up more gains

The Indian market ended flat in the week ended 22nd October, after a two-week losing streak. Global cues, quarterly earning figures and fund flows towards the mega Coal India Ltd (CIL) initial public offer (IPO) led to volatile trading throughout the week.

The market, which traded lower for a major part of the session on Monday, sprang a surprise at the fag end of day closing with marginal gains. The gains were short-lived as the indices were in and out of the red on quite a few occasions on the back of a highly choppy session, ending the day with cuts of nearly a percent on Tuesday. Sluggish global cues pulled the market down for the second day in a row on Wednesday. Participation by institutional investors in the secondary market was muted in the early part of the week on account of the CIL IPO.

Easing of global pressures helped the domestic market close with handsome gains on Thursday. Lower food inflation numbers and upbeat earnings data also supported the broad-based rally. Profit-taking made its appearance on the last trading day of the week. Investors preferred to stay on the sidelines as cautiousness prevailed ahead of the two-day Group of Twenty (G20) meeting being held in South Korea.

The market settled in neutral territory with the Sensex logging gains of 40.81 points and the Nifty adding 3.40 points in the week.

The top weekly gainers were TCS (up 9%), Reliance Industries (RIL), Cipla (up 4% each), Hero Honda (up 3%) and Reliance Communications (RCom) (up 2%). On the flip side, Sterlite Industries (down 6%), Wipro, HDFC (down 5% each), Jaiprakash Associates (down 4%) and Tata Steel (down 3%) were the key losers.

BSE Healthcare (HC) and BSE Oil & Gas (up 3% each) were the top sectoral performers during the week while BSE Metal (down 3%) and BSE Realty (down 2%) were the sectoral losers in the week.

Food inflation eased to 15.53% as of 9th October and the fall gave the Planning Commission a reason to forecast single-digit food inflation by December.

Food inflation declined 0.84 percentage points from 16.37% in the previous week.

Overall wholesale price index (WPI) based inflation for September rose to 8.62%, from 8.5% in the previous month, prompting analysts to project a 25 basis points increase in key policy rates in the Reserve Bank of India's (RBI) 2nd November policy review. The central bank has raised policy rates five times so far this year.

Robust demand from all classes of investors saw Coal India Ltd's (CIL) mega initial share sale offer being oversubscribed 15.20 times on the final day of the issue, generating bids worth Rs2,35,290 crore.

The IPO, which was open between 18th October and 21st October, garnered total demand for over 960.36 crore shares, as against 63.16 crore equities on offer as per data from the National Stock Exchange. This translated into total demand worth Rs2.35 lakh crore - the highest upfront payment for any IPO in the country.

India's foreign exchange reserves rose by $641 million to $296.43 billion on the back of a sizable jump in foreign currency assets, making it the fifth consecutive weekly rise in the kitty.

Foreign currency assets, a major component of the forex pie, shot up by $582 million to $268.68 billion for the week, according to Reserve Bank of India (RBI) data.

The country's largest lender State Bank of India (SBI) increased its base rate or the minimum lending rate for new borrowers by 10 basis points to 7.6%, a move that would make all kinds of advances, including corporate loans, costlier.

The bank has revised the base rate below which banks cannot offer loans, upwards by 10 basis points from 7.5% to 7.6%, effective from 21 October 2010. This is the first review of the base rate since it was introduced in July this year. As per RBI guidelines, banks have to review their base rate every quarter.


Govt to resolve technical issues in SKS case: Khurshid

Mumbai: Union minister of state for corporate affairs, Salman Khurshid has said that the government would resolve the 'technical issues' pertaining to the SKS Microfinance case, reports PTI.

"The Andhra Pradesh High Court has given its decision on the matter (sacking of the company's CEO Suresh Gurumani). When courts take a decision, we obviously have to comply with it," Mr Khurshid told journalists on the sidelines of an event in Mumbai on Friday. "Courts have taken a view on this...it will obviously reflect in what the ministry has to do going forward." The minister said that there are certain technical issues and "we will resolve them."

On 4th October, SKS Microfinance sacked Mr Gurumani from the post of CEO and managing director, a few months after it had successfully raised about Rs1,500 crore through a share sale. Founder and chairman Vikram Akula had said that Mr Gurumani was removed because of "inter-personal" issues.

However, Mr Gurumani petitioned the Andhra Pradesh High Court, which allowed him to continue as a director. The court did not stay the company's decision to terminate his services as CEO and managing director.

Asked about weak corporate governance processes in the micro-finance sector, Mr Khurshid said, "Corporate governance is not something that should be limited to companies." The minister said that as far as corporate governance was concerned, it applies across the board. "It has to go to other platforms as well, which come under this broad area. Of course, the levels of compliance and expectation will have to be different," he said.

"Where public money is involved it is one level and where public money is not involved, it is another level. Similarly, corporate governance parameters are different for both private companies and limited liability partnerships. But there has to be basic standards for everyone. There is a need for compliance with rules and regulations along with transparency for efficiency and perfection," Mr Khurshid said.


SKS Microfinance Q2 net profit up 116% at Rs80.54 cr

Hyderabad: SKS Microfinance has reported a profit after tax of Rs80.54 crore in the second quarter ended 30 September 2010, a jump of 116% from the Rs37.35 crore in the corresponding period last year, reports PTI.

Revenues of the country's largest microfinance institution increased by 76% to Rs366 crore from Rs207 crore in the period a year ago, the company said in a statement, PTI reports. The company had reported a net profit of Rs67 crore in the first quarter of the current fiscal year.

Incremental loan disbursements in the second quarter increased by 61% y-o-y to Rs3,171 crore and the loan portfolio for the half-year period was up by 69% to Rs5,454 crore, the company said. Earnings per share improved to Rs11.74 at the end of September 2010 compared to Rs7.77 in the corresponding period last year.

SKS Microfinance's main business is to provide loans to poor women in rural communities that will enable them to set up small businesses to earn income. The company recently raised more than Rs1,600 crore through a public offer of 168 lakh shares at Rs985 a share. On Friday, the SKS share price closed at Rs1,053 on the Bombay Stock Exchange, about 4.78% down on the day.


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