Cautiousness ahead of the Reserve Bank of India's (RBI) quarterly monetary review, due next week, and the outcome of the US Federal Open Market Committee (FOMC) meeting that is also slated for the coming week, weighed on investors worldwide. The Indian market, being no exception to the global nervousness, witnessed a high degree of choppiness throughout the week.
Upbeat earnings reports of the previous weekend boosted the market on Monday, however, profit-taking after the indices touched the day's high resulted in the market paring some of the gains accrued earlier in the session. Although the market opened in the green, volatility ahead of the futures and options (F&O) expiry later in the week spooked the market on Tuesday. The indices extended their losses on Wednesday on unsupportive global cues and institutional sell-off.
The market ended in the red for the third successive day on Thursday with the key benchmarks settling below their psychological levels. The last trading day of the week resulted in a reversal of fortunes with the Sensex gaining over 100 points in the last half-hour to bounce back into the green and settle a tad above the 20,000-mark.
The market ended with a loss of 1% for the week ended 29th October with the Sensex losing 133.52 points and the Nifty shedding 48.35 points. On a monthly basis, the market tumbled 2% in October with the Sensex declining 412.70 points and the Nifty falling by 125.70 points.
Mahindra & Mahindra (M&M) (up 4%), Maruti Suzuki, ICICI Bank (up 3% each), Cipla (up 2%) and Reliance Industries (RIL) (up 1%) were the top Sensex gainers in the week. On the other hand, Wipro (down 6%), Tata Steel, NTPC, Jaiprakash Associates and DLF (down 4% each) were the top losers.
Festive demand boosted the BSE Consumer Durables sector (up 4%) making it the top sectoral gainer during the week, followed by the BSE Auto sector (up 2%). On the flip side, the BSE Realty index (down 4%) and BSE Power (down 3%) were the week's top losing sectors.
Food inflation declined sharply to 13.75% for the week ended 16th October, falling by 1.78 percentage points from 15.53% in the previous week. This is the second consecutive week when food inflation has declined.
Experts said the impact of a good monsoon was slowly becoming visible on prices of essential items, as supply side pressure was easing after a good kharif harvest.
Growth of six infrastructure industries dipped to an 18-month low of 2.5% in September, prompting experts to say that industrial expansion will also be adversely impacted. The expansion of core industries slowed down primarily due to a dip in petroleum refinery and coal output.
Analysts said the slower pace poses a dilemma for the Reserve Bank of India (RBI), which is slated to conduct its quarterly monetary policy review next week.
The government is not considering freeing diesel prices yet, as the move will lead to rise in retail prices that will push up the already high inflation rate, oil secretary S Sundareshan said during the week.
The government had, on 25th June, freed petrol price from its control resulting in a hike of Rs3.50 per litre. Diesel prices were raised by Rs 2 per litre on the same day, and it was stated then that they will be gradually freed. A move to deregulate the rates now would mean a further increase in the price of the fuel by Rs2.87 a litre.
The government is likely to dilute its stake in seven more companies this fiscal, including 10% disinvestment in Indian Oil Corporation in January and SAIL's stake sale in February, to meet the target of raising Rs40,000 crore.
The public issue of PowerGrid is expected in the second week of November and of Manganese Ore India Ltd towards the end of November. That would be followed by Shipping Corporation in the first week of December, while Hindustan Copper's public subscription would open on the second week of December.
India's exports shot up by an annualised 23.2% in September, 2010, to a two-year high of $18.02 billion, but even faster import growth increased concerns over the country's widening trade gap.
In the April-September period of the 2010-11 fiscal, exports aggregated to $103.30 billion, a 27.6% increase over the year-ago period.
On the global front, Japan's cabinet earlier this week approved an additional budget to cover a new stimulus package worth about $63 billion to avert the threat of a "double-dip recession" as deflation and a strong yen bite.
The package, which amounts to around five trillion yen, will be financed by the extra budget, whose fate now depends on whether prime minister Naoto Kan's ruling party can pass it in parliament where it lacks a clear majority.
The US Federal Reserve is expected to announce its "quantitative easing" in its meeting next week. The additional stimulus is seen as a step to help the economic recovery.
The domestic market will have four trading sessions next week on account of a holiday-shortened week. The outcome of the RBI's policy review and the Fed's future stance on "quantitative easing" will guide the market next week.
Bulls will be hoping for a flood of dollars to keep the market going
After a whole month of...
It has been more than a decade now that private insurance players have been trying to gain a foothold in the market. But despite tying up with global leaders and having some of the best brains on board, private insurers seem to be headed nowhere
Private sector insurers are witnessing rapid erosion in market share. Despite having been around for a decade, even reaching break-even seems a distant dream for a number of them. On top of this, private players are even planning initial public offerings (IPOs)!
The numbers do all the talking. Between March 2009 to September 2010, domestic giant Life Insurance Corp of India (LIC) increased its market share in terms of first year premium to 73.27% (from 60.77%) while its market share in terms of number of policies increased to 72.20% (from 70.52%).
Moneylife calculated the first premium market share of life insurance companies as of September 2009 and September 2010, based on data from the Insurance Regulatory and Development Authority (IRDA). We considered first-year premium of individual single, individual non-single, group single and group non-single policies. (Please see: www.docstoc.com/docs/58726713/Market-Share-as-per-First-Year-Premiums).
The writing on the wall couldn't be any clearer. LIC has taken away market share from almost all the players.
So is this endgame for private operators? How long will they keep flogging tired revenue models and continue to support balance sheets bleeding red?
Coming back to the IPOs that these private insurers are planning, IRDA is currently readying its guidelines for such offers. Already, questions are being asked over the quality of disclosures mandated and whether investors would really be able to analyse the prospects of such companies.
Speaking about the challenges in the valuation process of insurance companies at a seminar held in Mumbai recently, Ashvin Parekh, partner and national leader - Global Financial Services, Ernst & Young Pvt Ltd, said: "Disclosures for profitability of different product lines should have been made long ago. It would have helped not just for IPOs, but also for corporate governance. But the regulators have already missed the boat by 7-8 years. The authorities kept dragging their feet on Embedded Value (EV) disclosure even after three committees have gone into it. They kept saying it was too technical for them. If it is introduced now, it is impossible for investors to get (an) accurate picture from the disclosure that will be submitted to regulators as per the new guidelines. The regulators should have taken the lead, but confirmed the age-old belief that business is always ahead of regulators."
But regulatory lapses aside, why have private insurers not been able to take on the public sector behemoth? Agreed, LIC is huge, its size bigger than the GDP of almost 80% of countries in this planet- but whatever happened to private ingenuity and nimbleness?
Till 2000, LIC enjoyed a monopoly. But elephants can dance, too. After the market was thrown open to private players, it got its act together. According to TS Vijayan, chairman, LIC, "The company felt threatened, but made changes and prospered."
According to Vipin Anand, chief-corporate communications, LIC, "The opening (up) of (the) insurance sector to private insurers did shake us up, but LIC responded well due to its intrinsic strength. We have 14 lakh agents as of today who cover every part of the country. We were the first government company to go for computerisation. Our computer network is (the) largest in the country after the Indian Railways. Even with the volume of our business we are able to have speed ratio (settlement within stipulated time, usually 30 days) of settling claims at 97.47% (maturity claims) and 95.29% (death claims) for 2009-10. We have excellent investment expertise to manage funds in-house."
Is it too late for private insurers to go back to the drawing board?