Weekly Market View: The market looks overbought, a correction is due

The market finished the truncated week with smart gains. The indices ended in the green on all trading days, scaling fresh 31-month highs on all four days. Global as well as domestic indicators will give direction to the market next week.

The indices ended with gains of over 1.75% on the first day of the week buoyed by optimism in the Asian region. The gains were pared the next day. The market ended flat with a positive bias on Wednesday on dour global cues. The last trading day of the week was punctuated with modest gains, mainly on buying support from institutional investors in the post-noon session.

For the week ended 9th September, the key barometers ended with gains of 3% each with the Sensex advancing 578.23 points and the Nifty gaining 160.65 points. The market will remain closed today for a local holiday.

The top gainers on the Sensex on a weekly basis were Tata Steel, ACC (up 10% each), State Bank of India (SBI) (up 8%), Hindalco Industries (7%) and Jaiprakash Associates (up 6%). The losers on the benchmark were Reliance Infrastructure (R-Infra) (down 2%) and ITC (down 1%).

All sectoral indices on the BSE ended in the positive terrain during the week under review. The gainers were led by BSE Metal index (up 5%), BSE Bankex and BSE IT (up 4%) each. The BSE Fast Moving Consumer Goods (FMCG) was at the lower end of the list, ending flat.

Belying fears of a slowdown, industrial growth accelerated to 13.8% in July from 7.2% in the corresponding month last year, on the back of a 63% jump in capital goods production.

Among the main industry segments, manufacturing activity expanded by 15%,  the mining sector grew by 9.7%, electricity generation growth slowed down to 3.7% while capital goods industry and consumer durable goods production expanded by 63% and 22.1% respectively in July.

Experts earlier had predicted that industry growth would be a single-digit number for July because of the base effect. Industrial growth for the first four months of this fiscal stood at 11.4% from 4.7% a year ago.

Driven by a hike in prices of perishable items, food inflation rose to 11.47% for the week ended 28th August, fuelling fears of a rate hike by the Reserve Bank of India (RBI) in its policy review later this month. Food inflation was 10.86% in the previous week.

Fuel inflation for the week under review remained unchanged at 12.71%.

Overall inflation for July, as measured by the wholesale price index (WPI), stood at 9.97% and data for August is expected next week. The RBI is scheduled to hold a mid-quarterly policy review on 16th September.

Direct tax collections shot up by 13.91% to Rs1,00,112 crore in the first five months of the 2010-11 financial year till August, compared to Rs87,888 crore in the corresponding period (April to August) of the last fiscal, as per data released by the finance ministry.

While corporate tax collections grew by 17.05% to Rs57,750 crore in April-August, 2010, from Rs49,339 crore in the corresponding previous period, personal income tax (PIT) collection - including securities transaction tax, residual fringe benefit tax and banking cash transactions tax - rose by 9.68% to Rs42,217 crore from Rs38,491 crore.

The government exuded confidence that the new Company Law, which promises greater shareholder democracy and stricter corporate governance norms, will be enacted by the end of this fiscal.
 
The Companies Bill 2009, which seeks to replace the half-a-century-old Act, was introduced in the Lok Sabha in August last year. The standing committee report on the new Companies Bill was presented in the Lok Sabha last week after nearly eight months of deliberation.

The Bill proposes to tighten the laws for raising money from the public. It also seeks to prohibit insider trading by company directors or key managerial personnel by treating such activities as a criminal offence.

On the corporate front, a proposed Rs50,000-crore deal to merge telecom tower assets of the Anil Dhirubhai Ambani group firm Reliance Infratel with GTL Infrastructure has failed to materialise, reports earlier this week indicated.

The two parties could not reach an agreement within the stipulated time frame and the non-binding term sheet signed by them on 27 June 2010, expired on 31st August, GTL Infra said in a filing to the Bombay Stock Exchange.

R-Infratel's parent company Reliance Communications further said that it has begun searching for other investors for sale of the tower assets, but did not specify the reasons for failure of deal with GTL Infra.

The Bombay High Court, earlier this week, dismissed Vodafone International's petition challenging an Income Tax (I-T) department order that demanded Rs12,000 crore in liabilities arising out of the company's $11-billion takeover of Hutchison Telecom. A division bench held that the I-T department had the jurisdiction to tax the transaction.

It, however, gave liberty to Vodafone to argue before the tax department that no penalty should be imposed as they genuinely believed they had no liability to deduct tax at source.

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COMMENTS

Prem

7 years ago

Hi,
Can you tell on what basis / parameters, the markets are overbought? Or is it just octopus type of predictions. Nowhere in the above article there is any mention about why it is overbought.

If it is based on technical analysis the markets aren't overbought yet. If the markets hits 31-month, it doesn't mean overbought.

Nokia names Stephen Elop to be new president and CEO

Nokia said it has named Stephen Elop to be the new president and chief executive officer (CEO) of the company with effect from 21 September 2010. 

Mr Elop currently heads Microsoft's business division. He holds a degree in computer engineering and management from McMaster University in Hamilton, Canada, which is his home country, said the company in a press release.

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IIP growth rises to 13.8% in July

New Delhi: Belying fears of a slowdown, industrial growth, as measured by the Index of Industrial Production (IIP), accelerated to 13.8% in July from 7.2% in the corresponding month last year, on the back of a 63% jump in capital goods production, reports PTI.

Among the main industry segments, manufacturing activity expanded by 15% from 7.4% a year ago. Mining sector grew by 9.7% from 8.7% while electricity generation growth slowed down to 3.7% when compared to previous 4.2% growth.

Capital goods industry and consumer durable goods production expanded by 63% and 22.1% in July.

Experts earlier had predicted the industry growth in single-digit number for the month of July because of the base effect.

The double-digit growth in July is commendable because industrial expansion in the previous month (June 2010) was revised down to 5.67% from the earlier estimates of 7.1%.

Industrial growth for the first four months of this fiscal stood at 11.4% from 4.7% a year ago.
 

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