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IPOs: Avoid Them

IPOs are usually priced to deliver losses after listing

It was wrongly rumoured that the IPO (initial public offering) market is dead. It is, indeed, dead for dud issues at any price and for good issues at fancy prices. The listing of MCX (Multi Commodity Exchange of India) proves that if the issuer decides to leave something on the table for the investor and has an interesting future,...

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Sensex, Nifty may dip and then rally: Monday closing report

The Nifty may dip a bit and then rally

All the Asian indices opened in red after the weak closing in the US on Friday. Slowdown in job creation has raised question mark over the prospects for US growth. Making things worrisome was the outcome of European elections over the weekend where a Socialist victory added jitters about the eurozone's future. On the domestic front both the Sensex and the Nifty too opened in the negative at 16,620 and 5,018 respectively.

In Friday's closing report we had mentioned that we may now see the index falling to the level of 5,045 and then to 5,000. Today in the morning session itself the Nifty was below the second support and went on to hit a low of 4,988, the lowest since 18 January 2012 in the afternoon session. A smart recovery took place after the finance minister announced that GAAR implementation has been postponed for one year. From here the Nifty may dip a bit and then rally If on any day the benchmark closes above previous day's high.The National Stock Exchange (NSE) saw a higher volume of 71.87 crore shares

Back home all the eyes were set on the finance minister Pranab Mukherjee move of taking up the Finance Bill 2012 for debate in Lok Sabha today. In the Budget 2012-13 tabled in the parliament in mid-March 2012, the finance minister had proposed tax-avoidance legislation viz. General Anti-Avoidance Rules (GAAR). He also has proposed to amend the Income Tax Act, 1961 with retrospective effect to bring into tax net overseas mergers and acquisitions involving domestic assets.

However the Sensex and the Nifty could recover from the lows of 16,514 and 4,988 after finance minister said in parliament that the application of GAAR have been deferred by one year and will be implemented from April 2013. Mukherjee also said that the proposed retrospective amendment of income tax laws will not override tax break treaties. In the closing hours the benchmarks hit a high of 16,944 and 5,125. Both the indices managed to gain some strength and end in the positive. After three days of consecutive losses, the Sensex gained 82 points (0.49% up) to close at 16,913 and while the Nifty rose 27 points (0.54% up) to close at 5,114

The advance-decline ratio on the NSE was 804:842.

Among the broader indices the BSE Mid-cap index gained 0.52% while the BSE Small-cap index rose 0.30%.

The top five gainers in the sectoral indices were BSE Capital Goods (up 3.87%); BSE Power (up 1.82%); BSE Metal (up 1.57%); BSE Consumer Durables (up 1.45%); BSE Auto (up 1.23%). The five sectoral indices which fell today were, BSE FMCG (0.72%); BSE Oil & Gas (0.51%); BSE IT (0.41%); BSE Health Care (0.13%); BSE TECk (fell 0.04%).

BHEL (up 6.12%); Larsen & Toubro (up 4.79%); DLF (up 4.34%); Jindal Steel (up 3.54%); Maruti Suzuki (up 2.46%) were the top gainers on the Sensex. The top losers were Reliance Industries (fell 1.53%); Hero MotoCorp (fell 1.21%); Hindustan Unilever (fell 1.17%); HDFC Bank (fell 0.86%); Wipro (fell 0.71%)

The Nifty toppers were BHEL (up 5.56%); BPCL (up 4.84%); Larsen & Toubro (up 4.61%); Jindal Steel (up 4.54%); DLF (up 4.47%). The main laggards were Cairn (fell 2.27%); Jaiprakash Associates (fell 2.25%); HCL Technologies(fell 1.97%); Dr. Reddy's (fell 1.92%); Reliance Industries (fell 1.51%)   

Data showed 115,000 jobs were added to the US economy last month, well below the market expectations of 163,000 job additions. In France, Nicolas Sarkozy was ousted as president by socialist Francois Hollande, who has indicated that he wants to renegotiate Europe's fiscal compact, which aims to impose tough budget rules for Europe. In Greece, the two most established parties, the center-right New Democracy Party and the center-left Pasok party -- both supporters of the country's most recent bailout, dealt major blows in parliamentary elections on Sunday.

According to Macquarie, flows into India are likely to remain limited in the near term, as relative valuations of stocks versus emerging markets do not look attractive. It added that India "may be staring at possible negative 12 month forward returns". Controversy over taxation for foreign investors and the macro challenges are the key reasons for net outflows of foreign institutional investors in April vs strong Jan-March inflows.

Nikkei 225 fell 2.78%, Hang Seng fell 2.61%, Taiwan Weighted fell 2.11%, All Ordinaries and Straits Times both fell 2.19%, Kospi Composite Index fell 1.64%, Jakarta Composite fell 1.37%, KLSE Composite fell 0.39%, NZSE 50 fell 0.27%, Shanghai Composite ended flat

All the European indices and American Futures were trading sharply in the red while writing this report

Elder Pharmaceuticals has made a clarification in relation to the news making round that the company considering the sale of nutrition business. The company clarified to BSE that it has no intentions to sell any business nor is in any discussion with any party. The stock rose 4.30% to close at Rs 331.05 on the BSE

IRB Infrastructure Developers fell for the fourth consecutive trading session after Virendra Mhaisker, the promoter, along with two other officials of the company, have been asked to undergo polygraph tests in relation to an investigation in the matter of a murder of RTI activist Satish Shetty. The stock fell 7.03% to close at Rs 119.70 on the BSE

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Slide to continue: Weekly Market Report

Nifty headed for 5,000-5,045

The market settled lower this week on concerns about the government’s proposed tax reforms, a depreciating rupee and the weakening macro picture. While the market closed in the green on the first day of holiday-shortened week, the losses kept increasing on the latter three days.
 
The market closed 2% lower in the week with the Sensex losing 303 points at 16,831 and the Nifty settling at 5,087, down 104 points. The market is likely to see a further slide with the Nifty headed for the 5,000-5,045 area.

The market closed higher on Monday on hopes of a stimulus from the US Fed on the back of weak growth in the world’s largest economy. The market sputtered in the second half of trade and settled flat on Wednesday. The losses increased on the last two sessions on domestic as well as global concerns.

BSE IT (up 3%) and BSE TECk (up 2%) were the main sectoral gainers in the week while BSE Capital Goods and BSE Auto (declined 5% each).

The top Sensex gainers were TCS (up 6%), Cipla, Hindustan Unilever (up 5% each), Wipro and Infosys (up 2%). The main losers were Hero MotoCorp (down 9%), Maruti Suzuki (down 7%); State Bank of India, Coal India and Tata Steel (down6% each).

The Nifty was led by TCS (up 6%); Cipla, HUL (up 5% each), Asian Paints (up 3%) and Wipro (up 2%). The losers on the index were Bank of Baroda (down 10%); Hero MotoCorp, Axis Bank (down 9% each), Maruti Suzuki (down 7%) and Tata Steel (down 6%).

The government has proposed to review the Direct Tax Avoidance Convention (DTAC) to incorporate amendments to the DTAC for prevention of treaty abuse and to strengthen the mechanism for exchange of information on tax matters between India and Mauritius. The review will help India to raise revenue from these foreign investments in the country. India is said to be losing more than $600 million every year in revenue because of the tax treaty, ministry of state for finance SS Palanimanickam informed the Parliament on Friday.

After three months of decline, India’s factory output inched up to 54.9 in April, from 54.7 in March. A reading above 50 shows that the sector is growing, while a reading below 50 means the segment is contracting.

Similarly, driven by a rise in new businesses, services sector growth picked up momentum in April to 52.8, up from 52.3 in the previous month, and business optimism hit its highest level since last June, according the HSBC services PMI survey released on Thursday.

Reflecting a slowdown in the economy, the growth rate of eight core infrastructure sectors dipped to 2% in March and 4.3% during 2011-12 on account of poor performance in crude oil and natural gas.

India’s exports surpassed the target of $300 billion for 2011-12 at $303.7 billion while imports touched $488.6 billion on account of rise in imports of crude oil and gold. The high import bill resulted in a trade deficit of $13.9 billion.

On the global front, US markets witnessed their biggest weekly fall this year on weak economic indicators. Eurozone services and manufacturing output contracted more than expected in April, dampening the prospects of a firm pickup in the world economy.

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