Markets remain volatile, end on a flat note

Strong cues from the US Fed helped Indian and other Asian markets to remain positive

Indian markets and other Asian markets reacted strongly towards the positive moves from the US Federal Reserve. The Fed renewed its pledge to keep rates near zero to promote economic recovery.

However, Indian markets slipped sharply after the government released weekly inflation data. At the end of the day, the Sensex was up 17 points from the previous day’s close at 16,307 while the Nifty closed at 4,867, up 14 points.

Volatility ruled the day as traders rolled over positions in the derivatives segment ahead of the expiry of the near-month January 2010 futures & options contracts today.

At the end of Wednesday’s trading in the derivatives segment, rollover of Nifty futures from the January 2010 series to the February 2010 series was about 60% and for Mini Nifty futures it was about 64%.

India VIX, a volatility index based on the S&P CNX Nifty index option prices, declined 6.78% to 26.96.

At 11:00 hrs IST, the Sensex was trading at 16,487, up 197 points from its previous day’s close while the Nifty was trading up 66 points at 4,919.

However, at 13:00 hrs IST, the Sensex was trading down 90 points at 16,200 while the Nifty was trading at 4,833, down 20 points.

At the end of the day, L&T plunged 2%. As per reports, the government is considering selling its stake in the firm in tranches to state-run financial institutions.

Bharat Heavy Electricals announced that it would sign an agreement with the Madhya Pradesh state utility to jointly set up a 1,600-megawatt thermal power plant in the central Indian state. The stock remained flat.

Crompton Greaves surged 7% after the company posted better-than-expected results and approved a 3-for-4 bonus share issue. The company has also divested 59% in Malanpur Power to Avantha Power for Rs51.4 crore.

Tata Steel rose 5% after the company’s net profit surged 156% to Rs1,191.75 crore in the December 2009 quarter over the same period last year.

HCL Technologies has been selected by international aerospace and defence leader Meggitt to provide engineering services for its global operations. The two companies have signed a $50-million Global Engineering Transformation Services Agreement. The stock shot up 5%.

Gitanjali Gems was up 1% on reports that the company has strategically acquired the balance 50% stake in the Indian joint venture company Morellato India Pvt Ltd.

During the day, Asia’s key benchmark indices in Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan rose by between 1.04%-1.88%. China’s index was up 0.25%.

On Wednesday, 27 January 2010, the Dow Jones Industrial Average rose 42 points while the S&P 500 and the Nasdaq Composite were up 5 points and 18 points after the Federal Reserve left interest rates unchanged at a record low.
The US Federal Reserve said yesterday that it intended to end some emergency lending and asset-buying programmes. The Fed left its benchmark interest rate in a range between zero and 0.25% and renewed its pledge to keep the rate near zero to promote economic recovery.

US president Obama pledged to double exports in five years to help create jobs, prompting some market players to think that the US government may seek a weak dollar to promote exports.

The Fed and other major central banks around the world on Wednesday decided to end emergency dollar-lending operations on 1 February 2010 due to improvement in financial markets.

In premarket trading, the Dow was trading 37 points higher.

Back home during trading hours, the government announced that the food price index rose 17.40% in the year to 16 January 2010, slightly higher than the previous week’s rise of 16.81%. The fuel price index rose 5.70% while the primary articles price index rose 14.66% in the year to 16 January 2010.

Meanwhile, agriculture minister Sharad Pawar said that the Reserve Bank of India (RBI) need not take monetary measures to contain food inflation. He also said wholesale sugar prices have already come down and retail prices may also follow suit soon.

The RBI’s data showed that banks’ outstanding loans fell by Rs11,900 crore in the two weeks to 15 January 2010 because companies repaid some loans. The data also showed that loans fell to Rs30,08,000 crore in the two weeks to 15 January 2010 and deposits fell by around Rs22,000 crore to Rs42,43,000 crore. In the two weeks to 1 January 2010, outstanding loans rose by a massive Rs78,192 crore and deposits also went up by Rs82,769 crore. 

We have no forecast for tomorrow’s market trend. Strong sell-off by traders is likely to continue.

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