Struggle ahead

Indian bourses gained following positive trends in global markets

Indian markets remained in the green on the back of strong Asian markets powered by strong economic data from Australia and China, and ahead of a key European Union summit that could lay out a rescue plan for debt-stricken Greece. At the end of the day, the Sensex shot up 230 points from the previous day’s close, ending the day at 16,153, while the Nifty closed at 4,827, up 70 points. The stock market remains closed on Friday, 12 February 2010, on account of Mahashivratri.

Next week, we expect the market to continue its short rally. But it will be a struggle from here on.

At 11:00 hrs IST, the Sensex was trading at 16,118, up 196 points from the previous day’s close, but at 14:00 hrs IST, the Sensex was trading up 217 points at 16,139.

At the end of the day, Hindalco Industries rose 1% on reports that the company hopes to complete raising Rs4,900 crore of debt in the next two weeks to achieve financial closure for Utkal Alumina Refinery, a 15 lakh tonne per annum project in Orissa.

JSW Steel rose 3% on reports the company is close to buying two coal mines in the US.

Trinethra Infra Ventures declined 2%, after P Koteswara Rao, a director and promoter of the company, pledged 24 lakh shares representing 7.43% of the equity capital of the firm.

WABCO TVS India rose 4%, after it recently signed a pact with Mahindra Navistar Automobiles to develop air-compressor technology, products for braking systems and clutch technology.

Orbit Corporation rose 7%, despite a media report that the income-tax department had raided the company’s premises. The report stated that the raid was due to bogus purchase billing worth over Rs300 crore over the past three years and income-tax officials unearthed unaccountable cash in excess of Rs15 crore.

Mahindra & Mahindra and Mitsubishi Agriculture Machinery Company, Japan, have signed a license agreement for a strategic transfer of agricultural machinery technology. The stock was up 3%.

As per media reports, the Union Cabinet today eased foreign investment rules. Home minister P Chidambaram told reporters after a Cabinet meeting that the Foreign Investment Promotion Board (FIPB) can now approve investments of up to Rs1,200 crore. Earlier, the FIPB, an arm of the finance ministry, had power to approve foreign investments of up to Rs600 crore.

Meanwhile, data released by the government showed that annual food inflation rose for the third straight week. The food price index rose 17.94% in the 12 months to 30 January 2010, higher than an annual rise of 17.56% in the previous week. The fuel price index rose 10.44% and the primary articles’ price index rose 15.75%.

Subir Gokarn, Reserve Bank of India (RBI) deputy governor, said that there would be no policy decision until April 2010 unless the situation demands it. Mr Gokarn also said that there is no proposal to bring down interest rates on saving accounts.

After trading hours on Wednesday, the central bank said that it would introduce (from 1 April 2010) a new base rate to price credit more transparently, replacing the existing benchmark prime lending rate (BPLR). The apex bank said that the base rate will be the new reference rate for determining lending rates. According to draft guidelines, the RBI has proposed that the actual lending rate charged to borrowers would be the base rate plus borrower-specific charges including product-specific operating cost, credit-risk premium and tenure premium. The base rate will be applicable for all new loans as well as for old loans that come for renewal. Existing borrowers who want to switch to the new system before the expiry of their contracts should agree on the revised rate structure with the banker, it said. The base rate could also serve as the reference benchmark rate for floating rate loan products, apart from the other external market benchmark rates, the RBI said.

During the day, Asia’s key benchmark indices in China, Indonesia, Hong Kong, South Korea and Singapore were up by between 0.1%-1.85%. Markets in Japan and Taiwan were shut for a public holiday. As per reports, South Korea’s central bank kept its benchmark interest rate at a record low of 2% after unemployment surged to a 10-year high, increasing political pressure on the bank to support a recovery.

On Wednesday, 10 February 2010, the Dow Jones Industrial Average was down 20 points while the S&P 500 and the Nasdaq Composite were down 2 points and 3 points respectively.

In premarket trading, the Dow was trading 48 points higher.

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