Money on the markets

from India Insight:

It’s time India bites the diesel bullet

"81 rupees?" asked an astonished TV anchor when an irate Bengaluru-based consumer called in after the recent 7.5-rupee hike in petrol prices. Perhaps cars that run on milk are now needed, the anchor suggested -- when the caller said the dairy product costs around 30 rupees a litre.

While milk-powered automobiles might be a distant dream, the reality remains that those relying on petrol vehicles will now need to do their budgeting again. If a falling rupee and high inflation were not enough, this steepest-ever rise in petrol prices will surely pinch.

The fact remains that petrol prices were decontrolled way back in June 2010. That move gave oil marketing companies (OMCs) freedom to revise prices and also gave the government some saving grace as ministers can now easily say that petrol prices are market driven.

Though the government cannot be blamed for this hike on paper, they do manage to influence OMC decisions. That is indicated by the fact that this hike comes after state elections and a day after the parliament’s budget session got over.

However, it is tough to understand why the government would allow OMCs to raise petrol prices, given the move will not help improve the fiscal situation as the government doesn’t subsidise petrol. It is the subsidy burden of other fuels that strains the government’s finances.

As Hitendra Dave, global markets head at HSBC in Mumbai explained -- This (the petrol price hike) has zero fiscal impact. This will only help oil marketing companies.

What was perhaps more needed at this stage was a revision or decontrol of other fuel prices, which could help boost the already weak economic sentiment.

Why should the government control inflation?

The ‘reform agenda’ understood as ‘market-oriented reform’ or giving more space to market mechanism in food and fuel economy seems to have been held up.

The government can not be seen to be doing away with subsidies just as prices are up. Its hand is stayed for now.

But is that enough for say the gross national happiness?

Food and fuel inflation has been in the news for a while.

The government has no short-term control over supply side issues causing price rise like a bad monsoon leading to a low harvest or floods, but it can control the rising demand by reining in liquidity.

It is guarded on doing so for fear of stifling growth.

Sensex closes above 15000

The BSE Sensex seesawed today, erasing early losses of as much as 1.8 percent, and finally closed above the 15,000 mark on hopes of a revival in the economy. Higher European markets also helped lift investor sentiments.

The 30-share sensitive index of the Bombay Stock Exchange swung from an intra-day low of 14,601 to an intra-day high of 15,026, and finally closed 137 points up at 15,008. The fifty-share Nifty ended 0.93 percent up at 4572.

The main contributors to the benchmark’s rise were L&T, ICICI Bank, HDFC and Bharti Airtel.

The BSE Mid-Cap index continued its rally gaining 2.26 percent, while the BSE Small-cap index was up 2.23 percent.

On the sectoral front, the BSE Realty index was up 3.29 percent, followed by the Capital Goods Index which ended 3.23 percent lower. The BSE Metal Index, however, ended 2.1 percent lower.

FIIs sold net $67.5 million in shares and bought $46.6 million in debt.

Data released today showed that inflation rose 0.48 percent in the 12 months to May 23, lower than previous week’s annual rise of 0.61 percent.

Sensex at 9-mth high; investors cheer econ data

The BSE Sensex traded firm on Monday as investors cheered improved manufacturing data at home and signs of recovery in the global economy.

The benchmark stayed mostly in positive territory, touching an intra-day high of 14,906 and finally closing 215 points higher at 14,840 – its highest close in almost nine months. The fifty-share Nifty ended 1.8 percent higher at 4529.

Data released on Monday showed manufacturing activity expanded for a second straight month in May to its highest level in eight months. Exports fell by 33.2 pct from a year earlier to $10.74 billion, while imports dropped by 36.6 percent to $15.75 billion.

Global sentiments were upbeat on positive Chinese manufacturing data.

The main contributors to the benchmark’s rise were Infosys, HDFC, ITC and NTPC.

The BSE Mid-Cap Index (up 2.9 percent) and the Small-Cap Index (up 3.5 percent) continued their rally.

On the sectoral front, the BSE Realty Index rose 5.6 percent, followed by the Metal Index which ended 5.3 percent higher. The BSE Banking Index however ended down at 0.8 percent.

Market rises on short covering

The good times continue for the market. The benchmark extended its rally on Thursday and ended 186 points up as investors covered short positions on the last date of derivatives expiry.

Engineering firm L&T beat forecast with strong quarterly numbers. Its shares closed 2.3 percent up.

Ranbaxy Labs, which gained 4.2 percent, and Sterlite Industries, which rose 3.6 percent, topped the list of Sensex gainers. Bharti shares rose nearly 3.5 percent after a three- session fall.

The metals sector led the sectoral space as its index gained 2.7 percent. SAIL and JSW Steel gained over 6 percent each. Bankex registered a rise of 1.8 percent.

Ispat Industries, Unitech and Suzlon Energy were among the stocks most traded on the BSE.

Data released today showed the inflation rate was unchanged, leaving room for the Reserve Bank to cut rates and boost growth.

Do you think the Sensex can achieve the 15,000 mark anytime soon? Or will profit-taking hamper the rally?

Sensex falls as post-poll euphoria begins to fade

The stock market was volatile today as profit taking continued for the second day after a two-day post election rally. Weak Asian markets too weighed on investor sentiments.

The Sensex moved mostly in negative territory throughout trade, turning positive briefly after touching an intra-day low of 13,704.43 points and then shifted back to the red. The benchmark closed 324.12 points down at 13,736.54, while the Nifty ended 59.40 points lower at 4,210.90. The main contributors to the benchmark’s fall were L&T, ICICI Bank, HDFC and Reliance Industries.

On the sectoral front, the BSE Capital Goods Index dropped 5.4 percent, followed by the Banking Index which ended 2.9 percent lower. The BSE Public Sector Undertaking Index, however, ended higher at 2.7 percent.

FIIs sold net $49.10 million in shares.

Oil stocks gained on account of higher crude prices which is now hovering above $60 a barrel. The realty sector fell on account profit taking, but the outlook remains robust as the new UPA government is likely to focus on investments in infrastructure to boost economic activity.

Data showed inflation has risen to 0.61 percent on account of higher food and metal prices in the 12 months to May 9.

Do you think the formation of the new government will infuse confidence among investors and help the Sensex cut losses?

Sensex closes lower on profit booking

The BSE Sensex closed 1.9 percent lower on Friday but posted ninth consecutive weekly rise as investors turned net sellers from net buyers.

The benchmark closed down 240.51 points at 11,876.43, while the Nifty ended 1.7 percent down at 3,620.70.

The fall in the Sensex was led by ICICI Bank, Infosys, Reliance Industries and HDFC.

On the sectoral front, the BSE Banking Index shed 3.2 percent, followed by the Metal Index which ended down 2.5 percent. The BSE Consumer Durable Index, however, ended higher at 1.8 percent.

In today’s trade, FIIs bought net $79.9 million in shares and $318.20 million in debt.

Data released today showed inflation stood at 0.70 percent in the 12 months to April 25, above the previous week’s 0.57 percent.

On the global front, U.S. regulators have asked banks to raise as much as $74.6 billion to build a capital cushion for people to restore faith in the system. Stocks across Asia climbed as the stress test results produced no big shocks.

Sensex rises amid choppy trade

The Sensex seesawed in early trade today but managed to close 0.57 percent higher, tracking gains in Asian and European markets.

The benchmark closed 61 points up at 10,803.86, with investors locking in gains ahead of the earnings season and national elections.

Reliance Industries, ICICI, L&T and Tata Steel led the benchmark. Tata Steel was also the top index gainer, closing 7.7 percent higher.

Among sectors, the BSE Realty Index led with gains of 5.4 percent, followed by the  Banking Index which was up 2.6 percent. The BSE FMCG index was among the top loser.

The 50-Share Nifty index ended 0.03 percent down at 3342.05.

Data released today showed industrial production fell 1.2 percent in February from a year earlier, while the inflation rate stood at 0.26 percent in the 12 months to March 28.

The key benchmark indices remained flat even as expectations of further measures by the Reserve Bank rose after the government released key economic data today.

Reliance leads Sensex rally

The BSE Sensex today crossed the psychological mark of 10,000 and ended 446 points higher, its best close in nearly five months, guided by strong Asian and European markets.

The benchmark index ended at 10,348.83, while the 50-share Nifty ended 150.7 points higher at 3,211.05. Reliance Industries surged more than 5 per cent on reports the company has started pumping gas from the KG basin, which at full throttle will nearly double India’s gas output.

The Sensex rise was led by Reliance Industries (up 5.2 percent), ONGC (up 8.2 percent) and L&T (up 6.6 percent).

Top among the gainers were DLF, Jaiprakash Associates and Tata Motors, all gaining over 12 percent.

The BSE Realty index emerged on top, posting gains of 9.1 percent. Anant Raj Industries, HDIL and DLF were up in the range 6-15 percent.

The sectoral picture looked healthy with most indices closing in the green. The BSE Oil & Gas Index ended 5.7 percent up, while the Banking Index closed 4.7 pct higher.

Latest data shows the wholesale price index, India’s most widely watched inflation measure, rose 0.31 percent in the 12 months to March 21. Analysts say it is likely to turn negative in the coming weeks, which would provide enough room for a further easing of monetary policy by the Reserve Bank of India (RBI).

Inflation down but reforms needed to boost demand

The latest inflation data for early March may please authorities ahead of national elections. Political leaders will trumpet the fact that the government’s efforts have yielded results and the demon of inflation has finally been tamed.

But the early March number throws up some serious concerns. It signifies that the Indian economy has entered a phase of deflation for a temporary period. Demand in the economy is extremely subdued and fresh efforts are needed to restore confidence.

Farm crop output is likely to be robust and this may help in moderating prices but the problems with regards to supply bottlenecks have hardly been addressed. Ports, roads and reforms in agriculture must therefore be the focus of the new government which assumes power after the April-May elections.  Past experience has shown that a tardy monsoon can upset calculations overnight.

There is very little time to lose and massive reforms across all sectors are needed to get the economy moving again. Much will depend on the government which is voted in after the elections.

Such low level of wholesale price inflation, the most widely watched inflation measure in India, throws up another worry. Real interest rates are still high and authorities must nudge banks to lower them to push demand and restore confidence in the economy.

The central bank and the government have taken timely action but now it is up to the commercial banks and firms to take the benefits of the stimulus packages to the consumers.

There is still room for more stimulus measures and the new government will have to immediately hit the ground running to sustain a 6-7 percent growth and protect jobs in a country which hardly has any social security.