Monday, December 29, 2014

Santa gives Indian markets a miss

Santa gives Indian markets a miss
The truncated Christmas trading week turned out to be quite volatile, as price moves caused by profit-booking and strong US data held sway over the indices.
The week ahead is expected to be relatively passive due to year-end holidays, which may result in a lack of global as well as domestic triggers to stock prices. Investors should tread with caution in the coming week.
The rupee too was choppy and stayed below the 63 mark against the dollar. Crude oil extended its weekly fall by tumbling 4 per cent to close at $54.7 a barrel.
The commodity needs to hold above $50 levels to see some relief in the coming weeks. The next level to watch is pegged at ₹38. Even natural gas extended its decline on worries of a supply glut and has plunged 13.3 per cent to close the week at $3 per mmbtu.
Globally, the US indices — the Standard & Poor’s 500, Dow Jones Industrial Average and the Nasdaq Composite —registered new highs on Friday even as most other major markets were shut that day. The S&P 500 and the Dow ended the week at records, posting their biggest rally in the past three years.
Back in domestic markets, the daily relative strength index, which bounced back a week ago is weakening. It is on the brink of re-entering the bearish zone from the neutral region. Volumes in the past week were below par.
The short-term trend continues to be down. Other indicators in the daily charts continue to hover in the negative territory supporting this downtrend. Indicators in the weekly chart have also given a sell signal and the momentum is fading.
The indicators are displaying negative divergence, indicating that the medium-term trend is under threat and that a reversal may be on the cards. However, this trend is likely to take sometime to unfold.
Sensex (27,241.7)

Last week, the Sensex reversed downwards from the intra-week peak of 27,851 and fell 130 points or 0.48 per cent for the week, closing on a marginally negative note.
The week ahead: The index continues to be in a short-term downtrend. The significant resistances are at 27,700 and 28,000.
A decisive rally and close above 28,000 is needed to alter this bearish short-term view. Inability to surpass 27,700 in the early part of the week will be an indication that selling pressure continues.
The Sensex is testing an immediate support at 27,000, a psychological level as well. A fall below this level can pull the index down to 26,042 or 25,144 in the coming sessions.
Medium-term trend: The movement over the coming weeks will determine that the medium-term correction is continuing or just a short-term corrective decline.
A strong rally above 28,000 will be needed to indicate that the bullish momentum has returned and that the index can regain its highs.
A failure to surpass this levels will mean that the decline from the 28,822-peak can extend downwards to 24,500. The 200-DMA hovering around 25,395 can act as a key base in the event of a sharp fall.
Nifty (8,200.7)

The Nifty too reversed downwards from the intra-week peak of 8,364.7 and declined 24.5 points to end the week on a marginally negative note.
The week ahead: The index has key resistance at 8,324 and 8,400 levels. Inability to rally above the first resistance will indicate selling pressure exists.
On the downside, the index can test a key support at 8,100 levels. A fall below this level can pull it down to 7,961. Further breakthrough of this level will strengthen the downtrend and drag Nifty down to 7,854 and then 7,601 levels.
Medium-term trend: The index is also testing the 8000 support which it managed to hold recently.
Having said that, a fall below this level will signify that the uptrend is under threat. Failure to rally beyond 8400 will keep the near term downtrend alive. A fall to 7,724 or 7,600 is possible in the weeks ahead.
However, an emphatic break of the level, can take the index to a new high.
Global cues

In the shortened week, most global asset markets were closed for festive holidays. The CBOE volatility index continued its decline the previous week to close at 14.5 as investor concerns faded. The Dow surged 248 points to close at 18,053.7 which is a record closing.
The index can trend upwards to 18,400 and then to 19,200 in the medium term. Gold and silver ended the week on a flat note.
Even as the US markets are soaring, Indian indices appear weak

Sunday, December 21, 2014

Market enters a turbulent patch

Market enters a turbulent patch

The four-day week ahead could see further volatility as the December derivative contract expires this Wednesday. Investors will keep an eye on the unfolding events in Russia and elsewhere as they juggle with their investment strategy.
There was heightened drama in all financial markets last week. Indian equity investors who were thus far rejoicing at the positive impact of sliding crude prices on companies’ input costs and the country’s import bills, began worrying about the negative impact on our exports and foreign portfolio and direct investment flows.
The currency market was also in an upheaval with the Russian rouble facing a speculative onslaught and the Russian central bank hiking the interest rate in the country by 6.5 percentage points. The rupee added its bit to the ongoing pandemonium, moving close to the 64 mark against the dollar.
But peace returned in the latter part of the week, thanks to the Federal Reserve saying it intends to be patient in hiking interest rates in the US, and that policy rates could remain at the current level for a ‘considerable time’.
Higher volumes in the cash segment on the days when the market declined signal that retail investors are willing to buy in declines. Derivative volumes on the NSE too hit record levels in the early part of the week, signalling higher trading interest. Foreign portfolio investors stayed net sellers till Thursday, according to SEBI.
The fate of equity markets now hinges on crude price movement. As explained earlier, the level between $60 and $65 was the critical support for the commodity. Crude fell to $53.6, representing a 74 per cent retracement of the previous up-move. This is also permissible as a retracement when selling pressure is intense. It needs to be seen if crude holds above the $50 mark in the coming weeks. If it does, some stability can return to financial markets. Else a slide to $38 will be on.
Momentum in the daily chart deteriorated with the daily oscillators moving deeper into the negative zone. But there was a slight recovery towards the weekend. The short-term trend, however, continues to be down.
Oscillators in the weekly chart are giving a sell signal but they continue to be in the positive zone, implying that the medium-term view stays positive.
Sensex (27,371.8)
The Sensex reversed upward from the low of 26,469 mid-week and gained 823 points from there.
The week ahead: But the negative bias in the short term has not yet reduced. The Sensex has immediate resistances at 27,407 and then 28,000. We need a strong close above 28,000 for the near term trend to turn positive. But failure to move above 27,400 early next week will be taken as a negative signal. It will mean that the index can move lower to 26,042 or 25,144 in the days ahead.
Since the 50-DMA is also positioned at 27,500, a close above this level will be construed a short-term victory for the bulls.
Medium-term trend: As explained earlier, we are expecting the completion of a medium-term move at the November peak at 28,822. The extent of the pull-back next week will determine if we are in a medium-term correction or if the correction over the last three weeks was just a short-term pull-back.
If the Sensex moves above 28,000, it will mean that the up-trend has resumed and we will be hitting new highs soon. On the other hand, inability to move above that level will mean that the move down from the 28,822-peak will have legs that can pull it lower towards the 24,500 level indicated earlier. The 200-DMA at 25,200 will also be an important support if there is a sharp medium-term correction.
Nifty (8,225.2)
The Nifty reversed from the low of 7,961 to end the week on a flat note.
The week ahead: The index faces short-term resistance at 8,231 and then at 8,372. That the index is halting at the first hurdle implies that traders need to be a little watchful in the early part of the week. Presence of the 50-DMA at this level adds to its significance. Reversal in the early part of the week can pull the index lower to 7,961. A move below this level can take the index to 7,854 and then 7,601.
Medium-term trend: The medium-term view is under threat as the index moved below 8,000 last week. But a strong close below this level is needed to signal that further deterioration is possible.
Inability to move beyond 8,372 in the next couple of weeks will strengthen the possibility of a drift lower towards 7,724 or 7,600 over the coming weeks. But if this level is surpassed, the index will be on course to record a new high soon.
Global cues
Most global benchmarks recovered in the second part of the week to erase some losses. The CBOE volatility index too declined sharply from the intra-week high of 25.2 to close the week at 16.5, as investor trepidation abated.
The recovery has been spectacular in Dow, with a strong piercing white candle in the weekly chart that has gone past more than three-fourth of the white candle formed in the previous week. That the index retraced only 38.2 per cent of its previous up-move implies that it can move higher to 18,400 or 19,200 soon.
Indices have recovered but there are some hurdles in the near term

Sunday, December 14, 2014

Market looks for a foothold

Market looks for a foothold
Equity markets are now on a slippery slope thanks to the selling fury unleashed last week by the crash in crude oil prices. Stocks are going to start the coming week on an extremely wobbly note as they react to the dismal industrial production numbers for October and the sharp dive in US equity market on Friday.
There was pandemonium in financial markets last week. Our hopes of a leisurely amble into the New Year were dashed as OPEC continued to pressure oil prices lower, sending Nymex crude to $58 on Friday. This caused a wave of global risk-off trades that made most global equity markets dive sharply.
As we have been reiterating, crude oil had important support zone between $60 and $65 dollar. Since many traders would have placed stop losses just below $60, break of this level will increase the downward momentum. Unless there is a strong recovery in the early part of next week, the slide could intensify, pulling crude prices toward the 2009 trough at $38.
This is not that great for earnings of oil companies or countries such as Russia and Venezuela whose primary exports are oil products. There are also concerns being expressed about possible debt default by these countries.
Both the Dow and the Nasdaq have lost more than 3.5 per cent last week making investors wonder if the long-awaited correction is finally here. As a thumb-rule, investors expect benchmarks to fall at least 10 per cent to signal a correction. A decline of more than 20 per cent is needed to signal a bear market.
While no one is really expecting the bear to emerge from its lair, either in the US or India, many investors waiting on the sidelines would welcome a correction since that would provide them an opportunity to enter the market.
Economic data has not been cheerful. OECD Lead Indicator showed that the Euro Zone is at risk of sliding back into recession with the UK and Russia at higher risk.
While the slide in consumer price inflation in India is worth cheering, the sharp contraction in industrial production has been a shocker.
Momentum in the daily chart deteriorated significantly last week. Price rate of change oscillator moved into the bearish zone and the relative strength index is close to oversold zone.
Weekly oscillators are moving in the neutral zone, implying that the medium-term trend has not reversed lower yet. But negative divergence in some of the momentum indicators implies that a reversal could be on the cards.
Sensex (27,350.7)

The short-term trend has reversed lower after the sell-off.
The week ahead: The bearish candle in the daily chart of the Sensex and the close below the 50-day moving averages are negatives for the index.
But the move last week is in consonance with our view that a five-wave pattern from October-17 low completed last week.
The index is currently poised at a critical support, just around the 50-DMA and the previous peak formed on September 9. The next support for the short-term is at 27,050.
Short-term investors should keep away from market on a dip below 27,000. For, the next support is at 25,910.
If the index manages to move higher in the early part of next week, resistances will be at 27,912 and 28,256.
Medium-term trend: If we assume that the move that began at 17,448 is now complete, then the current correction should drift lower down to 24,500 in the Sensex.
This could happen in a gradual manner.
The movement of the Sensex next week and the strength in the pull-back, if any, will give us more clues about the medium-term intention of the index.
Nifty (8,224.1)

The Nifty too drifted lower to close just above its 50-day moving average on Friday.
The week ahead: The index has closed on a negative note on Friday. With the weak industrial production numbers and sell-off in US on Friday, Nifty could open lower on Monday.
Immediate support to watch is at 8,082. Traders with short positions should watch out for a reversal from this region.
Fresh short positions are advised only on a strong close below this level. The next target is at 7,737.
Rebound next week will face resistance at 8,375 and 8,473. Inability to move above the first hurdle will be the cue for traders to initiate fresh short positions with stop loss at 8,480.
Medium-term trend: Our medium term view is unchanged. The fall last week strengthens the wave-count of completion of the move that began in August 2013 at the recent peak.
The extent of the pull-back next week will determine if this is the onset of a medium-term correction. A strong close below 8,090 will be the first indication of a deteriorating medium-term trend.
If a medium-term correction is in progress, the Nifty can drift lower towards 7,724 or 7,600 over the coming weeks. A sideways move between 7,600 and 8,600 can then ensue for a few months. The outlook will deteriorate significantly only on close below 7,600.
Global cues

Many global benchmarks took a deep dive last week with some commodity-heavy indices such as Brazil’s Bovespa and Russia RTSI declining 7.6 and 12 per cent, respectively. Indices such as the CAC and the FTSE are now in the third leg of the wave that began in September.
The evening star and bearish engulfing candle in the weekly chart of the Dow implies that the correction could extend for some more time. Immediate support for the index is at 17,135.
A breach of this level will take it lower to 16,650.
As long as the second support holds, the medium-term outlook is not under threat.
The medium-term trend is at risk, unless there is a smart turnaround soon

Monday, December 8, 2014

Market to meander sideways

Market to meander sideways
Indian equities put up a subdued show last week. The Sensex and the Nifty remained shackled in a narrow range and ended the week marginally lower.
Investors who felt let down by the RBI Governor not lowering policy rates in the monetary policy were consoled by his statement that he will consider cutting rates early next year and that this could even happen outside the monetary policy cycle. It implies that we could have sudden rate cut sprung on us, if inflation stays benign.
With the monetary policy now done with, the market has few triggers to take it higher from these levels, at least in the short term. We are also in the month of December, when the holiday mood pervades investors, who are too tired to even work up the energy to go on a selling spree.
Neither rallies nor declines have too much momentum in this month, as many large institutions go on a year-end break and others are more interested in preserving the profits made during the year.
This mood was reflected in last week’s trade, when the indices closed lower in four out of five sessions, but the decline wasn’t deep enough to cause any concern. Lack of momentum can make the front-line indices drift lower in the near term. But there will not be any cause for concern unless the Sensex closes below 27,500 and the Nifty below 8,200.
We have a data-heavy week coming up, with industrial production and consumer price inflation numbers set to be released next week.
The Winter Session of Parliament and the passage of important bills such as the Insurance Bill will also keep investors riveted.
Movement of crude prices and the progress of the North-East monsoon will be other data that will be watched. Crude is attempting to stabilise around the $64-support indicated in this column last week. There is a high probability of a base formation around this level.
Momentum continues to slacken in the daily chart. This is reflected in the sell signal generated in the momentum indicators in the daily chart, such as the daily moving average convergence divergence indicator. But the fact that this indicator is still featuring in the overbought zone implies that the short-term trend has not reversed lower yet.
Weekly oscillators, however, continue to be positive, signalling a very strong medium-term trend. Oscillators in the monthly chart are also showing strong upward traction.
Sensex (28,458.1)
The Sensex remained in a narrow 500-point range last week.
The week ahead: We stay with the view elaborated in our last column. This could be the final leg of the move from October 17 low. The targets for this move are 28,701, 29,047 and then 29,187.
The first target has been achieved and the index is currently struggling to move past 28,800. If it manages that, then the next two levels will come into play.
Sell signals in short-term oscillators are signalling a possible extension of the correction in the short term. Supports in that event are at 28,184 and 27,753. Short-term traders can continue to buy in declines as long as the first support holds.
Medium-term trend: There is no alteration in the medium-term trend too. We could be nearing the end of the wave that began from the August 2013 low. The targets for this move fall between 28,270 and 29,717.
Since the first target has already been achieved, caution is advisable. But a reversal is possible anytime from this point. Key medium-term support is at 27,500.
Nifty (8,538.3)
The Nifty too was stuck in a narrow 100-point range last week.
The week ahead: The deterioration in momentum continues to signal caution. But the wave pattern signals the possibility of yet another lurch upward. This can take the Nifty to 8,682 or 8,793. Traders can continue to buy in dips as long as the index trades above 8,420. If this level is breached, the next supports are at 8,300 and 8,200.
Medium-term trend: We continue to advise caution from a medium-term view. The trend-following indicators continue to be strong. But we are close to critical medium-term targets.
The market could move sideways in December between 8,300 and 8,700 in December in a rounding top distribution pattern before a sell-off in January. A sharp move beyond 8,800 is needed to signal that the Nifty is moving towards 9,026 and 9,541.
Global cues
Global indices put up a mixed show last week. While European and US markets continued to hit new highs, some markets with larger weights assigned to commodity stocks, such as Brazil and Russia, recorded steep declines.
Strong US jobs numbers — with unemployment at a six-year low of 5.8 per cent and the strongest addition to jobs since January 2012 in November — pleased US investors, lifting US benchmarks to yet another record high.
The Dow has now moved close to the 18,000-mark. If this rally continues, the index will be on course to hit the next target of 18,550. Supports for the index stay at 16,652 and 16,000.
With many large investors away on a year-end break, sharp moves are unlikely in December

Weekahead - Markets seen rangebound ahead of CPI, industrial output data

Weekahead - Markets seen rangebound ahead of CPI, industrial output data
Indian debt/FX markets to wait for cues from CPI, industrial production data next week.

U.S. nonfarm payrolls data to provide cues for market's opening on Monday.

10-year bond seen in 7.88 to 7.98 pct range next week.

Rupee seen holding between 61.30 to 62.00 per dollar band.

Winter session of parliament and government's disinvestment programme for FY15 also to be in focus.

Nifty seen in 8,400-8,700 range.

Foreign investor activity in index futures also on watch after four consecutive sessions of selling.

China CPI data on Wednesday.


July-Sept current acc balance, no fixed date for release.

Wed: India money supply data.

Fri: India bank credit data, deposit data at 1130 GMT.

India CPI/industrial production data at 1200 GMT.

Wednesday, December 3, 2014

Nifty will hit 1,25,000 by 2030: Jhunjhunwala

Nifty will hit 1,25,000 by 2030: Jhunjhunwala
Congratulating CNBC-TV18 on it 15th birth anniversary, Rakesh Jhunjhunwala, partner at asset management firm Rare Enterprises, says Nifty has grown 10 times in last 15 years and can easily grow 10-12 times in the coming decade.


RBI opens the door for a rate cut early 2015: CRISIL

RBI opens the door for a rate cut early 2015: CRISIL
Reserve Bank of India (RBI) has held the repo rate steady at 8% as expected. CRISIL expects inflation to average at 6.7% in FY15 and the RBI to cut rates by April 2015.

In today’s rather dovish monetary policy statement, RBI indicated that a change in its monetary policy stance is premature at this juncture. However, if the fall in inflation is sustained, inflationary expectations remain contained and fiscal developments are encouraging then a change in monetary policy stance is likely early next year. The RBI kept its central estimate for growth at 5.5% while revising its inflation projection down to 6% by March-end FY15.

In the medium term, RBI expects inflation to hover around 6% assuming a normal south-west monsoon, lower crude oil prices and no change in administered prices barring electricity. RBI governor also mentioned that the RBI is in the process of finalizing the monetary policy framework, and the government seems comfortable with adopting a target of around 4% with a band of +/-2% beyond 2016. 

The liquidity in the banking sector has improved and currently the reverse repo rate of 7% is effectively the short-term effective rate to which other short-term market rates are linked. The yield on 10-year g-sec has also been easing in recent months – due to higher liquidity, falling inflation and lower pressure on government borrowings with declining oil prices. However, even as deposit rates and short term rates are starting to decline, lending rates will be slow in coming down.

India hikes excise duties on diesel, petrol

India hikes excise duties on diesel, petrol
India on Tuesday raised excise duties on petrol by 2.25 rupees per litre and on diesel by 1 rupee per litre with immediate effect, the finance ministry said in a statement to parliament.

The increases, which follow similar hikes in mid-November, seek to take advantage of a slump in world oil prices to shore up government revenues without stoking inflation.

A source familiar with the matter said the latest measures were expected to raise an additional 40 billion rupees ($650 million) in the remainder of the fiscal year to the end of March 2015.

Monday, December 1, 2014

Time to watch your step

Time to watch your step
Bulls were on the rampage on Friday, lifting stocks to new life-time highs and helping the BSE market capitalisation to cross the ₹100 lakh crore mark.
The mood could however turn a little circumspect this week, ahead of the monetary policy. The September quarter GDP growth was also nothing to cheer about.
The fate of the ongoing rally hinges on the Reserve Bank of India’s next move. If the RBI obliges and cuts policy rates, the Sensex will get past 29,000. But if the central bank continues with its current stance of waiting for structural decline in inflation, there could be a sharp sell-off next week.
Indices moved sideways in the early part of last week as the bulls and bears battled it out in the expiry week. But market broke free of its shackles on Friday. It was the sharp decline in crude oil prices — after OPEC decided to squeeze shale gas producers in to a tight corner — that made stocks soar sharply towards the end of the week.
All eyes will now be on the price of crude. If we consider the chart of Nymex crude futures, the most significant long-term support is at $64. This occurs at 61.8 per cent (Fibonacci) retracement of the move from the 2009 low of $36 to the 2011 peak of $115. If oil breaks below $64, a decline to $36 is possible, technically. Since a fall to $36 is inconceivable at this juncture, the decline should find a base in the zone of $60 and $65.
Oscillators in the daily chart are moving sideways in the positive zone. Sell signals are also beginning to emerge in some oscillators, implying slowing momentum that can eventually lead to a fall.
Weekly oscillators however continue to be strong. The medium-term trend therefore continues to be up. It has been a breathless run for our market since this February with consecutive up closes in the monthly chart, interspersed with two doji candles.
Sensex (28,693.9)
The Sensex vacillated in a narrow range in the first four sessions before the strong surge on Friday that took the index 359 points higher.
The week ahead: As explained in the last column, a running correction was forming in the Sensex and the Nifty since November 3. The indices have broken out into the next leg of the uptrend now.
This appears to be the fifth wave from the October 17 low. The targets of this wave are 28,701, 29,047 and then 29,187. Since the index is close to the first target, some degree of caution is needed here. A break beyond 28,700 can take the index towards 29,047.
But there is a high probability of a wobble, as the index nears 29,000.
It is also equally possible that the mood turns cautious, ahead of the monetary policy and the index drops lower. Supports in that case are at 27,735 and 27,000. Traders can continue to buy on declines as long as the index trades above the first support.
Medium-term trend: The medium-term trend stays strong in the Sensex. But it could be nearing the end of a five-wave formation from the August 2013-low. The targets for this move fall between 28,270 and 29,717.
Since the first target has already been achieved, a reversal is possible anytime from this point. Key medium-term support is at 27,354. The recent peak was formed at this level. The 50-day moving average is placed here and it is also a short-term Fibonacci support.
Nifty (8,588.2)
The Nifty too rallied sharply on Friday, helping the index close 94 points higher.
The week ahead: The lack of momentum and negative divergence in daily oscillators shows that a decline is in the offing. The final wave from the October 17 low of 7,723 could be unfolding now. This wave has the targets of 8,598, 8, 706 and 8,750.
Since the index hovers around the first target, investors should tread cautiously. A strong start on Monday (quite unlikely, given the monetary policy overhang and GDP numbers) can take the Nifty above 8,700. Supports for the week are at 8,429, 8,320 and 8,300. Fresh long positions should be avoided only on a close below 8,300.
Medium-term trend: The medium-term trend for the Nifty stays strong. But the index is nearing critical long-term targets.
If we consider the move from August 2013 low at 5,118, the final stages of this move appear to be in motion. This wave has the targets of 8,585, 9,026 and 9,541. The first target of the longer-term wave has also been achieved. A reversal is therefore possible.
However, if the rally continues, the Nifty will be reaching out to the 9,000 mark soon.
Global cues
Global indices edged slightly higher last week. The Shanghai Composite Index posted the strongest gain among global indices, up 8 per cent. Investors seem to have flocked to Chinese stocks following the interest rate cut by the Chinese Central bank. There appears to be a lesson for Raghuram Rajan here.
The Dow was however a little subdued last week, recording a mild 18 points gain. Supports for the index are at 16,652 and 16,000. Our medium-term target for this index stays at 18,550, if the index holds above 17,350.
The daily chart signals caution. A status quo in the monetary policy can cause turbulence

Petrol price cut by 91 paise/litre, diesel by 84 paise.

State-run oil marketing companies have slashed petrol prices by 91 paise per litre from Monday and diesel prices by 84 paise. This is the seventh consecutive reduction in petrol prices in the last four months and the third cut in diesel prices since October 18 when the Cabinet deregulated the fuel.

But the decision drew criticism from the opposition parties and petrol pump dealers, who said the government was not passing on the entire benefit of falling global oil prices to the consumers.

International crude prices have dropped 40% since June to $70 a barrel on Friday, but the reduction in pump prices of petrol and diesel are not in that proportion, they said. Petrol prices have been reduced by a little over 11% and diesel by 8% since June.

Brent crude fell to a new four year low on Friday after the Organisation of Petroleum Exporting Countries (OPEC) decided not to cut output despite a slide in prices. 

India's average crude oil import price (Indian basket) plunged to a four-year low of $72.51 per barrel last week, according to an oil ministry statement issued on Friday. 

Petrol price cut by 91 paise/litre, diesel by 84 paise.

Executives at state-run oil firms, however, said that in a bear market, the global price of refined products falls after a lag. Retail prices of petrol and diesel are also affected because of the rupee-dollar exchange rates, they said. India imports about 80% crude oil it processes and pays in dollar.

Oil companies have so far reduced petrol prices by Rs 10.27 per litre since August 1 and diesel by Rs 6.46 per litre since October 18. They had last cut fuel prices on November 1.
"Since the last revision, international prices of both petrol and diesel have continued to be on a downtrend.

The rupee-dollar exchange rate has, however, appreciated since the last price change. The combined impact of both these factors warrant a decrease in retail selling prices of both petrol and diesel," an IOC spokesman said. 
Taking advantage of falling international oil prices since June, the government had on November 13 imposed additional excise duty ofRs 1.50 per litre on petrol and diesel to meet its revenue deficit target.

Although the government officially deregulated diesel in October, just as it did in case of petrol over four years ago, the oil ministry retains informal control on retail prices.

The government has informally nudged state-run firms to keep a small margin on fuel prices to prevent consumers from volatile global oil markets especially during the crucial elections in Jharkhand and Jammu & Kashmir, government and industry officials said.

"Despite a hike in central excise on petrol and diesel in mid-November, there was a scope to reduce fuel prices by 50 paise to Rs 1 per litre on November 15. But oil companies silently usurped the amount. Private retailers are silent partners of public sector oil firms in this because they have historically suffered from predatory pricing and this is the time to make up some of their past losses," said one dealer, requesting anonymity.

Source: ET

Saturday, November 29, 2014

India's smaller private sector banks

India's smaller private sector banks
India could be set for more banking acquisitions after a record $2.4 billion takeover last week ended four years of drought, but restrictive rules, reluctant sellers and sometimes difficult unions mean a flurry of deals is unlikely.

Below is a profile of the smaller banks in the private sector, which are seen playing a major role in a sector consolidation.



Total assets: 786.2 billion rupees ($12.7 billion)

Net bad loans %: 0.22

Capital Adequacy ratio: 12.69

Return on Equity %: 21

Return on Assets %: 1.74



Total assets: 745.94 billion rupees ($12 billion)

Net bad loans %: 0.74

Capital Adequacy ratio: 14.73

Return on Equity %: 12

Return on Assets %:1.20



Total assets: 549.86 billion rupees ($8.9 billion)

Net bad loans %: 0.78

Capital Adequacy ratio: 12.42

Return on Equity %: 15

Return on Assets %: 1



Total assets: 515.43 billion rupees ($8.3 billion)

Net bad loans %: 0.41

Capital Adequacy ratio: 12.60

Return on Equity %: 13

return on Assets %: 0.86



Total assets: 363.22 billion rupees ($5.9 billion)

Net bad loans %: 1.91

Capital Adequacy ratio: 13.20

Return on Equity %: 10

Return on Assets %: 0.71



Total assets: 263.98 billion rupees ($4.3 billion)

Net bad loans %: 1.22

Capital Adequacy ratio: 15.59

Return on Assets %: 1.19



Total assets: 249.94 billion rupees ($4 billion)

Net bad loans %: 1.23

Capital Adequacy ratio: 15.01

Return on Equity %: 3

Return on Assets %: 1.44



Total assets: 206.53 billion Indian rupees ($3.3 billion)

Net bad loans %: 3.44

Capital Adequacy ratio: 10.90

Return on Equity %: 6

Return on Assets %: 0.32



Total assets: 181.98 billion Indian rupees ($2.9billion)

Net bad loans %: 0.31

Capital Adequacy ratio: 14.64

Return on Assets %: 0.67



Total assets: 153.16 billion rupees($2.5 billion)

Net bad loans %: 2.22

Capital Adequacy ratio: 11

Return on Assets %: 0.18



Total assets: 146.88 billion rupees ($2.4 billion)

Net bad loans %: 1.60

Capital Adequacy ratio: 8.67

Return on Equity %: -34

Return on Assets %: -1.86



Total assets: 129.23 billion rupees($2.1 billion)

Net bad loans %: 0.91

Capital Adequacy ratio: 13.71

Return on Equity %: 13

Return on Assets %: 1.31

* Metrics as of March 2014, Capital Adequacy Ratio under Basel III

* Source: Indian Banks' Association, Thomson Reuters

Friday, November 28, 2014

NSE cuts trading fees for select segments

 To make it cheaper for investors to trade on its platform, NSE, the country's largest stock exchange by turnover, on Thursday cut charges for trading on its currency derivatives platform and equity options segment by up to 40%. The bourse also introduced liquidity enhancement schemes, an incentive process for brokers to bring in higher volumes, for these two segments.

Market players pointed out that NSE's decision to cut charges came at a time when BSE, its only competitor and the country's oldest exchange, is gaining market share at a faster clip after it rolled out a new trading technology in the last one year.

Under the revised structure, NSE will charge about Rs 3,000 for every Rs 1 crore worth of premium in the equity options segment, down from Rs 5,000 earlier. In the currency derivatives segment, it will charge Rs 110 per Rs 1 crore worth of trades, NSE circulars showed.

Market sources said the cut in transaction charges on NSE is expected to bring in more participants since at higher charges traders were finding it difficult to recover their costs. "In a business (like broking) where margins are wafer thin, cost levied by an exchange is often the determining factor," said a market analyst. NSE said that the revised charges were being rolled out on a pilot basis.

NSE cuts trading fees for select segments

On a comparative basis, however, even the reduced trading charges on NSE are much higher than BSE's. In the equity options segment, BSE charges Rs 50 per Rs 1 crore of premium. Here again, while NSE charges on both sides of the trade, that is for buying as well as selling, BSE charges are only for the sell side. In the currency derivatives segment, BSE charges Rs 2 per Rs 1 crore worth of trade.

In the past few months, BSE's currency derivatives segment, which was launched just about a year ago, is clocking volumes that are around 50% of NSE's. On Thursday, turnover for this segment on BSE was Rs 4,343 crore, compared to NSE's Rs 7,122 crore.

In the equity options segment, however, NSE remained much ahead of BSE. On Thursday, NSE clocked a turnover of Rs 16,992 crore, compared to BSE's Rs 1,141 crore. BSE's equity derivatives segment, after remaining dormant for several years, is gaining traction since it launched the new technology platform in February this year, sources said.

Sourced from TOI

Monday, November 24, 2014

Sept quarter disappoints for India Inc

Sept quarter disappoints for India Inc
Economic indicators may be beginning to look up, but corporate earnings are faltering. The July-September period has been lacklustre for corporate India with sales growing a modest 3.2 per cent over the previous year, and profits from operations expanding by a mere 8 per cent.
In the June quarter, operating profits had grown 23 per cent year-on-year and revenues by10 per cent.
Though companies reported a 29 per cent increase in net profits for the September 2014 quarter, it was thanks largely to a leg-up from ‘other income’ from an asset sale or an investment income. This is almost similar to the 31 per cent net profit increase in the June 2014 quarter.
These numbers are from the 3,347-listed companies which have declared results for the earnings season, excluding banks, financial institutions and oil marketing companies.
Slowing down
Sales growth has steadily lost pace, spiralling down from 11 per cent in the March quarter, to 10 per cent for the June and to 3.2 per cent now. Many core sectors saw a sharp drop, indicating that all is not well with the investment cycle.
For instance, power companies, with their litany of woes, clocked sales growth of 7 per cent in the September quarter, well below the 12-13 per cent in June and March.
Sales growth for steel companies also came in at a low 5 per cent in the September 2014 quarter, as weak prices on abundant supply capped realisations. Bigwigs such as SAIL, Tata Steel, and JSW Steel have all slowed down.
Power equipment and capital goods, telecom, and fertilisers are the other sectors where sales growth is losing steam.
And while raw material costs did fall, it did not materially bolster profits for all.
Costs of inputs such as coal, base metals, and crude oil have been drifting lower, but other cost heads such as staff did the opposite.
The impact of raw material savings on profits may, however, be felt in the coming quarters.
Large versus small
The fall in sales growth was steeper for large companies in the September quarter compared to mid-and-small companies, given the slowdown reported by players such as Bharti Airtel, Tata Motors, SAIL, Tata Steel, NTPC, and Power Grid.
The BSE 100 companies saw sales growing 4.3 per cent in the September quarter over the year ago period, decelerating from the 14 per cent in the June and March quarters. Companies making up the mid-and-small cap indices on the BSE have seen sales growth stagnate at 5-7 per cent in the past three quarters.
But large companies have trumped the smaller ones on profitability, suggesting that they were benefiting from economies of scale in procurement. Their input costs shrank in the September 2014 quarter.
Net profit margins for large companies have held at a reasonable 10 per cent for the past three quarters. These margins for smaller companies, on the other hand, are far below at 2-3 per cent. There were also more loss-making companies in the September quarter than in the previous ones.
Bucking the trend
A few sectors that bucked this trend, reporting improving sales and profit growth, include brokerage companies, auto ancillaries and cement. Brokerages benefited from booming stock trading volumes and auto ancillaries from strong replacement demand besides better commercial vehicles, two-wheeler and car sales.

Index Outlook: Markets raring to go higher

Index Outlook: Markets raring to go higher
The Sensex and the Nifty moved out of their tight band last week. But only just. While investors should not start exulting yet, it is positive for the short term. Traders can look forward to the Sensex reaching towards the 29,000 peak and the Nifty moving to 8,700.
Central bankers, in their attempts to help their respective economies, continued to inadvertently support stock markets. Global equity markets that were beginning to wilt, got yet another shot in the arm, this time from the Chinese central bank.
Worried about falling industrial production, weak real estate market and dismal third quarter GDP growth, the Chinese central bank reduced interest rate on Friday, the first time in two years.
Mario Draghi contributed his bit to improve market sentiments by announcing that he is determined to do “what he must, to raise inflation and inflation expectations as fast as possible.” This central banker-speak took US benchmarks to record highs on Friday.
The feeble memory of markets is reflected in the ease with which the failing of yet another central banker — the one in Japan —was shrugged aside.
As long as money keeps flowing in, investors aren’t complaining.
The limelight will be on our central banker, Raghuram Rajan, this week as the RBI monetary policy is scheduled in the week after that.
The third quarter GDP data set for release towards the end of the week will, therefore, be of great interest to those obsessed with second-guessing RBI’s next move.
The expiry of the November derivative contracts will also influence the movement of stock prices this week. Nifty put call ratio above one implies that there could be a rally if short-squeeze takes place.
Open interest on the National Stock Exchange is also climbing to uncomfortable levels above ₹240,000 crore.
Action of foreign investors last week was interesting. Their net purchases have shrunk significantly and they have even been net sellers in some sessions.
This shows that global investors are getting restive with the continued sideways move.
Momentum indicators in the daily chart are weak. The price rate of change oscillator in the daily chart is dipping while the moving average convergence divergence oscillator is on the verge of signalling a sell.
Weekly oscillators are moving sideways. The price rate of change oscillator hovers in the neutral region. This implies that the medium-term trend is on the verge of reversing lower.
Sensex (28,334.6)
The Sensex moved sideways with an upward bias last week.
The week ahead: While there hasn’t been a significant breakout, the pattern on the daily chart now resembles a running correction. Traders would do well to take bullish bets and wait for yet another leg of the up-move.
The Sensex could move higher to 28,717 or 29,070 in the near term. Traders can play for these targets with a stop-loss at 27,760.
Supports for the week ahead are at 27,760, 27,430 and 26,845. The short-term view will turn murky only on a close below 27,430.
Medium-term trend: The Sensex is still placed at a critical medium-term resistance zone. Caution is required as long as the index does not make a sharp break above 28,500. If it does so, the next target is at 29,694.
Nifty (8,477.3)
The Nifty too closed on a strong note on Friday.
The week ahead: The movement over the last couple of weeks is increasingly appearing to be a consolidation pattern in an uptrend. Short-term traders can play long with a stop-loss at 8,300.
The index can move higher to 8,598 or 8,749.
Supports next week will be available at 8,200, 8,100 and 8,000. Wait for a close below 8,200 before reversing your short-term view.
Medium-term trend: We had mentioned the resistance in the zone of 8,400 and 8,450 in our last column.
The Nifty has managed to move above the upper band of this range, but the breakout is not emphatic.
If the index manages to hold above 8,450 this week, it can attempt to move on to 8,892.
Global cues
Global indices moved higher last week, reversing their short-term downtrends. The strong rally on Friday helped the US and European indices close with strong gains. Volatility also declined last week with the CBOE volatility index declining close to 12.
The chart pattern in the Dow Jones Industrial Average indicates bullish momentum. There is a running correction forming over the last three weeks.
Break from this correction can take the index higher to 18,550 or 19,139. The short-term view will stay positive as long as the index trades above 17,350.
The Nikkei was volatile but managed to close at the upper end of its current trading band at 17,350.
The strength in the dollar index is a negative for riskier asset classes such as equity in emerging markets.
Global markets got a new lease of life, thanks to the Chinese central bank and the ECB
Source: BusinessLine