Greece’ worries continue to weigh

Domestic market started the first week of May month on disastrous note. The Indian bourses plunged for the second straight week tracking weak global cues due to lots of negative events such as China raising CRR, fraud case against Goldman Sachs, Australia imposing 40% tax on mining companies, worries of Greece' debt crisis that it could spread to other southern European nations such as Spain and Portugal and suspected trade glitch in the US markets. These negative occurrences dragged the market down across the globe overshadowing the upbeat data in the US and easing food inflation back home (coming down at 16.4% from 16.61%).

The Supreme Court (SC)’s decision on the dispute between Mukesh Ambani’s Reliance Industries and Anil Ambani’s Reliance Natural Resources over the supply of gas from the Krishna-Godavari basin was out today (May 7, 2010). The Supreme Court ruled in favour of RIL by 2:1.

SC judge Sathasivam declared that the brothers' memorandum of understanding (MoU) was not binding and that RIL and RNRL must renegotiate in six weeks. He said that the government owned all the gas assets till it reached the users. It added that production sharing contract (PSC) will overwrite all the prior agreements and the MoU between the Ambani brothers is not binding. The PSC dictates a price of $4.2 per mmbtu while RNRL wanted gas at $2.34 per mmbtu.

During the week, the market remained volatile as the Sensex swung over 852 points while the Nifty 294 points. In the week, the Sensex breached the significant 17000 levels and closed at 16796 lower by 790 points or (4.50%) while the Nifty also broke the crucial level of 5000 during last trading day in the week. However, the Nifty managed to close above 5000 to shut week at 5018, lower by 260 points or (4.93%).

On global front, continuous worries over Greece’ debt dragged the market down across the globe. All the major indices around the world closed lower over 3.5%. CAC 40 declined the most with losses of 6.83%.

Bears spared none, metal and realty scrips hitting the most with the BSE Metal down by 9.64% and BSE Realty shedby 9.52%. The remaining sectoral indices slipped between 0.57-5.82%.

Gainers’ in ‘A’ group list — BPCL that rose by 6.24%, followed by HPCL that surged by 6.13% and Everest Kanto that was up by 5.43%. Losers’ in ‘A’ list —Reliance Natural Resources that slid the most by 24.70% after Supreme Court ruled judgment against the company in RIL-RNRL gas dispute, followed by Gujarat NRE Coke that was down by 17.64% and Aban Lloyd that declined by 15.62%.

Foreign institutional investors (FIIs) tuned in to the net sellers after such a long time as Greece’ worries continue to hit the global markets, selling stocks worth Rs982 crore. Domestic institutional investors (DIIs) continued to be the net sellers, selling Rs778.90 crore worth of shares in the week.

In forthcoming week, index of industrial production (IIP) data for the month of March and inflation figures for the month of April along and earnings of major Indian Inc’s such as State Bank of India (SBI), Hindalco Industries, Reliance Natural Resources, Reliance Power and Reliance Infrastructure will be the key factor for market to determine its future path. However, on global front, mainly on how Greece’ bailout plan will go ahead and FIIs inflow will play significant role in deciding the markets course.