Unconvincing possibilities!

A likely impossibility is always preferable to an unconvincing possibility. - Aristotle.

Possibilities of sustaining higher levels remain unconvincing. Food inflation may be in the negative zone now, but that’s partly due to the base effect. Interest rate cycle appears to have peaked but a weak Rupee and stubbornly high crude are delaying the reversal in the RBI’s hawkish monetary policy. It is a question of when and not if as far rate cuts by the RBI is concerned.

The impending shift in the central bank's policy stance could act like a tonic for the markets in the short-term. But, that won’t be enough to revive economic growth. The Government must find a way out of the current mess and rollout important reforms. Even a declaration of intent should be suffice for now.



The start today is likely to be subdued due to weak Asian markets and overnight fall in European indices. Investors are worried about the ability of eurozone economies and banks to raise funding. US stocks recovered smartly from session lows. American bank shares rose on reports of possible new measures to help mortgage borrowers. But, the White House has denied such reports.

Meanwhile, the euro has slipped below $1.28 on concerns about European banks’ finances after UniCredit sold shares at a huge discount. Investors’ response to German and French debt auctions has been quite timid. All eyes are on monthly US payroll data expected later today. The last monthly jobs report of 2011 is expected to show further progress in hiring.

There will be a special one-and-a-half-hour session on the Indian bourses on Saturday. The session starts at 11:15 am and will close at 12:45 pm.

The FIIs were net buyers of Rs 3.81bn in the cash segment on Thursday, as per the provisional figures released by the NSE. The domestic institutional investors (DIIs) were net sellers of Rs 2.89bn.

The FIIs were net buyers of Rs 5.15bn in the F&O segment on Thursday, according to NSE data.

The foreign funds were net buyers of Rs 2.57bn in the cash segment on Wednesday, the SEBI data shows. Mutual funds were net sellers at Rs 1.32bn in the cash segment on the same day.

Global Data Watch: Switzerland CPI, EU consumer confidence, EU retail sales, EU unemployment report, German factory orders, Canada unemployment rate, US non-farm payrolls and US unemployment rate.

Kingfisher Airlines and SBI could be in focus on the latest news about turbulence in the domestic aviation sector. Mcleod Russel has forecast a 14% rise in profits. Auto companies will remain in the spotlight due to the ongoing Auto Expo in New Delhi.

Brent crude slipped after data showed a surprise build in US stockpiles while renewed strength in the dollar encouraged traders to shun riskier assets. Gold rose on Thursday and was on track to extend to a fifth straight day of gains.



Sensex consolidates further…Nifty ends flat

After enjoying two terrific sessions at the start of the new year, the Indian equity markets have entered into a consolidation phase. It may be recalled that the BSE Sensex had surged by more than 400 points on Tuesday after advancing modestly on Monday. After coming close to 4800, the NSE Nifty erased all of the session's gains and slipped into the negative terrain in late afternoon trade. During the day, the Sensex also came within striking distance of 16,000. However, it was unable to sustain the momentum.

Even the negative food inflation number for late December and possibility of some monetary easing by the RBI later this month were unable to cheer up the bulls.

Finally, the BSE Sensex ended at 15,857, down 25 points from the last close. It earlier touched a day's high of 15,980 and day’s low of 15,809.

The NSE Nifty closed at 4749.95, nearly unchanged. The index hit an intra-day high of 4780 and an intra-day low of 4730.

The sentiment was weak after the European markets opened with a negative bias and extended the fall. Markets in Italy and Spain were particularly under strain amid worries about their ability to finance their swelling budget deficits. Markets have turned jittery again following a lackluster debt auction in Germany and France.

Also, Greek Prime Minister Lucas Papademos has warned that his nation may face economic collapse as soon as March. A disappointing Rights Issue by Italian lender UniCredit SpA has also added to the European fiscal woes.

Important economic reports are also due from the US in the next two days. Automatic Data Processing (ADP) will release its employment report on Thursday, just ahead of weekly jobless claims data from the US government. On Friday, the nonfarm payrolls report for December is due. Many retailers will be reporting December sales totals on Thursday.

"The early bounce across world stocks has tapered off a wee bit as old worries have returned to haunt global investors. Italy and Spain remain in focus amid worries about their precarious fiscal health. The bond auctions in Germany and France have also been a tad disappointing.

The US monthly jobs data due on Friday will be keenly tracked to check the state of the labour market in the world's largest economy. Meanwhile, the primaries have started in the US for the end-of-the-year Presidential elections.

Back home, data on direct tax collection and ECB mop-up are reflecting underlying strain in the domestic economy. So, one must wait for more decisive indications of a turnaround before committing money in equities. Upcoming reports on the IIP and inflation will give further insights into the health of the Indian economy.

Market players would also tune into corporate commentary during the upcoming results season to learn about business sentiment. Crude oil has spiked on Iran’s threat to block oil shipments as ‘western’ powers get ready to impose sanctions on Tehran for it’s reluctant to give up the atomic ambitions. Any further escalation of tension in the Pursian Gulf is the last thing that the markets need at this juncture. So watch this space carefully," says Amar Ambani, Head of Research, IIFL - India Private Clients.

Among the 30 stocks of Sensex, JP Associates, Bajaj Auto, Tata Motors, Hero Motocorp, L&T, M&M and Cipla were among the leading gainers.

DLF, NTPC, Reliance Industries, Maruti, Hindalco, STER, ONGC and Coal India were among the laggards on the BSE.

The market breadth was quite healthy as the broader indices outperformed their Large-Cap peers. The India VIX on the NSE was down ~2% at 25.91 after touching a day's peak of 26.60 and day's low of 25.72.

Among the BSE sectoral indices Realty, Oil & Gas and Metals indices were the top losers while the Auto index was the biggest gainer adding nearly 1%.

TV18 Broadcast, Network 18 Media, Wockhardt, United spirits, GSPL, DHFL, Adani Enterprise, HCC, TTML, JSW Energy, Jain Irrigation, HDIL, HPCL and Kingfisher Airlines were among the big losers in the BSE 500 index.

Kinetic Motor, Kinetic Engineering, GEECEE, Supreme Infra, MMTC, Welcorp, Brigade Enterprise, KEC International, Kiri Industries, Prestige Estates, Anant Raj Industries, Mindtree, Graphite India and Shriram Transport were among the big winners in the broader market.

Wabco India, United breweries, Gujarat Gas, Indiabulls financial, Bosch, Sun Pharma, ACC, UTV Software and DLF saw a spurt in trading volumes.

Shares of Brigade Enterprises surged 7%, extending the advance to three straight days amid media reports that the Bangalore-based company was looking to raise Rs. 1.5bn through private equity firms by selling part of stake in a commercial project.

Hero MotoCorp snapped a three-day decline after it was added to Credit Suisse’s focus list. The stock gained 2.5%.

Gati shares rose over 5% after the company told the exchanges that Goldman Sachs holds securities that can convert into ~25.79% stake in the company. On Dec. 14, Gati had said that it had raised US$22mn through overseas convertible bonds issue.

Hexaware shares erased gains to close flat. Media reports suggested that its founder Atul Nishar, PE investors General Atlantic and ChrysCapital have asked investment banks to find suitors for their combined 53% stake in the mid-tier IT company.

Orchid Chemicals was up 2.6% after the company announced successful completion of phase I trial of its orally administered PDE4 inhibitor molecule OCID 2987 in Europe.

Hindustan Copper stretched its advance to a fifth straight day despite the Union Cabinet yesterday deferring a decision on allowing public sector companies to buy back shares. Ministries like Petroleum and Coal are reportedly not in favour of the buyback as the move would have an adverse impact on the cash balance of PSUs under them.

MMTC too closed higher amid hope that SEBI’s initiatives and compulsion on fiscal deficit will force the Centre to curtail its shareholding in the state-run trading company.

Kingfisher Airlines was down 3.6% after Bharat Bhushan, the Director General of the DGCA said in its financial surveillance report on December 28 that it was unsafe for the cash-strapped Vijay Mallya carrier to fly and that it should be wound up.

The company however denied the DGCA claims. Kingfisher Airlines also denied a report that it was considering laying off ~2,000 employees and longer working hours for its staff.

Network 18 and TV18 shares snapped a three-day rally that was powered by the announcement of a deal with Mukesh Ambani's Reliance Industries Ltd.

The multi-stage transaction is likely to help TV18 group buy 12 regional TV channels from the Eenadu group while also helping the TV18 promoters to subscribe to the rights issues of the two listed entities.