Sunday, March 25, 2012
The Indian markets closed the week lower for fifth straight week. The Sensex fell 0.60% and the Nifty declined 0.75%
Major news for the week:
Mahindra Satyam agree to merge with Tech Mahindra
RIL D6 output hits all-time low shuts 6 wells
RBI limits gold loan by NBFCs to 60%
Rail Minister Mukul Roy rolls back some fare hikes
TRAI summons Airtel, Idea, Loop on MNP
The market may remain volatile as traders roll over positions from the near-month March 2012 series to April 2012 series. The March 2012 derivatives contracts expire on Thursday, 29 March 2012.
The next major trigger for the market is Q4 March 2012 earnings. The earnings season will begin in mid April 2012. Advance tax payout of top Indian firms for the last installment of 15 March 2012 was largely flat. A muted advance tax payment indicates that the revenues and profits of companies are under stress. Companies have to pay advance tax on their projected earnings a fortnight before the end of every quarter.
The market declined for the fifth week in a row due to uninspiring budgetary proposals and weak global markets. Finance Minister Pranab Mukherjee unveiled Union Budget 2012-13 last Friday, 16 March 2012, which set only modest targets for trimming a ballooning fiscal deficit and there was lack of any big-bang reform announcement in the Budget, dampening investor sentiment.
The move by the railway minister on Thursday, 22 March 2012, to rollback some of the tough proposals in the Railway Budget due to populist demands also unnerved investors. The weakness of the Indian rupee against the US dollar also left investors jittery.
The Telecom Regulatory Authority of India has proposed to regulate the duration, frequency, timing and audio levels of advertisements. TRAI, in its paper, says that free-to-air channels should not carry ads exceeding 12 minutes per hour (inclusive of 10 minutes of commercials and two minutes of self promotions) and pay channels not over six minutes of ads an hour. TRAI also says that for live telecast of sporting events, ads should only be carried during actual breaks. These rules already exist but are often breached, reports said. The regulator says that ads should not in any manner interfere with the programme use of lower part of screen to carry captions, static or moving alongside the programme. However, pay channels are unhappy with the TRAIs proposal as they feel that their primary source of revenue would take a hit. Advertising contributes about 60% to the revenues of paid channels. Also, due to leakages in the broadcasting system, pay channels depend more on advertising than subscription revenues, reports said. "TRAI has no business to meddle with the duration of ads. The objective of each channel is to make profits and it should work on the principles of free market," reports said quoting Paritosh Joshi, CEO, Star CJ and Director, Indian Broadcasting Federation. If and when the proposal is accepted, it remains to be seen if TV channels would hike their rates to make up for the dip in revenues.
After five days of protests on the the 1% hike in excise duty on gold and doubling of customs duty on unbranded jewellery announced in the Union Budget, bullion traders and jewellers reopened shops on Thursday, reports said. The country was losing Rs. 10bn daily due to the nationwide strike and is the first since 2005, reports said earlier. The strike was called by the All India Gems and Jewellery Federation on Mar 17. Finance Minister Pranab Mukherjee in Union Budget on Friday proposed doubling the customs duty on gold to 4% and imposing an excise duty on unbranded jewellery of 1%. Traders fear that the move would adversely affect the small businesses but benefit the big players. Jewellers were of the opinion that the new taxes would lead to various complications with regard to goldsmiths, manufacturers, wholesale businessmen and retailers, reports said. According to reports, small artisans who design jewellery for goldsmiths would not be subject to the hassle of registration for duty payment. Industry bodies believe that demand would take a severe hit. Bachhraj Bamalwa, Chairman of the All India Gems & Jewellery Trade Federation expects a decline of 40-50% in purchases due to higher prices. Reports state that the government has imposed and increased these duties to bridge the current account deficit gap, partly fuelled by record bullion imports last year. The jewellers’ group will continue to lobby the government to withdraw the levy on non-branded gold jewellery, reports said citing Bamalwa.
Goldman Sachs Group Inc. raised its recommendation on Indian equities citing expectations of some pick-up in the domestic economy and lower risks from the euro area debt crisis. The US investment bank upgraded Indian equities to "market weight" from "underweight", Goldman Sachs analysts led by Timothy Moe wrote in a report yesterday. "Asset markets around the world have discounted a lower probability of a more severe European debt crisis, and we believe these risks will remain relatively muted in the near term," the analysts wrote. "Growth will indeed pick up in India over the next one to two quarters." Goldman Sachs raised its March 2013 estimate for the S&P CNX Nifty Index to 6,100, up 17% from Thursday's closing level.
Apple announced it has sold three million of its incredible new iPad, since its launch on Friday, March 16. The new iPad features a stunning new Retina display, Apple’s new A5X chip with quad-core graphics, a 5 megapixel iSight camera with advanced optics for capturing amazing photos and 1080p HD video, and still delivers the same all-day 10 hour battery life* while remaining amazingly thin and light. iPad Wi-Fi + 4G supports ultrafast 4G LTE networks in the US and Canada, and fast networks around the world including those based on HSPA+ and DC-HSDPA. "The new iPad is a blockbuster with three million sold?the strongest iPad launch yet," said Philip Schiller, Apple’s senior vice president of Worldwide Marketing. "Customers are loving the incredible new features of iPad, including the stunning Retina display, and we can't wait to get it into the hands of even more customers around the world this Friday."
The new iPad is already available in the US, Australia, Canada, France, Germany, Hong Kong, Japan, Puerto Rico, Singapore, Switzerland, UK and the US Virgin Islands and will be available in 24 more countries starting at 8:00 a.m. local time on Friday, March 23 through the Apple Online Store (www.apple.com), Apple’s retail stores and select Apple Authorized Resellers, including Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, Greece, Hungary, Iceland, Ireland, Italy, Liechtenstein, Luxembourg, Macau, Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.
The new iPad Wi-Fi models are available in black or white for a suggested retail price of US$499 (US) for the 16GB model, US$599 (US) for the 32GB model, US$699 (US) for the 64GB model. iPad Wi-Fi + 4G for either AT&T or Verizon is available for a suggested retail price of US$629 (US) for the 16GB model, US$729 (US) for the 32GB model and US$829 (US) for the 64GB model. iPad is sold in the US through the Apple Online Store (www.apple.com), Apple’s retail stores and select Apple Authorized Resellers. Additionally, the incredible iPad 2 is now offered at a more affordable price of US$399 (US) for the 16GB Wi-Fi model and just US$529 (US) for the 16GB Wi-Fi + 3G model.
The win-loss score line for the Indian market now stands at 7 to 5. The strong momentum that one saw early in the year has clearly subsided now post the big events of March. It looks like market players are resigned to another grinding year ahead with no clear bias. At the same time, there is no dearth of headwinds at the moment. It will take a while for these uncertainties to abate.
As far as India is concerned the two big worries are sticky crude oil and persistent policy inertia at the Centre. Even the RBI is waiting for these two variables to sort of ease a wee bit before it starts slashing rates. Estimates of potential quantum of rate cuts by the RBI have been scaled back after the Budget.
All eyes are on the Government’s economic managers to see whether they are able to take the requisite decisions to pump-prime the domestic economy.
On the global front, market participants are increasingly worried about the situation in China even as concerns prevail over the sorry state of the eurozone.
India’s Comptroller and Auditor General (CAG) Vinod Rai said that a "draft report" on the coal mining scam actually existed, reports said. The final report by the CAG would be submitted in a month and would quantify losses, reports added. Providing some relief to the Government on the coal auction issue raked in Parliament on Thursday, India’s Comptroller and Auditor General (CAG) Vinod Rai told Prime Minister Manmohan Singh that the details in a newspaper report on matter were "exceedingly misleading". Media reports on Thursday stated that the CAG’s draft report on the ‘Performance Audit of Coal Block and Allocations’ revealed that 155 coal blocks were allotted to private companies without auction between 2004 and 2009 which caused the exchequer a loss of Rs. 10.7tn. About 100 companies, including private entities and public utilities in industries such as power, steel and cement benefitted from move, reports said. In a letter to the PM, the CAG said that the details in the news report were observations under discussion at a very preliminary stage and do not even constitute a pre-final draft, according to a recent statement issued on the CAG website. Also, the CAG cited a "change in thinking" over how to compute loss to the exchequer, pegged at Rs. 10.7tn in media reports. Reports said citing a CAG official that the figure was expected to qualify as gains to the companies and not loss to the exchequer. This statement would hold truth as the government did not receive any revenue or profit share or even licence fee on blocks allotted to entities. Interestingly, PM Manmohan Singh was in charge of the Coal Ministry for part of the period mentioned. Meanwhile, the government is trying to turn the guns on the BJP government as about 40 coal blocks were already auctioned before the UPA regime between 1993 and 2004.