Market Morning - 31st March 2011

SENSEX -     19,422.29        +132.11 (0.68%)


NIFTY -         5,823.65          +36.00 (0.62%)

Markets have had a good start today, with both the bourses trading 0.6% above yesterdays closing. 
Yesterday markets extended their gains for the seventh straight day. However a rise in crude prices and profit booking after the seven day rally might cap the upside.


Asian stock are trading flat at the moment

NIKKEI 225                       9,705.91     -2.88
HANG SENG INDEX      23,491.80     40.33

The government will unveil data on some wholesale price indices for the year through 19 March 2011 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST

US stock markets finished strong yesterday based on good employment figures which indicated an improving labour market.

DOW JONES INDUS. AVG                  12,350.60     71.60     0.58%
S&P 500 INDEX                                     1,328.26      8.82      0.67%
NASDAQ COMPOSITE INDEX            2,776.79     19.90      0.72%

 
US crude futures were up 37 cents a barrel or 0.35% to $104.64 a barre

Volatility may remain high as derivative contracts for the near-month March 2011 series are set for expiry today, 31 March 2011.

Market morning - 30th march 2011

SENSEX - 19,320.72         +199.92 (1.05%)

NIFTY -     5,794.60          +58.25 (1.02%)

Indian markets have shown strong performance in early trade. The Sensex is up by 1.07% and the broader index the Nifty is up by 1%.

All sectoral indices on both the exchange are in the green.
On the BSE Realty (+2.11%) and Consumer durables (+1.88%) are the highest performing indices.


Strong cues from Asian markets seem to be driving the positive start.

NIKKEI 225	9,656.11	+197.03	2.08%
HANG SENG INDEX	23,453.60	+393.24	1.71%

 

US stock markets closed strong yesterday.

DOW JONES INDUS. AVG 12,279.00 +81.13 0.67% S&P 500 INDEX 1,319.44 +9.25 0.71% NASDAQ COMPOSITE INDEX 2,756.89 +26.21 0.96%

Market Analysis - 29th March 2011

SENSEX  -  19,120.80        +177.66 (0.94%)

NIFTY -      5,736.35           +49.10 (0.86%)

The Indian markets witnessed a straight sixth day of gains as bullish trends continue to rule the market. The positive sentiment in the market stems from declining crude prices, easing inflation worries and most importantly the return of foreign investors on the street. FII's, who had been taking a lot of money out of the Indian markets since the start of the year, have started to invest again, as exchange data indicated.

Bombay Stock Exchange's Sensex ended at 19121.01, up 177.87 points or 0.94 per cent. The 30-share index touched a high of 19226.21 and low of 18944.82 in today's trade.

National Stock Exchange's Nifty closed at 5736.40, up 49.15 points or 0.86 per cent. The broader index touched a high of 5770.35 and low of 5680.70 intraday. 

The markets touched fresh 2 months high but then volatility returned in late afternoon session and the markets pared the gains. The profit booking could be attributed to the weak cues from European markets as they reversed initial gains.

Market breadth was negative on the BSE with 1110 advances against 1843 declines.

As per provisional figures, foreign institutional investors (FIIs) bought shares worth Rs 890.02 crore on Monday, 28 March 2011. FII inflow totaled Rs 3192.41 crore in five trading sessions from 22 March 2011 to 28 March 2011 as per data from the stock exchanges.

Crude continued its slide as the rebel forces continued to make advances against the Libyan forces of Gaddafi. Crude prices are easing as there is a belief that the Libyan conflict will be resolved soon and supplies restored. US crude futures were down 60 cents a barrel or 0.58% to $103.38 a barrel. Rising crude prices had created tension in Indian markets as India imports almost 70% of its crude requirement. With crude prices going down the inflation worries have also calmed a bit.

On the BSE all 13 sectoral indices were in the green. Auto (+1.52%), Teck (+1.35%) and Metal (+1.08%) led the gains on BSE.

IT pivotals rose on upbeat economic data in the US, the key market for Indian software exporters. India's largest software services exporter Tata Consultancy Services gained 2.17% after the company signed a contract with Credit Union Australia to implement core banking solution

Banking stocks extended recent gains after the government last week tabled banking sector amendment bill in parliament. India's largest bank by net profit and branch network State Bank of India rose 1.35%. Reportedly, the bank will launch its Rs 20000 crore rights issue after the first quarter of the fiscal year beginning in April 2011. The issue will raise half the amount needed to sustain the bank's growth over the next five years.

Oil & gas stocks rose after the ninth round of oil and gas block auctions closed on Monday. India's largest oil exploration firm ONGC advanced 1.90% on reports a consortia led by ONGC won 10 blocks in the latest round of bidding for oil & gas blocks in India. 

Telecom stocks were in demand on reports Communications and IT Minister Kapil Sibal on Monday met Prime Minister Manmohan Singh and Finance Minister Pranab Mukherjee to seek their intervention for the loans to telecom companies as the controversial 2G spectrum allocation virtually blocked flow of funds to the telecom companies. India's second largest listed cellular services provider by sales Reliance Communications jumped 4.18% to Rs 109.60 and was the top gainer from the Sensex pack.  

Shares of aviation firms rose after crude oil futures fell on hopes that Libyan oil may be back to the pipelines sooner than anticipated. Falling crude oil prices have eased worries about higher operational cost for airlines as jet fuel constitutes more than 50% of operating cost for airliners. The prices of jet fuel are linked to the crude oil prices. Jet Airways India (up 3.50%), SpiceJet (up 1.60%) and Kingfisher Airlines (up 1.45%), edged higher. 

European shares reversed initial small gains. The key benchmark indices in Germany, France and UK were down by between 0.20% to 0.53%. 

Asian stocks pared declines as better-than-estimated earnings in China and Hong Kong offset concerns economic growth in Japan will falter as the nation struggled to contain a partial meltdown at a nuclear plant. The key benchmark indices in China, Hong Kong, Singapore, Japan and Indonesia were down by between 0.03% to 0.86%. The key benchmark indices in Taiwan and South Korea rose 0.51% and 0.77%, respectively.

US stocks edged lower on Monday, 28 March 2011, after a late tumble undercut advances from earlier in the day, and as investors cautiously retreated ahead of key data reports later this week. The Dow Jones Industrial Average closed down 22.71 points, or 0.2%, at 12197.88. The Nasdaq Composite fell 12.38, or 0.5%, to 2730.68 and the Standard & Poor's 500-stock index shed 3.61, or 0.3%, to 1310.19.

Retail Investors confident of Indian equities

Retail investors in India seem quite confident about the performance of equities, reported Morgan Stanley in a survey it conducted. Those surveyed believe that the Sensex will give a return of 20%. This is in stark opposition of what global fund managers are predicting. Global fund managers and various institutions are predicting India to perform poorly compared to other emerging markets.

The survey also showed that investors perceive political instability and indecision as a concern than inflation. Investors don’t see much of a hike in the interest rates from current levels.

A Merill Lynch survey of global investors pointed out that India is among the least preferred of emerging markets. India's Sensex trades at 17.78 times estimated earnings, while China trades at 13.98 times, according to Bloomberg data. Among other leading emerging markets, Brazil trades at 10.71 times and Russia at 7.46 times.

Foreign investors who had invested almost $30 billion last year have sold a net of $1.6 billion so far. The Sensex has shed almost 7% so far. The general mood is that rising inflation is going to put pressure on growth.

A quarter of those surveyed believed that valuations are high at present levels and they will go for buying only on a correction. Among sectors, technology is the most preferred by retail investors whereas telecom is the least preferred. In 2010 technology was the best performing sector and telecom the worse.

As of today the markets are continuing with their recent bullish trend. Both the bourses are in the green, with Sensex crossing the 19000 mark and the Nifty above 5700.

Market Analysis - 28th March 2011

SENSEX  - 18,943.14       +127.50 (0.68%)

NIFTY     -  5,687.25        +33.00 (0.58%)

 

Indian stock markets rallied to touch 2 month highs in intraday. The Sensex crossed the psychologically important mark of 19,000. At the closing bell the Sensex was at 18,943.14 up 127.50 points while the broader index, the Nifty, closed at 5687.35 up by 33 points.

The positive index seen in the market was due to the fall in the crude oil prices. US crude futures were down 72 cents a barrel or 0.68% to $104.68. This helped ease the worries of rising inflation because of rise in crude. The significant advance made by the Libyan rebels came as good news as it seems that the Libyan crises might end soon and oil supplies will resume. Libya produces 1.7 million barrels of oil  daily and thus holds a significant place in world oil suppy.

Another news which boosted investor sentiment was that foreign institutional investors bought more of Indian equity than they sold, late last week. As per provisional figures, foreign institutional investors (FIIs) bought shares worth Rs 1446.18 crore on Friday, 25 March 2011. FII inflow totaled Rs 2302.39 crore in four trading sessions from 22 March 2011 to 25 March 2011 as per data from the stock exchanges.

The fresh FII interest in Indian equities can be attributed to the fact that the government has put forward some key reform bills in the parliament.The government had placed the Banking sector reform bill in the parliament on 22nd March.

Sensex

The market breadth, indicating the health of the market, was negative. On BSE, 1603 shares declined while 1306 shares advanced. A total of 101 shares remained unchanged. The breadth was strong earlier in the day.

 

On the BSE the sectors that advanced were, Auto (+1.52 %), Capital Goods (+1.27 %) and Bankex (+1.21 %). The sectors that led the fall were Health Care (-1.17 %), Realty (-0.56 %) and Metals (-0.29 %).

In the Sensex pack the top gainers were LIC Housing Finance (+7.93 %), M&M Financial services (+5.52 %), Tata communication (+4.69 %). LIC Housing Finance surged 5.37% following reports that LIC Housing Finance Asset Management Company, a unit of the company, is planning to start a Rs 500-750 crore real estate fund.

NIFTY

Billionaire investor and international investment icon Warren Buffett who was in his maiden visit to India last week said that he hopes to spend some money in India. His firm Berkshire Hathaway is looking to park funds in large investment destinations and India fits the bill perfectly, he said. India, according to him, is not an emerging market but a very big country with a large number of significant businesses. He said that Berkshire Hathaway would look at possible acquisitions in India as and when there were opportunities. 

The near term major trigger for the market is Q4 March 2011 results. The Q4 results will start trickling in from about mid-April 2011. 

European market edged higher on Monday, 28 March 2011, even as the gains were small. The key benchmark indices in UK, France and Germany were up by between 0.29% to 0.35%. 

Asian stocks dropped on Monday, 28 March 2011, as radiation hampered efforts to cool crippled nuclear reactors in Japan, and as company earnings missed analyst estimates. The key benchmark indices in Singapore, Japan, Indonesia, Taiwan and Hong Kong fell by between 0.27% to 0.67%. The key benchmark indices in South Korea and China were up 0.11% and 0.21%, respectively. 

US stocks rose on Friday, 25 March 2011, after upbeat results from technology giant Oracle Corp. and on data showing the economy grew more than previously estimated at the end of 2010. The Dow Jones Industrial Average finished up 50.03 points, or 0.41%, at 12220.59. The Standard & Poor's 500-stock index closed 4.14 points higher, or 0.32%, at 1313.80, and the Nasdaq Composite added 6.64 points, or 0.24%, to 2743.06. 

US real gross domestic product grew at a 3.1% annualized rate in the fourth quarter, revised up from the 2.8% pace reported one month ago, according to the Commerce Department.

The Free India - Liberalization of Telecom

The Indian telecom market is the second largest in the world after China. However a decade ago we were at the bottom of the pyramid in terms of subscriber figures. Today India is the world’s fastest growing telecom market. All of this has been possible by the policies framed by the government which allowed private companies to enter telecom market. The success of these private players has been phenomenal and they have left their public counterparts far behind.

AirTel, the largest Indian telecom company crossed the 200 million subscriber mark in the third quarter of 2011. The combined figure for both wireless and wireline subscribers stood at 806.13 million as on 31^st January 2011, out of which wireline contributed 34.94 million subscribers and wireless contributed 771.18 million subscribers.

The telecom market of late has seen intense competition with many new entrants like Uninor, Videocon etc.

Let us look back at what reforms have shaped this sector over the last 20 years.

The government opened the telecom sector in its New Economic Policy 1991. Following this telecom equipment manufacturing was de-licensed and value added services were opened up for the private sector. This opened up the cellular mobile services to the private sector. By framing the New Telecom Policy 1994 the government clearly announced its intention of liberalizing the sector.

New Telecom Policy 1994

Teledensity in India at that time was extremely low at .8 per 100 persons compared to the world average of 10. The main objectives of this policy were telecommunication for all and telecommunication within the reach of all. Telephone should be available on demand by 1997. All villages should be covered in the telecom network by 1997. Value added services available in International markets should be available in India too. The policy also aimed at making India an exporter of telecom equipment.

When this policy was framed there were only three incumbents in the market, the DoT, VSNL and MTNL. DoT had a pan India presence except in Delhi and Mumbai and was the policy making authority. MTNL was present in Delhi and Mumbai and VSNL provided international telephony. It was apparent that the DoT with its vast presence was a formidable competitor for any private player. Hence to create a level playing field the government decided to split up the DoT into two divisions, one policy maker and the other service provider. The service providing arm was later corporatized as BSNL. The DoT’s role was now limited to policy making only.

TRAI

The entry of private players gave rise to need of an independent regulator. With this view in mind the government set up the Telecom Regulatory Authority of India. TRAI’s mission is to create and nurture an environment of growth in the sector.

In 2000 the government passed an amendment to the TRAI act and created the Telecom Dispute Settlement and Appellate Tribunal (TDSAT) to take over all the adjudicatory and disputes from TRAI.

The New Telecom Policy 1999

The government in 1999 reframed the telecom policy to address the prevailing issues and to restore faith in the investment environment.

Under this policy it was sought to, strengthen the regulator and open National & International long distance to private players.

With this policy all sectors in telecom were opened up to the private sector.

Broadband Policy 2004

Realizing the potential of broadband services in a growing economy and the improvement in quality of life that it can bring through various services like tele-education, tele-medicine etc, the government declared the broadband policy in 2004. 

Through this policy broadband services using various technologies like ADSL, Wi Fi and Wi-Max were de-licensed. Broadband penetration in India stands at a dismal low figure of 10.7 million (2011) compared to the government target of 20 million by 2010. More needs to be done in this field to increase penetration of broadband services.

Foreign Direct Investment Policy

In Basic, Cellular Mobile, Paging and Value Added Service, and Global Mobile Personal Communications by Satellite, Composite FDI permitted is 74% (49% under automatic route) subject to grant of license from Department of Telecommunications subject to security and license conditions

FDI up to 74% (49% under automatic route) is also permitted for Radio Paging Service, Internet Service Providers (ISP's),

FDI up to 100% permitted in respect of the following telecom services, Infrastructure Providers providing dark fiber (IP Category I), Electronic Mail, and Voice Mail.

Future scope

The next phase of growth definitely lies in the rural areas. TRAI and DoT have made rural penetration an important target. But the low density in rural areas makes it a less attractive prospect for private players. Policy changes need to be initiated. Government should consider giving Tax breaks to attract private companies to rural areas. 

On the broadband front some long term thinking is certainly needed. Technology needed for this service is expensive and generally imported. Duties can be reduced so that it’s less expensive for players to procure the technology and then they can pass on these benefits to the end user in terms of lower charges. 

Consolidation is the buzz word. The market can’t sustain the current number of players. Competition has eroded the average revenue per user; the ARPU figures have been showing a downward trend in recent years. Government needs to frame policies for this purpose soon. 

New Telecom Policy

The 2G scam has forced the ministry to get into the clean up act and it has realized the need to amend to 11 year old telecom policy. The new policy will determine the direction that the sector takes.

Last 2 decades of reforms have established telecom as one of the fastest growing sector of our economy. But the recent rough patch that the sector has witnessed has reduced investor confidence.Its clear that the government needs to initiate new reforms so that investor confidence can be restored and the sector can witness a new phase of growth.

The Free India - Chronicles of a liberalized economy

This year we are celebrating the 20^th anniversary of the event that changed the economic landscape of country. It was probably the most significant event in our young country’s history, most significant since our independence. This event propelled India from the fringes of the world to the centre stage. Today, if India is counted as a future superpower then it is due to this one significant moment. I am talking about the Liberalization of Indian economy in 1991.

Today India stands as one of the fastest growing economies of the world. People world over believe that we will overtake the Chinese in the coming decade. Today we are a respected economic power and the world listens when India speaks. We are amongst the most attractive investment destinations of the world.

The conditions under which these reforms were introduced were forced upon us. India was almost bankrupt, foreign investment was zero and growth was at standstill. Clearly none of our politicians had the muscle or the will to overthrow the old socialist system that was prevalent in the country since the time of our first PM Jawarharlal Nehru. So in a way we might consider ourselves fortunate that desperate times forced our leaders, then Prime Minister P.V. Narshimha Rao and finance minister Dr. Manmohan Singh, to take desperate measures. Nonetheless it was a very monumental decision, a decision that would shape the future of the nation.

Gone were the days of License Raj and Public sector domination. Gone were the days of government interference in even the tiniest of matters. ‘Business’ was no longer a bad word.

Pre liberalization era private sector was dominated by families with affluence and long histories. Today entrepreneurship is the buzz word. Liberalization gave birth to a whole new generation of entrepreneurs who have created business houses from scratch. We have seen the rise of the Indian MNC, a phenomenon unimaginable 20 years ago. Today the whole world salutes the business acumen of Indian entrepreneurs.

Liberalization has been a major force for poverty alleviation. About 300 million, that is almost the entire population of United States, have come out of poverty. Liberalization has changed the social fabric of our society, making the bulging middle class the fuel that is driving this country. It is this middle class that the world has recognized as the strength of our economy. Future growth of our country will be driven by this ever growing middle class.

People were expecting that on the 20^th anniversary of our economy our finance minister Mr. Pranab Mukherjee might usher in a new wave of reforms, but this expectation did not come true. The finance minister decided to play it safe. But India does need a second wave of reforms. Many economists and thinkers have started raising this issue of new reforms.

“The Free India” is a series of articles wherein we will see the difference that these 20 years of reforms have made to various sectors. Some very promising and exciting sectors like IT enabled services and Telecommunication came into the limelight. Sectors like Banking have grown strong over the years. In fact service sectors have taken the lead and are the highest contributor to the country’s GDP.

It’s been 20 years, but not everything that we had set out to achieve has been achieved. India still hasn’t crossed into the territory of double digit growth rate. Many problems still ail our economy. Many reforms are required to give a boost to our economy. This series also intends to take a look at what future reforms are needed and what new opportunities might lay in these sectors.

I would like to start off this series by talking about my favourite sector – Telecom.