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Union Budget 2010-2011 Highlights

The Indian economy was facing grave uncertainty. Growth had started decelerating when the interim and full budget for 2009-10 were presented.

At home there was added uncertainty because of subnormal southwest monsoon.

Yet, the economy now in a far better position than it was eight years ago.

India weathered the economic crisis well and emerged from the global slowdown faster than any other country.

First challenge before the government is to quickly revert to high GDP growth path of 9%.

Expects 10% economic growth in the near future.

Second challenge is to harness economic growth to make it more inclusive and consolidate gains.

Third challenge is to overcome weakness in government’s public delivery mechanism; a long way to go in this.

Impressive recovery in the past few months. Can witness faster recovery in the coming months.

Food security has been strengthened.

But bottleneck of the public delivery mechanism can hold us back.

Fiscal year 2009-10 was challenging for the economy.

Focus shifted to non-governmental actors and an enabling government. Government now concentrates on supporting and delivering services to the poorer sections.

Economy stabilised in the first quarter of 2009 itself.

18.5% manufacturing growth in December was the highest in two decades.

Figures for merchandise exports for January encouraging after turnaround in November and December last year.

Double digit food inflation last year due to bad monsoon and drought-like conditions.

Government conscious of the price rise and taking steps to tackle it.

Erratic monsoon and drought-like conditions forced supply-side bottleneck that fuelled inflation.

Need to review stimulus imparted to economy last year to overcome the recession.

Need to ensure that the demand-supply imbalance is managed.

Need to make growth more broad-based.

Need to review public spending and mobilise resources.

Status paper on public debt within six months.

Government hopes to implement direct tax code from April 2011.

Earnest endeavour to implement general sales tax in April 2011.

Government will raise Rs25,000 crore from divestment of its stake in state-owned firms.

Kirit Parekh report on fuel price deregulation will be taken up by petroleum minister Murli Deora in due course.

Nutrient-based fertiliser subsidy scheme to come into force from April 1 this year.

Nutrient-based fertiliser subsidy will reduce volatility of subsidy and also reduce it.

Market capitalisation of five public-sector undertakings listed since October increased by 3.5 times.

FDI inflows steady during the year. Government has taken series of steps to simplify FDI regime. Intends to make FDI policy user friendly by compling all guidelines into one document.

Government has decided to set up apex-level Financial Stability and Development Council.

RBI considering issuing banking licences to private companies. Non-banking finance companies will also be considered if they meet the criteria.

Government to provide Rs16,500 crore to public-sector banks to maintain tier-I capital.

Government to continue interest subvention of 2% for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises.

Government to provide Rs300 crore to organise 60,000 pulse and oilseed villages and provide integrated intervention of watershed and related programmes.

Rs200 crore provided for climate-resilient agriculture initiative.

Government committed to ensuring continued growth of special economic zones.

Need to take firm view on opening up of the retail sector.

Deficit in foodgrains storage capacity to be met with private-sector participation.

Period for repayment of loans by farmers extended by six months to June 30, 2010, in view of the drought and floods in some parts of the country.

Interest subvention for timely repayment of crop loans raised from 1% to 2%, bringing the effective rate of interest to 5%.

Road transport allocation raised by 13% to Rs19,894 crore.

Proposal to maintain thrust of upgrading infrastructure in rural and urban areas. IIFCL authorised to refinance infrastructure projects.

Rs1,73,552 crore provided for infrastructure development.

Allocation for railways fixed at Rs16,752 crore, an increase of Rs950 crore over the last financial year.

Government proposes to set up Coal Development Regulatory Authority.

Mega power plant policy modified to lower cost of generation; allocation to power sector more than doubled to Rs5,130 crore in 2010-11.

Government favours competitive bidding for coal blocks for captive power plants.

Rs500 crore allocated for solar and hydro projects for the Ladakh region in Jammu & Kashmir.

Clean Energy Fund to be created for research in new energy sources.

Allocation for new and renewable energy ministry increased by 61% to Rs1,000 crore.

One-time grant of Rs200 crore provided to Tirupur textile cluster in Tamil Nadu.

Allocation for National Ganga River Basin Authority doubled to Rs500 crore.

Alternative port to be developed at Sagar Island in West Bengal.

Draft of Food Security Bill ready, to be placed in the public domain soon.

Outlay for social sectors pegged at Rs1,37,674 crore, accounting for 37% of the total plan allocation.

Plan allocation for school education raised from Rs26,800 crore to Rs31,036 crore in 2010-11.

25% of plan outlay earmarked for rural infrastructure development.

Plan allocation for health and family welfare increased to Rs22,300 crore from Rs19,534 crore.

For rural development, Rs66,100 crore have been allocated.

Allocation for National Rural Employment Guarantee Authority stepped up to Rs40,100 crore in 2010-11.

Indira Awas Yojana’s unit cost raised to Rs45,000 in the plains and Rs48,500 in hilly areas.

Allocation for urban development increased by 75% to Rs5,400 crore in 2010-11.

1% interest subvention loan for houses costing up to Rs20 lakh extended to March 31, 2011; Rs700 crore provided.

Allocation for development of micro and small-scale sector raised from Rs1,794 crore to Rs2,400crore.

Rs1,270 crore provided for slum development programme, marking an increase of 700%.

Government to set up National Social Security Fund with initial allocation of Rs1,000 crore to provide social security to workers in the unorganised sector.

Government to contribute Rs1,000 per annum to each account holder under the new pension scheme.

Exclusive skill development programme to be launched for textile and garment-sector employees.

Allocation for woman and child development increased by 80%.

Plan outlay for the social justice ministry raised by 80% to Rs4,500 crore.

Plan allocation for minority affairs ministry raised from Rs1,740 crore to Rs2,600 crore.

Financial-Sector Legislative Reforms Committee to be set up.

Rs1,900 crore allocated for Unique Identification Authority of India.

A unique identity symbol will be provided to the rupee in line with the US dollar, British pound sterling, euro and Japanese yen.

Defence allocation pegged at Rs1,47,344 crore in 2010-11 against Rs1,41,703 crore in the previous year. Of this, capital expenditure would account for Rs60,000 crore.

Planning Commission to prepare integrated action plan for Naxal-affected areas to encourage “misguided elements” to eschew violence and join the mainstream.

Gross tax receipts pegged at Rs7,46,656 crore for 2010-11, non-tax revenues at Rs1,48,118 crore.

Total expenditure pegged at Rs11.8 lakh crore, an increase of 8.6%.

Fiscal deficit at 5.5%.

Fiscal deficit seen at 4.8% and 4.1% in 2011-12 and 2012-13, respectively.

Non-plan expenditure pegged at Rs37,392 crore and plan expenditure at Rs7,35,657 crore in budget estimates. Proposed increase of 15% in plan expenditure and 6% in non-plan expenditure.

Cash subsidy for fuel and fertiliser instead of previous practice of bonds to continue.

Fiscal deficit pegged at 6.9% in 2009-10 as against 7.8% in the previous fiscal.

Government’s net borrowing to be Rs3,45,010 crore for 2010-11.

Income-tax department ready with two-page Saral-2 returns form for individual salaried assesses.

Personal income-tax rates pruned:

Income up to Rs1.6 lakh — nil

Income above Rs1.6 lakh and up to Rs5 lakh — 10%

Income above Rs5 lakh and up to Rs8 lakh — 20%

Income above Rs8 lakh — 30%

Additional deduction of Rs20,000 allowed on long-term infrastructure bonds for income-tax payers; this is above Rs1 lakh on savings instruments allowed already.

Investment-linked tax deductions to be allowed to two-star hotels anywhere in the country.

Weighted deduction of 125% for payments to approved associations doing social and statistical research.

One-time interim relief to housing and real-estate sector.

Businesses with a turnover of up to Rs60 lakh and professionals earning up to Rs15 lakh to be exempted from the obligation to audit their accounts.

Housing projects allowed to be completed in five years instead of four to avail of tax breaks.

Revenue loss of Rs26,000 crore on direct tax proposals.

Central excise duty on all non-petroleum products raised to 10% from 8%.

FM increases customs duty on crude oil to 5%, on diesel and petrol to 7.5%, and on other petroleum products to 10%.

Structural changes in excise duties on cigarettes, cigars, and cigarillos.

Clean energy cess of Rs50 per ton to be levied on coal produced in India.

Concessional excise duty of 4% on solar cycle-rickshaws.

Balloons exempted from central excise duty.

Customs and central excise proposals to result in a net revenue gain of Rs43,500 crore.

More services to be brought under the service tax net.

Certain accredited news agencies exempted from payment of service tax.

Net revenue gain from tax proposals pegged at Rs20,500 crore.

Indian Stock Market Outlook: 1st Feb – 15th Feb 2010

The market corrected a sizeable percentage in the last few trading sessions giving opportunities to long-term investors to enter the market selectively. Though there is no definite signal of correction to be over so one must adopt cautious approach and buy in trances at this level. The market is still below 16600 on the Sensex and 4950 on the Nifty. Only on couple of close above 16600 we can see a move to 17000 -17300 zone where one should again take a review of the stock portfolio. On the downside one can expect support around 16200 and 4850-4870 range. So unless the index surpasses such levels the timing of next up-move is not clear. The gut feeling is there is still some downtrend left in the market which may resume after a short break prior to budget.

The market internals indicate a higher turnover due to the selling. The number of trades was higher and the average ticket size per trade was higher, indicating a selling bias. The capitalisation of the market was lower in line with a downtick session. The f&o cues show the bears squaring up shorts on declines.

Stock Ideas: Long-term investors should give a look at telecom sector, which is presently in a bearish/consolidation phase. Handsome gains can only be achieved with patience and conviction. If one believes in the long-term growth, prospects of telecom sector it must not be overlooked then at this point of time. Slow and steady accumulation at every dip is the best technique. But one should stick with the market leaders (bharti, idea, rcom) unless there is fancy for any particular scrip the sector.

Happy Investing!

By TheStockWorld.com

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DISCLAIMER: The Stock Trading Calls/Investment ideas by TheStockworld.Com and Group Companies associated with it should not be construed as an offer to buy or sell securities, nor advice to do so and are for information purposes only and under no circumstances should be used for actual trading. You agree to assume complete and full responsibility for the outcomes of all trading decisions that you make on the basis of above trading calls, including but not limited to loss of capital. Consult a qualified financial advisor before making any trading/investment decisions.

Stock Pick for 2010

Stock Pick for 2010

 

The stock market in India is likely to extend its recent rally into 2010 but it is unlikely to repeat 2009′s spectacular rise. It is expected that the Indian economy will do well as well the corporate earnings will do well but one shouldn’t expect the market to rise sharply as was seen last year. The market will look forward to several issues that may dent the upward momentum. Issues like withdrawal of stimulus measures, bad monsoon, direct tax code implementation (as per the draft code) may pose an upper cap on the indices. But undoubtedly these issues won’t hamper the long term bull market trend and it will march ahead in the long term. 2010 may not see a new high but there is high possibility of market crossing 20000 mark this year.

One has to be cautiously optimistic while picking stocks keeping in mind the recent market mayhem which taught every investors and traders that only companies with good fundamentals, strong balance sheet with low debt component and strong order book has only been able to withstand and overcome the crisis. One has to keenly watch the Government policy and their disinvestment decisions.

PSU stock will be the flavour of the season if the Government fulfills the promises. PSU stocks has already rallied to a great extent and one must not jump into any such stocks without judging the valuations else there will be high chance of burning their fingers. Midcap PSU bank stocks like Dena Bank, Uco Bank, Indian Overseas Bank, Allahabad Bank, Central Bank still have some steam left in them and if Q3 and Q4 results are promising they may rally further. NTPC, REC, BHEL, BEL are some good long term pick among the PSU arena.

Telecom is expected to under-perform the bourses in the medium term and any correction sooner or later will bring those stocks at attractive buy levels for a long-term investment decision. Bharti, Rcom and Idea should be keenly watched as a value pick for long-term investment only after decent correction.

Power and infrastructure will continue to do well despite high valuations among front liners. LT, CESC one must closely watch and can be bought on every dip with good potentiality of appreciation.

And last but not least, Reliance Industries must not be overlooked and it must be noted that despite its gas dispute issue it has all quality to give decent returns and must form a part of a long term portfolio.

Happy Investing!

By TheStockWorld.com

DISCLAIMER: The Stock Trading Calls/Investment ideas by Thestockworld.Com and Group Companies associated with it should not be construed as an offer to buy or sell securities, nor advice to do so and are for information purposes only and under no circumstances should be used for actual trading. You agree to assume complete and full responsibility for the outcomes of all trading decisions that you make on the basis of above trading calls, including but not limited to loss of capital. Consult a qualified financial advisor before making any trading/investment decisions.

INDIAN STOCK MARKET IN 2010

INDIAN STOCK MARKET IN 2010

The prevailing economic conditions, both domestic and global, suggest the Indian stock market is poised to continue to rally in 2010 even though US and European Markets have yet to recover from recession effect. Key factor remains the impact of Q4 results and strong GDP growth of around 8%. However point of caution needs to be the phase wise withdrawal of financial support given by Indian government to the market.

So far, the recovery in India has been driven by domestic consumption and government expenditure. However, corporate investment is expected to surge in 2010 due to the strong GDP growth which will increase capacity utilisation. Stocks in the infrastructure and power sectors may be the front runners in 2010 as they receive strong policy support from the Indian government. But one must be cautious that the interest rate cycle might start moving up with the strong GDP performance and relatively high inflation. If it does, banking stocks will be affected severely as was seen in the past.

We have witnessed a global financial crisis in 2008-09 which is still very much an unforgettable incident and taught us good lessons. During the bull rally (2003-2007) there was considerable exuberance. This was the time when interest rates were low. Credit was available and that too cheaply. Not just that, corporate profits were growing at a healthy rate. Stock markets were notching strong gains. But the global credit crisis changed all that. The abundant liquidity, not surprisingly, led to asset bubbles that finally burst. So if one learned a good lesson should go for companies with less debt, enough cash and strong return ratios. These are the ones who will be able to tide over the crisis and generate strong returns to shareholders in the long term beyond 2010.

Happy Investing!

Stock to watch out for in 2010: Larsen & Toubro, BHEL, CESC, Dena Bank, Karnataka Bank, Indian Overseas Bank.

By TheStockWorld.com

visit us at http://www.thestockworld.com 

DISCLAIMER: The Stock Trading Calls by Thestockworld.Com and Group Companies associated with it should not be construed as an offer to buy or sell securities, nor advice to do so and are for information purposes only and under no circumstances should be used for actual trading. You agree to assume complete and full responsibility for the outcomes of all trading decisions that you make on the basis of above trading calls, including but not limited to loss of capital. Consult a qualified financial advisor before making any trading decisions.

INDIAN STOCK MARKET: IS IT TIME TO JUDGE THE VALUATION?

The Bull-run

One of the major factors behind the bull-run of 2007 was the USD 17 billion of foreign money that came into India which was mostly speculative money. Not long term capital that large pension funds invest with a 10 year and 20 year time frame. But quick, in-and-out money that hedge funds were happily gambling with. The swine flu of the western capitalist society had invaded India. Such “hot money” began to fund highly irrational ventures – like this concept of land banks accumulated by various real estate developers. But the injection of this money itself made the irrational, look rational. Every barren piece of land stolen from illiterate villagers was seen as a glossy township with billions of dollars of future cash flow.

 

The fall

The Indian stock markets wobbled from their January 2008 peak largely because of the fears of inflation. The price of commodities including oil and wheat had surged. India was seen to be a victim of a high inflation environment. When India did actually face a threat and problem from the global economic crisis and financial meltdown, the policy makers were helpless. And thus when the global crisis hit – India, one of the lesser affected economies – was one of the worst hit stock markets in the world. Market fell from 21000 levels to 14000 levels. But again the markets fell to 8,000 after September 15, 2008 when Lehman went bust.  That is because the foreign hedge funds went scrambling back home with their cash. And there was no buyer to absorb their vicious selling.

 

The Comeback

The BSE 30 Index was stuck in the 8,000 to 10,000 range for 5 months between October 2008 and March 2009. But, after breaking the 10,000 barrier in March, the market marched on relentlessly to 12,173 on May 15th – the last trading day before the election results. And after the election results the index surged dramatically to 15000 plus levels. This rise was so rapid – and against the mainstream thinking – that most people were left out. In fact, many lost money by going “short” – betting that the markets would decline.

 

What next?

The BSE-Sensex has moved up by nearly 80% from the bottom. Back then, the index was trading at an attractive price to earnings valuation of 12 times. Presently it is trading at about 20 times. Historically, it is believed that the BSE-Sensex has traded at a price to earnings multiple of around 15 to 16 times. Therefore, if one wishes to view this from an FY11 perspective, considering that we expect returns of 12%-13% on a CAGR basis from the Sensex, the earnings of the companies that comprise the Sensex will have to grow at a CAGR of 27%. And therein lies the difficulty. For a GDP that is expected to log in nominal growth rate in the region of 10%-12%, a 27% CAGR in earnings looks a tall order indeed. Thus, unless there is a significant re-rating of the Sensex, where in the P/E remains the same or goes even higher, things do not look rosy for an investor from a FY11 perspective. He will have to rely on his stock picking skills to achieve any outsized returns.

 

The BSE-Midcap Index also has moved up by nearly 108% in the last three months. From a valuation of 9 times that it garnered during the first week of March, currently the index is trading at a multiple of 17 times. On the other hand, the BSE-Smallcap Index has moved up by 123% in the past three months and is currently trading at a price to earnings multiple of 14 times. Three months back it was trading at a multiple of 6 times. Although these indices are not as steeply priced as the Sensex, the upside, if any, is likely to be only marginal from the current levels.

 

Thus, unless earnings re-rate dramatically, fundamentals, at least in the medium term, point towards a correction of the magnitude of 20%-25%, which will again take us back to the fair valuation range.

 

By:  TheStockWorld.com

INDIAN STOCK MARKET REVIEW: 1ST SEPT 2008

MARKET MAY EDGE HIGHER WITH POSITIVE CUES

Better than expected inflation numbers and in-line Q1 GDP growth helped the bulls to take charge and the Indian equities managed to close with modest gains in a volatile week. Frontline indices reacted positively to fall in inflation and witnessed sharp run up despite slow down in Q1 GDP growth. Rate sensitives, infrastructure, oil, metal and technology stocks led the rally. Midcap and small cap stocks also sailed in the same boat. Sensex rose 163.04 points or 1.13% to 14,564.53 in the week ended Friday, 29 August 2008. The S&P CNX Nifty gained 32.55 points or 0.75% at 4,360 in the week.

The market started the week with marginal gains on falling crude oil prices and reports of near-normal monsoon. The market slumped later on expectations of higher weekly inflation figures. However, the market ended the week on a buoyant note as inflation fell for the first time in 28 weeks. Inflation declined to 12.40% for the week ended August 16 as against 12.63% due to lower prices of some minerals and fuels.

Gross Domestic Products (GDP) growth has declined to 7.9% in the first quarter as against 9.2% in same period of last year and 8.8% in previous quarter. These numbers were not a big disappointment for markets as numbers were in line with analysts’ expectations and seemed like already factored in by markets.

In the coming week, marketmen expects that gains will be extended further however a further rise in crude oil prices may act as a spoilsport for the stock markets. Also the market will closely watch developments on the Indo-US nuclear deal in the coming week.

Technical View: Sensex made a low of around 14000 close to the 50 % retracements. Inflation and crude cues are giving a positive cue to markets for a while but the range bound markets could remain for some more time to come.

Stock to Watch: IDFC, RCOM, CENTURYTEX.

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INDIAN STOCK MARKET WEEKLY REVIEW

WEEKLY UPDATE: 18th AUGUST 2008 - 22nd AUGUST 2008
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Market lost the steam after a five day rally to edge lower in truncated week due to poor industrial growth, fall in car sales after 33-months and rebound in crude oil prices from a 3-month low. The sentiment turned bearish after the Prime Minister’s Economic Advisory Committee (EAC) trimmed its forecast for GDP growth in FY09 to 7.7%. It also expects inflation to shoot up to 13% shortly before it softens. The BSE Sensex and the S&P CNX Nifty settled below their psychologically important levels of 15,000 and 4,500 respectively. The barometer index BSE Sensex declined 443.64 points or 2.92% to 14,724.18 in the week ended Thursday, 14 August 2008. The S&P CNX Nifty lost 98.80 points or 2.18% at 4,430.70 in the week.

Interest-rate sensitive sectors bore the brunt of the selling after EAC indicated a slowdown in GDP growth and its expectations of higher inflation. Also, concerns about shrinking economic growth in key global economies and continued financial sector woes had an adverse impact on the sentiment. Slowdown in industrial production hit the capital goods stocks. Metal and power stocks were the other major losers. IT stocks bucked the negative trend to close higher after the Rupee depreciated to 42.90 against the US Dollar.

Inflation had hit 12.44% and remains a major concern for the central bank. High inflation will mean that tight monetary policy stance by the central bank may continue. On 29 July 2008, the Reserve Bank of India (RBI), at its quarterly policy review late month raised repo rate by 50 basis points to a seven-year high of 9% to curb inflation and dampen inflationary expectations. RBI also raised the cash reserve ratio (CRR), the proportion of funds that banks must keep on deposit with it, by 25 basis points to 9%. And this relentless monetary tightening by the RBI has finally started to catch up with industrial growth. A slowdown in the manufacturing sector pulled down India‘s industrial growth in June 2008 to 5.4% from 8.9% a year ago. This is however higher than 4.1% growth as per revised figures in May 2008. The index of industrial production (IIP) went up 5.2% in Q1 June 2008 compared to 10.3% in Q1 June 2007.

In the coming week, sentiment is likely to remain edgy in the near term dampened by a series of negative news. Car sales recorded a dip in sales for the first time in 33 months as interest rates, inflationary pressures and hike in fuel prices dented demand. Passenger car sales declined 1.7% to 87,724 units in July 2008 over July 2007, according to data released by the Society of Indian Automobile Manufacturers. With no key events scheduled in the forthcoming week, the Indian stock market will closely watch global stock markets for direction. However, on the positive side, a further fall in crude oil prices may boost the sentiment. Crude oil prices have declined sharply from record high $147.27 a barrel hit on 11 July 2008. US crude settled below $114 on Friday, 15 August 2008 due to stronger US dollar.

From 21^st August, NSE will introduce 39 new stocks to the F&O segment. They are ABG Shipyard, Akruti City, Asian Paints, Balaji Telefilms, Concor, Core Projects, Deccan Chronicle, Dish TV, Everonn, Firstsource, GSPL, GTL Infrastructures, HCL Infosystems, Indiabulls Real Estate, ICSA, KLG Systel, KS Oils, MIC Electronics, Mindtree Consulting, Mercator Lines, Monnet Ispat, MRF, Nava Bharat Venturs, Noida Toll, Opto, Orbit Corp, Prism Cem, PTC, Reliance Ind Infra, Sintex, SREI, Thermax, Torrent Power, TV18, UCO Bk, UTV, Voltamp, Walchandnagar.

Marketmen will also watch the review of PN notes by SEBI. It is anticipated that SEBI may extend the period for unwinding PNs, on underlying derivatives from 18 months to 24 months.

Technical View: Sensex has given a weekly close below 15050 and broken the bearish Rising Wedge pattern. Therefore, it can test the previous low of 12500 again in the coming days as a measured objective of the Wedge. However, multiple support levels exist for Sensex at the region 14400-14600. below that 14000-14050 and 13650-13700 are the levels to watch. For Nifty, 4370-4390 may provide a bit of cushion below that levels are 4320/ 4220/4150/4120.

From the F&O perspective, only Nifty 3900 put saw any significant buildup. On the other hand, 4500 and 4600 calls have been written a lot. So it looks like that market participants are far more interested to write calls as if they are expecting a level of 3900 in this expiry itself.

VIX has taken support and bouncing back to higher levels means markets are going to be choppy and volatile.

INDIAN STOCK MARKET WEEKLY REVIEW

WEEKLY MARKET UODATES: WEEK STARTING 10th AUGUST 2008

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A host of positive factors like sharp fall in crude oil prices, recovery in rainfall and buying by foreign institutional investors helped Sensex close above crucial 15,000 mark. For the week ended August 9, the Sensex settled at an eight-week high of 15,167.82, a net rise of 511.13 points (3.49%) from the previous weekend’s close. The Nifty gained 115.95 points (2.63 percent) to close the week at 4,529.50 from last weekend’s close.

 

Crude oil prices declined sharply from a record high $147.27 a barrel hit on 11 July 2008. Oil held near $115 a barrel on weekend giving a positive breadth for the equity market. India‘s monsoon was above average for the first week in August 2008, helping ease a dry spell that had threatened to delay sowing of crops including rice and cotton.

 

Foreign institutional investors (FII)’s bought shares worth Rs 1527.90 in the first few days of August 2008 (till 7 August 2008). FIIs sold shares worth Rs 25774.20 in the calendar year 2008, till 7 August 2008. Mutual funds sold shares worth Rs 286.10 in the month of August 2008 (till 7 August 2008).

 

Amid some positive factors, inflation still remains a major concern for the central bank. Inflation based on the wholesale price index rose 12.01% in 12 months to 26 July 2008, slightly above the previous week’s annual rise of 11.98%.

 

Reserve Bank of India (RBI) on 29 July 2008, raised repo rate by 50 basis points to a seven-year high of 9% to curb inflation and dampen inflationary expectations. RBI also raised the cash reserve ratio (CRR), the proportion of funds that banks must keep on deposit with it, by 25 basis points to 9%. The central bank left its reverse repo and bank rates unchanged. Responding to the RBI’s monetary tightening, top lenders HDFC and ICICI Bank and a number of state run bank have raised interest rates.

 

In the coming week, the market will take cues from June 2008 industrial production figures which the government will release on Tuesday, 12 August 2008. Falling crude oil prices and improvement in south west monsoon will provide some relief to investors. Rising inflation remains a major worry for the markets in the medium term. Marketmen will keenly watch the development of India’s nuclear deal with US. The Board of Governor of the International Atomic Energy Agency (IAEA) on 1 August 2008 unanimously adopted the India-specific safeguards agreement, a key step in operationalisation of the Indo-US nuclear deal.

INDIAN STOCK MARKET UPDATES

WEEKLY MARKET UPDATE: 4th AUGUST 2008

With the Q1 June 2008 earnings season over, global developments are likely to come back as the driving force of Indian stock market after a brief rally seen over the past few days on domestic factors like expectations for economic reforms being taken forward. The market will now closely watch movement in crude oil prices and global stock markets. A further slide in oil price may boost investor confidence in the short term. The marketmen see falling crude oil prices as a positive cue for the bourses, but expect persisting concerns for the US economy to continue to limit any major upsurge here. On the domestic front, the bullish investors are pinning their hopes on some boost from the progress in the proposed India-US nuclear deal, besides some support from banking sector, especially on expectations for progress on some key financial sector reform bills.

 

The highly volatile July 2008 series of derivative contracts expired on Thursday, 31 July 2008 with poor rollovers. As per reports, Nifty rollover of positions from July 2008 series to August 2008 series stood at 65.05% as compared to 70.07% in the previous series. Even in single stock futures, rollovers were relatively muted at 79.19% compared to 82.05% in the previous series.

 

Stubbornly high inflation still remains a concern. Again, the market trend is likely to dictated by the progress of the monsoon. India‘s annual monsoon rains from 17 to 23 July were 33% below the long-term average. Rainfall since 1 June 2008 has been 2% below the same average.

 

Stocks of the public sector units will continue to remain in focus as there are expectations that the government may push forward some economic reforms, which were stalled over the past four years due to opposition from Left parties. Left parities had stalled privatisation of state-run firms, pension reforms, higher foreign limits in insurance and more liberal norms for foreign bank.

 

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