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Market Wrap as on Jan 30, 2009
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Cheer to Domestic Markets on global cues…
Date: 30/01/2009 --- Amar Ranu1
The much awaited RBI’s credit policy failed to bring any cheers to financial industries, however, the markets traded in range bound initially and finally ended in a good positive note. The equity bellwethers Sensex and Nifty gained by 8.6% and 7.4% and jumped to 9,424 and 2,875 level respectively. The RBI maintained status quo and did not bring any changes in key rates as hoped by Indian Inc, thus, giving a strong signal to banks to bring down the PLR rates. This led to swift action from UCO bank and PNB which agreed to bring down the PLR post Feb 01. The Real GDP growth for 2008-09 is revised downwards to 7.0%, with a downward bias from 7.5-8.0% earlier, but much higher than the average World GDP which is slated to grow in the range of -1 to 2%.
Despite the entire negative domestic cues such as RBI inaction on interest rates, high inflation numbers, poor 3rd quarter earnings et al, the markets ended in positive territory probably due to firm trends across global market. The Barrack Obama’s administration massive package plan of $825 billion which got approved by the Congress brought confidence in the global markets. The major beneficiary of auto bailout package announced by UK would be Tata-Jaguar-Rover combine. This would definitely bring cheers to struggling Tata Motors which posted a loss of Rs 263 crore in the 3rd quarter of current fiscal as compared to a profit of Rs 499.05 crore in the corresponding quarter of last fiscal.
In the week, the first two day rally was mainly led by short covering as confirmed from F&O data. All round buying in scrips across sectors led to the indices close in positive. But on Thursday, the bull took a breather and plummeted marginally mainly due to weak European
1 An independent columnist and writes for different websites and magazines on financial domain. He can be reached at [email protected].
cues and high inflation reporting. The RBI report which has targeted a range of 3% for inflation in the coming months did not rule out with deflation like situation.
Despite the lower than expected quarterly earnings from SAIL and Tata Steel, the BSE Metal Index ended as the top gainer adding 15.2% in its category. The other major movers were Realty, Oil, Bank, IT indexes gaining in the range of 8-10.2%.
On the debt front, the 10-year bond posted the biggest monthly loss in the last decade after a speculation that government borrowing would increase to finance its additional spending. The federal fiscal deficit widened to 2.18 trillion rupees in the first nine months of 2008-09 fiscal year or 163.8 % of the full year target. The data clearly impacted the 10-year bond which rose briefly to 6.21 % from 6.18%. The 3G auction inflows in the range of 300-400 billion rupees might ease the pressure on government spending after the finance ministry suggesting a doubling in the sale base price and the issue now is pending with a panel of ministers. The 10-year 8.24% paper would be replaced by 6.05% 2019 paper and would become the new benchmark. The 10 year security is widely used by traders to take a view on interest rates.
