Nifty closes below 4700 for 1st time since 2009

It was a dire situation for the market on Friday despite RBI's policy on expected lines and flat global cues. The Nifty closed below the psychological 4700-mark for the first time since November 3, 2009 while theSensex shed 345.12 points. Looking at the sharp sell-off in index heavyweights, it seems investors cut some of their exposure in the second half of trade.

The Sensex closed at 15,491.4, after shedding more than 560 points from day's high of 16,068.90. The Nifty dropped 94.75 points, to end at 4,651.60; it touched the 4800 mark in an intra-day trade.

Sanjay Sinha, Founder of Citrus Advisors listed out the points, which spoiled the mood of markets. According to him, first is global problem, second is currency, third is government policies and fourth is interest rates.

For the week, the Sensex and Nifty fell over 4.5%.

Experts feel the mid quarter review of monetary policy announced by the RBI was on expected lines, so it was completely non-event for the market. Breaking of technical level of 4700 amid huge volumes may be the reason that traders opted to short selling.

"Today’s fall is definitely a little more unexpected because the RBI policy didn’t have anything that would spook the market," He feels this is some bout of concentrated selling.

The Reserve Bank of India kept CRR unchanged at 6% (the money banks have to necessarily park with the RBI), SLR at 24% (money which every bank has to maintain in the form of cash, gold or approved securities), repo rate (at which banks borrow money from RBI) at 8.5%, and even reverse repo rate (at which RBI borrow money from banks) remains unchanged at 7.5%.

The central bank insisted that downside risks to growth have clearly increased and inflation is still above comfort level. But it relieved some tension by saying further rate hikes may not be warranted. "Further monetary policy is likely to reverse cycle."

There was another ray of optimism, which is appreciation in the rupee after central bank's intervention. To control speculation in the currency, the Reserve Bank imposed restrictions with immediate effect on forward trading in the local currency by FIIs and traders and capped banks exposure to the forex market.

The Indian rupee moved up 1.5% or by 82 paise to 52.82 a dollar, which is quite better from record low of 54.29 touched yesterday. It was down by 80 paise to 68.85 an euro.

Shares of capital goods companies hit quite badly as experts feel the thrid quarter earnings would be very bad due to low order book and overall slowdown. The respective index fell 4.4%; L&T was down 5.33% and BHEL tanked 3.9%.

The BSE Bank, Realty, Power, Metal and Oil & Gas indices were down 2-3%. Index heavyweight Reliance Industries plunged 3.43%, to close at Rs 723 a share.

Rupee hits all time low; trading at 54.23

The rupee breached the 54 mark to open at 54.20 against a dollar. The rupee had closed at 53.71 yesterday. Currently it is trading at 54.23.

Analysing the trend, Sanju Verma said there were enough signals about the rupee weakening. The general sense is that the RBI does not want to throw good money after bad. The RBI data suggests that on two days in November, the Reserve Bank of India had intervened, but that had not help the rupee. The RBI’s ability to do anything is very much limited. The rupee is playting spoil-sport and on the exchange rate front, one will need to be prepared for the worst. 

According to Ssharad D Pawaar, SPFX INDIA: "The rupee is expected to slide further as the safe haven demand for the dollar continues. Investors converting holdings into dollar towards year-end is also pushing the greenback higher. Weak equity markets cues may also weigh on sentiment. The range for the day is seen between 53.75-54/$."

HTC sues Citi in Taiwan after share price fall

HTC Corp , the world's No.4 smartphone maker, has filed a criminal complaint against Citigroup Inc's Taiwan unit, alleging the bank published false information that led to a fall in HTC's share price, a Taiwan prosecutor said on Tuesday.

HTC, whose rapid rise in the cut-throat handset industry had made it an investor darling until early this year, has lost much of its lustre in recent weeks as its models struggle to compete with Apple Inc's iPhone and Samsung Electronics Co Ltd's Galaxy range.

Its shares have tumbled from a high of more than TUSD 1,200 in April to as low as TUSD 403 earlier this month. HTC has twice cut its earnings forecast recently, stoking investor concern over future profits.

"HTC submitted its case in August and we have been in the process of handling it," said Huang Mou-hsin, deputy chief prosecutor at the Taipei Prosecution Office. "HTC sued Citi Global Markets for violating stock transaction law," he said, declining to elaborate further.

HTC declined to confirm or deny the action, saying it did not comment on legal cases. Citi Global Markets Taiwan officials had no immediate comment.

Taiwan newspapers reported on Tuesday that HTC and Citi had run out of time for a settlement, so prosecutors had stepped in.

"HTC is using the lawsuit as a gesture to say its outlook is not as bad as the research report indicated and to ask foreign analysts to keep quiet or at least to stay a bit low-profile," said K.H. Lin, vice president at the fund unit of Yuanta Financial Holding Co Ltd.

"For long-term investors, however, HTC is probably not a good buy. We are very worried about the future of HTC due to its patent war with Apple and others. The lack of a powerful pool of patents is the most vulnerable part for HTC and other Taiwan companies."

HTC is fighting legal battles on several fronts and faces a crucial ruling in the United States on Wednesday in a patent case with arch-rival Apple that could result in a ban on HTC's handsets being sold in the United States.

The suit is seen as a proxy for the larger fight for market share between Google Inc's Android cellphones and tablets, many of which HTC makes, and Apple's product line.

Samsung, which also makes Android products, is locked in similar court fights with Apple.

The International Trade Commission, a US trade panel that investigates patent infringement involving imported goods, will deliver its ruling on Wednesday.

HTC shares were up 2.5USD  in early Tuesday trading at TUSD 426.50.

"The rise is because the current share price is too low and valuations are way under," said KGI Securities analyst Richard Ko in Taipei. "The price already reflects the risk of future court judgements."

India stares at economic slowdown, job cuts

The fear of an economic slowdown has turned to be a real one, as for the first time in recent months, India's industrial economy has actually shrunk, which may lead to job cuts, high inflation and more bearish stock markets.

In fact, the Confederation of Indian Industry (CII) has warned of job losses and appealed for urgent measures to tackle the slowdown after the Index of Industrial Production fallen to minus 5.1% in October.

The CII further said a lack of investments can act as a drag on growth and that a continued decline in the mining sector can have consequences on livelihoods. Economic experts say the manufacturing sector is likely to see job losses and warned that inflation will continue to stay high even as the stock markets may continue to be in bear grip.

The industrial output was 1.9% in the month of September and the fall comes after a sustained slowdown over the past few months, led by a steep fall in production of almost sectors, particularly manufacturing, mining and capital goods.

The biggest fall has come in the capital goods as well as in the manufacturing sector and mining. The capital goods growth is at minus 25% while manufacturing activity has declined to minus 6% from 2.1% a month ago.

Factory output, as measured by the Index of Industrial Production (IIP), had grown by 11.3% in October 2010.

The negative growth in factory output pulled down the BSE Sensex by 343 points or 1.12% on Monday to below the 16,000 level after two weeks.

The Sensex, which had lost 664 points in the past two trading sessions, fell further by 343.11 points to end the day at 15,870.35, closing below the 16k level after November 25.

The BSE 30-share benchmark has lost over 1,000 points in the last three sessions, eroding investor wealth by nearly Rs 3 lakh crore.

The broad-based National Stock Exchange index Nifty has also lost 102.10 points or 2.10% to 4,764.60 on Monday.

Though, Prime Minister's Economic Advisory Council Advisor C Rangarajan hoped that the GDP growth will still be between 7-7.5%, it looks hard to achieve due to lack of corrective measures on the part of the UPA Government.

With the headline inflation remained above the 9%-mark since December 2010, the Reserve Bank has hiked interest rates 13 times since March, 2010, to tame inflation.

India Inc had attributed the slowdown to rising interest rates, which have led to an increase in the cost of borrowing, thus hindering fresh investment.

But for long, the political turmoil has prevented the scam-hit UPA Government from taking any major policy decisions.

Some leading industrialists at the annual Indian summit of World Economic Forum has already alleged that the Central Government has been suffering from policy paralysis.

Moreover, a combined attack by the Opposition and some its own allies forced the Government to hold back its decision on allowing FDI in retail sector, which put a big question mark on the ability of the Government to go for any further economic reforms.

As a result, it seems the crisis-hit UPA Government is in no position to infuse the confidence that needed to boost the falling economy, which is already facing turbulence due to gloomy global economic scenario.

Lokpal: Govt may offer to include PM, Group C

A day after Anna Hazare's fast, the government as part of its counter Anna strategy on the Lokpal Bill is expected to offer to include the Prime Minister and Group C employees in its ambit at the all-party meet on Wednesday.

According to sources, the bill will be tabled in Parliament next week.

This indication has come after the Congress, isolated by the Opposition, received support from its allies.

On Tuesday, the Cabinet is also slated to take up judicial accountability bill, whistle blowers protection bill and citizens grievance redressal bill.

The Cabinet will also take up the feel-good Foods Security Bill, hoping to woo voters just as farm loan waiver did.

This will be followed by a meeting between the UPA and its allies. Unlike the Lokpal draft committee, this time the Congress wants to keep allies on board.

And on Wednesday there will be an all-party meet. Sources say that the final Lokpal will include Prime Minister and Group C.

The government is likely to propose that the Prime Minister could be brought under the ambit of Lokpal, however, with certain safeguards.

Further, on the issue of bringing CBI investigations under the ambit of Lokpal, the government may propose that though it could not be done, the Lokpal may however be kept in the know of the probe into corruption-related cases.

Though the Congress is upset with the Team Anna over their attack on party general secretary Rahul Gandhi, it is also aware that a strong opposition could nix the chance of easy passage of Lokpal Bill. And in that case, it may be difficult to stop the agitation by Anna Hazare on December 27.