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Markets snap 3-day losing streak; gains seen short-lived

Markets snap 3-day losing streak; gains seen short-lived
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First Published: Wed, Aug 17 2011. 05 00 PM IST
Updated: Wed, Aug 17 2011. 05 00 PM IST
New Delhi: Markets rose 0.7% on Wednesday, snapping a three-day losing streak, as investors hunted for bargains in a market that is among the world’s worst performers this year, although concerns over rising interest rates and global economic slowdown remain.
The day saw Coal India , the world’s largest coal miner, topple energy major Reliance Industries to become the country’s most valuable firm at more than $55 billion.
The main 30-share BSE index closed 109.86 points higher at 16,840.80, with 20 components rising. The benchmark index is down nearly 18% this year as high inflation and rising interest rates have started eating into corporate profitability.
“This is not at all a reversal of the trend,” said R.K. Gupta, managing director at Taurus Asset Management, referring to Wednesday’s gains.
“It’s more due to short-covering. The market was in a heavily oversold territory.”
The 14-day relative strength index (RSI) of the main index had slumped to 27 at Tuesday’s close. A reading below 30 typically indicates oversold conditions. At Wednesday’s close, it stood at just above 30.
The 50-share NSE index rose 0.41% to 5,056.60 points.
In the broader market, there were more than two losers for every gainer on a heavy volume of about 669 million shares.
India’s central bank has raised rates 11 times since March last year to control stubbornly high inflation, which marginally eased to 9.22% in July. However, it is feared that the still-high headline number and persistent price pressures might lead to further rate increases.
Besides, key economic reforms have been delayed as a beleaguered government struggles to contain the fall out of a series of scams.
The bounce back “doesn’t mean that we are out of the woods”, said Alex Mathews, head of research at Geojit BNP Paribas.
“Quarterly numbers were not encouraging. We saw rising input costs and borrowing costs. There are still concerns of a further rate hike,” he said.
Foreign funds have turned net sellers of local equities this month -- offloading $1.25 billion of shares -- after buying a net $1.7 billion worth of shares in July.
On Wednesday, shares in state-run Coal India rose 2.8% to Rs 397.90, giving the firm a market value of $55.4 billion.
Reliance Industries, which has the heaviest weightage in the main index, closed 0.6% lower at Rs 755, its lowest close in nearly 2-1/2 years, to have a market value of $54.4 billion.
Reliance, controlled by the world’s ninth-richest man Mukesh Ambani, has been under pressure from an industry regulator and investors over slowing gas output, and has seen its shares shed nearly 29% this year.
Shares in Infosys, India’s No. 2 software services exporter, closed 2.1% higher at Rs 2,448.95, while its bigger rival Tata Consultancy gained 2.7% to Rs 999.90.
But top listed property firm DLF fell 6.3% to Rs 177, extending Tuesday’s 5.7% slide.
DLF was fined Rs 630 crore ($139 million) by the country’s competition watchdog on Tuesday after it found the company guilty of breaching laws regarding the unfair pricing of goods and services.
At 10:4:10pm, the MSCI world equity index edged was down 0.07%, while the emerging equities was up 0.06%.
STOCKS
Tata Motors , the owner of luxury brands Jaguar and Land Rover, fell 2.8% to its lowest in more than a year after the company said late Tuesday its global sales in July fell 6% from a year earlier. The stock is down more than 40% this year.
Shares in Shriram Transport Finance rose 3.6% to Rs 618.90. The company plans to raise Rs 250 crore from three and five-year bonds, a source with knowledge of the matter told Reuters on Wednesday.
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First Published: Wed, Aug 17 2011. 05 00 PM IST
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