Sensex

Monday, December 15, 2008

DG - RBI & DOLLAR RELATION

The Reserve Bank of India sold $20.6 billion in October, according to the figures published in the December bulletin of the bank.

It was during October that the local currency faced severe pressure. The currency declined from about 47 to the dollar at the beginning of the month to a little over 50 at the end of October. The decline in forex reserves during that period had prompted speculation that the RBI was ‘intervening’ massively to prop up the local currency.

The super spike in oil prices on the one hand and flight of capital on the other have been the two factors that saw the RBI furiously sell off dollars to prop up the rupee, according to Dr D.K. Joshi, Director and Principal Economist at rating agency Crisil.

The RBI has so far in this fiscal sold close to $34 billion while purchasing $5.68 billion. The net sale of $28.3 billion would mean that an equivalent amount of Rs 1,20,000 crore has been removed from the banking system – causing some liquidity crunch before the announcement of recent liquidity infusing measures.

Why RBI buys

The RBI buys dollars in the market when there is a heavy inflow of dollars – as was the case in the last few years. This is done to prevent the rupee from appreciating beyond the level that the RBI is comfortable with. A considerable part of the liquidity enjoyed by commercial banks during the past few years owed its origins to the dollar inflows that were sucked out by the RBI.

By placing rupees in their hands and once again ‘sterilising’ it by selling government paper to banks, the RBI was hoping to keep inflation under control.

During 2006-07 the RBI did not sell any dollars in the market. In 2007-08 also the RBI remained a purchaser of dollars – except in March, when it sold about $1.4 billion. During these two years alone, the RBI had purchased about $100 billion – which got added to the country’s forex reserves.

The RBI was also very active in the forward market for dollar purchase from October 2007 when the inflows were high. Its outstanding net purchase of dollars in the forward market was at a high of $17 billion in April 2008 after which it has gradually reduced the net position to a mere $90 million in October 2008.

Since June this year, the RBI has had to intervene actively and sell more dollars than what it purchased during each month. There was a brief reprieve in August but things have taken a turn for the worse after that.

Volatility to continue

According to Dr Joshi, the nascent, if hesitant, uptrend in rupee in recent times should relieve the pressure on the Reserve Bank to continue to aggressively engage the market.

The drop in oil prices has come in as a major stress-buster, but Dr Joshi was apprehensive that the exchange rate scenario would continue to be volatile with each passing day bringing out varyingly depressive forecasts on global finances.

But he struck an optimistic note with a hunch that capital flows should begin to trickle in sooner than later. And that next year would not require the RBI to be as active in the market as it has been throughout year 2008.

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DG - FW: Sharekhan Post-Market Report dated December 15, 2008

 

 

From: The Sharekhan Research Team [mailto:marketwatch@research.sharekhan.com]
Sent: 15 December 2008 16:10
To: The Sharekhan Research Team
Subject: Sharekhan Post-Market Report dated December 15, 2008

 

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December 15, 2008

 

Index Performance

Index

Sensex

Nifty

Open

9,821.85

2,917.90

High

9,948.33

3,012.10

Low

9,749.29

2,917.90

Today's Cls

9,832.39

2,981.20

Prev Cls

9,690.07

2,921.35

Change

142.32

59.85

% Change

1.47

2.05

 

Market Indicators

Top Movers (Group A)

Company

Price 
(Rs)

%
chg

Gainers

India Infoline

48.00

24.51

Welspun Gujarat

119.55

21.06

GMDC

38.10

20.00

Biocon

117.65

18.12

Lanco Infra

161.75

18.02

Losers

Power Finance

122.10

-4.53

Sun TV

159.05

-4.22

RCom

239.00

-4.09

Crompton Greaves

146.85

-3.45

HCL Tech

104.20

-2.75

Market Statistics

-

BSE

NSE

Advances

1,937

1018

Declines

555

188

Unchanged

80

21

Volume(Nos)

40.01cr

81.60cr

 Market Commentary 

Market ends buoyant

Buoyancy in frontline and banking stocks lifts Sensex 142 points higher.

The 30-stock Sensex remained firm today on the back of firm Asian markets. The market opened on a positive note, tracking positive global cues at 9,822

 

up 132 points. The strong optimism among traders kept the Sensex above 9,900 mark. In mid-morning trades, buoyancy among frontline, realty, metal and consumer durable stocks lifted the Sensex to touch the day's high of 9,948. The market remained buoyant thereafter, but the 9,900 mark continued to elude the Sensex. The Sensex finally ended the session with a gain of 142 points at 9,832 while the Nifty closed the session at 2,981 up 60 points.

The breadth of the market was positive. Of the 2,572 stocks traded on the BSE, 1,937 stocks advanced, whereas 555 stocks declined. Eighty stocks ended unchanged. Among sectoral indices, BSE Realty jumped 5.53% followed by BSE Metal (up 5.19%), BSE CD (up 4.90%) and BSE PSU index (up 3.49%).

Most heavyweights ended higher. Among blue chips, Grasim Industries shot up by 9.32% at Rs1,173.70, Hindalco Industries soared 5.86% at Rs56, Sterlite Industries surged 5.07% at Rs307.70, Larsen & Toubro advanced 4.24% at Rs820.40, Tata Steel added 4.22% at Rs227.10, ONGC moved up 4.09% at Rs672.90, ACC scaled up 3.87% at Rs513.35 and Mahindra & Mahindra was up 3.50% at Rs303. Among laggards, Reliance Communications dropped 4.09% at Rs239, Tata Consultancy Services slipped 2.62% at Rs469.60 and Wipro shed 2.49% at Rs469.60 while Wipro, HDFC, State Bank of India and Infosys Technologies closed marginally lower.

Realty stocks were in limelight and closed with strong gains. HDIL jumped 16.65% at Rs127.15, Orbit Corporation soared 12.95% at Rs61.05, Ansal Infrastructure surged 11.88% at Rs33.90, Unitech added 10.50% at Rs37.90, Phoenix Mills gained 9.28% at Rs74.45 and Omaxe advanced by 9.28% at Rs60.65.

Over 3.51 crore shares of Reliance Natural Resources changed hands on BSE followed by Unitech (2.29 crore shares), IFCI (2.24 crore shares), Reliance Petroleum (1.50 crore shares) and GVK Power & Infrastructure (1.46 crore shares).

Reliance Industries clocked a turnover of Rs504 crore on BSE followed by State Bank of India (Rs234 crore), Reliance Natural Resources (Rs206 crore), DLF (Rs193 crore) and Reliance Capital (Rs145 crore).

European Indices at 16:00 IST on 15-12-2008

Index

Level

Change (pts)

Change (%)

FTSE 100 Index

4308.01

27.66

0.65

CAC 40 Index

3232.94

19.34

0.60

DAX Index

4729.88

66.51

1.43

Asian Indices at close on 15-12-2008

Index

Level

Change (pts)

Change (%)

Nikkei 225

8664.66

428.79

5.21

Hang Seng Index

15046.95

288.56

1.96

Kospi Index

1158.19

54.37

4.93

Straits Times Index

1774.76

34.42

1.98

Jakarta Composite Index

1359.27

96.30

7.63

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DG - SMARTINVT13122008WEEKLY

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