Tuesday, February 1, 2011

MARKETS STILL IN NEGATIVE ZONE

Local equity markets, which haplessly tried to come back into the positive zone in the early trade but plunged deep into the red, is continuing its downtrend on the back of profit booking which has taken toll over the market, leading to BSE' Sensex tumbling by 213 points and NSE' Nifty dousing by 64 points in trade at this point of time. As regards the global markets, Asian indices are trading well into the green and US index futures too are showing an up-tick in screen trade. Back on the Dalal-Street, all the BSE sectoral indices are trading in the red with Fast Moving Consumer Goods, Auto and Capital Goods leading the pack of losers. Broader indices are mirroring their larger counterparts' fall; the BSE Mid-cap and Small-cap indices lost 0.68% and 0.35%, respectively. Meanwhile, as the global crude prices inch up, domestic fuel retailers have raised aviation turbine fuel (ATF) prices by whopping 4.5% from midnight of Jan 31. The hike has led to all the airlines stocks waning.  Kingfisher Airlines was down 2.77%, Jet Airways was down 4.87% and Spicejet was down by 7.72%. The market breadth on the BSE, however, remained in favour of declines; there were 1428 shares on the losing side against 1184 shares on the gaining side while 119 shares were unchanged.
The BSE Sensex plummeted 213.16 points or 1.16% at 18,114.60. The index touched a high and a low of 18,452.06 and 18,039.70, respectively.
The BSE Mid-cap and Small-cap indices plunged 0.68% and 0.35%, respectively.
All the BSE sectoral spaces were trading in the red with deep cuts. Fast Moving Consumer Goods (FMCG) down 2.57%, Auto down 1.69%, Capital Goods (CG) down 1.59%, Information Technology (IT) down 1.51% and TECk down 1.41% were the major losers.
Meanwhile, as the global crude prices inch up, domestic fuel retailers have been hiking the aviation turbine fuel (ATF) prices, pushing up the cost of airlines. In the latest review, the state-owned oil marketing companies (OMCs) have again increased the prices of ATF by whopping 4.5% from midnight of Jan 31, implementing the eighth straight increase in jet fuel prices in a matter of few months.
The jet fuel will now cost Rs 50,958.79 per kilo-litre in Delhi, compared with Rs 48,764 per kilo-litre in the previous fortnight.  Similarly, prices in Mumbai too have gone up from Rs 49,046 to Rs 51,332.82 over the same period. Among the metros, prices are highest in Kolkata due to higher state government's duty and have reached now to Rs 58,500.90 from Rs 56,186 in the previous fortnight.
Although in absolute sense the hike seems to be not very big, the cumulative increase in ATF over last three months has been huge. The OMCs had earlier increased ATF prices by massive 7% in the month of November followed by 5% in the month of December as well. The state owned fuel retailers revise ATF prices twice a month.  As a result, over the last 3-4 months or so, jet fuel prices have seen an increase of more than 25%. For instance, the price of ATF in Delhi on Oct 1 was Rs 40,728.25 per kilo-litre, which represents an increase of nearly 25.3%.
Fuel cost is the most critical component of the overall cost structure of the aviation industry and constitute nearly 40% of total operating expenses. As the crude prices move above the $90 a barrel, fuel cost start pinching the airlines. One relief for the industry is that the increasing demand for air travel over last few quarters has given airlines more pricing power. However, analysts feel that if crude oil prices breach the $100 a barrel mark, airlines will start feeling a lot of pressure as aviation demand in India is quite price sensitive and further hike in fares will dent load factors.
HDFC up 2.32%, Hindalco Inds up 0.44%, Sterlite Inds up 0.43%, DLF up 0.29% and ONGC up 0.02%, were the only gainers on the Sensex.
On the other hand, Tata Motors down 4.29%, Jindal Steel down 3.78%, ITC down 3.44%, Wipro down 3.11% and L&T down 2.09%, were the top losers on the index.
Government may be able to get at least Rs 90,000 crore of revenue by giving the next tranche of 1.8 MHz of the second generation (2G) spectrum to the new operators, over and above the 4.2 MHz already given to them if the calculations of telecom regulator of India (TRAI) are accepted and market prices are charged as per the announcement of communications ministry.
The union telecom minister Kapil Sibal had said last week that the government was looking to separate spectrum from the license and if the new telecom operators which were awarded license in 2008 want to have more spectrum beyond the start-up spectrum of 4.4 Mhz that has been allocated to them already, they would have to pay market prices for that.
This contradicts with the fact that the incumbent telecom operators like the Bharti Airtel and Vodafone got 6.8 MHz of the spectrum bundled with the license and the regulator had said that these will have to pay for excess spectrum held in all circles over and above the 6.2 MHz. If the same rule is applied on the new operators, then even after the start-up spectrum of 4.4 MHz, they would be entitled to 1.8 MHz of free spectrum. 
The TRAI had earlier released 2G spectrum recommendations in May last year asking for all the operators to pay for the spectrum over and above 6.2MHz held in all circles. The prices for such spectrum was recommended to be computed from the prices discovered in the 3G auction which has been severely contended by telecom players. Some other recommendations were also dubbed biased and regressive by some of the major players in the industry and no final call the matter has yet been taken. 
The regulator is now expected to give a final pricing formula soon for charging the operators for spectrum held over and above what comes bundled with the license. What the minister now is trying to do is ensure that all the operators pay for excess spectrum. Incumbent ones already have more than 6.2 MHz in many circles, so they will have to pay. On the other hand, new operators which have 4.4 MHz and might have managed operations for years to come with just 1.8 MHZ of additional spectrum too will have to pay.
Sibal contends that the move will create a level playing field in the industry, and will bring both the new and the incumbent operators at same level. However, many political analysts feel that it would also generate substantial revenue for government and compensate perhaps to come extent the losses that the exchequer suffered in allocation of telecom licenses on first come first serve basis in 2008. In this sense, it might also dilute the accusations of causing huge losses on the government.
The S&P CNX Nifty plunked 64.25 points or 1.17% to 5441.65. The index touched a high and a low of 5539.15 and 5418.30, respectively. 
The top gainers on the Nifty were HDFC up 2.53%, Sesa Goa up 1.29%, Kotak Mahindra Bank up 0.99%, DLF up 0.36% and Sterlite Inds up 0.34%.
The top losers on the index were Tata Motors down 4.62%, BPCL down 3.87%, Jindal Steel down 3.72%, ITC down 3.44% and Ambuja Cement down 3.29%.
Other Asian markets are trading in the green. Shanghai Composite rose 0.30%, Hang Seng added 0.10%, Jakarta Composite gained 0.89%, Nikkei 225 advanced 0.36%, Straits Times jumped 0.25% and Seoul Composite increased 0.47%.

No comments:

Post a Comment