Market Analysis: Weekly roundup till Dec 19

Markets corrected after two weeks of gains as the benchmark Sensex tumbled by nearly 400 points during the week. Profit booking emerged after inflation trebled to 4.78 pc in Nov 2009. Investors fear that Reserve Bank may tighten the monetary measures which could lead to higher interest rates.

Sensex lost 399 points and closed at 16719 over its previous weekend"s close, while Nifty ended the week at 4987 netting a loss of 129 points over its previous weekends close.

During the week BSE Midcap index lost 2.0 per cent, while Smallcap index lost 1.0 per cent. Week"s top gainers were Health care and IT indices by 4.0 per cent and 3.0 per cent respectively.

Going Forward

Markets might witness lower volumes as the year-end holiday season begins. However, expectations of healthy third quarter results could cap the downside on the indices. Announcement of Advance tax payments by India Inc would provide further support.

Corporate

RIL woos Lyondell creditors as management fights back
Reliance Industries Ltd (RIL) efforts to gain control over LyondellBasell, is looking to team up with the unsecured creditors and bondholders of the bankrupt Dutch petrochemicals giant.

Lyondellbasell management fields an updated rescue plan last week that centered on a USD 2.5 billion cash infusion by the company"s former owner and two investors.

Bankruptcy court in New York will hear the updated rescue plan of the management and take views of creditors to Lyondellbasell on the proposal.

According to RIL executives, Company waits for the result of hearing before floating a concrete proposal on formulating an alternative plan.

They further added, unsecured creditors, who are fighting against the management and secured creditors in court, may raise their voice against the USD 2.5 billion revival proposal.

Tata Motors, M&M eye Fiat plant
Tata Motors and Mahindra & Mahindra (M&M) have shown interest in taking over the Termini Imerese plant owned by Italy"s largest car maker Fiat.

Fiat has already decided to relocate the Termini Imerese plant, preferably to cost-effective areas of Poland or Germany, in 2011.

The plant makes the Lancia Ypsilon (a three-door hatchback) and has a daily production capacity of 400 cars, and employs 3,500 people.

Another 3,000 are engaged in vendor and related activities.

Fiat has made models such as Fiat 126, the original Fiat Panda as well as the Punto at the Imerese plant. The plant is the smallest of the six Italian plants owned by Fiat.

Recently, Fiat cut production to cope with lower demand and put thousands of workers at its plants on temporary layoffs with reduced pay across Europe.

In Italy alone, the company has 21,000 employees. This is unlike its India operation where the company has substantially increased production of cars and engines over the past two years and has launched multiple models.

Economy

Inflation trebles to 4.78 pc
Inflation rate measured by the wholesale price index surged to 4.78 pc for the month of Nov 2009.

This is due to consistently rising prices of primary articles, especially food items.

Inflation for the October Month is stood at 1.3 pc and 8.4 pc in Nov 2008.

The build-up of inflation in the financial year 2009-10 so far has been 7.5 pc as against an increase of 3.8 pc in the corresponding period in 2008.

According to economist the inflation rate would be around 7pc by the end of current financial year.

Further they also expect a raise on CRR by the end of Dec 2009.

The inflation rate for manufacturing has also climbed up along with primary articles.

Manufactured products registered an inflation rate of 3.9 per cent in Nov 2009 as against 7.8 pc in Nov 2008.

Export growth turns positive after 13 months
After falling continuously for 13 months, the country"s merchandise exports registered a growth of 18 per cent in Nov 2009 at USD 13.2 billion (Rs 61,800 crore) against USD 11.16 billion (Rs 52,250 crore) in Nov 2008.

However, cumulative growth since the beginning of the current financial year continues to show a decline.

Exports of petroleum products reachedUSD 2.4 billion (Rs 11,240 crore) in Nov 2009 against USD 1.3 billion (Rs 6,100 crore) in the same month last year, whereas gems and jewellery exports topped USD 2.15 billion (Rs 10,070 crore) from USD 1.6 billion (Rs 7,500 crore) in Nov 2008.

Some sectors are still facing severe problems and the government is carrying out a sector-wise review. Exporters fear withdrawal of present stimulus measures.

According to Federation of Indian Export Organization sources the sops should continue at least till the end of 2010-2011.

(An article by DAS CAPITAL MANAGEMENT & ADVISORS Pvt Ltd)