Nifty September 2010 futures at discount
The key benchmark indices edged lower in the week ended Friday, 27 August 2010, halting a three-week rising trend, on weak global cues. Markets across the globe were gripped under selling pressure on worries about the pace of the economic recovery in the US, the world's biggest economy. The Sensex declined in three out of the five trading days of the week. The BSE Sensex fell below the psychological 18,000 mark while the S&P CNX Nifty retraced from 31-month high. Shares of Prakash Steelage made a strong debut on Wednesday, 25 August 2010.
Volatility was high during the week as traders rolled positions in the derivatives segment from the August 2010 series to September 2010 series. The August 2010 derivatives contracts expired on Thursday, 26 August 2010.
The Union Cabinet on 26 August 2010 approved a new set of direct tax rules that propose to raise income tax exemption limit from 1.6 lakh to 2 lakh, leaving more money in the hands of individuals, and a lower tax rate for companies. The much-awaited Direct Taxes Code, or DTC, Bill, which seeks to replace the nearly 50-year-old income tax law, is likely to be introduced in Parliament on Monday, 30 August 2010, and may then be referred to a select committee of members of both houses of Parliament.
However, the government proposes to raise the minimum alternate tax (MAT) on book profits to 20% from current 18%. The move will be a big blow for Reliance Industries (RIL) and a host of IT and infrastructure companies that pay MAT.
The BSE Sensex lost 403.41 points or 2.19% to 17,998.41, in the week ended 27 August 2010. The 50-unit S&P CNX Nifty fell 121.95 points or 2.20% to settle at 5408.70.
The BSE Mid-Cap index declined 186.49 points or 2.38% to 7,634.71 and the BSE Small-Cap index slipped 234.81 points or 2.38% to 9,640.95 in the week. Both these indices underperformed the Sensex.
Trading for the week started on a lackluster note with the key benchmark indices posting tiny gains on Monday, 23 August 2010. The BSE 30-share Sensex rose 7.53 points or 0.04% to 18,409.35. The S&P CNX Nifty rose 12.85 points or 0.23% to 5,543.50, its highest closing since 18 January 2008.
GLOBAL SIGNALS: The European stocks edged lower in early trades on Friday (August 27, 2010) following a slump in the US, as investors were worried about the pace of economic recovery after recent grim macroeconomic data. All the major Asian indices shut the day on a mixed note, Japanese Nikkei closed with gains of 0.95%.
The US stock index trading around 147 points higher on the Wall Street ahead of US gross domestic data (GDP) data and a major speech by Federal Reserve’s Chairman Ben Bernanke.
BOND MARKET: India’s 10-year bonds are set for a second weekly drop on speculation that the central bank will boost borrowing costs to curb inflation that has held at or above 10% since February. India’s rupee headed for a weekly loss on speculation that investors will pare holdings of emerging-market assets as the US economic recovery falters and because of month-end demand for the dollar from importers.
MARKET OUTLOOK: Tonight, Wall Street will be looking at the first revision of second quarter GDP and the market reaction will depend on whether that revision takes us from 2.4% to above or below a consensus of 1.4%. Secondly, Ben Bernanke is going to give a speech tonight.
MARKET SENTIMENT: The market breadth was extremely weak as declining stocks outdid the advancing ones. Of the 3,059 shares traded on the BSE, 2,074 shares declined whereas 889 shares gained and 96 shares traded unchanged.
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